vrs-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from __________ to __________

001-34056

(Commission File Number)

VERSO CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

75-3217389

(State of Incorporation
or Organization)

(IRS Employer
Identification Number)

8540 Gander Creek Drive

Miamisburg, Ohio 45342

(Address, including zip code, of principal executive offices)

(877) 855-7243

(Registrant’s telephone number, including area code)

_____________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.01 per share	VRS	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☐

Accelerated filer

☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☑ Yes ☐ No

As of April 30, 2021, Verso Corporation had 32,650,370 shares of Class A common stock, par value $0.01 per share, outstanding.

Entity Names and Organization

In this report, the term “Verso,” “the Company,” “we,” “us,” and “our” refer to Verso Corporation, which is the ultimate parent entity and the issuer of Class A common stock listed on the New York Stock Exchange, and its consolidated subsidiaries. Verso is the sole member of Verso Holding LLC, which is the sole member of Verso Paper Holding LLC. As used in this report, the term “Verso Holding” refers to Verso Holding LLC, and the term “Verso Paper” refers to Verso Paper Holding LLC.

Forward-Looking Statements

In this quarterly report, all statements that are not purely historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or “Securities Act,” and Section 21E of the Securities Exchange Act of 1934, as amended, or “Exchange Act.” Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “project,” “plan,” “estimate,” “intend” and other similar expressions. They include, for example, statements relating to our business and operating outlook, including our plans with respect to our Duluth Mill and Wisconsin Rapids Mill; the continued impact of the COVID-19 pandemic; assessment of market conditions; and the growth potential of the industry in which we operate. Forward-looking statements are based on currently available business, economic, financial and other information and reflect management’s current beliefs, expectations and views with respect to future developments and their potential effects on us. Actual results could vary materially depending on risks and uncertainties that may affect us and our business. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the adverse impact of idling production, shutting down machines or facilities, restructuring our operations and selling non-core assets; changes in the costs of raw materials and purchased energy; security breaches and other disruption to our information technology infrastructure; uncertainties regarding the impact, duration and severity of the COVID-19 pandemic and measures intended to reduce its spread; the long-term structural decline and general softening of demand facing the paper industry; adverse developments in general business and economic conditions; developments in alternative media, which are expected to adversely affect the demand for some of our key products, and the effectiveness of our responses to these developments; intense competition in the paper manufacturing industry; our limited ability to control the pricing of our products or pass through increases in our costs to our customers; our business being less diversified because of the Pixelle Sale (as defined below), closure of our Luke Mill, our Duluth Mill and the No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill; our dependence on a small number of customers for a significant portion of our business; our ability to compete with respect to certain specialty paper products for a period of two years after the closing of the Pixelle Sale (as defined below); any failure to comply with environmental or other laws or regulations; legal proceedings or disputes; any labor disputes; and the potential risks and uncertainties described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other sections of this Quarterly Report on Form 10-Q as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission, including subsequent annual reports on Form 10-K and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking statement made in this Quarterly Report to reflect subsequent events or circumstances or actual outcomes.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets	4

	Unaudited Condensed Consolidated Statements of Operations	5

	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	5

	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity	6

	Unaudited Condensed Consolidated Statements of Cash Flows	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	23


PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mine Safety Disclosures	24

Item 5.	Other Information	24

Item 6.	Exhibits	25

SIGNATURES		27

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


VERSO CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


	December 31,		March 31,
(Dollars in millions, except per share amounts)	2020		2021
ASSETS
Current assets:
Cash and cash equivalents	$	137	$	118
Accounts receivable, net	83		93
Inventories	224		204
Assets held for sale	17		26
Prepaid expenses and other assets	5		4
Total current assets	466		445
Property, plant and equipment, net	613		505
Deferred tax assets	122		137
Intangibles and other assets, net	44		40
Total assets	$	1,245	$	1,127
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	80	$	82
Accrued and other liabilities	92		85
Current maturities of long-term debt and finance leases	1		1

Total current liabilities	173		168
Long-term debt and finance leases	4		3
Pension benefit obligation	350		337
Other long-term liabilities	34		37
Total liabilities	561		545
Commitments and contingencies (Note 11)
Equity:
Preferred stock -- par value $0.01 (50,000,000 shares authorized, no shares issued)	—		—
Common stock -- par value $0.01 (210,000,000 Class A shares authorized with 35,877,533 shares issued and 33,133,649 outstanding on December 31, 2020 and 36,238,549 shares issued and 32,719,539 outstanding on March 31, 2021; 40,000,000 Class B shares authorized with no shares issued and outstanding on December 31, 2020 and March 31, 2021)	—		—
Treasury stock -- at cost (2,743,884 shares on December 31, 2020 and 3,519,010 shares on March 31, 2021)	(39)		(49)
Paid-in-capital	705		706
Retained deficit	(42)		(135)
Accumulated other comprehensive income	60		60
Total equity	684		582
Total liabilities and equity	$	1,245	$	1,127

See notes to Unaudited Condensed Consolidated Financial Statements.


