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Verso reports Q4 and year end 2016 results

Verso reported financial results for the fourth quarter of 2016, including net sales of $646m, net income of $8m, and adjusted EBITDA of $92m, which includes a $25m gain on the elimination of certain post-retirement benefit obligations.

For the full year 2016, results for the predecessor and successor companies are shown below.

Overview 

"Verso closed out the year with a strong fourth quarter, with adjusted EBITDA exceeding our guidance and a solid foundation to build upon in 2017," said Verso Chief Executive Officer, B. Christopher DiSantis. "We are especially pleased to report a significant improvement in Verso's 2016 safety performance, with serious injuries reduced 30 percent compared to 2015.  Our employees have worked very hard to achieve this world-class safety performance, but we believe zero injuries is achievable and won't be satisfied until everyone goes home from work in the same condition as when they arrived.

"With a refreshed capital structure, strong free cash flow and potential opportunities for value creation, Verso is well positioned to compete and win in the global marketplace," DiSantis continued.  "Our aim is high and our determination unmatched as we continue to deliver the high quality products and services our customers expect, strive to further improve our safety performance, improve operating efficiency and drive out cost in every aspect of our business."

Presentation of Predecessor and Successor Financial Results

Verso Corporation (the "Company") adopted fresh-start reporting as of July 15, 2016 (the "Effective Date"), the effective date of its First Modified Third Amended Joint Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code dated June 20, 2016, and the date that Verso emerged from its Chapter 11 cases. As a result of the application of fresh-start reporting, the Company's financial statements for periods prior to the Effective Date are not comparable to those for periods subsequent to the Effective Date. References to "Successor" refer to the Company on or after the Effective Date. References to "Predecessor" refer to the Company prior to the Effective Date. Operating results for the Successor and Predecessor periods are not necessarily indicative of the results to be expected for a full fiscal year. References such as the "Company," "we," "our" and "us" refer to Verso Corporation and its consolidated subsidiaries, whether Predecessor and/or Successor, as appropriate.

Results of Operations – Comparison of Three Months Ended December 31, 2016 to Three Months Ended December 31, 2015

Comments to Results of Operations – Comparison of Three Months Ended December 31, 2016 to Three Months Ended December 31, 2015

  • Net sales for the fourth quarter of 2016 were 15% lower than the fourth quarter of 2015. The sales decline was attributable to both a decrease in total sales volume and a decrease in pricing due to the general softening of demand for coated papers.
  • Gross margin increased from 12% in the fourth quarter of 2015 to 17% in the fourth quarter of 2016 due to the favorable impact from raw material costs, improved operations and benefits related to the elimination of certain post-retirement benefit obligations, resulting in a gain of $25 million in the fourth quarter of 2016.
  • Depreciation, amortization and depletion for the fourth quarter of 2016 was significantly lower than the fourth quarter of 2015, which was attributable to capacity reductions at our Androscoggin Mill, the closure of the Wickliffe Mill and the reduction in fair value of our property, plant and equipment as a result of adopting fresh-start accounting.
  • SG&A expense reduction was attributable to both a decline in spending, reduced (pre) reorganization costs as well as a reclassification of 2016 SG&A to cost of products sold (COPS).
  • Restructuring charges are related to the closure of the Wickliffe Mill in Kentucky and capacity reductions at the Androscoggin Mill in Maine.  2015 includes the reclassification of accelerated depreciation expense previously reported as restructuring charges.

Results of Operations – Comparison of 12 Months Ended December 31, 2016 to 12 Months Ended December 31, 2015

 

Comments to Results of Operations – Comparison of 12 Months Ended December 31, 2016 to 12 Months Ended December 31, 2015

  • Net sales for the 12 months of 2016 were 15% lower than in the 12 months of 2015.  The decline in sales was attributable to both a decline in total sales volume and a decrease in pricing due to the general softening of demand for coated papers, our capacity reductions at our Androscoggin Mill, and the closure of our Wickliffe Mill. 
  • SG&A expenses decreased primarily as a result of synergies achieved from the NewPage acquisition, and a reallocation of $11 million in 2016 SG&A to COPS.
  • Depreciation, amortization and depletion for the 12 months of 2016 was lower than in the same period of the prior year 2015, which was attributable to capacity reductions at our Androscoggin Mill, the closure of the Wickliffe Mill and the reduction in fair value of our property, plant and equipment as a result of adopting fresh-start accounting.
  • Restructuring charges increased $108 million for the 12 months of 2016 compared to the same period of 2015.Restructuring charges for the 12 months of 2016 consisted primarily of non-cash fixed asset write-down charges from the closure of the Wickliffe Mill. 2015 includes restructuring expenses associated with the NewPage acquisition and the Wickliffe, Androscoggin and Bucksport facilities. 
  • Other operating income for the 12 months of 2016 increased $50 million and was primarily attributable to the gain on the sale of hydroelectric facilities in January 2016.
  • Reorganization items, net for the Predecessor period from January 1, 2016 to July 14, 2016, was a net gain of $1,338 million, primarily attributable to adjustments to reflect the gain associated with the elimination of debt, offset by the impact of fresh-start accounting and professional fees directly associated with our Chapter 11 cases.