MIAMISBURG, Ohio, Feb. 28, 2022 /PRNewswire/ -- Verso
Corporation (NYSE: VRS) today reported financial results for the
fourth quarter and full year of 2021.
Fourth Quarter 2021 Highlights:
- Net sales of $328 million, a 4%
increase over fourth quarter 2020 and a 3% decrease over third
quarter 2021
- Net income of $13 million
compared to a net loss of $90 million
in the fourth quarter of 2020 and net income of $58 million in the third quarter 2021
- Adjusted EBITDA of $74 million
compared to $9 million in the fourth
quarter of 2020 and $67 million in
the third quarter of 2021
Overview
"Thanks to the efforts of the Verso team,
Verso delivered excellent safety results and solid financial
performance in the fourth quarter driven by improved sales and
operations year-over-year," said Verso President and Chief
Executive Officer Randy Nebel. "As
we look toward the future, we believe our pending combination with
BillerudKorsnäs will enable our customers and employees to benefit
from enhanced opportunities as part of a larger, stronger
organization. Our full Board believes the proposed merger maximizes
value for shareholders, who will receive a significant premium and
immediate and certain value for their shares of Verso."
Results of Operations – Comparison of Three Months Ended
December 31, 2021 to Three Months
Ended December 31, 2020
|
Three Months
Ended
December 31,
|
|
Three
Month
|
(Dollars in
millions)
|
2020
|
|
2021
|
|
$
Change
|
Net
sales
|
$
314
|
|
$
328
|
|
$
14
|
Costs and
expenses:
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation and
amortization)
|
327
|
|
252
|
|
(75)
|
Depreciation
and amortization
|
87
|
|
17
|
|
(70)
|
Selling,
general and administrative expenses
|
15
|
|
22
|
|
7
|
Restructuring
charges
|
8
|
|
6
|
|
(2)
|
Other
operating (income) expense
|
(5)
|
|
(3)
|
|
2
|
Operating income
(loss)
|
(118)
|
|
34
|
|
152
|
Interest
expense
|
-
|
|
1
|
|
1
|
Other (income)
expense
|
(5)
|
|
(6)
|
|
(1)
|
Income (loss)
before income taxes
|
(113)
|
|
39
|
|
152
|
Income tax
expense (benefit)
|
(23)
|
|
26
|
|
49
|
Net income
(loss)
|
$
(90)
|
|
$
13
|
|
$
103
|
Comments to Results of Operations - Comparison of Three
Months Ended December 31, 2021 to
Three Months Ended December 31,
2020
Net sales
Net sales for the three months ended December 31, 2021 increased $14 million or 4% compared to the three months
ended December 31, 2020 driven by
favorable price/mix of $57 million,
partially offset by $43 million, or
14%, in decreased sales largely attributable to our sold Duluth and
idled Wisconsin Rapids mills. Total company sales volume was down
from 392 thousand tons during the three months ended December 31, 2020, to 341 thousand tons during
the same period of 2021, primarily attributable to our sold Duluth
and idled Wisconsin Rapids mills.
Operating income (loss)
Operating income was
$34 million for the three months
ended December 31, 2021, an increase
of $152 million when compared to an
operating loss of $118 million for
the three months ended December 31,
2020.
Operating results for the three months ended December 31, 2021 were positively impacted
by:
- Favorable price/mix of $57
million driven by price increase realization across all
grades, including pulp
- Improved operating income of $12
million resulting from the conversion to our current two
mill system
- Lower net operating expenses of $42
million driven by $25 million
of lower closed/idled mill spend and $17
million of additional reductions associated with lower wood
cost and cost reduction initiatives across our mill system
- Lower depreciation expense of $70
million, primarily due to $65
million in accelerated depreciation related to the closure
of our Duluth Mill in December
2020
- Lower Restructuring charges of $2
million associated with the permanent shutdown of our Duluth
Mill in December 2020
Operating results for the three months ended December 31, 2021 were negatively impacted
by:
- Lower sales volume resulting in a decrease of $2 million in net operating income
- Inflationary costs of $20 million
driven by purchased pulp, latex, energy and freight
- Higher Selling, general and administrative costs of
$7 million primarily driven by costs
associated with the Merger Agreement, as well as higher incentive
expense, partially offset by lower severance costs
- Lower other operating income of $2
million, primarily related to finalization of the working
capital adjustment to the sale of our Androscoggin and Stevens
Point mills in 2020
Other (income) expense
Other income for the three
months ended December 31, 2021 and
2020 includes income of $7 million
and $5 million, respectively,
associated primarily with the non-operating components of net
periodic pension cost (income).
