Verso Corporation Reports First Quarter 2021 Financial Results and Declares Quarterly Cash Dividend of $0.10 per Share

First Quarter 2021 Highlights:
- Net sales of $282 million
- Improving price environment
- Net loss of $90 million after reflecting the write-off on certain assets
- Adjusted EBITDA of $30 million, with an Adjusted EBITDA margin of 10.6%
- $264 million in available liquidity including $118 million in cash
- Returned $12 million in capital to shareholders of combined repurchases and dividends

Overview
"Verso delivered improved first quarter Adjusted EBITDA of $30 million compared to $9 million in the fourth quarter of 2020. We continue to maintain a strong balance sheet and liquidity, with no outstanding debt," said Verso President and Chief Executive Officer Randy Nebel. "We are seeing a rise in order rates and backlogs while realizing announced price increases, indicating demand recovery. Given our strong financial position and improving market dynamics, I am confident we will continue to gain momentum throughout 2021 and generate value for all of our stakeholders."

Comments to Results of Operations - Comparison of Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020
Net sales
Net sales for the three months ended March 31, 2021 decreased $189 million compared to the three months ended March 31, 2020, as a result of significant declines in sales volume and unfavorable price/mix. Of the $189 million, or 40%, net sales decline, $59 million, or 13%, was a result of the sale of our Androscoggin and Stevens Point mills in February 2020, and $33 million, or 7%, was attributable to the indefinite idling of our Duluth Mill in July 2020. The remaining $97 million was a combination of market declines and the idling of our Wisconsin Rapids Mill. Total company sales volume was down from 554 thousand tons during the three months ended March 31, 2020, to 339 thousand tons during the same period of the current year. Of the 215 thousand ton volume decline, 59 thousand tons were a result of the sale of our Androscoggin and Stevens Point mills in February 2020, 54 thousand tons were attributable to the indefinite idling of our Duluth Mill in July 2020, and the additional decline in volume resulted from lower customer demand and the idling of our Wisconsin Rapids Mill.

Operating income (loss)
Operating loss was $109 million for the three months ended March 31, 2021, a decrease of $185 million when compared to operating income of $76 million for the three months ended March 31, 2020.

Operating results for the three months ended March 31, 2021 were positively impacted by:
- Reduced planned major maintenance costs of $1 million
- Lower Selling, general and administrative costs of $12 million driven primarily by cost reduction initiatives in connection with the sale of our Androscoggin and Stevens Point mills in February 2020, lower equity compensation expense and lower severance costs

Operating results for the three months ended March 31, 2021 were negatively impacted by:
- Unfavorable price/mix of $6 million
- Lower sales volume resulting in a decrease of $12 million in net operating income, driven by the impact of the COVID-19 pandemic, the sale of our Androscoggin and Stevens Point mills in February 2020 and the indefinite idling of our Duluth and Wisconsin Rapids mills in July 2020
- Higher net operating expenses of $7 million driven primarily by costs incurred to idle our Duluth and Wisconsin Rapids mills, partially offset by improved performance and cost reduction initiatives across our mill system and reduced corporate overhead
- Higher freight costs of $2 million
- Higher depreciation expense of $79 million due primarily to $84 million in accelerated depreciation associated with the permanent shutdown of No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill in February 2021
- Higher restructuring charges of $5 million primarily associated with the permanent shutdown of our Duluth Mill in December 2020 and of the No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill in February 2021 partially offset by costs associated with the closure of our Luke Mill in June 2019
- Lower other operating income of $87 million, primarily as a result of the $88 million gain on the sale of our Androscoggin and Stevens Point mills in February 2020

Other (income) expense
Other income for the three months ended March 31, 2021 and 2020 includes income of $6 million and $5 million, respectively, associated with the non-operating components of net periodic pension cost (income).

Income tax expense (benefit)
Income tax benefit of $14 million for the three months ended March 31, 2021 primarily reflects estimated tax benefit for the period partially offset by $4 million of additional valuation allowance recognized against state tax credits. Income tax expense of $26 million for the three months ended March 31, 2020 primarily reflects estimated taxes for the period and $6 million of additional valuation allowance recognized against state tax credits.

2021 Outlook
The Company is providing the following outlook for full year 2021:
- Expect capital expenditures to be $50 million to $60 million
- Anticipate pension minimum required1 contribution of $26 million
- Cash Taxes of zero to $5 million
- Improving operating cash flow in excess of cash required to fund capital, pension and dividends
- Anticipate idled and closed mill costs to decline while advancing realization of potential asset sales