☑
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to __________
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Delaware
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75-3217389
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(State of Incorporation
or Organization)
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(IRS Employer
Identification Number)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Class A common stock, par value $0.01 per share
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VRS
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New York Stock Exchange
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Large accelerated filer
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☑
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page
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VERSO CORPORATION
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|||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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|||||||
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|||||||
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||||||
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December 31,
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June 30,
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||||
(Dollars in millions, except per share amounts)
|
2019
|
|
2020
|
||||
ASSETS
|
|
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|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
42
|
|
|
$
|
209
|
|
Accounts receivable, net
|
155
|
|
|
99
|
|
||
Inventories
|
395
|
|
|
367
|
|
||
Prepaid expenses and other assets
|
7
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|
|
6
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|
||
Total current assets
|
599
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|
681
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Property, plant and equipment, net
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945
|
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|
733
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Deferred tax assets
|
118
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|
95
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|
||
Intangibles and other assets, net
|
59
|
|
|
50
|
|
||
Total assets
|
$
|
1,721
|
|
|
$
|
1,559
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LIABILITIES AND EQUITY
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|
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Current liabilities:
|
|
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|
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|
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Accounts payable
|
$
|
188
|
|
|
$
|
127
|
|
Accrued and other liabilities
|
103
|
|
|
77
|
|
||
Current maturities of long-term debt and finance leases
|
2
|
|
|
1
|
|
||
Total current liabilities
|
293
|
|
|
205
|
|
||
Long-term debt and finance leases
|
5
|
|
|
4
|
|
||
Pension benefit obligation
|
369
|
|
|
307
|
|
||
Other long-term liabilities
|
41
|
|
|
36
|
|
||
Total liabilities
|
708
|
|
|
552
|
|
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Commitments and contingencies (Note 11)
|
|
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|
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Equity:
|
|
|
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|
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Preferred stock -- par value $0.01 (50,000,000 shares authorized, no shares issued)
|
—
|
|
|
—
|
|
||
Common stock -- par value $0.01 (210,000,000 Class A shares authorized with 34,949,430 shares issued and 34,704,367 outstanding on December 31, 2019 and 35,766,353 shares issued and 33,669,707 outstanding on June 30, 2020; 40,000,000 Class B shares authorized with no shares issued and outstanding on December 31, 2019 and June 30, 2020)
|
—
|
|
|
—
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|
||
Treasury stock -- at cost (245,063 shares on December 31, 2019 and 2,096,646 shares on June 30, 2020)
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(5
