UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K


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

For the fiscal year ended December 31, ~~2020~~2021


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

Verso Corporation

(Exact name of registrant as specified in its charter)

Delaware

001-34056

75-3217389

(State of Incorporation
or Organization)

(Commission File Number)

(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☑ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

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

As of June 30, ~~2020~~2021, the aggregate market value of the voting and non-voting common equity of Verso Corporation held by non-affiliates, computed by reference to the price at which the common equity was last sold on the last business day of the most recently completed second fiscal quarter, was $~~400~~523,~~452~~592,~~075~~090. For purposes of this calculation, only those shares held by directors, executive officers and holders of 10% or more of the voting securities of Verso Corporation have been excluded as held by affiliates. Such exclusion should not be deemed a determination or an admission by Verso Corporation or any such person that such individuals or entities are or were, in fact, affiliates of Verso Corporation.

As of February 1918, ~~2021~~2022, Verso Corporation had 3329,~~071~~154,~~589~~580 shares of Class A common stock, par value $0.01 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

The information required by Part III will either be (i) included in an amendment to this Annual Report on Form 10-K, or (ii) incorporated by reference from portions of the definitive proxy statement of Verso Corporation to be filed in connection with the ~~2021~~2022 annual meeting of stockholders of Verso Corporation. Such amendment or proxy statement will be filed with the Securities and Exchange Commission no later than 120 days after December 31, ~~2020~~2021.

Verso Corporation

Form 10-K

December 31, ~~2020~~2021

TABLE OF CONTENTS

PART I
		Page
Item 1.	Business	3
Item 1A.	Risk Factors	1110
Item 1B.	Unresolved Staff Comments	2122
Item 2.	Properties	2122
Item 3.	Legal Proceedings	22
Item 4.	Mine Safety Disclosures	22
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2624
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	4037
Item 8.	Financial Statements and Supplementary Data	4239
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	7976
Item 9A.	Controls and Procedures	7976
Item 9B.	Other Information	7976
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	76
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	8077
Item 11.	Executive Compensation	8077
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	8077
Item 13.	Certain Relationships and Related Transactions and Director Independence	8077
Item 14.	Principal Accounting Fees and Services	8077
PART IV
Item 15.	Exhibits, Financial Statement Schedules	8178
Item 16.	Form 10-K Summary	8583
Signatures		8684

Forward-Looking Statements

In this annual 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~~regarding tothe pending acquisition of our company by BillerudKorsnäs AB, or the “Merger”; our business and operating outlook, including our plans with respect to our ~~Duluth Mill and~~ Wisconsin Rapids Mill; the ~~potential~~continued impact of the ~~coronavirus, or “~~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 inability to complete the Merger due to the failure to obtain stockholder approval or failure to satisfy the other conditions to the completion of the Merger, including, but not limited to, receipt of required regulatory approvals; risks that the proposed Merger disrupts our current operations or affects our ability to retain or recruit key employees; the effect of the announcement or pendency of the Merger on our business relationships, operating results and business generally; 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, and the impact of COVID-19 on economic conditions, including with respect to labor market conditions, economic activity, consumer behavior, supply chain shortages and disruptions and inflationary pressure; 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 continue 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~~the sale of our ~~Luke~~Duluth Mill, the closure of our ~~Duluth~~Luke Mill and permanent shut down of 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,” as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission, ~~or “SEC,”~~ including subsequent annual reports on Form 10-K and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking ~~statements~~statement made in this annual report to reflect subsequent events or circumstances or actual outcomes.

Market and Industry Information

Market data and other statistical information used throughout this annual report are based on independent industry publications, government publications, reports by market research firms, or other published independent sources. Some data is also based on our good-faith estimates which are derived from our review of internal surveys, as well as the independent sources listed above. Although we believe these sources are reliable, we have not independently verified the information. Industry prices for coated paper provided in this annual report are, unless otherwise expressly noted, derived from RISI, Inc. data. “North American” data included in this annual report that has been derived from RISI, Inc. only includes data from the United States and Canada. Any reference to grade No. 3 and grade No. 4 coated paper relates to 60 lb. basis weight and 50 lb. basis weight, respectively. The RISI, Inc. data included in this annual report has been derived from the RISI Paper Trader: A Monthly Monitor of the North American Graphic Paper Market, January ~~2021~~2022.

PART I

Item 1. Business

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.

Overview

We are a leading North American producer of coated paper, shipped in both roll and sheet formats, which is used primarily in printing applications to produce high-end advertising brochures, catalogs and magazines among other media and marketing publications as well as specialty and packaging applications. We also produce and sell Northern Bleached Hardwood Kraft, or “NBHK” pulp, which is used to manufacture printing and writing paper grades and tissue products.

As of the date of this report, we operate three paper machines at our mill in Escanaba, Michigan and one paper machine and one NBHK pulp machine at our mill in Quinnesec, Michigan. The mills are fully integrated, in that they produce the majority of the pulp and energy needed for their paper production, and they are located in close proximity to the major printing markets. The mills have an aggregate annual production capacity of approximately 1,400,000 tons of paper and ~~market~~ NBHK pulp. We also operate a sheeting facility in Wisconsin Rapids, Wisconsin to convert paper produced at our Michigan mills to sheets for the commercial print market.

We sell and market our products to approximately 200 customers which comprise approximately ~~1,100~~900 end-user accounts. We have long-standing relationships with many leading paper merchants, commercial printers, brokers, magazine and catalog publishers, and specialty retail merchandisers. Our relationships with many of our large customers average more than 20 years. We reach end-users through several distribution channels, including direct sales, commercial printers, paper merchants and brokers. Our NBHK pulp sales are handled through direct relationships and brokers.

Recent Developments

~~Sale~~Agreement ~~of Androscoggin Mill~~ and ~~Stevens~~Plan ~~Point~~of ~~Mill~~Merger

On ~~November~~December 1119, ~~2019~~2021, or the “Agreement Date,” we entered into aan ~~membership~~Agreement ~~interest~~and ~~purchase~~Plan ~~agreement~~of Merger, or the “~~Purchase~~Merger Agreement,” with ~~Pixelle~~BillerudKorsnäs ~~Specialty~~Inc., ~~Solution~~a ~~LLC~~Delaware corporation, or the “~~Pixelle~~Parent,” ~~whereby~~West weAcquisition ~~agreed~~Merger toSub ~~sell~~Inc., toa ~~Pixelle~~Delaware corporation and a wholly owned subsidiary of Parent, or ~~the~~ “~~Pixelle~~Merger ~~Sale~~Sub,” and, solely for purposes of certain sections thereof (as specified therein), BillerudKorsnäs AB, a Swedish limited company, which we refer to as “Guarantor” or ~~"Sale~~“BillerudKorsnäs.” Parent is a wholly owned subsidiary of ~~Androscoggin/~~Guarantor. Pursuant to the Merger Agreement, Merger Sub will merge with and into Verso, with Verso surviving the Merger as a wholly owned subsidiary of Parent.

~~Stevens~~The ~~Point~~closing ~~Mills," all~~ of the ~~outstanding~~Merger ~~membership~~is ~~interests~~subject into ~~Verso~~certain ~~Androscoggin~~conditions, ~~LLC,~~including: an(a) ~~indirect~~the ~~wholly~~adoption ~~owned subsidiary~~ of ~~Verso~~the ~~and~~Merger ~~the~~Agreement ~~entity~~by ~~that~~our stockholders, as(b) of the ~~closing~~expiration ~~date~~or termination of ~~the~~any ~~Pixelle~~applicable ~~Sale,~~waiting ~~held~~periods ~~all~~under the ~~assets~~Hart-Scott-Rodino ~~primarily~~Antitrust ~~related~~Improvements toAct ~~Verso’s~~of ~~Androscoggin~~1976, ~~Mill~~as ~~located in Jay~~amended, ~~Maine,~~or ~~and~~the ~~Stevens~~“HSR ~~Point Mill~~Act,” ~~located~~(c) inreceipt ~~Stevens~~of ~~Point,~~certain ~~Wisconsin.~~regulatory ~~The~~approvals ~~transaction~~set ~~was~~forth ~~approved~~in bythe ~~Verso’s~~Merger ~~stockholders~~Agreement, on(d) ~~January~~the ~~31,~~absence ~~2020,~~of ~~and~~any ~~closed~~law onor ~~February~~governmental ~~10,~~order ~~2020.~~or Asother ~~consideration~~legal ~~for~~restraint ~~the~~or ~~Pixelle~~prohibition ~~Sale,~~preventing wethe ~~received~~consummation ~~$352~~of ~~million~~the ~~in cash~~Merger, ~~which~~(e) ~~reflected~~the ~~certain~~accuracy ~~adjustments~~of ~~related~~the toother ~~our~~party’s ~~estimates~~representations ofand ~~cash~~warranties, ~~indebtedness~~(f) ~~and~~the ~~working~~other ~~capital~~party’s ofcompliance ~~Verso~~in ~~Androscoggin,~~all ~~LLC~~material ~~and~~respects ~~Pixelle~~with ~~assumed~~its ~~$37~~covenants ~~million~~under ofthe ~~Verso’s~~Merger ~~unfunded~~Agreement ~~pension~~and ~~liabilities,~~(g) ~~which~~the ~~reflected~~absence ~~certain~~of ~~adjustments~~a inCompany ~~connection~~Material ~~with~~Adverse ~~the~~Effect ~~completed~~(as ~~transfer~~defined ofin the ~~unfunded~~Merger ~~pension~~Agreement) ~~liabilities~~since ~~during~~ the ~~year~~Agreement ~~ended~~Date. ~~December~~On 31January 11, ~~2020.~~2022, ~~The~~Verso ~~Pixelle~~and ~~Sale~~BillerudKorsnäs ~~reduced~~made the ~~aggregate~~filings ~~annual~~required ~~production~~to ~~capacity~~be ofmade ~~our~~under ~~mills~~the byHSR ~~approximately 660~~Act,~~000~~ ~~tons.~~and ~~The~~the ~~Androscoggin~~applicable ~~and~~waiting ~~Stevens~~period ~~Point~~under ~~mills~~the ~~together~~HSR ~~represented~~Act ~~approximately~~expired ~~22%~~on ofFebruary ~~our~~10, ~~revenues~~2022. ~~for~~Subject to the ~~year~~satisfaction ~~ended~~of ~~December~~the ~~31,~~remaining ~~2019.~~closing ~~See~~conditions, ~~Note~~we 4expect to ~~our~~close ~~Consolidated~~the ~~Financial~~Merger ~~Statements~~by the second quarter 2022.

For additional information related to the Merger Agreement, please refer to our filings previously made with the SEC in connection with the proposed Merger, including our definitive proxy statement filed on February 8, 2022 and the full text of the Merger Agreement, which is attached as Exhibit 2.2 to this report.

~~Duluth~~Because the Merger is not yet complete, and ~~Wisconsin~~except ~~Rapids~~as ~~Mills~~otherwise specifically stated, the descriptions and disclosures presented elsewhere in this Annual Report on Form 10-K assume the continuation of Verso as a public company.

OnSee ~~June~~Note 9,2 ~~2020, we announced plans~~ to ~~indefinitely idle~~ our ~~mills~~Consolidated inFinancial ~~Duluth, Minnesota and Wisconsin Rapids, Wisconsin, while exploring viable and sustainable alternatives for both mills~~Statements. Those alternatives included restarting, selling or permanently closing one or both mills. To assist in evaluating the possible sale of these idled mills, we have been working with outside advisors. Our decision to reduce production capacity was driven by the accelerated decline in graphic paper demand, primarily resulting from the COVID-19 pandemic. The “stay-at-home” and other orders related to the COVID-19 pandemic have significantly reduced the use of print advertising in various industries, including retail, sports, entertainment and tourism. 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. We idled production at the Duluth Mill on July 1, 2020 and at the Wisconsin Rapids Mill on July 27, 2020. In the third quarter of 2020, we recognized $3 million in severance and benefit costs, included in Costs of products sold, associated with the idling of our Duluth Mill and in the fourth quarter of 2020, we recognized $5 million in severance and benefit costs, included in Costs of products sold, associated with the idling of our Wisconsin Rapids Mill. We continue to operate the facility at our Wisconsin Rapids Mill to convert paper produced at our Quinnesec and Escanaba mills to sheets for the commercial print market.

OnSale December 31, 2020, we decided to permanently shut down our paper mill in Duluth, Minnesota while continuing with efforts to sell the mill. We furloughed approximately 190 employees when the mill was idled in July 2020, while a smaller group of ~~approximately 35 employees remained at the mill to maintain critical systems. In connection with the closure of the~~ Duluth Mill, we recognized $65 million of accelerated depreciation which is included in Depreciation and amortization on the Consolidated Statement of Operations for the year ended December 31, 2020. In addition, we recognized $6 million in charges associated with certain contract termination, write-off of property, plant and equipment, spare parts and inventory, and $1 million in additional severance and related benefits in the fourth quarter of 2020 due to a further reduction in the remaining employees.

On ~~February~~May 813, 2021, weVerso ~~decided~~Minnesota toWisconsin ~~permanently~~LLC, ~~shut~~an ~~down~~indirect ~~the~~wholly ~~No.~~owned 14subsidiary ~~paper~~of ~~machine~~Verso, ~~and~~entered ~~certain~~into ~~other~~an ~~long-lived~~asset ~~assets~~purchase atagreement ~~our~~with ~~paper~~ST ~~mill~~Paper ~~in Wisconsin Rapids~~1, ~~Wisconsin,~~LLC ~~while continuing to explore viable~~ and ~~sustainable~~sold ~~alternatives~~all ~~with~~of the ~~remaining~~ assets, ~~including~~primarily ~~our~~related ~~converting~~to ~~operations, No. 16 paper machine and other remaining long-lived assets. This decision will permanently reduce~~ our ~~total~~Duluth ~~annual~~Mill ~~production~~located ~~capacity~~in ~~by 185~~Duluth,~~000~~ ~~tons~~Minnesota offor ~~coated~~$7 ~~paper.~~million ~~We furloughed approximately 700 employees when the Wisconsin Rapids Mill was idled~~ in ~~July~~cash ~~2020~~less ~~and~~costs ~~do not expect~~ to ~~further~~sell ~~reduce the number~~ of ~~employees~~$1 ~~remaining at the mill~~million. InThe ~~the~~sale, ~~first~~including ~~quarter~~related ofsale ~~2021~~costs, weresulted ~~expect~~in toa ~~recognize~~loss ~~$95~~of ~~million to~~ $~~105~~3 million ofincluded ~~accelerated~~in ~~depreciation~~Other ~~and~~operating ~~pre-tax~~(income) ~~non-cash~~expense ~~charges~~on ~~associated~~the ~~with~~Consolidated ~~the~~Statement ~~No.~~of 14Operations ~~paper~~for ~~machine~~the ~~and~~year ~~certain~~ended ~~other~~December ~~long-lived~~31, ~~assets~~2021.

~~Luke~~Changes ~~Mill~~to Executive Officers

On ~~April~~January 3027, ~~2019~~2021, ~~we announced~~ the ~~permanent~~Board ~~shutdown~~ of ~~our~~Directors ~~paper~~appointed ~~mill~~Randy inJ. ~~Luke,~~Nebel ~~Maryland~~as inour ~~response~~President toand ~~the~~Chief ~~continuing~~Executive ~~decline in customer demand for the grades of coated freesheet paper produced at the Luke Mill~~Officer, ~~along~~prior ~~with~~to ~~rising~~which ~~input~~he ~~costs,~~served aas ~~significant~~our ~~influx~~interim ofPresident ~~imports~~ and ~~rising~~Chief ~~compliance~~Executive ~~costs~~Officer ~~and~~since ~~infrastructure~~September ~~challenges associated with environmental regulation. We completed the shutdown and closure of the Luke Mill in June 2019~~30, ~~which reduced our coated freesheet production capacity by approximately 450,000 tons and eliminated approximately 675 positions~~2020.

OnAllen ~~August 1, 2020, we entered into an equipment purchase agreement with Halkali Kagit Karton Sanayi ve Tic~~J. ~~A.S.~~Campbell, aour ~~company~~Senior ~~organized~~Vice ~~under~~President ~~the laws of Turkey, whereby we agreed to sell,~~ and ~~the~~Chief ~~buyer~~Financial ~~agreed to purchase~~Officer, ~~certain~~retired ~~equipment~~effective atJune ~~our Luke Mill~~30, primarily including two paper machines. The purchase price was $11 million in cash due at various milestones. We received $8 million in non-refundable deposits associated with the sale during the year ended December 31, 2020, and an additional $1 million in the first quarter of 2021. We expect 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 buyer, will occur upon satisfactory completion of the disassembly and removal of the equipment and the receipt, by us, of all payments due from the buyer.

On ~~October~~April 305, ~~2020~~2021, weMatthew ~~received~~M. $4Archambeau ~~million~~resigned ofas ~~cash proceeds for the sale of ancillary land associated with~~ our ~~Luke~~Senior ~~Mill~~Vice ~~with~~President ~~a net book value~~ of $4Manufacturing ~~million~~and Energy.

WeOn ~~have~~May ~~evaluated~~6, 2021, the ~~remaining~~Board ~~assets~~ of ~~our~~Directors ~~Luke~~appointed ~~Mill~~Kevin ~~and~~M. ~~have~~Kuznicki ~~received~~as aSenior ~~letter~~Vice ofPresident, ~~intent~~General toCounsel ~~purchase~~and ~~these assets~~Secretary. ~~Negotiations for a purchase agreement are ongoing.~~

~~Changes~~On toJune 4, 2021, the Board of Directors appointed Brian D. Cullen to serve as Verso’s Senior Vice President and ~~Officers~~Chief Financial Officer, effective June 16, 2021.

On January 30, 2020, we entered into a Cooperation Agreement with Lapetus Capital II LLC together with its affiliates, including Atlas Holdings LLC, or “Atlas,” and Blue Wolf Capital Advisors IV, LLC together with its affiliates, or “Blue Wolf,”

and certain of their respective affiliates, which settled the proxy contest with respect to our 2019 Annual Meeting of Stockholders held on January 31, 2020, or the “2019 Annual Meeting.”

Pursuant to the Cooperation Agreement, Verso, Atlas and Blue Wolf agreed to take the necessary actions for Verso’s Board of Directors to consist of the following individuals immediately after our 2019 Annual Meeting: Dr. Robert K. Beckler, Marvin Cooper, Sean T. Erwin, Jeffrey E. Kirt, Randy J. Nebel, Nancy M. Taylor and Adam St. John. Immediately following the certification of voting result of the 2019 Annual Meeting on February 6, 2020, Marvin Cooper was appointed to fill a vacancy on the Board.

