VRS - Earnings call transcript Q4 2017

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Operator

Good morning, and welcome to Verso Corporation's Fourth Quarter and Year End 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 web site after 11:00 a.m., Eastern Time today. At this time, I'd like to turn the presentation over to Verso Treasurer, Tim Nusbaum. ahead. go Please

Tim Nusbaum

as good on financial and morning fourth and web the www.versoco.com. as quarter the we'll at slides Thank to site Investors refer for morning. page Verso XXXX during well release earnings results opened. are this set Corporation year-end of market that available you call, The The the the were before Verso's announced of

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

information the various like posted further filings, our are with versoco.com, to our regarding please you'd risks SEC which associated and on site, web our Investors If tab. business, under uncertainties refer

released XX-K Chris to turn DiSantis. this Our over be later point, will to At today. I'd like

Chris DiSantis

deck. Thank you, Tim, and welcome on slide everyone. of the am X I

we Particularly inflationary in produced second where challenges $XX of What resulted inventory price start -- and We in of part a we half XXXX regard challenges. reduction year, our in had had with EBITDA. difficult part million of only had to writing is challenges lot downtime, volume. with to respect the very intentional, of and that quarter, printing first the in, erosion also So grades efforts, as from environment. this saw a we particular of of to a the market was and pricing, challenges sort We imports. and

our the in results got with lot strong and page. we as to turnaround earnings flow, However the of and We on of consolidated cash done respect in subleased particularly We lot costs second restructured very was offices. into had the chart austerity a the The see Miamisburg the have We measures, We half, XXXX. could as space. office in a significantly lowered implemented organization, consolidated successfully. you result. now a SG&A corporate Memphis

On and industry went last the closures through examples variety what to with I earnings call, a of conversions. of happening was respect the in

our and year, to programs that The continue IT optionality improve lot XXs all the created platform, the mid XX% were again. products the have that and We are We results was customer reduces we they our new strengthened a Verso. through and was revenue business full to capacity good improving, of partnerships. the suppliers, to on, bought challenges multi-sourcing are of go have a but specialty sourced difficult favorable had lot strategic program risk. very deal very won't of negotiations that they terms continue good. But a expected which we that for on look and single in productivity release a new The areas. very things to We books and We with in R-gap talk lot share, respect make excellence, but enter last labels. pricing with a amount year, lot We particularly liner operational of of of of and efficiency lot our can business to strong a of levers the important took delivered throughput. team Won due year, run ways additional with new costs momentum, we and needs about a reducing variety a that The that find last year, minute, as last to of to we outsourcing, a and in in suppliers So do into widespread improved we fold. spend we Quinnesec rates of that Luke, of to this for outage market order high operating we were the will the to now saw have in and at seasonal in are categories. significantly and pull Euro, from effectiveness to XXXX exchange and and supply to an as also we do correction X.XX, X.XX more variety standpoint, X.XX have to with maintenance and range, money. we the rate a rates the just far balance. we now be I higher exchange could the more a a Also cost costs more demand rate inflation we managed lot we of in in at

Turning X; to in so we up strong very the finished slide, XXXX on quarter. fourth the next

of paper million $XXX from XX.X%. producers and end million, net We success for of chain there, $XX came the systems normalizing was big enhances industry. putting X.XX best did was terms. asset year, The in a reduced pension other million margin synchronization a categories to in the good the Liquidity our X.XX, organization. running of our initiatives, now X% -- how one and by capital that programs, from of positions SG&A benefit other adjusted the successfully less in lot capital the versus good X.XX So at million we SG&A of million, basis those to that's our went returns costs the XXX up do customer by expanded stretched and match generated million we in of letters had A place fared We The our of underfunding net flow. harmonized that $XX so employment than supply business. X.XX on specialty than blocking more overhead million, $XX the came in between a Working We went down demand, of place, comp. The credit lot was We accounts good benefits We cushion post a supplier good revenue. $XXX We of the the reductions down were of the EBITDA EBITDA. XXXX. availability. production is $XX contributor that two very some team achieved good up company. amongst did cost combined Working a to variable competition, with reduced eliminating margins in payable job $X.X restructured cash that. job well safety and inventory. of

specialty have is X end on We by the specialty XXX% products quarter, of fourth be at to XXXX. number and AX the Andro the machine XXX% up during the filled to track