|
)
|
|
(32
|
)
|
||
Paid-in-capital
|
698
|
|
|
702
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|
||
Retained earnings
|
198
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|
|
215
|
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Accumulated other comprehensive income
|
122
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|
|
122
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Total equity
|
1,013
|
|
|
1,007
|
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||
Total liabilities and equity
|
$
|
1,721
|
|
|
$
|
1,559
|
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VERSO CORPORATION
|
|||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||||||||||
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|
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|
||||||||
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Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(Dollars in millions, except per share amounts)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Net sales
|
$
|
602
|
|
|
$
|
268
|
|
|
$
|
1,241
|
|
|
$
|
739
|
|
Costs and expenses:
|
|
|
|
|
|
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|||||||
Cost of products sold (exclusive of depreciation and amortization)
|
540
|
|
|
271
|
|
|
1,089
|
|
|
698
|
|
||||
Depreciation and amortization
|
104
|
|
|
22
|
|
|
132
|
|
|
45
|
|
||||
Selling, general and administrative expenses
|
29
|
|
|
16
|
|
|
53
|
|
|
43
|
|
||||
Restructuring charges
|
40
|
|
|
—
|
|
|
40
|
|
|
6
|
|
||||
Other operating (income) expense
|
1
|
|
|
1
|
|
|
2
|
|
|
(87
|
)
|
||||
Operating income (loss)
|
(112
|
)
|
|
(42
|
)
|
|
(75
|
)
|
|
34
|
|
||||
Interest expense
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Other (income) expense
|
(1
|
)
|
|
(5
|
)
|
|
(2
|
)
|
|
(9
|
)
|
||||
Income (loss) before income taxes
|
(112
|
)
|
|
(37
|
)
|
|
(75
|
)
|
|
43
|
|
||||
Income tax expense (benefit)
|
—
|
|
|
(3
|
)
|
|
1
|
|
|
23
|
|
||||
Net income (loss)
|
$
|
(112
|
)
|
|
$
|
(34
|
)
|
|
$
|
(76
|
)
|
|
$
|
20
|
|
Income (loss) per common share:
|
|
|
|
|
|
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|
||||||||
Basic
|
$
|
(3.23
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(2.19
|
)
|
|
$
|
0.56
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|
Diluted
|
(3.23
|
)
|
|
(0.99
|
)
|
|
(2.19
|
)
|
|
0.56
|
|
||||
Weighted average common shares outstanding (in thousands)
|
|
|
|
|
|
|
|
|
|
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|
||||
Basic
|
34,626
|
|
|
34,548
|
|
|
34,555
|
|
|
34,827
|
|
||||
Diluted
|
34,626
|
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|
34,548
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34,555
|
|
|
35,023
|
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VERSO CORPORATION
|
|||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|||||||||||||||
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||||||||
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Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Net income (loss)
|
$
|
(112
|
)
|
|
$
|
(34
|
)
|
|
$
|
(76
|
)
|
|
$
|
20
|
|
Other comprehensive income (loss), net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Comprehensive income (loss)
|
$
|
(112
|
)
|
|
$
|
(34
|
)
|
|
$
|
(76
|
)
|
|
$
|
20
|
|
VERSO CORPORATION
|
||||||||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
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Class A
|
|
|
|
Retained Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
Stockholders’
Equity
|
|||||||||||||||
(Dollars in millions, shares in thousands)
|
Common Shares
|
Common Stock
|
Treasury Shares
|
Treasury Stock
|
Paid-in-Capital
|
|||||||||||||||||
Balance - March 31, 2019
|
34,570
|
|
$
|
—
|
|
86
|
|
$
|
(2
|
)
|
$
|
688
|
|
$
|
138
|
|
$
|
120
|
|
$
|
944
|
|
Net income (loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(112
|
)
|
—
|
|
(112
|
)
|
||||||
Treasury shares
|
—
|
|
—
|
|
152
|
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
||||||
Common stock issued for restricted stock
|
341
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Equity award expense
