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EX-10.3 - ASSET SALE AGREEMENT - NewPage Holding CORPdex103.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - NewPage Holding CORPdex312.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - NewPage Holding CORPdex311.htm
EX-10.1 - EMPLOYMENT AGREEMENT - NewPage Holding CORPdex101.htm
EX-32.2 - SECTION 906 CFO CERTIFICATION - NewPage Holding CORPdex322.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - NewPage Holding CORPdex321.htm
EX-10.4 - AMENDING AGREEMENT - NewPage Holding CORPdex104.htm
Table of Contents

 

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 September 30, 2010

LOGO

8540 Gander Creek Drive

Miamisburg, Ohio 45342

877.855.7243

 

      IRS Employer   
Commission       Identification    State of
File Number    Registrant    Number    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 November 1, 2010.

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.


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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 activity related to NewPage Holding’s debt and equity and income tax effects. 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 our Annual Report on Form 10-K for the year ended December 31, 2009

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

 

        Page   

PART I

  

FINANCIAL INFORMATION

  

Item 1.

  

Financial Statements:

  
   Condensed Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009      3   
   Consolidated Statements of Operations for the third quarter and three quarters ended September 30, 2010 and 2009      4   
   Consolidated Statements of Equity (Deficit) for the three quarters ended September 30, 2010 and 2009      6   
   Condensed Consolidated Statements of Cash Flows for the three quarters ended September 30, 2010 and 2009      8   
   Notes to Condensed Consolidated Financial Statements      9   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     24   

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

     31   

Item 4.

  

Controls and Procedures

     32   

PART II

  

OTHER INFORMATION

  

Item 1.

  

Legal Proceedings

     32   

Item 5.

  

Other Information

     32   

Item 6.

  

Exhibits

     33   

Signatures

     34   

 

2


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PART I FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

SEPTEMBER 30, 2010 AND DECEMBER 31, 2009

Dollars in millions, except per share amounts

 

     NewPage Holding     NewPage  
     Sept. 30,     Dec. 31,     Sept. 30,     Dec. 31,  
ASSETS    2010     2009     2010     2009  

Cash and cash equivalents

   $ 8     $ 5     $ 8     $ 5  

Accounts receivable, net

     313       296       313       296  

Inventories (Note 3)

     532       602       532       602  

Other current assets

     30       23       30       23  
                                

Total current assets

     883       926       883       926  

Property, plant and equipment, net of accumulated depreciation of $1,098 as of September 30, 2010 and $905 as of December 31, 2009

     2,798       2,965       2,798       2,965  

Other assets

     114       115       113       114  
                                

TOTAL ASSETS

   $ 3,795     $ 4,006     $ 3,794     $ 4,005  
                                

LIABILITIES AND EQUITY (DEFICIT)

        

Accounts payable

   $ 201     $ 230     $ 201     $ 230  

Other current liabilities

     307       238       307       238  
                                

Total current liabilities

     508       468       508       468  

Long-term debt (Note 5)

     3,393       3,231       3,179       3,030  

Other long-term obligations

     492       493       492       493  

Commitments and contingencies (Note 12)

        

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

     706       685       812       791  

Accumulated deficit

     (1,035     (606     (938     (522

Accumulated other comprehensive loss

     (269     (265     (259     (255
                                

Total equity (deficit)

     (598     (186     (385     14  
                                

TOTAL LIABILITIES AND EQUITY (DEFICIT)

   $ 3,795     $ 4,006     $ 3,794     $ 4,005  
                                

See notes to condensed consolidated financial statements.

 

3


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NEWPAGE HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

THIRD QUARTER AND THREE QUARTERS ENDED

SEPTEMBER 30, 2010 AND 2009

Dollars in millions

 

     NewPage Holding  
     Third Quarter
Ended Sept. 30,
     Three Quarters
Ended Sept. 30,
 
     2010       2009       2010       2009   

Net sales

   $ 943       $ 791       $ 2,650       $ 2,249   

Cost of sales

     886         785         2,648         2,261   

Selling, general and administrative expenses

     41         47         148         142   

Interest expense (including non-cash interest expense of $15, $59, $47 and $82 and loss on extinguishment of debt of $85 in 2009) (Note 5)

     97         199         295         343   

Other (income) expense, net (Note 8)

     (10)         (93)         (13)         (218)   
                                   

Income (loss) before income taxes

     (71)         (147)         (428)         (279)   

Income tax (benefit)

     —          (10)                (20)   
                                   

Net income (loss)

     (71)         (137)         (429)         (259)   

Net income (loss)—noncontrolling interests

     —                 —           
                                   

Net income (loss) attributable to the company

   $       (71)       $       (138)       $       (429)       $       (263)   
                                   

See notes to condensed consolidated financial statements.

 

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NEWPAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

THIRD QUARTER AND THREE QUARTERS ENDED

SEPTEMBER 30, 2010 AND 2009

Dollars in millions

 

     NewPage  
     Third Quarter
Ended Sept. 30,
     Three Quarters
Ended Sept. 30,
 
     2010       2009       2010       2009   

Net sales

   $ 943       $ 791       $ 2,650       $ 2,249   

Cost of sales

     886         785         2,648         2,261   

Selling, general and administrative expenses

     41         47         148         142   

Interest expense (including non-cash interest expense of $11, $55, $34 and $68 and loss on extinguishment of debt of $85 in 2009) (Note 5)

     93         194         282         328   

Other (income) expense, net (Note 8)

     (10)         (93)         (13)         (218)   
                                   

Income (loss) before income taxes

     (67)         (142)         (415)         (264)   

Income tax (benefit)

     —          (5)                (15)   
                                   

Net income (loss)

     (67)         (137)         (416)         (249)   

Net income (loss)—noncontrolling interests

     —                 —           
                                   

Net income (loss) attributable to the company

   $       (67)       $       (138)       $       (416)       $       (253)   
                                   

See notes to condensed consolidated financial statements.

 

5


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NEWPAGE HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (unaudited)

THREE QUARTERS ENDED SEPTEMBER 30, 2010

Dollars in millions

 

     Common Stock     

Add-

itional

  Paid-in  

    

Accum-

ulated

    

Accum-

ulated

Other

Compre-

hensive

  Income  

        
       Shares          Amount        Capital        Deficit        (Loss)        Total    

Balance at December 31, 2009

     10      $       $ 685       $ (606)       $ (265)       $ (186)   

Comprehensive income (loss):

                 

Net income (loss)

              (429)            (429)   

Defined-benefit postretirement plans:

                 

Change in net actuarial gains (losses)

                 (6)         (6)   

Amortization of net actuarial loss on defined benefit plans

                         

Cash-flow hedges:

                 

Change in unrealized gains (losses), net of tax benefit of $1

                 (2)         (2)   

Reclassification adjustment to net income (loss), net of tax of $1

                         

Foreign currency translation adjustment

                         
                       

Comprehensive income (loss)

                  $ (433)   
                       

Equity awards (Note 6)

           22               22   

Loan to NewPage Group

           (1)               (1)   
                                                     

Balance at September 30, 2010

     10      $       $ 706       $ (1,035)       $ (269)       $ (598)   
                                                     

THREE QUARTERS ENDED SEPTEMBER 30, 2009

Dollars in millions

 

     Equity Attributable to the Company                
     Common Stock     

Add-

itional

Paid-in

    

Accum-

ulated

    

Accum-

ulated

Other

Compre-

hensive

  Income  

    

Total
Attribut-

able to the

    

Noncon-

trolling

        
       Shares          Amount          Capital          Deficit        (Loss)        Company          Interests          Total    

Balance at December 31, 2008

     10      $       $ 661       $ (283)       $ (402)       $ (24)       $ 26      $  

Comprehensive income (loss):

                       

Net income (loss)

              (263)            (263)         4        (259)   

Amortization of net actuarial loss on defined benefit plans, net of tax of $6

                                   

Cash-flow hedges:

                       

Change in unrealized gains (losses), net of tax benefit of $9

                 (13)         (13)            (13)   

Reclassification adjustment to net income (loss), net of tax of $10 (Note 2)

                 67         67            67   

Foreign currency translation adjustment

                 12         12            12   
                                         

Comprehensive income (loss)

                  $ (190)       $ 4      $ (186)   
                                         

Equity awards (Note 6)

                                   

Loan to NewPage Group

           (3)               (3)            (3)   
                                                                       

Balance at September 30, 2009

     10      $       $ 665      $ (546)       $ (329)       $ (210)       $ 30      $ (180)   
                                                                       

See notes to condensed consolidated financial statements.