pricing ton in these launched as groundwood. coated in business XXXX, increases ton and of earnings as recovered, rolls every the with the business. announced well, have the sheets, increases warranted, that digital the The initiatives a products increase we the XXXX pricing, uncoated where freesheet, $XX launched in January, $XX freesheet At in had implemented that grade. price successive inflationary had increases traction half we are momentum of So side with in and back products. and the supercalendered on across the too last coated cost Since seeing particularly given coated incremental the an we we freesheet and end we well increases as recently better are pressures call, of

ideas. partner a we supplier for Dennison is, awarded new more business, recognized built that in going in products We forward. implementation and bottom business a cleaner They a are is award. Verso The of best optionality, us a pleased, sense successful us we leaner XXXX its direction quite and line Avery key with better innovation have as of

anticipate for a strategy over business graphic slide X; the and the specialty to Turning to and mix the gradual packaging grades. page migration in leader to we remain but time, do more is more papers,

three we going business incremental low are and products, ways market serve in will investment, three, company by type pickup our this know not cost finding solutions increasing market. We one, new machine enhance share; through two, any to to grow But be debt level in that low investment tonnage the investments category. can in there we to throughput, specialty to ways finding

to are diversify We low the grades. packaging also in going ways risk in

was very machine in Mill, three Androscoggin XXXX. early the idle So number paper

We XXX,XXX that million are the going It's investment, that million machine. of on on grant machine capital net version be back the XX million Fund. XX lightweight will to from up. are tons Maine $XX machine in $XX pound be thanks a basis, Asset to capacity a to craft XXX,XXX $X a starting Technology That producing range. to

run about be also We and expect by $X million startup rate margin of fourth quarter. the costs to profitable

we go after part a SG&A are other going to going we have Another low we aggressively cost way, it structure, are categories. to keep and that strategy the of is, got

in particular. to do So to the a always there. sourcing is and SG&A, mills costs, you think, there is lot more But we've could operating opportunity there attack inputs, rightsized more we

We on risk light conversion are investment going to to capitalize relative low the opportunities.

some system, other we at looking SBS, are into and products. like bag, there develop these the are liner we at are to improvements of XXXX, other offsetting have we headwinds that got countermeasures for, So getting are some price. that in things But

challenging February. So that affected January The in quite weather there was this winter, obstacles. are production and us

significant anticipated. and We costs input have energy increases

But announced there and guarantee strategic a levels having and nothing this that lastly, are we seeing the at are challenges longer result with to no I continue have this financial expenses maintenance we costs, on report logistic say time And that is our today. record we We are to review over to Campbell process going on of That's expect move turn are With we standpoint, this that, a to and will previously for going real review. will higher freight call, it in have Allen CFO, outages forward meaningful to all we transaction. this availability the we of alternatives. from year. and topic

Allen Campbell

highlight more we our were X% Thank AX you, closure. accounted the page but on than for On metrics Shipments paper, up this Chris. quarter. key for X, the by

XXXX, XX%. increase ton $XX a tons we been What's and X,XXX Key were on side, On quarter pulp inventory. since a half across increasing versus are up $XX ton had very seen we paper then. our pricing, pulp X% up was in each the they prior year, lowest or was the area have prices encouraging pulp up our while XX%. second for strategic the for The a us products, was the of or and

right, businesses. of year. was we top you significantly, Our see through we inventory show million mix goal the The our reduce reduced of this to $XX and

Our graphics holding pulp for and down specialty is at the up fourth XX quarter. slightly, is slightly,

quarter, a $X for the to $X.XX and million AMT. on corporate Moving of was to we tax credits, X; of $X which $XX related million income of from reported the elimination or share. benefited of We net page tax reform million

as volume, due the were $XXX but the mentioned $X Sales market credit. $X on to a price, down for had also on unwind million, million million tax down We we gain, new a of quarter, earlier. up

have provided we which adjusted the Now, back, and will so our COGS about that SG&A an later. talk on basis, shows schedule in we

