VRS - Earnings call transcript Q3 2017

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Operator

Good morning, and welcome to Verso Corporation’s Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. A replay of this call will be available on the Investors page of Verso’s website after 12:00 p.m., Eastern Time today. At this time, I’d like to turn the presentation over to Verso Treasurer, Tim Nusbaum. Please go ahead, sir.

Tim Nusbaum

morning. good and you, Thank

we’ll The website third announced earnings Verso were Investors slides results as are the available on www.versoco.com. XXXX morning before financial the that of this set The of as for to the during well call, Verso’s Corporation page the quarter refer at market release opened.

Weinhold, more will forward-looking Papers. and materialize DiSantis, uncertainties these should understanding Allen expectations. Campbell, Officer; would our me for to vary Chief risks underlying uncertainties. Officer; remind in Joining Financial Executive subject everyone today Graphic or better prove estimates management’s order today’s assumptions from the the may certain or forward-looking Chief call and give President and to like results be statements course performance, Mike Vice you incorrect, a I of call, are is President materially of to statements. Chris actual These that we Senior or risks in of or one making Should of

tab. like like please presentation If business, and this to associated versoco.com, risks uncertainties regarding our which the various I’d the Chris posted the our website, under Investors information SEC point, on to with are to our refer turn further filings, DiSantis. At over you’d

Chris DiSantis

and Level Update. Tim, going to the Macro titled start everybody. you, good Thank I’m of morning, here on Page deck X

A lot changed start a on certainly with market real has me let landscape. recent level So months. high in the

For one, American in North coated freesheet we’ve approximately capacity. reduction seen a XX%

Linn include it, and capacity Appleton at month. and X And West closures the same If ton for it’s million a within you instance, market. Coated conversions, look

machine that roughly UPM, location roughly the their first announced they five to down by XXX,XXX XXX,XXX noted tons going West the end Linn. the Appleton, quarter ‘XX. were taking of number closure of be at their Blandin So at they of

Somerset conversion include to of notable machine one year, from three Skowhegan going PCA’s line, quarter their second paperboard. Wallula next starting and in some the Sappi’s number number conversions And conversion

supply and and have So meaningful we’ve seen that’s market, real a some recently now pricing demand the balance reversal trends. of tightened of the shift in we

were in $XX a both depending and $XX freesheet; at include; increases pulp $XX ton on the ton. announced fourth ton; a to NBHK price uncoated and the specialty, So that a coated $XX grade, on quarter

As far as like growth. stores dynamics "R" list. strong same we be that trends. pages close To there’s the the continues print Toys mailings. there’ll groundwood, standpoint, next period latest across is groundwood, update in gaining the from those being coated America with concerned, to additions the of had new consumption value And the LIMITED to extent demand down not X,XXX Us thing to and Commercial it’s and those are X.X%, big see products year-to-date are down retail, of up X.X% that freesheet, and last print Flipping coated XX% E-commerce retail intensive. XX% at latest page. apparent Specialty Verso as gains That’s are same in are of that significantly; absolute names The freesheet XXXX, ad Magazine year. revenue. a respectively. the growth. imports share still little And with catalog bit down. but an same from

in record machine-glazed at machine five level Uncoated to now quarter the our XXX% Maine, number Our an at products hit coated continues Jay, grow. the all-time have forecasted Mill And emergence. of that machine-glazed first exited XX% a growth tonnage. share full release Verso’s Continue the line, ‘XX year pace in time in and since for utilization to roll on of we’re liner, gain product ‘XX. for to Androscoggin

out We’ve We expanded in the of we’re machine new in being improving be were remaining those a offering. X%. Point the of product launches. Performance with on lot liner AX particularly packaging places. market products where an segments. new introducing the Productolith digital Our Verso’s development a release new stuff continues face and is products, new product development pipeline pulp in Stevens other is coming XX% products. robust, machine, of and to revenue growth for laminates for got and paper year-to-date Pts in the Graphic got growth

up to at pricing very second you pricing since the look that’s If a of now year, the flat relative the but the important of Production our prior is third quarter normal. comparisons, to is ‘XX, quarter back sequentially it’s dynamic. X%

fast maintenance quarter the year. inventory We our projects back downtime events early paying early, of in the the reduce inventory strategy And downtime and significant now do second to half is and take have the the to in as end in the some of that is the year, year. And we to be actually, thought markets. graphics this the the rates of mills strong operating of challenging continue mills, expected. the are the the Web for operating and dividends rates very SC specialty, and