|
—
|
|
—
|
|
—
|
|
—
|
|
6
|
|
—
|
|
—
|
|
6
|
|
||||||
Balance - June 30, 2019
|
34,911
|
|
$
|
—
|
|
238
|
|
$
|
(5
|
)
|
$
|
694
|
|
$
|
26
|
|
$
|
120
|
|
$
|
835
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance - March 31, 2020
|
35,766
|
|
$
|
—
|
|
717
|
|
$
|
(12
|
)
|
$
|
700
|
|
$
|
252
|
|
$
|
122
|
|
$
|
1,062
|
|
Net income (loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(34
|
)
|
—
|
|
(34
|
)
|
||||||
Treasury shares
|
—
|
|
—
|
|
1,380
|
|
(20
|
)
|
—
|
|
—
|
|
—
|
|
(20
|
)
|
||||||
Dividends declared
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
—
|
|
(3
|
)
|
||||||
Equity award expense
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
2
|
|
||||||
Balance - June 30, 2020
|
35,766
|
|
$
|
—
|
|
2,097
|
|
$
|
(32
|
)
|
$
|
702
|
|
$
|
215
|
|
$
|
122
|
|
$
|
1,007
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance - December 31, 2018
|
34,570
|
|
$
|
—
|
|
86
|
|
$
|
(2
|
)
|
$
|
686
|
|
$
|
102
|
|
$
|
120
|
|
$
|
906
|
|
Net income (loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(76
|
)
|
—
|
|
(76
|
)
|
||||||
Treasury shares
|
—
|
|
—
|
|
152
|
|
(3
|
)
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
||||||
Common stock issued for restricted stock
|
341
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Equity award expense
|
—
|
|
—
|
|
—
|
|
—
|
|
8
|
|
—
|
|
—
|
|
8
|
|
||||||
Balance - June 30, 2019
|
34,911
|
|
$
|
—
|
|
238
|
|
$
|
(5
|
)
|
$
|
694
|
|
$
|
26
|
|
$
|
120
|
|
$
|
835
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance - December 31, 2019
|
34,949
|
|
$
|
—
|
|
245
|
|
$
|
(5
|
)
|
$
|
698
|
|
$
|
198
|
|
$
|
122
|
|
$
|
1,013
|
|
Net income (loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
20
|
|
—
|
|
20
|
|
||||||
Treasury shares
|
—
|
|
—
|
|
1,852
|
|
(27
|
)
|
—
|
|
—
|
|
—
|
|
(27
|
)
|
||||||
Common stock issued for restricted stock
|
817
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||
Dividends declared
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3
|
)
|
—
|
|
(3
|
)
|
||||||
Equity award expense
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
—
|
|
—
|
|
4
|
|
||||||
Balance - June 30, 2020
|
35,766
|
|
$
|
—
|
|
2,097
|
|
$
|
(32
|
)
|
$
|
702
|
|
$
|
215
|
|
$
|
122
|
|
$
|
1,007
|
|
VERSO CORPORATION
|
|||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||||
|
|
|
|
||||
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
(Dollars in millions)
|
2019
|
|
2020
|
||||
Cash Flows From Operating Activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(76
|
)
|
|
$
|
20
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
||||
Depreciation and amortization
|
132
|
|
|
45
|
|
||
Noncash restructuring charges
|
18
|
|
|
—
|
|
||
Net periodic pension cost (income)
|
—
|
|
|
(9
|
)
|
||
Pension plan contributions
|
(16
|
)
|
|
(18
|
)
|
||
Amortization of debt issuance cost and discount
|
1
|
|
|
—
|
|
||
Equity award expense
|
8
|
|
|
4
|
|
||
Gain on Sale of Androscoggin/Stevens Point Mills
|
—
|
|
|
(88
|
)
|
||
(Gain) loss on sale or disposal of assets
|
1
|
|
|
—
|
|
||
Deferred taxes
|
1
|
|
|
23
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
8
|
|
|
18
|
|
||
Inventories
|
(69
|
)
|
|
(61
|
)
|
||
Prepaid expenses and other assets
|
2
|
|
|
(2
|
)
|
||
Accounts payable
|
(14
|
)
|
|
(18
|
)
|
||
Accrued and other liabilities
|
(19
|
)
|
|
(19
|
)
|
||
Net cash provided by (used in) operating activities
|
(23
|
)
|
|
(105
|
)
|
||
Cash Flows From Investing Activities:
|
|
|
|
|
|||
Capital expenditures
|
(39
|
)
|
|
(37
|
)
|
||
Net proceeds from Sale of the Androscoggin/Stevens Point Mills
|
—
|
|
|
340
|
|
||
Net cash provided by (used in) investing activities
|
(39
|
)
|
|
303
|
|
||
Cash Flows From Financing Activities:
|
|
|
|
|
|||
Borrowings on ABL Facility
|
278
|
|
|
36
|
|
||
Payments on ABL Facility
|
(231
|
)
|
|
(36
|
)
|
||
Principal payment on financing lease obligation
|
—
|
|
|
(1
|
)
|
||
Acquisition of treasury stock
|
(3
|
)
|
|
(27
|
)
|
||
Dividends paid to stockholders
|
—
|
|
|
(3
|
)
|
||
Debt issuance costs
|
(1
|
)
|
|
—
|
|
||
Net cash provided by (used in) financing activities
|
43
|
|
|
