We believe that we are the largest coated paper manufacturer in North America, based on production capacity. We operate four integrated pulp and paper mills in Kentucky, Maine, Maryland and Michigan which, together with our distribution centers, are strategically located near attractive end-use markets, such as New York, Chicago and Atlanta. Our mills have a total annual production capacity of approximately 2.2 million short tons of coated paper and approximately 200,000 short tons of market pulp.
Coated paper is used primarily in media and marketing applications, including corporate annual reports, high-end advertising brochures, magazines, catalogs and direct mail advertising. Our largest product category is coated freesheet paper, which is used primarily for higher-end applications such as annual reports, brochures, coated labels and magazine covers. The remainder of our coated paper is coated groundwood paper, which is used primarily for catalogs, magazines and textbooks. We also produce uncoated paper, digital printing paper and market pulp, a component used in the manufacturing of paper. We have long-standing relationships with many leading publishers, commercial printers, specialty retail merchandisers and paper merchants. Our key customers include: Hearst Publications, McGraw-Hill Companies, Pearson Education and Time, in publishing; Banta Corporation, QuadGraphics, QuebecorWorld and RR Donnelley, in commercial printing; Williams-Sonoma, in specialty retailing; and xpedx and Unisource Worldwide, which are paper merchants.
Underwriters:Goldman Sachs, UBS Investment Bank
Offering: Range of $14-$16. The proceeds of the offering will be used to resolve debt arising from recent acquisition and other transactions.
We expect that our net sales for the second quarter of 2006 will be between $485 million and $495 million compared to $416 million in the second quarter of 2005. We expect coated paper sales volumes will be between 70,000 tons and 75,000 tons higher in the second quarter of 2006 than the 450,000 tons sold in the second quarter of 2005. Our expected increase in coated paper sales volume is largely caused by improved demand in 2006 and recent industry capacity closures. We expect average coated paper prices in the second quarter of 2006 to be between $892 per ton to $895 per ton compared to $877 per ton in the second quarter of 2005.
We expect that gross profit for the second quarter of 2006 will be between approximately $56 million and $60 million compared to $30 million for the second quarter of 2005. This expected increase in gross profit compared to the comparable 2005 period is primarily the result of stronger volume, higher sales prices and productivity improvement initiatives, partially offset by higher costs resulting from increased energy and wood costs.
We expect that selling, general and administrative expense will be between $23 million and $24 million for the second quarter of 2006 compared to $25 million for the second quarter of 2005, and that depreciation and amortization expense for the second quarter of 2006 will be approximately the same as the first quarter of 2006.