MIAMISBURG, Ohio, May 8, 2019 /PRNewswire/ -- Verso
Corporation (NYSE: VRS) today reported financial results for the
first quarter of 2019.
First Quarter 2019 Highlights:
- Net sales of $639 million, flat
compared to first quarter 2018
- Net income of $36 million or
$1.03 per diluted share
- Adjusted EBITDA of $69 million,
up $28 million versus first quarter
2018
Overview
"Verso had strong first quarter performance
despite a very challenging market environment," said Verso Interim
Chief Executive Officer Leslie T.
Lederer. "While sales were flat, both price and mix
were favorable as demand pressures increased across all product
categories. An unfortunate result of these demand pressures was the
difficult decision to close our paper mill in Luke, Maryland, which will reduce Verso's
total coated freesheet production capacity by 450,000 tons," he
said. "We remain committed to matching the supply of our products
with our customers' demand as we continue our efforts to move more
production from graphic papers to specialty and packaging grades
and pulp."
Results of Operations – Comparison of Three Months Ended
March 31, 2019 to Three Months Ended
March 31, 2018
|
|
|
|
|
|
|
Three Months
Ended
March 31,
|
|
Three
Month
|
(Dollars in
millions)
|
2018
|
|
2019
|
|
$
Change
|
Net
sales
|
$
639
|
|
$
639
|
|
$
-
|
Costs and
expenses:
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation and
amortization)
|
581
|
|
549
|
|
(32)
|
Depreciation
and amortization
|
27
|
|
28
|
|
1
|
Selling,
general and administrative expenses
|
25
|
|
24
|
|
(1)
|
Restructuring
charges
|
1
|
|
-
|
|
(1)
|
Other
operating (income) expense
|
-
|
|
1
|
|
1
|
Operating income
(loss)
|
5
|
|
37
|
|
32
|
Interest
expense
|
11
|
|
1
|
|
(10)
|
Other (income)
expense
|
(4)
|
|
(1)
|
|
3
|
Income (loss)
before income taxes
|
(2)
|
|
37
|
|
39
|
Income tax
expense
|
-
|
|
1
|
|
1
|
Net income
(loss)
|
$
(2)
|
|
$
36
|
|
$
38
|
Comments to Results of Operations - Comparison of Three
Months Ended March 31, 2019 to Three
Months Ended March 31, 2018
Net sales
Net sales in the first quarter of 2019 were flat compared to the
first quarter of 2018 as price and product mix offset declines in
sales volume. Total company sales volume was down from
722,000 tons during the first quarter of 2018, to 665,000
tons during the first quarter of 2019, driven by general softening
of demand and increased imports for graphic papers, partially
offset by an increase in specialty papers and packaging papers
sales volume.
Operating income
Operating income in the first quarter of 2019 was $37 million, an increase of $32 million when compared to operating income of
$5 million in the first quarter of
2018. This increase in operating income is primarily attributable
to:
- Favorable average net selling price and product mix;
- Lower planned major maintenance costs due primarily to timing
of outages. Lower planned major maintenance costs were partially
offset by decreased sales volume, higher input costs driven by
inflation of chemicals, wood fiber and purchased pulp, and higher
operating expenses driven primarily by union ratification expense,
which included signing bonuses and the settlement of various work
arrangement issues associated with the ratification of a new Master
Labor Agreement;
- Reduced selling, general and administrative expenses and
freight cost.
Interest expense
Interest expense in the first quarter of 2019 decreased
$10 million over the same period in
2018. Interest expense in the first quarter of 2018 includes
$4 million in non-cash accelerated
amortization of debt issuance cost and discount associated with the
voluntary principal prepayments and excess cash flow payments on
our prior term loan facility. The remaining decrease in interest
expense resulted from the reduction in amounts outstanding under
the ABL Facility and the payoff of our prior term loan facility on
September 10, 2018.
Guidance
2019 Second Quarter
- Net Sales of $620-640
million
- Capital Expenditures of $32-35
million
- Major Maintenance of $21
million
- Cash pension funding of $7-9
million
Expectations for Full Year 2019
- Reinvesting in mills (higher maintenance and capital
expenditures expected)
- Cash pension funding to be equal to 2018
- Luke Mill closure cash costs of
approximately $25-35 million
- Finished goods at 2018 year end levels
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,
|
(Dollars in
millions)
|
|
|
|
|
2018
|
|
2019
|
Net income
(loss)
|
|
|
|
|
$
(2)
|
|
$
36
|
Income tax
expense
|
|
|
|
|
-
|
|
1
|
Interest
expense
|
|
|
|
|
11
|
|
1
|
Depreciation and
amortization
|
|
|
|
|
27
|
|
28
|
EBITDA
|
|
|
|
|
$
36
|
|
$
66
|
Adjustments to
EBITDA:
|
|
|
|
|
|
|
|
|
Restructuring charges
(1)
|
|
|
|
|
1
|
|
-
|
|
Non-cash equity award
compensation (2)
|
|
|
|
|
1
|
|
2
|
|
(Gain) loss on sale
or disposal of assets
|
|
|
|
|
-
|
|
1
|
|
Strategic initiatives
(3)
|
|
|
|
|
2
|
|
-
|
|
Other items, net
(4)
|
|
|
|
|
1
|
|
-
|
Adjusted
EBITDA
|
|
|
|
|
$
41
|
|
$
69
|
(1)
|
Charges are primarily
associated with the closure of the Wickliffe Mill.
|
(2)
|
Amortization of
non-cash incentive compensation.
|
(3)
|
Professional fees and
other charges associated with the prior strategic alternatives
initiative.
|
(4)
|
For 2018, 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. A leading North American producer
of specialty and graphic papers, packaging 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 2019 and
other expectations for 2019, including our expected reduction in
coated freesheet production capacity. 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, 2018 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 8, 2019 at
9 a.m. (EDT) to discuss first quarter
2019 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 9791708 and Verso Corporation. To register,
please dial in 10 minutes before the conference call begins. The
news release and first quarter 2019 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/1524/30461 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 10131323. The replay
will be available starting at 11 a.m. (EDT)
Wednesday, May 8, 2019, and will remain available until
June 8, 2019. An archive of the
conference call and webcast will be available at
http://investor.versoco.com starting at 11 a.m. (EDT) Wednesday, May 8, 2019, and will
remain available for 120 days.
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SOURCE Verso Corporation