(31
|
)
|
||
Change in Cash and cash equivalents and restricted cash
|
(19
|
)
|
|
167
|
|
||
Cash and cash equivalents and restricted cash at beginning of period
|
28
|
|
|
44
|
|
||
Cash and cash equivalents and restricted cash at end of period
|
$
|
9
|
|
|
$
|
211
|
|
Supplemental cash flow disclosures:
|
|
|
|
||||
Total income taxes paid
|
$
|
2
|
|
|
$
|
—
|
|
Noncash investing and financing activities:
|
|
|
|
||||
Right-of-use assets recorded upon adoption of ASC 842
|
$
|
24
|
|
|
$
|
—
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities
|
6
|
|
|
—
|
|
||
Right-of-use assets obtained in exchange for new capitalized operating lease liabilities
|
2
|
|
|
7
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Paper
|
$
|
548
|
|
|
$
|
219
|
|
|
$
|
1,130
|
|
|
$
|
640
|
|
Packaging
|
23
|
|
|
18
|
|
|
47
|
|
|
42
|
|
||||
Pulp
|
31
|
|
|
31
|
|
|
64
|
|
|
57
|
|
||||
Total Net sales
|
$
|
602
|
|
|
$
|
268
|
|
|
$
|
1,241
|
|
|
$
|
739
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
End-users and Converters
|
$
|
282
|
|
|
$
|
110
|
|
|
$
|
569
|
|
|
$
|
280
|
|
Brokers and Merchants
|
228
|
|
|
108
|
|
|
475
|
|
|
327
|
|
||||
Printers
|
92
|
|
|
50
|
|
|
197
|
|
|
132
|
|
||||
Total Net sales
|
$
|
602
|
|
|
$
|
268
|
|
|
$
|
1,241
|
|
|
$
|
739
|
|
|
December 31,
|
|
June 30,
|
||||
(Dollars in millions)
|
2019
|
|
2020
|
||||
Raw materials
|
$
|
80
|
|
|
$
|
64
|
|
Work-in-process
|
51
|
|
|
69
|
|
||
Finished goods
|
233
|
|
|
208
|
|
||
Replacement parts and other supplies
|
31
|
|
|
26
|
|
||
Inventories
|
$
|
395
|
|
|
$
|
367
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Net income (loss) available to common stockholders (in millions)
|
$
|
(112
|
)
|
|
$
|
(34
|
)
|
|
$
|
(76
|
)
|
|
$
|
20
|
|
Weighted average common shares outstanding - basic (in thousands)
|
34,626
|
|
|
34,548
|
|
|
34,555
|
|
|
34,827
|
|
||||
Dilutive shares from stock awards (in thousands)
|
—
|
|
|
—
|
|
|
—
|
|
|
196
|
|
||||
Weighted average common shares outstanding - diluted (in thousands)
|
34,626
|
|
|
34,548
|
|
|
34,555
|
|
|
35,023
|
|
||||
Basic income (loss) per share
|
$
|
(3.23
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(2.19
|
)
|
|
$
|
0.56
|
|
Diluted income (loss) per share
|
$
|
(3.23
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(2.19
|
)
|
|
$
|
0.56
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
||||||||
Service cost
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
1
|
|
Interest cost
|
16
|
|
|
11
|
|
|
32
|
|
|
23
|
|
||||
Expected return on plan assets
|
(17
|
)
|
|
(16
|
)
|
|
(34
|
)
|
|
(33
|
)
|
||||
Net periodic pension cost (income)
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
$
|
(9
|
)
|
|
Restricted Stock
|
|
Weighted Average
|
|||
|
Units
|
|
Grant Date
|
|||
Shares (in thousands)
|
Outstanding
|
|
Fair Value
|
|||
Non-vested at December 31, 2019
|
579
|
|
|
$
|
11.55
|
|
Granted
|
221
|
|
|
15.75
|
|
|
Dividend equivalent units (1)
|
4
|
|
|
—
|
|
|
Vested
|
(257
|
)
|
|
9.59
|
|
|
Forfeited
|
(47
|
)
|
|
15.87
|
|
|
Non-vested at June 30, 2020
|
500
|
|
|
14.03
|
|
|
Restricted Stock
|
|
Weighted Average
|
|||
|
Units
|
|
Grant Date
|
|||
Shares (in thousands)
|
Outstanding
|
|
Fair Value
|
|||
Non-vested at December 31, 2019
|
638
|
|
|
$
|
18.84
|
|
Granted
|
439
|
|
|
15.19
|
|
|
Dividend equivalent units (1)
|
3
|
|
|
—
|
|
|
Incremental shares vested (2)
|
161
|
|
|
—
|
|
|
Vested
|
(555
|
)
|
|
21.05
|
|
|
Forfeited
|
(303
|
)
|
|
14.32
|
|
|
Non-vested at June 30, 2020
|
383
|
|
|
17.10
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
||||||||||||||
|
June 30,
|
|
June 30,
|
|
Cumulative
|
||||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
Incurred
|
||||||||||
Property, plant and equipment, net
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
Severance and benefit costs
|
19
|
|
|
—
|
|
|
19
|
|
|
(1
|
)
|
|
18
|
|
|||||
Write-off of spare parts and inventory
|
8
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
9
|
|
|||||
Write-off of purchase obligations and commitments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Other costs(1)
|
3
|
|
|
—
|
|
|
3
|