VERSO CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended
	March 31,
(Dollars in millions, except per share amounts)		2020		2021
Net sales		$	471	$	282
Costs and expenses:
Cost of products sold (exclusive of depreciation and amortization)		427		264
Depreciation and amortization		23		102
Selling, general and administrative expenses		27		15
Restructuring charges		6		11
Other operating (income) expense		(88)		(1)
Operating income (loss)		76		(109)

Interest expense		—		1
Other (income) expense		(4)		(6)
Income (loss) before income taxes		80		(104)
Income tax expense (benefit)		26		(14)
Net income (loss)		$	54	$	(90)
Income (loss) per common share:
Basic		$	1.53	$	(2.71)
Diluted		1.52		(2.71)
Weighted average common shares outstanding (in thousands)
Basic		35,107		33,044
Diluted		35,381		33,044

See notes to Unaudited Condensed Consolidated Financial Statements.


VERSO CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended
	March 31,
(Dollars in millions)		2020		2021
Net income (loss)		$	54	$	(90)




Other comprehensive income (loss), net of tax		—		—
Comprehensive income (loss)		$	54	$	(90)

See notes to Unaudited Condensed Consolidated Financial Statements.


VERSO CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

	Class A						Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
(Dollars in millions, shares in thousands)	Common Shares	Common Stock		Treasury Shares	Treasury Stock								Paid-in-Capital



















Balance - December 31, 2019	34,949	$	—	245	$	(5)	$	698	$	172	$	122	$	987
Net income (loss)	—	—		—	—		—		54		—		54

Treasury shares	—	—		472	(7)		—		—		—		(7)
Common stock issued for restricted stock	817	—		—	—		—		—		—		—

Equity award expense	—	—		—	—		2		—		—		2
Balance - March 31, 2020	35,766	$	—	717	$	(12)	$	700	$	226	$	122	$	1,036

Balance - December 31, 2020	35,878	$	—	2,744	$	(39)	$	705	$	(42)	$	60	$	684
Net income (loss)	—	—		—	—		—		(90)		—		(90)

Treasury shares	—	—		775	(10)		—		—		—		(10)
Common stock issued for restricted stock	361	—		—	—		—		—		—		—
Dividends and dividend equivalents declared	—	—		—	—		—		(3)		—		(3)
Equity award expense	—	—		—	—		1		—		—		1
Balance - March 31, 2021	36,239	$	—	3,519	$	(49)	$	706	$	(135)	$	60	$	582

See notes to Unaudited Condensed Consolidated Financial Statements.


VERSO CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31,
(Dollars in millions)	2020		2021
Cash Flows From Operating Activities:
Net income (loss)	$	54	$	(90)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	23		102
Noncash restructuring charges	—		8


Net periodic pension cost (income)	(4)		(6)
Pension plan contributions	(8)		(7)

Equity award expense	2		1
Gain on Sale of Androscoggin/Stevens Point Mills	(88)		—

Deferred taxes	26		(14)


Changes in assets and liabilities:
Accounts receivable, net	(26)		(10)
Inventories	(24)		16
Prepaid expenses and other assets	—		1
Accounts payable	(18)		1
Accrued and other liabilities	(14)		(3)
Net cash provided by (used in) operating activities	(77)		(1)
Cash Flows From Investing Activities:


Capital expenditures	(22)		(4)

Net proceeds from Sale of Androscoggin/Stevens Point Mills	340		—
Net cash provided by (used in) investing activities	318		(4)
Cash Flows From Financing Activities:






Borrowings on ABL Facility	36		—
Payments on ABL Facility	(36)		—






Principal payment on financing lease obligation	—		(1)
Acquisition of treasury stock	(7)		(10)
Dividends paid to stockholders	—		(3)

Net cash provided by (used in) financing activities	(7)		(14)
Change in Cash and cash equivalents and restricted cash	234		(19)
Cash and cash equivalents and restricted cash at beginning of period	44		139
Cash and cash equivalents and restricted cash at end of period	$	278	$	120
Supplemental cash flow disclosures:
Total interest paid	$	—	$	—
Total income taxes paid	—		—
Noncash investing and financing activities:
Right-of-use assets obtained in exchange for new finance lease liabilities	$	—	$	—
Right-of-use assets obtained in exchange for new capitalized operating lease liabilities	1		—

See notes to Unaudited Condensed Consolidated Financial Statements.

