MIAMISBURG, Ohio, Nov. 5, 2021 /PRNewswire/ -- Verso
Corporation (NYSE: VRS) today reported financial results for the
third quarter of 2021 and announced that its Board of Directors has
declared a quarterly cash dividend for the quarter ending
December 31, 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 December 29, 2021 to
Verso's stockholders of record holding shares of common stock at
the close of business December 17,
2021.
Third Quarter 2021 Highlights:
- Net sales of $339 million, an 11%
increase over third quarter 2020 and a 3% increase over second
quarter 2021
- Net income of $58 million
compared to a net loss of $31 million
in third quarter 2020 and net income of $16
million in second quarter 2021
- Adjusted EBITDA of $67 million
compared to $12 million in third
quarter 2020 and $52 million in
second quarter 2021
- Adjusted EBITDA margin of 19.8% compared to a 3.9% margin in
third quarter 2020 and a 15.8% margin in second quarter 2021
- $286 million in available
liquidity including $166 million in
cash
- Returned $14 million in capital
to shareholders in repurchases and quarterly dividends
Overview
"This was a strong quarter for Verso in
which our people drove robust cash flow, reflecting steadfast
execution and positive macro trends, including price increases, for
our business. Over the past few years, Verso has streamlined our
operations and reduced costs while strategically investing in
projects to enhance our ability to support our customers.
Additionally, strong demand with reduced industry capacity has led
to healthy order rates across our product lines," said Verso
President and Chief Executive Officer Randy
Nebel. "Verso maintains a strong, debt-free balance sheet,
which provides a solid foundation for generating long-term value
for shareholders."
Results of
Operations – Comparison of Three Months Ended September 30, 2021 to
Three Months Ended September 30, 2020
|
|
|
Three Months
Ended
September 30,
|
|
Three
Month
|
(Dollars in
millions)
|
2020
|
|
2021
|
|
$
Change
|
Net
sales
|
$
306
|
|
$
339
|
|
$
33
|
Costs and
expenses:
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation and
amortization)
|
309
|
|
274
|
|
(35)
|
Depreciation
and amortization
|
21
|
|
18
|
|
(3)
|
Selling,
general and administrative expenses
|
19
|
|
19
|
|
-
|
Restructuring
charges
|
(2)
|
|
-
|
|
2
|
Other
operating (income) expense
|
3
|
|
(7)
|
|
(10)
|
Operating income
(loss)
|
(44)
|
|
35
|
|
79
|
Interest
expense
|
1
|
|
-
|
|
(1)
|
Other (income)
expense
|
(5)
|
|
(6)
|
|
(1)
|
Income (loss)
before income taxes
|
(40)
|
|
41
|
|
81
|
Income tax
expense (benefit)
|
(9)
|
|
(17)
|
|
(8)
|
Net income
(loss)
|
$
(31)
|
|
$
58
|
|
$
89
|
Net sales
Net sales for the three months ended September 30, 2021 increased $33 million, or 11%, compared to the three months
ended September 30, 2020, driven by
favorable price/mix of $47 million,
partially offset by $14 million, or
5%, largely attributable to our sold Duluth and idled Wisconsin
Rapids mills. Total company sales volume was down from 382 thousand
tons during the three months ended September
30, 2020, to 358 thousand tons during the same period of the
current year, primarily attributable to our sold Duluth and idled
Wisconsin Rapids mills.
Operating income (loss)
Operating income was
$35 million for the three months
ended September 30, 2021, an increase
of $79 million when compared to an
operating loss of $44 million for the
three months ended September 30,
2020.
Operating results for the three months ended September 30, 2021 were positively impacted
by:
- Favorable price/mix of $47
million driven by price increase realization across all
grades, including pulp
- Improved operating income of $11
million resulting from the conversion to our current two
mill system
- Lower depreciation expense of $3
million
- Lower net operating expenses of $29
million driven primarily by $22
million lower closed/idled mill spend, lower wood costs,
improved performance and cost reduction initiatives across our mill
system
- Higher other operating income of $10
million, driven primarily by $6
million in insurance recoveries during the third quarter of
2021 associated with a 2019 insurance claim at our Quinnesec Mill
and $3 million loss on sale or
disposal of assets in 2020
Operating results for the three months ended September 30, 2021 were negatively impacted
by:
- Inflationary cost increases of $19
million driven by purchased pulp, latex, energy and
freight
- Favorable restructuring charge adjustments of $2 million in the third quarter of 2020 for
activities associated with the closure of our Luke Mill in
2019
Other (income) expense
Other income for the three
months ended September 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 benefit of
$17 million for the three months
ended September 30, 2021 reflects
estimated net tax benefit for the period, including $2 million of tax benefit from the release of
valuation allowance against state tax credits.