 

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NEWPAGE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (unaudited)

THREE QUARTERS ENDED SEPTEMBER 30, 2010

Dollars in millions

 

     Common Stock     

Add-

itional

  Paid-in  

    

Accum-

ulated

    

Accum-

ulated

Other

Compre-

hensive

  Income  

        
       Shares          Amount        Capital        Deficit        (Loss)        Total    

Balance at December 31, 2009

     100      $       $ 791       $ (522)       $ (255)       $ 14   

Comprehensive income (loss):

                 

Net income (loss)

              (416)            (416)   

Defined-benefit postretirement plans:

                 

Change in net actuarial gains (losses)

                 (6)         (6)   

Amortization of net actuarial loss on defined benefit plans

                         

Cash-flow hedges:

                 

Change in unrealized gains (losses), net of tax benefit of $1

                 (2)         (2)   

Reclassification adjustment to net income (loss), net of tax of $1

                         

Foreign currency translation adjustment

                         
                       

Comprehensive income (loss)

                  $ (420)   
                       

Equity awards (Note 6)

           22               22   

Loans to parent companies

           (1)               (1)   
                                                     

Balance at September 30, 2010

     100      $       $ 812       $ (938)       $ (259)       $ (385)   
                                                     

THREE QUARTERS ENDED SEPTEMBER 30, 2009

Dollars in millions

 

     Equity Attributable to the Company                
     Common Stock     

Add-

itional

Paid-in

    

Accum-

ulated

    

Accum-

ulated

Other

Compre-

hensive

  Income  

    

Total
Attribut-

able to the

    

Noncon-

trolling

        
       Shares          Amount          Capital          Deficit        (Loss)        Company          Interests          Total    

Balance at December 31, 2008

     100      $       $ 767      $ (214)       $ (396)       $ 157       $ 26      $ 183   

Comprehensive income (loss):

                       

Net income (loss)

              (253)            (253)         4        (249)   

Amortization of net actuarial loss on defined benefit plans, net of tax of $6

                                   

Cash-flow hedges:

                       

Change in unrealized gains (losses), net of tax benefit of $9

                 (13)         (13)            (13)   

Reclassification adjustment to net income (loss), net of tax of $6 (Note 2)

                 71         71            71   

Foreign currency translation adjustment

                 12         12            12   
                                         

Comprehensive income (loss)

                  $ (176)       $ 4      $ (172)   
                                         

Equity awards (Note 6)

                                   

Loans to parent companies

           (3)               (3)            (3)   
                                                                       

Balance at September 30, 2009

     100      $       $ 771       $ (467)       $ (319)       $ (15)       $ 30      $ 15   
                                                                       

See notes to condensed consolidated financial statements.

 

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

THREE QUARTERS ENDED SEPTEMBER 30, 2010 AND 2009

Dollars in millions

 

         NewPage Holding                      NewPage               
     Three Quarters      Three Quarters  
     Ended Sept. 30,      Ended Sept. 30,  
     2010      2009      2010      2009  

CASH FLOWS FROM OPERATING ACTIVITIES

           

Net income (loss)

   $   (429)       $ (259)       $   (416)       $ (249)   
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:            

Depreciation and amortization

     203         208         203         208   

Non-cash interest expense

     47         82         34         68   

Loss on extinguishment of debt (Note 5)

     —          72         —          72   

(Gain) loss on disposal and impairment of assets

                           

Deferred income taxes

     —          (21)         —          (17)   

Non-cash U.S. pension expense

     26         37         26         37   

Equity award expense (Note 6)

     21                21          

Change in operating assets and liabilities

     32         (144)         32         (144)   
                                   

Net cash provided by (used for) operating activities

     (91)         (13)         (91)         (13)   

CASH FLOWS FROM INVESTING ACTIVITIES

           

Capital expenditures

     (49)         (45)         (49)         (45)   

Proceeds from sales of assets

     12         22         12         22   

Other investing activities

     (2)         —          (2)         —    
                                   

Net cash provided by (used for) investing activities

     (39)         (23)         (39)         (23)   

CASH FLOWS FROM FINANCING ACTIVITIES

           

Proceeds from issuance of long-term debt

     67         1,598         67         1,598   

Payment of financing costs

     (4)         (54)         (4)         (54)   

Loans to parent companies

     (1)         (3)         (1)         (3)   

Repayments of long-term debt

     —          (1,584)         —          (1,584)   

Borrowings on revolving credit facility

     735         907         735         907   

Payments on revolving credit facility

     (667)         (823)         (667)         (823)   
                                   

Net cash provided by (used for) financing activities

     130         41         130         41   

Effect of exchange rate changes on cash and cash equivalents

                           
                                   

Net increase (decrease) in cash and cash equivalents

                           

Cash and cash equivalents at beginning of period

                           
                                   

Cash and cash equivalents at end of period

   $      $ 11       $      $ 11   
                                   

SUPPLEMENTAL INFORMATION

           

Cash paid for interest

   $ 210       $ 153       $ 210       $ 153   
                                   

See notes to condensed consolidated financial statements.

 

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NEWPAGE HOLDING CORPORATION AND SUBSIDIARIES

NEWPAGE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Dollars in millions, except per share amounts

 

1. BASIS OF PRESENTATION

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. 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.

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 statement 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, 2009.

 

2. FINANCIAL INSTRUMENTS

Derivative Financial Instruments

We periodically use derivative financial instruments as part of our overall strategy to manage exposure to market risks associated with 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 material 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

 

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accumulated 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.

Prior to our debt refinancing in September 2009, we utilized interest rate swaps to manage our exposure to market risks from interest rate fluctuations. During the third quarter ended September 30, 2009, we reclassified $48 of unrealized losses from accumulated other comprehensive income (loss) to interest expense as the hedged forecasted cash flows were no longer probable of occurring as a result of the refinancing. After our debt refinancing, we no longer had sufficient variable-rate debt exposure for our outstanding interest rate swaps to qualify for hedge accounting treatment and recorded the fair value of the interest rate swaps as other current liabilities with changes in fair value recognized as an adjustment to interest expense. We recognized in interest expense a (gain) loss of zero and $3 for the third quarter and three quarters ended September 30, 2010, for interest rate swaps that did not qualify for hedge accounting.

Interest Rates

As of December 31, 2009, we had outstanding interest rate swaps totaling $900 for which we received amounts based on LIBOR and paid amounts based on a fixed rate. As of December 31, 2009, we also had outstanding a $200 interest rate swap with an offsetting exposure for which we received amounts based on a fixed rate and paid amounts based on LIBOR. During the third quarter of 2010, we settled the remaining liability for all interest rate agreements. We measured 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 $21 and $15 on our interest rate agreements for the third quarter ended September 30, 2010 and 2009 and we paid cash of $34 and $31 on our interest rate agreements for the three quarters ended September 30, 2010 and 2009.

