MIAMISBURG, Ohio, Aug. 6, 2021 /PRNewswire/ -- Verso Corporation
(NYSE: VRS) today reported financial results for the second quarter
of 2021 and announced that its Board of Directors has declared a
quarterly cash dividend for the quarter ending September 30, 2021, in the amount of $0.10 per each outstanding share of Verso's Class
A common stock. The quarterly cash dividend is payable on
September 28, 2021 to Verso's
stockholders of record holding shares of common stock at the close
of business September 17, 2021.
Second Quarter 2021 Highlights:
- Net sales of $329 million, a 23%
increase over second quarter 2020 and 17% increase over first
quarter 2021
- Net income of $16 million
compared to a net loss of $34 million
in second quarter 2020 and a net loss of $90
million in the first quarter 2021
- Adjusted EBITDA of $52 million
compared to $(9) million in second
quarter 2020 and $30 million in first
quarter 2021
- Adjusted EBITDA margin of 15.8% compared to a negative margin
in second quarter 2020 and a 10.6% margin in first quarter
2021
- $246 million in available
liquidity including $117 million in
cash
- Returned $59 million in capital
to shareholders in repurchases and dividends
Overview
"Verso delivered a strong second quarter
performance driven by the ongoing execution of our operating
strategy and positive macro trends. We are seeing the benefits of
these actions that support our customers' needs. Continued capacity
reduction in the industry, combined with heightened demand as the
economy reopens, is driving growth in order rates and backlogs as
well as price increases across our product lines," said Verso
President and Chief Executive Officer Randy
Nebel. "I am pleased that we were able to return
$59 million to our shareholders,
while continuing to maintain a strong balance sheet which we
believe provides the financial flexibility to execute on our
strategy to generate long-term value for all stakeholders."
Results of Operations – Comparison of Three Months Ended
June 30, 2021 to Three Months Ended
June 30, 2020
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
Three
Month
|
|
(Dollars in
millions)
|
2020
|
|
2021
|
|
$
Change
|
|
Net
sales
|
$
268
|
|
$
329
|
|
$
61
|
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation and
amortization)
|
271
|
|
272
|
|
1
|
|
Depreciation
and amortization
|
22
|
|
17
|
|
(5)
|
|
Selling,
general and administrative expenses
|
16
|
|
20
|
|
4
|
|
Restructuring
charges
|
-
|
|
6
|
|
6
|
|
Other
operating (income) expense
|
1
|
|
3
|
|
2
|
|
Operating income
(loss)
|
(42)
|
|
11
|
|
53
|
|
Interest
expense
|
-
|
|
-
|
|
-
|
|
Other (income)
expense
|
(5)
|
|
(7)
|
|
(2)
|
|
Income (loss)
before income taxes
|
(37)
|
|
18
|
|
55
|
|
Income tax
expense (benefit)
|
(3)
|
|
2
|
|
5
|
|
Net income
(loss)
|
$
(34)
|
|
$
16
|
|
$
50
|
Net sales
Net sales for the three months ended June
30, 2021 increased $61
million, or 23%, compared to the three months ended
June 30, 2020, driven by increases in
volume and favorable price/mix as the economy began to open,
partially offset by $30 million, or
11%, attributable to our idled Duluth and Wisconsin Rapids mills.
Total company sales volume was up from 346 thousand tons during the
three months ended June 30, 2020, to
369 thousand tons during the same period of the current year. Of
the 23 thousand ton volume increase, 82 thousand tons were
attributable to an increase in volume, partially offset by 59
thousand tons attributable to our idled Duluth and Wisconsin Rapids
mills.
Operating income (loss)
Operating income was
$11 million for the three months
ended June 30, 2021, an increase of
$53 million when compared to
operating loss of $42 million for the
three months ended June 30, 2020.