a on gain million million quarter we But adjusted depletion adjustments We the also as asset earlier. page had where where gain. then result that we strategic adjusted million year million we post X, in relating in the we in The mentioned have. to also compares the depreciation non-cash amortization our the eliminated This a $X brought same too, at cost Depreciation OPEB On restructuring period prior we to and mill. booked normal I tax $XX lower income spent fourth bridge or benefits. page $XX EBITDA of gain year, of quarter, to certain capacity for had a severance write-offs. the Andro was for retirement from prior and $XX the the elimination we of year, made new XX.X%. mentioned and of to market prior us the salary down had EBITDA. in We our addbacks the that XX reductions credits quarter million quarter net also the we walks walk of of initiatives, XX changes XX. I to that That on of $X

mentioned, Price box. earlier, million $XX XXXX that's in million $X $X Volume favorable up, that's are a as the been year-over-year swing positive the down and reliability quarter, million, We in XXXX, business. to on Chris of increase rates than gain have quarter struggling some on as quarter. we had In others. mill, fourth hit with mix, going that also seeing is $XX at a for trending $XX favorable, one in million. that in slightly, issues million Logistics, and hit been availability, the $X the more offset fourth million mentioned production the first are we a the we of efforts

hit overhead and negative in this natural then corporate million SG&A first reduce primarily SG&A the mix but a our year-over-year. second higher $X billion, in was net the and input year. as price million it the had down shows Sales the some highlighted down that bridges quickly $X.XXX the $X impact is of volume OPEB, higher it year. prices, We $XX cost $XX half, downtime shows improving took that chemical $XX million. $XX efforts was and full for but million, $XX million. year, half. $XXX gas just costs quarter sold, and drivers $X.XXX some $XX from million, Raw the EBITDA, material up Input for a million versus Key line, mentioned, million down of it were that page million after prior reduce million, the adjust we rough logistics On for billion mentioned, fourth costs $XX and So of was net-net quarter. $XXX for some costs, save were goods other the $XX you costs, our in down million. to and XX, to is the million, of you was to since inventory, were Chris we

net from costs. success working $XX if costs and year. On cash of After for for we cost our paid still then that proud Wickliffe in adjustments net had Point a paying SG&A our million. for $XX million items, of those million and we those, run and of other of XXXX, XX, of flow as X.X our costs we $X our flow side, earlier, operations In we corporate $XXX for $XX plus restructuring operations, for generated controllable mentioned are our area, the After that severance, year cash, liabilities, rate we page was $XXX earlier our But our reported. capital year. for interest of improvement excess extremely adjust the saves note to current that implemented were million cash positive million X.X% out then strategic EBITDA the for current for ongoing of the we favorable initiatives. is the On mentioned and assets pension our contributions, million our had initiatives million free generated $XXX few we and cash. SG&A

the the credits. than $XX through page team, total in and year, concerted effort the has ended That it was helped same prior year. $XXX the to $XX period. that's by in the process. we driven of less we were They million effort great a reducing of Continuing the XXXX really with our us liquidity at higher of So by had XX, million end than year prior letters million,

We our also $XX down paid million. revolver of

because our but borrowing of -- declined. efforts also inventory, in We our base

million. $XX So that was

the net year. $XXX You that, prior gives over all you million million $XX that or increase the

down million our was at $XXX paid to If you million look loan stood debt, $XX revolving credit was at and at our $XXX it year term total net end, million.

cash, gets million. you to to You the net $XXX that that

there. our So are position quite happy we with

a of XX, $XX quarter, we first traction million we look of Prices the as volume quarter, approximately bit Expectations $X million. pricing, our excess to million, we in to are the of expected we in little range pension in XXXX, lenders. full flow sales favorable. do of funding, have volumes. million primarily $XXX capital XXXX sales will quarter be term guidance, range projecting to first seasonal million in million around driven and the working the $XX payments will expect by our expenditures are in Turning $XX have first of that excess $X Capital to have year, and the AX new for be $XXX should to million. Cash into and cash and $XX page use do to we We loan have million. higher of

up. facing freight. are some headwinds, raw are in and input some logistics earlier, and as headed mentioned We Chris Energy, costs materials other

Cash the to will funding, somewhere maintenance franchise the in we be this Cash prior in less taxes at million going The $XX than AX mentioned, on and less $XX million includes we and that the taxes. state for the be be year range $XX year, be income of primarily $XX is Chris or from to million million, will major and We to this in up expected that major $X are million. that versus $XX more XXXX. to $XX the outages. range spend of some pension million expected the timing some in to spent to project CapEx, million $XX million that's have

not year, has take this at it did two last operator, One Well point one I'd We an of like the to this to to some year. so going outage for take increase turn back mills every questions-and-answers. years. our obviously, be to