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 September 30, 2010 and December 31, 2009, we were party to natural gas futures contracts for notional amounts aggregating 1,190,000 and 2,130,000 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 September 30, 2010 and December 31, 2009, the fair values and carrying amounts of our financial assets and liabilities measured on a recurring basis are as follows:

 

     Sept. 30,      Dec. 31,  
Significant other observable inputs (Level 2)    2010      2009  

Qualifying as hedges—

     

Other long-term liabilities—natural gas contracts

   $ (3)       $ (2)   

Not qualifying as hedges—

     

Other current liabilities:

     

Interest rate swap agreements

   $ —        $ (35)   

Interest rate swap agreements

     —           

The amount of gain (loss) on cash flow hedges recognized in accumulated other comprehensive income (loss) (“AOCI”) and the amount reclassified to income (loss) during the third quarter and three quarters ended September 30, 2010 and 2009 are as follows:

 

    

Amount of

gain (loss)

recognized

   

Location of gain

(loss) reclassified

from AOCI to

    

Amount of

gain (loss)

reclassified

from AOCI

to income

 
Derivative Type    in OCI     income (loss)      (loss)  

Third Quarter Ended September 30, 2010

       

Natural gas contracts

   $ (1     Cost of sales       $   

Three Quarters Ended September 30, 2010

       

Natural gas contracts

   $ (3     Cost of sales       $ (2

Third Quarter Ended September 30, 2009

       

Interest rate swap agreements

   $ (17     Interest expense       $ (57

Natural gas contracts

     (1     Cost of sales         (2

Three Quarters Ended September 30, 2009

       

Interest rate swap agreements

   $ (18     Interest expense       $ (73

Natural gas contracts

     (4     Cost of sales         (4

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 September 30, 2010 and December 31, 2009, 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:

 

         September 30, 2010             December 31, 2009      
     Fair
Value
    Carrying
Amount
    Fair
Value
    Carrying
Amount
 

Long-term debt:

        

NewPage Holding

   $ (2,264   $ (3,243   $ (2,686   $ (3,083

NewPage

     (2,252     (3,029     (2,624     (2,882

 

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3. INVENTORIES

Inventories as of September 30, 2010 and December 31, 2009 consist of:

 

    

Sept. 30,

2010

    

Dec. 31,

2009

 

Finished and in-process goods

   $ 306      $ 376  

Raw materials

     88        86  

Stores and supplies

     138        140  
                 
   $ 532      $ 602  
                 

If inventories had been valued at current costs, they would have been valued at $509 and $607 at September 30, 2010 and December 31, 2009.

 

4. ACCOUNTS PAYABLE

Accounts payable as of September 30, 2010 and December 31, 2009 includes $16 and $13 of outstanding checks in excess of cash.

 

5. LONG-TERM DEBT

The balances of long-term debt as of September 30, 2010 and December 31, 2009 are as follows:

 

     Sept. 30,
2010
     Dec. 31,
2009
 
NewPage:      

Revolving credit facility

   $ 120      $ 52  

11.375% first-lien senior secured notes (face amount $1,770 and $1,700)

     1,680        1,601  

Floating rate second-lien senior secured notes (LIBOR plus 6.25%)

     225        225  

10% second-lien senior secured notes (face amount $806)

     805        805  

12% senior subordinated notes (face amount $200)

     199        199  

Capital lease

     150        148  
                 

Subtotal

     3,179        3,030  
NewPage Holding—      

Senior unsecured NewPage Holding PIK Notes (face amount $219 and

     

$207; LIBOR plus 7.00%)

     214        201  
                 

Long-term debt

   $ 3,393      $ 3,231  
                 

In February 2010, we issued an additional $70 in aggregate principal amount of 11.375% senior secured notes due 2014 (the “Additional First-Lien Notes”) in a private placement. The Additional First-Lien Notes have the same terms as the existing first-lien senior secured notes.

 

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Included in interest expense for the third quarter of 2009 is a loss of $85 from the extinguishment of debt, including the write-off of $13 of consent fees, and a reclassification adjustment of $48 of unrealized losses from accumulated other comprehensive income (loss) as the hedged forecasted cash flows were no longer probable of occurring as a result of the refinancing.

 

6. EQUITY

During the third quarter ended September 30, 2010, NewPage loaned $1 to NewPage Group, which was recorded as a reduction in shareholder’s equity as repayment is not assured, to enable NewPage Group to satisfy its obligation to repurchase a former executive officer’s NewPage Group stock.

Included in selling, general and administrative expenses is equity award expense of $2 and $1 for the third quarter ended September 30, 2010 and 2009 and $21 and $7 for the three quarters ended September 30, 2010 and 2009. In February 2010, the compensation committee amended the outstanding stock option awards of employees and directors to change the exercise price to $2.00 per share and vest the unearned performance-based options for 2008 and 2009. Included in the amount of equity award expense for the three quarters ended September 30, 2010 is $8 to reflect the effects of the modification and the vesting of the prior-year unearned performance-based options. Also included in the amount of equity award expense for the three quarters ended September 30, 2010 is $5 of remaining unamortized grant-date fair value relating to the accelerated vesting of stock options previously awarded to certain former executive officers. In accordance with their stock option agreements, upon their separation all of their outstanding stock options became vested. None of these options were exercised by the executive officers.

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, 2009

     5,070       $ 20.47  
Granted      2,678         4.08  
Forfeited or expired      (4,426)         9.55  
           
Outstanding at September 30, 2010      3,322         1.95  
           
Exercisable at September 30, 2010      1,589         2.00  
           

The outstanding options and the exercisable options at September 30, 2010 have a weighted-average remaining contractual life of 1.8 years.

We utilize a Black-Scholes pricing model to determine the fair value of options granted. 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.

 

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Assumptions used to determine the fair value of option grants are as follows:

 

     Three Quarters  
     Ended September 30,  
     2010     2009  

Weighted-average fair value of options granted

   $ 2.75     $ 3.06  

Weighted-average assumptions used for grants:

    

Expected volatility

     90     90

Risk-free interest rate

     1.8     2.0

Expected life of option (in years)

     4       5  

 

7. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS

A summary of the components of net periodic costs for the third quarter and three quarters ended September 30, 2010 and 2009 is as follows:

Pension Plans

 

     U.S. Plans      Canadian Plans  
     Third Quarter      Third Quarter  
     Ended Sept. 30,      Ended Sept. 30,  
     2010       2009       2010       2009   

Service cost

   $             6       $             6       $             1       $             1   

Interest cost

     16         15                 

Expected return on plan assets

     (16)         (14)         (4)         (4)   

Amortization of net loss

                   —          —    
                                   

Net periodic cost

   $ 10       $ 12       $      $  
                                   
     U.S. Plans      Canadian Plans  
     Three Quarters      Three Quarters  
     Ended Sept. 30,      Ended Sept. 30,  
     2010         2009         2010         2009   

Service cost

   $             18       $             17       $             3       $             2   

Interest cost

     48         47         15         13   

Expected return on plan assets

     (49)         (42)         (14)         (11)   

Amortization of net loss

     10         15                —    
                                   

Net periodic cost

   $ 27       $ 37       $      $  
                                   

 

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Other Postretirement Plans

 

     U.S. Plans      Canadian Plans  
     Third Quarter
Ended Sept. 30,
     Third Quarter
Ended Sept. 30,
 
     2010       2009       2010       2009   

Service cost

   $         —        $         —        $         —        $         1   

Interest cost

                          —    

Amortization of net prior service cost (credit)

     (3)         —          (1)         —    
                                   

Net periodic cost (income)

   $ (1)       $     3       $ —        $  
                                   
     U.S. Plans      Canadian Plans  
     Three Quarters
Ended Sept. 30,
     Three Quarters
Ended Sept. 30,
 
     2010       2009       2010       2009   

Service cost

   $      $      $      $  

Interest cost

                           

Amortization of net prior service cost (credit)

     (9)         (1)         (1)         —    
                                   

Net periodic cost (income)

   $ (3)       $      $      $  
                                   

 

8. OTHER (INCOME) EXPENSE

During the three quarters ended September 30, 2010, we recognized $12 of net loss on disposal and impairment of assets in other (income) expense. In addition, during the third quarter and three quarters ended September 30, 2010, we recognized $(9) and $(22) of income for alternative fuel mixture tax credits, as income recognition criteria was met. We recognized $(94) and $(214) of income during the third quarter and three quarters ended September 30, 2009 for alternative fuel mixture tax credits.

