MIAMISBURG, Ohio, May 18, 2017 /PRNewswire/ -- Verso Corporation
(NYSE: VRS) will hold a conference call today to review financial
results for the first quarter of 2017. Earlier this week, net sales
of $616 million, a net loss of
$21 million, and adjusted EBITDA of
$26 million were reported. For the
first quarter of 2016, results for the predecessor and successor
companies are shown below.
Overview
"Verso is relentlessly pursuing
opportunities to successfully adapt to the rapidly evolving coated
papers marketplace," said Verso Chief Executive Officer,
B. Christopher DiSantis. "We are
aggressively reducing our overhead expense by more than 10 percent,
and after trimming our mill operational costs by an annualized
$68 million in 2016, we've identified
another $55 million in productivity
and cost reduction opportunities this year. In addition, we are
evaluating a variety of low-cost machine conversion projects to aid
in our repositioning efforts."
"As we continue to work with our customers to address their
evolving business needs, Verso has launched a series of machine
glazed natural kraft products produced at our Androscoggin
Specialty mill and we have commercialized many new products across
our platform in the first quarter with nearly 100 in the pipeline,
19 of which are already in pre-production," DiSantis
continued.
Presentation of Predecessor and Successor Financial
Results
Verso Corporation (the "Company") adopted
fresh-start reporting as of July 15,
2016 (the "Effective Date"), the effective date of its First
Modified Third Amended Joint Plan of Reorganization under Chapter
11 of the U.S. Bankruptcy Code dated June
20, 2016, and the date that Verso emerged from its Chapter
11 cases. As a result of the application of fresh-start reporting,
the Company's financial statements for periods prior to the
Effective Date are not comparable to those for periods subsequent
to the Effective Date. References to "Successor" refer to the
Company on or after the Effective Date. References to "Predecessor"
refer to the Company prior to the Effective Date. Operating results
for the Successor and Predecessor periods are not necessarily
indicative of the results to be expected for a full fiscal year.
References such as the "Company," "we," "our" and "us" refer to
Verso Corporation and its consolidated subsidiaries, whether
Predecessor and/or Successor, as appropriate.
Results of Operations – Comparison of Three Months Ended
March 31, 2017 to Three Months Ended
March 31, 2016
|
Predecessor
|
|
|
Successor
|
|
|
|
Three
Months
|
|
|
Three
Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March
31,
|
|
|
March
31,
|
|
Three
Month
|
(Dollars in
millions)
|
2016
|
|
|
2017
|
|
$
Change
|
Net
sales
|
$
690
|
|
|
$
616
|
|
$
(74)
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation,
|
|
|
|
|
|
|
amortization and
depletion)
|
618
|
|
|
560
|
|
(58)
|
Depreciation,
amortization and depletion
|
48
|
|
|
33
|
|
(15)
|
Selling,
general and administrative expenses
|
47
|
|
|
33
|
|
(14)
|
Restructuring
charges
|
144
|
|
|
2
|
|
(142)
|
Other
operating income
|
(57)
|
|
|
-
|
|
57
|
Operating
loss
|
(110)
|
|
|
(12)
|
|
98
|
Interest
expense
|
26
|
|
|
9
|
|
(17)
|
Loss before
reorganization items, net
|
(136)
|
|
|
(21)
|
|
115
|
Reorganization
items, net
|
(48)
|
|
|
-
|
|
48
|
Loss before income
taxes
|
(88)
|
|
|
(21)
|
|
67
|
Income tax
expense
|
-
|
|
|
-
|
|
-
|
Net
loss
|
$
(88)
|
|
|
$
(21)
|
|
$
67
|
Comments to Results of Operations - Comparison of Three
Months Ended March 31, 2017 to Three
Months Ended March 31, 2016
- Net sales for the first quarter of 2017 were 11% lower than the
first quarter of 2016. The sales decline was attributable to both a
decrease in total sales volume and a decrease in pricing due to the
general softening of demand for coated papers, our capacity
reductions at our Androscoggin Mill and the closure of the
Wickliffe Mill.
- Gross margin decreased from 10.4% in the first quarter of 2016
to 9.1% in the first quarter of 2017 driven by lower sales volume
and pricing, higher input costs, and the effects of accounting
policy changes adopted in conjunction with fresh-start
accounting.