On September 30, 2020, Adam St. John resigned from his role as President and Chief Executive Officer and from our Board of Directors and Randy J. Nebel, a member of our Board of Directors, was appointed as our interim President and Chief Executive Officer. On January 27, 2021, the Board of Directors appointed Randy J. Nebel as Verso’s President and Chief Executive Officer.

COVID-19 Pandemic

The ~~outbreak of~~ COVID-19, ~~which was declared by the World Health Organization to be a global~~ pandemic, ishas ~~impacting~~impacted ~~worldwide~~our ~~economic~~operations ~~activity. In an effort to contain~~ and ~~combat~~financial ~~the~~results ~~spread~~since ~~of COVID-19, government and health authorities around~~ the ~~world~~first ~~have~~quarter ~~taken~~of ~~extraordinary~~2020 and ~~wide-ranging~~continues ~~actions, including orders~~ to ~~close all businesses not deemed essential, quarantines and “stay-at-home” orders. Although some of these governmental restrictions~~ have ~~since been lifted or scaled back, recent surges of COVID-19 and the discovery of new variants of the virus may lead to restrictions being implemented in~~ an ~~effort~~impact toon ~~reduce the spread of COVID-19~~us. We serve as an essential manufacturing business and, as a result, we have continued to be operational during ~~this~~the ~~time~~pandemic in order to meet the ongoing needs of our customers, including those in other essential business sectors, which provide food, medical and hygiene products needed in a global health crisis. ~~The~~However, the guidelines and orders enacted by federal, state and local governments ~~have~~in 2020 impacted demand from retailers, political campaigns, and sports and entertainment events, driving reduced purchases of printed materials and substantially impacting our graphic paper business.

~~Our~~There continue to be significant uncertainties associated with the COVID-19 ~~preparedness~~pandemic, including with respect to the resurgence of new and ~~response~~more ~~team~~contagious ~~has~~variants ~~been~~of ~~monitoring~~the virus; the ~~pandemic~~efficacy ~~and~~of ~~related~~the ~~events~~vaccines introduced to combat the virus and ~~preparing~~the public acceptance of such vaccines; and ~~implementing~~the ~~responses~~impact inof ~~accordance~~COVID-19 on economic conditions, including with ~~the~~respect ~~Centers~~to ~~for~~labor ~~Disease~~market ~~Control~~conditions, ~~and~~economic ~~Prevention~~activity, orconsumer ~~“CDC~~behavior,” ~~and~~supply ~~the~~chain ~~Occupational~~shortages ~~Safety~~and disruptions and ~~Health~~inflationary ~~Administration,~~pressure; orall ~~“OSHA,”~~of ~~recommendations~~which ascould ~~well~~have asa ~~federal~~material impact on our business, ~~state~~financial position, results of operations and ~~local~~cash ~~guidelines~~flows.

While we cannot reasonably estimate the full impact of COVID-19 on our business, financial position, results of operations and cash flows, ~~the~~we ~~pandemic~~saw ~~will continue to have a negative impact on~~ our ~~business and financial results. The full extent to which COVID-19 impacts our operations will depend on future developments~~sales, ~~which~~volume ~~are highly uncertain, including, among others, the duration of the outbreak, new information that may emerge concerning the severity of COVID-19~~ and ~~the~~prices ~~actions~~continue ~~taken, especially those by governmental authorities,~~ to ~~contain~~recover ~~its~~during ~~spread or treat its impact including the availability, effectiveness and/or public acceptance of any U~~2021.S. ~~Food and Drug Administration, or “FDA,” approved COVID-19 vaccines.~~

~~Share Repurchase Authorization~~History

OnWe ~~February~~began ~~26,~~operations ~~2020,~~on ~~our~~August ~~Board~~1, of2006, ~~Directors~~when ~~authorized~~we upacquired tothe ~~$250~~assets ~~million~~and ofcertain ~~net~~liabilities ~~proceeds~~comprising ~~from~~ the ~~Pixelle~~business ~~Sale~~of tothe beCoated ~~used~~and toSupercalendered ~~repurchase~~Papers ~~outstanding~~Division ~~shares~~ of ~~our~~International ~~common stock~~Paper. ~~During~~We ~~the~~were ~~year~~formed ~~ended~~for ~~December~~the ~~31,~~purpose ~~2020,~~of weconsummating ~~purchased~~the ~~approximately~~acquisition ~~2.2~~from ~~million~~International ~~shares~~Paper. ofWe completed our ~~common~~initial ~~stock~~public ~~through~~offering ~~open~~of ~~market~~common ~~purchases~~stock ~~and~~on ~~10b-5 programs under~~ the ~~share~~New ~~repurchase~~York ~~authorization~~Stock atExchange ain ~~weighted~~May ~~average cost of $13~~2008.~~39 per share.~~

In conjunction with the declaration of the special cash dividend of $3.00 per share, or $101 million, on August 5, 2020, our Board of Directors reduced the total amount of the share repurchase authorization from $250 million to $150 million. As of December 31, 2020, $121 million of the $150 million authorized remained.4

Industry

Coated paper is used primarily in media and marketing applications, including catalogs, magazines and commercial printing applications, which include high-end advertising brochures and direct mail advertising. Demand is generally driven by North American advertising and print media trends~~, which in turn have historically been correlated with growth in gross domestic product~~. The coated paper industry has been facing a decline in demand driven primarily by the growth in digital media (see “Item 1A. Risk Factors - Risks Related to Our Industry - The printing and writing paper industry has been facing a long-term structural decline and our profitability may continue to be adversely impacted by such decline”).

In North America, coated paper is classified by brightness and falls into five grades, labeled No. 1 to No. 5, with No. 1 having the highest brightness level and No. 5 having the lowest brightness level. Papers graded No. 1, No. 2 and No. 3 are typically coated freesheet grades. No. 4 and No. 5 papers are predominantly grades containing groundwood. Coated groundwood grades are the preferred grades for catalogs and magazines, while coated freesheet is more commonly used in commercial print applications.

Within the paper industry, specialty paper consists of products which are given unique characteristics in their manufacturing, converting or processing and that have properties suitable for special purposes or custom engineered applications. Specialty paper has unique functional properties and is usually produced in relatively small quantities for a specific product, function or end-use requirement. Commercial and development activities rely largely on defining the unique characteristics of an application, in contrast with other substrates. We have focused on label and converting, flexible packaging and technical paper applications within the specialty paper market.

~~While~~In ~~the~~2021 ~~structural~~demand ~~decline~~for of our products ~~accelerated~~saw inimprovement over 2020, wewhich ~~saw~~was asignificantly ~~significant~~impacted ~~reduction~~by COVID-19. Due to improved economic conditions, print demand held momentum through 2021. Due to reductions in capacity ~~through~~in 2020, the ~~year.~~industry Weoperating ~~have~~rates ~~also~~exceeded ~~seen~~100% ~~improved~~causing ~~demand~~significant reductions in the ~~second~~mills ~~half~~and customers inventories. Imports were hampered by logistical issues and lingering effects of ~~the~~COVID-19 ~~year,~~which ~~specifically~~contributed into the ~~North~~tight ~~American~~marketing ~~commercial~~conditions. ~~print~~Verso’s ~~market.~~backlogs ~~This~~were ~~improved~~strong ~~demand,~~through ~~along~~2021 ~~with~~and ~~lower~~nearly ~~imports,~~all ~~resulted~~of inour ~~stronger~~products ~~shipments~~were ~~from~~on ~~North~~some ~~American~~form ~~mills~~of allocation throughout the year.

Products

We manufacture paper products that serve the graphic and specialty paper markets. In addition, we manufacture pulp for both internal use and external sales.

Graphic paper. The graphic paper market includes coated freesheet, uncoated freesheet, coated groundwood and supercalendered paper. We produce Coated Freesheet and Coated Groundwood No. 4 grades for our customers. Freesheet paper is made from bleached kraft pulp, which is produced using a chemical process to break apart wood fibers and dissolve impurities such as lignin. The use of bleached kraft pulp results in a bright, smooth paper with excellent print qualities. Coated freesheet paper contains primarily kraft pulp with less than 10% mechanical pulp in its composition, and is therefore well-suited for high-end commercial applications, premium magazines, catalogs and direct mail. Groundwood paper includes a fiber component produced through a mechanical pulping process. The use of such fiber results in a bulkier and more opaque paper that is better suited for applications where lighter weights and/or higher stiffness are required. In addition to mechanical pulp, groundwood paper typically includes a kraft pulp component to improve brightness and print quality. Groundwood paper is coated (coated groundwood) for higher quality applications such as catalogs and magazines. Graphic paper revenues have been declining primarily due to the focus on digital media as opposed to traditional print advertising. Revenues from our graphic paper sales represented 6260%, 6066% and 6668% of our total annual net sales for ~~2018~~2019, ~~2019~~2020 and ~~2020~~2021, respectively.

Specialty paper. We offer product solutions for our customers by producing paper grades used as labels for packaging, canned goods and other related applications. Revenues from our specialty paper sales represented 31%, 3120% and 2019% of our total annual net sales for ~~2018~~2019, ~~2019~~2020 and ~~2020~~2021, respectively.

Packaging paper. We produce heavy weight coated freesheet grades for use in higher-end packaging and printing applications such as greeting cards, book covers, folders, labels and point-of-purchase displays. Revenues from our packaging paper sales represented 24%, 45% and 52% of our total annual net sales for ~~2018~~2019, ~~2019~~2020 and ~~2020~~2021, respectively.

Pulp. We produce and sell ~~Northern Bleached Hardwood Kraft, or “~~NBHK” pulp. NBHK pulp is produced through the chemical kraft process using hardwoods. Hardwoods typically have shorter length fibers than softwoods and are used in a variety of end-use applications. NBHK describes pulp produced using a chemical process, whereby hardwood chips are combined with chemicals and steam to separate the wood fibers. The fibers are then washed and pressure screened to remove the chemicals and lignin which originally held the fibers together. Finally, the pulp is bleached to the necessary whiteness and brightness. NBHK pulp is used in applications where a brighter and whiter fiber based product is required. We can also offer Northern Bleached Softwood Kraft pulp, de-inked recycled pulp and unbleached virgin kraft pulp to help meet specific customer requirements. Revenues from our pulp sales represented 5%, 5% and 9% of our total annual net sales for 2018, 2019 and 2020, respectively.

where a brighter and whiter fiber based product is required. We can also offer Northern Bleached Softwood Kraft pulp, de-inked recycled pulp and unbleached virgin kraft pulp to help meet specific customer requirements. Revenues from our pulp sales represented 5%, 9% and 11% of our total annual net sales for 2019, 2020 and 2021, respectively.

Manufacturing

AsWe ~~of the date of this report, we~~ operate three paper machines at our mill in Escanaba, Michigan, and one paper machine and one NBHK pulp machine at our mill in Quinnesec, Michigan~~, and a sheeting facility in Wisconsin~~. The mills have an aggregate annual production capacity of approximately 1,400,000 tons of paper and ~~market~~ NBHK pulp. In 2019, we shut down our paper mill in Luke, Maryland and agreed to sell our Androscoggin Mill located in Jay, Maine and our Stevens Point Mill located in Stevens Point, Wisconsin to Pixelle, which closed on February 10, 2020. In July 2020, we indefinitely idled our mills in Duluth, Minnesota and Wisconsin Rapids, Wisconsin, ~~while~~but ~~exploring~~continue ~~viable~~to ~~and~~operate ~~sustainable~~the ~~alternatives~~sheeting ~~for~~facility ~~both~~at our Wisconsin Rapids mill to convert paper produced at our Michigan mills to sheets for the commercial print market. Our facilities are strategically located within close proximity to major publication printing customers, which affords us the ability to deliver our products more quickly and cost-effectively.

The following table provides key information about our mills and operating paper machines’ capacity as of the date of this report.

Mill/Location	Product/Paper Grades	Paper/Market PulpMachines		Annual ProductionCapacity(in tons)
Duluth, Minnesota (closed)(1)	Supercalendered papers		1		270,000
Escanaba, Michigan	Coated, specialty and uncoated paper		3		730,000
Quinnesec, Michigan	Coated paper and ~~market~~NBHK pulp		2		670,000
Wisconsin Rapids, Wisconsin (idled)(2)	Coated and packaging papers		2		540,000
Wisconsin Rapids, Wisconsin (idled)(1)	Coated and packaging papers		2		540,000

(1) ~~Duluth~~Wisconsin Rapids Mill annual paper production capacity of ~~270~~540,000 ~~tons~~ is not included in our total paper production capacity. On February 8, 2021, we decided to permanently shut down the No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill, which permanently reduced annual production capacity by approximately 185,000 tons of coated paper.

(2) Wisconsin Rapids Mill annual paper production capacity of 540,000 is not included in our total paper production capacity. On February 8, 2021, we decided to permanently shut down the No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill, which will permanently reduce annual production capacity by approximately 185,000 tons of coated paper.

The basic raw material of the papermaking process is wood pulp. The first stage of papermaking involves converting trees to pulp through either a mechanical or chemical process. Before trees can be processed into pulp, they are passed through a debarking drum to remove the bark and be chipped. Once separated, the bark is burned as fuel in bark boilers. The trees are composed of small cellulose fibers which are bound together by a glue-like substance called lignin. The cellulose fibers are then separated from each other through either a mechanical or a kraft pulping process.

After the pulping phase, the fiber furnish is delivered onto the forming fabric of the paper machine. On the forming fabric, the fibers become interlaced, forming a mat of paper, and much of the water is extracted. The paper web then goes through a pressing and drying process to extract the remaining water. After drying, the web goes through a series of on machine and off machine finishing and converting processes that impact product specific attributes to ensure excellent downstream performance. Finally, the paper is wrapped, labeled and shipped.

Our indirect wholly-owned subsidiary, Consolidated Water Power Company, or “CWPCo,” has 33.3 megawatts of generating capacity on 39 generators located in five hydroelectric plants on the Wisconsin River. CWPCo is a regulated public utility that provides electricity to our Wisconsin Rapids facility, and a small number of industrial, light commercial and residential customers.

We utilize a continuous improvement process to lower our cost position and enhance operating efficiency through reduced consumption of energy and material inputs, reduced spending on indirect costs and improved productivity, product quality and safety. The program utilizes benchmarking data to identify improvement initiatives and establish performance targets. Detailed action plans are used to monitor the execution of these initiatives and calculate the amount saved. We also use multi-variable analysis, lean manufacturing, center of excellence teams, source-of-loss initiatives and best practice sharing to constantly improve our manufacturing processes and products. Since 2001, the Quinnesec Mill has been recognized in the Michigan Occupational Safety and Health Administration’s Voluntary Protection Program as a Star facility. The Michigan Voluntary Protection Program Star award is the state’s highest recognition for workplace safety programs and performance. Each year we develop and implement new efforts to continue our safety improvement and share our successes through the mentoring aspects of this important program.

Raw Materials and Suppliers

Our key cost inputs in the papermaking process are wood fiber, wood pulp, chemicals and energy.

Wood Fiber. We source our wood fiber from a broad group of timberland and sawmill owners located in the regions around our mills. Our cost to purchase wood is affected directly by the market price of wood in our regional markets and indirectly by the variability of fuel cost for the logging and transportation of timber to our facilities. While we have fiber supply agreements in place that ensure delivery of a substantial portion of our wood requirements, purchases under these agreements are typically at market rates.

Wood Pulp. We source bleached wood pulp from market producers to supplement fiber requirements at our mills. The primary pulp procured is Northern Bleached Softwood Kraft, or “NBSK.” ~~NBSK~~We ~~pulp~~expect isweather ~~produced~~events ~~using a chemical process, whereby softwood chips are combined with chemicals~~ and steam to separate the wood fibers. The fibers are washed and screened to remove the chemicals and lignin. Then the pulp is bleached to the necessary brightness. NBSK pulp provides a brighter fiber and the long fiber length from softwood pulp is beneficial for paper strength. We expect imbalances in supply and demand to create volatility in prices for ~~market~~ NBSK from time to time.

Chemicals. Chemicals utilized in the manufacturing of coated paper include latex, clay, starch, calcium carbonate, caustic soda, sodium chlorate and titanium dioxide. We purchase these chemicals from a variety of suppliers and are not dependent on any single supplier to satisfy our chemical needs. We expect imbalances in supply and demand and weather events to periodically create volatility in prices and supply for certain chemicals.

Energy. We produce a significant portion of our energy needs for our paper mills from sources such as waste wood, waste heat recovery, liquid biomass from our pulping process and internal energy cogeneration facilities. Our external energy purchases include fuel oil, natural gas, coal and electricity. Our overall energy expenditures are mitigated by our internal energy production capacity and ability to switch between certain energy sources. The use of derivative contracts is also considered as part of our risk management strategy to manage our exposure to market fluctuations in energy prices.

Sales, Marketing and Distribution

We reach our end-users through several channels, including merchants, brokers, printers, ~~converters~~ and direct sales to end-users. We sell our products to approximately 200 customers which comprise approximately ~~1,100~~900 end-user accounts.

Sales to End-Users. In ~~2020~~2021, we sold 3531% of our paper products directly to end-users, most of which are specialty converters and catalog and magazine publishers. These customers are typically large, sophisticated buyers who have the scale, resources and expertise to procure paper directly from manufacturers. Customers for our NBHK pulp products are mostly other paper manufacturers.

Sales to Brokers and Merchants. Our largest indirect paper sales by volume are through brokers and merchants who resell the paper to end-users. In ~~2020~~2021, our sales to brokers and merchants represented 4752% of our net sales. Brokers typically act as an intermediary between paper manufacturers and smaller end-users who do not have the scale or resources to cost effectively procure paper directly from manufacturers. The majority of the paper sold to brokers is resold to catalog publishers. We work closely with brokers to achieve market share in the catalog, magazine and insert end-user markets through collaborative selling.

Merchants are similar to brokers in that they act as an intermediary between the manufacturer and the end-user. However, merchants generally take physical delivery of the product and keep inventory on hand. Merchants tend to deal with smaller end-users that lack the scale to warrant direct delivery from the manufacturer. Coated freesheet comprises the majority of our sales to merchants. In most cases, because they are relatively small, the ultimate end-users of paper sold through merchants are generally regional or local commercial printers.

Sales to Printers. In ~~2020~~2021, our sales to printers represented 1817% of our net sales. The majority of these sales were to the two largest publication printers in the United States. Printers also effectively act as an intermediary between manufacturers and end-users in that they directly source paper for printing/converting and then resell it to their customers as a finished product.