 

9. INCOME TAXES

For the third quarter and three quarters ended September 30, 2010 and 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 third quarter and three quarters ended September 30, 2009, we allocated $(4) and $7 of tax expense (benefit) to other comprehensive income (loss) and the corresponding offset as an allocation to tax benefit from operations. For the third quarter and three quarters ended September 30, 2009, for NewPage, we have allocated $(8) and $3 of tax expense (benefit) to other comprehensive income (loss) and the corresponding offset as an allocation to tax expense (benefit) from operations. The amounts for the third quarter and three quarters ended September 30, 2009, reflect the reclassification to income tax (benefit) of all amounts previously allocated to other comprehensive income (loss) related to the interest rate swap cash flow hedges. Also included in the third quarter and three quarters ended September 30, 2009 was a tax benefit of $12, reflecting the decreases to our state deferred tax liabilities resulting from changes in our distribution channels that have occurred as part of our integration with Stora Enso North America, Inc. (“SENA”).

 

10. RESTRUCTURING

During 2008, we announced actions being taken to integrate NewPage operations and the former SENA facilities and services. The restructuring actions included the permanent closure of six paper machines and two mills affecting approximately 980 employees, the permanent closure of a converting facility affecting approximately 160 employees and the reduction of personnel in other areas, including sales, finance and other support functions, affecting approximately 200 employees. Most of the affected employees had separated from the company by December 31, 2008 with the remainder separating in 2009 and 2010. We expect remaining closure-related activities to be completed in 2010.

 

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The activity in the accrued restructuring liability relating to these actions for the three quarters ended September 30, 2010 and 2009 was as follows:

 

    Closure
Costs
    Employee
Costs
 

Three Quarters ended September 30, 2010

   

Balance accrued at December 31, 2009

  $     $  

Payments

                (4)                    (2)   
               

Balance accrued at September 30, 2010

  $ —       $  
               

Three Quarters ended September 30, 2009

   

Balance accrued at December 31, 2008

  $ 14      $ 19   

Adjustments

    —         (1)   

Payments

    (7)        (14)   
               

Balance accrued at September 30, 2009

  $     $  
               

 

11. DISPOSITION OF ASSETS

On November 3, 2010, NewPage Port Hawkesbury Corp. (“NPPH”), an indirect wholly-owned subsidiary of NewPage, completed the sale of certain assets, including a boiler at the Port Hawkesbury, Nova Scotia mill, to Nova Scotia Power Inc. (“NSPI”) for a cash sales price of Canadian $80. In addition, NSPI and NPPH have entered into an engineering, procurement and construction agreement for NPPH to construct for NSPI a 60 MW biomass cogeneration utility plant for the generation of electricity by December 31, 2012 for approximately Canadian $93. NSPI and NPPH also entered into a management, operations and maintenance agreement related to NPPH operating the utility assets for NSPI.

In February 2010, Consolidated Water Power Company (“CWPCo”), an indirect wholly-owned subsidiary of NewPage, announced that it signed an agreement with Wisconsin Rapids Water Works Lighting Commission to sell the CWPCo utility transmission and distribution assets (“CWPCo Utility”). The purchase price will be equal to the net book value of the assets at the time of closing, which is subject to regulatory approvals. On November 1, 2010, CWPCo entered into an asset sale agreement to sell five hydroelectric projects to Great Lakes Utilities for a net cash sales price of approximately $70. The closing of the transaction is subject to completion of the CWPCO Utility sale and regulatory approval. These transactions are not expected to close in 2010. We continue to hold and operate the assets in the normal course of our operations.

In March 2009, NewPage Wisconsin System Inc. (“NPWSI”), 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 three quarters ended September 30, 2009 is a loss on the sale of $3.

 

12. 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.

 

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13. SUPPLEMENTAL CONSOLIDATING INFORMATION

NewPage has issued $1,770 face amount of 11.375% senior secured notes due May 2014, $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 (collectively, 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 adjustments totaling $18 have been made that decrease the net losses of the parent and guarantor subsidiaries columns in the supplemental consolidating statement of operations for the three quarters ended September 30, 2009, to correct the classification of certain expenses in the period ended March 31, 2009. This adjustment is not considered material to the periods to which it relates.

 

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NEWPAGE CORPORATION

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

SEPTEMBER 30, 2010

 

    

NewPage

  Corporation  

    

Guarantor

  Subsidiaries  

    

Non-

Guarantor

  Subsidiaries  

    

 Consolidation/ 

Eliminations

      Consolidated   

ASSETS

              

Cash and cash equivalents

   $      $ (1)       $      $ —        $  

Accounts receivable

     243         69                —          313   

Inventories

     235         297         —          —          532   

Other current assets

     20                       —          30   
                                            

  Total current assets

     500         374                —          883   

Intercompany receivables

     1,308         460         144         (1,912)         —    

Property, plant and equipment, net

     27         2,716         55         —          2,798   

Investment in subsidiaries

     1,773         66         —          (1,839)         —    

Other assets

     105                       —          113   
                                            

TOTAL ASSETS

   $ 3,713       $ 3,623       $ 209       $ (3,751)       $ 3,794   
                                            

LIABILITIES AND EQUITY

(DEFICIT)

              

Accounts payable

   $ 44       $ 156       $      $ —        $ 201   

Other current liabilities

     170         131                —          307   
                                            

  Total current liabilities

     214         287                —          508   

Intercompany payables

     460         1,326         126         (1,912)         —    

Long-term debt

     3,029         150         —          —          3,179   

Other long-term liabilities

     395         87         10         —          492   

Equity (deficit)

     (385)         1,773         66         (1,839)         (385)   
                                            

TOTAL LIABILITIES AND EQUITY

(DEFICIT)

   $ 3,713       $ 3,623       $ 209       $ (3,751)       $ 3,794   
                                            

 

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NEWPAGE CORPORATION

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2009

 

                   Non-                
     NewPage      Guarantor      Guarantor      Consolidation/         
     Corporation      Subsidiaries      Subsidiaries      Eliminations      Consolidated  

ASSETS

              

Cash and cash equivalents

   $ 1      $       $ 4      $ —        $ 5  

Accounts receivable

     230        65        1        —          296  

Inventories

     293        309                —          602  

Other current assets

     15        7        1        —          23  
                                            

Total current assets

     539        381        6        —          926  

Intercompany receivables

     1,262        274        85        (1,621)           

Property, plant and equipment, net

     41        2,867        57        —          2,965  

Investment in subsidiaries

     1,783        66                (1,849)           