I’ll will detail things the you Allen highlights financial give quarter. So the from I’ll you few but we to into a Flipping page. next highlight some give we some third get are section, full. here. more as the

is all-time So an level. at record safety performance

seeing for second you performance lost nicely on million. cost if And in downtime, ever reduction, flow price, the terms the from quarter and EBITDA the incidents operating was the to they’ve cash impact adjusted bridge, So third materials. diminishing you everything in EBITDA been. look currently better than raw they right the liquidity We third were the $XXX quarter in at we’re are in able to best third in which rebounded capital. bringing again, year-to-date the number end And when the the third $XXX go you’d going great quarter, at to $XX performance, direction exceptional is the and time, -- the our metrics Q The million. quarter from is of a through to job just better in down, at inflation XX, also reduction $X the term this working at balance, loan is the of as inventory October Took balance million, We million. by another see term loan million. quarter a of $XX did million. on increase $XX

capital out growing. very excess being intense October of taking end focused at some about over credit whole the availability and the the the is and system, just currently, sheet. number that across $XXX managing spending, is actually We’re balance just letters managing And of million real efforts

the page So alternatives. of reduce liquidity conversions, being able company. to strategic healthy combination talk debt, a to any increase next for about combination that’s the simultaneously, Flipping to

of process more to applications. evaluated system. the the to level packaging-grade-type evaluation deep early in would and and that can caliper lightweight expansions our do low-capital the that So grades machine-by-machine to bag we’re our recycled into would one we next evaluation company" basically we’re make about SBS liner, the conversions product whole the on higher into continue you and is tell us products this, And in projects, going being no and I medium is get thing type areas throughout of But make allow plan us which "bet investments right important, some there’s just decisions now. is line year,

this at formally return So can very careful about announced and committee JVed, when to scrutinizing publicly mill And a being alternatives. with the business and is best we with pushing the to of to go you nice you investment have thing evaluate risk. be whole because anytime We’ve holistically outside the creation. you we’re at by with being change the this work operating creation be That option do these company. should you and Houlihan which the evaluation strategic when the it system, do levels should get we’re advised wind sold, thing each the of what’s is and risk up a of that, one of board relatively go kept low mill-by-mill And for do projects that they’re To one should counsel. look around value an invested, upon, one out mill. seeing capital different at reward one make Lokey, best one holistic subcommittee be tonnage embark to you the on set and of the system. this looking for whole And mill-by-mill,

effects the system. dependent on big have whole can changes small So

fourth complicated comment on And looking So the that summary, it’s as progress evaluation, strategic And I planned alternatives this we’ve go, can The good I book made can right say it. things is very December strong. good. on a far as forward, in in won’t topic. further has slide. business, any In but Order downtime now, a card. pretty But next look quarter wild no some there. be perennial have

expect the tell we with the but more to pricing We what effect. guide business, what’s inflation this and can reasonable you it indeed highly this is is highly by happened impacted I specifics driver of expect happy The a restored finally to levels. price material there, raw and down, favorable to I we’re profitability but pricing are continue. logistics coming of see impactful won’t on that hurricane

from bottom comps, SG&A strategies beyond. standpoint, seeing to cost the a operational to and of companies If just pricing the in of stuff’s we’ve And at levels And leanest. the to in our we negotiate has our actually in line have new has of we supportive and out our just retired public new We’ve you evaluation excellence expect wrong as it’s we’re to and do amount Everything and that going terms, base. leaner terms a company look that restructuring different leanest direction. the at pay, the suppliers conditions, now. rates trucking, benefits XXXX measures looking of structure, about of continue of comment an continue austerity we’re comps terms to lowest the new of now supply a right our and ever the that availability We debt. in kind of had. XX there, substantial be done worked, But for verso real

$XX now since has emergence. year-to-date seen liquidity have been the and So, are best in retired term through XX/XX, position we that million our we of loan

can’t a had done. last this you are to we’ve told the lot in on control, there earnings lot control, of that of So and that’s business call, what very a intensively time you things going there are focus what and we controllables, I that are can we and we an

by a by going excellence sheet balance So in that. decisions, company the an the operational built as are making ambitious back standpoint, finally mills, for and business the after we like the success positioned managing aggressively we feel commercially after -- result momentum from very through right projects and aggression direction, as the we all of in going a being better some right

to turn that, Campbell, I will finances. it over the Chief Financial Officer, our So to Allen talk you through with