Operating results for the three months ended June 30, 2021 were positively impacted by:
- Favorable price/mix of $31
million driven by price increase realization across all
grades, led by pulp price improvements
- Higher sales volume resulting in an increase of $8 million
- Improved operating income from closed and idled mills of
$9 million
- Lower depreciation expense of $5
million
- Lower net operating expenses of $11
million driven primarily by improved performance and cost
reduction initiatives across our mill system
- Lower planned major maintenance costs of $6 million driven by reduced scope of planned
outages
Operating results for the three months ended June 30, 2021 were negatively impacted by:
- Inflationary costs of $5 million
driven by purchased pulp, energy and freight
- Higher selling, general and administrative expenses of
$4 million driven primarily by an
increase in incentive expense and other general expenses
- Higher restructuring charges of $6
million associated with the permanent shutdown of our Duluth
Mill in December 2020
- Higher other operating expenses of $2
million primarily related to a loss on the sale of our
Duluth Mill of $3 million
Other (income) expense
Other income for the three
months ended June 30, 2021 and 2020
includes income of $6 million and
$5 million, respectively, associated
with the non-operating components of net periodic pension cost
(income).
Income tax expense (benefit)
Income tax expense of
$2 million for the three months ended
June 30, 2021 primarily reflects
estimated tax expense for the period, partially offset by
$1 million of tax benefit from the
release of valuation allowance against state tax credits.
Results of Operations – Comparison of Six Months Ended
June 30, 2021 to Six Months Ended
June 30, 2020
|
|
|
|
|
|
|
|
|
Six Months
Ended
June 30,
|
|
Six
Month
|
|
(Dollars in
millions)
|
2020
|
|
2021
|
|
$
Change
|
|
Net
sales
|
$
739
|
|
$
611
|
|
$
(128)
|
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation and
amortization)
|
698
|
|
536
|
|
(162)
|
|
Depreciation
and amortization
|
45
|
|
119
|
|
74
|
|
Selling,
general and administrative expenses
|
43
|
|
35
|
|
(8)
|
|
Restructuring
charges
|
6
|
|
17
|
|
11
|
|
Other
operating (income) expense
|
(87)
|
|
2
|
|
89
|
|
Operating income
(loss)
|
34
|
|
(98)
|
|
(132)
|
|
Interest
expense
|
-
|
|
1
|
|
1
|
|
Other (income)
expense
|
(9)
|
|
(13)
|
|
(4)
|
|
Income (loss)
before income taxes
|
43
|
|
(86)
|
|
(129)
|
|
Income tax
expense (benefit)
|
23
|
|
(12)
|
|
(35)
|
|
Net income
(loss)
|
$
20
|
|
$
(74)
|
|
$
(94)
|
Net sales
Net sales for the six months ended June 30,
2021 decreased $128 million
compared to the six months ended June 30,
2020, driven by an increase in net sales at our Escanaba and
Quinnesec mills of $64 million,
attributable to increased volume and pricing, more than offset by a
$192 million sales decline related to
our sold and idled mills. Of the $192
million net sales decline, $64
million was a result of the sale of our Androscoggin and
Stevens Point mills, $57 million was
attributable to our idled Duluth Mill and $71 million was attributable to our idled
Wisconsin Rapids Mill. Total company sales volume was down from 900
thousand tons during the six months ended June 30, 2020, to 708 thousand tons during the
same period of the current year. Of the 192 thousand ton volume
decline, 66 thousand tons were a result of the sale of our
Androscoggin and Stevens Point mills in February 2020, 94 thousand tons were attributable
to our idled Duluth Mill and 86 thousand tons were attributable to
our idled Wisconsin Rapids Mill.
Operating income (loss)
Operating loss was
$98 million for the six months ended
June 30, 2021, a decrease of
$132 million when compared to
operating income of $34 million for
the six months ended June 30,
2020.
Operating results for the six months ended June 30, 2021 were positively impacted by:
- Favorable price/mix of $25
million as prices continued to recover during the second
quarter of 2021
- While overall sales volume dropped, the impact to net operating
income improved $3 million, driven by
the elimination of unprofitable volume at closed and idled
mills
- Lower net operating expenses of $6
million driven by $23 million
in reduced machine downtime, improved performance and cost
reduction initiatives across our mill system, partially offset by
$17 million in idled and closed mill
costs
- Reduced planned major maintenance costs of $7 million driven by reduced scope of planned
outages
- Lower selling, general and administrative expenses of
$8 million driven primarily by cost
reduction initiatives in connection with the sale of our
Androscoggin and Stevens Point mills in February 2020, non-recurring costs associated
with the proxy solicitation contest in the first quarter of 2020,
lower equity compensation expense and severance costs, partially
offset by an increase in incentive expense
Operating results for the six months ended June 30, 2021 were negatively impacted by:
- Inflationary costs of $7 million
driven by purchased pulp, energy and freight, partially offset by
lower wood costs
- Higher depreciation expense of $74
million due primarily to $84
million in accelerated depreciation associated with the
permanent shutdown of No. 14 paper machine and certain other
long-lived assets at our Wisconsin Rapids Mill in February 2021
- Higher restructuring charges of $11
million primarily associated with the permanent shutdown of
our Duluth Mill in December 2020 and
of the No. 14 paper machine and certain other long-lived assets at
our Wisconsin Rapids Mill in February
2021, partially offset by restructuring costs associated
with the closure of our Luke Mill in June
2019
- Lower other operating income of $89
million, primarily as a result of the $88 million gain on the sale of our Androscoggin
and Stevens Point mills in February
2020
Other (income) expense
Other income for the six months
ended June 30, 2021 and 2020 includes
income of $12 million and
$10 million, respectively, associated
with the non-operating components of net periodic pension cost
(income).
