UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2009

8540 Gander Creek Drive
Miamisburg, Ohio 45342
877.855.7243
| | | | | | |
Commission File Number | | Registrant | | IRS Employer Identification Number | | State of Incorporation |
001-32956 | | NEWPAGE HOLDING CORPORATION | | 05-0616158 | | Delaware |
333-125952 | | NEWPAGE CORPORATION | | 05-0616156 | | Delaware |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| | |
NewPage Holding Corporation | | Yes x No ¨ |
NewPage Corporation | | Yes x No ¨ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
| | |
NewPage Holding Corporation | | Yes ¨ No ¨ |
NewPage Corporation | | Yes ¨ No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
| | | | | | | | |
NewPage Holding Corporation | | Large accelerated filer | | ¨ | | Accelerated filer | | ¨ |
| | | | |
| | Non-accelerated filer | | x | | Smaller reporting company | | ¨ |
| | | | | | | | |
NewPage Corporation | | Large accelerated filer | | ¨ | | Accelerated filer | | ¨ |
| | | | |
| | Non-accelerated filer | | x | | Smaller reporting company | | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| | |
NewPage Holding Corporation | | Yes ¨ No x |
NewPage Corporation | | Yes ¨ No x |
There were 10 Common Shares, $0.01 per share par value, of NewPage Holding Corporation and 100 Common Shares, $0.01 per share par value, of NewPage Corporation outstanding as of August 1, 2009.
This Form 10-Q is a combined quarterly report being filed separately by two registrants: NewPage Holding Corporation and NewPage Corporation. NewPage Corporation meets the conditions set forth in general instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.
References to “NewPage Holding” refer to NewPage Holding Corporation, a Delaware corporation; references to “NewPage” refer to NewPage Corporation, a Delaware corporation and a wholly-owned subsidiary of NewPage Holding. References to “NewPage Group” refer to NewPage Group Inc., a Delaware corporation and the direct parent of NewPage Holding. Unless the context provides otherwise, references to “we,” “us” and “our” refer to NewPage Holding and its subsidiaries. All assets, liabilities, income, expenses and cash flows presented for all periods represent those of NewPage Holding’s wholly-owned subsidiary, NewPage, except for NewPage Holding’s debt obligation and related financing costs, interest expense and income tax effect. Unless otherwise noted, the information provided pertains to both NewPage Holding and NewPage.
FORWARD-LOOKING STATEMENTS
This quarterly report contains “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, the Private Securities Litigation Reform Act of 1995 and other related laws. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. Forward-looking statements may include the words “may,” “plans,” “estimates,” “anticipates,” “believes,” “expects,” “intends” and similar expressions. Although we believe that these forward-looking statements are based on reasonable assumptions, they are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected or assumed in our forward-looking statements. These factors, risks and uncertainties include, among others, the following:
| • | | our substantial level of indebtedness |
| • | | changes in the supply of, demand for, or prices of our products |
| • | | general economic and business conditions in the United States and Canada and elsewhere |
| • | | the ability of our customers to continue as a going concern, including our ability to collect accounts receivable according to customary business terms |
| • | | the activities of competitors, including those that may be engaged in unfair trade practices |
| • | | changes in significant operating expenses, including raw material and energy costs |
| • | | changes in currency exchange rates |
| • | | changes in the availability of capital |
| • | | changes in the regulatory environment, including requirements for enhanced environmental compliance |
| • | | the other factors described under “Risk Factors” in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2008 |
Given these risks and uncertainties, we caution you not to place undue reliance on forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, either to reflect new developments or for any other reason, except as required by law.
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INDEX
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PART I | FINANCIAL INFORMATION |
ITEM 1. | FINANCIAL STATEMENTS |
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
JUNE 30, 2009 AND DECEMBER 31, 2008
Dollars in millions, except per share amounts
| | | | | | | | | | | | | | | | |
| | NewPage Holding | | | NewPage | |
| | June 30, 2009 | | | Dec. 31, 2008 | | | June 30, 2009 | | | Dec. 31, 2008 | |
ASSETS | | | | | | | | | | | | | | | | |
| | | | |
Cash and cash equivalents | | $ | 6 | | | $ | 3 | | | $ | 6 | | | $ | 3 | |
Accounts receivable, net | | | 260 | | | | 278 | | | | 260 | | | | 278 | |
Inventories (Note C) | | | 681 | | | | 628 | | | | 681 | | | | 628 | |
Other current assets | | | 21 | | | | 22 | | | | 21 | | | | 22 | |
| | | | | | | | | | | | | | | | |
Total current assets | | | 968 | | | | 931 | | | | 968 | | | | 931 | |
| | | | |
Property, plant and equipment, net of accumulated depreciation of $774 as of June 30, 2009 and $641 as of December 31, 2008 | | | 3,067 | | | | 3,205 | | | | 3,067 | | | | 3,205 | |
Other assets | | | 106 | | | | 110 | | | | 105 | | | | 109 | |
| | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 4,141 | | | $ | 4,246 | | | $ | 4,140 | | | $ | 4,245 | |
| | | | | | | | | | | | | | | | |
| | | | |
LIABILITIES AND EQUITY (DEFICIT) | | | | | | | | | | | | | | | | |
| | | | |
Accounts payable | | $ | 215 | | | $ | 254 | | | $ | 215 | | | $ | 254 | |
Other current liabilities | | | 244 | | | | 270 | | | | 244 | | | | 270 | |
Current maturities of long-term debt (Note D) | | | 16 | | | | 16 | | | | 16 | | | | 16 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | 475 | | | | 540 | | | | 475 | | | | 540 | |
| | | | |
Long-term debt (Note D) | | | 3,145 | | | | 3,082 | | | | 2,953 | | | | 2,900 | |
Other long-term obligations | | | 618 | | | | 622 | | | | 618 | | | | 622 | |
Commitments and contingencies (Note L) | | | | | | | | | | | | | | | | |
| | | | |
EQUITY (DEFICIT) | | | | | | | | | | | | | | | | |
| | | | |
Common stock, NewPage Holding—10 shares authorized, issued and outstanding, $0.01 per share par value; NewPage—100 shares authorized, issued and outstanding, $0.01 per share par value | | | — | | | | — | | | | — | | | | — | |
Additional paid-in capital | | | 665 | | | | 661 | | | | 771 | | | | 767 | |
Accumulated deficit | | | (408 | ) | | | (283 | ) | | | (329 | ) | | | (214 | ) |
Accumulated other comprehensive loss | | | (383 | ) | | | (402 | ) | | | (377 | ) | | | (396 | ) |
Noncontrolling interests | | | 29 | | | | 26 | | | | 29 | | | | 26 | |
| | | | | | | | | | | | | | | | |
Total equity (deficit) | | | (97 | ) | | | 2 | | | | 94 | | | | 183 | |
| | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND EQUITY (DEFICIT) | | $ | 4,141 | | | $ | 4,246 | | | $ | 4,140 | | | $ | 4,245 | |
| | | | | | | | | | | | | | | | |
See notes to condensed consolidated financial statements.
3
NEWPAGE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
SECOND QUARTER AND FIRST HALF ENDED JUNE 30, 2009 AND 2008
Dollars in millions
| | | | | | | | | | | | | | | | |
| | NewPage Holding | |
| | Second Quarter Ended June 30, | | | First Half Ended June 30, | |
| | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Net sales | | $ | 736 | | | $ | 1,063 | | | $ | 1,458 | | | $ | 2,253 | |
| | | | |
Cost of sales | | | 756 | | | | 974 | | | | 1,476 | | | | 2,032 | |
Selling, general and administrative expenses | | | 49 | | | | 62 | | | | 95 | | | | 117 | |
Interest expense (including non-cash interest expense of $11, $11, $23 and $23) | | | 72 | | | | 73 | | | | 144 | | | | 149 | |
Other (income) expense, net | | | (125 | ) | | | (3 | ) | | | (125 | ) | | | (10 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Income (loss) before income taxes | | | (16 | ) | | | (43 | ) | | | (132 | ) | | | (35 | ) |
Income tax (benefit) | | | (7 | ) | | | (6 | ) | | | (10 | ) | | | (3 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net income (loss) | | | (9 | ) | | | (37 | ) | | | (122 | ) | | | (32 | ) |
Net income (loss)—noncontrolling interests | | | 2 | | | | 1 | | | | 3 | | | | 2 | |
| | | | | | | | | | | | | | | | |
Net income (loss) attributable to the company | | $ | (11 | ) | | $ | (38 | ) | | $ | (125 | ) | | $ | (34 | ) |
| | | | | | | | | | | | | | | | |
See notes to condensed consolidated financial statements.
4
NEWPAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
SECOND QUARTER AND FIRST HALF ENDED JUNE 30, 2009 AND 2008
Dollars in millions
| | | | | | | | | | | | | | | | |
| | NewPage | |
| | Second Quarter Ended June 30, | | | First Half Ended June 30, | |
| | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Net sales | | $ | 736 | | | $ | 1,063 | | | $ | 1,458 | | | $ | 2,253 | |
| | | | |
Cost of sales | | | 756 | | | | 974 | | | | 1,476 | | | | 2,032 | |
Selling, general and administrative expenses | | | 49 | | | | 62 | | | | 95 | | | | 117 | |
Interest expense (including non-cash interest expense of $6, $5, $13 and $12) | | | 67 | | | | 68 | | | | 134 | | | | 139 | |
Other (income) expense, net | | | (125 | ) | | | (3 | ) | | | (125 | ) | | | (10 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Income (loss) before income taxes | | | (11 | ) | | | (38 | ) | | | (122 | ) | | | (25 | ) |
Income tax (benefit) | | | (7 | ) | | | (18 | ) | | | (10 | ) | | | (13 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net income (loss) | | | (4 | ) | | | (20 | ) | | | (112 | ) | | | (12 | ) |
Net income (loss)—noncontrolling interests | | | 2 | | | | 1 | | | | 3 | | | | 2 | |
| | | | | | | | | | | | | | | | |
Net income (loss) attributable to the company | | $ | (6 | ) | | $ | (21 | ) | | $ | (115 | ) | | $ | (14 | ) |
| | | | | | | | | | | | | | | | |
See notes to condensed consolidated financial statements.