Income tax expense (benefit)
Income tax expense of
$26 million for the three months
ended December 31, 2021 primarily
reflects estimated tax expense for the period, partially offset by
$1 million of tax benefit from
release of valuation allowance against state tax credits.
Results of Operations – Comparison of Twelve Months Ended
December 31, 2021 to Twelve Months
Ended December 31, 2020
|
Twelve Months
Ended
December 31,
|
|
Twelve
Month
|
(Dollars in
millions)
|
2020
|
|
2021
|
|
$
Change
|
Net
sales
|
$
1,359
|
|
$
1,278
|
|
$
(81)
|
Costs and
expenses:
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation and
amortization)
|
1,334
|
|
1,062
|
|
(272)
|
Depreciation
and amortization
|
153
|
|
154
|
|
1
|
Selling,
general and administrative expenses
|
77
|
|
76
|
|
(1)
|
Restructuring
charges
|
12
|
|
23
|
|
11
|
Other
operating (income) expense
|
(89)
|
|
(8)
|
|
81
|
Operating income
(loss)
|
(128)
|
|
(29)
|
|
99
|
Interest
expense
|
1
|
|
2
|
|
1
|
Other (income)
expense
|
(19)
|
|
(25)
|
|
(6)
|
Income (loss)
before income taxes
|
(110)
|
|
(6)
|
|
104
|
Income tax
expense (benefit)
|
(9)
|
|
(3)
|
|
6
|
Net income
(loss)
|
$
(101)
|
|
$
(3)
|
|
$
98
|
Comments to Results of Operations - Comparison of Twelve
Months Ended December 31, 2021 to
Twelve Months Ended December 31,
2020
Net sales
Net sales for the twelve months ended December 31, 2021 declined by $81 million or 6% compared to the twelve months
ended December 31, 2020, attributable
to favorable price/mix of $129
million, which was more than offset by a decrease in sales
of $210 million, or 15%, primarily
related to our sold Duluth, Androscoggin and Stevens Point mills
and idled Wisconsin Rapids mill. Total company sales volume was
down from 1,674 thousand tons during the year ended December 31, 2020, to 1,407 thousand tons during
2021, primarily attributable to our sold Duluth, Androscoggin and
Stevens Point mills and idled Wisconsin Rapids mill.
Operating income (loss)
Operating loss was
$29 million for the twelve months
ended December 31, 2021, an
improvement of $99 million when
compared to operating loss of $128
million for the twelve months ended December 31, 2020.