Allen Campbell

versus Thank you, quarter basis. about Chris. how this And third talk Page and done on I’d same we’ll the like year. to sequentially quarter prior I’ll through we’ve X, first quarter go start -- a on quarter versus

payable accounts to while EBITDA million improved improving reduced inventory increasing we also from by million; on loss million; we $XX by million. quarter, by our a to decreased second $XX $X debt initiatives. reduce by addition loan, able value-creation liquidity net the $X $XX were In $XX million by million; in term delivered to We

trailing X.XX quarter, in listed. Our ratios leverage dropped see can to additional addition, we’ve price we’ve And announced as increases you in that the from X.XX.

challenges the is continue the issues dynamics industry. we face of our Some to secular of the around

have our We the complete remarket candidate will to did as deal. not Mill the buyer Wickliffe

mentioned, hurricane So as been supply issues. freight And we’ll related be to working on on chain, logistics, pressure lot that the rates a on of a basis. go-forward there’s

we’re our of Moving pulp. key same to side. ‘XX off the period X%. in up while or the Page prior ton $XXX versus down up Pulp’s ton total the the $XX some show in average $X ‘XX, a on a -- year. ton X% Couple We of we’re over metrics. of total versus then up and XX% versus versus paper pulp’s XX, quarter or pricing. business points third $XXX, XX% highlight on paper And the

another million. we’ve $XXX been September from we’ve positive So that’s $XX That’s period the Inventory, to us. performance area focus lowered balance for million our down to continually the been same in our on, that year. last of

periods volume, And change report machine may can As we Mill. I’ll Page the year-over-year you at column if on closure of income at three look you XX go number showing separately, was impacted to and our rules the same are periods. that successor you our it recall, to Andro our statement. significantly show predecessor compare Accounting that but our help we require by

off column Sales third $XX So the negative is million between but the the $X were in the price quarter, mix. for volume last positive first in million and two million and difference the year-over-year column. third columns $XX two,

there’s impacted through, emergence of go you the significantly fresh-start As a years. lot significantly issues prior impacted accounting

So I’ll to just EBITDA XX. page on forward move the comparison

and XX The made third our for largest EBITDA is the down million. this $X We income sales to million our some restructuring, finished $X adjusted We’ve $XX normal very and our X.X% restructuring column We help in the of walks net which in EBITDA consolidation. process, of show add-backs the Wickliffe one understand adjusted headquarters respectable quarter of million being the margin. remainder a walk. the to Mill with of on bridge the

We have in XXXX. $XX periods million in combined

very is in we a We’ve had a other it movements The first stabilized, the one, important way. for one quarter. obviously, trend And positive made some third and the us.

the increases the $X to product development period. a to along about Some standpoint; been delta of and off little cost able from million business, we’ve competitors Volume profit $XX of million for affected hit year-over-year. downtime our $X pass had We bit a customers. in our logistics, million was

chemicals $X We between some operations some primarily extra cost-saving R-Gap We our have gas off cost, natural some coming prices incurred the million. cost reduced that and input initiatives operations $X the our $XX by million we from note cost XXXX. here improvement place our put of SG&A year. in and good prior a from our is But to reduction positive in million manufacturing lows point areas initiatives

that that coated driven primarily lower, groundwood we CFS, machine by for volume, less XX you the at XX,XXX but quarter. three million tons $XX The driven was So which XX,XXX volume the our is tons number less closure had by walks tons Andro. to

not a we a in there’s but Page this spend nine about $XXX the versus forward months, for coming billion on. XX, delta I’ll we’ll the nine of to Sales going of up. $X.XXX the time $X.XXX for restructuring in million, little talk show because schedules, here year-to-date were a billion with that and the months Looking lot bit, slides noise much

to As and you try noise for out go in of so on. those noise through, later there’s a lot pull manufacturing we’ll you on SG&A,

a the that a $XXX So as But our normal EBITDA I’ll in bridge lots there $XX to moving Page The third process -- leveled $XX had mix. the in of loss million we in We -- months noted, walks We lot ‘XX ‘XX net walk nine that show $XX in from We income just price off to happened the date. months. in the nine third first in column through of to in million for last EBITDA that’s the quarter. up quarter. this gave million million XX.

