MIAMISBURG, Ohio, May 9, 2018 /PRNewswire/ -- Verso
Corporation (NYSE: VRS) today reported financial results for the
first quarter of 2018, including net sales of $639 million, net loss of $2 million, and Adjusted EBITDA of $41 million.
Overview
"Verso had a good start in the first quarter
of 2018, with sales revenue up 4 percent to $639 million, Adjusted EBITDA (a non-GAAP
measure) up 58 percent to $41
million, and Adjusted EBITDA margin up 2.2 percentage points
compared to the first quarter of 2017," said Verso Chief Executive
Officer, B. Christopher DiSantis.
"We continued to grow our specialty papers business, now 24 percent
of total revenue, and are seeing the benefits of our SG&A cost
improvement initiatives, with an improvement of $8 million versus the first quarter of 2017.
Looking ahead, we have positioned Verso well to benefit from
improved operating rates and are building a better business."
Results of
Operations – Comparison of Three Months Ended March 31, 2018 to
Three Months Ended March 31, 2017
|
|
|
Three Months
Ended
March 31,
|
|
Three
Month
|
(Dollars in
millions)
|
2017
|
|
2018
|
|
$
Change
|
Net
sales
|
$
616
|
|
$
639
|
|
$
23
|
Costs and
expenses:
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation,
|
|
|
|
|
|
amortization and
depletion)
|
562
|
|
581
|
|
19
|
Depreciation,
amortization and depletion
|
33
|
|
27
|
|
(6)
|
Selling,
general and administrative expenses
|
33
|
|
25
|
|
(8)
|
Restructuring
charges
|
2
|
|
1
|
|
(1)
|
Operating income
(loss)
|
(14)
|
|
5
|
|
19
|
Interest
expense
|
9
|
|
11
|
|
2
|
Other (income)
expense
|
(2)
|
|
(4)
|
|
(2)
|
Income (loss)
before income taxes
|
(21)
|
|
(2)
|
|
19
|
Income tax
expense
|
-
|
|
-
|
|
-
|
Net income
(loss)
|
$
(21)
|
|
$
(2)
|
|
$
19
|
Comments to Results of Operations - Comparison of Three
Months Ended March 31, 2018 to Three
Months Ended March 31, 2017
- Net sales for the first quarter of 2018 increased $23 million compared to the first quarter of
2017. The sales increase was primarily attributable to improved
average pricing and product mix, partially offset by a reduction in
total sales volume. The decrease in volume was driven by a
reduction in external pulp sales of 15 thousand tons, primarily in
preparation for a planned outage at our Quinnesec Mill, and a
reduction in coated paper sales of 7 thousand tons as a result of
capacity reductions at our Androscoggin Mill. While sales volume of
specialty papers increased in the first quarter of 2018, it was
offset by a reduction in sales volume of other coated papers during
that same period.
- Gross margin, excluding depreciation, amortization and
depletion expenses, increased from 8.8% in the first quarter of
2017 to 9.1% in the first quarter of 2018 driven by higher average
pricing and improved product mix, lower pension and corporate
overhead costs and favorable wood costs, partially offset by lower
sales volume, production issues at certain mills, additional major
maintenance costs, increased freight expense and inflation on
chemicals and energy costs. The most significant production issue
was related to a boiler failure at our Luke
Mill, combined with a simultaneous weather event and
depletion of fuel used to generate steam throughout the mill. This
event had an impact of approximately $4
million on the results of the first quarter of 2018.
- Depreciation, amortization and depletion expenses for the first
quarter of 2018 were lower than the first quarter of 2017, as a
result of $6 million in accelerated
depreciation in first quarter of 2017 attributable to the capacity
reductions at the Androscoggin Mill.
- SG&A expense reduction was primarily attributable to cost
reduction initiatives implemented across the Company.
- Interest expense for the first quarter of 2018 includes
$4 million of amortization of debt
issuance cost and discount associated with the Term Loan Facility
as a result of a $21 million
voluntary principal payment and a $21
million excess cash flow payment, both made during the first
quarter of 2018.
- Other (income) expense in the first quarter of 2018 and 2017
includes income of $3 million and
$2 million, respectively, associated
with the non-operating components of net periodic pension cost
(income) in connection with the adoption of a new accounting
standard in the first quarter of 2018.