Income tax expense (benefit)
Income tax benefit of
$12 million for the six months ended
June 30, 2021 primarily reflects
estimated tax benefit for the period, partially offset by
$3 million of additional valuation
allowance recognized against state tax credits.
2021 Outlook
The Company is providing the following
outlook for full year 2021:
- Expects capital expenditures to be $50
million to $60 million
- Pension minimum required1 contribution of
$25 million
- Cash taxes of zero to $2
million
- Cash position to increase
- Idled and closed mill costs improving while advancing
realization of potential asset sales
1 Minimum required cash contributions reduced with
implementation of American Rescue Plan Act Provisions
COVID-19 Pandemic
The COVID-19 Pandemic has impacted
our operations and financial results since the first quarter of
2020 and continues to have an impact on us. While we cannot
reasonably estimate the full impact of COVID-19 on our business,
financial position, results of operations and cash flows, we have
seen our sales, volume and prices begin to recover during the
second quarter of 2021. If a resurgence of COVID-19 related
variants occurs or if the vaccines introduced to combat the virus
are not effective, the adverse impact on our business, financial
position, results of operations and cash flow could be
material.
Special Committee Announcement
Verso today also
announced that, on July 15, 2021, its
Board of Directors formed a Special Committee to review and
evaluate the unsolicited acquisition proposal made by Atlas
Holdings LLC on July 11, 2021 and
alternatives thereto. The Special Committee is comprised of two
non-executive, independent and disinterested directors,
Robert K. Beckler and Nancy M. Taylor. Rothschild & Co is
serving as financial advisor and Kirkland & Ellis LLP is
serving as legal counsel to the Special Committee.
Consistent with its fiduciary duties and in consultation with
its financial and legal advisors, the Special Committee will
thoroughly review and evaluate the proposal and alternatives
thereto. There can be no assurance that any negotiations between
Verso and Atlas Holdings LLC regarding its proposal (or between
Verso and any other party) will take place, and if such
negotiations do take place, there can be no assurance that any
transaction with Atlas Holdings LLC (or any other party) will occur
or be consummated. Verso does not intend to comment on or disclose
further developments regarding the Special Committee's evaluation
unless and until it deems further disclosure is appropriate or
required.
Verso stockholders do not need to take any action at this
time.
Conference Call
Verso will host a conference call and
webcast for analysts and investors on Friday, August 6, 2021 at 9 a.m. (EST) to discuss second quarter 2021
financial results.
Analysts and investors may access the live conference call only
by dialing 888-317-6003 (U.S. toll-free), 866-284-3684
(Canada toll-free) or 412-317-6061
(international) and referencing elite entry number 1830797 and
Verso Corporation. To register, please dial in 10 minutes before
the conference call begins. The news release and second quarter
2021 results will be available on Verso's website at
http://investor.versoco.com by navigating to the Financial
Information page.
Analysts and investors may also access the live conference call
and webcast by clicking on the event link
https://www.webcaster4.com/Webcast/Page/1524/42246 or by
visiting Verso's website at http://investor.versoco.com and
navigating to the Events page. Please go to this link at least one
hour before the call and follow the instructions to register,
download and install any necessary audio/video software.
A telephonic replay of the call can be accessed at 877-344-7529
(U.S. toll-free), 855-669-9658 (Canada toll-free) or 412-317-0088
(international), access code 10159009. The replay will be available
starting at 11 a.m. (EST) Friday, August 6,
2021, and will remain available until September 3, 2021. An archive of the conference
call and webcast will be available at http://investor.versoco.com
starting at 11 a.m. (EST) Friday, August 6,
2021, and will remain available for 120 days.