Results of
Operations – Comparison of Nine Months Ended September 30, 2021 to
Nine Months Ended September 30, 2020
|
|
|
Nine Months
Ended
September 30,
|
|
Nine
Month
|
(Dollars in
millions)
|
2020
|
|
2021
|
|
$
Change
|
Net
sales
|
$
1,045
|
|
$
950
|
|
$
(95)
|
Costs and
expenses:
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation and
amortization)
|
1,007
|
|
810
|
|
(197)
|
Depreciation
and amortization
|
66
|
|
137
|
|
71
|
Selling,
general and administrative expenses
|
62
|
|
54
|
|
(8)
|
Restructuring
charges
|
4
|
|
17
|
|
13
|
Other
operating (income) expense
|
(84)
|
|
(5)
|
|
79
|
Operating income
(loss)
|
(10)
|
|
(63)
|
|
(53)
|
Interest
expense
|
1
|
|
1
|
|
-
|
Other (income)
expense
|
(14)
|
|
(19)
|
|
(5)
|
Income (loss)
before income taxes
|
3
|
|
(45)
|
|
(48)
|
Income tax
expense (benefit)
|
14
|
|
(29)
|
|
(43)
|
Net income
(loss)
|
$
(11)
|
|
$
(16)
|
|
$
(5)
|
Net sales
Net sales for the nine months ended September 30, 2021 decreased $95 million, or 9%, compared to the nine months
ended September 30, 2020,
attributable to favorable price/mix of $72
million, which was more than offset by a decrease of
$167 million, or 16%, primarily
related to our sold Duluth, Androscoggin and Stevens Point mills
and idled Wisconsin Rapids mill. Total company sales volume was
down from 1,282 thousand tons during the nine months ended
September 30, 2020, to 1,066 thousand
tons during the same period of the current year, primarily
attributable to our sold Duluth, Androscoggin and Stevens Point
mills and idled Wisconsin Rapids mill.
Operating income (loss)
Operating loss was
$63 million for the nine months ended
September 30, 2021, a decrease of
$53 million when compared to
operating loss of $10 million for the
nine months ended September 30,
2020.
Operating results for the nine months ended September 30, 2021 were positively impacted
by:
- Favorable price/mix of $72
million driven by price increase realization across all
grades, including pulp
- Improved operating income of $22
million resulting from the conversion to our current two
mill system
- Lower net operating expenses of $37
million driven primarily by lower closed/idled mill spend,
improved performance and cost reduction initiatives across our mill
system
- Lower planned major maintenance costs of $7 million driven by reduced scope
- 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,
and lower equity compensation expense and severance costs,
partially offset by an increase in incentive expense
Operating results for the nine months ended September 30, 2021 were negatively impacted
by:
- Lower sales volume resulting in a decrease of $4 million in net operating income
- Inflationary costs of $32 million
driven by purchased pulp, latex, energy and freight
- Higher depreciation expense of $71
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 $13
million primarily associated with the permanent shutdown of
our Duluth Mill in December 2020 and
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 $79
million, primarily as a result of the $88 million gain on the sale of our Androscoggin
and Stevens Point mills in February
2020, partially offset by $6
million in insurance recoveries during the third quarter of
2021, associated with a 2019 insurance claim at our Quinnesec Mill
and $3 million loss on sale or
disposal of assets in 2020
Other (income) expense
Other income for the nine
months ended September 30, 2021 and
2020 includes income of $18 million
and $15 million, respectively,
associated with the non-operating components of net periodic
pension cost (income).
Income tax expense (benefit)
Income tax benefit of
$29 million for the nine months ended
September 30, 2021 reflects estimated
tax benefit for the period, partially offset by $2 million of additional valuation allowance
recognized against state tax credits.
2021 Outlook
The Company is providing the following
outlook for full year 2021:
- Expect capital expenditures to be $60
million to $65 million
- Pension minimum required contribution of $25 million
- Cash taxes from zero to $2
million
- Cash position to increase
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. There continues to be
significant uncertainties associated with the COVID-19 Pandemic,
including with respect to the resurgence of new variants of the
virus; whether the vaccines introduced to combat the virus are not
effective or public acceptance of such vaccines is not widespread;
and the impact of COVID-19 on economic conditions, including with
respect to labor market conditions, economic activity, consumer
behavior, supply chain shortages and disruptions and inflationary
pressure; all of which could have a material impact on our
business, financial position, results of operations and cash flows.