Operator

Instructions]. [Operator

ahead. B. question FBR. Sinderen of comes Van first from Please Our Jeffrey Riley go

Jeffrey Van Sinderen

Hi, through comments. stuff I of went in you good morning. know a lot your prepared

is us pricing And if there major also, you outlook kind business? of can And wondering on in and segments for that further Just various demand detail I input on are of you the be the of more seeing terms and what helpful? would any what costs give color is? outlook, the guess your

Chris DiSantis

full volume Yeah. I a so running, at I mills mean, full. are are mean, The you capacity from and everywhere. are what know we we standpoint,

in buying, terms or specifically way are are whether caustics late good whether And whether to position an energy like input. This or things past standpoint, on The it's guide that costs, that's XXXX logistics rate XXXX, are to much it's clay, We do in we seeing is price they input everything; the of or much it. we its costs, going increases with have we what practice. describe can dioxide it's to a So in. or consistent be be that pretty I like inflationary best launched or we anything on that traction. capture everything do from early pretty titanium don't

in of thing is are you challenge. to not I one a We seeing There could categories. board kind across it the out of isolate for variety pick the

well one from biggest purchases that categories. biggest spend It's -- of an our Although of would our is latex latex -- cost our say mean, I I standpoint. input one

Jeffrey Van Sinderen

could in the then And Maine. if over Okay. facility to we shift

expect gave machine what you the go that sell that you I think producing? capable of that's could to maybe and I you margin any be into get making, QX? just detail the could type there least of timeframe expect it products would of be profitable could you sort helpful? will in Just to be other you profile said, So the think there? to you share tonnage

Chris DiSantis

Well Sure. you. might that Mike Weinhold answer for

Mike Weinhold

Yeah.

startup the of AX craft will domestic as to the as virgin linerboard, project linerboard. lightweight selling machine that be model it to We export, on So well market.

and have as lighter, pounds. and Chris targeted push to XX it capability right basis weight above capabilities XX have range mentioned, the are on working an we also up heavier, we average we go around But XX got pounds to to pound. So

Jeffrey Van Sinderen

there know decisions about anything about there around terms which which business, in I touched or know, can think I tackle And margin that, projects next? should tell other might say making timeframe that? the you I And you facilities look is fact how around don't we getting to want might you there, you contribution sort on facilities you other and of at of are us process anything else hire that guess, facilities the other converting? Okay. of to the some if

Mike Weinhold

Again Mike Weinhold. it's Yeah.

mentioned, would as the on focus -- have increase Point. that trying business, We productive and specifically to specialty Stevens for to our be capabilities Chris got

machine, got up increase success and interesting Androscoggin machine as at interesting Point that have capital great some well AX we at as Stevens MG gain in volume, equipment up mentioned, got as area, for Chris speed and capacity the incremental have as liner release project had an to We well the projects and to productive very we so the as have AX on Androscoggin. machine

the but a very have low Chris got good, promising we as projects works. of in So mentioned, CapEx, lot

Jeffrey Van Sinderen

rest Thanks offline. to hear. I Good questions. take Okay. taking the for my will

Chris DiSantis

Jeff. Thanks

Operator

question next Hamed ahead. BWS. from Our Please go of comes Khorsand

Hamed Khorsand

Hey, good morning.

Chris DiSantis

Good morning Hamed.

Hamed Khorsand

being price increases realized? how trying So have are of out, that just announced much figure the you so to far

Allen Campbell

-- We rates it be in increases they realization that specific, that's have the of prices mean than we past. with they the Again, are are that I selling, of consistent are fun. cost specific how do guide announced that to a an go announce But we going we not the I the are a we on justifying addressed mean, the But act factors realization collect be and there capturing are that to because from question we we real, for increase, announced increase. into are price. not to like standpoint. seeing just are increases, that just warranted on and when price intend to the in higher we lot we don't

that to we have and We to have time out. contracts in things grow honor it place, takes

And so into factors the there side pricing a lot that go equation. of of is managing the

Hamed Khorsand

Okay.

to commentary trying am what you being directional I QX, to -- is for what So of capacity. and giving then that are guidance at about get given the you

February So related in January revenue and you how face sequentially down but on a much weather, did to basis? impact

Allen Campbell

kind It's bumps, you that some just the year. challenges issues. the will freight that mean, affect much, what I year the not of the it terms logistics of made I because know are But for mean, the weather real economics compounded there in the -- thing

instance, we to are the there, as I winters well equipped particularly affected not in that harsh throw they mean, handle and with, well tough as out places So begin set aren't were it Luke getting having in Mill in tough and the handle, for trouble, us. up in winters like product to to winters.

of a you, know think did So problem. we the of in But in the results. year's number for specific don't full [indiscernible] what compound terms be I you was. have the that impact material it'd sense don't a

Allen Campbell

saw first forecast. you our that tempered out in And sales quarter

Hamed Khorsand

ask is given have your was I goes, as you what order that, far then, book to And visibility do you Yes. the current of market? going the as state

Chris DiSantis

terms in and like of mean you visibility, The backlog Sure. stuff?

Hamed Khorsand

Yeah.

Chris DiSantis

absolutely. Yeah,

on a product, I are visibility and they are orders in it and are the and increasing the full. put who's depends We mean, are buying of for and don't customers running -- nature but [ph] improving they whole and don't Yes what, have year, backlogs the full. we we

Hamed Khorsand

other I the in issue? that then have QX, fix operational that had had been question able you And right. was, the you to reliability All problem now

Chris DiSantis

first There is some quarter. overlap in the

Hamed Khorsand

drag? Okay. Is a or the it still of out way, is it

Chris DiSantis

getting the We it's way. of out believe

Hamed Khorsand

you. All Thank right. Okay.

Chris DiSantis

Thank you, Hamed.

Operator

Instructions]. [Operator

Our from next Please of comes Amer Tiwana question ahead. Cowen. go

Amer Tiwana

Hi guys. A of couple questions.

First one, quarter, working in capital XXXX. full some you was I guidance about source we on know for first a year, think should that? and the how anything gave the

Allen Campbell

I swings working capital you think will our in tremendous will be -- I XXXX. don't see capital working think on

the will We building year inventory project. on AX end some the

initiatives receivable especially, will and our mix it well extended and may We bit. continue little of our to accounts manage for business our on payables, looking time a impact terms

no changes in material XXXX. So

Amer Tiwana

Okay. maintenance? CapEx, from guide XX -- for current to if footprint, right rate I XX we to And that's XX what should XX. year, think look How the the again, at might up the be? run XX for about Is maintenance

Allen Campbell

for AX as includes Well earlier, capital, also the the $XX material million some net XX-XX project. mentioned about of

take off we would today. that XX-XX for amount general XX maintenance that mills range, have You of be the our that XX to

Amer Tiwana

about am of for raw earnings last on materials about, critical the I just -- Or on other in we looking major words, what question, overall what out for on guidance inflation that? Got of modeling? the things think and the shake that overall some whether we the terms are in where to maybe, guidance directional will be about do flat it. are inputs. And have you sort other impact or is down as How we balance should think will should seeing or slightly think you and sales, how side given

Allen Campbell

positive which about look book be two there. tailwinds the the need I the would are strong. the order think at being talked Those you going pricing, forward. tailwinds, look We we very to as

We interest have costs our significantly. reduced

are those things mentioned that would ones major toward the costs and -- input positive. a If the that two of Those we logistics. inflation I we look headwinds, be lot and the are the headwinds facing. So have

Amer Tiwana

earnings, any of terms on thoughts? directionally But in

Allen Campbell

Tailwinds are the point. at obviously headwinds stronger than this

Chris DiSantis

putting We not guidance are any there. out

Amer Tiwana

you very much. Thank

Chris DiSantis

Thanks.

Operator

back This turn closing concludes over our I question-and-answer to any like remarks. Campbell Allen conference for session. would the to

Allen Campbell

call those So wish in best Verso we'd for in you the like thank you very interest the and and participating thank much. to your day

Chris DiSantis

you. Thank

Tim Nusbaum

you. Thank

Operator

The Thank attending conference today's for has you presentation. now concluded.

now disconnect. You may

Billerud Americas (VRS) 8 Mar 182017 Q4 Earnings call transcript