5
NEWPAGE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (unaudited)
FIRST HALF ENDED JUNE 30, 2009
Dollars in millions
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Equity attributable to the company | | | | | | |
| | Common Stock | | Additional Paid-in | | | Accumulated | | | Accumulated Other Comprehensive | | | Non- controlling | | | |
| | Shares | | Amount | | Capital | | | Deficit | | | Loss | | | Interests | | Total | |
Balance at December 31, 2008 | | 10 | | $ | — | | $ | 661 | | | $ | (283 | ) | | $ | (402 | ) | | $ | 26 | | $ | 2 | |
Net income (loss) | | | | | | | | | | | | (125 | ) | | | | | | | 3 | | | (122 | ) |
Amortization of net actuarial loss on defined benefit plans, net of tax of $5 | | | | | | | | | | | | | | | | 5 | | | | | | | 5 | |
Change in unrealized gain (loss) on cash-flow hedges, net of tax of $6 | | | | | | | | | | | | | | | | 8 | | | | | | | 8 | |
Foreign currency translation adjustment | | | | | | | | | | | | | | | | 6 | | | | | | | 6 | |
Equity awards | | | | | | | | 6 | | | | | | | | | | | | | | | 6 | |
Loan to NewPage Group | | | | | | | | (2 | ) | | | | | | | | | | | | | | (2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2009 | | 10 | | $ | — | | $ | 665 | | | $ | (408 | ) | | $ | (383 | ) | | $ | 29 | | $ | (97 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
FIRST HALF ENDED JUNE 30, 2008
Dollars in millions
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Equity attributable to the company | | | | | | | |
| | Common Stock | | Additional Paid-in | | | Accumulated | | | Accumulated Other Comprehensive Income | | | Non- controlling | | | | |
| | Shares | | Amount | | Capital | | | Deficit | | | (Loss) | | | Interests | | | Total | |
Balance at December 31, 2007 | | 10 | | $ | — | | $ | 632 | | | $ | (141 | ) | | $ | 23 | | | $ | 31 | | | $ | 545 | |
Net income (loss) | | | | | | | | | | | | (34 | ) | | | | | | | 2 | | | | (32 | ) |
Distributions from Rumford Cogeneration to limited partners | | | | | | | | | | | | | | | | | | | | (4 | ) | | | (4 | ) |
Change in unrealized gain (loss) on cash-flow hedges, net of tax of $1 | | | | | | | | | | | | | | | | 3 | | | | | | | | 3 | |
Foreign currency translation adjustment | | | | | | | | | | | | | | | | (1 | ) | | | | | | | (1 | ) |
Adjustment to fair value of equity issued by NewPage Group in connection with the acquisition of SENA | | | | | | | | 8 | | | | | | | | | | | | | | | | 8 | |
Equity awards | | | | | | | | 15 | | | | | | | | | | | | | | | | 15 | |
Loan to NewPage Group | | | | | | | | (6 | ) | | | | | | | | | | | | | | | (6 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2008 | | 10 | | $ | — | | $ | 649 | | | $ | (175 | ) | | $ | 25 | | | $ | 29 | | | $ | 528 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to condensed consolidated financial statements.
6
NEWPAGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY (unaudited)
FIRST HALF ENDED JUNE 30, 2009
Dollars in millions
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Equity attributable to the company | | | | | | |
| | Common Stock | | Additional Paid-in | | | Accumulated | | | Accumulated Other Comprehensive | | | Non- controlling | | | |
| | Shares | | Amount | | Capital | | | Deficit | | | Loss | | | Interests | | Total | |
Balance at December 31, 2008 | | 100 | | $ | — | | $ | 767 | | | $ | (214 | ) | | $ | (396 | ) | | $ | 26 | | $ | 183 | |
Net income (loss) | | | | | | | | | | | | (115 | ) | | | | | | | 3 | | | (112 | ) |
Amortization of net actuarial loss on defined benefit plans, net of tax of $5 | | | | | | | | | | | | | | | | 5 | | | | | | | 5 | |
Change in unrealized gain (loss) on cash-flow hedges, net of tax of $6 | | | | | | | | | | | | | | | | 8 | | | | | | | 8 | |
Foreign currency translation adjustment | | | | | | | | | | | | | | | | 6 | | | | | | | 6 | |
Equity awards | | | | | | | | 6 | | | | | | | | | | | | | | | 6 | |
Loans to parent companies | | | | | | | | (2 | ) | | | | | | | | | | | | | | (2 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2009 | | 100 | | $ | — | | $ | 771 | | | $ | (329 | ) | | $ | (377 | ) | | $ | 29 | | $ | 94 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
FIRST HALF ENDED JUNE 30, 2008
Dollars in millions
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Equity attributable to the company | | | | | | | |
| | Common Stock | | Additional Paid-in | | | Accumulated | | | Accumulated Other Comprehensive Income | | | Non- controlling | | | | |
| | Shares | | Amount | | Capital | | | Deficit | | | (Loss) | | | Interests | | | Total | |
Balance at December 31, 2007 | | 100 | | $ | — | | $ | 729 | | | $ | (97 | ) | | $ | 23 | | | $ | 31 | | | $ | 686 | |
Net income (loss) | | | | | | | | | | | | (14 | ) | | | | | | | 2 | | | | (12 | ) |
Distributions from Rumford Cogeneration to limited partners | | | | | | | | | | | | | | | | | | | | (4 | ) | | | (4 | ) |
Change in unrealized gain (loss) on cash-flow hedges, net of tax of $1 | | | | | | | | | | | | | | | | 3 | | | | | | | | 3 | |
Foreign currency translation adjustment | | | | | | | | | | | | | | | | (1 | ) | | | | | | | (1 | ) |
Adjustment to fair value of equity issued by NewPage Group in connection with the acquisition of SENA | | | | | | | | 8 | | | | | | | | | | | | | | | | 8 | |
Equity awards | | | | | | | | 15 | | | | | | | | | | | | | | | | 15 | |
Loans to parent companies | | | | | | | | (6 | ) | | | | | | | | | | | | | | | (6 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at June 30, 2008 | | 100 | | $ | — | | $ | 746 | | | $ | (111 | ) | | $ | 25 | | | $ | 29 | | | $ | 689 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
See notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FIRST HALF ENDED JUNE 30, 2009 AND 2008
Dollars in millions
| | | | | | | | | | | | | | | | |
| | NewPage Holding | | | NewPage | |
| | 2009 | | | 2008 | | | 2009 | | | 2008 | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | (122 | ) | | $ | (32 | ) | | $ | (112 | ) | | $ | (12 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | | | | | | | | | | | | | | | | |
Depreciation and amortization | | | 139 | | | | 149 | | | | 139 | | | | 149 | |
Non-cash interest expense | | | 23 | | | | 23 | | | | 13 | | | | 12 | |
(Gain) loss on disposal of assets | | | 4 | | | | 2 | | | | 4 | | | | 2 | |
Deferred income taxes | | | (11 | ) | | | (3 | ) | | | (11 | ) | | | (13 | ) |
LIFO effect | | | 27 | | | | 14 | | | | 27 | | | | 14 | |
Pension expense | | | 25 | | | | — | | | | 25 | | | | — | |
Equity award expense (Note E) | | | 6 | | | | 15 | | | | 6 | | | | 15 | |
Change in operating assets and liabilities | | | (125 | ) | | | (179 | ) | | | (125 | ) | | | (178 | ) |
| | | | | | | | | | | | | | | | |
Net cash provided by (used for) operating activities | | | (34 | ) | | | (11 | ) | | | (34 | ) | | | (11 | ) |
| | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | | | | | |
Capital expenditures | | | (31 | ) | | | (71 | ) | | | (31 | ) | | | (71 | ) |
Cash paid for acquisition | | | — | | | | (6 | ) | | | — | | | | (6 | ) |
Proceeds from sales of assets | | | 22 | | | | 5 | | | | 22 | | | | 5 | |
| | | | | | | | | | | | | | | | |
Net cash provided by (used for) investing activities | | | (9 | ) | | | (72 | ) | | | (9 | ) | | | (72 | ) |
| | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | | | | | |
Distributions from Rumford Cogeneration to limited partners | | | — | | | | (4 | ) | | | — | | | | (4 | ) |
Loans to parent companies (Note E) | | | (2 | ) | | | (6 | ) | | | (2 | ) | | | (6 | ) |
Repayments of long-term debt | | | (24 | ) | | | (8 | ) | | | (24 | ) | | | (8 | ) |
Borrowings on revolving credit facility | | | 587 | | | | — | | | | 587 | | | | — | |
Payments on revolving credit facility | | | (513 | ) | | | — | | | | (513 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Net cash provided by (used for) financing activities | | | 48 | | | | (18 | ) | | | 48 | | | | (18 | ) |
| | | | |
Effect of exchange rate changes on cash and cash equivalents | | | (2 | ) | | | (1 | ) | | | (2 | ) | | | (1 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net increase (decrease) in cash and cash equivalents | | | 3 | | | | (102 | ) | | | 3 | | | | (102 | ) |
Cash and cash equivalents at beginning of period | | | 3 | | | | 143 | | | | 3 | | | | 143 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 6 | | | $ | 41 | | | $ | 6 | | | $ | 41 | |
| | | | | | | | | | | | | | | | |
| | | | |
SUPPLEMENTAL INFORMATION | | | | | | | | | | | | | | | | |
Cash paid for interest | | $ | 121 | | | $ | 129 | | | $ | 121 | | | $ | 129 | |
| | | | | | | | | | | | | | | | |
See notes to condensed consolidated financial statements.
8
NEWPAGE HOLDING CORPORATION AND SUBSIDIARIES
NEWPAGE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Dollars in millions, except per share amounts
NewPage Holding Corporation (“NewPage Holding”) is a holding company that owns all of the outstanding capital stock of NewPage Corporation. NewPage Corporation and its subsidiaries are engaged in manufacturing, marketing and distributing printing papers used primarily for commercial printing, magazines, catalogs, textbooks and labels. Our products include coated, uncoated, supercalendered, newsprint and specialty papers and market pulp. Our products are manufactured at multiple mills in the United States and one mill in Canada and are supported by multiple distribution and converting locations. We operate within one operating segment. The condensed consolidated financial statements include the accounts of NewPage Holding and all entities it controls. This includes Rumford Cogeneration Company L.P. (“Rumford Cogeneration”), a limited partnership for which we are the general partner, which was created to generate power for our use and for third-party sale. All intercompany transactions and balances have been eliminated.
Unless the context provides otherwise, the terms “we,” “our” and “us” refer to NewPage Holding and its consolidated subsidiaries, including NewPage Corporation, a separate public-reporting company. Unless otherwise noted, “NewPage” refers to NewPage Corporation and its consolidated subsidiaries. Other than NewPage Holding’s debt obligation and related financing costs, interest expense and income tax effects, all other assets, liabilities, income, expenses, and cash flows presented for all periods represent those of its wholly-owned subsidiary, NewPage. Unless otherwise noted, the information provided pertains to both NewPage Holding and NewPage.
In December 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 160,Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51 (SFAS No. 160), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income (loss) attributable to the parent and to the noncontrolling interests, changes in a parent’s ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide disclosures to identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. We adopted SFAS No. 160 effective January 1, 2009. The amounts related to the minority interests in the condensed consolidated financial statements were retroactively adjusted to equity and the amount of minority interest in the condensed statements of operations was removed from other (income) expense. Revisions were made to prior period financial statements to present them on a comparable basis.
These interim condensed consolidated financial statements have not been audited. However, in the opinion of management, these financial statements include all normal recurring adjustments necessary for a fair presentation in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Certain information and footnote disclosures normally included in annual financial statements presented in accordance with U.S. GAAP have been condensed or omitted. The results of operations and cash flows for the interim periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying financial statements should be read in conjunction with the annual financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2008. We have evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q on August 14, 2009.
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Derivative Financial Instruments
We periodically use derivative financial instruments as part of our overall strategy to manage exposure to market risks associated with interest rate, foreign currency exchange rate and natural gas price fluctuations. We do not hold or issue derivative financial instruments for trading purposes. We regularly monitor the credit-worthiness of the counterparties to our derivative instruments in order to manage our credit risk exposures under these agreements. Our risk of loss in the event of nonperformance by any counterparty under derivative financial instrument agreements is not considered significant by management. These derivative instruments are measured at fair value and are classified as other assets or other long-term obligations on our balance sheets depending on the fair value of the instrument. If the derivative is designated as a fair-value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash-flow hedge, the effective portion of the change in the fair value of the derivative is recorded in other comprehensive income (loss) and is recognized in the consolidated statements of operations when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash-flow hedges and financial instruments not designated as hedges are recognized in earnings.