that EBITDA a is Volume’s million. Operations about product development Freight time in to significant inventory, off came that $XX million and fixed support the the rest of our the of spending down business, not year-over-year. and made had first in that $XX we costs do all million cost So from in a as effort but logistics We six XXXX. we XXXX. million, Major repeat not heavy in months $X invested absorbed plus much us year. reducing year-over-year some $XX were basis. maintenance, overhead improvement a we’ve

it’s XX to contributed our a improvement But flow. in of million spent in quarter. Page significant for some nine the initiatives in of continued nine favorable our our the million million pension, mentioned, million offset we column, third first things cash our on We and faced a in million million. bringing then came million CapEx; out our the as other increases little had interest price $X $XX working year-over-year, positive quarter. year-to-date the EBITDA in it wood that’s a capital we for down EBITDA and changes. million months. the in to contributed paid $XX that We in $XX $X I’d And cash In $XX manufacturing cash $XX energy, change us improvement walks $X $XX overall, to which point to like first the on So $XX hit. million million We million $XX and chemical months. prices bit SG&A overhead restructuring

of lot strong to -- us on That in very net we’ve that the on. quarter. that XX, So Chris cost for hard We $XX improving position million. again to highlight our $XX year controllables, controllable million. net revolver the our change the reduced been area. $XX pay a we flow, term that $XX million wanted effort million put liquidity down the the On and puts as a and fourth cash enter used brings of months Page in and the change million for cash working We improving loan, $XX area toward we mentioned to X our we by

points. negotiated down key -- $XX by successfully lower basis the credits $XX Some We’ve just apples-to-apples million. vendor term SG&A, We on million. in level inventory balance by loan statement on in We’ve managed $XX driving of an income line amount million. Reduced million. increase negotiated the terms, We’ve payable SG&A $XX that’s of reduced accounts the and by of million. letter our $XX

We $XX to we from cycle able and been we’ve stand and conversion our XX, have a where net from Page cash million, XX from debt improved reduce down XX. to on overall That’s liquidity by liquidity days highlighted eight basis.

the You can earlier. September million million. $XXX $XXX increased we’ve talked million That’s about section, to from on liquidity the we see June in $X from top-left to the

no improvement, from Input numbers. closing, continue to is about winter is be $XX You October. price what down versus this higher June SG&A fourth to the $XXX $XX a little third and October million fourth see guidance. the $XX cost, roughly that That bit we time covenant in see flat. wasn’t and and relatively our loan downtime at sales going to we maximum a X.XX at spend, flat payment rate. about. letters the frame on plants. to in in northern X.X. loan voluntary talked talk brings higher to down. We in a X.XX, quarter, It was depends of cost, debt run profit the is ratio million, million gross of fixed XX. Energy to like to quarter. performance note, We bit of operational September months. versus of due at we the we’re see term made million. reflected maybe Net $XX X.X a balance can To increases term X/XX I’d This to additional going in improving We will minimum up $XXX In above went down quarter our November/December going our little the credit on CapEx time and third the -- leverage ratio cost total million see from reduced million.

million million million projecting We’re $XX $XX the to million put of to which for year. $XX to spend us $XX will quarter, the in fourth

at to up So I’d it point, I’d back like this to return Q&A. it open for to like Rachel.

Operator

[Operator Instructions] will first BWS Hamed Financial. come from question with go Khorsand ahead. The Please

Hamed Khorsand

from continue Just the tightness and the I that to your and -- capacity want you’re how reduction first seeing with any as producing amount I’ll start -- in at you have volumes, capacity? do does been this as nameplate to taken of or -- far off higher long now keep XXX% has ability

Chris DiSantis

Yes, day, kind of graphic end so the the we’re it’s where, the making of thing still at papers.

I of as to full picking of erosion looks mean, But like that’s still be on of announced closed quarters years outlook reasonable answer certain couple has ball, to next going market, mean, So can’t it the so I have and in it And have year. in have next of order couple what a are market going long-term concerned to I closed with be amount every happen and good. pretty say, don’t to can for what’s as happening the a question, you’d and yes, What what erosion crystal far quarters. graphic a rate the with that supply-demand has we’re we with out those really I look looks kind there’s that been a dynamics. of to dynamic.

made And rates into going it’s another comes based imports. or which exchange that, on could scenario, more there’s happen And tighten also beyond up on at is loosen play, variable what’s to overseas. up that that out decisions could capacity difficult. that it Looking that -- with are it based and

to can I I quarter, quarter, So good. but the a looks now, first difficult business predict, pretty it’s say inherently mean, fourth right

Hamed Khorsand

spot, at of right So book now prices? was is question next my spot how much the

Chris DiSantis

nature, You’re opposed quickly happen longer-term as such that contracts? much price what saying Is would our variable asking? of sales you’re increases how in that are to

Hamed Khorsand

in your you’d specifically, events much been Well, on this landed so closing, with given assuming competitors quarter, going so forth. and new customers I’m that there’s

spot there’s now. got activity be more So to

Chris DiSantis

Yes.