VERSO CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business — Verso is a producer of graphic paper, specialty paper, packaging paper and Northern Bleached Hardwood Kraft, or “NBHK,” pulp. Verso’s products are used primarily in media, marketing applications and commercial printing applications. Uses include catalogs, magazines, high-end advertising brochures, direct-mail advertising, and specialty applications, such as labeling and other special applications. Verso’s NBHK pulp is used to manufacture printing, writing and specialty paper grades, tissue and other products. Verso operates in the pulp and paper market segments. However, Verso determined that the operating income (loss) of the pulp segment is immaterial for disclosure purposes. Verso’s assets are utilized across segments in an integrated mill system and are not identified by segment or reviewed by management on a segment basis. Verso operates primarily in North America.

Sale of Androscoggin Mill and Stevens Point Mill — On November 11, 2019, Verso and Verso Paper entered into a membership interest purchase agreement, or the “Purchase Agreement,” with Pixelle Specialty Solution LLC, or “Pixelle,” whereby Verso and Verso Paper agreed to sell to Pixelle, or the “Pixelle Sale,” or “Sale of Androscoggin/Stevens Point Mills,” all of the outstanding membership interests in Verso Androscoggin, LLC an indirect wholly owned subsidiary of Verso and the entity that, as of the closing date of the Pixelle Sale, held all the assets primarily related to Verso’s Androscoggin Mill located in Jay, Maine, and Stevens Point Mill, located in Stevens Point, Wisconsin. The transaction was approved by Verso’s stockholders on January 31, 2020 and closed on February 10, 2020 (see Note 5).

Duluth Mill and Wisconsin Rapids Mill — On June 9, 2020, Verso announced plans to indefinitely idle its mills in Duluth, Minnesota and Wisconsin Rapids, Wisconsin, while exploring viable and sustainable alternatives for both mills including restarting, selling or permanently closing one or both mills. Verso’s decision to reduce its production capacity was driven by the accelerated decline in graphic paper demand, primarily resulting from the COVID-19 pandemic. The production capacity of the Duluth Mill is approximately 270,000 tons of supercalendered/packaging paper and the production capacity of the Wisconsin Rapids Mill is approximately 540,000 tons of coated and packaging paper. Verso idled production at the Duluth Mill on July 1, 2020 and at the Wisconsin Rapids Mill on July 27, 2020. On December 31, 2020, Verso decided to permanently shut down the Duluth Mill while continuing with efforts to sell the mill (see Note 10). On February 8, 2021, Verso decided to permanently shut down the No. 14 paper machine and certain other long-lived assets at the Wisconsin Rapids Mill (see Note 10). Verso continues to operate the facility at the Wisconsin Rapids Mill to convert paper produced at the Quinnesec and Escanaba mills to sheets for the commercial print market.

COVID-19 Pandemic — The COVID-19 Pandemic has impacted our operations and financial results since the first quarter of 2020 and continues to have an impact on us. Verso serves as an essential manufacturing business and, as a result, Verso’s mills have continued to be operational during the time of the pandemic in order to meet the ongoing needs of its customers, including those in other essential business sectors, which provide food, medical and hygiene products needed in a global health crisis. The guidelines and orders enacted by federal, state and local governments have, however, impacted demand from retailers, political campaigns, and sports and entertainment events, driving reduced purchases of printed materials and substantially impacting Verso’s graphic paper business.

Verso’s COVID-19 preparedness and response team has been monitoring the pandemic and related events and preparing and implementing responses in accordance with Centers for Disease Control and Prevention, or “CDC,” and the Occupational Safety and Health Administration, or “OSHA,” recommendations as well as federal, state and local guidelines.

While Verso cannot reasonably estimate the full impact of COVID-19 on the business, financial position, results of operations and cash flows, Verso expects the pandemic will continue to have a negative impact on business and financial results.