Interest Rates
We utilize interest-rate swap agreements to manage a portion of our interest-rate risk on our variable-rate debt instruments. As of June 30, 2009, we had outstanding interest rate swaps, designated as cash-flow hedges, totaling $1,200, expiring from December 2009 through December 2012. We receive amounts based on LIBOR and pay amounts at a weighted-average fixed rate of 3.7%. We measure the fair values of our interest rate swaps using observable interest-rate yield curves for comparable assets and liabilities at commonly quoted intervals. We paid cash of $(8) and $(4) for the second quarter ended June 30, 2009 and 2008, and $(16) and $(1) for the first half ended June 30, 2009 and 2008, which were recorded in interest expense on the hedged debt.
Foreign Currency
As of June 30, 2009, we were a party to foreign currency forward contracts aggregating $45 of contract value, expiring monthly through December 2009, to manage the variability of cash flows on anticipated U.S. dollar-denominated transactions with our Canadian subsidiary. We measure the fair values of our foreign currency forward contracts based on current quoted market prices for similar contracts.
Natural Gas
In order to hedge the future cost of natural gas consumed at our mills, we engage in financial hedging of future gas purchase prices, designated as cash flow hedges. We hedge with financial instruments that are priced based on New York Mercantile Exchange (NYMEX) natural gas futures contracts. We do not hedge basis (the effect of varying delivery points or locations) or transportation costs (the cost to transport the gas from the delivery point to a company location) under these transactions. As of June 30, 2009, we were party to natural gas futures contracts for notional amounts aggregating 3,000,000 MMBTUs, which expire through October 2011. We measure the fair values of our natural gas contracts based on natural gas futures contracts priced on the NYMEX.
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Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of June 30, 2009 and December 31, 2008, the fair values and carrying amounts of our financial assets and liabilities measured on a recurring basis are as follows:
| | | | | | | | |
Significant other observable inputs (Level 2) | | June 30, 2009 | | | Dec. 31, 2008 | |
| | |
Other assets—foreign exchange forward contracts | | $ | 6 | | | $ | — | |
| | |
Other long-term liabilities: | | | | | | | | |
Interest rate swap agreements | | $ | (42 | ) | | $ | (58 | ) |
Natural gas contracts | | | (3 | ) | | | (2 | ) |
The amount of gain (loss) on cash flow hedges recognized in other comprehensive income (loss) and the amount reclassified to income (loss) during the second quarter and first half ended June 30, 2009 are as follows:
| | | | | | | | | | |
Derivative Type | | Amount of gain (loss) recognized in OCI | | | Location of gain (loss) reclassified from AOCI to income (loss) | | Amount of gain (loss) reclassified from AOCI to income (loss) | |
Second quarter ended June 30, 2009 | | | | | | | | | | |
Interest rate swap agreements | | $ | 1 | | | Interest expense | | $ | (9 | ) |
Natural gas contracts | | | — | | | Cost of sales | | | (1 | ) |
| | | |
First half ended June 30, 2009 | | | | | | | | | | |
Interest rate swap agreements | | $ | (1 | ) | | Interest expense | | $ | (16 | ) |
Natural gas contracts | | | (3 | ) | | Cost of sales | | | (2 | ) |
Assets and Liabilities Not Carried at Fair Value
The fair value of long-term debt is based upon quoted market prices for the same or similar issues or on the current interest rates available to us for debt of similar terms and maturities. At June 30, 2009 and December 31, 2008, the carrying amounts of all other assets and liabilities that qualify as financial instruments approximated their fair value. Details of our long-term debt are as follows:
| | | | | | | | | | | | | | | | |
| | June 30, 2009 | | | Dec. 31, 2008 | |
| | Fair Value | | | Carrying Amount | | | Fair Value | | | Carrying Amount | |
Long-term debt: | | | | | | | | | | | | | | | | |
NewPage Holding | | $ | (1,975 | ) | | $ | (3,014 | ) | | $ | (1,343 | ) | | $ | (2,951 | ) |
NewPage | | | (1,945 | ) | | | (2,822 | ) | | | (1,305 | ) | | | (2,769 | ) |
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Inventories as of June 30, 2009 and December 31, 2008 consist of:
| | | | | | |
| | June 30, 2009 | | Dec. 31, 2008 |
Finished and in-process goods | | $ | 468 | | $ | 385 |
Raw materials | | | 75 | | | 110 |
Stores and supplies | | | 138 | | | 133 |
| | | | | | |
| | $ | 681 | | $ | 628 |
| | | | | | |
If inventories had been valued at current costs, they would have been valued at $714 and $630 at June 30, 2009 and December 31, 2008.
The balances of long-term debt as of June 30, 2009 and December 31, 2008 are as follows:
| | | | | | |
| | June 30, 2009 | | Dec. 31, 2008 |
NewPage: | | | | | | |
Revolving senior secured credit facility (LIBOR plus 2.00%) | | $ | 74 | | $ | — |
Term loan senior secured credit facility (face amount $1,560 and $1,584; LIBOR plus 3.75%) | | | 1,520 | | | 1,541 |
Floating rate senior secured notes (LIBOR plus 6.25%) | | | 225 | | | 225 |
10% senior secured notes (face amount $806) | | | 804 | | | 804 |
12% senior subordinated notes (face amount $200) | | | 199 | | | 199 |
Capital lease | | | 147 | | | 147 |
| | | | | | |
Total long-term debt, including current portion | | | 2,969 | | | 2,916 |
Current portion of long-term debt | | | 16 | | | 16 |
| | | | | | |
Subtotal | | | 2,953 | | | 2,900 |
NewPage Holding— | | | | | | |
Senior unsecured NewPage Holding PIK Notes (face amount $199 and $190; LIBOR plus 7.00%) | | | 192 | | | 182 |
| | | | | | |
Long-term debt | | $ | 3,145 | | $ | 3,082 |
| | | | | | |
Substantially all of our assets are pledged as collateral under our various debt agreements. See our Annual Report on Form 10-K for the year ended December 31, 2008 for further details on our debt agreements.
We were in compliance with all covenants as of June 30, 2009. The required financial covenant levels and the actual levels as of June 30, 2009 are as follows:
| | | | |
| | Covenant | | Actual |
Maximum Leverage Ratio | | 5.75 | | 5.65 |
Maximum Senior Leverage Ratio | | 3.25 | | 3.04 |
Minimum Interest Coverage Ratio | | 1.75 | | 2.14 |
Minimum Fixed Charge Coverage Ratio | | 1.10 | | 1.36 |
NewPage is required to comply with specified financial ratios and tests, including minimum interest and fixed charge coverage ratios, maximum senior and total leverage ratios and maximum capital expenditures. The required financial covenant levels become more restrictive over the term of the senior secured credit facilities. By December 31, 2009, the leverage ratio declines to 5.00 with further
12
decreases over the following three years to 3.75, the senior leverage ratio declines to 2.50 with further decreases over the following three years to 1.25 and the interest coverage ratio increases to 2.00 with a further increase to 2.50 the following year. Certain items included in results of operations are excluded under the definition of “consolidated adjusted EBITDA” used to calculate compliance with the financial covenants in our senior secured credit facilities. These include items such as equity award expense, the effect of LIFO inventory accounting, non-cash pension expense, cost of restructuring activities and costs related to the integration of the two businesses, among other items.
In July 2009, we announced that we were working with our lenders on an amendment of certain provisions of our term loan senior secured credit facility and revolving senior secured credit facility. In addition, NP Investor LLC (“NPI”), an affiliate of Cerberus Capital Management, L.P., the indirect controlling shareholder of NewPage, announced in July 2009 an offer to purchase a portion of NewPage’s floating rate senior secured notes, 10% senior secured notes and 12% senior subordinated notes. In addition, NPI announced an offer to purchase all of NewPage Holding’s senior unsecured PIK notes that are validly tendered and not withdrawn. Furthermore, the size, terms and timing of our previously announced proposed offering of new senior secured notes due 2014 are still under consideration at this time. There can be no assurance that we or NPI will complete any or all of these transactions on the terms previously announced or at all.
The economic environment continues to be challenging and uncertain, with limited visibility to the timing and strength of an economic recovery in North American coated paper. We continue to closely monitor market pricing and demand, but forecasting has become particularly difficult in this uncertain environment. A weak recovery in customer demand, coupled with continued price erosion, could jeopardize our ability to meet our financial covenants during the upcoming twelve-month period.
We are considering all actions possible to maintain compliance with our financial covenants. We also are continuing discussions with our lenders to obtain a waiver or amendment to the covenants. In addition, the senior secured credit agreements allow the shareholders of NewPage Group to make an equity contribution to NewPage within 10 days of the delivery of the compliance certificate to the administrative agent. The equity contribution would be added to consolidated adjusted EBITDA to determine compliance. The aggregate amount of contributions cannot exceed $50 and may be made up to two times in any 12 month period and four times over the life of the credit agreements. We cannot provide assurance that waivers or amendments could be obtained or whether the shareholders of NewPage Group would make an equity contribution to cure a violation. If we did violate our financial covenants, and were not able to obtain a waiver or amendment to the covenants, and the shareholders of NewPage Group did not make an equity contribution to cure the violation, and the lenders so request, the debt would become immediately payable and would affect our ability to borrow amounts under the revolving credit facility for liquidity needs. We do not have sufficient cash on hand to satisfy such a demand. Accordingly, the inability to comply with our financial covenants or obtain waivers or amendments for non-compliance would have a material adverse effect on our financial position, results of operations, liquidity and cash flows.
Under repurchase agreements between NewPage Group and certain former executive officers, NewPage Group agreed to repurchase the executive officers’ NewPage Group stock. During the first quarter ended March 31, 2009 and 2008, NewPage loaned $1 and $6 to NewPage Group to enable NewPage Group to satisfy its repurchase obligations, which were recorded as reductions in shareholder’s equity as repayment is not assured.
Included in selling, general and administrative expenses is equity award expense of $3 and $9 for the second quarter ended June 30, 2009 and 2008 and $6 and $15 for the first half ended June 30, 2009 and 2008. In March 2008, a portion of the performance-based options was considered granted for accounting purposes. These options had an aggregate fair value of $13 at the grant date. In March 2009, an additional portion of the performance-based options was considered granted for accounting purposes. These options had an aggregate fair value of $3 at the grant date and are being expensed over the remainder of 2009.
13
The following table summarizes activity in the plan:
| | | | | |
Shares of NewPage Group issuable under stock options, in thousands | | Options | | Weighted- average exercise price |
Outstanding at December 31, 2008 | | 4,022 | | $ | 20.46 |
Granted | | 1,128 | | | 21.23 |
| | | | | |
Outstanding at June 30, 2009 | | 5,150 | | | 20.49 |
| | | | | |
Exercisable at June 30, 2009 | | 847 | | | 21.24 |
| | | | | |
The outstanding options and the exercisable options at June 30, 2009, have a weighted-average remaining contractual life of 8.5 years.