The majority of our paper products are delivered directly from our manufacturing facilities to the printer or converter, regardless of the sales channel. In addition, we maintain a network of distribution centers located in the West, Midwest, South and Northeast close to our customer base to provide quick delivery. The majority of our NBHK pulp is delivered to our customers’ paper mills.

Our sales force is organized around our sales channels. We maintain an active dialogue with all of our major customers and track product performance and demand across grades. We have a team of sales representatives and marketing professionals organized into three major sales groups that correspond with our sales channels: direct sales support; support to brokers and merchants; and printer support.

Many of our customers provide us with forecasts, which ~~allow~~allows us to plan our production runs in advance, optimizing production over our integrated mill system and thereby reducing costs and increasing overall efficiency. Generally, our sales agreements do not extend beyond the calendar year, and they typically provide for quarterly or semiannual price adjustments based on market price movements.

Customers

We have developed long-standing relationships with many premier customers. Our relationships with our ten largest customers average more than 20 years. Our two largest customers, Central National-Gottesman and Veritiv Corporation, together accounted for 3324% of our net sales in ~~2020~~2021. In ~~2020~~2021, our ten largest customers (including Central National-Gottesman and Veritiv Corporation) together accounted for 6462% of our net sales. Our key customers in the graphic paper market include Central National-Gottesman, ~~Quad/Graphics,~~Veritiv ~~Inc.~~Corporation, ~~Meredith/Time,~~Midland ~~Veritiv~~Paper ~~Corporation~~ and ~~Midland~~RR ~~Paper~~Donnelley. Our key customers in the specialty paper market include Avery Dennison, UPM Raflatac and ~~Mactac~~Green Bay Packaging.

Seasonality

We are exposed to fluctuations in quarterly net sales volumes and expenses due to seasonal factors. These seasonal factors are common in the coated paper industry. Our third and fourth quarters are generally our strongest quarters for volume and revenue, reflecting an increase in printing related to end-of-year magazines, increased end-of-year direct mailings, and holiday season catalogs. Our working capital and accounts receivable generally peak in the third quarter, while inventory generally peaks in the second quarter in anticipation of the third quarter season. We expect our seasonality trends to continue for the foreseeable future.

Research and Development

The primary function of our research and development efforts is to work with customers in developing and modifying products to accommodate their evolving needs and to identify cost-saving opportunities within our operations. Over the past several years, examples of our research and development efforts include innovative and performance-driven products for the graphic and specialty ~~printing~~ markets and the successful transfer of products within our manufacturing platform to create flexibility and maximize margin within our operations.

Intellectual Property

We have several patents and patent applications in the United States and various foreign countries. These patents and patent applications generally relate to various paper manufacturing methods and equipment which may become commercially viable in the future. We also have trademarks for our name, Verso®, as well as for our products such as Sterling®, Futura®, Anthem Plus®, Productolith®, Influence®, Liberty® and Voyager®. In addition to the intellectual property that we own, we license a significant portion of the intellectual property used in our business on a perpetual, royalty-free, non-exclusive basis from International Paper.

Competition

Our business is highly competitive. A significant number of North American competitors produce coated paper, specialty paper, packaging paper and NBHK pulp, and several overseas manufacturers export to North America. We compete based on a number of factors, including price, product availability, product quality, customer service, breadth of product offerings, timeliness of product delivery, market presence and degree of forward integration.

Foreign competition in North America is affected by the exchange rate of the U.S. dollar relative to other currencies’ market prices in North America and other markets, worldwide supply and demand and the cost of ocean-going freight.

While our product offering is broad in terms of grades produced (from coated and uncoated graphical grades, including web and sheeted products, to highly technical specialty grades), our largest offering is in the coated freesheet category, with about two-thirds in web form and one-third in sheets. This strategy is driven primarily by our alignment with the commercial print market with a secondary focus on catalogs and magazines for our coated freesheet grades.

Human Capital Resources

As of December 31, ~~2020~~2021, we had approximately 1,~~700~~600 ~~active~~ employees, of ~~whom~~which 52% are represented by 11eight ~~local~~union ~~branches~~locals of 6six different international unions. We believe that we offer competitive compensation (including salary and incentive compensation) and benefits packages for all of our employees. We know that our success depends on our ability to attract, develop and retain key personnel. The skills, experience and industry knowledge of our employees significantly benefit our operations and performance. We believe that internal promotion and key employee retention are critical components to our long-term success. From professional development opportunities to leadership training, we have development programs and online opportunities to cultivate talent throughout the Company.

We believe that an equitable and inclusive environment with diverse teams produces more creative solutions, results in better, more innovative products and services and is crucial to our efforts to attract and retain key talent. We are committed to compliance with all applicable federal, state and local employment laws that prohibit discrimination on the basis of race, color, religion, age, gender, sexual orientation, marital status, citizenship, national origin, disability, military or veteran status and any other protected classifications.

Environmental and Other Governmental Regulations

We are subject to a wide range of federal, state, regional and local general and industry-specific environmental, health and safety laws and regulations, including without limitation the Federal Water Pollution Control Act of 1972, or “Clean Water Act,” the federal Clean Air Act, the federal Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or “CERCLA,” the federal Occupational Safety and Health Act, the Toxic Substances Control Act, the Emergency Planning & Community Right-To-Know Act, the Oil Pollution Act and similar state and local laws. In the future, we may be subject to additional federal, state, regional, local or supranational legislation related to climate change and greenhouse gas controls.

Among our activities subject to environmental regulation are the emissions of air pollutants, discharges of wastewater and stormwater, operation of dams, storage, handling, treatment and disposal of materials and waste, and remediation of soil, surface water and ground water contamination. Many environmental and health and safety laws and regulations provide for substantial fines or penalties and other civil and criminal sanctions for any failure to comply. In addition, failure to comply with these laws and regulations could result in significant costs for abatement measures, the interruption of our operations and/or facility shutdowns.

Certain environmental laws, such as CERCLA and similar state laws, provide for strict liability, and under certain circumstances joint and several liability, for investigation and remediation of the release of hazardous substances into the environment, including without limitation soil and groundwater. These laws may apply to properties presently or formerly owned or operated by or presently or formerly under the charge, management or control of an entity or its predecessors, as well as to conditions at properties at which waste attributable to an entity or its predecessors was disposed. Under environmental laws, a current or previous owner or operator of real property or a party formerly or previously in charge, management or control of real property and parties that generate or transport hazardous substances that are disposed of at real property, may be held liable for the cost to investigate or clean up that real property and for related damages to natural resources. We handle and dispose of wastes arising from our mill operations, including disposal at on-site landfills. We are required to maintain financial assurance (in the form of letters of credit and other similar instruments) for the expected cost of landfill closure and post-closure care. We could be subject to liability, including liability for investigation and cleanup costs, if contamination is discovered at one of our current or former paper mills or another location where we have disposed of, or arranged for the disposal of, wastes.

Compliance with environmental laws and regulations is a significant factor in our business. We have made, and will continue to make, significant expenditures to comply with these requirements and our permits. We incurred environmental capital expenditures of $2 million, $3 million and $1 million in 2018, 2019 and 2020, respectively.

Permits are required for the operation of our mills and related facilities. Most such permits are subject to periodic renewal, and all are subject to modification and revocation. We and others have the right to challenge our permit conditions through administrative and legal appeals and review processes. Governmental authorities have the power to enforce compliance with the permits, and violators are subject to civil and criminal penalties, including fines, injunctions or both. Other parties also may have the right to pursue legal actions to enforce compliance with the permits.

WeCompliance ~~could~~with beenvironmental ~~subject~~laws toand ~~potentially~~regulations is a significant ~~fines,~~factor ~~penalties,~~in ~~criminal~~our ~~sanctions,~~business. We ~~mill~~have ~~shutdowns~~made, orand ~~interruptions~~will incontinue ~~operations~~to ~~for~~make, ~~failure~~significant expenditures to comply with ~~applicable~~these requirements and our permits. We incurred environmental capital expenditures of $3 million, ~~health~~$1 million and ~~safety~~$3 ~~laws~~million in 2019, ~~regulations~~2020 and ~~permits~~2021, respectively.

10We could be subject to potentially significant fines, penalties, criminal sanctions, mill shutdowns, or interruptions in operations for failure to comply with applicable environmental, health and safety laws, regulations and permits. See Note 17 to our Consolidated Financial Statements.

In November 2019, the state of West Virginia asserted in an administrative enforcement action that three above-ground storage tanks at Verso’s Luke Mill leaked and that Verso had failed to take certain actions to prevent and report the release of pollutants into the North Branch of the Potomac River. In March 2020, the Potomac Riverkeeper Network (“PRKN”) filed a federal lawsuit against Verso alleging the improper handling, storage, and disposal of wastes generated at the Luke Mill. In May 2020, Maryland joined the PRKN lawsuit and in July 2020, Maryland obtained dismissal of a lawsuit that it previously had filed with respect to the same facts. The Luke Mill sits on the border of West Virginia and Maryland, and it was closed in June 2019.9

We have worked cooperatively with the states of Maryland and West Virginia to address impacts to the environment at our Luke Mill from previous historic operations related to the alleged violations of state and federal environmental laws. We have undertaken actions to identify the extent of such impacts and have installed, and are continuing ongoing evaluation and installation of, remedial measures to address these impacts.

We are currently engaged in settlement negotiations with the states of Maryland and West Virginia and with the PKRN. We believe that we are nearing agreements in principle with the two states and the PKRN to settle all claims related to these environmental impacts including the installation of remedial measures and the payment of civil penalties to the two states.

If settlement terms with the state of West Virginia are reached, we anticipate that the state of West Virginia would file an action in West Virginia state court and would have a consent decree entered to effect the settlement.

As a result of our ongoing discussions with the states of Maryland and West Virginia and the PRKN, we have reserved an estimated amount for the potential settlements of these disputes in our Consolidated Financial Statements as of December 31, 2020. See Note 16 to our Consolidated Financial Statements.

History

We began operations on August 1, 2006, when we acquired the assets and certain liabilities comprising the business of the Coated and Supercalendered Papers Division of International Paper. We were formed for the purpose of consummating the acquisition from International Paper. We completed our initial public offering of common stock on the New York Stock Exchange in May 2008.

On January 26, 2016, Verso and substantially all of its direct and indirect subsidiaries, or the “Debtors,” filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. On June 23, 2016, the bankruptcy court entered an order confirming the Debtors’ First Modified Third Amended Joint Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated as of June 20, 2016, or the “Plan.” On July 15, 2016, the Plan became effective pursuant to its terms and the Debtors emerged from their Chapter 11 cases, or the “Chapter 11 Cases.”

Available Information

Our principal executive offices are located at 8540 Gander Creek Drive, Miamisburg, Ohio 45342. Our telephone number is (877) 855-7243. Our website address is www.versoco.com. Information on or accessible through our website is not considered part of this annual report. We make available free of charge through this website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. The reports can also be found on the SEC’s website located at www.sec.gov.

Item 1A. Risk Factors

Our business is subject to various risks. Set forth below are certain of the more material risks that we face and that could cause our actual results to differ materially from our historical results and negatively impact our business, cash flows, financial condition or results of operation. Our business could also be affected by other risks that are presently unknown to us or that we currently believe are immaterial to our business.

RISKS RELATED TO THE PROPOSED MERGER WITH BILLERUDKORSNÄS AB

There are material uncertainties and risks associated with the Merger Agreement and proposed Merger.

We may not be able to complete the proposed Merger within the time frame we anticipate or at all, which could have a material adverse effect on our business, financial results and/or operations. In addition, compliance with the terms of the Merger Agreement in the interim could adversely affect our business.

On December 19, 2021, we entered into the Merger Agreement with Parent, Merger Sub and solely for the purposes of certain sections thereof, BillerudKorsnäs, providing for the merger of Merger Sub with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Parent.

Consummation of the proposed Merger remains subject to certain customary conditions, including, without limitation:

•certain regulatory approvals consisting of approval from (i) the Federal Energy Regulatory Commission, (ii) the Nuclear Regulatory Commission, (iii) State of Wisconsin Department of Health Services and (iv) the Public Service Commission of Wisconsin either (x) having been obtained from the applicable government authorities and remain in full force and effect, without the imposition of any Burdensome Condition (as defined in the Merger Agreement) or (y) being no longer required by applicable law.

•the consummation of the Merger not being restrained, enjoined, rendered illegal or otherwise prohibited or prevented by any law or order issued by any court of competent jurisdiction, and

•the approval by our stockholders of the Merger Agreement.

As a result of the proposed Merger, the following may occur:

•the attention of management and employees may be diverted from ongoing business operations as they focus on matters relating to the proposed Merger;

•the public announcement or pendency of the Merger may disrupt or otherwise adversely affect our business relationships, operating results and business generally;

•our ability to retain our key management, sales and marketing personnel may be adversely affected due to the uncertainties created by the proposed Merger; and

•the restrictions and limitations on our conduct of business pending the Merger, and the requirement that we conduct our business in the ordinary course, may delay or prevent us from undertaking business opportunities that may arise before the completion of the Merger that, absent the Merger Agreement, we might have pursued. Any delay in consummating the Merger may exacerbate these issues.

There can be no assurance that all of the conditions to closing will be satisfied, or where possible, waived, or that the Merger will become effective. Investors should not place undue reliance on the consummation of the Merger. If the Merger does not become effective because all conditions to closing are not satisfied, or because one of the parties or all of the parties mutually terminate the Merger Agreement, then, among other possible adverse effects:

•our stockholders will not receive payment of the merger consideration for their shares of common stock;

•our stock price could potentially decrease since the current stock price may reflect a market assumption that the proposed Merger will be consummated;

•we may experience difficulties in attracting customers or obtaining financing due to changed perceptions about our competitive position, our management, our liquidity or other aspects of our business;

•we may be unable to find a partner willing to engage in a similar transaction on terms as favorable as those set forth in our agreements with Parent and Merger Sub;

•our business may have been adversely affected; and

•we will have incurred significant transaction costs.

We cannot predict or give any assurances as to our stock price at any time before the completion of the proposed Merger.

The pendency of the proposed Merger could materially adversely affect our operations and the future of our business.

In connection with the pending Merger, our directors, senior management and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the Merger, which could negatively impact our revenues, earnings and cash flows, regardless of whether the Merger is completed. Similarly, we may have abandoned or delayed certain projects, business opportunities and divestitures which may materially adversely affect the future of our business.

Failure to complete the proposed Merger could negatively impact our stock price and our future businesses and financial results.

If the proposed Merger is not completed, we will be subject to several risks and consequences, including the following:

•under the Merger Agreement, we may be required, under certain circumstances, to pay to Parent a termination fee of $24,690,000;

•we may be required to pay certain costs relating to the Merger, including litigation costs, whether or not the Merger is completed, such as legal, accounting, financial advisor and printing fees;

•our stock price could potentially decrease since the current stock price may reflect a market assumption that the proposed Merger will be consummated;

•under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the proposed Merger that may adversely affect our ability to execute certain of our business strategies;

•matters relating to the proposed Merger may require our management to devote substantial commitments of time and resources, which could otherwise have been devoted to other opportunities that may have been beneficial to us; and

•we may experience negative reactions from the financial markets and from our customers and employees.

In addition, the following action has been commenced by purported stockholders of the Company:

On January 21, 2022, a purported stockholder complaint was filed in the United States District Court for the Southern District of New York, against us and the individual members of our Board, captioned O’Dell v. Verso Corporation et al., Civil Action No. 1:21-cv-00575, or the “O’Dell Complaint.” On January 27, 2022, a purported stockholder complaint was filed in the United States District Court for the Southern District of New York, against us and the individual members of our Board, captioned Whitfield v. Verso Corporation et al., Case No. 1:22-cv-00715, or the “Whitfield Complaint.” On February 1, 2022, a purported stockholder complaint was filed in the United States District Court for the Southern District of New York, against us and the individual members of our Board, captioned Trinh v. Verso Corporation et al., Case No. 1:22-cv-00874, or the “Trinh Complaint.” On February 16, 2022, a purported stockholder complaint was filed against us and the individual members of our Board in the Eastern District of New York, captioned Collins v. Verso Corporation et al., Case No. 1:22-cv-00875, or the “Collins Complaint,” and collectively with the O’Dell Complaint, the Whitfield Complaint and the Trinh Complaint the “Stockholder Complaints.”

The O’Dell Complaint alleges generally that the Company and the members of its Board of Directors violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by omitting material information from the Proxy Statement rendering it false and misleading and seeks, among other things, an injunction against the Merger.

The Whitfield Complaint alleges generally that the Company and the members of its Board of Directors violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by omitting material information from the Proxy Statement rendering it false and misleading and seeks, among other things, an injunction against the Merger.

The Trinh Complaint alleges generally that the Company and the members of its Board of Directors violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by omitting material information from the Proxy Statement rendering it false and misleading, and that the defendants breached their fiduciary duties in connection with the Merger, and seeks, among other things, an injunction against the Merger.

The Collins Complaint alleges generally that the Company and the members of its Board of Directors violated Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder by omitting material information from the Proxy Statement rendering it false and misleading, and seeks, among other things, an injunction against the Merger.

On February 17, 2022, Verso received a letter on behalf of a purported stockholder of Verso requesting to inspect certain of Verso’s books and records pursuant to Section 220 of the Delaware General Corporation Law, or the “Demand Letter.” The purported stockholder alleges that he has concerns regarding the process that led to the Merger, the disclosures in the Proxy Statement, and the adequacy of the Merger consideration.

We believe the allegations in the Stockholder Complaints and the Demand Letter to be without merit. Additional lawsuits may be filed in the future related to the Merger. We cannot predict the outcome of the proceeding related to the Stockholder Complaints or any other proceeding that may be commenced against us.

RISKS RELATED TO OUR OPERATIONS

We could be required to idle production, shut down machines or facilities, restructure operations, or sell non-core assets, which could result in recording significant closure costs and long-lived asset impairment or accelerated depreciation charges.

We have responded to changing market dynamics by optimizing assets and streamlining our production, including idling or shutting down certain paper machines and facilities. For example, in June 2020, we idled production at our mills in Duluth, Minnesota and Wisconsin Rapids, Wisconsin. In December 2020, we decided to permanently shut down our paper mill in Duluth and in February 2021, we decided to permanently shut down the No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill. In April 2019, we announced the permanent shutdown of our mill in Luke, Maryland. If demand for our products continues to decline, or if the pace of decline accelerates, it may be necessary to curtail production even further or permanently shut down certain machines and facilities. In addition to the potential loss of production, curtailments and shutdowns have in the past resulted, and could in the future result, in asset impairments or accelerated depreciation and cash closure costs for the affected facilities, including restructuring charges and exit or disposal costs.