Mike Weinhold

happened Specifically, in the of certainly to some roughly the year. to average, say, of think about is increases the for is spot business next coincide it negotiations different timing business price XX% on of have, varies market. transacting of timing safe of But And with product or these they grouping. we application by contractual the program the them, I what some for it’s and

So that of you get the positive well. effect as

dependent spot not So just market. on the transactions in it’s

Hamed Khorsand

QX, I my X% impact? see And long question is and accumulative. of we before far, in announced excess you’ve was I how so X% last it greater something think price mean, only in

of So we seen really haven’t much it. any

Chris DiSantis

correct Yes. Well, if I didn’t but quarter-over-quarter? X% see me I’m think I a wrong, you see improvement here, sequentially mean, we guys -- I got my

the it certainly is, it we I of So with to over increases we in comps third can’t but we’re it happens guide phases restorative about more be how being regard with year-over-year, hindsight. of in talk I as what’s And time, next much price realizing, to to specifically can year. but going so getting kind in what mean quarter -- described I happened mean,

Operator

comes The Riley Andrew from FBR. D’Silva B question next with

Andrew D’Silva

here. follow-ups few a Just

this transitive price you on been Have pass-through the at that customers? far increases increase the it that have in to actually that As increases you as been coated point? price your seen has point able that process -- this July stick lines, in still price to Or announced, the at get have particularly time? that is to

Mike Weinhold

through the increases bottom bringing pushing to I very success had, price say, line. have those good We the would and in

grades. movement important don’t understand price shown, relative on on price We it’s have grades. we certain to all movement price think data the to I have

good as grade continued those of increases So year. But we categories, areas we’ve to about move the into very and on total movement the where you effect next feel have the a overall realization in business. specific price date in realization announced we dilutive the for

Andrew D’Silva

exactly the atop you’re $XX correct, all that, a just another then $XX ton? to various getting increases groundwood. $XX on to increase, top not for per quarter, price Okay, paper of quarter specialty adding seeing you’re And currently of just great. of confirm And coated July grades products, fourth also the what’s make-up in coated and price then increase

Mike Weinhold

Yes.

Just on freesheet to side not the additional clarify, the correct coated in other an there’s sheet the of freesheet the But coated sheets, assumption. on business. you’re increase

Andrew D’Silva

And paper so moving Okay. mill at Andros the that Mill, of EBITDA just over positive hit or that $XX to discussing full your should figure were forward? mean, And at that I about that capacity; you that we is positive at implying $XX you specialty capacity remarks? then if million impact million, capacity? previously, going Is EBITDA -- hit are during prepared you And were right -- line benefit full guys that at full if what is now?

Allen Campbell

get a took full EBITDA going we from it little than a momentum rate originally for The now hoped, positive here. we’re run at longer -- million at but to We there and have got now. year. was positive full us $XX there bit We’re had

have roughly $XX quarter go million $XX four than that. quarters. third be million the going you with we So we on, should would before to It’s better through -- --

Andrew D’Silva

to you from more a to you And an the stability bit pricing? probably, it product And is can more bit grades Okay. assuming, of standpoint with challenging in more little where typical move mean, coated? over specialty control are sticky seeing I’m I pricing another. erosion a versus from producer one paper, it’s those little

Chris DiSantis

product mean, I a has Yes. that generally pricing. less in the it’s elasticity stickier

there more make. typically to are bit a little yes, products So difficult that longer take process qualification technically

business variability in beta, on than So yes, less specialty to graphic. the see do tend side you you of less

Andrew D’Silva

And at meaningfully around than company. Okay, for you mean is today. want Appleton last hurdles, off. sell kind a being to you like seeing noted mills trying to? seemed of market the a cap looking to just macro Obviously, value additional just some you market question of the revolves were from is higher if guys to it and they just standpoint, I that to able what any book it Are asset had you still great. happened value pulled me, in the your problems Wickliffe, Coated, sell

to kind more to So it the question of that’s end the mills sell landscape really then make dropped mills question, you capacity sell utilization. guys thought, back you first you that the in to? difficult at at anybody is, you’re point, And quarter, I does this much look is the want part think as has of so XXX% even becoming than more if for like particularly this sense now of

this So even to at sense point does make it consider that?