We utilize a Black-Scholes pricing model to determine the fair value of options granted in accordance with SFAS 123R. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the stock price as well as assumptions regarding a number of other variables. These variables include expected stock price volatility over the term of the awards and projected employee stock option exercise behaviors (term of option). We estimate the expected term of options granted by incorporating the contractual term of the options and employees’ expected exercise behaviors. We estimate the volatility of NewPage Group’s common stock by considering volatility of appropriate peer companies and adjusting for factors unique to our stock, including the effect of debt leverage.
Assumptions used to determine the fair value of option grants are as follows:
| | | | | | | | |
| | First Half Ended June 30, | |
| | 2009 | | | 2008 | |
Weighted-average fair value of options granted | | $ | 3.06 | | | $ | 12.87 | |
Weighted-average assumptions used for grants: | | | | | | | | |
Expected volatility | | | 90 | % | | | 60 | % |
Risk-free interest rate | | | 2.0 | % | | | 2.8 | % |
Expected life of option (in years) | | | 5 | | | | 5 | |
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F. | COMPREHENSIVE INCOME (LOSS) |
Total comprehensive income (loss) is comprised of net income (loss), amortization of unrealized losses under our defined benefit plans, net unrealized gains (losses) on cash flow hedges and changes in foreign currency translation adjustment. Total comprehensive income (loss) is as follows:
| | | | | | | | | | | | | | | |
| | Second Quarter Ended June 30, | | | First Half Ended June 30, | |
| | 2009 | | 2008 | | | 2009 | | | 2008 | |
NewPage Holding | | | | | | | | | | | | | | | |
Comprehensive income (loss) | | $ | 6 | | $ | (12 | ) | | $ | (103 | ) | | $ | (30 | ) |
Comprehensive income (loss)—noncontrolling interests | | | 2 | | | 1 | | | | 3 | | | | 2 | |
Comprehensive income (loss) attributable to the company | | | 4 | | | (13 | ) | | | (106 | ) | | | (32 | ) |
| | | | |
NewPage | | | | | | | | | | | | | | | |
Comprehensive income (loss) | | $ | 11 | | $ | 5 | | | $ | (93 | ) | | $ | (10 | ) |
Comprehensive income (loss)—noncontrolling interests | | | 2 | | | 1 | | | | 3 | | | | 2 | |
Comprehensive income (loss) attributable to the company | | | 9 | | | 4 | | | | (96 | ) | | | (12 | ) |
G. | RETIREMENT AND OTHER POSTRETIREMENT BENEFITS |
A summary of the components of net periodic costs for the second quarter and first half ended June 30, 2009 and 2008 is as follows:
Pension Plans
| | | | | | | | | | | | | | | | |
| | U.S. Plans | | | Canadian Plans | |
| | Second Quarter Ended June 30, | | | Second Quarter Ended June 30, | |
| | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Service cost | | $ | 6 | | | $ | 4 | | | $ | 1 | | | $ | 1 | |
Interest cost | | | 16 | | | | 16 | | | | 5 | | | | 4 | |
Expected return on plan assets | | | (14 | ) | | | (21 | ) | | | (4 | ) | | | (5 | ) |
Amortization of net loss | | | 5 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net periodic cost (income) | | $ | 13 | | | $ | (1 | ) | | $ | 2 | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | |
| | U.S. Plans | | | Canadian Plans | |
| | First Half Ended June 30, | | | First Half Ended June 30, | |
| | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Service cost | | $ | 11 | | | $ | 9 | | | $ | 1 | | | $ | 2 | |
Interest cost | | | 32 | | | | 31 | | | | 9 | | | | 9 | |
Expected return on plan assets | | | (28 | ) | | | (42 | ) | | | (7 | ) | | | (10 | ) |
Amortization of net loss | | | 10 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net periodic cost (income) before termination benefits | | | 25 | | | | (2 | ) | | | 3 | | | | 1 | |
Termination benefits | | | — | | | | 1 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
Net periodic cost (income) after termination benefits | | $ | 25 | | | $ | (1 | ) | | $ | 3 | | | $ | 1 | |
| | | | | | | | | | | | | | | | |
15
Other Postretirement Plans
| | | | | | | | | | | | | |
| | U.S. Plans | | Canadian Plans |
| | Second Quarter Ended June 30, | | Second Quarter Ended June 30, |
| | 2009 | | | 2008 | | 2009 | | 2008 |
Service cost | | $ | 1 | | | $ | — | | $ | — | | $ | — |
Interest cost | | | 3 | | | | 4 | | | 1 | | | — |
Amortization of prior service cost | | | (1 | ) | | | — | | | — | | | — |
| | | | | | | | | | | | | |
Net periodic cost | | $ | 3 | | | $ | 4 | | $ | 1 | | $ | — |
| | | | | | | | | | | | | |
| | |
| | U.S. Plans | | Canadian Plans |
| | First Half Ended June 30, | | First Half Ended June 30, |
| | 2009 | | | 2008 | | 2009 | | 2008 |
Service cost | | $ | 1 | | | $ | 1 | | $ | — | | $ | 1 |
Interest cost | | | 6 | | | | 8 | | | 1 | | | — |
Amortization of prior service cost | | | (1 | ) | | | — | | | — | | | — |
| | | | | | | | | | | | | |
Net periodic cost | | $ | 6 | | | $ | 9 | | $ | 1 | | $ | 1 |
| | | | | | | | | | | | | |
As a result of the restructuring actions described in Note J, during the first quarter ended March 31, 2008 we recognized a special termination charge of $1 in cost of sales for employees affected by the shutdown of the No. 11 paper machine in Rumford, Maine.
The U.S. Internal Revenue Code allows a refundable excise tax credit for alternative fuel mixtures produced for sale or for use as a fuel in a trade or business. The credit is equal to fifty cents per gallon of alternative fuel contained in the mixture. During the first quarter ended March 31, 2009, we filed to be registered as an alternative fuel mixer, and in April 2009 received notification that the registration was approved. During the second quarter of 2009, we received payments of $112, including $45 for alternative fuel mixtures used in the first quarter of 2009. We recognize income for the credits at the time the alternative fuel mixtures are used in our operations and when all revenue recognition criteria have been met. The amounts of credits eligible for recognition, but not received at the end of the period are included in accounts receivable, net. We recognized $120 of income in other (income) expense for the second quarter of 2009 for alternative fuels used through June 30, 2009.
For the second quarter and first half ended June 30, 2009 and 2008, we recorded a valuation allowance against our net deferred income tax benefit for federal income taxes and for certain states as it was more likely than not that we would not realize those benefits. For the second quarter and first half ended June 30, 2009, we have allocated $7 and $11 of tax expense to other comprehensive income (loss) and the corresponding offset as an allocation to tax benefit from operations.
During 2008, we announced actions being taken to integrate NewPage operations and the former Stora Enso North America, Inc. (“SENA”) facilities and services. These actions were intended to expand our business platform, serve our customers more efficiently and deliver on the projected synergies of the acquisition.
16
The restructuring actions taken are as follows:
| • | | Permanently close the No. 11 paper machine in Rumford, Maine, in February 2008; approximately 60 employees were affected by the shutdown |
| • | | Permanently close the pulp mill and both paper machines in Niagara, Wisconsin, in June 2008; approximately 320 employees were affected by the shutdown |
| • | | Permanently close the No. 95 paper machine in Kimberly, Wisconsin, in May 2008 and the mill and both remaining paper machines, Nos. 96 and 97, in September 2008; approximately 600 employees were affected by the shutdowns |
| • | | Permanently close the Chillicothe, Ohio, converting facility in February 2009; approximately 160 employees were affected by the shutdown |
| • | | Reduce personnel in other areas, including sales, finance and other support functions; approximately 200 employees will be affected by this action |
During the first quarter ended March 31, 2009, we recorded an adjustment of $1 in selling, general and administrative expenses for the reversal of employee-related costs included as an assumed liability in the purchase price allocation as a result of a change in estimate. During the second quarter ended June 30, 2008, we incurred total charges of $8 for historical NewPage operations, including $6 in accelerated depreciation recorded in cost of sales and $2 of employee-related costs recorded in cost of sales. During the first half ended June 30, 2008, we incurred total charges of $17, including $12 in accelerated depreciation and inventory write-offs recorded in cost of sales and $5 of employee-related costs, of which $4 is recorded in cost of sales and $1 is recorded in selling, general and administrative expenses. In addition, as of June 30, 2008, we recorded $25 of employee-related costs for former SENA employees as a liability in the purchase price allocation. We expect all remaining closure-related activities to be substantially completed in 2009.
The activity in the accrued restructuring liability relating to these actions for the first half ended June 30, 2009 was as follows:
| | | | | | | | |
| | Closure Costs | | | Employee Costs | |
Balance accrued at December 31, 2008 | | $ | 14 | | | $ | 19 | |
Adjustments | | | — | | | | (1 | ) |
Payments | | | (4 | ) | | | (11 | ) |
| | | | | | | | |
Balance accrued at June 30, 2009 | | $ | 10 | | | $ | 7 | |
| | | | | | | | |
17
The activity in the accrued restructuring liability relating to these actions for the first half ended June 30, 2008 was as follows:
| | | | |
| | Employee Costs | |
Balance accrued at December 31, 2007 | | $ | 4 | |
Additions to reserve recorded on opening balance sheet | | | 25 | |
Current charges | | | 5 | |
Payments | | | (10 | ) |
| | | | |
Balance accrued at June 30, 2008 | | $ | 24 | |
| | | | |
K. | SALE OF HYDROELECTRIC FACILITY |
On March 23, 2009, NewPage Wisconsin System Inc., an indirect wholly-owned subsidiary of NewPage, completed the sale of a hydroelectric generating facility located in Niagara, Wisconsin to Northbrook Wisconsin, LLC for a net cash sales price of $22. Included in cost of sales for the first half ended June 30, 2009 is a loss on the sale of $3.
L. | COMMITMENTS AND CONTINGENCIES |
Claims have been made against us for the costs of environmental remediation measures taken or to be taken. Reserves for these liabilities have been established and no insurance recoveries have been anticipated in the determination of the reserves. We are involved in various other litigation and administrative proceedings arising in the normal course of business. Although the ultimate outcome of these matters cannot be predicted with certainty, we do not believe that the currently expected outcome of any matter, lawsuit or claim that is pending or threatened, or all of them combined, will have a material adverse effect on our financial condition, results of operations or liquidity.
M. | INITIAL PUBLIC OFFERING OF NEWPAGE GROUP |
On May 5, 2008, NewPage Group filed a registration statement on Form S-1 with the Securities and Exchange Commission relating to an initial public offering of its common stock. There can be no assurance that NewPage Group will complete the offering or what the terms of the offering will be.
N. | SUPPLEMENTAL CONSOLIDATING INFORMATION |
NewPage has issued $225 face amount of floating rate senior secured notes due May 2012, $806 face amount of 10% senior secured notes due May 2012 and $200 face amount of 12% senior subordinated notes due May 2013 (the “Notes”). The Notes are jointly and severally guaranteed on a full and unconditional basis by NewPage’s 100%-owned subsidiaries, except Consolidated Water Power Company, our non-guarantor subsidiary.
The following condensed consolidating financial statements have been prepared from financial information on the same basis of accounting as the consolidated financial statements. Investments in our subsidiaries are accounted for under the equity method. Certain revisions have been made to this supplemental consolidating information related to the presentation of the noncontrolling interest. The noncontrolling interest was initially recognized in this data for the period ended March 31, 2009. We believe the revision is immaterial to that period.