Losses related to the impairment of long-lived assets to be held and used are recognized when circumstances, such as continuing losses or demand declines in certain businesses, indicate the carrying value of an asset group may not be recoverable. When indicators that the carrying value of an asset group may not be recoverable are present, we evaluate the carrying value of the asset group in relation to its estimated undiscounted future cash flows. If the carrying value of an asset group is greater than the estimated undiscounted future cash flows to be generated by the asset group, an impairment charge is recognized based on the excess of the asset group’s carrying value over its fair value. If it is determined that the carrying value of an asset group is recoverable, we review and adjust, as necessary, the estimated useful lives of the assets in the group. If there were to be a triggering event, it is possible that we could record ~~non-cash~~noncash long-lived asset impairment or accelerated depreciation charges in future periods.

We may be unable to obtain energy or raw materials, including petroleum-based chemicals, at favorable prices or at all.

We purchase substantial amounts of energy, wood fiber, market pulp, chemicals and other raw materials from third parties. We may experience shortages of energy supplies or raw materials or be forced to seek alternative sources of supply. If we are forced to seek alternative sources of supply, we may not be able to do so on terms as favorable as our current terms or at all. The prices for energy and many of our raw materials, especially petroleum-based chemicals, have been volatile and may be volatile in the future, including as a result of rising prices due to overall inflationary pressure. Chemical suppliers that use petroleum-based products in the manufacture of their chemicals may, due to a supply shortage and/or cost increase, ration the amount of chemicals available to us and/or we may not be able to obtain the chemicals we need to operate our business at favorable prices, if at all. In addition, certain specialty chemicals that we currently purchase are available only from a small number of suppliers. If any of these suppliers were to cease operations or cease doing business with us in the future, we may be unable to obtain such chemicals at favorable prices, if at all.

The supply of energy or raw materials may be adversely affected by, among other things, natural disasters or an outbreak or escalation of hostilities between the United States and any foreign power, and, in particular, events in the Middle East or weather events such as hurricanes could result in a real or perceived shortage of oil or natural gas, which could result in an increase in energy or chemical prices. In addition, wood fiber is a commodity and prices historically have been cyclical. The primary source for wood fiber is timber. Environmental litigation and regulatory developments have caused, and may cause in the future, significant reductions in the amount of timber available for commercial harvest in Canada and the United States. In addition, future domestic or foreign legislation, litigation advanced by aboriginal groups, litigation concerning the use of timberlands, the protection of endangered species, the promotion of forest biodiversity and the response to and prevention of wildfires and campaigns or other measures by environmental activists also could affect timber supplies.

Any disruption in the supply of energy or raw materials also could affect our ability to meet customer demand in a timely manner and could harm our reputation. We have limited ability to pass through increases in our costs to our customers absent increases in market prices for our products. Furthermore, we may be required to post letters of credit or other financial assurance obligations with certain of our energy and other suppliers, which could limit our financial flexibility.

We are subject to physical and financial risks associated with global, regional, and local weather conditions and climate change.

Our operations and the operations of our suppliers are subject to climate variations which impact the productivity of forests, the frequency and severity of wildfires, the distribution and abundance of species, and other such events, which in turn may adversely or positively affect timber production and availability. Over the past several years, changing weather patterns and climatic conditions have added to the unpredictability of natural disasters. These natural disasters could affect our woodlands or cause variations in the cost of raw materials, such as virgin fiber, and adversely affect timber harvesting.

We are involved in continuous manufacturing processes with a high degree of fixed costs. Any interruption in the operations of our manufacturing facilities may affect our operating performance.

We run our paper machines on a nearly continuous basis for maximum efficiency. Any downtime at any of our paper mills, including as a result of or in connection with planned maintenance and capital expenditure projects, results in unabsorbed fixed costs that could negatively affect our results of operations for the period in which we experience the downtime. Due to the extreme operating conditions inherent in some of our manufacturing processes, we may incur unplanned business interruptions from time to time due to, among other things, transportation interruptions and mechanical, power or structural failures at our facilities. As a result, we may not generate sufficient cash flow to satisfy our operational needs. In addition, the geographic areas where our production is located and where we conduct our business has been, and may in the future be affected by natural disasters, including snow storms, forest fires and flooding which could cause our mills to stop running. Furthermore, during periods of weak demand for paper products or periods of rising costs, we have experienced and may in the future experience market-related downtime.

Work stoppages and slowdowns and legal action by our unionized employees may have a material adverse effect on our business.

As of December 31, ~~2020~~2021, we had approximately 1,~~700~~600 employees of which 52% are represented by 11eight ~~local~~union ~~branches~~locals of 6six different international unions. On ~~February~~March 281, 2019, the United ~~Steel~~Steelworkers ~~Workers~~International ~~union~~Union, or “USW,” who represented employees at four Verso sites, voted to ratify a new Master Labor Agreement, or the “Agreement,” covering five USW ~~local~~union ~~branches~~locals, or approximately 80% of Verso’s hourly represented workforce as of December 31, 2019. ~~The~~Since ~~Agreement~~that time, ~~which~~two ~~was~~of ~~effective~~the onfour ~~March~~Verso 1,sites ~~2019~~(Stevens Point, ~~will~~Wisconsin ~~run~~and ~~for~~Luke, aMaryland) ~~period~~covered ofby ~~three~~the ~~years~~Agreement ~~with~~have ~~staggered~~been ~~expiration~~sold ~~dates~~or atare ~~each~~no oflonger ~~the affected sites~~operating. In addition to the USW, two smaller ~~local~~international unions (the International Brotherhood of Electrical Workers and the International Brotherhood of Teamsters) at ~~two of~~ the ~~mill~~Escanaba ~~locations~~site also signed and are participating in the Agreement. The ~~remaining~~Agreement, ~~trade~~which ~~unions~~was ateffective ~~two~~on March 4, 2019, will run for a period of three years with the ~~mill~~Wisconsin ~~sites~~Rapids site expiring on March 1, 2022 and the Escanaba site expiring on October 27, 2022. In December 2021, the parties agreed to extend the Wisconsin Rapids local contract for one year, through February 28, 2023. The remaining four smaller trade unions at Wisconsin Rapids site ratified new local agreements in the fourth quarter of 2019. We may become subject to material cost increases as a result of future actions taken by the labor unions., ~~This~~which could increase expenses in absolute terms and/or as a percentage of net sales. In addition, although we believe we have a good relationship with our employees, work stoppages or other labor disturbances may occur in the future. Any of these factors could lead to operational delays or increased costs.

Security breaches and other disruptions to our information technology infrastructure may interfere with our operations and could compromise our information and the information of our customers and suppliers, exposing us to liability which would cause our business and reputation to suffer.

In the ordinary course of business, we rely upon information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information and to manage or support a variety of business processes and activities, including supply chain, manufacturing, distribution, invoicing and collection of payments from customers. We use information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. Additionally, we collect and store sensitive data, including intellectual property, proprietary business information, the propriety business information of our customers and suppliers, as well as personally identifiable information of our employees, in data centers and on information technology networks. The secure operation of these information technology networks and the processing and maintenance of this information is critical to our business operations and strategy. Despite security measures and disaster recovery plans, our information technology networks and infrastructure may be vulnerable to damage, disruptions or shutdowns due to security breaches, including those caused by physical or electronic break-ins, computer viruses, malware, attacks by hackers, employee error and disruptions caused from unauthorized access and tampering, or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, telecommunication or utility failures or natural disasters or other catastrophic events. The occurrence of any of these events could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. In addition, we believe cyberattack attempts are increasing in number and that cyber attackers are developing increasingly sophisticated systems and means to not only access and attack systems, but also to evade detection or to obscure their activities. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations and damage our reputation.

We rely on third parties for certain transportation services.

~~products~~Data insecurity aincidents ~~timely~~and ~~manner,~~breaches weand ~~may~~other bedisruptions ~~unable~~ to ~~sell~~our ~~them~~information attechnology ~~full~~infrastructure ~~value. Similarly, if any transportation provider fails to deliver raw materials to us in a timely manner, we~~ may beinterfere ~~unable~~with ~~to manufacture~~ our ~~products~~operations ~~on a timely basis. Shipments of products~~ and ~~raw materials may be delayed due to weather conditions, strikes or other events. Any failure of a third-party transportation provider to deliver raw materials or products in a timely manner~~ could ~~harm~~compromise our ~~reputation~~information and ~~negatively impact our customer relationships. In addition, our ability to deliver our products on a timely basis could be adversely affected by~~ the ~~lack~~information of ~~adequate~~our ~~availability~~customers ofand ~~transportation services~~suppliers, ~~especially~~exposing ~~rail capacity, whether because of work stoppages or otherwise. If any of these third-party transportation providers were to cease operations or cease doing business with~~ us, ~~we may be unable~~ to ~~replace~~liability ~~them~~which atwould acause ~~reasonable cost. Furthermore, we may experience increases in the cost of~~ our ~~transportation~~business ~~services as a result of rising fuel costs~~ and ~~surcharges~~reputation ~~(primarily in diesel fuel), which we may not be able~~ to ~~pass through to our customers~~suffer.

In the ordinary course of business, we rely upon information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information and to manage or support a variety of business processes and activities, including supply chain, manufacturing, distribution, invoicing and collection of payments from customers. We use information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. Additionally, we collect and store sensitive data, including intellectual property, proprietary business information, the propriety business information of our customers and suppliers, as well as personally identifiable information of our employees, in data centers and on information technology networks. The secure operation of these information technology networks and the processing and maintenance of this information is critical to our business operations and strategy. Despite security measures and disaster recovery plans, our information technology networks and infrastructure have, from time to time, experienced cyber incidents and we may be vulnerable to damage, disruptions or shutdowns in the future due to cyber incidents, including those caused by physical or electronic break-ins, computer viruses, malware, worms, phishing, attacks by hackers, employee error and disruptions caused from unauthorized access and tampering, or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, telecommunication or utility failures or natural disasters or other catastrophic events. The occurrence of any of these events could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. In addition, we believe cyberattack attempts are increasing in number and that cyber attackers are developing increasingly sophisticated systems and means to not only access and attack systems, but also to evade detection or to obscure their activities. As a result, we may suffer cyber incidents even where we have implemented cybersecurity protections. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations and damage our reputation.

We rely on third parties for certain transportation services.

We rely primarily on third parties for transportation of our products to our customers and transportation of our raw materials to us, in particular, by truck and train. The transportation industry is subject to legislative and regulatory changes that can affect the economics of those third-party transportation providers by requiring changes in their operating practices or influencing the demand for, and the cost of providing transportation services. If any third-party transportation provider fails to deliver our products in a timely manner, we may be unable to sell them at full value. Similarly, if any transportation provider fails to deliver raw materials to us in a timely manner, we may be unable to manufacture our products on a timely basis. Shipments of products and raw materials may be delayed due to weather conditions, strikes or other events. Any failure of a third-party transportation provider to deliver raw materials or products in a timely manner could harm our reputation and negatively impact our customer relationships. In addition, our ability to deliver our products on a timely basis could be adversely affected by the lack of adequate availability of transportation services, especially rail capacity, whether because of work stoppages or otherwise. If any of these third-party transportation providers were to cease operations or cease doing business with us, we may be unable to replace them at a reasonable cost. Furthermore, we may experience increases in the cost of our transportation services as a result of rising fuel costs and surcharges (primarily in diesel fuel), which we may not be able to pass through to our customers.

The COVID-19 pandemic and related efforts to mitigate the pandemic have adversely impacted and may continue to adversely impact our business.

There continues to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the resurgence of new and more contagious variants of the virus; the efficacy of the vaccines introduced to combat the virus and the public acceptance of such vaccines; and the impact of COVID-19 on economic conditions, including with respect to labor market conditions, economic activity, consumer behavior, supply chain shortages and disruptions and inflationary pressure; all of which could have a material impact on our business, financial position, results of operations and cash flows.

While we cannot predict the ultimate impact of COVID-19 on our business at this time, the pandemic and related efforts to mitigate the pandemic have impacted and could continue to impact our business in a number of ways, including but not limited to:

•a decline in economic conditions and consumer confidence that have negatively affected, and will continue to negatively affect, consumer spending, commercial printing and advertising, and political campaign spending, all of which have adversely impacted and could continue to adversely impact sales volume and demand for our products, particularly in our graphic paper business;

•an adverse impact on timing of payments by customers;

•disruption of our mill operations, including the possible need to implement increased downtime at one or more of our mills due to decreased demand, new governmental mandates or for voluntary reasons, which could result in unabsorbed fixed costs, the loss of production, asset impairments or accelerated depreciation and cash closure costs for the affected facilities, including restructuring charges and exit or disposal costs if it becomes necessary to permanently shut down certain machines or facilities;

•the financial deterioration of, or the disruption to, one or more of our suppliers of energy or raw materials or the third parties we rely on for transportation of our products to customers, which may result in the inability of our suppliers or service providers to meet our needs in a timely manner, cause delays in delivery to our customers, result in cancellation of customer orders or a reduction in purchase prices and, ultimately, termination of customer relationships;

•limitations on our access to capital and other sources of funding, which could adversely affect the availability and terms of future borrowings, refinancing activities or other forms of capital raising;

•decreased availability of trucking and other transportation providers;

•increased difficulty in maintaining our workforce during this uncertain time;

•increased employee absenteeism due to illness or fear of infection;

•lawsuits or regulatory actions due to any COVID-19 spread in the workplace; and

•productivity of management and our employees that are working remotely, including the ability to maintain our financial reporting processes and related controls.

These risks could accelerate or intensify depending on the severity and length of the pandemic. ~~If a resurgence of the COVID-19 virus occurs or if the vaccines introduced to combat the virus are not effective, these factors will be exacerbated.~~

Our liquidity during the pandemic and the recovery period after we emerge from the pandemic will depend on multiple factors, including the impact on demand for our products, our ability to continue operations at our mills, the impact of the pandemic on our suppliers and third party service providers, and our operating performance.

As a result of the COVID-19 outbreak, we continually evaluate the impact on our long-lived assets, including the potential for impairment charges. For example, in June 2020, we announced plans to indefinitely idle our mills in Duluth, Minnesota and Wisconsin Rapids, Wisconsin and in January and February 2021, we reported our decision to permanently shut down our paper mill in Duluth, Minnesota and the No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill, respectively. Depending on future events, we may be required to record future impairment charges. In addition, depending on the ongoing impact of the pandemic, we may also be required to reserve for incremental credit losses. Any material increase in our allowances for credit losses would have a corresponding effect on our results of operations and related cash flows.

While our mills have continued in operation as “essential businesses” during the COVID-19 outbreak, we have implemented strict health and sanitization protocols to keep our employees safe, including enhanced and more frequent cleaning of work areas, requiring social distancing while at our facilities, providing facemasks to employees, and installing barriers in locations where employees work in closer proximity~~, and screening employees for potential symptoms~~. These additional safety precautions may also impact the productivity and profitability at our mills. ~~Our corporate employees have been working remotely during this time and we suspended all non-essential travel for our employees and discouraged employee attendance at in-person work-related meetings.~~

The ultimate magnitude of COVID-19, including the extent of its impact on our financial condition and results of operations, which could be material, will depend on all of the factors noted above, including other factors that we may not be able to forecast at this time.

We are subject to various environmental, health and safety laws and regulations that could impose substantial costs or other liabilities upon us.

We are subject to a wide range of federal, state, regional and local general and industry-specific environmental, health and safety laws and regulations, including those relating to air emissions (including greenhouse gases and hazardous air pollutants), wastewater discharges, solid and hazardous waste management and disposal, site remediation and natural resources. Compliance with these laws and regulations, and permits issued thereunder, is a significant factor in our business and may be subject to the same or even increased scrutiny and enforcement actions by regulators. We have made, and will continue to make significant expenditures to comply with these requirements and permits, which may impose increasingly more stringent standards over time as they are renewed or modified by the applicable governmental authorities. In addition, we handle and dispose of waste arising from our mill operations and operate a number of on-site landfills to handle that waste. We are required to maintain financial assurance (in the form of letters of credit and other similar instruments) for the projected cost of closure and post-closure care for certain landfill operations. We could be subject to potentially significant fines, penalties, criminal sanctions, mill shutdowns or interruptions in operations for any failure to comply with applicable environmental, health and safety laws, regulations and permits. Moreover, under certain environmental laws, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of at real property, may be held liable for the full cost to investigate or clean up such real property and for related damages to natural resources. We also may be subject to liability, including liability for investigation and cleanup costs, if contamination is discovered at one of our current or former paper mills, other properties or other locations where we have disposed of or arranged for the disposal of waste. For example, in November 2019, the state of West Virginia asserted in an administrative enforcement action that three above-ground storage tanks at our Luke Mill leaked and that we had failed to take certain actions to prevent and report the release of pollutants into the North Branch of the Potomac River. In March 2020, PRKN filed a federal lawsuit against us alleging the improper handling, storage, and disposal of wastes generated at our Luke Mill. In May 2020, Maryland joined the PRKN lawsuit and in July 2020, Maryland obtained dismissal of a lawsuit that it previously had filed with respect to the same facts. We are currently engaged in negotiations with each of these parties.

subject to the same or even increased scrutiny and enforcement actions by regulators. We have made, and will continue to make significant expenditures to comply with these requirements and permits, which may impose increasingly more stringent standards over time as they are renewed or modified by the applicable governmental authorities. In addition, we handle and dispose of waste arising from our mill operations and operate a number of on-site landfills to handle that waste. We are required to maintain financial assurance (in the form of letters of credit and other similar instruments) for the projected cost of closure and post-closure care for certain landfill operations. We could be subject to potentially significant fines, penalties, criminal sanctions, mill shutdowns or interruptions in operations for any failure to comply with applicable environmental, health and safety laws, regulations and permits. Moreover, under certain environmental laws, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of at real property, may be held liable for the full cost to investigate or clean up such real property and for related damages to natural resources. We also may be subject to liability, including liability for investigation and cleanup costs, if contamination is discovered at one of our current or former paper mills, other properties or other locations where we have disposed of or arranged for the disposal of waste. For example, in November 2019, the state of West Virginia asserted in an administrative enforcement action that three above-ground storage tanks at our Luke Mill leaked and that we had failed to take certain actions to prevent and report the release of pollutants into the North Branch of the Potomac River. In March 2020, PRKN filed a federal lawsuit against us alleging the improper handling, storage, and disposal of wastes generated at our Luke Mill. In May 2020, Maryland joined the PRKN lawsuit and in July 2020, Maryland obtained dismissal of a lawsuit that it previously had filed with respect to the same facts. On April 1, 2021, a consent decree was approved and entered by the court in the federal lawsuit, setting forth the terms agreed by Verso with the PRKN and the Maryland Department of the Environment to settle the claims by PRKN and the state of Maryland. On September 1, 2021, a civil action was filed and a consent decree was simultaneously approved and entered by the circuit court of Mineral County, West Virginia, setting forth the terms agreed by Verso with the West Virginia Department of Environmental Protection to settle the claims by the Department of Environmental Protection. Unilateral Order MM-20-10 was rescinded and Verso agreed to enter the Luke Mill site into the West Virginia Voluntary Remediation Program and remediate the site pursuant to the requirements of the program.