Chris DiSantis

of certainly, profit producing, momentum And mean, can part analysis harder what and and it’s of that’s mean, mill other that’s complex to terms operating producing. I and that’s the the Yes, if speaking, a building the generally one that’s said in mill certainly you I that’s just direction. to evaluate you one that’s easier a I to is than operating basically and board have strategic have committee the tell much sell do. sell shuttered, in that’s going than been I to mill a or idled profitable

we us yes, doing be going very of we’re a as but things that concerned, I have assets, seriously company. And to may as right -- the the considering. for for make offers there far if any as mean, shareholders that evaluation refuse be the So we to anybody thing can’t makes

Mike Weinhold

the we And just out market XX%. to to to data of Weinhold, total to question before it’s we our you exposure a clarify to with -- relative closer in all the look is go products spot point earlier. to bring XX% bear to market, When I threw the Mike brought next everything

Operator

ahead. OFS. Instructions] go with Sean question The [Operator Please next comes Kelley from

Sean Kelley

you a did think closures I groundwood? you well what conversions removed in Chris, and said coated capacity, as as as estimate percentage of earlier, both this was but CFS by total

Chris DiSantis

just there search out break that are you down -- that that. XX%. articles mathematically. can some There’s Google some There

Sean Kelley

And you update control? much on the as then the capacity, freesheet Verso has what’s the Of for in groundwood? total America as guys capacity North coated both how well do --

Chris DiSantis

total our is mean how You big how system? much --

Sean Kelley

Yes.

Chris DiSantis

dedicated million ton tons to the specialty, other X million dedicated Roughly with grades. system X.X XXX,XXX to

X.X and would million that freesheet, be groundwood SC. So

Mike Weinhold

bit of pulp. A little

Operator

next The KLS. Mehta from ahead. with comes question Neilay Please go

Neilay Mehta

of looking sales up announced at to should contribution guiding going price be guidance. get each Because how profit. guys guys some and of could you of flows increase sort to XQ, want EBITDA, gross about XQ. into think going trying that up we follow Just might the and dollar through are sort what’s be where ones through I’m see sense If price increases of have to additional on your I’m that you of a coming I how some margin? the for

Chris DiSantis

Well, pricing. the business very is sensitive

So rate. run $X.X roughly had you billion

roughly So $X is average, every point, ton on bit a than a more that. little maybe which

So the business. every million of to is $XX point EBITDA

So it. is every high a -- there’s lot business a of a of that. lot and a puts beta takes But it’s into with roughly $X ton

got going -- just changes. So can’t look you at vacuum there’s you things and on input with pricing costs changes we’ve mix can’t in because and a volume

-- So forward. generally, the But more only the the it as the that’s variable pricing one not we to in levels. It’s dynamic not equation is the it’s restoring for business. a reasonable moving go good

Neilay Mehta

was issue level of guys The guys year a I were your million I point takes, you Understood. $XX gain million pension on. the think it. sales similar last think the of puts of margin XQ and there’s sort if too. that lot gained on sort I gross mean and you out of Got you back $XX.X

in guidance. per similar of level that your So sales this now kind are year,

You have price increases. guys obviously

into year raw I last on that how XQ benefits the know side. on don’t some think side. saw the input looks going I

think rates. so thing up think mentioned I some I picked the that pressure you far freight I only from guys is

what’s then takes, the materials raw So how And negative think think and the relative year about or costs of if -- freight you trending impact how in quarter? input the are I rates to puts from a sort ago?

Allen Campbell

We exactly the the quarter quarter, haven’t third and a be than we little going it’s as logistics. look you said But -- from through freight on fourth if worse to bit impact as to quarter the be expect that. the far

Neilay Mehta

side, On the is freight that...

Allen Campbell

side. freight Yes,

Chris DiSantis

Worse third. than the

Allen Campbell

third, A the little yes. worse bit than

Chris DiSantis

input asked you then cost. And about

Allen Campbell

other But periods in cost colder seen in than chemicals card And input energy time. the a cost, some of there’s we’ve just that, abatement most the wild side. because on the transportation of

one fighting specific two or still We’re ones.

be inflation of not year, will as it but is higher the will high rate as It before. than last declining. So still be

Chris DiSantis

Similar third quarter. to the

when costs, trending. terms out, say flattening in input talking flattening most think we’re I of we out about

to of able the some be it’ll So increases. stop

Allen Campbell

than higher It’ll last be year.