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NEWPAGE CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2009
| | | | | | | | | | | | | | | | |
| | NewPage Corporation | | Guarantor Subsidiaries | | Non- Guarantor Subsidiary | | Consolidation/ Eliminations | | | Consolidated |
ASSETS | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 1 | | $ | — | | $ | 2 | | $ | 3 | | | $ | 6 |
Accounts receivable | | | 234 | | | 22 | | | 1 | | | 3 | | | | 260 |
Inventories | | | 369 | | | 311 | | | — | | | 1 | | | | 681 |
Other current assets | | | 16 | | | 4 | | | 1 | | | — | | | | 21 |
| | | | | | | | | | | | | | | | |
Total current assets | | | 620 | | | 337 | | | 4 | | | 7 | | | | 968 |
| | | | | |
Intercompany receivables | | | 1,341 | | | 476 | | | 45 | | | (1,862 | ) | | | — |
Property, plant and equipment, net | | | 29 | | | 2,979 | | | 40 | | | 19 | | | | 3,067 |
Investment in subsidiaries | | | 2,058 | | | 46 | | | — | | | (2,104 | ) | | | — |
Other assets | | | 102 | | | — | | | — | | | 3 | | | | 105 |
| | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 4,150 | | $ | 3,838 | | $ | 89 | | $ | (3,937 | ) | | $ | 4,140 |
| | | | | | | | | | | | | | | | |
| | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 62 | | $ | 153 | | $ | — | | $ | — | | | $ | 215 |
Other current liabilities | | | 117 | | | 119 | | | 8 | | | — | | | | 244 |
Current maturities of long-term debt | | | 16 | | | — | | | — | | | — | | | | 16 |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | 195 | | | 272 | | | 8 | | | — | | | | 475 |
| | | | | |
Intercompany payables | | | 542 | | | 1,295 | | | 25 | | | (1,862 | ) | | | — |
Long-term debt | | | 2,806 | | | 147 | | | — | | | — | | | | 2,953 |
Other long-term liabilities | | | 542 | | | 66 | | | 10 | | | — | | | | 618 |
Equity | | | 65 | | | 2,058 | | | 46 | | | (2,075 | ) | | | 94 |
| | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 4,150 | | $ | 3,838 | | $ | 89 | | $ | (3,937 | ) | | $ | 4,140 |
| | | | | | | | | | | | | | | | |
19
NEWPAGE CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2008
| | | | | | | | | | | | | | | | |
| | NewPage Corporation | | Guarantor Subsidiaries | | Non- Guarantor Subsidiary | | Consolidation/ Eliminations | | | Consolidated |
ASSETS | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 1 | | $ | — | | $ | 2 | | $ | — | | | $ | 3 |
Accounts receivable | | | 242 | | | 35 | | | 1 | | | — | | | | 278 |
Inventories | | | 249 | | | 379 | | | — | | | — | | | | 628 |
Other current assets | | | 11 | | | 10 | | | 1 | | | — | | | | 22 |
| | | | | | | | | | | | | | | | |
Total current assets | | | 503 | | | 424 | | | 4 | | | — | | | | 931 |
| | | | | |
Intercompany receivables | | | 1,194 | | | 168 | | | 20 | | | (1,382 | ) | | | — |
Property, plant and equipment, net | | | 16 | | | 3,122 | | | 40 | | | 27 | | | | 3,205 |
Investment in subsidiaries | | | 2,051 | | | 47 | | | — | | | (2,098 | ) | | | — |
Other assets | | | 97 | | | 12 | | | 1 | | | (1 | ) | | | 109 |
| | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 3,861 | | $ | 3,773 | | $ | 65 | | $ | (3,454 | ) | | $ | 4,245 |
| | | | | | | | | | | | | | | | |
| | | | | |
LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 51 | | $ | 201 | | $ | 1 | | $ | 1 | | | $ | 254 |
Other current liabilities | | | 99 | | | 164 | | | 7 | | | — | | | | 270 |
Current maturities of long-term debt | | | 16 | | | — | | | — | | | — | | | | 16 |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | 166 | | | 365 | | | 8 | | | 1 | | | | 540 |
| | | | | |
Intercompany payables | | | 244 | | | 1,139 | | | — | | | (1,383 | ) | | | — |
Long-term debt | | | 2,753 | | | 147 | | | — | | | — | | | | 2,900 |
Other long-term liabilities | | | 541 | | | 71 | | | 10 | | | — | | | | 622 |
Equity | | | 157 | | | 2,051 | | | 47 | | | (2,072 | ) | | | 183 |
| | | | | | | | | | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 3,861 | | $ | 3,773 | | $ | 65 | | $ | (3,454 | ) | | $ | 4,245 |
| | | | | | | | | | | | | | | | |
20
NEWPAGE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 2009
| | | | | | | | | | | | | | | | | | |
| | NewPage Corporation | | | Guarantor Subsidiaries | | Non- Guarantor Subsidiary | | Consolidation/ Eliminations | | | Consolidated | |
Net sales | | $ | 562 | | | $ | 716 | | $ | 20 | | $ | (562 | ) | | $ | 736 | |
Cost of sales | | | 595 | | | | 705 | | | 20 | | | (564 | ) | | | 756 | |
Selling, general and administrative expenses | | | 44 | | | | 5 | | | — | | | — | | | | 49 | |
Equity in (earnings) loss of subsidiaries | | | (1 | ) | | | — | | | — | | | 1 | | | | — | |
Interest expense | | | 64 | | | | 3 | | | — | | | — | | | | 67 | |
Other (income) expense, net | | | (127 | ) | | | 2 | | | — | | | — | | | | (125 | ) |
| | | | | | | | | | | | | | | | | | |
| | | | | |
Income (loss) before income taxes | | | (13 | ) | | | 1 | | | — | | | 1 | | | | (11 | ) |
Income tax (benefit) | | | (7 | ) | | | — | | | — | | | — | | | | (7 | ) |
| | | | | | | | | | | | | | | | | | |
| | | | | |
Net income (loss) | | | (6 | ) | | | 1 | | | — | | | 1 | | | | (4 | ) |
Net income (loss)—noncontrolling interests | | | — | | | | — | | | — | | | 2 | | | | 2 | |
| | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to the company | | $ | (6 | ) | | $ | 1 | | $ | — | | $ | (1 | ) | | $ | (6 | ) |
| | | | | | | | | | | | | | | | | | |
NEWPAGE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FIRST HALF ENDED JUNE 30, 2009
| | | | | | | | | | | | | | | | | | | |
| | NewPage Corporation | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiary | | Consolidation/ Eliminations | | | Consolidated | |
Net sales | | $ | 1,072 | | | $ | 1,454 | | | $ | 41 | | $ | (1,109 | ) | | $ | 1,458 | |
Cost of sales | | | 1,111 | | | | 1,436 | | | | 41 | | | (1,112 | ) | | | 1,476 | |
Selling, general and administrative expenses | | | 75 | | | | 20 | | | | — | | | — | | | | 95 | |
Equity in (earnings) loss of subsidiaries | | | 8 | | | | — | | | | — | | | (8 | ) | | | — | |
Interest expense | | | 129 | | | | 5 | | | | — | | | — | | | | 134 | |
Other (income) expense, net | | | (126 | ) | | | 1 | | | | — | | | — | | | | (125 | ) |
| | | | | | | | | | | | | | | | | | | |
| | | | | |
Income (loss) before income taxes | | | (125 | ) | | | (8 | ) | | | — | | | 11 | | | | (122 | ) |
Income tax (benefit) | | | (10 | ) | | | — | | | | — | | | — | | | | (10 | ) |
| | | | | | | | | | | | | | | | | | | |
| | | | | |
Net income (loss) | | | (115 | ) | | | (8 | ) | | | — | | | 11 | | | | (112 | ) |
Net income (loss)—noncontrolling interests | | | — | | | | — | | | | — | | | 3 | | | | 3 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to the company | | $ | (115 | ) | | $ | (8 | ) | | $ | — | | $ | 8 | | | $ | (115 | ) |
| | | | | | | | | | | | | | | | | | | |
21
NEWPAGE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 2008
| | | | | | | | | | | | | | | | | | | |
| | NewPage Corporation | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiary | | Consolidation/ Eliminations | | | Consolidated | |
Net sales | | $ | 459 | | | $ | 1,038 | | | $ | 22 | | $ | (456 | ) | | $ | 1,063 | |
Cost of sales | | | 409 | | | | 1,000 | | | | 22 | | | (457 | ) | | | 974 | |
Selling, general and administrative expenses | | | 33 | | | | 29 | | | | — | | | — | | | | 62 | |
Equity in (earnings) loss of subsidiaries | | | (8 | ) | | | — | | | | — | | | 8 | | | | — | |
Interest expense | | | 65 | | | | 3 | | | | — | | | — | | | | 68 | |
Other (income) expense, net | | | (1 | ) | | | (2 | ) | | | — | | | — | | | | (3 | ) |
| | | | | | | | | | | | | | | | | | | |
| | | | | |
Income (loss) before income taxes | | | (39 | ) | | | 8 | | | | — | | | (7 | ) | | | (38 | ) |
Income tax (benefit) | | | (18 | ) | | | — | | | | | | | — | | | | (18 | ) |
| | | | | | | | | | | | | | | | | | | |
| | | | | |
Net income (loss) | | | (21 | ) | | | 8 | | | | — | | | (7 | ) | | | (20 | ) |
Net income (loss)—noncontrolling interests | | | — | | | | — | | | | — | | | 1 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to the company | | $ | (21 | ) | | $ | 8 | | | $ | — | | $ | (8 | ) | | $ | (21 | ) |
| | | | | | | | | | | | | | | | | | | |
NEWPAGE CORPORATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FIRST HALF ENDED JUNE 30, 2008
| | | | | | | | | | | | | | | | | | | | |
| | NewPage Corporation | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiary | | | Consolidation/ Eliminations | | | Consolidated | |
Net sales | | $ | 974 | | | $ | 2,151 | | | $ | 46 | | | $ | (918 | ) | | $ | 2,253 | |
Cost of sales | | | 860 | | | | 2,046 | | | | 46 | | | | (920 | ) | | | 2,032 | |
Selling, general and administrative expenses | | | 77 | | | | 40 | | | | — | | | | — | | | | 117 | |
Equity in (earnings) loss of subsidiaries | | | (45 | ) | | | 1 | | | | — | | | | 44 | | | | — | |
Interest expense | | | 134 | | | | 5 | | | | — | | | | — | | | | 139 | |
Other (income) expense, net | | | (1 | ) | | | (9 | ) | | | — | | | | — | | | | (10 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Income (loss) before income taxes | | | (51 | ) | | | 68 | | | | — | | | | (42 | ) | | | (25 | ) |
Income tax (benefit) | | | (37 | ) | | | 23 | | | | 1 | | | | — | | | | (13 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net income (loss) | | | (14 | ) | | | 45 | | | | (1 | ) | | | (42 | ) | | | (12 | ) |
Net income (loss)—noncontrolling interests | | | — | | | | — | | | | — | | | | 2 | | | | 2 | |
| | | | | | | | | | | | | | | | | | | | |
Net income (loss) attributable to the company | | $ | (14 | ) | | $ | 45 | | | $ | (1 | ) | | $ | (44 | ) | | $ | (14 | ) |
| | | | | | | | | | | | | | | | | | | | |
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NEWPAGE CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FIRST HALF ENDED JUNE 30, 2009
| | | | | | | | | | | | | | | | | | |
| | NewPage Corporation | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiary | | Consolidation/ Eliminations | | Consolidated | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | | | | | | | | | |
Net cash provided by (used for) operating activities | | $ | (45 | ) | | $ | 8 | | | $ | — | | $ | 3 | | $ | (34 | ) |
| | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | | | | | | | |
Capital expenditures | | | (3 | ) | | | (28 | ) | | | — | | | — | | | (31 | ) |
Proceeds from sales of assets | | | — | | | | 22 | | | | — | | | — | | | 22 | |
| | | | | | | | | | | | | | | | | | |
Net cash provided by (used for) investing activities | | | (3 | ) | | | (6 | ) | | | — | | | — | | | (9 | ) |
| | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | | | | | | | |
Loans to parent companies | | | (2 | ) | | | — | | | | — | | | — | | | (2 | ) |
Repayments on long-term debt | | | (24 | ) | | | — | | | | — | | | — | | | (24 | ) |
Borrowings on revolving credit facility | | | 587 | | | | — | | | | — | | | — | | | 587 | |
Payments on revolving credit facility | | | (513 | ) | | | — | | | | — | | | — | | | (513 | ) |
| | | | | | | | | | | | | | | | | | |
Net cash provided by (used for) financing activities | | | 48 | | | | — | | | | — | | | — | | | 48 | |
| | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | — | | | | (2 | ) | | | — | | | — | | | (2 | ) |
| | | | | | | | | | | | | | | | | | |
| | | | | |
Net increase (decrease) in cash and cash equivalents | | | — | | | | — | | | | — | | | 3 | | | 3 | |
Cash and cash equivalents at beginning of period | | | 1 | | | | — | | | | 2 | | | — | | | 3 | |
| | | | | | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 1 | | | $ | — | | | $ | 2 | | $ | 3 | | $ | 6 | |
| | | | | | | | | | | | | | | | | | |
23
NEWPAGE CORPORATION
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FIRST HALF ENDED JUNE 30, 2008
| | | | | | | | | | | | | | | | | | | | |