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 continue to
recover during the third quarter of 2021.
Unsolicited Acquisition Proposal from Atlas Holdings
LLC
On September 21, 2021,
Verso announced that the Company entered into a confidentiality
agreement with Atlas Holdings LLC, or "Atlas," and communicated to
Atlas that the previously disclosed $20.00 per share all-cash offer to acquire Verso
was insufficient and that Verso would only consider a potential
transaction if the offer meaningfully increased. Verso and Atlas
agreed to exchange additional information under the terms of the
confidentiality agreement to facilitate ongoing discussions
regarding a potential transaction with Atlas on mutually acceptable
terms. The Special Committee is diligently continuing its work.
There can be no assurance that any negotiations between Verso
and Atlas will take place following the exchange of additional
information or that any transaction with Atlas, or any other party,
will occur or be consummated.
Conference Call
Verso will host a conference call and
webcast for analysts and investors on Friday, November 5, 2021 at 9 a.m. (EDT) to discuss third 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 1707105 and
Verso Corporation. To register, please dial in 10 minutes before
the conference call begins. The news release and third 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/1524/42871 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 10160274. The replay will be available
starting at 11 a.m. (EDT) Friday, November
5, 2021, and will remain available until December 3, 2021. An archive of the conference
call and webcast will be available at http://investor.versoco.com
starting at 11 a.m. (EDT) Friday, November
5, 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
June 30,
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(Dollars in
millions)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
Net income
(loss)
|
|
$
16
|
|
$
(31)
|
|
$
58
|
|
$
(11)
|
|
$
(16)
|
Income tax expense
(benefit)
|
|
2
|
|
(9)
|
|
(17)
|
|
14
|
|
(29)
|
Interest
expense
|
|
-
|
|
1
|
|
-
|
|
1
|
|
1
|
Depreciation and
amortization
|
|
17
|
|
21
|
|
18
|
|
66
|
|
137
|
EBITDA
|
|
$
35
|
|
$
(18)
|
|
$
59
|
|
$
70
|
|
$
93
|
Adjustments to
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges
(1)
|
|
6
|
|
(2)
|
|
-
|
|
4
|
|
17
|
|
Luke Mill
post-closure costs (2)
|
|
-
|
|
3
|
|
(1)
|
|
9
|
|
7
|
|
Noncash equity award
compensation (3)
|
|
1
|
|
1
|
|
1
|
|
5
|
|
3
|
|
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)
|
|
4
|
|
17
|
|
3
|
|
17
|
|
17
|
|
(Gain) loss on sale
or disposal of assets (7)
|
|
-
|
|
3
|
|
-
|
|
3
|
|
-
|
|
Stockholders proxy
solicitation costs (8)
|
|
-
|
|
-
|
|
-
|
|
4
|
|
-
|
|
Other severance costs
(9)
|
|
1
|
|
8
|
|
2
|
|
13
|
|
4
|
|
Other items, net
(10)
|
|
2
|
|
-
|
|
3
|
|
1
|
|
5
|
Adjusted
EBITDA
|
|
$
52
|
|
$
12
|
|
$
67
|
|
$
38
|
|
$
149
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Margin
%
|
|
4.9%
|
|
-10.1%
|
|
17.1%
|
|
-1.1%
|
|
-1.7%
|
Adjusted EBITDA
Margin %
|
|
15.8%
|
|
3.9%
|
|
19.8%
|
|
3.6%
|
|
15.7%
|
|
|
(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)
|
Realized (gain) loss
on the sale or disposal of assets.
|
(8)
|
Costs incurred in
connection with the stockholders proxy solicitation
contest.
|
(9)
|
Severance and related
benefit costs not associated with restructuring
activities.
|
(10)
|
For 2020, other
miscellaneous adjustments. For 2021, professional fees and other
charges associated with strategic initiatives, including activities
in connection with the unsolicited acquisition proposal from Atlas
Holdings LLC, and 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 support
its customers and return value to shareholders, and statements
regarding Verso's order rates, and price increases. 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; 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; 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, and
the impact of COVID-19 on economic conditions, including with
respect to labor market conditions, economic activity, consumer
behavior, supply chain shortages and disruptions and inflationary
pressure; 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 continue 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; 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