RISKS RELATED TO OUR INDUSTRY

The printing and writing paper industry has been facing a long-term structural decline and our profitability may continue to be adversely impacted by such decline.

The coated paper industry faces a long-term, structural decline. From ~~2017~~2018 to ~~2020~~2021, demand for printing and writing paper in North America fell by roughly 3330%. North America demand for coated freesheet has declined 3834% from ~~2017~~2018 to ~~2020~~2021. Similarly, North America demand for coated groundwood has declined 4950% from ~~2017~~2018 to ~~2020. However, the demand for coated paper is expected to increase in the future, with market volumes in~~ 2021 ~~projected to be 5% above 2020 levels~~.

Adverse developments in general business and economic conditions could have an adverse effect on the demand for our products.

General economic conditions may adversely affect industrial non-durable goods production, consumer spending, commercial printing and advertising activity, and consumer confidence, all of which impact demand for our products. During an economic downturn, end-users may reduce magazine subscriptions, contributing to lower demand for our products and advertising in printed magazines and catalogs may also decline. In addition, we could experience volatility in the capital and credit markets, which would impact interest and the availability of credit.

Furthermore, significant changes in, and uncertainty with respect to, legislation, regulations and monetary, tax and trade policy, among other things could have an adverse effect on the demand for our products. While it is not possible to predict whether and when any such changes will occur, changes at the local, state or federal level could significantly impact our business and the industry in which we compete.

Foreign overcapacity could also result in an increase in the supply of paper products available in the North American market. An increased supply of paper available in North America could put downward pressure on prices and/or cause us to lose sales to competitors.

Developments in alternative media could adversely affect the demand for our products.

Trends in advertising, electronic data transmission and storage and the internet have had and likely will continue to have adverse effects on traditional print media, including the use of and demand for our products and those of our customers. Our magazine and catalog publishing customers may increasingly use (both for content and advertising), and compete with businesses that use, other forms of media and advertising and electronic data transmission and storage, particularly the internet, ~~instead of paper made by us. As the use of these alternative media continues to grow, the demand for our paper products will likely continue to decline.~~

instead of paper made by us. As the use of these alternative media continues to grow, the demand for our paper products will likely continue to decline.

The industry in which we operate is highly competitive.

Competition in our industry is based largely on price. We compete with foreign producers, some of which are lower-cost producers than we are or are subsidized by certain foreign governments. We also face competition from numerous North American coated paper manufacturers. Some of our competitors have advantages over us, including lower raw material and labor costs and may be subject to fewer environmental and governmental regulations.

Furthermore, due to the trend toward consolidation in our industry, some of our competitors have greater financial and other resources than we do or may be better positioned than we are to compete for certain opportunities. There is no assurance that we will be able to continue to compete effectively in the markets we serve.

Competition could cause us to lower our prices or lose sales to competitors. In addition, our ability to compete will be affected by product availability, the quality of our products, our breadth of product offerings, our ability to maintain mill efficiencies and to achieve high operating rates, manufacturing costs, our ability to distribute our products on time and availability and/or cost of wood fiber, market pulp, chemicals, energy, other raw materials and labor.

We have limited ability to control the pricing of our products or pass through increases in our costs to our customers.

Our earnings are sensitive to price changes in coated paper. Fluctuations in paper prices (and coated paper prices in particular) historically have had a direct effect on our net income (loss) and EBITDA for several reasons:

•Market prices for paper products are a function of supply and demand, factors over which we have limited control. We therefore have limited ability to control the pricing of our products. Market prices of grade No. 3, 60 lb. basis weight paper, which is an industry benchmark for coated freesheet paper pricing, have fluctuated since 2000 from a high of $1,~~105~~255 per ton to a low of $740 per ton. In addition, since 2000, market prices of grade No. 4, 50 lb. basis weight paper, which is an industry benchmark for coated groundwood paper pricing, have fluctuated between a high of $1,~~075~~200 per ton to a low of $710 per ton over the same period. As market conditions determine the price for our paper products, the price for our products could fall below our cash production costs.

•Market prices for paper products typically are not directly affected by raw material costs or other costs of sales, and consequently we may have limited ability to pass through increases in these raw materials and/or other sales costs to our customers absent increases in the market price. Thus, even though our costs may increase, we may not have the ability to increase the prices for our products or the prices for our products may decline.

•The manufacturing of coated paper is highly capital-intensive and a large portion of our operating costs are fixed. Additionally, paper machines are large, complex machines that are more efficient when operated continuously. Consequently, both we and our competitors typically continue to run our machines whenever marginal sales exceed the marginal costs, adversely impacting prices at times of lower demand.

Therefore, our ability to achieve acceptable margins is principally dependent on (a) our cost structure, (b) changes in the prices of raw materials, electricity, energy and fuel, which will represent a large component of our operating costs and will fluctuate based upon factors beyond our control and (c) general conditions in the paper market including the demand for paper products, the amount of foreign imports, the amount spent on advertising, the circulation of magazines and catalogs, the use of electronic readers and other devices and postal rates. Any one or more of these economic conditions could affect our sales and operating costs.

RISKS RELATED TO OUR BUSINESS STRATEGY

Our annual production capacity has been significantly reduced and our business has become less diversified because of the Pixelle Sale, 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.

The reduction in the scale and scope of our business as a result of the Pixelle Sale, 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 has significantly reduced our annual production capacity and exposed a larger portion of our business to the risks associated with the market for graphic paper. Our total annual production capacity is now 1.4 million tons. Our total company sales volume was down from 21,~~647~~674 thousand tons during the year ended December 31, ~~2019~~2020, to 1,~~674~~407 thousand tons during the year ended December 31, ~~2020~~2021. In addition, a greater portion of our product line will now be exposed to greater secular and cyclical risks associated with our business. If these difficulties or challenges cannot be overcome, our business may not be successful.

addition, a greater portion of our product line will now be exposed to greater secular and cyclical risks associated with our business. If these difficulties or challenges cannot be overcome, our business may not be successful.

We depend on a small number of customers for a significant portion of our business. Furthermore, we may have credit exposure to these customers through extension of trade credits.

Our two largest customers, Central National-Gottesman and Veritiv Corporation, together accounted for 3324% of our net sales in ~~2020~~2021. In ~~2020~~2021, our ten largest customers (including Central National-Gottesman and Veritiv Corporation) together accounted for 6462% of our net sales. The loss of, or reduction in orders from, any of these customers or significant customer disputes regarding shipments, price, quality, or other matters could adversely impact our business.

In addition, we generally do not have long-term contracts with our customers that ensure a continuing level of business from them. Our agreements with our customers are not exclusive and generally do not contain minimum volume purchase commitments. Our relationship with our customers is dependent on our ability to continue to meet their needs for quality products and services at competitive prices. If we lose customers or if we experience a significant decline in sales volume, we may not be able to quickly replace the lost revenue.

Furthermore, we extend trade credit to certain of these customers to facilitate the purchase of our products, and we rely on these customers’ creditworthiness and ability to obtain credit from lenders. Accordingly, a bankruptcy or a significant deterioration in the financial condition of any of these significant customers could result in a reduction in sales, a longer collection cycle or an inability to collect accounts receivable.

We will be unable to compete with respect to certain specialty paper products for a period of two years after the closing of the Pixelle Sale, which occurred on February 10, 2020.

The Purchase Agreement entered into in connection with the Pixelle Sale provides that for a period of two years beginning on the closing date of February 10, 2020, Verso and its affiliates (excluding stockholders of Verso) have agreed not to engage in, own, operate or assist any other business or person in engaging in the business of designing, manufacturing, and selling any specialty paper products related to: (i) coated thermal transfer paper manufactured and sold at the Stevens Point Mill, (ii) coated direct thermal base paper manufactured and sold at the Stevens Point Mill or (iii) uncoated flexible packaging manufactured and sold at the Androscoggin Mill, subject to customary exceptions as outlined in the Purchase Agreement. These restrictions may prevent us from pursuing attractive business opportunities.

We may not realize certain projected cost savings or productivity improvements, which could result in lower profitability for our business.

As part of our business strategy, we identify opportunities to improve profitability by reducing costs and enhancing productivity. For example, through our continuous process improvement program, we have implemented focused programs to optimize material and energy sourcing and usage, reduce repair costs and control overhead. We will continue to utilize the process improvement program to drive cost reductions and operating improvements in our mill system and have targeted additional profitability enhancements in the next twelve months. Our strategy assumes that increases in productivity through our continuous process improvement program, including through a more efficient manufacturing process or engineering design enhancements, will result in economies of scale, and global competitive sourcing of our materials will reduce our raw material and other costs. Any cost savings or productivity enhancements that we expect to realize from such efforts may differ materially from our estimates. Cost savings or productivity enhancements that we realize may be offset, in whole or in part, by reductions in pricing or volume, or through increases in other expenses, including wood, chemicals and energy. We cannot assure you that these initiatives will be completed as anticipated or that the benefits we expect will be achieved on a timely basis, or at all.

The loss of members of our senior management team or other key personnel could adversely impact our business.

We are highly dependent on the efforts of our senior management team and other key personnel. The loss of services of members of our senior management team and other key personnel could adversely affect our business until suitable replacements can be found. OnThere ~~January~~may ~~27,~~be ~~2021,~~a ~~our~~limited ~~Board~~number of ~~Directors~~persons ~~appointed~~with ~~Randy~~the J.requisite ~~Nebel~~skills asto ~~our~~serve ~~President~~in ~~and~~these ~~Chief~~senior ~~Executive~~management ~~Officer.~~positions ~~Mr.~~and ~~Nebel~~we ~~had~~may ~~been~~be ~~serving~~unable asto ~~our~~locate ~~interim~~or ~~President~~employ ~~and~~qualified ~~Chief~~personnel ~~Executive~~on ~~Officer~~acceptable ~~since Adam St~~terms. ~~John’s~~In ~~resignation on September 30~~addition, ~~2020~~our ~~and~~future ~~has~~success ~~been~~requires aus ~~member~~to ofcontinue ~~our~~to ~~Board~~attract ofand ~~Directors~~retain ~~since~~competent ~~November 14, 2019~~personnel. ~~The~~Currently ~~transition~~we toare ~~Mr.~~experiencing ~~Nebel~~an asincreasingly ~~our~~tight ~~President~~ and ~~Chief~~competitive ~~Executive~~labor ~~Officer~~market isand ~~critical~~could toface ~~our~~unforeseen ~~success.~~challenges ~~There~~in ~~may~~the beavailability aof ~~limited~~labor. ~~number~~A ofsustained ~~persons~~labor ~~with~~shortage ~~the~~or ~~requisite~~increased ~~skills~~turnover torates ~~serve~~within inour ~~these~~employee ~~positions~~base ~~and~~in wethe ~~may~~future becould ~~unable~~lead to ~~locate~~increased orcosts, ~~employ~~such ~~qualified~~as ~~personnel~~increased onovertime ~~acceptable~~to ~~terms.~~meet Indemand ~~addition,~~and ~~our~~increased ~~future~~wages ~~success requires us~~ to ~~continue to~~ attract and retain ~~competent personnel~~employees. ~~Any~~If ~~failure~~we fail to attract and retain key personnel it could ~~have~~lead to a material adverse effect on our business and may require substantial additional costs to recruit replacement personnel.

We may from time to time pursue opportunistic acquisitions, the success of which could have a material adverse effect on our business.

If we identify an acquisition candidate to complement or expand our business, we may not be able to successfully negotiate or finance the acquisition or integrate the acquired businesses with our existing business and services. Future acquisitions could result in potentially dilutive issuances of equity securities and the incurrence of debt and contingent liabilities, amortization expenses and goodwill. The negotiation of any transaction, its completion and subsequent integration of any business acquired may be complex and time consuming, involve significant costs and may result in a distraction of management’s attention from ongoing business operations. We may be affected materially and adversely if we are unable to successfully integrate businesses that we acquire. Similarly, we may divest portions of our business, which may also have material and adverse effects.

RISKS RELATED TO OUR FINANCIAL OBLIGATIONS

Currency fluctuations may adversely affect our competitive position and selling prices.

We compete with producers from around the world, particularly in North America. In addition to the impact of product supply and demand, changes in the relative strength or weakness of international currencies, particularly the U.S. dollar, can also affect international trade flows in certain products. A stronger U.S. dollar may attract imports, thereby increasing product supply and possibly creating downward pressure on prices. Conversely, a weaker U.S. dollar might encourage U.S. exports, thereby decreasing product supply and possibly creating upward pressure on prices.

We may incur debt from time to time under our ABL Facility or through other means.

We had $~~176~~103 million of borrowing availability under our ABL Facility (as defined below) as of December 31, ~~2020~~2021, and no amount outstanding. We also may incur additional debt in the future through other means. Our ability to make scheduled payments of principal and interest or to refinance our indebtedness ~~depends~~will depend on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service ~~our~~any current or future debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or dilutive.

Financial covenants and restrictions under our ABL Facility could result in an event of default or limit our ability to pursue business strategies and changes relating to LIBOR could impact borrowing cost under our ABL Facility.

Under our ABL Facility, we are required to maintain a minimum fixed charge coverage ratio when the excess availability under such facility is less than the greater of (a) 10% of the lesser of (i) the borrowing base at such time and (ii) the aggregate amount of revolving facility commitments at such time or (b) $27.5 million.

Our ABL Facility also contains certain covenants which, among other things and subject to certain exceptions, restrict Verso Paper and certain of its subsidiaries’ ability to incur additional debt or liens, pay dividends, repurchase equity interests, prepay other indebtedness, sell, transfer, lease or dispose of assets and make investments in or merge with another company, make capital expenditures, enter into sale and leaseback provisions, engage or enter into any new line of business, enter into transactions with our affiliates or amend or modify certain provisions of our, and our subsidiaries’, organizational documents.

If we were to violate any of the covenants under our ABL Facility and were unable to obtain a waiver, it would be considered a default after the expiration of any applicable grace period and no additional borrowings would be available until the default was waived or cured. If we were in default under our ABL Facility, then the lenders thereunder may exercise remedies under such facility in accordance with the terms thereof, including declaring all outstanding borrowings immediately due and payable and the termination of any commitments they have to provide further borrowings. If we are unable to repay our indebtedness when due or declared due, the lenders thereunder will also have the right to proceed against the collateral pledged to them to secure the indebtedness. If such indebtedness were to be accelerated, our assets may not be sufficient to repay in full our secured indebtedness.

Certain covenants also apply to, and similarly restrict the operations of, Verso Holding. Any default under our ABL Facility could adversely affect our operations and our ability to satisfy our obligations as they come due.

In addition, borrowings under our ABL Facility bear interest at variable rates, primarily based on LIBOR as the reference rate. LIBOR is subject to national and international proposals for reform. ~~that~~Certain ~~may~~tenors ~~cause~~of LIBOR toceased ~~cease~~publication toafter ~~exist~~December ~~after~~31, 2021 orand toother ~~perform~~tenors ~~differently~~of ~~than~~LIBOR in(including ~~the~~overnight ~~past.~~and ~~However~~one, ~~for U.S dollar LIBOR~~three, itsix ~~now~~and ~~appears~~12 ~~that~~months) ~~the~~will ~~relevant~~cease ~~date~~publication ~~may~~after ~~be deferred to~~ June 30, 2023. ~~for~~Organizations ~~certain~~are ~~tenors~~currently ~~(including~~working ~~overnight~~on industry wide and ~~one,~~company ~~three,~~specific ~~six~~transition plans as it relates to financial and 12other ~~months),~~derivative atcontracts ~~which~~exposed ~~time~~to LIBOR. Although the ~~LIBOR~~secured ~~administrator~~overnight financing rate (“SOFR”) has ~~indicated~~been ~~that~~endorsed itby ~~intends~~the toAlternative ~~cease~~Reference ~~publication~~Rates ofCommittee ~~U.S.~~as ~~dollar~~its preferred replacement for LIBOR., ~~While~~it weremains ~~expect~~uncertain ~~that~~whether ~~reasonable~~or ~~alternatives~~when toSOFR ~~LIBOR~~or other alternative reference rates will be ~~available,~~widely weaccepted ~~cannot~~by ~~predict~~lenders as the ~~consequences~~replacement ~~and~~for ~~timing~~LIBOR. ofIf ~~the~~future ~~development~~rates ofbased ~~alternative~~upon a successor reference rate are higher or more volatile than LIBOR rates, ~~and~~as ~~the~~currently ~~transition~~determined toor anif ~~alternative~~our ~~reference~~lenders ~~rate~~have ~~could~~increased ~~result~~costs indue anto ~~increase~~changes in ~~our~~LIBOR, we may experience potential increases in interest ~~expense~~rates on any variable rate debt. We also have the ability to borrow under our ABL Facility based on the Federal Funds Rate as an alternative to the use of LIBOR.

We have certain material pension obligations. Future funding requirements related to these obligations could restrict cash available for our operations, capital expenditures or other requirements or require us to borrow additional funds.

As of December 31, ~~2020~~2021, we have a defined benefit pension plan covering 5751% of our employees. AsThe ~~of December 31, 2015, all of our defined benefit~~ pension ~~plans~~plan ~~were~~is frozen to new entrants. As of December 31, ~~2020~~2021, the projected benefit obligation for our pension plan was $1,~~527~~384 million and the fair value of the pension plan assets was $1,~~177~~236 million. The total underfunded status of the pension obligation calculated on a projected benefit obligation basis as of December 31, ~~2020~~2021 was $~~350~~148 million. In connection with the Pixelle Sale on February 10, 2020, Pixelle assumed $37 million of Verso’s unfunded pension liabilities (see Note 45 to our Consolidated Financial Statements). In ~~2021~~2022, we expect to make cash contributions to the pension plan of $4621 million (see Note 1213 to our Consolidated Financial Statements). A deterioration in the value of plan assets could cause the unfunded status of the pension plan to increase, thereby increasing our obligation to make additional contributions to the plan. In addition, we will require future operating cash flows to fund our pension obligations, which could restrict available cash for our operations, capital expenditures and other requirements. We also may not generate sufficient cash to satisfy these obligations, which could require us to seek funding from other sources, including through additional borrowings, which could materially increase our outstanding debt or debt service requirements.