Operating results for the twelve months ended December 31, 2021 were positively impacted
by:
- Favorable price/mix of $129
million driven by price increase realization across all
grades, including pulp
- Improved operating income of $34
million resulting from the conversion to our current two
mill system
- Lower net operating expenses of $78
million primarily driven by lower closed/idled mill spend,
as well as lower wood cost, 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
$1 million driven primarily by cost
savings in connection with the sale of the two specialty mills in
2020, offset by higher incentive expense and Merger Agreement costs
in 2021
Operating results for the twelve months ended December 31, 2021 were negatively impacted
by:
- Lower sales volume resulting in a decrease of $6 million in net operating income
- Inflationary costs of $51 million
driven by purchased pulp, latex, energy and freight
- Higher depreciation expense of $1
million due primarily to $84
million in accelerated depreciation at our Wisconsin Rapids
Mill in 2021, partially offset by $65
million in accelerated depreciation associated with the
closure of our Duluth Mill in December
2020 and approximately $16
million of nonrecurring depreciation associated with these
events
- Higher Restructuring charges of $11
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
- Lower other operating income of $81
million, primarily as a result of the $94 million gain on the sale of our Androscoggin
and Stevens Point mills in 2020, partially offset by $6 million in insurance recoveries in 2021,
associated with a 2019 insurance claim at our Quinnesec Mill
Other (income) expense
Other income for the twelve
months ended December 31, 2021 and
2020 includes income of $25 million
and $20 million, respectively,
associated primarily with the non-operating components of net
periodic pension cost (income).
Income tax expense (benefit)
Income tax benefit of
$3 million for the year ended
December 31, 2021 reflects estimated
tax benefit for the period.
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 continue 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 saw our sales, volume and prices continue to recover
during the fourth quarter of 2021.
BillerudKorsnäs Transaction
As announced on
December 19, 2021, Verso has entered
into a definitive merger agreement (the "Merger Agreement") under
which BillerudKorsnäs AB ("BillerudKorsnäs") has agreed to acquire
all of the outstanding shares of Verso for a purchase price of
$27.00 per share in cash (the
"Merger"). Verso's Board of Directors ("Board"), acting upon the
recommendation of a special committee of independent directors of
the Board, unanimously determined that it is advisable and in
the best interests of the Company and the Company's stockholders to
enter into the Merger Agreement and to consummate the Merger upon
the terms and subject to the conditions set forth therein.
Please see the Additional Information and Where to Find It
section below.
Conference Call
In light of the proposed Merger, Verso
will not be hosting a conference call and webcast for analysts and
investors or issuing an earnings presentation in conjunction with
the release of financial results for the fourth quarter and full
year 2021. For further detail and discussion of our financial
performance please refer to our upcoming Annual Report on Form 10-K
for the year ended December 31,
2021.
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
September 30,
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
(Dollars in
millions)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
Net income
(loss)
|
|
$
58
|
|
$
(90)
|
|
$
13
|
|
$
(101)
|
|
$
(3)
|
Income tax expense
(benefit)
|
|
(17)
|
|
(23)
|
|
26
|
|
(9)
|
|
(3)
|
Interest
expense
|
|
-
|
|
-
|
|
1
|
|
1
|
|
2
|
Depreciation and
amortization
|
|
18
|
|
87
|
|
17
|
|
153
|
|
154
|
EBITDA
|
|
$
59
|
|
$
(26)
|
|
$
57
|
|
$
44
|
|
$
150
|
Adjustments to
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring charges
(1)
|
|
-
|
|
8
|
|
6
|
|
12
|
|
23
|
|
Luke Mill
post-closure costs (2)
|
|
(1)
|
|
6
|
|
2
|
|
15
|
|
9
|
|
Noncash equity award
compensation (3)
|
|
1
|
|
-
|
|
2
|
|
5
|
|
5
|
|
Gain on Sale of the
Androscoggin/Stevens Point Mills (4)
|
|
-
|
|
(6)
|
|
-
|
|
(94)
|
|
-
|
|
Loss on Sale of
Duluth Mill (5)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3
|
|
Duluth and Wisconsin
Rapids mills idle/post-closure costs (6)
|
|
3
|
|
20
|
|
3
|
|
37
|
|
20
|
|
(Gain) loss on sale
or disposal of assets (7)
|
|
-
|
|
1
|
|
(1)
|
|
4
|
|
(1)
|
|
Stockholders proxy
solicitation costs (8)
|
|
-
|
|
-
|
|
-
|
|
4
|
|
-
|
|
Other severance costs
(9)
|
|
2
|
|
5
|
|
-
|
|
18
|
|
4
|
|
Merger related costs
(10)
|
|
-
|
|
-
|
|
5
|
|
-
|
|
6
|
|
Other items, net
(11)
|
|
3
|
|
1
|
|
-
|
|
2
|
|
4
|
Adjusted
EBITDA
|
|
$
67
|
|
$
9
|
|
$
74
|
|
$
47
|
|
$
223
|
|
(1)
|
For 2020, charges are
associated with the closure of our Luke Mill in June 2019 and the
closure of our Duluth Mill in
December 2020. For 2021, charges are associated with the closure of
our Luke Mill, the closure of our Duluth Mill 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 costs 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 activity.
