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Verso Corporation Reports Second Quarter 2019 Financial Results

August 8, 2019 - Verso Corporation (NYSE: VRS) today reported financial results for the second quarter of 2019.

Net sales of $602 million, down $42 million compared to second quarter 2018
Net loss of $112 million, including $116 million in pre-tax charges associated with the Luke Mill closure, compared to net income of $1 million in the second quarter of 2018
Adjusted EBITDA of $44 million lower by $7 million versus second quarter 2018

Overview

"Even though pricing for our products and mill operating performance remained favorable in the second quarter, our results were impacted by lower sales volume attributed to the continued decline in graphic paper usage by our customers, existing customer inventory overhang and increased graphic paper imports," said Verso Interim Chief Executive Officer Leslie T. Lederer. "We anticipate the balancing of supply and demand resulting from the second quarter closure of our paper mill in Luke, Maryland, along with significant announced industry conversions."

Comments to Results of Operations - Comparison of Three Months Ended June 30, 2019 to Three Months Ended June 30, 2018

Net sales
Net sales for the second quarter of 2019 decreased by $42 million compared to the second quarter of 2018 as price/mix improvement was more than offset by declines in sales volume. Total company sales volume was down from 706,000 tons during the second quarter of 2018, to 646,000 tons during the second quarter of 2019, due to continued decline of graphic paper demand by our customers, the existing customer inventory overhang and increased graphic paper imports, partially offset by an increase in sales volume of specialty papers, packaging papers and market pulp.

Operating income (loss)

Operating income (loss) was a loss of $112 million for the second quarter of 2019, a decrease of $116 million when compared to operating income of $4 million for the second quarter of 2018. Eliminating the cash and non-cash charges relating to the Luke Mill closure, the second quarter 2019 operating income equaled the operating income of the second quarter of 2018 at $4 million. Improved price/mix for the second quarter of 2019 was more than offset by:

Lower sales volume driven by a decline in graphic paper sales, partially offset by an increase in the sales volume of specialty paper, packaging paper and market pulp.
Higher input costs driven by wood fiber and purchased pulp, partially offset by lower chemical costs and favorable weather impacts on energy costs.
Higher operating expenses driven primarily by mill market downtime, partially offset by improved operational performance of our mill system.
Costs associated with the closure of our Luke Mill, including $76 million of non-cash accelerated depreciation and $40 million of cash and non-cash restructuring charges.

Interest expense

Interest expense for the second quarter of 2019 decreased $5 million from the second quarter of 2018 as a result of the reduction in amounts outstanding under the ABL facility and the repayment and termination of our term loan facility in September 2018.

Other (income) expense

Other (income) expense for the second quarter of 2019 and 2018 includes income of $1 million and $3 million, respectively, associated with the non-operating components of net periodic pension cost (income).

Guidance

2019 Third Quarter

Net Sales expected to be $620-640 million
Capital Expenditures of $34-38 million
Maintenance expense $15-20 million less than second quarter 2019
Cash pension funding of $17-20 million

Complete second quarter and first half 2019 results with detailed tables are available on Verso's website: versoco.com

Verso Corporation is a leading North American producer of specialty and graphic papers, packaging and pulp. To learn more, please visit versoco.com

SOURCE: Verso Corporation