RISKS RELATED TO INVESTMENT IN OUR COMMON STOCK

Actions of activist stockholders could cause us to incur substantial costs, divert management's attention and resources, and have an adverse effect on our business.

the loss of potential business opportunities, harm our ability to attract new investors, customers, employees, suppliers and other strategic partners, and cause the price of our common stock to experience periods of volatility or stagnation.

Our stock price has been, and could continue to be volatile, and stockholders may be unable to sell shares at or above the price at which they purchased them.

Since January 1, ~~2020~~2021 to the date of filing this annual report on Form 10-K, our Class A common stock price ranged from $711.3625 per share to $1927.3429 per share. The market price of our common stock may continue to be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our common stock may fluctuate and cause significant price variations to occur. Volatility in the market price of our common stock may prevent stockholders from being able to sell shares at or above the price at which they purchased them. The market price for our common stock could fluctuate significantly for various reasons, including:

•the pendency of, or the failure to complete, the proposed Merger (see “Risks Related to the Proposed Merger with BillerudKorsnäs AB” above);

•our operating and financial performance and prospects;

•our quarterly or annual earnings or those of other companies in our industry;

•conditions that impact demand for our paper products;

•the public’s reaction to our press releases, other public announcements and filings with the SEC;

•changes in earnings estimates or recommendations by securities analysts who track our common stock;

•market and industry perception of our success and competitive position within the industry in which we operate;

•strategic actions by us or our competitors, such as acquisitions, dispositions or restructurings;

•changes in government regulations;

•arrival and departure of key personnel;

•changes in our capital structure;

•sales of common stock by us or members of our management team; and

•changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.

The exercise of all or any number of outstanding Plan Warrants or the issuance of stock-based awards may dilute the value of the shares of our common stock.

As of the date of filing this annual report on Form 10-K, we have (i) outstanding warrants to purchase 20.39 million shares of our common stock, or the “Plan Warrants,” at an adjusted exercise price of $2120.6766 per share that expire on July 15, 2023, (ii) 0.98 million restricted stock units outstanding and (iii) 12.82 million shares of common stock reserved for future issuance under our Verso Corporation Performance Incentive Plan. The exercise of equity awards, including any stock options that we may grant in the future, the Plan Warrants, and the sale of shares of our common stock underlying any such options or the Plan Warrants, could have an adverse effect on the market for our common stock, including the price that an investor could obtain for their shares. Investors may experience dilution in the net tangible book value of their investment upon the exercise of the Plan Warrants and any stock options that may be granted or issued pursuant to the Verso Corporation Performance Incentive Plan in the future.

Our Amended and Restated Bylaws, our Certificate of Incorporation and Delaware law contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.

Provisions of our Amended and Restated Bylaws and Amended and Restated Certificate of Incorporation, as amended, or the “Certificate of Incorporation,” ~~which became effective on July 15, 2016,~~ and Delaware law may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our Board of Directors. These provisions include:

•not providing for cumulative voting in the election of directors;

•establishing advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted on by stockholders at stockholder meetings;

•prohibiting stockholder action by written consent; and

•authorizing the issuance of “blank check” preferred stock without any need for action by stockholders.

Together, these charter and statutory provisions could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our Class A Common Stock. The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of the Company, thereby potentially reducing the likelihood that our stockholders could receive a premium for their common stock in an acquisition.

pay in the future for shares of our common stock. They could also deter potential acquirers of the Company, thereby potentially reducing the likelihood that our stockholders could receive a premium for their common stock in an acquisition.

Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our Certificate of Incorporation provides that, unless we consent in writing to alternative forums, the Court of Chancery of the State of Delaware will be the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us by our directors, officers, or stockholders, (iii) any action asserting a claim against us arising under the Delaware General Corporation Law or to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine. We may consent in writing to alternative forums. This exclusive forum provision is intended to apply to claims arising under Delaware state law and would not apply to claims brought pursuant to the Exchange Act or Securities Act or any other claim for which the federal courts have exclusive jurisdiction. The exclusive forum provision in our Certificate of Incorporation does not relieve us of our duties to comply with the federal securities laws and the rules and regulations thereunder, and our stockholders are not deemed to have waived our compliance with these laws, rules and regulations.

This choice of forum provision in our Certificate of Incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us, which may discourage lawsuits against Verso and our directors, officers and other employees. In addition, stockholders who do bring a claim in the Court of Chancery of the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder would otherwise choose to bring the action, and such judgments or results may be more favorable to Verso than to our stockholders. However, the enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find this type of provision to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find the exclusive forum provision contained in Verso’s Certificate of Incorporation to be inapplicable or unenforceable in an action, Verso might incur additional costs associated with resolving such action in other jurisdictions.

~~Corporate~~Actions ~~responsibility,~~of ~~specifically~~activist ~~related~~stockholders tocould ~~environmental,~~cause ~~social~~us ~~and~~to ~~governance~~incur ~~(“ESG”)~~substantial ~~matters~~costs, ~~may~~divert ~~impose~~management's ~~additional~~attention ~~costs~~and resources, and ~~expose~~have usan toadverse ~~new~~effect ~~risks~~on our business.

Future activist stockholder activities could adversely affect our business as (i) responding to proxy contests and reacting to other actions by activist stockholders can be costly and time-consuming, disruptive to our operations and divert the attention of management and our employees and (ii) perceived uncertainties as to our future direction, strategy or leadership could result in the loss of potential business opportunities, harm our ability to attract new investors, customers, employees, suppliers and other strategic partners, and cause the price of our common stock to experience periods of volatility or stagnation.

Corporate responsibility, specifically related to environmental, social and governance, or “ESG,” matters, may impose additional costs and expose us to new risks.

Public ESG and sustainability reporting is becoming more broadly expected by investors, stockholders and other third parties. Certain organizations that provide corporate governance and other corporate risk information to investors and stockholders have developed scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. These ratings may impact our investor base universe. Ongoing focus on corporate responsibility matters by investors and other parties may impose additional costs or expose us to new risks.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our material facilities as of December 31, ~~2020~~2021 are shown in the following table:

Location	Use	Owned/Leased
Miamisburg, Ohio	corporate office		leased
Duluth, Minnesota(1)	paper mill		owned
Escanaba, Michigan	paper mill		owned
Luke, Maryland(2)	paper mill, warehouse and converting		owned
Luke, Maryland(1)	paper mill, warehouse and converting		owned
Quinnesec, Michigan	paper mill/kraft pulp mill		owned
Wisconsin Rapids, Wisconsin(3)	paper mill, warehouse and converting		owned
Wisconsin Rapids, Wisconsin(2)	paper mill, warehouse and converting		owned

(1) InWe ~~2020,~~completed wethe ~~decided~~shutdown toand ~~permanently~~closure ~~shut~~of ~~down~~the ~~our~~Luke ~~mill~~Mill in ~~Duluth,~~June ~~Minnesota~~2019 (see Note 1415 to our Consolidated Financial Statements).

(2) ~~Verso~~In ~~completed~~2020, ~~the~~we ~~shutdown~~announced ~~and~~plans ~~closure~~to ofindefinitely ~~the~~idle ~~Luke~~our ~~Mill~~mill in ~~June~~Wisconsin ~~2019~~Rapids, ~~(see~~Wisconsin, ~~Note~~with 14the toexception ~~our~~of ~~Consolidated~~warehouse ~~Financial~~and ~~Statements)~~converting.

(3) In 2020, we announced plans to indefinitely idle our mill in Wisconsin Rapids, Wisconsin, with the exception of warehouse and converting.

Item 3. Legal Proceedings

See Note 1617 to our Consolidated Financial Statements for additional information regarding our material legal proceedings, which is incorporated into this Item 3 by reference.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company’s Class A common stock is listed on the New York Stock Exchange under the symbol “VRS.”

Holders

As of February 1918, ~~2021~~2022, there were 4939 stockholders of record of our Class A common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, including 3228,~~995~~930,~~044~~079 shares of our Class A common stock where the registered stockholder is Cede & Co., we are unable to estimate the total number of stockholders represented by these record holders.

Dividends

We did not declare or pay any cash dividends on shares of Verso common stock during the years ended December 31, 2018 and 2019. Cash dividends on shares of Verso common stock during the year ended December 31, 2020 are shown in the following table:

Quarter

Date Declared

Date of Record

Date Paid

Amount

2nd

May 12

June 15

June 29

0.10

3rd

August 5

September 18

September 28

0.10

3rd

August 5

September 18

September 28

3.00

4th

November 9

December 18

December 29

0.10

On February 5, 2021, our Board of Directors declared a quarterly cash dividend of $0.10 per share of Verso common stock, payable on March 29, 2021, to stockholders of record on March 18, 2021.

We expect to continue to pay quarterly cash dividends of $0.10 per share of Verso common stock for the foreseeable future, subject to the approval of our Board of Directors.

Dividends

Cash dividends on shares of Verso common stock during the year ended December 31, 2021 are shown in the following table:

Quarter

Date Declared

Date of Record

Date Paid

Amount

1st

February 5

March 18

March 29

0.10

2nd

May 7

June 17

June 29

0.10

3rd

August 6

September 17

September 28

0.10

4th

November 4

December 17

December 29

0.10

Pursuant to the terms of the Merger Agreement, we will not pay a cash dividend for the first quarter ending March 31, 2022. The Merger Agreement permits us to resume paying regular quarterly cash dividends commencing in the second quarter ending June 30, 2022 in an amount not to exceed $0.10 per share and consistent with our past practice in terms of the timing of declaration and payment of such dividends.

Issuer Repurchases of Equity Securities

On February 26, 2020, our 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 on August 5, 2020, our Board of Directors reduced the total amount of the share repurchase authorization from $250 million to $150 million. AsWe adid ~~result~~not repurchase any shares of ~~this~~our ~~reduction~~common instock pursuant to this repurchase authorization during the three months ended December 31, as2021. As of December 31, ~~2020~~2021, $~~121~~45 million of the $150 million authorized remained.

The table below discloses the shares of our common stock repurchased during the fourth quarter of ~~2020~~2021 (dollars in millions, except per share amounts):

	Total Number of Shares(or Units)Purchased (1)	AveragePrice Paidper Share(or Unit) (a)		Total Number ofShares (or Units)Purchased as Part of Publicly Announced Plans or Programs	Maximum Number(or ApproximateDollar Value) ofShares thatMay Yet BePurchasedUnder the Plansor Programs (b) (in millions)
October 1, 2020 through October 31, 2020	—	$	—	—	$	127
October 1, 2021 through October 31, 2021	—	$	—	—	$	45
November 1, 2020 through November 30, 2020	207,000	10.61		207,000	125
November 1, 2021 through November 30, 2021	—	—		—	45
December 1, 2020 through December 31, 2020	396,472	11.84		396,472	121
December 1, 2021 through December 31, 2021	—	—		—	45
Total	~~603,472~~—

(1) Does not include 3731,~~009~~144 shares of Verso common stock repurchased during the three months ended December 31, ~~2020~~2021 at an average price of $926.2194 per share to meet participant tax withholding obligations on restricted stock units that vested during the quarter.

Performance Graph

The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act except to the extent that it is specifically incorporated by reference into such filing.

The following graph compares the cumulative total shareholder return of our common stock with the cumulative total return of the Russell 2000 Index and a peer group index(1) for the period ~~July~~December 1931, 2016 ~~(our first day of trading on the NYSE following our emergence from the 2016 bankruptcy)~~ through December 31, ~~2020~~2021. The graph assumes that $100 was invested in our common stock, the Russell 2000 Index and the peer group index at the close of business on ~~July~~December 1931, 2016, and that all dividends were reinvested. Shareholder returns over the indicated period should not be considered indicative of future returns.

	Verso Corporation		Peer Group(1)		Russell 2000
July 19, 2016	$	100.00	$	100.00	$	100.00
December 30, 2016	$	100.00	$	100.00	$	100.00
December 30, 2016	59.17		111.68		113.05
December 29, 2017	247.46		122.86		113.14
December 29, 2017	146.42		140.11		127.91
December 31, 2018	315.49		94.44		99.37
December 31, 2018	186.67		106.64		112.34
December 31, 2019	253.94		122.97		122.94
December 31, 2019	150.25		136.13		138.99
December 31, 2020	169.30		136.32		145.52
December 31, 2020	100.17		149.36		164.51
December 31, 2021	380.56		145.30		165.45

(1)The peer group index includes companies in a similar industry which were used by Verso for compensation decisions in ~~2018, 2019 and 2020~~2021. The peer group index includes: Clearwater Paper Corporation, ~~Domtar Corporation,~~ P.H. Glatfelter Company, Graphic Packaging Holding Company, Greif, Inc., Neenah Paper, Inc., Packaging Corporation of America, Resolute Forest Products Inc., Schweitzer-Mauduit International, Inc. and Sonoco Products Company. In 2021, Domtar Corporation was acquired by another company. As such, Domtar Corporation is no longer used by Verso for compensation decisions and was removed from the peer group index for the periods presented above.

Item 6. ~~Selected Financial Data~~[Reserved]

The following table presents our selected historical financial data for the period from January 1, 2016 to July 14, 2016 (Predecessor), for the period from July 15, 2016 to December 31, 2016 (Successor) and for the years ended December 31, 2017, 2018, 2019 and 2020 (Successor). The following information is only a summary and has been derived from the Consolidated Financial Statements. It should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and their related notes, and the other financial information, included elsewhere in this annual report. Historical results are not indicative of future results.

The Consolidated Financial Statements for the reporting entity subsequent to emergence from the Chapter 11 Cases, or the “Successor,” are not comparable to the Consolidated Financial Statements for the reporting entity prior to emergence from the Chapter 11 Cases, or the “Predecessor.”

	Predecessor		Successor
	January 1, 2016		July 15, 2016
	Through		Through
	July 14,		December 31,		Year Ended December 31,
(Dollars in millions except per share amounts)	2016		2016		2017		2018		2019		2020
Statement of Operations Data:
Net sales	$	1,417	$	1,224	$	2,461	$	2,682	$	2,444	$	1,359
Costs and expenses:
Cost of products sold - (exclusive of depreciation and amortization)	1,250		1,126		2,250		2,321		2,138		1,334
Depreciation and amortization	100		93		115		111		183		153
Selling, general and administrative expenses	96		53		107		102		104		77
Restructuring charges	151		11		9		1		52		12
Other operating (income) expense(1)	(57)		8		1		(5)		4		(89)
Operating income (loss)	(123)		(67)		(21)		152		(37)		(128)
Interest expense	39		17		38		33		2		1
Other (income) expense(2)	(2)		(32)		(21)		(52)		(18)		(19)
Income (loss) before reorganization items, net	(160)		(52)		(38)		171		(21)		(110)
Reorganization items, net(3)	(1,338)		—		—		—		—		—
Income (loss) before income taxes	1,178		(52)		(38)		171		(21)		(110)
Income tax expense (benefit)(4)	—		(20)		(8)		—		(91)		(9)
Net income (loss)	$	1,178	$	(32)	$	(30)	$	171	$	70	$	(101)
Per Share Data:
Income (loss) per common share:
Basic	$	14.39	$	(0.93)	$	(0.87)	$	4.97	$	2.03	$	(2.95)
Diluted	14.39		(0.93)		(0.87)		4.88		2.00		(2.95)
Weighted average common shares outstanding (in thousands):
Basic	81,847		34,391		34,432		34,514		34,625		34,232
Diluted	81,847		34,391		34,432		35,096		35,134		34,232
Statement of Cash Flows Data:
Cash provided by (used in) operating activities	$	25	$	17	$	153	$	283	$	125	$	(62)
Cash provided by (used in) investing activities	32		(41)		(40)		(52)		(104)		303
Cash provided by (used in) financing activities	(11)		(20)		(113)		(212)		(5)		(146)
Other Financial and Operating Data:
EBITDA(5)	$	1,317	$	58	$	115	$	315	$	164	$	44
Capital expenditures	(31)		(42)		(40)		(73)		(105)		(48)
Total tons sold (in thousands)	1,676		1,473		2,959		2,927		2,647		1,674
Balance Sheet Data:
Working capital(6)	$	463	$	412	$	309	$	300	$	308	$	277
Property, plant and equipment, net	1,180		1,132		1,062		1,016		945		613
Total assets	2,006		1,855		1,732		1,699		1,695		1,245
Total debt and finance leases	310		293		190		—		7		5
Total equity	675		770		746		906		987		684

(1)Other operating (income) expense for the period from January 1, 2016 to July 14, 2016 (Predecessor) primarily reflects the gain on sale of hydroelectric facilities in January 2016. Other operating (income) expense in 2020 includes a $94 million gain on the sale of our Androscoggin and Stevens Point mills.

(2)Other (income) expense in 2018 includes $42 million of income related to countervailing duty settlement gains pursuant to the settlement agreement, or “the Settlement Agreement,” entered into in March 2018 with Canadian producers of supercalendered paper, Port Hawkesbury Paper Limited Partnership and certain related entities.

(3)Reorganization items, net, for the period from January 1, 2016 to July 14, 2016 (Predecessor) represented expenses and income directly associated with the Predecessor’s bankruptcy filing. This amount represents primarily a gain on settlement of liabilities subject to compromise of $1,992 million, partially offset by a loss of $651 million due to the revaluation of our assets and liabilities as part of the application of fresh start accounting as of July 15, 2016.

(4)Income tax benefit in 2019 is primarily driven by a release of the income tax valuation allowances on all federal deferred tax assets and certain state tax credits.

