VRS - Earnings call transcript Q1 2020

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Operator

Good morning, everybody. And welcome to Verso Corporation First Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. [Operator Instructions]

is be and page available website XX event this replay on this after will call on a.m. note, being a recorded of Verso’s Please the Investors today. Time Eastern

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

Tim Nusbaum

and you Thank good morning.

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

Adam Joining Officer; John, me on Vice Officer. the call Campbell, Allen President today President Executive is Chief Chief Financial St. and Senior and Verso’s and

-- remind the you call, I’d give subject of These our like a better in that and understanding are statements everyone statements. we to certain to forward-looking order risks making in uncertainties. will of forward-looking be to to course make performance, the in order

should uncertainties or more materially expectations. one Should results may incorrect, from or of or vary management’s risks or estimates prove actual materialize underlying these assumptions

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

the this Adam At presentation to I’d point, St. like hand to over John.

Adam St. John

everyone. Thank you, morning, Tim. Good

We are and some through uncertain unprecedented times. definitely going

opportunity obvious company work. the helping situation for work take through unfortunate us So and I’d pandemic. bravery, workers to like community like dealing to commitment hard start the off frontline to by for this our and this recognizing the thank their leaders our with in I’d all terrible also

So thanks everybody.

of abrupt and been three beginning of the COVID-XX disruption, first a started with with definitely presentation. the let’s sudden slide XXXX get in quarter. outbreak the has concern time So

per safe cost our me, what operations, been They effective a running really have recommendations CDC employees. an of health first for safety and our outstanding the government mill and comes OSHA state guidelines in job doing So and and is mind to manner.

lots folks implemented mills in keep have different of things the to our We safe.

supplied social working in areas, close We workers have of also We implemented install we frequent and where things barriers and labs work for symptoms. distancing. control screening facemasks, proximity rooms, like like that, are cleaning are

the keep safe of to good on our going try people lots and work mills to healthy. So

appreciate working pandemic and so also customers And I fortunately haven’t that us had will suppliers any through we our note much situation. with appreciated we issues, supply there. I --

In can development company, are cost overall addition, across quick our means watching our we really we product cash. been in on product control allocation we mix, but the act efforts have focused in to which what managing and in capital managing

the liquidity the the in a Our of the quarter financial closed the $XXX mills quarter, combination position to sales is ABL. two funds through Pixelle strong. we first which of had under available the of of the At proceeds end of and million first

All of this cash through economic and crisis. these will actions certainly conserve help manage us

$XX million Now sales moving million, first to million adjusted million, EBITDA adjusted of XXXX. for for $XXX the of of $XX the we $XXX with sales of had results, of EBITDA first four, an compared quarter slide within an to quarter some

Point. the do took up Point sale, include million to the of XXth, quarter of the Androscoggin of revenue first included results $XX $X quarter and on Andro million The adjusted XXXX which from Stevens and half so February date EBITDA of place and

revenues adjusted million an and first quarter XXXX and EBITDA Point $XXX had mills of of $X million. Stevens The Androscoggin a

difference there first was large it’s capacity in XXXX comparison in the So XXXX, to quarter mind Point looking half revenue. ran quarter-to-quarter a quarter in the the that explaining at in important obviously and Luke Stevens difference when of the keep so

mentioned, there and in volume products declined quarter part our the further pandemic products, XXXX. in compared in for the our closure and demand I to the no the quarter. disruption Duluth continued at the of end decline XX% was of first of related quarter is packaging the as already the to exasperated which of at first at grade graphic Our by graphic of rate the And ship big a that intentional as the economic

side, sales the specialty business of a remain at Duluth On business to pulp and release the as with our packaging remains a bright partial online volume. continuing our market grow for which second also with liner to of Packaging months conversion as price quarter. however, up in and increase the a quarter our now sold facility, couple was out result solid scheduled products pulp the

in good to business packaging So we business graphic the got some really solid with that and decline our pulp. and offset decline but have news, some specialty

had teams fatality transactions that I is at Rapids a am safety Wisconsin sorry that quarter, operations currently to the contractor the a had pandemic. came X.XX the number. for despite Mill really with excellent an the however, is mill Our was of TIR performance, a under which there third-party that investigation. tragically We great report,

to of a maintaining have expense strong on focus low percentage sales. managing as continue our including We SG&A industry cost, a our

to that the to try at continue around manage We X% range.

to $X.XX quarter During the and our quarter also a initiate repurchase X.X% this $X.X did or million outstanding around shares a expect that effort limited had in of in We dividend do very share. of available. to we the we continue window second quarterly expect a first

your deck. slide in to turning Now, five

So necessary eliminations quickly the workforce our the positions. COVID reduction our accelerated to Stevens Point SG&A which we due addition address steps We the reduce right-size business in and to to take decline approximately and already our Andro quickly, after sale. to in were to announced XX impact. have These continue what we cost to included mentioned,

things implementing accelerate up so to the are We ahead a time savings, just take we it bit little quicker. of

operating done The every job focus continuing and really with We efforts. are have stone other reduction corporate stepped our up nice over also costs. costs turning a on to mills a reduce and with cost

the to in going of a reduce on costs cash. our work conserve mills So lot and lot a

million We continue high will $XX we to at down facilities. by We at $XX the around year, are trimmed maintaining million manage for the capital our $XX year for out spend million started capital with $XX threshold, reliability aggressively a to to we the and -- million. our while XXXX spend

focused and are maintain second increasing managing also appropriate downtime The our balance to current the plan not inventory downtime levels demand. the levels. supply the we goods to finished on the take and inventory to our demand on will in We necessary quarter, focusing is take

forecast the of Obviously, industry fluid But in decline could forecast will year. the be business, the this the prior of extremely environment, difficult experience current how the you quarter versus XX% versus we business. gets on see to we apply impact when book as COVID-XX Given our continuing it’s second economy shipments quickly for across restarted.

the sale Androscoggin as mentioned the to and quarter, we first So Pixelle. Point in of completed Stevens previously

transaction, Following proceeds did funded we Pixelle from company the authorization by the me. the announce of the $XXX sale, of the to shares million outstanding excuse repurchase

and to a Given stock conserve implementing liquidity state the until of market, our environment. a the the more will current tender it’s to and volatility offer defer prudent stable economy in we there’s course return to economic visibility we believe greater

a would best. this tender believe executing environment at do difficult be We in

a expecting repurchase However, addition presentation. quarter will we to during his $X.XX give share the in little in dividend and have continue of color activity we initiate Allen on a to more mentioned a quarterly will that two

mentioned, Lastly, financial position remains strong. our as I

liquidity. with place balance our sheet and in have are we a We healthy substantial

well this the managing may extremely during and will take pandemic. are arise. keeping cash this on have We weather of Again, and our advantage focus positioned to folks opportunities our to crisis ability our that be safe

turn over to going a it I’m finances that, With our Allen to review of in detail. for

Allen Campbell

Adam. you, Thank

key provide the we Turning some to quarter. metrics seven, page for

our results noted, for includes first mills. sold As two partial quarter quarter our

In fully addition, first operating Luke in our the we last are quarter. year Mill

sales the volume out, the $XXX down million significantly papers the Luke sold mills decline excluding quarter, $XXX in Falls Willamette adjusted graphic and noted, restart business were to as West from declining textbook we in we Decline EBITDA. mill’s the super of in sales are in drove Adam As Coast, delays our million, on significantly. calendar down declined

business this to specialty pulp, percentage we We from are on XX% to mix continuing XX% year. last configuration current and product packaging the our to efforts move the of mill our as year our improve

Mills, Androscoggin positive the net Point out pro to four income try pull noise show sale did net the to by a to Our forma on have Stevens income primarily quarter schedule the of was remaining we the of driven included believe basis, a and on rate run mills.

quarter, On The million believe for page eight, we are pretax $XX for was the items gain $XXX that with in we million. the accounting on for EBITDA show the calculated adjusted appropriate EBITDA sale Verso.

$XX and of Luke addition, of $X for other In tank back million adjusted adjustments had million add we which we cleaning, water waste -- costs. cost,

the sale equipment to and cost this we we land believe are on forward there. significantly We going expect progressing and drop of

reduction forward four-mill primarily We a severance to go overhead, of in related cost booked our related the $X matching of a million structure quarter, with to operation.

we had million relatively addition, the The contested related quarter minor costs typical. to In $X proxy in and were adjustments solicitation. rest the of

last note, quarter. sold year-over-year fourth by nine, $X $X of closing EBITDA million and things for net partial Two to Turning our quarter million the to page the improved bridge the we adjusted year this but impact our $X Luke in performance. mills period the million, made

total XX%. a in with was hit down large mix pricing quarter Price the average

price which As growth our with together grades, packaging product we comparatively lines, a competitive point. intentional lower around actions recycled sell and at are

more products, and offsetting especially Volume extra coated packaging than on liner. times and calendar the super release is on gain down freesheet

In downtime some some we outages. small around volume mill addition extra sales to the took decline,

freight favorable. On the positive side, input costs more are running cost and

for In pay impact. improvement addition, a net a SG&A to off continues favorable and did control cost we us pension at see P&L

a carrying inventory, over on That slightly input our Operations for in time and cost unfavorable. period. accounted cost operations more improved in we this as of shows this than was bridge reduction

$XXX and our of our the used million sheet. through that forward this cash on quarter liquidity. first the in XXXX. I spend to on minutes cash the quarter use liquidity first want first balance is cash use the we seasonal focusing working of The year, compares $XXX a this $XX are Moving We quarter and cash usage million what million always walking at a XX, us. page ended to to first few for quarter. is capital of in Note million $XXX

a year-end $X $XX of this quarter’s customer up that payment expected change at and items million while than this key this swing in major from paying drivers earlier million period, the one had had year. XXXX, accounts changes include, $X looking We million. in $XX million likely And XXXX, individual receivables the

March we In in several and accounts saw April. pay addition, will

We major are customers expect not working write-offs. forward any and we do this managing in our with going area

the hampers up materials winter in the in of by as of quarter. We raw as was inventory ahead chain. $XX million movement in million do wood the we the increased which our $XX the year inventories our quarter we spring fall, Our supply in significantly wood the first built every

slightly, a programs grants the relates $XX had this tons timing impact was million, year of amounts the goods spending and to was value and purchasing and were of capital million, Finished but relatively lower capital payables $XX and included customer to year up from $XX of costs, we check of this busy into $XX in carrying net projects manufacturing lower end down year cash of compensation in-transit a we seasonal year carryover deltas, other primarily accounts first billion, quarter. rebates, last million here last the due

million. projects on spending were $XX New

of number $XX Pension we also EBITDA $XX in million $X quarter, adjusted for million. $XX million. a a the was million, but $X in that’s million credit the the total So the plus million $XX the contribution

We related severance in other other restructuring our Luke miscellaneous mill were items. show schedule, costs included cash discussed repurchase costs the transition the while contest, We share to and proxy the Mill. closure

position Act. spend, capital we through mentioned, austerity cash taxes deferred measures, and allowed Adam on payroll deferred managing are the CARES as As conserving focused by compensation our

the the to we shares. up page and XXX,XXX in repurchase four-day purchased intend and a we $XXX,XXX -- the we Adam know first do. window share quarter Board On $X We XX, where of a in some million just mentioned what that we did summary to authorized what had

million the be able and We market purchases expect open. we of believe depending be is in shares. they price We trading $XX market period could trading open to and open somewhere throughout will the $XX million the projected between to on when window purchase continue and levels

market tender unsettled it believe not formal be the timing to a would Given we offer. initiate good

a as previously initiate discussed Adam share to $X.XX mentioned. dividend expect We

the that, up line With to the for call operator the like to to I’d questions. open return

Operator

Jeff your from first [Operator with you. will of question. Riley. Please Our Thank B. Instructions] question come today Van proceed Sinderen

Jeff Van Sinderen

Hi. A Good of multi-part morning, everyone. couple questions…

Adam St. John

Hi.

Jeff Van Sinderen

April into And pricing lockdown, you can sharing also you and demand and do … cost and your maybe are specialty about you you me. then speak And on how evolved if pulp as the how then in and progression of for about the our more demand the any? U.S. could and mind touch QX? don’t COVID segment a with the separately? and with what Can overall production graphic then March reopens? at if talk plans in you QX have reduction of if thinking little about idle And on planned maybe efforts facilities economy pricing touch you onset

Adam St. John

don’t We will I Yeah. we demand. persistent business guide of you Sure. normally price, but downward lack the due pressure seeing on that all are to across tell the graphic

If they to X% are prediction, you RISI’s XXXX. at X% a look in predicting erosion

on all can So price. I of say that’s kind

We idling quarter. are the second planning on production in

try our and to supply balance to We demand. are going

And of our side last question? what business. We no things, tons for was XXX,XXX the specialty your tons at the pulp downtime really graphic XXX,XXX planned packaging all are what -- and was predicting to on

Allen Campbell

Cost reductions…

Jeff Van Sinderen

just… Was

Adam St. John

reduction effort? Cost

Jeff Van Sinderen

Yeah.

Adam St. John

Yeah. Yeah.

the everything’s on table. So

an Obviously have working comes mills. of of integrated plan it got an are action the out We plan, we austerity that most through.

are shutdowns. that deem We don’t taking our during things is critical out especially we

like going a non-essential safety the that. And us a obviously type things everywhere and millions we operational the of pretty be are mills, that issue anything purchases back list like is are in to spend to all good that have feel on and on the cutting situation. we help the throughout concentrate doing regulatory dollars to going got would We going requirements cutting we

Jeff Van Sinderen

that, Can follow speak think are and into seeing generally the see how that in that more during segments, just in each what a as then you specialty pulp you that? planning opportunities pursue about investment might COVID? better. kind should then are products And that And plans we relatively are opportunities about potentially go types of to trending those of strength? you to to just Okay. which up after of and lean given for maybe perhaps specialty, you capacity you increasing what capital you And relative

Adam St. John

Right.

-- business remains I mentioned, our Our as remain pulp strong. --

any pulp take so we the we So take to and the when pulp the downtime -- with on opportunity can our of make potential some if to we sell machines, market. obviously, we more opportunity on -- make will -- machine, it

is specifically liner Our specialty business of release on business doing well, EX. our

and other release liner have machines are working with had on we trials with have we regard So to and that success run some our some we business.

up that So we are ramping business.

on So kind the things of of things. are the are development product doing those we side

decline So those forward. are businesses us happening. for looking really going good We don’t see any

possible going So as capital we to as for markets little as We on are get as concentrate any deeper. to capital. little plan bit as don’t moving possible significant a those on quickly into

with be We this period. very are to stingy going capital our through

Jeff Van Sinderen

Thanks enough. of questions taking Fair Okay. for best my luck. and

Adam St. John

Thank you.

Operator

Financial. come will question. from Khorsand Please Our of next your proceed BWS question Hamed with

Hamed Khorsand

Hi. Good morning.

took or you noting reported last by share they market are that that customers competitor and on you pricing is they driven had Just driven week? the that pressures seeing, being by competitors being one is when

Adam St. John

from the and the lack is the I of are obviously a have bit It’s going mean, aggressively. taking up both. Yeah. that the do machines we pressure there. of demand But after to approach competitors fill price little

have So to that. react we to

Hamed Khorsand

Are you decline your given shipments? projections your COIVD in sales of in of tactics QX any and XX% changing guys you because just of

Adam St. John

Yeah.

go to the technology are out we Obviously, but sales. are to out talk it. approach get and aggressive guys and an to taking their customers. kind are sales our with can going get there after do on mean, normal and thing, we constantly phones I we think the where share using working can’t with -- of they get road We market the

regard our of efforts speaking often, with more say, we that to feel get at have probably, would, for to trying customers are they are ramped there we where that a for and sure up them. I making

- I a seen get starting we orders at cancellations we coming forward Going flattening and least through. have say, to would some of

here. on what’s to a we be been seeing So bottom may going

Hamed Khorsand

How is gets and economy now the the how you much their got business the impact up again? because do by once oversupplied going you customer think ramp base to right orders COVID-XX fast do just the think

Adam St. John

it’s printer, tough we good. if don’t Jeez, predict I’d one. I don’t be have really visibility can they have what -- if Yeah. a -- inventory. in with That’s I really that

for hard I me that, on to comment it’s So apologize.

Hamed Khorsand

flow current be would given circumstance this cash year? And then the free business, positive still you

Adam St. John

Absolutely.

Hamed Khorsand

Okay. Thank you.

Operator

Our Hoak next question Please come will Hale from & proceed question. of Company. with your Hoak

Hale Hoak

thoughts you million How plan Hi, year what’s versus CapEx guys. Thanks. said you by the What Good morning. more Can growth little you you maintenance of the CapEx? capital $XX kind are said your $XX give expenditures, million. $XX million current your color to this down I is on being think around spent? reduce -- a

Adam St. John

The heavy million and of that’s we problem. we really quarter in million is $X spend $XX driven our by I four million. to outages, then $XX is plan plan all our and three No in Yeah. two believe one, $XX mill quarter -- quarter another on million in spend quarter spend

this focused -- items maintenance point, We on are nothing at just extraordinary. the it’s really just capital

Hale Hoak

Great. Okay.

Adam St. John

did We in packaging some spent we million said to spend that the Duluth first spend we quarter, were we the to going the about products. to capital machine convert $X

Hale Hoak

that -- but that return hitting is And your expectations? is certainly,

Adam St. John

is. It Yes.

Hale Hoak

you. Thank Great.

Adam St. John

Yeah.

Operator

[Operator proceed with next from your Richer shareholder. Instructions] an Adam individual question will question. Please Our [ph], come

Unidentified Analyst

pension the are contribution. Thanks for mill, pension I into Good When announced upload whole $XX year. you had the said in of the a of about kind put to taking morning. Hi. call. you my question going you your the sale guys million

you are you that you not in if that? and on noticed going more So could with the what pension to you are do you explain I in million So QX? $XX do to spent are going detail if any

Allen Campbell

is The for have that still we placeholder $XX the contribution. million

bit little a that. is less than contribution required Our

contribution this for our range our is. see placeholder it’s that So cash... the in year, in you Q But will yes, for required what

Unidentified Analyst

Okay.

Allen Campbell

…contribution.

Unidentified Analyst

Okay.

are to not going once. you you to -- $XX So put the in million $XX not -- in you the have at are put didn’t million

to during are that roughly spend going You the year?

Allen Campbell

quarter. correct. That’s the payments in third Larger

Unidentified Analyst

Got it.

Thanks. do to only the the small And now, are the spend spend converging is Okay. going -- is with to Duluth? there was you to Duluth or do the $X million further or over anything

Adam St. John

that’s spending. we planning are that’s the on -- Currently what

the that are going we in invest first and we that still later will evaluating are We whether of to to continue decide project. phase

Unidentified Analyst

shutting the guess, Got I QX, coming, it. in Europe capacity have anything your competitors here were I further big seen in what about there you lately? And know either close that industry-wide of in shutdown, QX, any happened U.S.,

Adam St. John

Yeah.

announce We competitors have looked announced lot report that it last was I downtime and tons includes XXX,XXX had of a a downtime. that in some downtime here. The of time north RISI of

Unidentified Analyst

Okay.

So you specifically expect you will who could shutting? Anybody mention?

Adam St. John

No. I that. mention can’t

it’s I their earnings think in report.

Unidentified Analyst

XXX,XXX tons have hearing you -- globally are it’s so about But Okay. that that and far? you

Adam St. John

something been Yeah. that’s -- announced. That’s what’s

Unidentified Analyst

Right.

Adam St. John

So far. Yeah.

Unidentified Analyst

Okay. Great.

Okay. Thanks it. very much. Appreciate

Adam St. John

bet. You

Operator

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

Adam St. John

Yeah. on are said Yeah. business. that as uncertain are our we definitely impact I and before, said I having times certainly -- an in unprecedented

allocation measures on lots the our help capital focus crisis. austerity However, through will and us of

intend liquidity and our manage of Our cash our expectations Go remains strong to the and employers flow. company’s shareholders and we of and cash the take customers, ahead. employees, care

Allen Campbell

and… Yeah.

Adam St. John

close. is going Allen to

Allen Campbell

this we cash be year There expected this question the about was it earlier and flow year. challenged will a that free

we we be it’s not helping the flow cash it’s earnings but that positive. So that. free helping We to side, working one crack will and the are spending obvious also on side wanted

Adam St. John

day. great a Have Thanks. right. All Okay.

Operator

Thank very is much today’s attending you now The presentation. concluded. for conference

You may now disconnect.

Billerud Americas (VRS) 11 May 202020 Q1 Earnings call transcript