| | NewPage Corporation | | | Guarantor Subsidiaries | | | Non- Guarantor Subsidiary | | | Consolidation/ Eliminations | | | Consolidated | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | | | | | | | | | | | |
Net cash provided by (used for) operating activities | | $ | (61 | ) | | $ | 52 | | | $ | (5 | ) | | $ | 3 | | | $ | (11 | ) |
| | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | | | | | | | | | |
Capital expenditures | | | (1 | ) | | | (70 | ) | | | — | | | | — | | | | (71 | ) |
Cash paid for acquisition | | | (6 | ) | | | — | | | | — | | | | — | | | | (6 | ) |
Proceeds from sales of assets | | | — | | | | 3 | | | | 2 | | | | — | | | | 5 | |
| | | | | | | | | | | | | | | | | | | | |
Net cash provided by (used for) investing activities | | | (7 | ) | | | (67 | ) | | | 2 | | | | — | | | | (72 | ) |
| | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | | | | | | | | | |
Distributions from Rumford Cogeneration to limited partners | | | — | | | | — | | | | — | | | | (4 | ) | | | (4 | ) |
Loans to parent companies | | | (6 | ) | | | — | | | | — | | | | — | | | | (6 | ) |
Repayments on long-term debt | | | (8 | ) | | | — | | | | — | | | | — | | | | (8 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net cash provided by (used for) financing activities | | | (14 | ) | | | — | | | | — | | | | (4 | ) | | | (18 | ) |
| | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | — | | | | (1 | ) | | | — | | | | — | | | | (1 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Net increase (decrease) in cash and cash equivalents | | | (82 | ) | | | (16 | ) | | | (3 | ) | | | (1 | ) | | | (102 | ) |
Cash and cash equivalents at beginning of period | | | 88 | | | | 49 | | | | 5 | | | | 1 | | | | 143 | |
| | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 6 | | | $ | 33 | | | $ | 2 | | | $ | — | | | $ | 41 | |
| | | | | | | | | | | | | | | | | | | | |
* * * * *
24
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Overview
Company Background
We believe that we are the largest coated paper manufacturer in North America based on production capacity. Coated paper is used primarily in media and marketing applications, such as high-end advertising brochures, direct mail advertising, coated labels, magazines, magazine covers and inserts, catalogs and textbooks. We operate 20 paper machines at ten paper mills located in Kentucky, Maine, Maryland, Michigan, Minnesota, Wisconsin and Nova Scotia, Canada.
Trends in Our Business
North American coated paper demand is primarily driven by advertising and print media usage. In particular, the demand for certain grades of coated paper is affected by spending on catalog and promotional materials by retailers and spending on magazine advertising, which affects the number of printed pages in magazines. During the first half of 2009, North American coated paper demand declined significantly compared to the first half of 2008. This decline was a result of decreased advertising spending and magazine and catalog circulation largely attributable to macroeconomic factors and inventory reductions by customers. In response to this reduction in coated paper demand, we took 310,000 tons of market-related downtime during the first half of 2009. We will consider the need for additional market-related downtime from time to time based on market conditions.
The supply of coated paper in North America also declined during the first half of 2009 compared to the first half of 2008. The North American coated paper supply has been affected by North American capacity closures and market-related downtime in response to the lower demand, partially offset by an increase in imports into North America. We believe imports continue to gain North American market share as a result of the exchange rate of the U.S. dollar relative to other currencies, especially the Euro, low transportation costs and foreign overcapacity. Asian producers, in particular, have significantly increased imports to the U.S. in recent years. The increase in import volume, combined with lower North American supply, has also resulted in a higher market share for imported products.
During the first half of 2009, we experienced a decrease in our transportation, chemical and other raw material costs as a result of lower crude oil prices. Overall, we expect crude oil and energy costs to remain volatile for the foreseeable future, although at lower levels compared to the peak levels in 2008.
North American prices for coated paper products historically have been determined by North American supply and demand, rather than directly by raw material costs or other costs of sales. We therefore have limited ability to increase prices in response to increases in our costs if demand relative to supply does not remain strong. As a result of the supply, demand and cost factors described above, coated paper prices in the United States generally rose due to a combination of increased demand and reduced North American capacity resulting from capacity rationalization. However, the recent decline in demand has resulted in some price pressure and our weighted-average coated paper prices declined modestly to $953 per ton in the first half of 2009. Since the peak in October 2008, U.S. market prices decreased for both coated groundwood paper and coated freesheet paper. As a result of the current economic downturn, we anticipate continued pressure on paper prices for the near term.
25
Restructuring
During 2008, we announced actions being taken to integrate NewPage operations and the former SENA facilities and services. These actions were intended to expand our business platform, serve our customers more efficiently and deliver on the projected synergies of the acquisition.
The restructuring actions taken are as follows:
| • | | Permanently close the No. 11 paper machine in Rumford, Maine, in February 2008; approximately 60 employees were affected by the shutdown |
| • | | Permanently close the pulp mill and both paper machines in Niagara, Wisconsin, in June 2008; approximately 320 employees were affected by the shutdown |
| • | | Permanently close the No. 95 paper machine in Kimberly, Wisconsin, in May 2008 and the mill and both remaining paper machines, Nos. 96 and 97, in September 2008; approximately 600 employees were affected by the shutdowns |
| • | | Permanently close the Chillicothe, Ohio, converting facility in February 2009; approximately 160 employees were affected by the shutdown |
| • | | Reduce personnel in other areas, including sales, finance and other support functions; approximately 200 employees will be affected by this action |
During the first quarter ended March 31, 2009, we recorded an adjustment of $1 million in selling, general and administrative expenses for the reversal of employee-related costs included as an assumed liability in the purchase price allocation as a result of a change in estimate. During the second quarter ended June 30, 2008, we incurred total charges of $8 million for historical NewPage operations, including $6 million in accelerated depreciation recorded in cost of sales and $2 million of employee-related costs recorded in cost of sales. During the first half ended June 30, 2008, we incurred total charges of $17 million, including $12 million in accelerated depreciation and inventory write-offs recorded in cost of sales and $5 million of employee-related costs, of which $4 million is recorded in cost of sales and $1 million is recorded in selling, general and administrative expenses. In addition, as of June 30, 2008, we recorded $25 million of employee-related costs for former SENA employees as a liability in the purchase price allocation. During the third quarter of 2009, we completed our integration activities. We expect all remaining closure-related activities to be substantially completed in 2009.
Seasonality
We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors common in the paper industry. Typically, the first two quarters are our slowest quarters due to lower demand for coated paper during this period. Our third quarter is typically our strongest sales quarter, reflecting an increase in sales volume as printers prepare for year-end holiday catalogs and advertising. Our accounts receivable and payable generally peak in the third quarter, while inventory generally peaks in the second quarter in anticipation of the third quarter season. Announced price increases and the general economic environment can affect historical seasonal patterns.
Results of Operations
The following tables set forth the historical results of operations of NewPage Holding for the periods indicated below. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and notes thereto included in this Quarterly Report. All assets, liabilities, income, expenses and cash flows presented for all periods represent those of NewPage Holding’s wholly-owned subsidiary, NewPage, except for NewPage Holding’s debt obligation and related financing costs, interest expense and income tax effects. Unless otherwise noted, the information provided pertains to both NewPage Holding and NewPage.
26
Second Quarter 2009 Compared to Second Quarter 2008
| | | | | | | | | | | | | | |
| | NewPage Holding | |
| | Second Quarter Ended June 30, | |
| | 2009 | | | 2008 | |
(in millions) | | $ | | | % | | | $ | | | % | |
| | | | |
Net sales | | | 736 | | | 100.0 | | | | 1,063 | | | 100.0 | |
Cost of sales | | | 756 | | | 102.7 | | | | 974 | | | 91.6 | |
Selling, general and administrative expenses | | | 49 | | | 6.7 | | | | 62 | | | 5.9 | |
Interest expense | | | 72 | | | 9.7 | | | | 73 | | | 6.8 | |
Other (income) expense, net | | | (125 | ) | | (17.0 | ) | | | (3 | ) | | (0.3 | ) |
| | | | | | | | | | | | | | |
Income (loss) before income taxes | | | (16 | ) | | (2.1 | ) | | | (43 | ) | | (4.0 | ) |
Income tax (benefit) | | | (7 | ) | | (0.9 | ) | | | (6 | ) | | (0.6 | ) |
| | | | | | | | | | | | | | |
Net income (loss) | | | (9 | ) | | (1.2 | ) | | | (37 | ) | | (3.4 | ) |
Net income (loss)—noncontrolling interests | | | 2 | | | 0.2 | | | | 1 | | | 0.1 | |
| | | | | | | | | | | | | | |
Net income (loss) attributable to the company | | | (11 | ) | | (1.4 | ) | | | (38 | ) | | (3.5 | ) |
| | | | | | | | | | | | | | |
| | | | |
Supplemental Information | | | | | | | | | | | | | | |
Earnings before interest, taxes, depreciation and amortization (EBITDA) | | $ | 123 | | | | | | $ | 103 | | | | |
| | | | | | | | | | | | | | |
Net sales for the second quarter of 2009 were $736 million, compared to $1,063 million for the second quarter of 2008, a decrease of $327 million, or 31%. Net sales were affected primarily by lower sales volume of coated paper ($271 million) and lower coated paper prices ($34 million) in the second quarter of 2009 compared to the second quarter of 2008. Weighted-average coated paper prices decreased to $931 per ton in the second quarter of 2009 compared to $988 per ton in the second quarter of 2008. We believe that some of the decline in pricing resulted from producers passing on the benefits of the alternative fuel mixture credit to customers. Coated paper sales volume decreased to 601,000 tons in the second quarter of 2009 compared to 875,000 tons in the second quarter of 2008. Volume was lower primarily from lower demand for catalog and promotional materials by retailers and lower spending on magazine advertising during the second quarter of 2009, as well as customers reducing their levels of inventory on hand. As a result of these factors, we took 161,000 tons of market-related downtime during the second quarter of 2009. During the second quarter of 2008, we took 18,000 tons of market-related downtime. We will consider the need for additional downtime from time to time based on market conditions.