|
|
7
|
|
|
20
|
|
|||||
Total restructuring costs
|
$
|
40
|
|
|
$
|
—
|
|
|
$
|
40
|
|
|
$
|
6
|
|
|
$
|
58
|
|
|
Six Months Ended
|
||
(Dollars in millions)
|
June 30, 2020
|
||
Beginning balance of reserve
|
$
|
4
|
|
Severance and benefits reserve adjustments
|
(1
|
)
|
|
Other costs
|
7
|
|
|
Payments on other costs
|
(6
|
)
|
|
Ending balance of reserve
|
$
|
4
|
|
•
|
Accelerated and expanded workforce reduction, eliminating approximately 95 positions, primarily associated with SG&A roles
|
•
|
Implemented austerity measures company wide, including reducing mill operating costs
|
•
|
Reduced planned capital spend by $11 million
|
•
|
Managed inventory by taking approximately 70,000 tons of downtime in the second quarter of 2020
|
•
|
Continued to accelerate new product development in specialty, packaging and pulp grades
|
•
|
Deferred certain compensation programs and payroll taxes (per the CARES Act)
|
•
|
Implemented a company-wide hiring freeze
|
•
|
Announced plans to indefinitely idle our Duluth and Wisconsin Rapids mills, reducing workforce by 44% and eliminating other operating costs of the mills
|
|
Three Months Ended
|
|
|
||||||||
|
June 30,
|
|
Three Months
|
||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
$ Change
|
||||||
Net sales
|
$
|
602
|
|
|
$
|
268
|
|
|
$
|
(334
|
)
|
Costs and expenses:
|
|
|
|
|
|
||||||
Cost of products sold (exclusive of depreciation and amortization)
|
540
|
|
|
271
|
|
|
(269
|
)
|
|||
Depreciation and amortization
|
104
|
|
|
22
|
|
|
(82
|
)
|
|||
Selling, general and administrative expenses
|
29
|
|
|
16
|
|
|
(13
|
)
|
|||
Restructuring charges
|
40
|
|
|
—
|
|
|
(40
|
)
|
|||
Other operating (income) expense
|
1
|
|
|
1
|
|
|
—
|
|
|||
Operating income (loss)
|
(112
|
)
|
|
(42
|
)
|
|
70
|
|
|||
Interest expense
|
1
|
|
|
—
|
|
|
(1
|
)
|
|||
Other (income) expense
|
(1
|
)
|
|
(5
|
)
|
|
(4
|
)
|
|||
Income (loss) before income taxes
|
(112
|
)
|
|
(37
|
)
|
|
75
|
|
|||
Income tax expense (benefit)
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|||
Net income (loss)
|
$
|
(112
|
)
|
|
$
|
(34
|
)
|
|
$
|
78
|
|
•
|
Lower input costs of $6 million, driven by lower chemical, energy and purchased pulp costs, partially offset by higher wood costs
|
•
|
Lower depreciation expense of $82 million due primarily to $76 million in accelerated depreciation associated with the closure of our Luke Mill in June 2019
|
•
|
Reduced planned major maintenance costs of $14 million, driven primarily by the deferral of the annual outage at our Wisconsin Rapids Mill
|
•
|
Lower Selling, general and administrative expenses of $13 million, driven primarily by cost reduction initiatives in connection with the sale of our Androscoggin and Stevens Point mills in February 2020, lower equity compensation expense and lower severance costs
|
•
|
Lower restructuring charges of $40 million associated with the closure of our Luke Mill in June 2019
|
•
|
Unfavorable net selling price and product mix of $36 million
|
•
|
Lower sales volume resulting in a decrease of $45 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 closure of our Luke Mill in June 2019
|
•
|
Higher net operating expenses of $4 million driven primarily by market downtime and a necessary extension of the planned outage at our Quinnesec Mill, partially offset by improved performance and cost reduction initiatives across our mill system
|
|
Six Months Ended
|
|
|
||||||||
|
June 30,
|
|
Six Months
|
||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
$ Change
|
||||||
Net sales
|
$
|
1,241
|
|
|
$
|
739
|
|
|
$
|
(502
|
)
|
Costs and expenses:
|
|
|
|
|
|
|
|||||
Cost of products sold (exclusive of depreciation and amortization)
|
1,089
|
|
|
698
|
|
|
(391
|
)
|
|||
Depreciation and amortization
|
132
|
|
|
45
|
|
|
(87
|
)
|
|||
Selling, general and administrative expenses
|
53
|
|
|
43
|
|
|
(10
|
)
|
|||
Restructuring charges
|
40
|
|
|
6
|
|
|
(34
|
)
|
|||
Other operating (income) expense
|
2
|
|
|
(87
|
)
|
|
(89
|
)
|
|||
Operating income (loss)
|
(75
|
)
|
|
34
|
|
|
109
|
|
|||
Interest expense
|
2
|
|
|
—
|
|
|
(2
|
)
|
|||
Other (income) expense
|