Guidance
The Company is providing the following guidance:
- 2018 Second Quarter
-
- Net sales of $625-640
million.
- Capital expenditures are expected to be approximately
$30-35 million, including initial
investment for the A3 startup project at our Androscoggin
Mill.
- Cash pension funding of $7-8
million.
- Major maintenance to increase by $13
million versus 1Q 2018.
- Expectations for Full Year 2018
-
- Revenue and pricing favorable to prior year.
- Continued headwinds in logistics / freight and other input
costs.
- Capital expenditures in the range of $60-70 million.
- Cash taxes of $0-5 million,
primarily state income and franchise taxes.
- Major maintenance costs up $14-16
million.
- Cash pension funding of approximately $45 million.
- SG&A less than 4% of Net sales.
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 Adjusted EBITDA is a
non-GAAP operating performance measure commonly used in our
industry that provides investors and analysts with a measure 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 or cash
flows from operating activities, which are determined in accordance
with GAAP.
The following table reconciles Net income (loss) to EBITDA and
Adjusted EBITDA for the presented periods:
|
|
Three Months Ended
March 31,
|
(Dollars in
millions)
|
2017
|
|
2018
|
Net income
(loss)
|
$
(21)
|
|
$
(2)
|
Income tax
expense
|
-
|
|
-
|
Interest expense,
net
|
9
|
|
11
|
Depreciation,
amortization and depletion
|
33
|
|
27
|
EBITDA
|
$
21
|
|
$
36
|
Adjustments to
EBITDA:
|
|
|
|
|
Restructuring charges
(1)
|
2
|
|
1
|
|
Strategic initiatives
costs (2)
|
-
|
|
2
|
|
Other items, net
(3)
|
3
|
|
2
|
Adjusted
EBITDA
|
$
26
|
|
$
41
|
|
|
|
|
|
(1)
|
Charges are primarily
associated with the closure and relocation of the Memphis office
headquarters and closure of the Wickliffe mill.
|
(2)
|
Professional fees and
other charges associated with strategic alternatives
initiative.
|
(3)
|
For 2017, costs
incurred in connection with the re-engineering of information
systems, amortization of non-cash incentive compensation, costs
associated with the temporary idling of the No. 3 paper machine at
the Androscoggin mill, and miscellaneous other non-recurring
adjustments. For 2018, amortization of non-cash incentive
compensation, legal settlement gain associated with prior closed
mill and miscellaneous other non-recurring adjustments.
|
About Verso
Verso Corporation is the turn-to company for those looking to
successfully navigate the complexities of paper sourcing and
performance. The leading North American producer of printing and
specialty papers and pulp, Verso provides insightful solutions that
help drive improved customer efficiency, productivity, brand
awareness and business results. Verso's long-standing reputation
for quality and reliability is directly tied to our vision to be a
company with passion that is respected and trusted by all. Verso's
passion is rooted in ethical business practices that demand safe
workplaces for our employees and sustainable wood sourcing for our
products. This passion, combined with our flexible manufacturing
capabilities and an unmatched commitment to product performance,
delivery and service, make Verso a preferred choice among
commercial printers, paper merchants and brokers, converters,
publishers and other end users. 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 in this
press release include, but are not limited to, our guidance for the
second quarter of 2018 and the full year of 2018. Forward-looking
statements may be identified by the words "believe," "expect,"
"anticipate," "project," "plan," "estimate," "intend," "potential"
and other similar expressions. 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 those risks and uncertainties listed under the
caption "Risk Factors" in Verso's Form 10-K for the fiscal year
ended December 31, 2017 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.
Conference Call
Verso will host a conference call on Wednesday, May 9, 2018 at 9 a.m. (EDT) to discuss first quarter 2018
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
9692788 and Verso Corporation. To register, please dial in 10
minutes before the conference call begins. The news release and
first quarter 2018 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/1524/25758 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 10120176. The replay will be available
starting at 11 a.m. (EDT) Wednesday,
May 9, 2018, and will remain available until June 9, 2018. An archive of the conference call
and webcast will be available at http://investor.versoco.com
starting at 11 a.m. (EDT) Wednesday,
May 9, 2018, and will remain available for 120 days.
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SOURCE Verso Corporation