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Verso Corporation Reports Third Quarter 2021 Financial Results

Randy Nebel "This was a strong quarter for Verso in which our people drove robust cash flow, reflecting steadfast execution and positive macro trends, including price increases, for our business." – Randy Nebel, President and CEO of Verso.

Nov. 8, 2021 - Verso Corporation [on Nov. 5] reported financial results for the third quarter of 2021 and announced that its Board of Directors has declared a quarterly cash dividend for the quarter ending December 31, 2021, in the amount of $0.10 per each outstanding share of Verso's Class A common stock. The quarterly cash dividend is payable on December 29, 2021 to Verso's stockholders of record holding shares of common stock at the close of business December 17, 2021.

Third Quarter 2021 Highlights:

  • Net sales of $339 million, an 11% increase over third quarter 2020 and a 3% increase over second quarter 2021
  • Net income of $58 million compared to a net loss of $31 million in third quarter 2020 and net income of $16 million in second quarter 2021
  • Adjusted EBITDA of $67 million compared to $12 million in third quarter 2020 and $52 million in second quarter 2021
  • Adjusted EBITDA margin of 19.8% compared to a 3.9% margin in third quarter 2020 and a 15.8% margin in second quarter 2021
  • $286 million in available liquidity including $166 million in cash
  • Returned $14 million in capital to shareholders in repurchases and quarterly dividends

Overview

"This was a strong quarter for Verso in which our people drove robust cash flow, reflecting steadfast execution and positive macro trends, including price increases, for our business. Over the past few years, Verso has streamlined our operations and reduced costs while strategically investing in projects to enhance our ability to support our customers. Additionally, strong demand with reduced industry capacity has led to healthy order rates across our product lines," said Verso President and Chief Executive Officer Randy Nebel. "Verso maintains a strong, debt-free balance sheet, which provides a solid foundation for generating long-term value for shareholders."

Net sales

Net sales for the three months ended September 30, 2021 increased $33 million, or 11%, compared to the three months ended September 30, 2020, driven by favorable price/mix of $47 million, partially offset by $14 million, or 5%, largely attributable to our sold Duluth and idled Wisconsin Rapids mills. Total company sales volume was down from 382 thousand tons during the three months ended September 30, 2020, to 358 thousand tons during the same period of the current year, primarily attributable to our sold Duluth and idled Wisconsin Rapids mills.

Operating income (loss)

Operating income was $35 million for the three months ended September 30, 2021, an increase of $79 million when compared to an operating loss of $44 million for the three months ended September 30, 2020.

Operating results for the three months ended September 30, 2021 were positively impacted by:

  • Favorable price/mix of $47 million driven by price increase realization across all grades, including pulp
  • Improved operating income of $11 million resulting from the conversion to our current two mill system
  • Lower depreciation expense of $3 million
  • Lower net operating expenses of $29 million driven primarily by $22 million lower closed/idled mill spend, lower wood costs, improved performance and cost reduction initiatives across our mill system
  • Higher other operating income of $10 million, driven primarily by $6 million in insurance recoveries during the third quarter of 2021 associated with a 2019 insurance claim at our Quinnesec Mill and $3 million loss on sale or disposal of assets in 2020

Operating results for the three months ended September 30, 2021 were negatively impacted by:

  • Inflationary cost increases of $19 million driven by purchased pulp, latex, energy and freight
  • Favorable restructuring charge adjustments of $2 million in the third quarter of 2020 for activities associated with the closure of our Luke Mill in 2019

2021 Outlook

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

  • Expect capital expenditures to be $60 million to $65 million
  • Pension minimum required contribution of $25 million
  • Cash taxes from zero to $2 million
  • Cash position to increase

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 continues 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 have seen our sales, volume and prices continue to recover during the third quarter of 2021.

Unsolicited Acquisition Proposal from Atlas Holdings LLC

On September 21, 2021, Verso announced that the Company entered into a confidentiality agreement with Atlas Holdings LLC, or "Atlas," and communicated to Atlas that the previously disclosed $20.00 per share all-cash offer to acquire Verso was insufficient and that Verso would only consider a potential transaction if the offer meaningfully increased. Verso and Atlas agreed to exchange additional information under the terms of the confidentiality agreement to facilitate ongoing discussions regarding a potential transaction with Atlas on mutually acceptable terms. The Special Committee is diligently continuing its work.

There can be no assurance that any negotiations between Verso and Atlas will take place following the exchange of additional information or that any transaction with Atlas, or any other party, will occur or be consummated.

Verso's complete third quarter 2021 financial report is available on the company's website: versoco.com.

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

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