Other assets

     110        3        1        —          114  
                                            

TOTAL ASSETS

   $ 3,735      $ 3,591      $ 149      $ (3,470)       $ 4,005  
                                            

LIABILITIES AND EQUITY

              

Accounts payable

   $ 54      $ 176      $       $ —        $ 230  

Other current liabilities

     117        116        5        —          238  
                                            

Total current liabilities

     171        292        5        —          468  

Intercompany payables

     274        1,279        68        (1,621)           

Long-term debt

     2,882        148                —          3,030  

Other long-term liabilities

     394        89        10        —          493  

Equity

     14        1,783        66        (1,849)         14  
                                            

TOTAL LIABILITIES AND EQUITY

   $ 3,735      $ 3,591      $ 149      $ (3,470)       $ 4,005  
                                            

 

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NEWPAGE CORPORATION

SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS

THIRD QUARTER ENDED SEPTEMBER 30, 2010

 

     NewPage
  Corporation  
     Guarantor
  Subsidiaries  
     Non-
Guarantor
  Subsidiaries  
     Consolidation/
Eliminations
       Consolidated   

Net sales

   $ 842       $ 808       $ 23       $ (730)       $ 943   

Cost of sales

     791         802         23         (730)         886   

Selling, general and administrative expenses

     41         —          —          —          41   

Equity in (earnings) loss of subsidiaries

     (4)         —          —                 —    

Interest expense

     91                —          —          93   

Other (income) expense, net

     (10)         —          —          —          (10)   
                                            

Income (loss) before income taxes

     (67)                —          (4)         (67)   

Income tax (benefit)

     —          —          —          —          —    
                                            

Net income (loss)

   $ (67)       $      $ —        $ (4)       $ (67)   
                                            

NEWPAGE CORPORATION

SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS

THREE QUARTERS ENDED SEPTEMBER 30, 2010

 

     NewPage
  Corporation  
     Guarantor
  Subsidiaries  
     Non-
Guarantor
  Subsidiaries  
     Consolidation/
Eliminations
       Consolidated   

Net sales

   $ 2,375       $ 2,384       $ 66       $ (2,175)       $ 2,650   

Cost of sales

     2,359         2,399         65         (2,175)         2,648   

Selling, general and administrative expenses

     147                —          —          148   

Equity in (earnings) loss of subsidiaries

     35         (1)         —          (34)         —    

Interest expense

     273                —          —          282   

Other (income) expense, net

     (23)         10         —          —          (13)   
                                            

Income (loss) before income taxes

     (416)         (34)                34         (415)   

Income tax (benefit)

     —                 —          —           
                                            

Net income (loss)

   $ (416)       $ (35)       $      $ 34       $ (416)   
                                            

 

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NEWPAGE CORPORATION

SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS

THIRD QUARTER ENDED SEPTEMBER 30, 2009

 

     NewPage  
Corporation  
     Guarantor  
Subsidiaries  
     Non-  
Guarantor  
Subsidiary  
    

Consolidation/ 

Eliminations 

     Consolidated    

Net sales

   $ 700       $     623       $     22       $     (554)       $ 791   

Cost of sales

     627         692         21         (555)         785   

Selling, general and administrative expenses

     41                —          —          47   

Equity in (earnings) loss of subsidiaries

     68         (1)         —          (67)         —    

Interest expense

     193                —          —          194   

Other (income) expense, net

     (90)         (3)         —          —          (93)   
                                            

Income (loss) before income taxes

     (139)         (72)                68         (142)   

Income tax (benefit)

     (1)         (4)         —          —          (5)   
                                            

Net income (loss)

     (138)         (68)                68         (137)   

Net income (loss)—noncontrolling interests

     —          —          —                  
                                            

Net income (loss) attributable to the company

   $     (138)       $ (68)       $      $ 67       $     (138)   
                                            

NEWPAGE CORPORATION

SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS

THREE QUARTERS ENDED SEPTEMBER 30, 2009

 

     NewPage  
Corporation  
     Guarantor  
Subsidiaries  
     Non-  
Guarantor  
Subsidiary  
     Consolidation/  
Eliminations  
     Consolidated    

Net sales

   $     1,772       $     2,077       $     63       $     (1,663)       $     2,249   

Cost of sales

     1,738         2,128         62         (1,667)         2,261   

Selling, general and administrative expenses

     128         14         —          —          142   

Equity in (earnings) loss of subsidiaries

     64         (1)         —          (63)         —    

Interest expense

     322                —          —          328   

Other (income) expense, net

     (216)         (2)         —          —          (218)   
                                            

Income (loss) before income taxes

     (264)         (68)                67         (264)   

Income tax (benefit)

     (11)         (4)         —          —          (15)   
                                            

Net income (loss)

     (253)         (64)                67         (249)   

Net income (loss)—noncontrolling interests

     —          —          —                  
                                            

Net income (loss) attributable to the company

   $ (253)       $ (64)       $      $ 63       $ (253)   
                                            

 

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NEWPAGE CORPORATION

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

THREE QUARTERS ENDED SEPTEMBER 30, 2010

 

    NewPage  
Corporation  
    Guarantor  
Subsidiaries  
    Non-  
Guarantor  
Subsidiaries  
    Consolidation/  
Eliminations  
    Consolidated    

CASH FLOWS FROM OPERATING ACTIVITIES

         

Net cash provided by (used for) operating activities

  $ (124)      $ 30      $     $ —       $ (91)   

CASH FLOWS FROM INVESTING ACTIVITIES

         

Capital expenditures

    (5)        (44)        —         —         (49)   

Proceeds from sales of assets

    —         12        —         —         12   

Other investing activities

    —         (2)        —         —         (2)   
                                       

Net cash provided by (used for) investing activities

    (5)        (34)        —         —         (39)   

CASH FLOWS FROM FINANCING ACTIVITIES

         

Proceeds from issuance of long-term debt

    67        —         —         —         67   

Payment of financing costs

    (4)        —         —         —         (4)   

Loan to parent companies

    (1)        —         —         —         (1)   

Borrowings on revolving credit facility

    735        —         —         —         735   

Payments on revolving credit facility

    (667)        —         —         —         (667)   
                                       

Net cash provided by (used for) financing activities

    130        —         —         —         130   

Effect of exchange rate changes on cash and cash equivalent

    —               —         —          
                                       

Net increase (decrease) in cash and cash equivalents

          (1)              —          

Cash and cash equivalents at beginning of period

          —               —          
                                       

Cash and cash equivalents at end of period

  $     $ (1)      $     $ —       $  
                                       

 

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NEWPAGE CORPORATION

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

THREE QUARTERS ENDED SEPTEMBER 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

  $ (37)      $ 16      $ —       $     $ (13)   

CASH FLOWS FROM INVESTING ACTIVITIES

         

Capital expenditures

    (4)        (41)        —         —         (45)   

Proceeds from sales of assets

    —         22        —         —         22   
                                       

Net cash provided by (used for) investing activities

    (4)        (19)        —         —         (23)   

CASH FLOWS FROM FINANCING ACTIVITIES

         

Proceeds from issuance of long-term debt

    1,598        —         —         —         1,598   

Payment of financing costs

    (54)        —         —         —         (54)   

Loans to parent companies

    (3)        —         —         —         (3)   

Repayments on long-term debt

    (1,584)        —         —         —         (1,584)   

Borrowings on revolving credit facility

    907        —         —         —         907   

Payments on revolving credit facility

    (823)        —         —         —         (823)   
                                       

Net cash provided by (used for) financing activities

    41        —         —         —         41   

Effect of exchange rate changes on cash and cash equivalent

    —               —         —          
                                       

Net increase (decrease) in cash and cash equivalents

    —         —         —                

Cash and cash equivalents at beginning of period

          —               —          
                                       

Cash and cash equivalents at end of period

  $     $ —       $     $     $ 11   
                                       

 

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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 printing 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 three quarters of 2010, North American printing paper demand increased compared to the first three quarters of 2009. This was a result of decreased advertising spending and magazine and catalog circulation during the first three quarters of 2009 largely attributable to general economic factors and inventory reductions by customers. As a result of the higher demand, our market-related downtime in the first three quarters of 2010 declined to 39,000 tons, with no market-related downtime in the third quarter of 2010, from 411,000 tons of market-related downtime in the first three quarters of 2009. We will consider the need for market-related downtime from time to time based on market conditions.

