Verso Corporation Reports First Quarter 2020 Financial Results
"While the pandemic-related economic slowdown has had minimal impact on our first quarter results, it is starting to put further demand pressure on our graphic papers business." – Adam St. John, President and CEO, Verso Corporation.
May 11, 2020 - Verso Corporation (NYSE: VRS) today reported financial results for the first quarter of 2020.
First Quarter 2020 Highlights:
- Net sales of $471 million, down $168 million compared to first quarter 2019
- Net income of $54 million or $1.52 per diluted share, including $88 million gain on sale of our Androscoggin and Stevens Point mills, compared to net income of $36 million or $1.03 per diluted share in first quarter 2019
- Adjusted EBITDA of $35 million, versus $69 million in first quarter 2019
"Our top concern during the COVID-19 pandemic is taking necessary precautions to protect the health and safety of our employees, their families, and our communities, while continuing to meet the needs and expectations of our customers, suppliers, business partners and stockholders," said Verso President and Chief Executive Officer Adam St. John.
"While the pandemic-related economic slowdown has had minimal impact on our first quarter results, it is starting to put further demand pressure on our graphic papers business. We have not seen similar pressure within our specialty, packaging and pulp business. With Verso's liquidity and healthy balance sheet, we are well positioned to face the market challenges that are ahead of us. Verso has responded quickly by using our manufacturing expertise and flexibility to accelerate product development efforts and make new grades, while trimming and managing capital allocation and reducing operational and corporate costs across the company. We believe these actions, combined with our strong financial position and healthy balance sheet, will help us successfully manage through this crisis and beyond."
Comments to Results of Operations - Comparison of Three Months Ended March 31, 2020 to Three Months Ended March 31, 2019
Net sales in the first quarter of 2020 decreased $168 million, or 26%, compared to the prior year as price/mix was unfavorable and sales volume declined. Total company sales volume was down from 665 thousand tons during the first quarter of 2019, to 554 thousand tons during the first quarter of 2020. Of the 111 thousand ton volume decline, 66 thousand tons were attributable to the closure of the Luke Mill. The remaining volume reduction was due to the continued decline of graphic paper demand and the sale of our Androscoggin and Stevens Point mills during the first quarter of 2020, partially offset by an increase in sales volume of packaging papers and market pulp.
Operating income was $76 million in the first quarter of 2020, an increase of $39 million when compared to operating income of $37 million in the first quarter of 2019.
Operating results for the first quarter of 2020 were positively impacted by:
- Lower input costs of $10 million, driven by lower chemical, energy and purchased pulp costs, partially offset by higher wood costs
- Lower freight costs of $6 million
- Lower depreciation expense of $5 million
- Reduced planned major maintenance costs of $2 million
Operating results for the first quarter of 2020 were negatively impacted by:
- Unfavorable price/mix of $47 million
- Unfavorable impact of $13 million as a result of lower sales volume driven by a decline in graphic paper sales and the sale of our Androscoggin and Stevens Point mills during the first quarter of 2020, partially offset by an increase in the sales volume of packaging paper and market pulp
- Higher operating expenses of $3 million driven primarily by market downtime and sell through of higher cost inventory produced in 2019, partially offset by reduced corporate overhead and union ratification expense for signing bonuses and for the settlement of various work arrangement issues in the first quarter of 2019 that did not recur in 2020
- Higher Selling, general and administrative costs of $3 million primarily driven by severance costs due to our headcount reduction initiatives and costs associated with the proxy solicitation contest, partially offset by reduced strategic initiative costs and Selling, general and administrative cost reduction initiatives in connection with the sale of our Androscoggin and Stevens Point mills
Other impacts to operating results included:
- Restructuring charges for the first quarter of 2020 increased $6 million compared to the first quarter of 2019 associated with the closure of our Luke Mill in June 2019
- Other operating income for the first quarter of 2020 was favorable $89 million, primarily as a result of the $88 million gain on the sale of our Androscoggin and Stevens Point mills
Other income in the first quarter of 2020 and first quarter of 2019 included $5 million and $1 million, respectively, associated with the non-operating components of net periodic pension income.
Income tax expense
Income tax expense of $26 million for the first quarter of 2020 primarily reflects the estimated taxes for the period and $6 million of additional valuation allowance recognized against state tax credits. Income tax expense for the first quarter of 2019 was primarily offset by a reversal of valuation allowance.
Verso's complete first quarter 2020 financial report is available on the company's website: versoco.com
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 graphic and specialty papers, packaging papers and pulp, Verso provides insightful solutions that help drive improved customer efficiency, productivity, brand awareness and business results. For further information, visit: versoco.com
SOURCE: Verso Corporatio