(5)EBITDA consists of earnings before interest, taxes, depreciation and amortization. Our use of EBITDA is further discussed in the “Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA” section of Item 7 herein. The following table reconciles net income (loss) to EBITDA for the periods presented:

	Predecessor		Successor
	January 1, 2016		July 15, 2016
	Through		Through
	July 14,		December 31,		Year Ended December 31,
(Dollars in millions)	2016		2016		2017		2018		2019		2020
Reconciliation of net income (loss) to EBITDA:
Net income (loss)	$	1,178	$	(32)	$	(30)	$	171	$	70	$	(101)
Income tax expense (benefit)	—		(20)		(8)		—		(91)		(9)
Interest expense	39		17		38		33		2		1
Depreciation and amortization	100		93		115		111		183		153
EBITDA	$	1,317	$	58	$	115	$	315	$	164	$	44

(6)Working capital is defined as current assets net of current liabilities, excluding assets held for sale and the current portion of long-term debt and finance leases.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a leading North American producer of coated paper, shipped in both roll and sheet formats, which is used primarily in printing applications to produce high-end advertising brochures, catalogs and magazines among other media and marketing publications as well as specialty and packaging applications. We also produce and sell NBHK pulp, which is used to manufacture printing and writing paper grades and tissue products.

As of the date of this report, we operate three paper machines at our mill in Escanaba, Michigan and one paper machine and one NBHK pulp machine at our mill in Quinnesec, Michigan. The mills have an aggregate annual production capacity of approximately 1,400,000 tons of paper and ~~market~~ NBHK pulp. In 2019, we shut down our paper mill in Luke, Maryland. In 2020, we sold our mills located in Jay, Maine and Stevens Point, Wisconsin, and indefinitely idled our mills in Duluth, Minnesota and Wisconsin Rapids, Wisconsin, but continue to operate the sheeting facility at our Wisconsin Rapids ~~Mill~~mill to convert paper produced at our Michigan mills to sheets for the commercial print market. ~~In December 2020, we decided to permanently shut down our paper mill in Duluth, Minnesota and to continue our efforts to sell the mill.~~

2624

Financial Overview

Net sales for the year ended December 31, ~~2020~~2021 declined by $~~1,085~~81 million or 446% compared to the prior year, as a result of a significant ~~declines~~decline in sales volume ~~and~~partially ~~unfavorable~~offset by greatly improved price/mix. OfStrong ~~the~~market ~~$1,085~~conditions ~~million,~~fueled orfavorable ~~44%~~price/mix ~~net~~of ~~sales decline,~~ $~~186~~129 million, orwhich ~~8%,~~ was ~~attributable~~more tothan ~~the~~offset ~~closure~~by ofa ~~our~~volume ~~Luke~~decrease ~~Mill~~of ~~in June 2019,~~ $~~489~~210 million, or 2015%, ~~was~~primarily arelated ~~result~~to ofour ~~the~~sold ~~sale~~Duluth, ~~of our~~ Androscoggin and Stevens Point mills ~~in February 2020,~~ and ~~$146~~idled ~~million, or 6%, was attributable to the indefinite idling of our Duluth and~~ Wisconsin Rapids ~~mills in July 2020~~mill. Total company sales volume was down from 21,~~647~~674 thousand tons during the year ended December 31, ~~2019~~2020, to 1,~~674~~407 thousand tons during the ~~year~~same ~~ended~~period ~~December~~of ~~31, 2020. Of~~ the ~~973~~current ~~thousand ton volume decline~~year, ~~185~~primarily ~~thousand tons were~~ attributable to ~~the closure of~~ our ~~Luke~~sold ~~Mill in June 2019~~Duluth, ~~479 thousand tons were a result of the sale of our~~ Androscoggin and Stevens Point mills ~~in February 2020, 170 thousand tons were attributable to the indefinite idling of our Duluth~~ and idled Wisconsin Rapids ~~mills in July 2020, and the additional decline resulted from lower customer demand driven by the COVID-19 pandemic~~mill.

Recent Developments

~~Sale~~Agreement ~~of Androscoggin Mill~~ and ~~Stevens~~Plan ~~Point~~of ~~Mill~~Merger

OnFor ~~November~~information ~~11,~~regarding 2019, we entered into a Purchase Agreement with Pixelle whereby we agreed to sell to Pixelle 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. As consideration for the Pixelle Sale, we received $352 million in cash, which reflected certain adjustments related to our ~~estimates~~pending ofMerger ~~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~~BillerudKorsnäs completed transfer of the unfunded pension liabilities during the year ended December 31, 2020. The Pixelle Sale reduced the aggregate annual production capacity of our mills by approximately 660,000 tons. The Androscoggin and ~~Stevens Point mills together represented approximately 22% of our revenues for~~ the ~~year~~Merger ~~ended December 31~~Agreement, ~~2019.~~see ~~See~~ Note 42 to ~~our~~the Consolidated Financial Statements.

~~Duluth~~Sale ~~and~~of ~~Wisconsin~~Duluth ~~Rapids Mills~~Mill

On ~~June~~May 913, ~~2020~~2021, weVerso ~~announced plans to indefinitely idle our mills in Duluth,~~ Minnesota ~~and~~ Wisconsin ~~Rapids~~LLC, ~~Wisconsin,~~an ~~while~~indirect ~~exploring~~wholly ~~viable~~owned ~~and~~subsidiary ~~sustainable~~of ~~alternatives for both mills. Those alternatives included restarting~~Verso, ~~selling~~entered orinto ~~permanently~~an ~~closing~~asset ~~one~~purchase oragreement ~~both~~with ~~mills.~~ST ToPaper ~~assist~~1, inLLC ~~evaluating~~and ~~the~~sold ~~possible~~all ~~sale~~ of ~~these idled mills, we have been working with outside advisors. Our decision to reduce production capacity was driven by~~ the ~~accelerated~~assets ~~decline in graphic paper demand,~~ primarily ~~resulting from the COVID-19 pandemic. The “stay-at-home” and other orders~~ related to ~~the~~our ~~COVID-19 pandemic have significantly reduced the use of print advertising in various industries, including retail, sports, entertainment and tourism. The production capacity of the~~ Duluth Mill islocated ~~approximately~~in ~~270~~Duluth,~~000~~ ~~tons~~Minnesota offor ~~supercalendered/packaging~~$7 ~~paper~~million ~~and~~in ~~the~~cash ~~production~~less ~~capacity~~costs ofto ~~the~~sell ~~Wisconsin Rapids Mill is approximately 540,000 tons~~ of ~~coated and packaging paper. We idled production at the Duluth Mill on July~~ $1, ~~2020 and at the Wisconsin Rapids Mill on July 27, 2020~~million. InThe ~~the third quarter of 2020~~sale, weincluding ~~recognized~~related $3sale ~~million in severance and benefit~~ costs, ~~included~~resulted in ~~Costs~~a ofloss ~~products sold, associated with the idling~~ of ~~our Duluth Mill and in the fourth quarter of 2020, we recognized~~ $53 million ~~in severance and benefit costs,~~ included in ~~Costs~~Other ofoperating ~~products~~(income) ~~sold,~~expense ~~associated~~on ~~with~~ the ~~idling~~Consolidated Statement of ~~our~~Operations ~~Wisconsin~~for ~~Rapids Mill. We continue to operate~~ the ~~facility~~year atended ~~our~~December ~~Wisconsin~~31, ~~Rapids Mill to convert paper produced at our Quinnesec and Escanaba mills to sheets for the commercial print market~~2021.

OnWisconsin ~~December~~Rapids 31, 2020, we decided to permanently shut down our paper mill in Duluth, Minnesota while continuing with efforts to sell the mill. We furloughed approximately 190 employees when the mill was idled in July 2020, while a smaller group of approximately 35 employees remained at the mill to maintain critical systems. In connection with the closure of the Duluth Mill, we recognized $65 million of accelerated depreciation which is included in Depreciation and amortization on the Consolidated Statement of Operations for the year ended December 31, 2020. In addition, we recognized $6 million in charges associated with certain contract termination, write-off of property, plant and equipment, spare parts and inventory, and $1 million in additional severance and related benefits in the fourth quarter of 2020 due to a further reduction in the remaining employees.

On February 8, 2021, we decided to permanently shut down the No. 14 paper machine and certain other long-lived assets at our paper mill in Wisconsin Rapids, Wisconsin, while continuing to explore viable and sustainable alternatives with the remaining assets, including our converting operations, No. 16 paper machine and other remaining long-lived assets. This decision ~~will~~ permanently ~~reduce~~reduced our total annual production capacity by 185,000 tons of coated paper. We ~~furloughed~~In ~~approximately~~connection ~~700~~with ~~employees~~the ~~when~~permanent shutdown of the ~~Wisconsin~~No. ~~Rapids~~14 ~~Mill~~paper ~~was~~machine ~~idled~~and certain other long-lived assets, we recognized $84 million of accelerated depreciation which is included in ~~July~~Depreciation ~~2020~~and amortization on the Consolidated Statement of Operations for the year ended December 31, 2021. In addition, we recognized $8 million in charges associated with the write-off of property, plant and doequipment ~~not~~and ~~expect~~spare toparts ~~further~~and ~~reduce~~inventory which is included in Restructuring charges on the ~~number~~Consolidated Statement of Operations for the year ended December 31, 2021.

27Luke Mill Equipment and Other Asset Sales

~~employees~~On ~~remaining~~August at1, ~~the~~2020, ~~mill~~we entered into an equipment purchase agreement with Halkali Kagit Karton Sanayi ve Tic. InA.S., ~~the~~a ~~first~~company ~~quarter~~organized under the laws of ~~2021~~Turkey, whereby we ~~expect~~agreed to ~~recognize~~sell, ~~$95~~and ~~million~~the buyer agreed to purchase, certain equipment at our Luke Mill, primarily including two paper machines. The purchase price was $~~105~~11 million in cash due at various milestones, all of ~~accelerated~~which ~~depreciation~~had ~~and~~been ~~pre-tax~~received ~~non-cash~~as ~~charges~~of ~~associated~~December 31, ~~with~~2021. We determined that the ~~No.~~control 14over ~~paper~~the ~~machine~~use of the acquired assets had transferred to the purchaser in June 2021 and ~~certain~~correspondingly ~~other~~recognized ~~long-lived~~the sale of the two paper machines and related assets at that time.

Luke Mill

On April 30, 2019, we announced the permanent shutdown of our paper mill in Luke, Maryland in response to the continuing decline in customer demand for the grades of coated freesheet paper produced at the Luke Mill, along with rising input costs, a significant influx of imports and rising compliance costs and infrastructure challenges associated with environmental regulation. We completed the shutdown and closure of the Luke Mill in June 2019, which reduced our coated freesheet production capacity by approximately 450,000 tons and eliminated approximately 675 positions.

On August 1, 2020, we entered into an equipment purchase agreement with Halkali Kagit Karton Sanayi ve Tic. A.S., a company organized under the laws of Turkey, whereby we agreed to sell, and the buyer agreed to purchase, certain equipment at our Luke Mill, primarily including two paper machines. The purchase price was $11 million in cash due at various milestones. We received $8 million in non-refundable deposits associated with the sale during the year ended December 31, 2020, and an additional $1 million in the first quarter of 2021. We expect 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 buyer, will occur upon satisfactory completion of the disassembly and removal of the equipment and the receipt, by us, of all payments due from the buyer.

On October 30, 2020, we received $4 million of cash proceeds for the sale of ancillary land associated with our Luke Mill, with a net book value of $4 million.

We have evaluated the remaining assets of our Luke Mill and have received a letter of intent to purchase these assets. Negotiations for a purchase agreement are ongoing.

Changes to Directors and Officers

On January 30, 2020, we entered into a Cooperation Agreement with Lapetus Capital II LLC together with its affiliates, including Atlas and Blue Wolf and certain of their respective affiliates, which settled the proxy contest with respect to our 2019 Annual Meeting.

COVID-19 Pandemic

2825

~~While~~conditions, weeconomic ~~cannot reasonably estimate the full impact of COVID-19 on our business~~activity, ~~financial~~consumer ~~position~~behavior, ~~results~~supply ofchain ~~operations~~shortages and ~~cash~~disruptions ~~flows,~~and ~~the~~inflationary ~~pandemic~~pressure; ~~will~~all ~~continue~~of towhich could have a ~~negative~~material impact on our business, ~~and~~ financial ~~results. The full extent to which COVID-19 impacts our operations will depend on future developments~~position, ~~which~~results ~~are highly uncertain, including, among others, the duration~~ of ~~the~~operations ~~outbreak, new information that may emerge concerning the severity of COVID-19~~ and ~~the~~cash actions taken, especially those by governmental authorities, to contain its spread or treat its impact including the availability, effectiveness and/or public acceptance of any FDA approved COVID-19 vaccinesflows.

~~Share~~While ~~Repurchase~~we ~~Authorization~~cannot reasonably estimate the full impact of COVID-19 on our business, financial position, results of operations and cash flows, we saw our sales, volume and prices continue to recover during 2021.

On February 26, 2020, our Board of Directors authorized up to $250 million of net proceeds from the Pixelle Sale to be used to repurchase outstanding shares of our common stock. In conjunction with the declaration of the special cash dividend of $3.00 per share, orfor an aggregate of $101 million, on August 5, 2020, our Board of Directors reduced the total amount of the share repurchase authorization from $250 million to $150 million. AsIn ofaddition, ~~December~~on 31May 13, ~~2020~~2021, we commenced a modified Dutch auction tender offer to purchase for cash shares of our common stock for an aggregate purchase price of not more than $~~121~~55 million. ofThe tender offer expired on June 10, 2021. Through the tender offer, we accepted for payment approximately 3.0 million shares at a purchase price of $~~150~~18.10 per share for an aggregate purchase price of approximately $56 million, ~~authorized~~including ~~remained~~fees and expenses. The shares purchased through the tender offer were immediately retired.

During the years ended December 31, 2020 and 2021, we purchased approximately 2.2 million and 1.3 million shares, respectively, of our common stock through open market purchases, the modified Dutch auction tender offer and 10b5-1 programs under the share repurchase authorization at a weighted average cost of $13.39 and $15.97 per share, respectively.

As of December 31, 2021, $45 million of the $150 million share repurchase authorization remained.

Return of Proceeds to Stockholders

In February 2020, we announced our intention to utilize no less than $225 million and up to $282 million of the net cash proceeds from the Pixelle Sale for the benefit of our stockholders. As of December 31, 2021, we have returned $225 million to our stockholders through a combination of share repurchases and special and quarterly cash dividends, including the modified Dutch auction tender offer in May 2021.

Warrants

In December 2021, after our announcement of the pending Merger with BillerudKorsnäs, certain warrant holders notified us of their request for the company to repurchase their warrants. During December 2021, we decided to repurchase and retire 0.8 million warrants at an average price of $11.67, for total consideration of $10 million.

As of December 31, 2021, 1.0 million warrants remained outstanding. From January 1, 2022 through the date of this report, we decided to repurchase and retire an additional 0.3 million warrants at an average price of $11.63 for total considerations of $3 million.

Selected Factors Affecting Operating Results

Net Sales

We are primarily focused on serving the following end-user categories: specialty converters, general commercial print, catalogs and magazine publishers. Coated paper demand is primarily driven by advertising and print media usage. To offset the decline in demand for graphic paper, we are constantly looking at new product development and production improvements to reposition our assets into more stable markets.

Many of our customers provide us with forecasts, which allow us to plan our production runs in advance, optimizing production over our integrated mill system and thereby reducing costs and increasing overall efficiency. Generally, our sales agreements do not extend beyond the calendar year and provide for quarterly or semiannual price adjustments based on market price movements.

We reach our end-users through several channels, including merchants, brokers, printers and direct sales to end-users. We sell our products to approximately 200 customers which comprise approximately 1,100 end-user accounts. In 2020, our two largest customers, Central National-Gottesman and Veritiv Corporation, together accounted for 33% of our net sales.26

We reach our end-users through several channels, including merchants, brokers, printers and direct sales to end-users. We sell our products to approximately 200 customers which comprise approximately 900 end-user accounts. In 2021, our two largest customers, Central National-Gottesman and Veritiv Corporation, together accounted for 24% of our net sales.

Cost of Products Sold

We are subject to changes in our cost of sales caused by movements in underlying commodity prices. The principal components of our cost of sales are wood fiber, wood pulp, chemicals, energy, labor and maintenance. Costs for commodities, including wood fiber, wood pulp, chemicals and energy, are the most variable component of our cost of sales because their prices can fluctuate substantially, sometimes within a relatively short period of time. In addition, our aggregate commodity purchases fluctuate based on the volume of paper that we produce.

Wood Pulp. We source bleached wood pulp from market producers to supplement fiber requirements at our mills. The primary pulp procured is ~~Northern Bleached Softwood Kraft, or “~~NBSK.” ~~NBSK~~We ~~pulp~~expect isweather ~~produced~~events ~~using~~and aimbalances ~~chemical~~in ~~process,~~supply ~~whereby softwood chips are combined with chemicals~~ and ~~steam~~demand to ~~separate~~create ~~the~~volatility ~~wood~~in ~~fibers.~~prices ~~The~~for ~~fibers~~NBSK ~~are~~from ~~washed~~time ~~and screened~~ to time.

29Chemicals. Chemicals utilized in the manufacturing of coated paper include latex, clay, starch, calcium carbonate, caustic soda, sodium chlorate and titanium dioxide. We purchase these chemicals from a variety of suppliers and are not dependent on any single supplier to satisfy our chemical needs. We expect imbalances in supply and demand and weather events to periodically create volatility in prices and supply for certain chemicals.

remove the chemicals and lignin. Then the pulp is bleached to the necessary brightness. NBSK pulp provides a brighter fiber and the long fiber length from softwood pulp is beneficial for paper strength. We expect imbalances in supply and demand to create volatility in prices for market NBSK from time to time.

Chemicals. Chemicals utilized in the manufacturing of coated paper include latex, clay, starch, calcium carbonate, caustic soda, sodium chlorate and titanium dioxide. We purchase these chemicals from a variety of suppliers and are not dependent on any single supplier to satisfy our chemical needs. We expect imbalances in supply and demand to periodically create volatility in prices for certain chemicals.

Our indirect wholly-owned subsidiary, ~~Consolidated Water Power Company, or “~~CWPCo,” has 33.3 megawatts of generating capacity on 39 generators located in five hydroelectric plants on the Wisconsin River. CWPCo is a regulated public utility that provides electricity to our Wisconsin Rapids facility, and a small number of industrial, light commercial and residential customers.

Labor. Labor cost includes wages, salary and benefit expenses attributable to our mill personnel. Mill employees at a non-managerial level are compensated on an hourly basis. Management employees at our mills are compensated on a salaried basis. Wages, salary and benefit expenses included in cost of sales do not vary significantly from year to year. In addition, we have not experienced significant labor shortages.

Maintenance. Maintenance expense includes day-to-day maintenance, equipment repairs and larger maintenance projects, such as paper machine shutdowns for periodic maintenance. Maintenance activities can produce quarter-to-quarter fluctuations in our maintenance expenses. In conjunction with our periodic maintenance shutdowns, we have incidental incremental costs that are primarily comprised of unabsorbed fixed costs from lower production volumes and other incremental costs for purchased materials and energy that would otherwise be produced as part of the normal operation of our mills.