Reconciliation of Net Income (Loss) to EBITDA and Adjusted
EBITDA
EBITDA consists of earnings before interest, taxes,
depreciation and amortization. Adjusted EBITDA reflects adjustments
to EBITDA to eliminate the impact of certain items that we do not
consider to be indicative of our ongoing performance. We use EBITDA
and Adjusted EBITDA as a way of evaluating our performance relative
to that of our peers and to assess compliance with our credit
facilities. We believe that EBITDA and Adjusted EBITDA are non-GAAP
operating performance measures commonly used in our industry that
provide investors and analysts with measures of ongoing operating
results, unaffected by differences in capital structures, capital
investment cycles and ages of related assets among otherwise
comparable companies.
We believe that the supplemental adjustments applied in
calculating Adjusted EBITDA are reasonable and appropriate to
provide additional information to investors.
Because EBITDA and Adjusted EBITDA are not measurements
determined in accordance with Generally Accepted Accounting
Principles (GAAP) and are susceptible to varying calculations,
EBITDA and Adjusted EBITDA, as presented, may not be comparable to
similarly titled measures of other companies. You should consider
our EBITDA and Adjusted EBITDA in addition to, and not as a
substitute for, or superior to, our operating or net income (loss),
which are determined in accordance with GAAP.
The following table reconciles net income (loss) to EBITDA and
Adjusted EBITDA for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
(Dollars in
millions)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Net income
(loss)
|
|
$
(90)
|
|
$
(34)
|
|
$
16
|
|
$
20
|
|
$
(74)
|
|
Income tax expense
(benefit)
|
|
(14)
|
|
(3)
|
|
2
|
|
23
|
|
(12)
|
|
Interest
expense
|
|
1
|
|
-
|
|
-
|
|
-
|
|
1
|
|
Depreciation and
amortization
|
|
102
|
|
22
|
|
17
|
|
45
|
|
119
|
|
EBITDA
|
|
$
(1)
|
|
$
(15)
|
|
$
35
|
|
$
88
|
|
$
34
|
|
Adjustments to
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges
(1)
|
|
11
|
|
-
|
|
6
|
|
6
|
|
17
|
|
|
Luke Mill
post-closure costs (2)
|
|
8
|
|
3
|
|
-
|
|
6
|
|
8
|
|
|
Noncash equity award
compensation (3)
|
|
1
|
|
2
|
|
1
|
|
4
|
|
2
|
|
|
Gain on Sale of the
Androscoggin/Stevens Point Mills (4)
|
|
-
|
|
-
|
|
-
|
|
(88)
|
|
-
|
|
|
Loss on Sale of
Duluth Mill (5)
|
|
-
|
|
-
|
|
3
|
|
-
|
|
3
|
|
|
Duluth and Wisconsin
Rapids mills idle/post-closure costs (6)
|
|
10
|
|
-
|
|
4
|
|
-
|
|
14
|
|
|
Stockholders proxy
solicitation costs (7)
|
|
-
|
|
-
|
|
-
|
|
4
|
|
-
|
|
|
Other severance costs
(8)
|
|
1
|
|
1
|
|
1
|
|
5
|
|
2
|
|
|
Other items, net
(9)
|
|
-
|
|
-
|
|
2
|
|
1
|
|
2
|
|
Adjusted
EBITDA
|
|
$
30
|
|
$
(9)
|
|
$
52
|
|
$
26
|
|
$
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Margin
%
|
|
-31.9%
|
|
-12.7%
|
|
4.9%
|
|
2.7%
|
|
-12.1%
|
|
Adjusted EBITDA
Margin %
|
|
10.6%
|
|
-3.4%
|
|
15.8%
|
|
3.5%
|
|
13.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
For 2020, charges are
associated with the closure of our Luke Mill in June 2019. For
2021, charges are primarily associated
with the permanent shutdown of our Duluth Mill in December 2020 and
of the No. 14 paper machine and certain other
long-lived assets at our Wisconsin Rapids Mill in February
2021.
|
|
(2)
|
Costs recorded after
the permanent shutdown of our Luke Mill that are not associated
with product sales or restructuring
activities, including $5 million in March 2021 associated with the
approval of a consent decree on April 1, 2021 relating to
the ongoing environmental remediation and monitoring
efforts.
