Verso Corporation Reports First Quarter 2021 Financial Results and Declares Quarterly Cash Dividend of $0.10 per Share
Verso Corporation (NYSE: VRS) reported a net loss of $90 million in Q1 2021, a significant decline from $54 million profit in Q1 2020. Net sales fell to $282 million, attributed to lower sales volume and the sale of mills. However, Adjusted EBITDA improved to $30 million from $9 million in the previous quarter. The company maintains liquidity with $264 million, including $118 million in cash. A quarterly cash dividend of $0.10 per share was declared for June 30, 2021. Verso anticipates a rebound in demand, with improved order rates and backlogs.
- Adjusted EBITDA increased to $30 million in Q1 2021 from $9 million in Q4 2020.
- Liquidity remains strong with $264 million available, including $118 million in cash.
- A quarterly dividend of $0.10 per share is set to be paid on June 29, 2021.
- Net sales dropped by $189 million year-over-year to $282 million.
- Net loss of $90 million in Q1 2021 compared to a profit of $54 million in Q1 2020.
- Sales volume decreased to 339 thousand tons from 554 thousand tons a year ago.
MIAMISBURG, Ohio, May 7, 2021 /PRNewswire/ -- Verso Corporation (NYSE: VRS) today reported financial results for the first quarter of 2021 and announced that its Board of Directors has declared a quarterly cash dividend for the quarter ending June 30, 2021, in the amount of
First Quarter 2021 Highlights:
- Net sales of
$282 million - Improving price environment
- Net loss of
$90 million after reflecting the write-off on certain assets - Adjusted EBITDA of
$30 million , with an Adjusted EBITDA margin of10.6% $264 million in available liquidity including$118 million in cash- Returned
$12 million in capital to shareholders of combined repurchases and dividends
Overview
"Verso delivered improved first quarter Adjusted EBITDA of
Results of Operations – Comparison of Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020
Three Months Ended | Three Month | ||||
(Dollars in millions) | 2020 | 2021 | $ Change | ||
Net sales | $ 471 | $ 282 | $ (189) | ||
Costs and expenses: | |||||
Cost of products sold (exclusive of depreciation and amortization) | 427 | 264 | (163) | ||
Depreciation and amortization | 23 | 102 | 79 | ||
Selling, general and administrative expenses | 27 | 15 | (12) | ||
Restructuring charges | 6 | 11 | 5 | ||
Other operating (income) expense | (88) | (1) | 87 | ||
Operating income (loss) | 76 | (109) | (185) | ||
Interest expense | - | 1 | 1 | ||
Other (income) expense | (4) | (6) | (2) | ||
Income (loss) before income taxes | 80 | (104) | (184) | ||
Income tax expense | 26 | (14) | (40) | ||
Net income (loss) | $ 54 | $ (90) | $ (144) | ||
Comments to Results of Operations - Comparison of Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020
Net sales
Net sales for the three months ended March 31, 2021 decreased
Operating income (loss)
Operating loss was
Operating results for the three months ended March 31, 2021 were positively impacted by:
- Reduced planned major maintenance costs of
$1 million - Lower Selling, general and administrative costs of
$12 million driven primarily by cost reduction initiatives in connection with the sale of our Androscoggin and Stevens Point mills in February 2020, lower equity compensation expense and lower severance costs
Operating results for the three months ended March 31, 2021 were negatively impacted by:
- Unfavorable price/mix of
$6 million - Lower sales volume resulting in a decrease of
$12 million in net operating income, driven by the impact of the COVID-19 pandemic, the sale of our Androscoggin and Stevens Point mills in February 2020 and the indefinite idling of our Duluth and Wisconsin Rapids mills in July 2020 - Higher net operating expenses of
$7 million driven primarily by costs incurred to idle our Duluth and Wisconsin Rapids mills, partially offset by improved performance and cost reduction initiatives across our mill system and reduced corporate overhead - Higher freight costs of
$2 million - Higher depreciation expense of
$79 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
$5 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 costs associated with the closure of our Luke Mill in June 2019 - Lower other operating income of
$87 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 three months ended March 31, 2021 and 2020 includes income of
Income tax expense (benefit)
Income tax benefit of
2021 Outlook
The Company is providing the following outlook for full year 2021:
- Expect capital expenditures to be
$50 million to$60 million - Anticipate pension minimum required1 contribution of
$26 million - Cash Taxes of zero to
$5 million - Improving operating cash flow in excess of cash required to fund capital, pension and dividends
- Anticipate idled and closed mill costs to decline while advancing realization of potential asset sales
1Minimum required cash contributions reduced with implementation of American Rescue Plan Act Provisions
Conference Call
Verso will host a conference call and webcast for analysts and investors on Friday, May 7, 2021 at 9 a.m. (EDT) to discuss first 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 4783336 and Verso Corporation. To register, please dial in 10 minutes before the conference call begins. The news release and first 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/1524/40990 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 10155478. The replay will be available starting at 11 a.m. (EDT) Friday, May 7, 2021, and will remain available until June 7, 2021. An archive of the conference call and webcast will be available at http://investor.versoco.com starting at 11 a.m. (EDT) Friday, May 7, 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 | Three Months Ended | |||||||
(Dollars in millions) | 2020 | 2020 | 2021 | |||||
Net income (loss) | $ (90) | $ 54 | $ (90) | |||||
Income tax expense (benefit) | (23) | 26 | (14) | |||||
Interest expense | - | - | 1 | |||||
Depreciation and amortization | 87 | 23 | 102 | |||||
EBITDA | $ (26) | $ 103 | $ (1) | |||||
Adjustments to EBITDA: | ||||||||
Restructuring charges (1) | 8 | 6 | 11 | |||||
Luke Mill post-closure costs (2) | 6 | 3 | 8 | |||||
Noncash equity award compensation (3) | - | 2 | 1 | |||||
Gain on Sale of the Androscoggin/Stevens Point Mills (4) | (6) | (88) | - | |||||
Duluth and Wisconsin Rapids mills idle/post-closure costs (5) | 20 | - | 10 | |||||
(Gain) loss on sale or disposal of assets (6) | 1 | - | - | |||||
Stockholders proxy solicitation costs (7) | - | 4 | - | |||||
Other severance costs (8) | 5 | 4 | 1 | |||||
Other items, net (9) | 1 | 1 | - | |||||
Adjusted EBITDA | $ 9 | $ 35 | $ 30 | |||||
(1) | For 2020, charges are primarily associated with the closure of our Luke Mill in June 2019 and the permanent shutdown of our Duluth Mill in December 2020. 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 |
(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) | Idle/post-closure costs associated with our Duluth and Wisconsin Rapids mills that are not associated with product sales or restructuring activities. |
(6) | Realized (gain) loss on the sale or disposal of assets. |
(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 our business and operating outlook for 2021 and our strategic position. 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, closure of the Luke Mill, the Duluth Mill and 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 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
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