|
(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)
|
Professional fees and
other charges associated with merger related activity, including
the Merger Agreement entered on
December 19, 2021 with BillerudKorsnäs.
|
(11)
|
For 2020, other
miscellaneous adjustments. For 2021, professional fees and other
charges associated with strategic
matters 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
"anticipates," "believes," "contemplates," "could," "seeks,"
"estimates," "intends," "targets", "expects", "allows", "enables",
"may," "plans," "potential," "predicts," "projects," "should,"
"will," "would" or similar expressions and the negatives of those
terms. They include, for example, statements relating to Verso's
business and the anticipated benefits of Verso's proposed merger
with BillerudKorsnäs. 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 inability to complete the Merger due to the
failure to obtain stockholder approval or failure to satisfy the
other conditions to the completion of the Merger, including, but
not limited to, receipt of required regulatory approvals; risks
that the proposed Merger disrupts our current operations or affects
our ability to retain or recruit key employees; the effect of the
announcement or pendency of the Merger on our business
relationships, operating results and business generally; 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, 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; 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,
Verso's Quarterly Report on Form 10-Q for the three months 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.
Additional Information and Where to Find It
In
connection with the Merger, on February 8,
2022, Verso filed with the SEC and furnished to its
stockholders a definitive proxy statement on Schedule 14A (the
"Proxy Statement") and accompanying WHITE proxy card, as well as
other relevant documents regarding the Merger. On or about
February 8, 2022, Verso commenced
mailing the Proxy Statement and a proxy card to Verso's
stockholders entitled to vote at a special meeting relating to the
Merger, seeking their approval of the respective merger-related
proposals. The Proxy Statement contains important information about
the Merger and related matters. STOCKHOLDERS OF VERSO ARE URGED TO
READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
THERETO) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE
MERGER THAT VERSO HAS FILED OR MAY FILE WITH THE SEC WHEN THEY
BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT VERSO, THE MERGER AND THE OTHER TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT THAT HOLDERS OF VERSO'S
SECURITIES SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING
VOTING. This release is not a substitute for the Proxy Statement,
or for any other document that Verso has filed or may file with the
SEC or send to its stockholders in connection with the Merger.
Investors and security holders may obtain copies of these
documents and any other documents filed with or furnished to the
SEC by Verso free of charge through the website maintained by the
SEC at www.sec.gov, or on Verso's investor website,
https://investor.versoco.com/.
The special meeting of shareholders to vote on the Merger will
be held virtually via live webcast at 10:00
a.m. Eastern Time on March, 11, 2022, and can be accessed by
stockholders of record as of the close of business on the record
date established for the special meeting by
visiting www.virtualshareholdermeeting.com/VRS2022SM.
Participants in the Solicitation
Verso and its
directors and certain of its executive officers and employees may
be deemed to be participants in the solicitation of proxies in
respect of the Merger under the rules of the SEC. Information about
Verso's directors and executive officers is available in the
Definitive Proxy and Verso's proxy statement dated on March 30, 2021 for its 2021 Annual Meeting of
Stockholders. These documents are available free of charge from the
sources indicated above, and from Verso by going to its investor
relations page on its corporate website at
https://investor.versoco.com/. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
is contained in the Proxy Statement and in other relevant materials
that may be filed with the SEC regarding the Merger when they
become available.
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SOURCE Verso Corporation