|
|
(3)
|
Amortization of
noncash incentive compensation.
|
|
(4)
|
Gain on the sale of
outstanding membership interests in Verso Androscoggin, LLC in
February 2020, which included our
Androscoggin Mill and Stevens Point Mill.
|
|
(5)
|
Loss on the sale of
our Duluth Mill in May 2021.
|
|
(6)
|
Idle/post-closure
costs associated with our Duluth and Wisconsin Rapids mills that
are not associated with product sales or
restructuring activities.
|
|
(7)
|
Costs incurred in
connection with the stockholders proxy solicitation
contest.
|
|
(8)
|
Severance and related
benefit costs not associated with restructuring
activities.
|
|
(9)
|
Other miscellaneous
adjustments.
|
About Verso
VERSO CORPORATION is a leading American
owned and operated producer of graphic, specialty and
packaging paper and market pulp, with a long-standing reputation
for quality and reliability. Verso's graphic paper
products are designed primarily for commercial printing,
advertising and marketing applications, including direct mail,
catalogs, corporate collateral, books and magazines. Verso's
specialty paper products include release liner papers and label
face stock for pressure sensitive, glue-applied and laminate
applications. Verso produces packaging paper used in higher-end
packaging and printing applications such as greeting cards, book
covers, folders, labels and point-of-purchase displays. Verso also
makes market pulp used in printing, writing, specialty and
packaging papers, facial and toilet tissue, and paper towels. For
more information, visit us online at versoco.com.
Forward-Looking Statements
In this press release, all
statements that are not purely historical facts are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements may be identified by the words
"believe," "expect," "anticipate," "project," "plan," "estimate,"
"intend," "potential" and other similar expressions. They include,
for example, statements relating to Verso's business and operating
outlook for 2021, statements regarding Verso's ability to execute
on its strategy and generate long-term value for all stakeholders
position and statements regarding the unsolicited acquisition
proposal and the response thereto. Forward-looking statements are
based on currently available business, economic, financial, and
other information and reflect management's current beliefs,
expectations, and views with respect to future developments and
their potential effects on Verso. Actual results could vary
materially depending on risks and uncertainties that may affect
Verso and its business. Verso's actual actions and results may
differ materially from what is expressed or implied by these
statements due to a variety of factors, including: the adverse
impact of idling production, shutting down machines or facilities,
restructuring our operations and selling non-core assets; changes
in the costs of raw materials and purchased energy; security
breaches and other disruption to our information technology
infrastructure; uncertainties regarding the impact, duration and
severity of the COVID-19 pandemic and measures intended to reduce
its spread; the long-term structural decline and general softening
of demand facing the paper industry; adverse developments in
general business and economic conditions; developments in
alternative media, which are expected to adversely affect the
demand for some of Verso's key products, and the effectiveness of
Verso's responses to these developments; intense competition in the
paper manufacturing industry; Verso's limited ability to control
the pricing of its products or pass through increases in its costs
to its customers; Verso's business being less diversified because
of the Pixelle sale, the sale of Verso's Duluth Mill, the closure
of the Luke Mill and the permanent shut down of the No. 14 paper
machine and certain other long-lived assets at the Wisconsin Rapid
Mill; the unsolicited proposal from Atlas Holdings LLC regarding a
potential transaction to acquire all of the outstanding shares of
Verso's Class A common stock; uncertainties as to whether an
agreement relating to a potential transaction with Atlas Holdings
LLC or an alternative thereto will be negotiated and executed;
uncertainties as to whether a potential transaction with Atlas
Holdings LLC or an alternative thereto will be completed; Verso's
dependence on a small number of customers for a significant portion
of its business; Verso's ability to compete with respect to certain
specialty paper products for a period of two years after the
closing of the Pixelle sale; any failure to comply with
environmental or other laws or regulations; legal proceedings or
disputes; any labor disputes; and the potential risks and
uncertainties described under the caption "Risk Factors" in Verso's
Form 10-K for the fiscal year ended December
31, 2020 and Verso's Form 10-Q for the quarter ended
June 30, 2021 and from time to time
in Verso's other filings with the Securities and Exchange
Commission. Verso assumes no obligation to update any
forward-looking statement made in this press release to reflect
subsequent events or circumstances or actual outcomes.
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SOURCE Verso Corporation