- Depreciation, amortization and depletion for the first quarter
of 2017 was lower than the first quarter of 2016, which was
attributable to capacity reductions at our Androscoggin Mill, the
closure of the Wickliffe Mill and reduction in the carrying
value of our property, plant and equipment as a result of adopting
fresh-start accounting.
- SG&A expense reduction was attributable to a decline in
spending, reduced pre-reorganization costs as well as a
reclassification of 2017 SG&A to cost of products sold
attributable to a change in accounting policy adopted in connection
with fresh-start accounting.
- Restructuring charges are primarily associated with the
announced closure and relocation of the Memphis office headquarters and closure of the
Wickliffe Mill. Restructuring in 2016 consisted primarily of
non-cash fixed asset write-down charges from the permanent closure
of the Wickliffe Mill.
- Other operating income for the first quarter of 2016 is
attributable to the sale of hydroelectric facilities in
January 2016.
Guidance
The Company is providing the following guidance:
- 2017 Second Quarter
-
- Sales of $575-595 million
- Price pressures will continue for the foreseeable future
- Capital expenditures of $13-16
million
- Maintenance expense of $60-70
million, heaviest quarter of 2017
- 2017 Full Year
-
- Capital expenditures of $55-65
million, down from $73 million
in 2016
- Maintenance costs of $210-220
million, down from approximately $235
million in 2016
- SG&A of $110-115 million
- Cash pension funding of $32-36
million
- Cash taxes of $0-5 million,
primarily state income and franchise taxes
Reconciliation of Net Income to 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 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 an 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 loss to EBITDA and Adjusted
EBITDA for the presented periods:
|
|
Predecessor
|
|
|
Successor
|
|
|
Three
Months
|
|
|
Three
Months
|
|
|
Ended
|
|
|
Ended
|
|
|
March
31,
|
|
|
March
31,
|
(Dollars in
millions)
|
2016
|
|
|
2017
|
Net
loss
|
$
(88)
|
|
|
$
(21)
|
Income tax
expense
|
-
|
|
|
-
|
Interest expense,
net
|
26
|
|
|
9
|
Depreciation,
amortization and depletion
|
48
|
|
|
33
|
EBITDA
|
$
(14)
|
|
|
$
21
|
Adjustments to
EBITDA:
|
|
|
|
|
|
Reorganization items,
net (1)
|
(48)
|
|
|
-
|
|
Restructuring charges
(2)
|
144
|
|
|
2
|
|
Gains on disposal of
assets (3)
|
(57)
|
|
|
-
|
|
Pre-reorganization
costs (4)
|
6
|
|
|
-
|
|
Other items, net
(5)
|
9
|
|
|
3
|
Adjusted
EBITDA
|
$
40
|
|
|
$
26
|
|
(1)
|
Net gains associated
with the Chapter 11 Cases.
|
(2)
|
For 2017, charges are
primarily associated with the announced closure and relocation of
the Memphis office headquarters and closure of the Wickliffe Mill.
For 2016, charges are primarily associated with the closure of the
Wickliffe Mill, of which $137 million is non-cash.
|
(3)
|
Realized gains on the
sale of assets, which are primarily attributable to the sale of
hydroelectric facilities in January 2016.
|
(4)
|
Costs incurred in
connection with advisory and legal services related to planning for
the Chapter 11 Cases.
|
(5)
|
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 2016, costs associated with the indefinite idling
of the Wickliffe Mill, amortization of non-cash incentive
compensation, unrealized losses (gains) on energy-related
derivative contracts, and miscellaneous non-cash and other earnings
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 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 from time
to time in Verso's 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 Thursday, May 18, 2017 at 9 a.m. (EDT) to discuss first quarter 2017
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 1298197 and
Verso Corporation. To register, please dial in 10 minutes before
the conference call begins. The conference call and presentation
materials can be accessed through Verso's website at
http://investor.versoco.com/ by navigating to the Events page. This
release and Verso's quarterly report on Form 10-Q for the period
ended March 31, 2017, will be made
available on Verso's website at http://investor.versoco.com/ by
navigating to the Financial Information page.
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 10107031. The replay will be available
starting at 11 a.m. (EDT) Thursday, May 18,
2017, and will remain available until June 18, 2017. An archive of the conference call
and webcast will be available at http://investor.versoco.com
starting at 11 a.m. (EDT) Thursday, May 18,
2017, and will remain available for 120 days.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/verso-corporation-to-review-first-quarter-2017-financial-results-300459789.html
SOURCE Verso Corporation