Chris DiSantis

quarter Yes, prior to so in year. but going from costs freight third, And be fourth up that’s then similar the wrong would direction.

costs quarter. higher in fourth on So definitely the those

Neilay Mehta

the of freight cost through sort average your system? per ton What’s

Allen Campbell

we that? Can say

Chris DiSantis

if we’ve I ever don’t that. know disclosed

Allen Campbell

in have believe I public. there don’t it Yes, we out the

Neilay Mehta

out a I and more, then to you little SG&A just think savings How more take of you the Got or And it. flat -- bit side? is also said SG&A take -- down. to guys sort out That’s on think can down much helpful. then you have I cost

Chris DiSantis

resources resources because for reasons. within Let hit We me the most you take really hard. I measures behind it I hit category that you’re us. stuff one. company are one, the a to hard We the the are mean, couple the things done. to do I wanted that need of cutting to get Those mean, get difficult austerity

is we had relative done when it’s look rate you’ll next really see to rate the a business. point There’s in that and and other really quarter that tier. it year. fourth behind the now a comps, costs at see excellent. and that and It’s company size So of consultants lot you the standpoint, at of mean, company we’ve from some top this at us. a in SG&A run scale get we -- and I need to you’ll do And its restructuring look get studies public

focus $XXX in million a that’s a $X.X of the huge put of SG&A billion there’s in on company. been amount So

more going call chain operating much and XX% on other the it the to supply the of be well, needs So the on focus really business. forward

in like certain it’s be done resources we in what like of feel strategically, implementing of I and that cuts have groups, the SG&A, on So but we’ve adding still could still what lot continuous might kind improvement. will that And we’re and a do we projects there certain we areas -- thing. be

So supply prices the cost paying prices going our we’re we logistics, on spend going have chain, that from for that standpoint all really, the focus mills. forward be the suppliers to the a for the is at and

the going on lot XX% So more of focus other forward the expect a pie.

Neilay Mehta

kind focused why And couple what And from last ones on? should backed going of of spend terms XQ was buyer sort just spend forward? at the we then me then quickly. for capital of What’s And Wickliffe the out? capital about issue how in think the

Chris DiSantis

I’ll I’ll take -- let take Allen So the Wickliffe one and let on on the other CapEx.

to So with Wickliffe. the regard

to alluded happened. is terms transaction through, own their don’t have They’re I still got had came closing The a of it issues clean possible. now, of that. and interested. we we the or didn’t there. just right why transparency buyer, And expand like still own get for buyer and make bring investors, still it But had working we be time. and all and They’re describe anything to others the and The I had are it’s we way But that would anything into closing very issue of up that interest with to a the we in the plan the a and to on our it get thought But the date. I we there mean, And shareholders business row. the think what didn’t which the nothing, they’re variety go asset of would price a of a to in best imminent ducks in that mill a sure marketing last believed in site. their It’s they it. up prudent So came environmental out. right we terms would back as we close, discover with be deal the in

Allen Campbell

What total -- that in be in number we Verso million, that in that And we’re if of today a look bit we have small then it’s the product it’s $XX testing, incremental investing CapEx any to going type $XX investment have of our conversions. of capital may on at expect a maintenance. on. development, that’s amount we’ll IT million some our for of CapEx. had conversion then a and you’re We little is the And this base just in that I IT projecting if year, would the range just and investing the and base thing or spend you to $XX side, million plus there or for in minus

it’s straightforward pretty mill capital year, So base spending. this

Operator

Adam question Ritzer comes with next from Pressprich. The

Adam Ritzer

Just had a here. couple questions of

what think would Your what cash And cost, of do it this year? be it’s you might year? think you next pension for going to end out

Chris DiSantis

You funding? mean the cash

Adam Ritzer

Yes.

Chris DiSantis

What we check for? write a

Adam Ritzer

Yes.

Allen Campbell

Yes. funding what year. at we’re We this look

$XX about in cash. spending We’re million

number up number year. for next from go million to $XX the maybe We that that expect

Adam Ritzer

So $XX year, next million roughly?

Allen Campbell

Yes.

Chris DiSantis

Roughly.

Adam Ritzer

Okay.

of it you million $XX terms term your guys loan, In down October. looks like another paid in

might XX% should be QX? that you XX%? payments in it’s $XXX what refinance think and think I that? Do further it roughly like And So you million. or on when try you’ll make at

Chris DiSantis

Yes.

Allen Campbell

payment but amortization of with flow the million, quarter over have, a payment excess have what with that’s March, calculated we little While then happens Wickliffe, earnings. quarter, with so other and -- opportunities coming an be fourth point at that will $X we’ll have end in we that at we’ll cash look

think do on. we’re we seen We to any Exactly through our or funding to be on over as cash and over we’re loan So more have. period. probably -- with our the opportunities. March there’ll may significant there traditional It’s yet, all each pay the us. -- how optimistic mill based it to quarter December -- able is open down not term and flow we’re getting be there’s market what will with time be The opportunities goes looking some at bond for sale is much but