Cost of sales for the second quarter of 2009 was $756 million, compared to $974 million for the second quarter of 2008, a decrease of $218 million, or 22%. The decrease was primarily a result of lower coated paper sales volume ($201 million). Gross margin for the second quarter of 2009 decreased to (2.7)% compared to 8.4% for the second quarter of 2008 primarily as a result of significantly lower sales volume and the effects of taking market-related downtime, partially offset by productivity improvement initiatives and lower input costs resulting primarily from lower crude oil prices. The second quarter of 2008 also includes $6 million for accelerated depreciation and $2 million of employee-related costs associated with our restructuring plan announced in 2008. Maintenance expense at our mills totaled $74 million and $101 million in the second quarter of 2009 and 2008.
Selling, general and administrative expenses decreased to $49 million for the second quarter of 2009 from $62 million for the second quarter of 2008, primarily as a result of lower costs related to the integration of the two businesses and lower employee costs, as well
27
as $6 million in lower stock compensation expense. As a percentage of net sales, selling, general and administrative expenses increased in the second quarter of 2009 to 6.7% from 5.9% in the second quarter of 2008, as a result of lower sales volumes.
Interest expense for the second quarter of 2009 was $72 million compared to $73 million for the second quarter of 2008. Interest expense for NewPage for the second quarter of 2009 was $67 million compared to $68 million for the second quarter of 2008. The slight decreases were primarily the effect of lower market interest rates on our variable interest rate debt, offset by higher outstanding borrowings under the revolving credit facility.
Other (income) expense was $(125) million for the second quarter of 2009 and $(3) million in the second quarter of 2008. The amount recognized in the second quarter of 2009 was primarily the result of $120 million of income recognized for alternative fuel mixture tax credits.
Income tax expense (benefit) for the second quarter of 2009 and 2008 was $(7) million and $(6) million. Income tax expense (benefit) for NewPage for the second quarter of 2009 and 2008 was $(7) million and $(18) million. For the second quarter of 2009, we recorded a valuation allowance against our net deferred income tax benefit for federal income taxes and for certain states as it was more likely than not that we would not realize those benefits. For the second quarter ended June 30, 2009, we have allocated $7 million of tax expense to other comprehensive income (loss) and the corresponding offset as an allocation to tax benefit from operations.
Net income (loss) attributable to the company was $(11) million in the second quarter of 2009 compared to net income (loss) attributable to the company of $(38) million in the second quarter of 2008, primarily as a result of the alternative fuel mixture tax credits, partially offset by significantly lower sales volumes.
EBITDA was $123 million and $103 million for the second quarter of 2009 and 2008. See “Reconciliation of Net Income (Loss) Attributable to the Company to EBITDA” for further information on the use of EBITDA as a measurement tool.
28
First Half 2009 Compared to First Half 2008
| | | | | | | | | | | | | | |
| | NewPage Holding | |
| | First Half Ended June 30, | |
| | 2009 | | | 2008 | |
(in millions) | | $ | | | % | | | $ | | | % | |
| | | | |
Net sales | | | 1,458 | | | 100.0 | | | | 2,253 | | | 100.0 | |
Cost of sales | | | 1,476 | | | 101.2 | | | | 2,032 | | | 90.2 | |
Selling, general and administrative expenses | | | 95 | | | 6.6 | | | | 117 | | | 5.2 | |
Interest expense | | | 144 | | | 9.8 | | | | 149 | | | 6.6 | |
Other (income) expense, net | | | (125 | ) | | (8.6 | ) | | | (10 | ) | | (0.5 | ) |
| | | | | | | | | | | | | | |
Income (loss) before income taxes | | | (132 | ) | | (9.0 | ) | | | (35 | ) | | (1.5 | ) |
Income tax (benefit) | | | (10 | ) | | (0.6 | ) | | | (3 | ) | | (0.1 | ) |
| | | | | | | | | | | | | | |
Net income (loss) | | | (122 | ) | | (8.4 | ) | | | (32 | ) | | (1.4 | ) |
Net income (loss)—noncontrolling interests | | | 3 | | | 0.2 | | | | 2 | | | 0.1 | |
| | | | | | | | | | | | | | |
Net income (loss) attributable to the company | | | (125 | ) | | (8.6 | ) | | | (34 | ) | | (1.5 | ) |
| | | | | | | | | | | | | | |
| | | | |
Supplemental Information | | | | | | | | | | | | | | |
Earnings before interest, taxes, depreciation and amortization (EBITDA) | | $ | 148 | | | | | | $ | 261 | | | | |
| | | | | | | | | | | | | | |
Net sales for the first half of 2009 were $1,458 million, compared to $2,253 million for the first half of 2008, a decrease of $795 million, or 35%. Net sales were affected primarily by lower sales volume of coated paper ($701 million) and lower coated paper prices ($19 million) in the first half of 2009 compared to the first half of 2008. Weighted-average coated paper prices decreased to $953 per ton in the first half of 2009 compared to $969 per ton in the first half of 2008. We believe that some of the decline in pricing resulted from producers passing on the benefits of the alternative fuel mixture credit to customers. Coated paper sales volume decreased to 1,189,000 tons in the first half of 2009 compared to 1,912,000 tons in the first half of 2008. Volume was lower primarily because of lower demand for catalog and promotional materials by retailers and lower spending on magazine advertising during the first half of 2009, as well as customers reducing their levels of inventory on hand. As a result of these factors, we took 310,000 tons of market-related downtime during the first half of 2009. During the first half of 2008, we took 18,000 tons of market-related downtime.
Cost of sales for the first half of 2009 was $1,476 million, compared to $2,032 million for the first half of 2008, a decrease of $556 million, or 27%. The decrease was primarily a result of lower coated paper sales volume ($529 million). Gross margin for the first half of 2009 decreased to (1.2)% compared to 9.8% for the first half of 2008, primarily as a result of significantly lower sales volume and the effects of taking market-related downtime, partially offset by productivity improvement initiatives and lower input costs resulting primarily from lower crude oil prices. The first half of 2008 also includes $12 million for accelerated depreciation and $4 million of employee-related costs associated with our restructuring plan announced in January 2008. Maintenance expense at our mills totaled $142 million and $183 million in the first half of 2009 and 2008.
Selling, general and administrative expenses decreased to $95 million for the first half of 2009 from $117 million for the first half of 2008, primarily as a result of $9 million in lower stock compensation expense, as well as lower restructuring charges, lower costs related to the integration of the two businesses and lower employee costs. As a percentage of net sales, selling, general and administrative expenses increased in the first half of 2009 to 6.6% from 5.2% in the first half of 2008, as a result of lower sales volumes.
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Interest expense for the first half of 2009 was $144 million compared to $149 million for the first half of 2008. Interest expense for NewPage for the first half of 2009 was $134 million compared to $139 million for the first half of 2008. The decreases were primarily the effect of lower market interest rates on our variable interest rate debt, partially offset by higher outstanding borrowings under the revolving credit facility.
Other (income) expense was $(125) million for the first half of 2009 and $(10) million in the first half of 2008. The amount recognized in the first half of 2009 was primarily the result of $120 million of income recognized for alternative fuel mixture tax credits.
Income tax expense (benefit) for the first half of 2009 and 2008 was $(10) million and $(3) million. Income tax expense (benefit) for NewPage for the first half of 2009 and 2008 was $(10) million and $(13) million. For the first half of 2009 and 2008, we recorded a valuation allowance against our net deferred income tax benefit for federal income taxes and for certain states as it was more likely than not that we would not realize those benefits. For the first half ended June 30, 2009, we have allocated $11 million of tax expense to other comprehensive income (loss) and the corresponding offset as an allocation to tax benefit from operations.
Net income (loss) attributable to the company was $(125) million in the first half of 2009 compared to net income (loss) attributable to the company of $(34) million in the first half of 2008, primarily as a result of significantly lower sales volumes partially offset by the alternative fuel mixture tax credits.
EBITDA was $148 million and $261 million for the first half of 2009 and 2008. See “Reconciliation of Net Income (Loss) Attributable to the Company to EBITDA” for further information on the use of EBITDA as a measurement tool.
Reconciliation of Net Income (Loss) Attributable to the Company to EBITDA
EBITDA is defined as net income (loss) attributable to the company before interest expense, income taxes, depreciation and amortization. EBITDA is not a measure of our performance under GAAP, is not intended to represent net income (loss) attributable to the company, and should not be used as an alternative to net income (loss) attributable to the company as an indicator of performance. EBITDA is shown because it is a primary component of certain covenants under our senior secured credit facilities and is a basis upon which our management assesses performance. In addition, our management believes EBITDA is useful to investors because it and similar measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies with substantial financial leverage. The use of EBITDA instead of net income (loss) attributable to the company has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
| • | | EBITDA does not reflect our current cash expenditure requirements, or future requirements, for capital expenditures or contractual commitments |
| • | | EBITDA does not reflect changes in, or cash requirements for, our working capital needs |
| • | | EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt |
| • | | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements |
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| • | | our measure of EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation |
Because of these limitations, EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business.
The following table presents a reconciliation of net income (loss) attributable to the company to EBITDA:
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| | NewPage Holding | |
| | Second Quarter Ended June 30, | | | First Half Ended June 30, | |
(in millions) | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | | |
Net income (loss) attributable to the company | | $ | (11 | ) | | $ | (38 | ) | | $ | (125 | ) | | $ | (34 | ) |
Interest expense | | | 72 | | | | 73 | | | | 144 | | | | 149 | |
Income taxes (benefit) | | | (7 | ) | | | (6 | ) | | | (10 | ) | | | (3 | ) |
Depreciation and amortization | | | 69 | | | | 74 | | | | 139 | | | | 149 | |
| | | | | | | | | | | | | | | | |
EBITDA | | $ | 123 | | | $ | 103 | | | $ | 148 | | | $ | 261 | |
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Liquidity and Capital Resources
Available Liquidity
As of June 30, 2009, our principal sources of liquidity include cash generated from operating activities and availability under our revolving senior secured credit facility. The amount of loans and letters of credit available to NewPage pursuant to the revolving senior secured credit facility is limited to the lesser of $500 million or an amount determined pursuant to a borrowing base ($450 million as of June 30, 2009). As of June 30, 2009, we had $282 million available for borrowing, after reduction for $94 million in letters of credit and $74 million in outstanding borrowings under the revolving senior secured credit facility. We have not experienced, and do not currently anticipate that we will experience, any limitations in our ability to access funds available under our revolving credit facility. In an effort to manage credit risk exposures under our debt and derivative instruments, we regularly monitor the credit-worthiness of the counterparties to these agreements. We believe our cash flow from operations, available borrowings under our revolving senior secured credit facility and cash and cash equivalents will be adequate to meet our liquidity needs for the next twelve months. However, given the uncertainty of the current economic environment, we cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us under our revolving senior secured credit facility in an amount sufficient to enable us to fund our liquidity needs.
