Verso Reports Fourth Quarter and Full Year 2020 Financial Results

"Despite 2020 being a challenging year, we continued to strengthen our operational efficiency and flexibility, manage our costs and working capital to generate free cash flow..." – Randy Nebel, President and CEO of Verso.

Feb. 25, 2021 - Verso Corporation (NYSE: VRS) today reported financial results for the fourth quarter and full year of 2020.

Fourth Quarter 2020 Highlights:

• Net sales of $314 million, up 3 percent versus the third quarter of 2020
• Net loss of $90 million, compared to net loss of $31 million in the third quarter of 2020
• Adjusted EBITDA of $9 million, compared to Adjusted EBITDA of $12 million in the third quarter of 2020

Overview

"Despite 2020 being a challenging year, we continued to strengthen our operational efficiency and flexibility, manage our costs and working capital to generate free cash flow, and align our product offering to our customers' needs as the commercial print market slightly improved," said Verso President and Chief Executive Officer Randy Nebel. "We have positive momentum leading into 2021, and are strategically positioned as industry and market dynamics continue to recover."

Comments to Results of Operations - Comparison of Three Months Ended December 31, 2020 to Three Months Ended December 31, 2019

Net sales

Net sales for the three months ended December 31, 2020 declined by $273 million or 47% compared to the three months ended December 31, 2019 as a result of significant declines in sales volume and unfavorable price/mix. Of the $273 million, or 47% net sales decline, $138 million, or 24%, was a result of the sale of our Androscoggin and Stevens Point mills in February 2020 and $77 million, or 13%, was attributable to the indefinite idling of our Duluth and Wisconsin Rapids mills in July 2020. Total company sales volume was down from 657 thousand tons during the three months ended December 31, 2019, to 392 thousand tons during the three months ended December 31, 2020. Of the 265 thousand ton volume decline, 140 thousand tons were a result of the sale of our Androscoggin and Stevens Point mills in February 2020, 91 thousand tons were attributable to the indefinite idling of our Duluth and Wisconsin Rapids mills in July 2020, and the additional decline resulted from lower customer demand driven by the COVID-19 pandemic.

Operating income (loss)

Operating loss was $118 million for the three months ended December 31, 2020, a decrease of $128 million when compared to operating income of $10 million for the three months ended December 31, 2019.

Operating results for the three months ended December 31, 2020 were positively impacted by:

• Lower input costs of $1 million, driven by lower chemical, fiber and purchased pulp costs, partially offset by higher energy costs
• Lower freight costs of $1 million
• Reduced planned major maintenance costs of $5 million, primarily driven by the fall outage at the Androscoggin Mill in 2019 that did not recur in 2020 due to the sale of the mill in February 2020
• Lower Selling, general and administrative costs of $13 million primarily driven by cost reduction initiatives in connection with the sale of our Androscoggin and Stevens Point mills in February 2020
• Higher other operating income of $7 million primarily related to finalization of the working capital adjustment to the sale of our Androscoggin and Stevens Point mills

Operating results for the three months ended December 31, 2020 were negatively impacted by:

• Unfavorable price/mix of $19 million
• Lower sales volume resulting in a decrease of $31 million in net operating income, driven by the impact of the COVID-19 pandemic, the sale of our Androscoggin and Stevens Point mills in February 2020 and the indefinite idling of our Duluth and Wisconsin Rapids mills in July 2020
• Higher net operating expenses of $44 million primarily driven by market downtime, costs incurred to idle our Duluth and Wisconsin Rapids mills, and severance costs, partially offset by cost reduction initiatives across our mill system and reduced corporate overhead
• Higher depreciation expense of $61 million primarily due to $65 million in accelerated depreciation related to the closure of our Duluth Mill in December 2020, partially offset by lower depreciation as a result of the sale of our Androscoggin and Stevens Point mills in February 2020

Other (income) expense

Other income for the three months ended December 31, 2020 and December 31, 2019 includes income of $5 million and $14 million, respectively, associated with the non-operating components of net periodic pension cost (income).

Income tax expense (benefit)

Income tax benefit was $23 million for the three months ended December 31, 2020, which primarily reflects estimated tax benefit for the period, partially offset by $7 million of additional valuation allowance recognized against state tax credits. Income tax benefit was $91 million for the three months ended December 31, 2019, primarily attributable to a release of the income tax valuation allowances on all federal deferred tax assets and certain state tax credits.

2021 Outlook

The Company is providing the following outlook for full year 2021:

• Expect capital expenditures to be $45 million to $55 million
• Pension contribution of $42 million to $46 million anticipated
• Expect operating cash flow in excess of cash required to fund capital, pension and dividends
• Idle and closed mill costs to decline while advancing potential realization of asset sales

Verso's complete fourth quarter and full year 2020 results are available on Verso's website at investor.versoco.com by navigating to the Financial Information page.

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. To learn more, visit: versoco.com

SOURCE: Verso Corporation