Chris DiSantis

mean, would on some out there allow are us options we financing the amount on values -- financing at there asset out of we loan asset of a alternatives positive that fixed with kind the that it depends with the kind out are of probably we capital kind if thing. [indiscernible] prime at that need mills it dollar and take of but business, would -- and based take much how right And exist no the size I and and fixed incredible rates lower there asset to that term covenants just

So it million mean, of our us. gives $XXX liquidity I -- got we the liquidity that more the and mean, -- and I pay the side, it generate, more and look term on particularly with down, optionality at we of liquidity. more there’s the business more million loan $XXX we’ve

interesting improving. So the the comparative. think get there’s and fundamentals still think to it’s cash here we flow also And basic for off business are that balance sheet, we an the

So a lot good we of choices. have

Adam Ritzer

Got it.

December, more summarize, more to So paydowns in in paydowns March.

mortgage QX. sale, that? good maybe like where Wickliffe in that plant, a time, on have point a a financing types debt stand to at going other at something Maybe you’re said you maybe see and look of already You

Chris DiSantis

as that’s well. affect mentioned which Yes, could mill-by-mill at that And strategies, of looking one I alternative. course, as earlier, we’re

evaluating whole have as we strategic of well. permutations a other committee So that’s a bunch

Adam Ritzer

think Got to going long-term talked what question, it. spot And versus then last my I you contracts. back pricing about

we through of your flowing increase? their the will full would customers really what’s are trying Then time At First, is, increase to that out and I a see run back you of $XX what to when see, you off, in people you was said contracts it had maybe to in point XX guess, what came close another in all figure in $XX October. reflected hopefully, as to XX-XX. all that said July, benefit really spot’s $XX XX. we $XX

Mike Weinhold

giving Without being I in and alluded specifics, is you have contracts earlier. to being effect traditional for announced period next we the taking I of tell what what a some are would of where contractual and advantage these renewed those mean, year. increases discussed price

in of of the to year. you the that is And you now. the coming those would Certainly, have So through tend those spot the with of into get seen first XX% it quicker. Majority exposure to extent the market, then implementation XX% of to play. be negotiate increases you some

year. So we’re we and seeing through, into roll next through expect to see that come we come as that

Adam Ritzer

I I the if frame. guess, QX, as QX on to going QX you’re know type January Xst, more So annual that’s like off, sorry, but stuff that -- contracts don’t accurate? long-term long-term time of more in Is I’m maybe more roll see QX, the basis,

Mike Weinhold

Yes, that’s perfect.

Operator

Next follow-up from BWS Financial. with Hamed is Khorsand go a question Please ahead.

Hamed Khorsand

would last last just that? that in into follow-ups similar actually year’s you Could clarify, dynamics expecting you a go or industry, more Just here. QX about higher QX? from last volumes year’s the year on than net-net are could you basis be given is two the details the just to One

Mike Weinhold

sales... gave you we Well, range a on

Chris DiSantis

you asking tonnage, you you or When about sales? mean volume, say

Hamed Khorsand

about Yes, I’m tonnage. asking

Mike Weinhold

Yes, haven’t we put out anything there.

about guidance, in quarter what we number put some quarter. on talked not have the specialty we run state the fourth in in last produced will which the year more we some think this I was fourth in our will the tons sales talked year Remember, positive we includes, wanted freight. year. that obviously, than things. to Andro. We We business AX, It about last

close, For or the to going minus. plus of it’s be it, rest

Chris DiSantis

you wide AX in week came have thing. -- guess the off-line, the out that so Xnd up year. line open AX build is to at Andro or of was running inventory December be -- some would fully and last January? officially of taking and of So first My that to it kind So

mix and into AX. comparative And So then yes, have out too. AX a is could come is from But be tonnage standpoint. course, to the of my just for it that would there’s it adjust because you’d down be that pricing numbers guess

Mike Weinhold

general in last that year. characterize more I we end the would out, as all robust year as versus netting quarter activity, this But

Chris DiSantis

rest... Yes, for the

Mike Weinhold

Positive movement business better. definitely is for the

Chris DiSantis

the of For the rest yes. system,

Hamed Khorsand

the would you and So expecting year’s levels? last industry the what that hitting gross through, QX given to how that I’m of price comfortable you’re trying go be to of get is to margin increases the dynamics

Allen Campbell

can in say. ballpark. I what the It’s That’s

Chris DiSantis

But ballpark. in want yes, we we the can But don’t it’s to guide specifically. say

Operator

This question-and-answer attending and for you session concludes Thank presentation. our conference. today’s

You now may disconnect.

Billerud Americas (VRS) 15 Nov 172017 Q3 Earnings call transcript