Aggregate indebtedness as of June 30, 2009 totaled $3,211 million, which includes $3,012 million at NewPage. Beginning in 2011, our debt service requirements will substantially increase as a result of scheduled payments of our indebtedness. We anticipate that we will seek to refinance our indebtedness prior to that time or retire portions of indebtedness with issuances of equity securities, proceeds from the sale of assets or cash generated from operations. Our ability to operate our business, service our debt requirements and reduce our total debt will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control, as well as the availability of revolving credit borrowings and other borrowings to refinance our existing indebtedness.
In July 2009, we announced that we were working with our lenders on an amendment of certain provisions of our term loan senior secured credit facility and revolving senior secured credit facility. In addition, NP Investor LLC (“NPI”), an affiliate of Cerberus Capital Management, L.P., the indirect controlling shareholder of NewPage, announced in July 2009 an offer to purchase a
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portion of NewPage’s floating rate senior secured notes, 10% senior secured notes and 12% senior subordinated notes. In addition, NPI announced an offer to purchase all of NewPage Holding’s senior unsecured PIK notes that are validly tendered and not withdrawn. Furthermore, the size, terms and timing of our previously announced proposed offering of new senior secured notes due 2014 are still under consideration at this time. There can be no assurance that we or NPI will complete any or all of these transactions on the terms previously announced or at all.
Cash Flows
Cash provided by (used for) operating activities was $(34) million during the first half of 2009 compared to $(11) million during the first half of 2008, primarily the result of the decline in sales demand and lower pricing, partially offset by cash received from the alternative fuel mixture credits. In response to these challenges, we took 310,000 tons of market-related downtime during the first half of 2009. We will continue to monitor North American paper demand in order to align our production to customer demand and will consider the need for additional market-related downtime from time to time based on market conditions. Investing activities in the first half of 2009 included spending of $31 million for capital expenditures and $22 million of proceeds from the sales of assets. Financing activities in the first half of 2009 included $24 million in payments on our long-term debt and $74 million of net borrowings under the revolving credit facility.
Capital Expenditures
Capital expenditures were $31 million and $71 million for the first half ended June 30, 2009 and 2008.
Debt Covenants
We are in compliance with all covenants as of June 30, 2009. The required financial covenant levels and the actual levels as of June 30, 2009 are as follows:
| | | | |
| | Covenant | | Actual |
Maximum Leverage Ratio | | 5.75 | | 5.65 |
Maximum Senior Leverage Ratio | | 3.25 | | 3.04 |
Minimum Interest Coverage Ratio | | 1.75 | | 2.14 |
Minimum Fixed Charge Coverage Ratio | | 1.10 | | 1.36 |
Financial Discussion
We continue to achieve cost savings from operating efficiencies, synergies and other restructuring activities that resulted from the acquisition of SENA. Over the course of 2009, however, we will continue to experience some increased costs associated with the continuation of information systems integration and enhancements. In an effort to manage costs and cash flows in 2009, we have implemented a wage freeze for all salaried exempt and non-exempt employees, reduced 2008 bonuses paid in 2009, suspended the matching contribution for our salaried 401(k) plan effective June 1, 2009 and significantly reduced our expected capital expenditures from $165 million in 2008 to a projected $75 million in 2009.
We have various investments held by our defined-benefit pension plan trusts. The returns on these assets have generally matched the broader market and we have experienced significant declines in our plan assets. We are monitoring the effects of the market declines on our minimum pension funding requirements and pension expense for future periods. We do not anticipate material increases in our minimum funding requirements during 2009 or 2010.
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The U.S. Internal Revenue Code allows a refundable excise tax credit for alternative fuel mixtures produced for sale or for use as a fuel in a trade or business. The credit is equal to fifty cents per gallon of alternative fuel contained in the mixture and is currently scheduled to expire on December 31, 2009. During the quarter ended March 31, 2009, we filed to be registered as an alternative fuel mixer, and, in April 2009, we received notification that our registration was approved. We have received payments of $112 million through June 30, 2009, including $45 million received during the second quarter of 2009 for alternative fuel mixtures used in the first quarter of 2009. Income recognized for the credit is included in net income (loss) attributable to the company. We recognized $120 million of income in other (income) expense for the second quarter of 2009 for alternative fuel mixtures used through June 30, 2009.
We will continue to evaluate opportunities for burning alternative fuel mixtures to produce energy at our mills. Certain members of the U.S. Congress and others have indicated their opposition to pulp and paper companies receiving the alternative fuel mixture credit. An amendment has been proposed that would eliminate or reduce the benefit of the credit for pulp and paper companies. In addition, the current fiscal year 2010 budget proposal excludes the paper industry from the credit. At this time, no action has been taken that changes the expiration date; however, there can be no assurance that this credit will continue in effect, that its provisions will not be changed in a manner that adversely affects us, that our operations will remain qualified to receive the credit or that our claims for the credit will be approved and paid.
The economic environment continues to be challenging and uncertain, with limited visibility to the timing and strength of an economic recovery in North American coated paper. We continue to closely monitor market pricing and demand, but forecasting has become particularly difficult in this uncertain environment. A weak recovery in customer demand, coupled with continued price erosion, could jeopardize our ability to meet our financial covenants during the upcoming twelve-month period.
We are considering all actions possible to maintain compliance with our financial covenants. We also are continuing discussions with our lenders to obtain a waiver or amendment to the covenants. In addition, the senior secured credit agreements allow the shareholders of NewPage Group to make an equity contribution to NewPage within 10 days of the delivery of the compliance certificate to the administrative agent. The equity contribution would be added to consolidated adjusted EBITDA to determine compliance. The aggregate amount of contributions cannot exceed $50 million and may be made up to two times in any 12 month period and four times over the life of the credit agreements. We cannot provide assurance that waivers or amendments could be obtained or whether the shareholders of NewPage Group would make an equity contribution to cure a violation. If we did violate our financial covenants, and were not able to obtain a waiver or amendment to the covenants, and the shareholders of NewPage Group did not make an equity contribution to cure the violation, and the lenders so request, the debt would become immediately payable and would affect our ability to borrow amounts under the revolving credit facility for liquidity needs. We do not have sufficient cash on hand to satisfy such a demand. Accordingly, the inability to comply with our financial covenants or obtain waivers or amendments for non-compliance would have a material adverse effect on our financial position, results of operations, liquidity and cash flows.
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ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Interest Rate Risk
As of June 30, 2009 and December 31, 2008, $2,058 million and $1,999 million of our debt consisted of borrowings with variable interest rates. If market interest rates increase, variable-rate debt will create higher debt service requirements, which could adversely affect our cash flow or compliance with our debt covenants. The potential annual increase in interest expense resulting from a 100 basis point increase in quoted interest rates on our debt balances outstanding at June 30, 2009 and December 31, 2008, would be $21 million and $20 million, without taking into account any interest rate derivative agreements.
While we may enter into agreements limiting our exposure to higher interest rates, these agreements do not offer complete protection from this risk. As of June 30, 2009 and December 31, 2008, we were a party to interest rate swap agreements to hedge the variability of cash flows on $1,200 million and $1,350 million of our floating-rate debt. Taking into account our interest rate derivative agreements and rates in effect at June 30, 2009 and December 31, 2008, a 100 basis point increase in quoted interest rates would result in an increase in interest expense of $9 million and $6 million.
Foreign Currency Risk
Our Canadian subsidiary makes a portion of its purchases and sales in the U.S. dollar. As a result, it is subject to transaction exposures that arise from foreign exchange movements between the date that the foreign currency transaction is recorded and the date it is consummated. Foreign currency exchange contracts may be used periodically to manage the variability in cash flows from the forecasted payment or receipt of currencies other than our functional currency, the U.S. dollar. As of June 30, 2009, we were a party to foreign currency forward contracts aggregating $45 million of contract value, expiring monthly through December 2009, to manage the variability of cash flows on anticipated U.S. dollar-denominated transactions with our Canadian subsidiary. As of June 30, 2009, the fair values of these contracts were an asset of $6 million.
ITEM 4T. | CONTROLS AND PROCEDURES |
We maintain a system of internal accounting controls designed to provide reasonable assurance that transactions are properly recorded and summarized so that reliable financial records and reports can be prepared and assets safeguarded. In addition, a system of disclosure controls is maintained to ensure that information required to be disclosed is recorded, processed, summarized and reported in a timely manner to management responsible for the preparation and reporting of our financial information.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the disclosure control systems as being effective as they encompass material matters for the quarter ended June 30, 2009. To the best of our knowledge, there were no changes in the internal controls over financial reporting that occurred during the quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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The alternative fuel mixture tax credit provided by the U.S. government is being challenged in Congress and may be amended in a manner that eliminates or reduces the benefits of the tax credit for pulp and paper companies.
The U.S. Internal Revenue Code allows a refundable excise tax credit for alternative fuel mixtures produced for sale or for use as a fuel in a trade or business. The credit is equal to fifty cents per gallon of alternative fuel contained in the mixture and is currently scheduled to expire at December 31, 2009. During the quarter ended March 31, 2009, we filed to be registered as an alternative fuel mixer, and, in April 2009, we received notification that our registration was approved. We have received payments of $112 million through June 30, 2009, including $45 million received during the second quarter of 2009 for alternative fuel mixtures used in the first quarter of 2009.
Certain members of the U.S. Congress and others have indicated their opposition to pulp and paper companies receiving the alternative fuel mixture credit. An amendment has been proposed that would eliminate or reduce the benefit of the credit for pulp and paper companies. In addition, the current fiscal year 2010 budget proposal excludes the paper industry from the credit. At this time, no action has been taken that changes the expiration date. There can be no assurance, however, that this credit will continue in effect, that its provisions will not be changed in a manner that adversely affects us, that our operations will remain qualified to receive the credit or that our claims for the credit will be approved and paid.
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
The Board of Directors was re-elected in its entirety on April 15, 2009 by a resolution adopted by unanimous written consent of all shareholders.
| | |
Exhibit Number | | Description |
31.1 | | Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
31.2 | | Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
32.1 | | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| |
32.2 | | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, NewPage Holding Corporation and NewPage Corporation have duly caused this Report to be signed on their behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
NEWPAGE HOLDING CORPORATION | | | | NEWPAGE CORPORATION |
| | | | |
By: | | /s/ David J. Prystash | | | | By: | | /s/ David J. Prystash |
| | David J. Prystash | | | | | | David J. Prystash |
| | Senior Vice President and | | | | | | Senior Vice President and |
| | Chief Financial Officer | | | | | | Chief Financial Officer |
| | (Principal Financial Officer) | | | | | | (Principal Financial Officer) |
Date: | | August 14, 2009 | | | | Date: | | August 14, 2009 |
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