Coated paper production capacity in North America was lower during the first three quarters of 2010 compared to the first three quarters of 2009, primarily as a result of North American capacity closures.

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. As a result of announced price increases, which began to take effect in the third quarter of 2010 and are expected to continue into the fourth quarter, we believe average prices for coated paper will increase during the fourth quarter of 2010 compared to the first three quarters of 2010.

In September 2009, NewPage, along with two other U.S. paper producers and the United Steelworkers Union, filed antidumping and countervailing duty petitions with the U.S. Department of Commerce and the U.S. International Trade Commission alleging that manufacturers of certain coated paper in China and Indonesia are dumping their products in the United States and that these manufacturers have been subsidized by their governments in violation of U.S. trade laws. In September 2010, the Department of Commerce announced final antidumping and countervailing duty margins, replacing the preliminary margins announced earlier this year. On October 22, 2010, the International Trade Commission determined by unanimous vote that imports of coated paper from China and Indonesia threaten material injury to U.S. producers and workers. The decision will allow the Department of Commerce to impose duties to offset the threat of dumping and government subsidies. These duties will remain in effect for five years, subject to annual administrative reviews. Approximately 17% of our net sales are directly related to the products covered by the duties.

 

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Additional First-Lien Notes Issuance

In February 2010, we issued an additional $70 million in aggregate principal amount of 11.375% senior secured notes due 2014 (the “Additional First-Lien Notes”) in a private placement. The Additional First-Lien Notes have the same terms as the existing $1.7 billion 11.375% first-lien senior secured notes.

Results of Operations

The following tables set forth our historical results of operations for the third quarter and three quarters ended September 30, 2010. 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 and equity activity and income tax effects. Unless otherwise noted, the information provided pertains to both NewPage Holding and NewPage.

Third Quarter 2010 Compared to Third Quarter 2009

 

     NewPage Holding  
     Third Quarter Ended Sept. 30,  
     2010      2009  
(in millions)    $      %      $      %  

Net sales

     943         100.0         791         100.0   

Cost of sales

     886         93.8         785         99.2   

Selling, general and administrative expenses

     41         4.4         47         5.9   

Interest expense

     97         10.3         199         25.2   

Other (income) expense, net

     (10)         (1.0)         (93)         (11.7)   
                                   

Income (loss) before income taxes

     (71)         (7.5)         (147)         (18.6)   

Income tax (benefit)

     —          —          (10)         (1.3)   
                                   

Net income (loss)

     (71)         (7.5)         (137)         (17.3)   

Net income (loss)—noncontrolling interests

     —          —                 0.2   
                                   

Net income (loss) attributable to the company

     (71)         (7.5)         (138)         (17.5)   
                                   

Supplemental Information

           

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization)

   $     106          $     140      
                       

Net sales for the third quarter of 2010 were $943 million compared to $791 million for the third quarter of 2009, an increase of $152 million or 19%. Net sales were affected primarily by higher sales volume of core paper ($146 million) compared to the third quarter of 2009. Core volume is principally coated freesheet, coated groundwood and supercalendered paper products sold in North America. Average core paper prices decreased to $875 per ton in the third quarter of 2010 compared to $886 per ton in the third quarter of 2009. Core paper sales volume increased to 939,000 tons in the third quarter of 2010 compared to 769,000 tons in the third quarter of 2009 as a result of decreased advertising spending and magazine and catalog circulation during the third quarter of 2009 largely attributable to general economic factors and inventory reductions by customers. We took 101,000 tons of market-related downtime in the third quarter of 2009. We did not take any market-related downtime during the third quarter of 2010. We will consider the need for additional downtime from time to time based on market conditions.

Cost of sales for the third quarter of 2010 was $886 million compared to $785 million for the third quarter of 2009, an increase of $101 million, or 13%. The increase was primarily a result of higher core paper

 

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sales volume ($121 million), partially offset by lower sales volumes of other non-core paper and the elimination of market-related downtime in the third quarter of 2010. Gross margin for the third quarter of 2010 was 6.2% compared to 0.8% for the third quarter of 2009, primarily as a result of higher core paper sales volumes and the effects of not taking market-related downtime. Maintenance expense at our mills increased to $73 million in the third quarter of 2010 from $66 million in the third quarter of 2009, as a result of higher costs for scheduled annual maintenance shutdowns.

Selling, general and administrative expenses decreased to $41 million for the third quarter of 2010 from $47 million for the third quarter of 2009, primarily from lower costs resulting from cost reduction initiatives and lower pension expense. As a percentage of net sales, selling, general and administrative expenses improved in the third quarter of 2010 to 4.4% from 5.9% in the third quarter of 2009.

Interest expense for the third quarter of 2010 was $97 million compared to $199 million for the third quarter of 2009. Interest expense for NewPage for the third quarter of 2010 was $93 million compared to $194 million for the third quarter of 2009, primarily as a result of a charge of $133 million on the refinancing of debt and related transactions in the third quarter of 2009, partially offset by higher interest rates and higher debt levels in the third quarter of 2010.

Other (income) expense was $(10) million for the third quarter of 2010 and $(93) million for the third quarter of 2009. Included in other (income) expense in the third quarter of 2010 and 2009 was $(9) million and $(94) million of income recognized for alternative fuel mixture tax credits.

Income tax expense (benefit) for the third quarter of 2010 and 2009 was zero and $(10) million. Income tax expense (benefit) for NewPage for the third quarter of 2010 and 2009 was zero and $(5) million. For the third quarter of 2010 and 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 third quarter ended September 30, 2010 and 2009, we allocated zero and $(4) million of tax expense to other comprehensive income (loss) and the corresponding offset as an allocation to tax benefit from operations. For the third quarter ended September 30, 2010 and 2009, for NewPage, we allocated zero and $(8) million of tax expense to other comprehensive income (loss) and the corresponding offset as an allocation to tax benefit from operations. The amounts for the third quarter of 2009 reflect the reclassification to income tax (benefit) of all amounts previously allocated to other comprehensive income (loss) related to the interest rate swap cash flow hedges. Also included in the third quarter ended September 30, 2009 was a tax benefit of $12 million, reflecting the decreases to our state deferred tax liabilities as a result of changes in our distribution channels that have occurred as part of our integration with SENA.

Net income (loss) attributable to NewPage Holding was $(71) million in the third quarter of 2010 compared to $(138) million in the third quarter of 2009. Net income (loss) attributable to NewPage was $(67) million in the third quarter of 2010 compared to $(138) million in the third quarter of 2009. The improvements were primarily a result of higher core paper sales volume and lower interest expense, partially offset by lower other income recognized from the alternative fuel mixture tax credits.

Adjusted EBITDA was $106 million for the third quarter of 2010 compared to $140 million for the third quarter of 2009. See “Reconciliation of Net Income (Loss) Attributable to the Company to Adjusted EBITDA” for further information on the use of EBITDA and Adjusted EBITDA as a measurement tool.