Basis of Presentation — This report contains the Unaudited Condensed Consolidated Financial Statements of Verso as of December 31, 2020 and March 31, 2021 and for the three months ended March 31, 2020 and 2021. The December 31, 2020 Unaudited Condensed Consolidated Balance Sheet data was derived from audited financial statements, but it does not include all disclosures required annually by accounting principles generally accepted in the United States of America, or “GAAP.” In Verso’s opinion, the Unaudited Condensed Consolidated Financial Statements include all adjustments that are necessary for the fair presentation of Verso’s respective financial condition, results of operations and cash flows for the interim periods

presented. Except as disclosed in the notes to the Unaudited Condensed Consolidated Financial Statements, such adjustments are of a normal, recurring nature. Intercompany balances and transactions are eliminated in consolidation. The results of operations and cash flows for the interim periods presented may not necessarily be indicative of full-year results. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Verso contained in its Annual Report on Form 10-K for the year ended December 31, 2020.

2. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Guidance Adopted in 2021

ASC Topic 740, Income Taxes. In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce the complexity in accounting for income taxes. Verso adopted this guidance on January 1, 2021, and the effect on the Unaudited Condensed Consolidated Financial Statements was not material.

3. REVENUE RECOGNITION

The following table presents the revenues disaggregated by product included on the Unaudited Condensed Consolidated Statements of Operations:


	Three Months Ended
	March 31,
(Dollars in millions)		2020		2021
Paper		$	421	$	250

Packaging		24		7
Pulp		26		25
Total Net sales		$	471	$	282

The following table presents the revenue disaggregated by sales channel included on the Unaudited Condensed Consolidated Statements of Operations:


	Three Months Ended
	March 31,
(Dollars in millions)		2020		2021
End-users and Converters		$	170	$	87
Brokers and Merchants		219		150
Printers		82		45
Total Net sales		$	471	$	282

4. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION

Restricted Cash — As of December 31, 2020 and March 31, 2021, $2 million of restricted cash was included in Intangibles and other assets, net on the Unaudited Condensed Consolidated Balance Sheets primarily related to asset retirement obligations in the state of Michigan. These cash deposits are required by the state and may only be used for the future closure of a landfill. As of both March 31, 2020 and 2021, Cash and cash equivalents and restricted cash on the Unaudited Condensed Consolidated Statements of Cash Flows includes restricted cash of $2 million.

Inventories — The following table summarizes inventories by major category:


	December 31,		March 31,
(Dollars in millions)	2020		2021
Raw materials	$	45	$	41

Work-in-process	31		30
Finished goods	125		114
Replacement parts and other supplies	23		19
Inventories	$	224	$	204

Property, plant and equipment — Depreciation expense for the three months ended March 31, 2020 and 2021 was $22 million and $101 million, respectively. Depreciation expense for the three months ended March 31, 2021 includes $84 million in accelerated depreciation associated with the permanent shutdown of the No. 14 paper machine and certain other long-lived assets at the Wisconsin Rapids Mill (see Note 10). Property, plant and equipment as of March 31, 2020 and 2021 include $3 million and $4 million, respectively, of capital expenditures that were unpaid and included in Accounts payable and Accrued and other liabilities on the Unaudited Condensed Consolidated Balance Sheets.

Income Taxes — Income tax expense for the three months ended March 31, 2020 was $26 million and income tax benefit for the three months ended March 31, 2021 was $14 million. During the three months ended March 31, 2020 and 2021, Verso recognized $6 million and $4 million, respectively, of additional valuation allowance against state tax credits.

5. DISPOSITIONS

Sale of Androscoggin Mill and Stevens Point Mill

On February 10, 2020, Verso completed the Pixelle Sale, selling all of the outstanding membership interests in Verso Androscoggin, LLC, an indirect wholly owned subsidiary of Verso and the entity that, as of the closing date of the Pixelle Sale, held all the assets primarily related to Verso’s Androscoggin Mill located in Jay, Maine and Verso’s Stevens Point Mill, located in Stevens Point, Wisconsin. The Pixelle Sale did not qualify as a discontinued operation. As consideration for the Pixelle Sale, Verso received $352 million in cash, which reflected certain adjustments related to Verso’s estimates of cash, indebtedness and working capital of Verso Androscoggin, LLC and Pixelle assumed $37 million of Verso’s unfunded pension liabilities, which reflected certain adjustments in connection with the completed transfer of the unfunded pension liabilities during the year ended December 31, 2020.