(2
|
)
|
|
(9
|
)
|
|
(7
|
)
|
|||
Income (loss) before income taxes
|
(75
|
)
|
|
43
|
|
|
118
|
|
|||
Income tax expense (benefit)
|
1
|
|
|
23
|
|
|
22
|
|
|||
Net income (loss)
|
$
|
(76
|
)
|
|
$
|
20
|
|
|
$
|
96
|
|
•
|
Lower input costs of $16 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 $87 million due primarily to $76 million in accelerated depreciation associated with the closure of our Luke Mill in June 2019
|
•
|
Reduced planned major maintenance costs of $16 million, driven primarily by the deferral of the annual outage at our Wisconsin Rapids Mill
|
•
|
Lower Selling, general and administrative costs of $10 million driven primarily by cost reduction initiatives in connection with the sale of our Androscoggin and Stevens Point mills in February 2020 and lower equity compensation expense, partially offset by increased severance costs incurred due to our headcount reduction initiatives and costs associated with the proxy solicitation contest
|
•
|
Lower restructuring charges of $34 million primarily associated with the closure of our Luke Mill in June 2019
|
•
|
Higher other operating income of $89 million, primarily as a result of the $88 million gain on the sale of our Androscoggin and Stevens Point mills
|
•
|
Unfavorable price/mix of $82 million
|
•
|
Lower sales volume resulting in a decrease of $57 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 closure of our Luke Mill in June 2019
|
•
|
Higher net operating expenses of $10 million driven primarily by market downtime, a necessary extension of the planned outage at our Quinnesec Mill and sell through of higher cost inventory produced in 2019, partially offset by improved performance and cost reduction initiatives across our mill system, 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
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||
(Dollars in millions)
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|||||||||
Net income (loss)
|
$
|
(112
|
)
|
|
$
|
(34
|
)
|
|
$
|
(76
|
)
|
|
$
|
20
|
|
|
Income tax expense (benefit)
|
—
|
|
|
(3
|
)
|
|
1
|
|
|
23
|
|
|||||
Interest expense
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|||||
Depreciation and amortization
|
104
|
|
|
22
|
|
|
132
|
|
|
45
|
|
|||||
EBITDA
|
$
|
(7
|
)
|
|
$
|
(15
|
)
|
|
59
|
|
|
88
|
|
|||
Adjustments to EBITDA:
|
|
|
|
|
|
|
|
|||||||||
|
Restructuring charges (1)
|
40
|
|
|
—
|
|
|
40
|
|
|
6
|
|
||||
|
Luke Mill post-closure costs (2)
|
1
|
|
|
3
|
|
|
1
|
|
|
6
|
|
||||
|
Non-cash equity award compensation (3)
|
6
|
|
|
2
|
|
|
8
|
|
|
4
|
|
||||
|
Gain on Sale of the Androscoggin/Stevens Point Mills (4)
|
—
|
|
|
—
|
|
|
—
|
|
|
(88
|
)
|
||||
|
(Gain) loss on sale or disposal of assets (5)
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
|
Stockholders proxy solicitation costs (6)
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||
|
Other severance costs (7)
|
2
|
|
|
1
|
|
|
2
|
|
|
5
|
|
||||
|
Other items, net (8)
|
2
|
|
|
—
|
|
|
2
|
|
|
1
|
|
||||
Adjusted EBITDA
|
$
|
44
|
|
|
$
|
(9
|
)
|
|
$
|
113
|
|
|
$
|
26
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
(Dollars in millions)
|
2019
|
|
2020
|
||||
Net cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
(23
|
)
|
|
$
|
(105
|
)
|
Investing activities
|
(39
|
)
|
|
303
|
|
||
Financing activities
|
43
|
|
|
(31
|
)
|
||
Change in Cash and cash equivalents and restricted cash
|
$
|
(19
|
)
|
|
$
|
167
|
|
|
Total Number
of Shares
(or Units)
Purchased
|
|
Average
Price Paid
per Share
(or Unit) (a)
|
|
Total Number of
Shares (or Units)
Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number
(or Approximate
Dollar Value) of
Shares that
May Yet Be
Purchased
Under the Plans
or Programs (b)(1) (in millions)
|
||||||
April 1, 2020 through April 30, 2020
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
247
|
|
May 1, 2020 through May 31, 2020
|
743,055
|
|
|
14.10
|
|
|
743,055
|
|
|
237
|
|
||
June 1, 2020 through June 30, 2020
|
637,132
|
|
|
14.50
|
|
|
637,132
|
|
|
227
|
|
||
Total
|
1,380,187
|
|
|
|
|
|
|
|
|
|
|
Exhibit
Number
|
Description of Exhibit
|
101.INS
|
Inline XBRL Instance Document.