 

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Three Quarters 2010 Compared to Three Quarters 2009

 

     NewPage Holding  
     Three Quarters Ended Sept. 30,  
     2010      2009  
(in millions)    $      %      $      %  

Net sales

     2,650         100.0         2,249         100.0   

Cost of sales

     2,648         99.9         2,261         100.5   

Selling, general and administrative expenses

     148         5.6         142         6.3   

Interest expense

     295         11.1         343         15.3   

Other (income) expense, net

     (13)         (0.5)         (218)         (9.7)   
                                   

Income (loss) before income taxes

     (428)         (16.1)         (279)         (12.4)   

Income tax (benefit)

            0.1         (20)         (0.9)   
                                   

Net income (loss)

     (429)         (16.2)         (259)         (11.5)   

Net income (loss)—noncontrolling interests

     —          —                 0.2   
                                   

Net income (loss) attributable to the company

     (429)         (16.2)         (263)         (11.7)   
                                   

Supplemental Information

           

Adjusted EBITDA

   $     131          $     344      
                       

Net sales for the first three quarters of 2010 were $2,650 million compared to $2,249 million for the first three quarters of 2009, an increase of $401 million, or 18%. Net sales were affected primarily by higher sales volume of core paper ($465 million) and higher sales volume and higher average prices of other non-core paper, partially offset by lower average core paper prices ($189 million) in the first three quarters of 2010 compared to the first three quarters of 2009. Average core paper prices decreased to $862 per ton in the first three quarters of 2010 compared to $924 per ton in the first three quarters of 2009. Core paper sales volume increased to 2,599,000 tons in the first three quarters of 2010 compared to 2,126,000 tons in the first three quarters of 2009. This can be attributed to the decreased advertising spending and magazine and catalog circulation during the first three quarters of 2009 largely attributable to general economic factors and inventory reductions by customers. We took 39,000 tons of market-related downtime in the first three quarters of 2010 compared to 411,000 tons of market-related downtime in the first three quarters of 2009.

Cost of sales for the first three quarters of 2010 was $2,648 million compared to $2,261 million for the first three quarters of 2009, an increase of $387 million, or 17%. The increase was primarily a result of higher core paper sales volume ($357 million) and higher volumes of other non-core paper, partially offset by lower levels of market-related downtime. During the second quarter of 2010, we took actions to reduce personnel as part of our cost reduction initiatives and recognized a charge of $4 million for employee-related costs in cost of sales. Gross margin (loss) for the first three quarters of 2010 was 0.1% compared to (0.5)% for the first three quarters of 2009. Maintenance expense at our mills increased to $230 million in the first three quarters of 2010 from $208 million in the first three quarters of 2009, as a result of higher costs for scheduled annual maintenance shutdowns.

Selling, general and administrative expenses increased to $148 million for the first three quarters of 2010 from $142 million for the first three quarters of 2009, primarily as a result of $14 million higher non-cash stock compensation expense and $6 million in employee-related costs, primarily associated with certain former executive officers, during the first three quarters of 2010, partially offset by the benefits from cost reduction initiatives, lower pension expense and lower integration costs. As a percentage of net sales, selling, general and administrative expenses improved in the first three quarters of 2010 to 5.6% from 6.3% in the first three quarters of 2009.

 

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Interest expense for the first three quarters of 2010 was $295 million compared to $343 million for the first three quarters of 2009. Interest expense for NewPage for the first three quarters of 2010 was $282 million compared to $328 million for the first three quarters of 2009, primarily as a result of a charge of $133 million on the refinancing of debt and related transactions in the third quarter of 2009 partially offset by higher interest rates on outstanding debt and higher levels of outstanding debt during 2010.

Other (income) expense was $(13) million for the first three quarters of 2010 and $(218) million for the first three quarters of 2009. Included in other (income) expense in the first three quarters of 2010 and 2009 was $(22) million and $(214) million of income recognized for alternative fuel mixture tax credits.

Income tax expense (benefit) for the first three quarters of 2010 and 2009 was $1 million and $(20) million. Income tax expense (benefit) for NewPage for the first three quarters of 2010 and 2009 was $1 million and $(15) million. For the first three quarters of 2010 and 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 first three quarters ended September 30, 2010 and 2009, we allocated zero and $7 million of tax expense to other comprehensive income (loss) and the corresponding offset as an allocation to tax benefit from operations. For the first three quarters ended September 30, 2010 and 2009, for NewPage, we allocated zero and $3 million of tax expense to other comprehensive income (loss) and the corresponding offset as an allocation to tax benefit from operations. The amounts for the first three quarters of 2009 reflect the reclassification to income tax (benefit) of all amounts previously allocated to other comprehensive income (loss) related to the interest rate swap cash flow hedges. Also included in the first three quarters ended September 30, 2009 was a tax benefit of $12 million, reflecting the decreases to our state deferred tax liabilities as a result of changes in our distribution channels that have occurred as part of our integration with SENA.

Net income (loss) attributable to NewPage Holding was $(429) million in the first three quarters of 2010 compared to $(263) million in the first three quarters of 2009. Net income (loss) attributable to NewPage was $(416) million in the first three quarters of 2010 compared to $(253) million in the first three quarters of 2009. The decreases were primarily a result of lower average sales prices and lower other income recognized for the alternative fuel mixture tax credits, partially offset by higher core paper sales volume and lower interest expense.

Adjusted EBITDA was $131 million for the first three quarters of 2010 compared to $344 million for the first three quarters of 2009. See “Reconciliation of Net Income (Loss) Attributable to the Company to Adjusted EBITDA” for further information on the use of EBITDA and Adjusted EBITDA as a measurement tool.

Reconciliation of Net Income (Loss) Attributable to the Company to Adjusted EBITDA

EBITDA is defined as net income (loss) attributable to the company before interest expense, income taxes, depreciation and amortization. EBITDA and Adjusted EBITDA are not measures of our performance under U.S. GAAP, are 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 and Adjusted EBITDA are shown because they are a basis upon which our management assesses performance and are primary components of certain covenants under our revolving credit facility. In addition, our management believes EBITDA and Adjusted EBITDA are useful to investors because they 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 and Adjusted EBITDA instead of net income (loss) attributable to the company has limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

 

   

EBITDA and Adjusted EBITDA do not reflect our current cash expenditure requirements, or future requirements, for capital expenditures or contractual commitments

 

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EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs

 

   

EBITDA and Adjusted EBITDA do 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 and Adjusted EBITDA do not reflect any cash requirements for such replacements

 

   

our measures of EBITDA and Adjusted EBITDA are 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 and Adjusted 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 and Adjusted EBITDA:

 

     NewPage Holding  
     Third Quarter
Ended Sept. 30,
     Three Quarters
Ended Sept. 30,
 
(in millions)    2010      2009      2010      2009  

Net income (loss) attributable to the company

   $ (71)       $ (138)       $ (429)       $ (263)   

Interest expense

     97         199         295         343   

Income tax (benefit)

     —          (10)                (20)   

Depreciation and amortization

     68         69         203         208   
                                   

EBITDA

     94         120         70         268   

Equity awards

                   21          

(Gain) loss on disposal and impairment of assets

                           

Non-cash U.S. pension expense

            12         26         37   

Integration and related severance costs

                          24   

Other

     (1)                —           
                                   

Adjusted EBITDA

   $       106       $       140       $       131       $       344   
                                   

Liquidity and Capital Resources

Available Liquidity

As of September 30, 2010, our principal sources of liquidity include cash generated from operating activities and availability under our revolving credit facility. The amount of borrowings and letters of credit available to NewPage pursuant to the revolving credit facility is limited to the lesser of $500 million or an amount determined pursuant to a borrowing base ($387 million as of September 30, 2010).

