VRS - Earnings call transcript Q4 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to Verso Corporation’s Fourth Quarter and Full Year 2019 Earnings Conference call. All participants are in a listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions] Please note that this conference is being recorded. A replay of this call will be available on the Investors page of Verso’s website after 11 a.m. today. Time Eastern

I’ll Tim time, presentation to over At Please turn go Treasurer, Nusbaum. ahead, Verso’s this the sir.

Tim Nusbaum

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

of today is Executive call of are Adam to Senior in will be Joining our Papers. like remind President Chief the I call that me making Specialty Financial President certain – St. John, Mike of order forward-looking Officer; Vice in on would you Graphic the statements. and give Weinhold, the understanding Campbell, Allen Officer; performance, course to and we everyone better Chief and a

uncertainties. these should These or vary risks are or actual results management’s and to materially or materialize one uncertainties may from of forward-looking expectations. subject underlying prove or incorrect, Should more estimates statements assumptions risks

information Investor various If posted like further our are filings, to under with our please regarding you SEC which associated risks and versoco.com, on website, tab. our would business, the uncertainties refer

presentation Now St. over I’d hand like John. to the Adam to

Adam St. John

the accomplishments full completed you and as the we like update would agreements implemented performance Thank for closed February, the ratified on you, matters was as Verso. SG&A, other Today, vested XXXX and Tim, year all quarter, fourth buyout to Point and June, pension Mills union our impacting well in Luke proxy and good a We efforts. planned Androscoggin and busy term morning, company. solicitation our offers, company’s everyone. in Stevens sold further reduced year our Mill

Beginning on Slide X.

During an this safety we maintained activity, performance. excellent all of

all really the involved employees rate and be. in thank incident a lot continued the an like I’d in this critical achieved focus industry, of is to which level our in for of of keeps we us of X.XX, happen, of nice year, doesn’t middle. the place area. This a the top-tier which our For to effort commitment performance

thanks. So

were of For of EBITDA margin the fourth million XX.X%. a of our with adjusted million $XX $XXX or XXXX, an quarter sales

sales for were of reduction the initiatives margin The an price of For with cost mix offset adjusted decline. Luke our the EBITDA $X.XX of $XXX at closure billion impact a year, and demand improvements, the million and partially XX.X%.

We in space ended market We in the $XXX XXXX. well total declines million. cash see year liquidity with million did double-digit $XX graphic the in no of with debt, and headwinds

result markets We on near-term in with as also as find rates. pressure price as a attractive exchange see the to continuing U.S. demand of well favorable the imports decline

to on expect the previous out conversions Based we see globally. industry papers graphic of announcements,

side in this on face challenges The compete of we continue supply we markets and talented with help to move the assets, will low-cost through As and base. with XXXX, employee a going to these along efficient dedicated challenging, be should things. we’re

Moving to X. Slide forward

outstanding on focus the products efficient company, and our an effective of the With providing transaction, for completion and our while is Pixelle customers. services our and running

of business revenue in our to our EBITDA. XX% of We expect the XX% retain top adjusted line

obligations business have our sheet. generate balance capital, attractive fund returns streamlined strong to and is a our We positioned well maintaining shareholders, that strong a while pension for maintenance

and to continue will packaging mix product papers, pulp include graphic Our specialty products. papers,

high-return these makes development grades. in markets decline through where the will the and to projects sense product the focus growth We within on graphic it offset

the this it and sale Stevens shareholder of Androscoggin business the to to exceptional. completed transaction process all The from through Earlier and we Point this execution manage Mills approval Pixelle. the my get team completed month, for to was successfully

Board the to up of a million. $XXX repurchase said, share has authorized that With

starting in quarter. share to initiate plans company the Additionally, the quarterly $X.XX second per a of dividend

experience have of working operations have visit a an our and industries support their amount Board, sites to the weeks. we’re forward and of getting and our that’s really, paper mill our look begun get happen of enormous first-hand to guidance. are at and going to They each next eager newly We to couple in with elected looking other and within

detail. turn that, in results over With financial I’d to to and like to the Allen performance Campbell presentation discuss our more

Allen Campbell

fourth unbleached Thank quarter where we were look to the coupled shown our pulp experienced products start-up, you, volumes XXXX result share fourth as were greater in Adam. a transition with three pulp in The shipping XXXX headwinds craft decline machine fourth paper machine shipments packaging decline and in we XX% in quarter of of versus a closure XXXX. the number in the XXXX. impacts the quarter mill Androscoggin of Mill’s of the The market,

We we the XXXX experienced XX.X% margin very adjusted an balance EBITDA price headwinds, part Without pension the on our in Additionally, to fourth number. which were all Despite across product year-over-year significant first we flat a year. sales, delivered a included inventories building lines. still pressure a the on gain despite quarter of delivered we settlement. respectable our gain, these XX.X%, keep of in of commitment

by exception direct was Slide from our deflation It quarter, with volume million in demand evident and of shows with being million. in This The X. of bridge as to input $XX decline coupled offset materials global from our the partially improvement XXXX. with we Turning $XX capacity price/mix costs our was across wood. all to XXXX impact down overhang fourth benefited

had our Mill some From an that Rapids we standpoint, drove Wisconsin negative million challenges our $X operations at variance.

at and We’re reducing issues continuing mill. this on focus operations to improving reliability

initiatives benefit which a cost-reduction risk. to we participants reduce executed lump of plan to qualified best of we resulted We effort $XX gain selling from the to pension bridge. and in the sum booked million, SG&A show costs on buyout continue quarter. This a as improving in We freight

The We Luke I solicitation costs million, Slide $X incurred Mill Mill ongoing the happened. initiative want that continuing that year restructuring of adjustments million, closure-related at several $XX Luke took strategic primarily expect with to costs highlight and expenses one-off legal final the the full we post Switching X. to $XX our events we do until Between note costs. and expenses, disposition. were cash contested our and costs million. for proxy

a $X fees downsizing expect the for number quarter for former XXXX, CEO severance shown banker earlier and million overhead, XXXX. The the transaction. first primarily for to investment of similar in excluding We was settlement related

which carryover benefiting early loss of in The On $XX to price/mix look Slide due million. XXXX. and reduced with from $XX mill capacity market downtime, basis, adjusted resulted EBITDA by and volume to from up the XX. On the price together was a year-over-year decline, positive price implementation million, impacted closure increased

settlement We from significant Wisconsin for Mill improved million our negative our offset settlement pension the was a by costs had less charge the contract. at of we prior events income – which to in primarily that benefited million settlement $XX onetime excluded of with also year-over-year. million, We union our $X reliability $X year versus accounted Rapids made that nearly our The ops. $X excluding freight of million and all performance relating was

strategic of and our in significant our also all Slide to $XXX year restructuring needs In ending to XX. XXXX, spending. the step-up even capital company projects. million XXXX, operating million. and million costs its liquidity position cash $XX cash flow expenditures from The included in of operations strengthen on Moving in with cash capital for satisfied has XXXX, available with in continued The $XX

projects. capacity papers Mill, packaging in which additional Mill our specialty three our projects now together Duluth for And Andro These specialty machine is investments with paper all included for some Escanaba our No. at the almost Mill, grades. additional

In noted, XXXX. all addition, as we across in up plant our maintenance stepped investment our mills

take want from have liability. $XXX unfunded of year-end to pension of have as million just done expectations I what highlight On reduced Slide Since minutes a to for $XXX liability XX, XXXX. to we couple emergence, and our our our million we

plans our strong assets. taken have reduce at as a steps utilizing deliver driven and way which return such of professional same and improve our flow while cash risk last We year moving XX.X% investment the advisers, strategy, a to several on position, time helped the to consolidating along

asset Looking million. to using $XXX liability of right, chart transfer pension after liability $XX at a on to bottom and unfunded discount and Pixelle, X.X% X.X% expected million, returns million the $XX net of contributions our assuming rate company decline to the is the of

the the through trends, prior based XX. for go four upon projections increase Any pension or zero Please continue, to mid-to liability be with will the XXXX. for tax years. next we contribution over XXXX company decline to believe pressures, single-digit made headwinds we five XXXX. four year. which our may current market as to industry additional potential quarter demand demand our price On anticipate can and will We we reduce are note With determined position, that high our contributions Slide can be

this seasonally weaker, traditionally it of The the business half be up first is as will second half our picking in year.

earlier franchise and it that, presentation, mentioned open and noting our around I’d questions. taxes. for commitments With we completes have mills the maintenance in our payments $X of XXXX, million at $XX to $XX Our and of Mill million, million biannual mostly capital million $XX million, contributions our that state projected to cash Quinnesec $X outage our pension tax up major at formal at that cash like for a to

Operator

from FBR. [Operator Riley question Sinderen go Instruction] And Jeff our ahead. come Van will first B. Please of

Jeff Van Sinderen

in maybe guess, demand, then to the maybe QX? that you’re How in that think I give to And you can And for know Can then what at on see half should we a organic I as SG&A we understand import of just the magnitude that. picture, elaborate shakes terms expect completed. QX? all? then I in I are And similar on on reduced follow-up should of you Andro? kind maybe in first to pressure, you out is half? QX, what reducing still Or how that, the in Stevens selling pricing is in supply good order you factor latest revenue that inventory, about think was of anything more QX of you guess, and that us about first how seeing if a decline? give in seeing you’re pricing terms overall? wondering us what

Mike Weinhold

ahead Mike go tackle the and try I’ll question. of to Weinhold. Okay. marketplace in some It’s

somewhat. to side free in of and in are you see operating the of still The weigh Imports experiencing some demand our coated so mechanical a sheet, somewhat can more mechanical They is have specific heavily abated coated industry [indiscernible] So is probably part the the U.S. up, XXs. we’re weak, the share rates uncoated what in their currently, kind decline rates business the operating aforementioned holding. which the markets. the reports from in of the on the tallied are are operating core rates as XXs. is But still low

few year. They of last points share certainly gained a

more is And pressure there’s standpoint, so to factor. side a are pricing the are our and less the but more near-term in in a pressure grades of mechanical still mechanical and on some that price categories. it’s From imports others. less uncoated in than due two So supply They grade factor so coated overhang. really again, is freesheet, coated in grades. those a

or side margins utilization to we currently we’re So past, have in heavily in still operating to committed weighing our we’ve help the supply supply rates our overhang demonstrated demand the that a and maximize control we’re to inventories. and creating also that’s balancing both as us experiencing

coated had conversions also and term, that I of lot in globally. through XXXX, Adam just start Those mentioned we coated place a we think, to mentioned grades conversions take impact will mechanical. We have move this near the earlier, free as sheets will and

of should some be So rates regards we’re supply help we the pressure think to globally. that experiencing on in the overhang will positive and operating improve the Should price. that

Allen Campbell

And tick SG&A slight see long question, may then or we’re we of with less. sales we have X% up transition to we’re the targeting In implementing services initiatives. quarter, in agreement Pixelle. but And that, a cost first term, related a

to one, it So it over the rest of improve year. the in pick even quarter does if up we expect

Jeff Van Sinderen

for to slated what capacity then, much far? that can Good most And year? freesheet guess, Okay. of supply-demand pricing? remind half, I you hear. picture. where means of might kind happening to this coated about by us think think I how exit is we you marketplace And think mean as you it that guess, then I also, what second think the that’s for the

Mike Weinhold

Sure.

XXXX, few, a that If at quite place into time significant on least in take been moving to some to basis. announced conversions global a you just XXXX there’s three look at – have two

of would note, conversion of Mill, Enso of the foremost, coated is and Stora Oulu million First tons the which sheets. be freesheet X.X

I a think will imports there impact so positive that of that the U.S. market. global on come the And overhang certainly is sheets supply into have and

standpoint. improvement an and So be should a import one could trade flow that surmise from that,

that’s mechanical side, conversion tons. Catawba the been announced XXX,XXX the coded have sometime We on That’s in XXXX. about

overhang. Dragons should again, of Biron would And announced Rumford, So the at or we’ve potential these of conversion hit and Nine supply XX, themselves, coated which closure mechanical help I at DM had and action and believe, with freesheets. in both, coated conversions,

And I thesis the past a the think closures. so in price. happened improve in that are improve turn as or my demand operating conversions very is on mill what’s has versus And generally the – Jeffrey rates, speaking, positive you with to similar you dynamics, effect machine supply

Jeff Van Sinderen

Okay. helpful. And I if it Good. That’s more, squeeze could one in.

mentioned Wisconsin think reliability I issues. you some the having Mill

that? Just us wondering at elaborate if behind Are those this on getting you can point?

Adam St. John

hurricane that try Unfortunately, of through of – mill. a last We’ve quite is this a event, took line reliability or collapsed had a that pulp Adam. about down a there, in than more the little a a improve the kept money to reroute bit we mill the the Yes. the to We year, line. was asset spent went mill to result on that major – and a week week sewer line for down,

So to lot the improve of that happened going reliability that projects mill in significant last that forward. event – slated a that. had we’re to We’ve year But do was a there. looking that a

Jeff Van Sinderen

taking Okay. Good my of And thanks for to hear, luck. best questions.

Operator

question of ahead. from Khorsand Hamed BWS. go And our Please next will come

Hamed Khorsand

morning. Good

balance on goes? competitive keep how I this on you year? as same guys were to initiatives first the adjusting you trying Are last inventories taking year, off, as it just are know the So you standpoint, far sheet. your

Mike Weinhold

we as it’s levels. our point our Hamed, inventory certain of programs. need inventory at a to Weinhold, year, did certain continue, Mike a last balance will to amount We We service

that in web. primarily inventory Our freesheet With coated move levels in ending that expectation areas, XXXX XXXX. through reductions did certain as some to we similar is we plan we said, have in on

inventory in And levels. so we’ll demand to our to the order supply manage manage

Hamed Khorsand

competitive that being is it Or pressures seeing, by purely is reasons? you’re pricing these customers holding this by And orders? on driven back

Mike Weinhold

which I that, think heavily, of supply imports imbalance, generally, with just some low bit pretty have still overall weighing it’s coupled a little rates. demand And operating and

we set really negotiations a that earnings evidenced our pricing heels And step so XXXX. in program which into the kind level of you and as was on in change is QX, of had move and

I believe that last And so customer large, it – talked worked itself is, know lot currently, believe we of really and has overhang a we I inventory, about out. by year.

customer XXXX how through for inventory As built I the we much itself side. has move the believe most that, was and on worked just part, out.

pressures So it’s low really rates. and just operating competitive pressures, import

Hamed Khorsand

Okay. at around And implement then to you some details Is you are lastly, could And the this? stock market? buyback? the fast going provide this how

Mike Weinhold

open We board and timing It mount has as the Well, far program. put there. exact the the out is methodology. authorized as

there As material you we some timing there know, when issues will out But around is various data or have avenues. be not.

to us. ones exact stated several not available are have but We we use, there

Hamed Khorsand

Okay, thank you.

Operator

Our go come Please Instructions] Ritzer, [Operator investor. question next private from will ahead. Adam

Adam Ritzer

I put call. pension $XX What’s I to what’s think? guys have pension contribution, going But in a said do be to guess, Pixelle you your ongoing with taking you’re contribution, Thanks question for proceeds. morning. that, the going in beyond my happen going XXXX? good had to the you million Hi, about

Mike Weinhold

Okay.

you estimating. So if normal million you we’ll probably stay level, paid million that that If off traditionally, been four with at – in have to be we’ve to range. returns look asset we in years, $XX were $XX we’re the

that our $XX to $XX five bit in taxable we’ll look or kick range a years million, in XXXX. requires in bit in long-term still and is going have cover we paid to a may if We’re four little situation, we XXXX million more But to at more – it, kick off. – little more tax our income

Adam Ritzer

Got it.

it. Okay. Thank That’s helpful. Got you.

the spending guys of at terms you lot. you CapEx three CapEx your Can called about in It hostilities, not maintenance the looks what’s more? is know like guess, program, a In I doing on about presentation talk of Duluth. are at program all the little plants. a you bit I other about guys the during that talking some talked materials the

Adam St. John

SC approach to know, is freesheet. Yes, you sure. in than is actually the our as dilute, greater a decline – We Adam. This market

different do looking to at this. different ways So we’re and things

the year So Duluth. invest little around tons kraft approach a to grades. of liner bag, million, we’re what XX,XXX we bit in And did, of we packaging type making probably of investing $X took capital, this and

So our project that do conversion to approach the whether is and right small out the see investment decision later we’re But mill. a full a now. on of waters then that of going just to market be and make to how see going kind how pans now, testing test we’re that right did

or asked that. We more do have for not than approval to anything gotten

Adam Ritzer

it. Got

So $X includes the million to at million or it? that the that Duluth. of $XX strategic Is at million spend look $XX way

Adam St. John

it is. Yes,

Adam Ritzer

to forward? $XX maintenance Okay. the of your million, Then that ongoing look is maintenance the how going at CapEx

Adam St. John

The $XX between is in capital no million. be that will strategic No. maintenance CapEx going $XX million There number. forward and

Adam Ritzer

Yes.

Okay.

that’s three So forward? on plants going maintenance the other annual your

Allen Campbell

Duluth Mill includes also. That on maintenance the some

Adam Ritzer

Okay.

Okay. Got it.

Allen Campbell

capital, some the base that capital there also. of IT some – of it’s in

Adam St. John

is there four-mill a system Yes, plan.

Adam Ritzer

understood. Okay,

I questions. for Okay, Appreciating. answering thanks that’s my had, all

Operator

question-and-answer concludes St. to over any This Adam session. ahead, remarks. our back Please John, would to the I like sir conference for closing go turn

Adam St. John

I’d you. has support. and by shareholders We their fairly realize to – our for been Thank this like long patience close thanking a thank strategic Yes. process.

returning repurchase quarterly of on portion through plan shares a the Pixelle proceeds do we a announced, and previously dividend. As significant of the

the that with a should to to healthy We have shareholders want company that benefit we sheet strong future. in continue very state balance a

well dedication. market the Verso performed challenging review. extended a of Lastly, and environment I’d very really like despite employees uncertainty their for They to thank the strategic all an

that. for thank So you

great With results. the that, thanks day. drive and have together working a keep Let’s and

Operator

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

You may disconnect. now

Billerud Americas (VRS) 27 Feb 202019 Q4 Earnings call transcript