During the three months ended March 31, 2020, Verso received $340 million in net cash proceeds, consisting of $346 million in cash reduced by $6 million in selling costs and recognized an $88 million gain on the sale. In connection with the Pixelle Sale, Verso provided certain transition services to Pixelle and recognized $1 million for these services as a reduction of Selling, general and administrative expenses on the Unaudited Condensed Consolidated Statement of Operation during the three months ended March 31, 2020.

Luke Mill Equipment and Other Asset Sales

On August 1, 2020, Verso entered into an equipment purchase agreement with Halkali Kagit Karton Sanayi ve Tic. A.S., or the “Purchaser,” a company organized under the laws of Turkey, whereby Verso agreed to sell, and the Purchaser agreed to purchase, certain equipment at Verso’s Luke Mill, primarily including two paper machines. The purchase price is $11 million in cash due at various milestones. Verso has received $9 million in non-refundable deposits associated with this sale which includes $1 million in the first quarter of 2021. Verso expects to receive an additional $1 million in the second quarter of 2021 and the final payment of $1 million by the third quarter of 2021. The closing of the equipment purchase, including the transfer of title and ownership of the equipment to the Purchaser, will occur upon satisfactory completion of the disassembly and removal of the equipment and the receipt by Verso of all payments due from the Purchaser. Verso is exploring options for disposal of the remaining assets of the Luke Mill. In connection with these sales, Verso classified $17 million in assets as held for sale on the Unaudited Condensed Consolidated Balance Sheets as of December 31, 2020 and March 31, 2021.

6. DEBT

As of December 31, 2020 and March 31, 2021, Verso Paper had no outstanding borrowings on its $350 million asset-based revolving credit facility, as amended, or the “ABL Facility.”

The amount of borrowings and letters of credit available to Verso Paper pursuant to the ABL Facility is limited to the lesser of $350 million or an amount determined pursuant to a borrowing base ($167 million as of March 31, 2021). As of March 31, 2021, there were no borrowings outstanding under the ABL Facility, with $21 million issued in letters of credit and $146 million available for future borrowings.

7. EARNINGS PER SHARE

The following table provides a reconciliation of basic and diluted income (loss) per common share:


	Three Months Ended
	March 31,
		2020		2021
Net income (loss) available to common stockholders (in millions)		$	54	$	(90)
Weighted average common shares outstanding - basic (in thousands)		35,107		33,044
Dilutive shares from stock awards (in thousands)		274		—
Weighted average common shares outstanding - diluted (in thousands)		35,381		33,044
Basic income (loss) per share		$	1.53	$	(2.71)
Diluted income (loss) per share		$	1.52	$	(2.71)

As a result of the net loss from continuing operations for the three months ended March 31, 2021, 0.8 million restricted stock units were excluded from the calculation of diluted earnings per share as their inclusion would be anti-dilutive. As of March 31, 2020 and 2021, Verso had 1.8 million warrants outstanding at an adjusted exercise price per share of $27.86 and $21.34, respectively (see Note 9). As a result of the exercise price of the warrants exceeding the average market price of Verso’s common stock during the three months ended March 31, 2020 and 2021, 1.8 million and 2.4 million shares, respectively, were excluded from the calculations of diluted earnings per share as their inclusion would be anti-dilutive.

8. RETIREMENT BENEFITS

The following table summarizes the components of net periodic pension cost (income) for the periods presented:


	Three Months Ended
	March 31,
(Dollars in millions)		2020		2021
Service cost		$	1	$	—
Interest cost		12		10
Expected return on plan assets		(17)		(16)


Net periodic pension cost (income)		$	(4)	$	(6)

Verso makes contributions that are sufficient to fund actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act. Verso made contributions to its pension plan of $8 million during the three months ended March 31, 2020 and $7 million during the three months ended March 31, 2021. On March 11, 2021, the government signed into law the American Rescue Plan Act of 2021, or “ARPA”. This act provides for pension funding relief which will reduce Verso’s expected 2021 required cash contribution to $26 million from $46 million. Verso expects to make at least $19 million in required contributions to the pension plan in the remainder of 2021.

