Comments to Results of Operations - Comparison of Six Months Ended June 30, 2018 to Six Months Ended June 30, 2017 • Net sales for the first half of 2018 increased $82 million, or 7%, compared to the first half of 2017. The sales increase was attributable to improved average pricing, primarily resulting from inflationary pressures, improvement in product mix and better alignment of supply and demand. The increased average pricing and improvement in product mix resulted in higher revenue, driven by price increases across our product lines while volume was up significantly in specialty papers, partially offset by an overall decrease in sales volume. The overall decrease in volume was driven primarily by a reduction in external pulp sales of 30,000 tons as a result of a planned outage at the Quinnesec Mill and other internal needs. While sales volume of specialty papers increased in the first half of 2018, it was offset by a reduction in sales volume of other coated papers during that same period. • Gross margin, excluding depreciation and amortization expenses, increased from 5.4% in the first half of 2017 to 9.4% in the first half of 2018, driven by higher average pricing and improved product mix, reduced downtime, improved operational performance, reduction of pension costs, favorable wood costs and lower corporate overhead costs, partially offset by lower sales volume, higher planned major maintenance costs, including bi-annual outages at the Quinnesec and Luke mills, increased freight expense and inflation on chemicals, energy and purchased pulp. Click Read More below for additional information.
Verso Corporation (NYSE: VRS) (“Verso” or the “Company”) today announced that the Verso Board of Directors has sent a letter to stockholders in connection with the Company’s upcoming 2019 Annual Meeting of Stockholders, to be held on January 31, 2020. As previously disclosed, the Annual Meeting will include proposals related to the sale of Verso’s Androscoggin and Stevens Point mills to Pixelle Specialty Solutions (the “Pixelle Transaction”). Verso stockholders of record at the close of business on December 16, 2019 are entitled to attend and vote at the Annual Meeting. The Company’s proxy statement and other important information related to the Annual Meeting can be found online at http://www.stockholderdocs.com/VRS.
Verso’s Board of Directors (the “Board”) unanimously recommends that stockholders vote “FOR” ALL seven of Verso’s nominees, “FOR” the approval of the Pixelle Transaction (Company Proposal 2), and “FOR” Company Proposals 3 – 8 on the WHITE proxy card TODAY.
Today the Verso Board will mail the following letter to stockholders:
January 13, 2020
Dear Fellow Stockholders,
Our Annual Meeting for Stockholders to be held on January 31, 2020, is rapidly approaching, and your vote is critical to the future of the Company, no matter how many shares you own. The Board of Directors unanimously recommends that you vote “FOR” ALL seven of Verso’s nominees and “FOR” the approval of the Pixelle Transaction (Company Proposal 2) on the WHITE proxy card TODAY.
Your vote is very important. You are entitled to have accurate and reliable information on which to base your decision. We are writing this letter to provide you with facts that dispel and negate Atlas/Blue Wolf’s contrived mischaracterizations of our Company. We want to set the record straight about the significant value that our proposed Board nominees will create for Verso in the near and long term.
EVERY “FOR” VOTE IS CRITICAL TO APPROVE THE PIXELLE TRANSACTION
ATLAS/BLUE WOLF’S ABSTENTION ON THE PIXELLE TRANSACTION HAS THE SAME IMPACT AS VOTING “AGAINST” SINCE VERSO REQUIRES AN AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES, NOT JUST A MAJORITY OF THE VOTES CAST AT THE ANNUAL MEETING. ATLAS/BLUE WOLF’S ACTIONS ARE PUTTING AT LEAST $225 MILLION OF CAPITAL RETURNS – AND THE FUTURE VALUE OF YOUR INVESTMENT – AT RISK
We believe Atlas/Blue Wolf has commenced its proxy contest so as to control the Company’s specialty mills without paying for them and to provide an exit strategy for its suspected underperforming portfolio asset, Twin Rivers Paper, by combining it with our better performing assets. Atlas/Blue Wolf’s objective is self-serving and doesn’t benefit all of Verso’s stockholders.
Atlas/Blue Wolf’s decision to abstain from voting on the Pixelle Transaction clearly evidences its self-serving agenda: it won’t take a public position on the sale because it doesn’t want to admit that this is a great deal for all of our stockholders – other than Atlas/Blue Wolf, which for the last two years has attempted to gain control of the Stevens Point and Androscoggin Mills without paying fair value. Atlas/Blue Wolf’s abstention is a way of voting NO on the sale and it is clear that Atlas/Blue Wolf took this position for the sole purpose of opposing the transaction. As outlined in our public proxy materials, abstentions have the same effect as voting against the transaction, since Verso requires an affirmative vote of a majority of the outstanding shares, not just a majority of the votes cast at the Annual Meeting. To be approved, the Pixelle Transaction requires the affirmative vote of a majority of shares outstanding. Your vote FOR the Pixelle Transaction is imperative.
Atlas/Blue Wolf is attempting to persuade stockholders that its real purpose for abstaining is to obtain more information about the Pixelle Transaction. We believe it hopes to confuse stockholders who may not understand the ramifications of an abstention. While an abstention may seem to be neutral, Atlas/Blue Wolf is actively sabotaging the deal. Stockholders should not be fooled.
Details about the transaction are disclosed in Verso’s definitive proxy materials;
We recently publicly filed the two additional agreements that Atlas/Blue Wolf stated it needed to review to evaluate the transaction—there is no reason for Atlas/Blue Wolf to abstain except to try to stop the sale;
Atlas/Blue Wolf is stalling for time as it searches for a red herring to kill the Pixelle Transaction;
Atlas/Blue Wolf is spending lots of its money as it tries to force its way into the Verso boardroom, not because its nominees will add any value to the Company but rather because a hostile proxy fight and litigation strategy is still significantly cheaper than paying full and fair value for the Company or its assets;
Atlas/Blue Wolf is forcing Verso to spend stockholders’ money on a costly and distracting proxy contest to defend your interests and the Company’s long-term stockholder value; and
Atlas/Blue Wolf will continue searching for any possible way to execute a deal with its own asset, Twin Rivers Paper, to the detriment of all other stockholders.
YOUR INVESTMENT IS AT RISK. If successful, we believe Atlas/Blue Wolf will hinder the progress your Board and management team are making, destroy the value potential of Verso and prevent stockholders from receiving at least $225 million in proceeds from the Pixelle Transaction.
WE BELIEVE ATLAS/BLUE WOLF SEEKS EFFECTIVE CONTROL OF VERSO BY SEEKING ELECTION OF HIGHLY CONFLICTED, NON-ADDITIVE NOMINEES
Consistent with best practice corporate governance principles, our Board conducted a comprehensive assessment of Atlas/Blue Wolf’s nominees, just as it does with any potential nominees, and the Board determined the Atlas/Blue Wolf nominees are highly conflicted and not additive.
Atlas/Blue Wolf has repeatedly pointed out that two of our nominees lack paper industry-specific experience, yet one of their own nominees, Jeffrey Kirt, has zero experience in the paper industry.
Unlike the activist hedge funds that typically engage in proxy contests for board representation, Atlas/Blue Wolf are private equity firms that own companies directly competing with Verso.
If elected, the Atlas/Blue Wolf nominees may intentionally derail the Pixelle Transaction in an effort to enhance the competitive position of Twin Rivers, a direct competitor of Verso in coated specialty papers. Its actions could potentially jeopardize the benefits of the Pixelle Transaction and influence the size, timing and manner of the distribution of proceeds.
When the Verso Board attempted to reach a reasonable settlement and proposed a cooperation agreement, Atlas/Blue Wolf’s proposed revisions included the ability for its nominees to freely share material, non-public information with Atlas/Blue Wolf, implying a level of dependency that poses a serious conflict of interest and is highly detrimental to other stockholders.
Atlas/Blue Wolf desperately needs effective control of Verso and its attractive assets, so as to influence and facilitate a possible transaction with the Company on terms favorable to Atlas/Blue Wolf at the expense of our other stockholders, and to camouflage the suspected underperformance of the portfolio assets of Atlas/Blue Wolf’s affiliates.
ATLAS/BLUE WOLF IS TARGETING THREE VERSO NOMINEES WHO BRING IMPORTANT DIVERSITY, GOVERNANCE EXPERTISE, INDUSTRY EXPERIENCE AND INSTITUTIONAL KNOWLEDGE TO THE VERSO BOARD
Each of the three Verso nominees that Atlas/Blue Wolf is opposing – Steven D. Scheiwe, Jay Shuster and Nancy M. Taylor – brings specific and necessary skills to the Company that are complementary and additive to the full Board. Replacing any of these directors with the Atlas/Blue Wolf nominees would remove diversity, skills and experience from the Board that are important to Verso’s continued success.
Additionally, Mr. Scheiwe, Mr. Shuster and Ms. Taylor have operational experience transforming companies, some of which includes turnarounds in the paper industry to adapt to changing industry dynamics and meet market demands. We believe their specific skills will support Verso’s continued trajectory, transformation and the outperformance of our peers.
Steven D. Scheiwe Verso Independent Director Since 2016, since the Company emerged from bankruptcy
President of Ontrac Advisors, Mr. Scheiwe is an expert in managing distressed debt issues for private equity firms, companies and funds.
Gained substantial knowledge of business planning and execution, M&A, finance and other aspects of managing a business enterprise
Service as a director of several public and private companies across a wide spectrum of industries provides him with diverse experiences
As a member of the Board since the Company’s emergence from bankruptcy in 2016, Mr. Scheiwe has played an integral role in Verso’s outperformance of both the Company’s peer group and the Russell 2000, with 49% stock appreciation over the last three years
Nancy M. Taylor Verso Independent Director Since 2019
Ms. Taylor has more than 20 years of experience in senior management, in both operational and commercial leadership roles with manufacturing companies, and as chief executive officer of a publicly traded global manufacturer.
Brings unique experience as a former public company CEO, having successfully implemented a growth and market diversification strategy as well as a rigorous capital project approval process for the organization she led.
Having served as a director of various public companies, brings to the Board a strong corporate governance knowledge and a broad set of skills in strategy development, M&A, global operations, commercial experience, corporate governance and business turnaround and growth.
Previously served as President and Chief Executive Officer of Tredegar Corporation, a global manufacturing company, and brings deep leadership and directorship experience to Verso.
Gained and developed extensive business, finance and leadership skills, and possesses an understanding of strategic planning, risk assessment and international operations.
Jay Shuster Verso Independent Director Since 2016, since the Company emerged from bankruptcy
Mr. Shuster is a Managing Member of Shuster Group, advising on strategic and operational planning, M&A, and turnaround management issues.
Lengthy career with Rock-Tenn Company (now WestRock) including ten years in charge of all operations, provides an in-depth understanding of the paper industry and business
Substantial operational and financial management experience in the paper products industry affords him insights into the complex challenges and opportunities faced by Verso
Service as a director of several companies in various industries provides him with broad experiences increases knowledge of effective corporate governance
As a member of the Board since the Company’s emergence from bankruptcy in 2016, Mr. Shuster has played an integral role in Verso’s outperformance of both the Company’s peer group and the Russell 2000, with 49% stock appreciation over the last three years
VOTE “FOR” ALL OF VERSO’S NOMINEES TO ENSURE THE RIGHT MIX OF SKILLS AND EXPERIENCE THAT WILL DELIVER VALUE AND DRIVE THE FUTURE VALUE OF YOUR INVESTMENT
Collectively, Verso’s successful and diverse director nominees have more than 150 years of paper industry experience, and a range of operational, executive and industry experience that will ensure the Board provides our company and operations with the best oversight and strategic counsel.
Our nominees bring deep experience in areas that are critical to our operations and strategy, including finance and M&A, organic growth strategic transformation and governance. Several also have an intimate understanding of the paper industry, including graphics papers, specialty papers, bag papers, linerboard, medium, bleached and unbleached boxboard, and market pulps, as well as extensive experience in international markets.
In light of Verso’s increased focus on our graphics operations on a go-forward basis, we believe the breadth and depth of experience of our nominees is essential to Verso’s ability to continue driving strong performance and delivering value to stockholders.
VOTING “FOR” VERSO’S NOMINEES AND “FOR” THE PIXELLE TRANSACTION ON THE WHITE PROXY CARD IS THE ONLY WAY TO ENSURE YOU RECEIVE THE PROCEEDS FROM THE PIXELLE TRANSACTION
There is only one rational choice. Your vote “FOR” our director nominees and “FOR” the Pixelle Transaction will help ensure that ALL Verso stockholders reap the benefits of our positive momentum and participate in the return of at least $225 million of proceeds from the Pixelle Transaction that we have promised.
Please use the enclosed WHITE proxy card to vote today “FOR” ALL seven of Verso’s nominees listed on the WHITE proxy card: Dr. Robert K. Beckler, Paula H. J. Cholmondeley, Randy J. Nebel, Steven D. Scheiwe, Jay Shuster, Adam St. John and Nancy M. Taylor. Simply follow the easy instructions on the enclosed proxy card to vote by telephone, by Internet or by signing, dating and returning the WHITE proxy card in the postage-paid envelope provided.
On behalf of the Verso Board and management team, we thank you for your continued support and dedication to our Company at this time.
Dr. Robert K. Beckler, Paula H. J. Cholmondeley, Randy J. Nebel, Steven D. Scheiwe, Jay Shuster, Adam St. John, Nancy M. Taylor
YOUR VOTE IS EXTREMELY IMPORTANT NO MATTER HOW MANY SHARES YOU OWN.
If you have questions or need assistance in voting your WHITE proxy card
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