 

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As of September 30, 2010, we had $117 million available for borrowing in excess of the $50 million required minimum, after reduction for $100 million in outstanding letters of credit and $120 million in outstanding borrowings under the revolving 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. Our revolving credit facility matures on October 2, 2011 unless we repay or refinance our second-lien notes by July 4, 2011, in which case the revolving credit facility matures on December 21, 2012. We anticipate seeking to extend or refinance the revolving credit facility prior to its maturity and/or refinancing our second-lien notes. We believe our cash flow from operations, proceeds from the sale of nonstrategic assets, available borrowings under our existing or a replacement revolving 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, that we will be able to complete the sale of nonstrategic assets or that future borrowings will be available to us under our existing or a replacement revolving credit facility in an amount sufficient to enable us to fund our liquidity needs.

Aggregate indebtedness as of September 30, 2010 totaled $3,490 million, which includes $3,271 million at NewPage. Beginning in 2012, 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 our 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 continued access to the capital markets as may be necessary to refinance our existing indebtedness.

Cash Flows

Cash provided by (used for) operating activities was $(91) million during the first three quarters of 2010 compared to $(13) million during the first three quarters of 2009. The reduction in cash provided by (used for) operating activities was primarily the result of the expiration of the alternative fuel mixture tax credit at the end of 2009, for which we received cash payments of $198 million during the first three quarters of 2009, as well as higher cash requirements for interest and the settlement of interest rate swaps in 2010, partially offset by improvements in working capital. Investing activities in the first three quarters of 2010 include $49 million for capital expenditures and the receipt of $12 million of proceeds from the sales of assets. Financing activities in the first three quarters of 2010 included the issuance of $70 million of additional First-Lien Notes (proceeds of $67 million) used to repay existing borrowings under the revolving credit facility and for general corporate purposes and $68 million of net borrowings under the revolving credit facility.

Capital Expenditures

Capital expenditures were $49 million and $45 million for the first three quarters ended September 30, 2010 and 2009.

Financial Discussion

During the second quarter of 2010, we took actions to reduce personnel as part of our cost reduction initiatives and recognized charges for employee-related costs of $4 million in cost of sales and $6 million in selling, general and administrative expenses. During the first three quarters of 2010, we continued to achieve cost savings from production and operating efficiencies and other restructuring activities. We also continued evaluating ways to raise capital through the issuance and refinancing of debt and through the sale of nonstrategic assets.

 

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On November 3, 2010, NewPage Port Hawkesbury Corp. (“NPPH”), an indirect wholly-owned subsidiary of NewPage, completed the sale of certain assets, including a boiler at the Port Hawkesbury, Nova Scotia mill, to Nova Scotia Power Inc. (“NSPI”) for a cash sales price of Canadian $80 million. In addition, NSPI and NPPH have entered into an engineering, procurement and construction contract for NPPH to construct for NSPI a 60 MW biomass cogeneration utility plant for the generation of electricity by December 31, 2012 for approximately Canadian $93 million. NSPI and NPPH also entered into a management, operations and maintenance agreement related to NPPH operating the utility assets for NSPI. NPPH is required to post $10 million of letters of credit under these arrangements in 2010 and an additional $5 million in 2011.

In February 2010, Consolidated Water Power Company (“CWPCo”), an indirect wholly-owned subsidiary of NewPage, announced that it signed an agreement with Wisconsin Rapids Water Works Lighting Commission to sell the CWPCo utility transmission and distribution assets (“CWPCo Utility”). The purchase price will be equal to the net book value of the assets at the time of closing, which is subject to regulatory approvals. On November 1, 2010, CWPCo entered into an asset sale agreement to sell five hydroelectric projects to Great Lakes Utilities for a net cash sales price of approximately $70 million. The closing of the transaction is subject to completion of the CWPCO Utility sale and regulatory approval. These transactions are not expected to close in 2010. We continue to hold and operate the assets in the normal course of our operations.

We have various investments held by our defined-benefit pension plan trusts. The returns on these assets have generally matched the broader market. We are monitoring the effects of our underfunded pension plans on our minimum pension funding requirements and pension expense for future periods. We currently do not anticipate material increases in our minimum funding requirements during the remainder of 2010 or 2011.

The Environmental Protection Agency released a proposed rule in June 2010, which provides for new Industrial Boiler Maximum Achievable Control Technology (MACT) standards to regulate emissions of hazardous air pollutants. The rule as proposed would impose new emission limits for solid fuel-fired boilers and is expected to be finalized in 2011 with compliance expected by early 2014. As proposed, we could be required to make significant capital expenditures on emission control equipment at our mills to comply with the rule. In addition, our mills would likely incur increased operating expenses associated with compliance and operation of the new control equipment. We will complete our evaluation following finalization of the rule and a review of our mills relative to the proposed new standards. We, along with others, have commented on the proposed rule and expect revisions to the final form.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of September 30, 2010 and December 31, 2009, $564 million and $484 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 September 30, 2010 and December 31, 2009, would be $6 million and $5 million.

 

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ITEM 4. 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 September 30, 2010. To the best of our knowledge, there were no changes in the internal controls over financial reporting that occurred during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II                OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

In September 2009, NewPage, along with two other U.S. paper producers and the United Steelworkers Union, filed antidumping and countervailing duty petitions with the U.S. Department of Commerce and the U.S. International Trade Commission alleging that manufacturers of certain coated paper in China and Indonesia are dumping their products in the United States and that these manufacturers have been subsidized by their governments in violation of U.S. trade laws.

In September 2010, the Department of Commerce announced final antidumping and countervailing duty margins, replacing the preliminary margins announced earlier this year. On October 22, 2010, the International Trade Commission determined by unanimous vote that imports of coated paper from China and Indonesia threaten material injury to U.S. producers and workers. The decision will allow the Department of Commerce to impose duties to offset the threat of dumping and government subsidies. These duties will remain in effect for five years, subject to annual administrative reviews.

 

ITEM 5. OTHER INFORMATION

On November 1, 2010, Consolidated Water Power Company, an indirect wholly-owned subsidiary of NewPage, entered into an asset sale agreement to sell five hydroelectric projects to Great Lakes Utilities for a net cash sales price of approximately $70 million. The closing of the transaction is subject to completion of a separate sale of utility assets and regulatory approval. These transactions are not expected to close in 2010.

On November 3, 2010, NewPage Port Hawkesbury Corp., an indirect wholly-owned subsidiary of NewPage, completed the sale of certain assets, including a boiler at the Port Hawkesbury, Nova Scotia mill, to Nova Scotia Power Inc. for a cash sales price of Canadian $80 million. An amending agreement was entered into in conjunction with the closing to address certain closing issues.

 

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ITEM 6.      EXHIBITS

 

Exhibit
Number
   Description

10.1

   Employment Agreement dated as of September 1, 2010 between NewPage Corporation and Laszlo M. Lukacs

10.2

   Third Amendment to Revolving Credit and Guaranty Agreement and First Amendment to Pledge and Security Agreement, dated as of October 15, 2010 (incorporated by reference from Exhibit 10.1 to the Form 8-K filed on October 21, 2010)

10.3

   Asset Sale Agreement dated as of November 1, 2010 between Consolidated Water Power Company and Great Lakes Utilities

10.4

   Amending Agreement dated November 3, 2010 between NewPage Port Hawkesbury Corp. and Nova Scotia Power Inc.

31.1

   Certification of Principal 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 Principal 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:   November 4, 2010    Date:   November 4, 2010

 

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