9. EQUITY

Equity Awards

During the three months ended March 31, 2021, Verso granted 0.2 million time-based restricted stock units and 0.2 million performance-based restricted stock units to its executives and certain senior managers. The performance-based restricted stock

unit awards granted vest on the performance determination date following the end of the performance period, as measured using an adjusted EBITDAP (earnings before interest, taxes, depreciation, amortization and pension expense/income) metric and a return on invested capital metric over a 3-year period ending December 31, 2023. The vesting criteria of the performance-based restricted stock unit awards meet the definition of a performance condition for accounting purposes. The number of shares which will ultimately vest at the vesting date ranges from 0% to 200% of the number of performance-based restricted stock units granted based on performance during the 3-year cumulative performance period. The compensation expense associated with these performance awards is currently estimated at 100%.

On March 5, 2021, Verso modified certain outstanding restricted stock unit awards as part of a retention arrangement for its Chief Financial Officer. If the Chief Financial Officer does not voluntarily terminate employment with Verso before June 30, 2021 then his performance-based restricted stock units will remain outstanding and can vest on a pro-rata basis and the next tranche of his time-based restricted stock units will vest. This change was considered a modification and resulted in a revaluation of his 2019 and 2020 performance-based restricted stock units to a fair value of $0.67 and $8.66, respectively, and a revaluation of his 2018, 2019 and 2020 time-based restricted stock units that will vest as a result of the modification to a fair value of $13.32.

Verso recognized equity award expense of $2 million and $1 million for the three months ended March 31, 2020 and 2021 respectively. As of March 31, 2021, there was approximately $7 million of unrecognized compensation cost related to the 0.8 million non-vested restricted stock units, which is expected to be recognized over the weighted average period of 2.3 years.

Time-based Restricted Stock Units

Changes to non-vested time-based restricted stock units for the three months ended March 31, 2021 were as follows:


	Restricted Stock	Weighted Average
	Units	Grant Date
Shares (in thousands)	Outstanding	Fair Value
Non-vested at December 31, 2020	421	$	9.95
Granted (1)	178	12.56
Vested	(211)	8.82
Forfeited	(2)	11.60
Non-vested at March 31, 2021(2)	386	11.77

(1) Includes 3 thousand dividend equivalent units on certain time-based restricted stock unit awards for dividends related to the stock units granted but not yet vested at the time cash dividends were paid.

(2) Includes the modified value of the time-based restricted stock units associated with the retention agreement for the Chief Financial Officer.

Performance-based Restricted Stock Units

Changes to non-vested performance-based restricted stock units for the three months ended March 31, 2021 were as follows:


	Restricted Stock	Weighted Average
	Units	Grant Date
Shares (in thousands)	Outstanding	Fair Value
Non-vested at December 31, 2020	424	$	12.21
Granted (1)	179	12.54
Incremental shares vested (2)	10	—
Vested	(143)	12.90
Forfeited	(21)	10.44
Non-vested at March 31, 2021 (3)	449	10.95

(1) Includes 3 thousand dividend equivalent units on certain performance-based restricted stock unit awards for dividends related to the stock units granted but not yet vested at the time cash dividends were paid.

(2) Incremental shares are a result of performance at 113% of the target level of shares subject to the performance based restricted stock units.

(3) Includes the modified value of the performance-based restricted stock units associated with the retention agreement for the Chief Financial Officer.

Share Repurchase Authorization and Dividends

On February 26, 2020, Verso’s Board of Directors authorized up to $250 million of net proceeds from the Pixelle Sale to be used to repurchase outstanding shares of Verso common stock. In conjunction with the declaration of the special cash dividend of $3.00 per share, or $101 million, on August 5, 2020, Verso’s Board of Directors reduced Verso’s total share repurchase

authorization from $250 million to $150 million. During the three months ended March 31, 2021, Verso purchased approximately 0.7 million shares of its common stock under the share repurchase authorization at a weighted average cost of $13.06 per share. As of March 31, 2021, $112 million of the $150 million authorized remained.

On February 5, 2021, Verso’s Board of Directors declared a quarterly cash dividend of $0.10 per share of Verso's common stock, which was paid on March 29, 2021, to stockholders of record on March 18, 2021. On May 6, 2021, Verso’s Board of Directors declared a quarterly cash dividend of $0.10 per share of Verso’s common stock, payable on June 29, 2021, to stockholders of record on June 17, 2021.

Warrants

On July 15, 2016, warrants to purchase up to an aggregate of 1.8 million shares of Class A common stock were issued to holders of first-lien secured debt at an initial exercise price of $27.86 per share and a seven-year term, subject to customary anti-dilution adjustments. In connection with the

SEC Form 10-Q filed by Verso Corporation