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema.
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase.
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase.
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101.LAB
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Inline XBRL Taxonomy Extension Label Linkbase.
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101.PRE
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Inline XBRL Taxonomy Extension Presentation Linkbase.
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104
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Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
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(1)
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Incorporated herein by reference to Exhibit 3.1 to Verso Corporation’s Registration Statement on Form 8-A filed with the SEC on July 15, 2016.
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(2)
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Incorporated herein by reference to Exhibit 3.1 to Verso Corporation’s Current Report on Form 8-K filed with the SEC on February 18, 2020.
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(3)
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Incorporated herein by reference to Exhibit 3.1 to Verso Corporation’s Current Report on Form 8-K filed with the SEC on June 26, 2020.
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(4)
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Incorporated herein by reference to Exhibit 4.1 to Verso Corporation’s Current Report on Form 8‑K filed with the SEC on July 19, 2016.
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(5)
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Incorporated herein by reference to Exhibit 10.4 to Verso Corporation’s Current Report on Form 8‑K filed with the SEC on July 19, 2016.
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(6)
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Furnished herewith.
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Date: August 6, 2020
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VERSO CORPORATION
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By:
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/s/ Adam St. John
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Adam St. John
President, Chief Executive Officer and Director
(Principal Executive Officer)
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By:
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/s/ Allen J. Campbell
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Allen J. Campbell
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
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Verso Corporation
Corporate Headquarters
8540 Gander Creek Drive
Miamisburg, OH 45342
Name of sender
Adam St John
T 906 221 7315
E Adam.StJohn@versoco.com
W www.versoco.com
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1.
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I have reviewed this quarterly report on Form 10-Q of Verso Corporation (the “registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Adam St. John
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Adam St. John
President, Chief Executive Officer and Director (Principal Executive Officer) |
1.
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I have reviewed this quarterly report on Form 10-Q of Verso Corporation (the “registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Allen J. Campbell
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Allen J. Campbell
Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of
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/s/ Adam St. John
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Adam St. John
President, Chief Executive Officer and Director (Principal Executive Officer) |
(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of
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/s/ Allen J. Campbell
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Allen J. Campbell
Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |