VRS - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to Verso Corporation First Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note, the conference is being recorded. A replay of this call will be available on the investor page of Verso's website after 11 PM Eastern Time today. At this time, I would like to turn the presentation over to Verso's Treasurer, Tim Nusbaum. Please go ahead.

Tim Nusbaum

afternoon. good and you, Thank

we’ll The Verso’s first 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 page as for to the during well call, of Corporation web the quarter refer website, market release, opened.

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

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

Les Lederer

morning. Good you, this us joining call Tim. morning the Thank everyone, and for thank on you

Directors in in and call. I all participate know, earnings April, was appointed Board Interim early you of the is As opportunity Verso by my CEO this a to first Verso

to with on success. I significant to Verso. commercial slides for of getting Senior St. position and our time the spent the and quarterly with efforts senior I explain over team indicated, available Weinhold, walk the mill to who today the capabilities. Verso's understand been have company, operating As everyone's Manufacturing results, me joined financial acquainted our with our will traveling questions future people who Mike our teams with Beginning I respond is Allen Campbell our the and Since fully with business I've meet is with to me next efforts. next leadership the Tim and our also Adam is more weeks, impressed mill President to company who the with week be better locations Vice few work with John will through

I release positioned less reliant As demand and for the challenges my business these morning, the in the projects are still this papers. In team, product the papers. press for company we described and earnings we face the through to the presentation to in review continuing believe graphic decline graphic through capital be overcome continuing leadership the in development on challenges

announced However, to Maryland in unfortunately for mill. decline customer despite that response we our has will environmental declining associated Luke. demand paper produced influx the and to changes the costs we and in The all in have that have demand at Asia input our Luke, coated and efforts mill challenges grade down the at the imports regulatory shut permanently paper also Europe we continuing issues from the infrastructure and rising along compliance with of costs rising add recent significant freesheet

the of we We remain the the result at environment. Verso the outlined results presentation but have of caused Luke because same. Luke possibility facility On by the impacts that mill shut The of all has difficult the mill faced company obstacles not the from close studied this to conclusions the profitability of Luke costs losses. provide Page closure. as and grades possibly slides, at the achieve market not we XXXX. operating We expect June XX, the continuing could the undertook in could down to better We the a overcome decision paper has completely today's which producing could X

First it will our by reduce specialty produced the closure annual to closer freesheet production capacity as the markets majority company's note at maybe of tons. products mills. minimal freesheet of and to is coated the will have coated XXX,XXX later target important the CXS Luke disruption that The be or can

production and made. XXX,XXX reduced spend net of million the major the In $X XXXX. of face shown remainder Our the of at second Luke to tons. charges quarter $X not mill other are shutdown and both impairment of and half first Luke of equipment of million first year. other facility generally XXXX Capital to company at in in XXXX. quarter had of and of million $X plant quarter benefit These per our company’s to and $XX $XXX to cash be issues at shutdown to market million results Luke we for Luke consist corresponding income result in million in will There quarter the depreciation XXXX the Luke projected for costs million. are $XX recorded for as a the million The charges versus million was in second approximately accelerated to $X planned million $XX Slide $XX be activities of XXXX. reflected The will million also quarter of disposition XXXX at until $X $XX and planned loss Luke. results. the approximately $X million closer the The in reported non-cash charges a $XX charges the million X spite costs in million be will net presentation, strong million otherwise be and maintain And benefits be pretax that expenditures severance maintenance by million Luke estimated $XX in to approximately costs or to of cash $XX severance of property, to

million. continued million pricing the and and offset quarter Our favorable compared order The our both believe adjusted quarterly was we our the mix. at month EBITDA result company for XXXX. the million better by results, able the of volume we'll first inventory in quarter in trailing closure demand of $XXX more corresponding volume the All Sales with decreased along Luke, for of effectively the totaled $XX unusual flat products. the balance that to corresponding XXXX quarter the million this supply. with be impact of of believe quarter $XX the graphic decline by demand EBITDA with was level available quarter end tons. XXXX were and paper stocking were XX,XXX to increase declining We customers year for XX Notwithstanding $XXX that with was high the the with over first of

with continue dependence products on leader, is in graphic In papers efforts other revenue and and now our of production XX% business While graphic decrease sales success. Verso in and percentage graphic to paper we we to grow leader our related XX%. of was have will in products. XXXX, the papers intend and was These remain industry Verso’s specialty That products. met the

our and Our made team, result value the and graphic is products commercially then working added significant success the together our dependence decreasing ultimate by the with development product in of on products. operations produce trial efforts commercial teams,

the two company's the led Vice process flexibility restart swing practices I agreement unbleach In of addition the can of the of from the other pulp with to This efficient grades, ability at the of of aligns our ability an in our case our Mill. both support now whereby This the Sawyer select as The the focus industry before convert company allows negotiating a results product team the in contract. and One Androscoggin us labor covered presentation conclusion to reduce with Steelworkers manufacture negotiation successful with machine which development United and use optimizes year Senior graphic important number containerboard, Verso first more to machine. by to machine the this three the the resulted and Human to to company's bleach long-term capital master specialty in trade closely President was was the over this ratified turn Resources quarter. products Allen, shifts the current the between and March. in the unions our to a the note which employees Kenny market lengthy Verso efforts agreement interest

As our a further of to incurred $X cash agreement the I first of a quarter. the a CFO the for will update. financial provide Allen, million ask result company charge now

Allen Campbell

Les. you, Thank

strong important X XXXX, right as were business the for with in down volume million Price Continuing Shipments strong our XXXX. favorable is key product diluted Les up Paper of EBITDA prices a the which one $X $XXX the been mix demand in double-digit by our and Net up our prices consistent mentioned the XXXX. The first up guidance increase. mills $X.X first fairly quarter quarter Price for the shown high improvement $XX strong with last $XX and year, quarter to prices versus from row the industry drove we've to volume the share. Page were the our prior across first the income quarter is volume that’s adjusted specially a versus versus in as the mix well XXXX million slightly fourth pressures. the of hits. highlights, of in that's pulp $XX is packaging X, the we as only our first despite million the million declines million quarter show weak XXXX with million versus Turning on highlighted On mix was XX% Inventory is down. at were our last end top of it moved quarter of quarter first increase came financial EBITDA year. help in to as Page sales the negative EBITDA quarter bridge and ton year, where X% of in X% normally percent us XX% note were as to in inflationary was fourth X adjusted production $XX improvement has to $XX and continue for $XX quarter offset first Page lines. achieved we same per sales quarter us XXXX contributing walking quarter contribution. overcame million the and positive the now for quarter quarter of of in pulp earnings paper first in in towards adjusted to in the

in XXX(k) and higher major was with our costs maintenance the million union for sold Included projects as improvement relatively call, Boarding low agreement operating use contributed$X Input million, ratification the and and and despite seasonal our arrangements up XXXX of year-over-year. fiber line bonus $XX year that compensation other improved cash quarter as first in XXXX. Page first incurred the and to million were liquidity mentioned mails in freight seasonal were to fact $X in master million going allow end build-up forward. of X, $X rebates. expense million $X we versus employee quarter representing which Pension we costs such unfavorable inventory, also costs prices. customer primarily the due chemical that payments remained with for strong The have as

step quarter customer build-up orders trim inventory million results Cash With of working build levels inventories year. operations saw in from and was industry the quarter, of $X Our the in will our operations softer we little service of demand, down million the first Cash our of performance that years closure million inventory and up capital the quarter. half versus wood first usage. Wisconsin up in estimates as second two earlier. in outage was the $XXX maintenance and the $XX XX the major mentioned interest result Rapids the versus continue strong fourth and down seasonally throughout quarter we down major by the boiler will for were XXXX quarter. so shows year, Page high and our drop Spending a year's cost maintenance at both the prior outage Note CapEx by same three last we will Mill. then quarter significantly in have slightly. spending quarter two,

sales maintenance,$XX the and the to $XX year second pension expect to $XXX be million million million. in $X million Moving to forward funding range the to of to in million $XXX guidance for be range, for million toward we $X million. to Capital major the cash spending $XX quarter,

to expense pension cash equal to expect XXXX. we be year, the For

With look operator earlier, million for million end. we open $XX closure mentioned range cash goods our finish to we on being decline line back And the As to conclude year now expect prepared year's to return inventory last presentation more to questions. level costs $XX and that basis. by

Operator

Jeff Sinderen [Operator from Please Riley Instructions] comes Van FBR. first Our ahead. of go question B.

Jeff Van Sinderen

to it the versus about as more you've know thinking I than time albeit changing how are a there operating attempt approach interim, make how been modifying only but courage potential buyer? to to short - or new company the pursuing you to your it prior the the a make are strategic you changing attractive CEO, alternatives more

Les Lederer

asked been the be strategy, time, said issue very graphic our a specialty a of The been products or that’s strategic so I've company will grades. my by remarks not operating review. anywhere away from short through to - And near as I the completed you said alternative opening board we guide diversify to company here as continue and the I've in and get into to

I get try most of operating company. to business think have the and mix at it's important that the continue remaining we optimal products we the from machines the

we this report out to As still news. to there former we is go at design strategy the point the more this specific studying board I to your and when will seek in the company, best direction but at to issues about back possibly the question no any and point selling alternatives the

Jeff Van Sinderen

give And the business. for wondering then legacy in pricing you on of prices as are pricing prices you what you year-over-year, on the seeing reduce think that see? is us can can I any anyone seen paper outlook was just on as do and then far what if you for you’ve more maybe the CFS terms legacy up know color

Mike Weinhold

are the and our Obviously, XXXX have From has with demand positive standpoint from as price and stable. stable data exceeding but closure, the what forward continues. deterioration and give pricing from so earnings, characterize we you’re current move reported market some statements challenging environment remain though we side to certainly from we sequentially us QX some can’t environment. fervor the but pricing guidance our as little and been environment said, pricing quarterly I and for stable. graphic a change I speak decline demand and leading seeing that With were on as that of prices seeing the our in has pretend demand to QX in is pricing we market basically been to the would expect speak I spot price general certainly as don’t seeing looking is

Jeff Van Sinderen

this wondering you liner given hearing you’re on that’s the And the board, seeing increased board if speak year? then for just all one your about the to paper sitting it are marketplace more, overall that slow if outlook in kind capacity and just maybe business specialty can there of liner you demand just on

Mike Weinhold

successful in our had We targeting initially first, really So machine specific and design have kraft, liner the conversion for definitely liner export and pricing seen I’ll in startup, question a in take was market. board lightweight that that’s export we to version deterioration a conversion. AX a in demand very the slowdown primarily markets and

also for of other produce market. the and conversion of quite been export domestic able the in bit was we’ve to a the design liner of dependency the products been quite we’ve on offset inherent to so able flexibility the honestly into While dependency board AX some and

to are U.K successful bag produce P the pulp, in leads. leads non So allow us board of had we flexibility asset on knee K his today both and development NBS deep and Kraft the as liner AX, trials to of opening, mentioned Les, that markets in pulp

So of there is amount flexibility. a tremendous

dependence have develop a and we net on slowdown in to to dependence deterioration is and in asset on, while container our bit seeing lessen demand our board domestically a So little products less continue of side pricing even is our on intention certainly export.

Operator

Salvator ahead. question Our Research. of comes go next Vertical from Tiano Please

Salvator Tiano

I on would board. first, a little So up like bit container the follow to

also the companies focusing pulp. lot the and think especially of pulp, slides are that are I You in more didn’t highlight flexibility on there the a on

being versus trending for firstly, pulp talk whether the even [indiscernible] how board volumes of bit PMX in quarter? the you terms or the how container you number since third from provide the your can least absolute - actual are know, up at you start a in an much little how can board Just production container trending things

Les Lederer

We type really of that don’t detail in disclosures. our breakdown

and and I into make some enter other machine is say have trying products and what repeat can are we such and that mentioned said can as bag. unbleached unbleach is we craft Mike bleach container as in board product already to proxibility really bleach all Mike So we have categories kraft

of only that’s at So we make the type disclosure this point.

Salvator Tiano

But think a was the we're think and think exported, talking initially I then on idea markets, export months I ago you but the And Day I the was plan think your you then Investor least most just few long-term product I don't mentioned XX%. the but had was at of exports. be or for XX% the probably that to necessarily

still inroads it As you we container have exported? the is board your or into look volumes, more mainly now market domestic made into

Les Lederer

success well during target. presentation characterized with it into had And of even domestic the accelerated up deterioration penetration will migrate product export we've to we and investor seen an also standpoint certainly domestic develop market. and you start intended success markets always in we've export the product alternative as correctly, the as but and the our Yes, it's desirable a and the and certainly we from market with that domestic this that with with

Salvator Tiano

paper. few change in you produce bit how one volume just actually been companies There about perhaps recently. and the has paper with your white lot free little especially that? there pricing increasing just of holding talk to coated - Can out white because of any not you a cultures reports much the paper a their last been listing And about on but has if making actually one months normally white there past used sheet for material

Les Lederer

by quite earnings, free and our on the focus value by coated for products tell for as our are uncoated of Yes, QX holding growing the free the indicated focused production well. We've can margins we a on percentage pricing small I won't give up absolute very sheet numbers, sheet you what would but Verso products, added enlarge And is I specialty. been you do.

And free is so Verso what part sheet not a big uncoated of does.

Operator

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

Hamed Khorsand

given from the off could Luke you kind profitability Are benefit you to around bottom So the the it of commentary about had see provide and first this that what later mill. on just standpoint the stage aggregate of line to year?

Les Lederer

make let the last more one you I didn’t sure of get last quite that I understand, Well part? can part the time repeat me

Hamed Khorsand

as up as after won’t mean some June be just benefits bottom shutdown are one-time margin in concerned? I there expenses the far backing events - sort of it to the line

Les Lederer

do to demand hope we what supply Well to of. the and issues the and is balance

explain hope but we have price that will don't maintain charges point have we of as expectation we some at total time. can any this We in stability we effect the

expect We balance to maintain our a supply in demand. and

Hamed Khorsand

had appropriately? just you will then a more standpoint from an And QX there be build managing you build in that that in inventory the QX are further

Les Lederer

balance we’ll Well do that now to we we with with tons The with XXX,XXX Luke. of thought is need taken capacity. closing what out

the of for in sales have half the We that year. product last

So half. in down And selling we then build throughout be this may that slightly two. we’ll ceases, when value quarter production last

Hamed Khorsand

And markets? the seeing repeated far in market in the QX your QX could concerned, then as end is that you're that be - as performance given environments current your

Les Lederer

headwind QX. one heavy We you need did difference a is quarter. the that in have The have to will look be the maintenance we for second us closely first in the in maintenance not at

Hamed Khorsand

flow Will it positive free still a be quarter? cash

Les Lederer

what the for forecasted haven't will cash the quarter. flow We be

Hamed Khorsand

structure. ideal to mean do generating or allocating with free if - what cash for at to stock my capital as start last be looking any to versus you're I going flow And to is, expectations buyback? we’re question plans

Allen Campbell

for question that the long-term as and still the has I of direction. strategic the growth company. our performance again vast in original through We're strategy working But on said the

cash conclusion with all So final any alternatives. are mean we been free that I specific at strategic we issue in not not as flow a our looking are has one direction going addressed

Hamed Khorsand

an brought got year has here? call, this mean discussion Board this to decision I be a as last ongoing it for a the I to up started right. I they quarter I now making listen But mean over been to it mean well.

Allen Campbell

the the been strategic we on Well make trying have again and. aware And measuring asking the been goes constituents are best they looking sure company direction alternatives. that is but in specific the questions the and is that direction the for quarters you're has and few all Board there fully at of question to no all last asking made decision are the

Hamed Khorsand

book have capital generating a allocation? value cash trading you a can't below You and free decision the flow make stock on

Allen Campbell

achieve objectives have trying try best are your reached not those and to we in look requires growth the is maybe liquidity I'm we the we're at avoid of alternatives companies if conclusion, measure stock additional solution. the have or cash Board in again saying question, long-term Hameed not to make all dividend a decision. it buyback to to and a the we've but flow

We have on decision question. a your not made

Operator

Adam from comes question go Please next Private. Our Richter a ahead.

Adam Richter

main supply overall free do situation much demand take going supply I you Luke sheet of is think of question do industry. the coated my in the guess How to the has out a to now? with right market

Allen Campbell

So roughly XXX,XXX at as percent of it's tons you capacity XXXX look the XX%. if a

Adam Richter

conversion So catalyst where dragon that I probably to Les that answer its what's sale now made XX% you currently nine stand do status does there think? and know with right the the

Les Lederer

nine it the their public at know time. to a their we status purpose in and that at is mean they we've the what answer plans. What the us progress catalyst we We’re seen dragons from that disclosure public didn't the disclose at so don't acquisition all is, disclosure what question. we was if the is of I see And plans probably can’t

Adam Richter

converting it? to that’s saying and what closed is the closing guess you look don't But officially right I but now best they're at way your is you know understanding ultimately heard is timing you're that haven't

Les Lederer

to extent want disclosure more U.S. I There the any the that All don't say get private that. disclosure. its are subject the they than we is companies make in public information I to have can again that insight are you to same and public

Adam Richter

that? Somerset by information on Sappi about what the And any mill closure

Les Lederer

conversion. That’s not it’s a a closure that’s conversion a a that's closure not

Allen Campbell

are coated and us SBS which that free converted was into in of up their Somerset through conversion to Main at seeing primarily marketplace sheet we somewhat. and grades continue CX they machine the Yes, being that

Adam Richter

in think closures. last talked industry, do little inventories, you what story good. QX challenges know and the also you a so was about And imports guys What pretty the like the about the about pricing quarter bit I looks European and help about the I that think but of you a do maybe what is import the talked think timing on that know will you little closures? structure hurting do you that bit

Les Lederer

what I've so again of see sees store sheets believe at referring public standpoint. certainly to which you're have that A free Luke an and sheet. Yes, produced disclosure for are would conversion lot we everyone the I specifically impact on free coated facility. coated

think it's also I assume impact the So specifically and coming those on of would to trade that don't that U.S. into product unusual have an products flows

been and sheets. imports our seen gaining in certainly the coated and charge increasing both Korea absolutely leading and coated share groundwood import coated imports. have the in sheet gaining segment free We and free sheet free it coated has mentioned gains

impact positive So simple the global should potentially the in should a and convert. flows or that U.S. trade on you summarize confirm that have that on the machine could imports machine

Adam Richter

now, any idea? Do on right specific have you any in how data were coming imports much more

Les Lederer

imported as at again groundwood its of Yes, look in in the coated percent its roughly the demand so coated U.S. if XX% and XX% that in in groundwood, of XX%. sheet roughly U.S. coated the be is Canada you just free imports now the

coated sheet percentage free always sheet in free side. have So increasing we’ve share a groundwood and both it the import, certain coated is

Adam Richter

It then pension like your some quarter. be less with And in that looks do could small so and the impactful. has cash that flows to my payments. your question pretty CapEx your other contribution interest So EBITDA

pretty You cash decent of amount guys generated a flow.

million. – talked that on is discuss about debt seems $XX that like and cash? builds, draw cash of plus down recurring inventory the why $XX all Could understand aspects big You million but inventory also or you you was the builds you was your a down

Les Lederer

usage the lease sheet bit if Well, about. roughly and saw either somewhat into accounting here in you $XXX added because and we EBITDA noise pension capital sheet. usage a $XX had roughly our then are capital balance was its you balance million working our that the the little we to we’ve made you But say, million at talking looked get on numbers working you’ve

$XX as So million million do inventory the was working and we is year. talked that a of wood build about that we $XXX capital, decent every have we

the in in and at first to the goods buying down second built half. that’s that are going The closure, We in quarter announced we clean and we’ll second that we the we and that that third. up finished worked as

So abnormally high capital build first wood the usage the $XXX with the working about in combined drove of number. quarter million seasonal

Adam Richter

up is that And on charges leases is of sheet, correct? balance on new the the accounting debt build the having because

Les Lederer

if of of No, $XX $XX to you you it's throughout at working get definitely you - have we look then EBITDA that and million cash million, capital a million quarter. million few see for crack $XXX there $XX usage payments other first the

Operator

Please FBR. a Van of Riley go ahead. Sinderen Jeff follow B. is up next question from Our

Jeff Van Sinderen

its paper this the light or you the done looking wanted the line is that strategic of ask of potential in that year in analysis and over the last closures are to you’ve just mind so there you the of company specialty expect are any projects at months projects might Luke closure keeping conversion other Yes, and make to wait what increase all maybe do XX might any of on? return that projects, seem penetration that and with some or to you to forward alternatives, and should we they goods you’ve that we’re major looked other are planning good move

Les Lederer

even question asking I to but the senior that’s avoid the team that leadership extend direction machines and have and still topics, said about don’t to of to the the studies and not hear overall to some of morning this have asked strategic we so it is to in capital definitely time to products. talking our make we been a this necessary. the trying variety undertaken everyone am of closure us our questions back I appropriate get as increase under gathering conversion We’ll papers give takes or to it. specialty come we’re give information and then want definitely types concentration to Again, study those a Well, month look into can

Operator

a Vertical ahead. [Operator Research. Instructions] from Please go follow Our question up Tiano of next Salvator is

Salvator Tiano

up So couple follow questions. of

one down First obviously to chose about know, you Luke shut you is the specifically mill. you now,

not potential company could Now this project, other an - entire undertaking if in in instead to know a there in why it for client shunning any something is but the the closure the called going you would mill Chinese player and else both any as Chinese this as potential pulp way mill of know, be future, know that from we considering for are any a interested? the or is companies could convergence, produce you alternatives full restart same there and way should see a any there to this you specifically you’re for Kentucky be mill not mill interest like making essentially again obviously

Les Lederer

someone not start whether The do purchasing question in mill Again, if is our an you if other is question? the purposes ask of for have mill me will of answer that. yes, that the that us, interested we it on we, conversion

Salvator Tiano

else? instead is why of something essentially it Yes, doing closed

Les Lederer

we to We flows cash on the and that the make products make and caused issues compliance other were at we facility. facility efficiencies cost those the facility the facility. to It’s close had and money negative because products closed on losing us because the that

– you whether close happy look its them. some to are mill to If make take otherwise more we happy come the we’re have it or it look we other to a listen more to not and than of purchase can Asian not if wants and have and we because than know, them convert have some purpose have those wish a mill, they direction to to we the it we mill determined, buyer altar and and we If profitable therefore reasons. that how don’t at

Salvator Tiano

world like between noted when and was public the annual change our a on six became expecting see least to actually took but change release to at press gap bit towards the provide And little very last color with little a just bit to more and the place release actually the not trying that press the when question place in there we’ve last one puzzled understand because day on mainly we’re change your April. information could if a took month, management

can about what six bit the elaborate little and during little why it you provide a some change management on happened days? bit a caller happened these So and

Les Lederer

closure again, early story in made and changes disclosures in our disclosures will made company talk been the only disclosure April about. the have what the the and is and we have. that’s made We around the Well, we this that’s of executive

Operator

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

Allen Campbell

thank in you. our to your call. ends like appreciate this for We each Verso Thank I’d interest your of and time. you

Les Lederer

Thank you.

Operator

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

You now may disconnect.

Billerud Americas (VRS) 8 May 192019 Q1 Earnings call transcript