Depreciation and Amortization.

Depreciation and amortization expense represents the periodic charge to earnings through which the cost of tangible assets and intangible assets are recognized over the asset’s life. Changes in our asset basis, such as capital investments and impairment or sale of tangible or intangible assets, may produce year-to-year fluctuations in expense.

Selling, General and Administrative Expenses

The principal components of our Selling, general and administrative expenses are wages, salaries and benefits for our office personnel at our headquarters and our sales force, travel and entertainment expenses, advertising expenses, expenses relating to certain information technology systems and research and development expenses.

~~Effect of Inflation~~27

While inflationary increases on certain raw materials such as energy, wood fiber, wood pulp and chemicals have an impact on our operating results, sales prices and volumes are more strongly influenced by supply and demand factors in specific markets and by exchange rate fluctuations than by inflationary factors.

Critical Accounting Policies

Our accounting policies are fundamental to understanding management’s discussion and analysis of financial condition and results of operations. Our Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America, or “GAAP.” The preparation of the financial statements requires management to make certain judgments and assumptions in determining accounting estimates. Accounting estimates are considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and different estimates reasonably could have been used in the current period, or changes in the accounting estimate are reasonably likely to occur from period to period, that would have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.

Management believes the following critical accounting policies are both important to the portrayal of our financial condition and results of operations and require subjective or complex judgments. These judgments about critical accounting estimates are based on information available to us as of the date of the financial statements.

Impairment of Long-lived Assets

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable, as measured by comparing their net book value to the estimated undiscounted future cash flows generated by their use.

Management believes that the accounting estimates associated with determining fair value as part of an impairment analysis are critical accounting estimates because estimates and assumptions are made about our future performance and cash flows. The estimated fair value is generally determined on the basis of discounted future cash flows. We also consider a market-based approach and a combination of both. While management uses the best information available to estimate future performance and cash flows, future adjustments to management’s projections may be necessary if economic conditions differ substantially from the assumptions used in making the estimates.

Pension

We offer various pension and retirement benefits to certain employees. ~~All~~Our ~~of our~~ defined benefit pension ~~plans~~plan ~~are~~is frozen to new entrants. The calculation of the obligations and related expenses under the plan requires the use of actuarial valuation methods and assumptions, including the expected long-term rate of return on plan assets, discount rates and changes in mortality rates. The table below shows assumptions used by us for the periods shown:

	Year Ended December 31,		Nine months ended September 30,		~~Nine~~Three months ended ~~September~~December 3031,		~~Three~~Year ~~months~~Ended ~~ended~~ December 31,
	2018		2019		2020		2020
	2019		2020		2020		2021
Weighted average assumptions used to determine benefit obligations as of end of period:
Discount rate	43.1711	%	32.1171	%	2.7157	%	2.5789	%
Weighted average assumptions used to determine net periodic pension cost for the period:
Discount rate	34.5117	%	43.1711	%	32.1171	%	2.7157	%
Expected long-term return on plan assets	67.5000	%	76.0050	%	6.50	%	6.5020	%
Cash balance interest credit rate	4.6049	%	4.4933	%	4.33	%	43.3332	%

We evaluate the actuarial assumptions annually as of December 31 (the measurement date), unless a significant event occurs during the year requiring a remeasurement (such as a plan amendment, settlement, or curtailment). We consider changes in these long-term factors based upon market conditions and the requirements of Accounting Standards Codification, or “ASC,” Topic 715, Compensation—Retirement Benefits. These assumptions are used to calculate benefit obligations as of December 31 of the current year and pension expense to be recorded for the following year. The discount rate assumption reflects the yield on a portfolio of high quality fixed-income instruments that have a similar duration to the plan’s liabilities. The expected long-term rate of return assumption reflects the average return expected on the assets invested to provide for the plan’s liabilities.

Actuarial valuations and assumptions used in the determination of future values of plan assets and liabilities are subject to management judgment and may differ significantly if different assumptions are used. The following table highlights the 28

31Actuarial valuations and assumptions used in the determination of future values of plan assets and liabilities are subject to management judgment and may differ significantly if different assumptions are used. The following table highlights the sensitivity of our pension obligations and 2022 net periodic pension cost (income) to changes in these assumptions, assuming all other assumptions remain constant.

sensitivity of our pension obligations and 2021 net periodic pension cost (income) to changes in these assumptions, assuming all other assumptions remain constant.

Impact on 2022 Net Periodic

Impact on Pension

Change in Assumption

Pension Cost (Income)

Benefit Obligation

0.25 percentage point decrease in discount rate

Decrease $3 million

Increase $39 million

0.25 percentage point increase in discount rate

Increase $3 million

Decrease $37 million

0.25 percentage point decrease in expected rate of return on assets

Increase $3 million

0.25 percentage point increase in expected rate of return on assets

Decrease $3 million

Impact on 2021 Net Periodic

Impact on Pension

Change in Assumption

Pension Cost (Income)

Benefit Obligation

0.25 percentage point decrease in discount rate

Decrease $3 million

Increase $44 million

0.25 percentage point increase in discount rate

Increase $2 million

Decrease $42 million

0.25 percentage point decrease in expected rate of return on assets

Increase $3 million

0.25 percentage point increase in expected rate of return on assets

Decrease $3 million

Contingent Liabilities

A liability is contingent if the outcome or amount is not presently known, but may become known in the future as a result of the occurrence of some uncertain future event. We estimate our contingent liabilities based on management’s estimates about the probability of outcomes and their ability to estimate the range of exposure. Accounting standards require that a liability be recorded if management determines that it is probable that a loss has occurred and the loss can be reasonably estimated. In addition, it must be probable that the loss will be confirmed by some future event. As part of the estimation process, management is required to make assumptions about matters that are by their nature highly uncertain.

The assessment of contingent liabilities, including legal contingencies, asset retirement obligations and environmental costs and obligations, involves the use of critical estimates, assumptions and judgments. Management’s estimates are based on their belief that future events will validate the current assumptions regarding the ultimate outcome of these exposures. However, there can be no assurance that future events will not differ from management’s assessments.

Income ~~taxes~~Taxes

We are subject to income taxes in the United States. Significant judgments and estimates are required in determining the consolidated income tax expense. The provision for income taxes includes income taxes paid, currently payable or receivable, and deferred taxes. Under GAAP, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss and credit carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the enactment date occurs. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. In the event that the actual outcome of future tax consequences differs from our estimates and assumptions due to changes or future events, the resulting change to the provision for income taxes could have a material effect on our Consolidated Financial Statements.

The recoverability of deferred tax assets and the recognition and measurement of uncertain tax positions are subject to various assumptions and judgment by us. If actual results differ from the estimates made by us in establishing or maintaining valuation allowances against deferred tax assets, the resulting change in the valuation allowance would generally impact earnings or other comprehensive income depending on the nature of the respective deferred tax asset. Positive and negative evidence is considered in determining the need for a valuation allowance against deferred tax assets, which includes such evidence as historical earnings, projected future earnings, tax planning strategies and expected timing of reversal of existing temporary differences. Additionally, the positions taken with regard to tax contingencies may be subject to audit and review by tax authorities, which may result in future taxes, interest and penalties.

In determining the recoverability of deferred tax assets, we give consideration to all available positive and negative evidence including reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. We place the most weight to historical earnings and we consider three years of cumulative income or loss. In addition, we have reflected increases and decreases in our valuation allowance based on the overall weight of positive versus negative evidence on a jurisdiction by jurisdiction basis.

Recent Accounting Pronouncements

For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, see Part II, Item 8, Note 23 of Notes to Consolidated Financial Statements, which is incorporated by reference in response to this item.

Results of Operations

The following table sets forth the historical results of operations of Verso for the periods presented. The following discussion of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto included elsewhere in this annual report.

	Year Ended December 31,
(Dollars in millions)	~~2018~~2019		~~2019~~2020		~~2020~~2021
Net sales	$	2,~~682~~444	$	21,~~444~~359	$	1,~~359~~278
Costs and expenses:
Cost of products sold (exclusive of depreciation and amortization)	2,~~321~~138		21,~~138~~334		1,~~334~~062
Depreciation and amortization	~~111~~183		~~183~~153		~~153~~154
Selling, general and administrative expenses	~~102~~104		~~104~~77		7776
Restructuring charges	152		5212		1223
Other operating (income) expense	~~(5)~~4		4(89)		(898)
Operating income (loss)	~~152~~(37)		(37128)		(~~128~~29)
Interest expense	332		21		12
Other (income) expense	(5218)		(1819)		(1925)
Income (loss) before income taxes	~~171~~(21)		(21110)		(~~110~~6)
Income tax expense (benefit)(1)	—		(91)		(9)
Income tax expense (benefit)	(91)		(9)		(3)
Net income (loss)	$	~~171~~70	$	70(101)	$	(~~101~~3)

~~(1) Income~~2021 ~~tax~~Compared ~~benefit in 2019 previously reported as a benefit of $117 million, is presented as corrected as a benefit of $91 million (see Note 1~~ to ~~our Consolidated Financial Statements).~~2020

Net sales. Net sales for the year ended December 31, 2021 declined by $81 million or 6% compared to the year ended December 31, 2020, attributable to favorable price/mix of $129 million, which was more than offset by a decrease in sales of $210 million, or 15%, primarily related to our sold Duluth, Androscoggin and Stevens Point mills and idled Wisconsin Rapids mill. Total company sales volume was down from 1,674 thousand tons during the year ended December 31, 2020, to 1,407 thousand tons during 2021, primarily attributable to our sold Duluth, Androscoggin and Stevens Point mills and idled Wisconsin Rapids mill.

Operating income (loss). Operating loss was $29 million for the year ended December 31, 2021, an improvement of $99 million when compared to operating loss of $128 million for the year ended December 31, 2020.

Our operating results for the year ended December 31, 2021 were positively impacted by:

•Favorable price/mix of $129 million driven by price increase realization across all grades, including pulp

•Improved operating income of $34 million resulting from the conversion to our current two mill system

•Lower net operating expenses of $78 million primarily driven by lower closed/idled mill spend, as well as lower wood cost, improved performance and cost reduction initiatives across our mill system

•Lower planned major maintenance costs of $7 million driven by reduced scope

•Lower Selling, general and administrative expenses of $1 million driven primarily by cost savings in connection with the sale of the two specialty mills in 2020, offset by higher incentive expense and Merger Agreement costs in 2021

Our operating results for the year ended December 31, 2021 were negatively impacted by:

•Lower sales volume resulting in a decrease of $6 million in net operating income

•Inflationary costs of $51 million driven by purchased pulp, latex, energy and freight

•Higher depreciation expense of $1 million due primarily to $84 million in accelerated depreciation at our Wisconsin Rapids Mill in 2021, partially offset by $65 million in accelerated depreciation associated with the closure of our

Duluth Mill in December 2020 and approximately $16 million of nonrecurring depreciation associated with these events

•Higher Restructuring charges of $11 million primarily associated with the permanent shutdown of our Duluth Mill in December 2020 and the No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill in February 2021

•Lower other operating income of $81 million, primarily as a result of the $94 million gain on the sale of our Androscoggin and Stevens Point mills in 2020, partially offset by $6 million in insurance recoveries in 2021, associated with a 2019 insurance claim at our Quinnesec Mill

Other (income) expense. Other income for the year ended December 31, 2021 and 2020 includes income of $25 million and $20 million, respectively, associated primarily with the non-operating components of net periodic pension cost (income).

Income tax expense (benefit). Income tax benefit of $3 million for the year ended December 31, 2021 reflects estimated tax benefit for the period. Income tax benefit of $9 million for the year ended December 31, 2020 primarily reflects estimated tax benefit for the period, partially offset by $9 million of additional valuation allowance recognized against state tax credits. The year ended December 31, 2020 includes $7 million of income tax expense related to the year ended December 31, 2019. This resulted from recording an adjustment for the federal tax effect on deferred tax assets for state net operating losses and state tax credits established in 2019 without a federal tax effect.

2020 Compared to 2019

Net sales. Net sales for the year ended December 31, 2020 declined by $1,085 million or 44% compared to the prior year, as a result of significant declines in sales volume and unfavorable price/mix. Of the $1,085 million, or 44% net sales decline, $186 million, or 8%, was attributable to the closure of our Luke Mill in June 2019, $489 million, or 20%, was a result of the sale of our Androscoggin and Stevens Point mills in February 2020, and $146 million, or 6%, was attributable to the indefinite idling of our Duluth and Wisconsin Rapids mills in July 2020. Total company sales volume was down from 2,647 thousand tons during the year ended December 31, 2019, to 1,674 thousand tons during the year ended December 31, 2020. Of the 973 thousand ton volume decline, 185 thousand tons were attributable to the closure of our Luke Mill in June 2019, 479 thousand tons were a result of the sale of our Androscoggin and Stevens Point mills in February 2020, 170 thousand tons were attributable to the indefinite idling of our Duluth and Wisconsin Rapids mills in July 2020, and the additional decline resulted from lower customer demand driven by the COVID-19 pandemic.

Operating income (loss). Operating loss was $128 million for the year ended December 31, 2020, ~~a decrease of $91 million when~~ compared to operating loss of $37 million for the year ended December 31, 2019.

Operating results for the year ended December 31, 2020 were positively impacted by:

•Lower input costs of $20 million, driven by lower chemical, energy and purchased pulp costs, partially offset by higher fiber costs

•Lower freight costs of $9 million

•Lower depreciation expense of $30 million primarily due to $76 million in accelerated depreciation associated with the closure of our Luke Mill in June 2019, as well as the sale of our Androscoggin and Stevens Point mills in February 2020, partially offset by $65 million in accelerated depreciation associated with the closure of our Duluth Mill in December 2020

•Reduced planned major maintenance costs of $28 million, primarily driven by the cancellation of the annual outage at our Wisconsin Rapids Mill, costs incurred at our Androscoggin Mill in 2019 that did not recur in 2020 and timing of a biannual outage at our Quinnesec Mill

•Lower restructuring charges of $40 million primarily associated with the closure of our Luke Mill in June 2019, partially offset by the closure of our Duluth Mill in December 2020

•Lower Selling, general and administrative costs of $27 million primarily driven by cost reduction initiatives in connection with the sale of our Androscoggin and Stevens Point mills in February 2020 and lower equity compensation expense, partially offset by increased severance costs incurred due to our headcount reduction initiatives and costs associated with the proxy solicitation contest

compensation expense, partially offset by increased severance costs incurred due to our headcount reduction initiatives and costs associated with the proxy solicitation contest

•Higher other operating income of $93 million, primarily as a result of the $94 million gain on the sale of our Androscoggin and Stevens Point mills, partially offset by a $1 million loss on related pension settlement

Operating results for the year ended December 31, 2020 were negatively impacted by:

•Unfavorable price/mix of $123 million

•Lower sales volume resulting in a decrease of $131 million in net operating income, driven by the impact of the COVID-19 pandemic, the closure of our Luke Mill in June 2019, 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 $84 million primarily driven by market downtime, costs incurred to idle our Duluth and Wisconsin Rapids mills, severance costs and an extension of the planned outage at our Quinnesec Mill, partially offset by cost reduction initiatives across our mill system, reduced corporate overhead and union ratification expense for signing bonuses and for the settlement of various work arrangement issues in 2019 that did not recur in 2020

Other (income) expense. Other income for the year ended December 31, 2020 and December 31, 2019 ~~includes~~included income of $20 million and $18 million, respectively, associated with the non-operating components of net periodic pension cost (income).

Income tax expense (benefit). Income tax benefit was $9 million for the year ended December 31, 2020, which primarily reflects estimated tax benefit for the period, partially offset by $9 million of additional valuation allowance recognized against state tax credits. The year ended December 31, 2020 includes $7 million of income tax expense related to the year ended December 31, 2019. This resulted from recording an adjustment for the federal tax effect on deferred tax assets for state net operating losses and state tax credits established in 2019 without a federal tax effect. Income tax benefit for the year ended December 31, 2019 was primarily offset by the valuation allowance adjustment.

2019 Compared to 2018

Net sales. Net sales for the year ended December 31, 2019 declined by $238 million or 9% compared to the prior year due to decreased sales volume, partially offset by improved price/mix. Total company sales volume was down from 2,927 thousand tons during the year ended December 31, 2018, to 2,647 thousand tons during the year ended December 31, 2019, driven by the closure of our Luke Mill in 2019, continued decline of graphic paper demand and increased pressure from imports.

Operating income (loss). Operating loss was $37 million for the year ended December 31, 2019, a decrease of $189 million when compared to operating income of $152 million for the year ended December 31, 2018.

Operating results for the year ended December 31, 2019 were positively impacted by:

•Improved price/mix of $20 million

•Lower freight costs of $6 million

Operating results for the year ended December 31, 2019 were negatively impacted by:

•Lower margin of $43 million resulting from a decrease in sales volume driven by the closure of our Luke Mill and a decline in graphic paper and NBHK pulp sales, partially offset by an increase in specialty and packaging paper sales

•Higher input costs of $2 million driven primarily by higher costs of wood fiber, partially offset by improved energy costs

•Higher Selling, general and administrative costs of $2 million driven by severance costs and equity compensation expense in connection with the former Chief Executive Officer pursuant to his employment agreement and, costs related to the Pixelle Sale and proxy solicitation, partially offset by reduced incentive expense in 2019 and continued cost cutting initiatives

•Higher operating expenses of $31 million driven primarily by market downtime, union ratification expense for signing bonuses and the settlement of various work arrangement issues, a power outage and subsequent acid sewer failure at our Wisconsin Rapids Mill, higher unplanned maintenance costs resulting from reliability events at our Wisconsin Rapids and Escanaba mills and environmental costs associated with remediation efforts at our Luke Mill

•Increased planned major maintenance costs of $5 million driven primarily by planned maintenance performed at our Escanaba Mill during the year ended December 31, 2019 that was not performed during the year ended December 31, 2018, partially offset by planned maintenance performed at our Luke Mill during the year ended December 31, 2018, which was not performed during the year ended December 31, 2019

•Higher depreciation expense of $72 million driven by $76 million of accelerated depreciation in connection with the closure of our Luke Mill

Other impacts to operating results included:

•Restructuring charges for the year ended December 31, 2019 increased $51 million compared to the year ended December 31, 2018, primarily as a result of the closure of our Luke Mill

•Other operating income for the year ended December 31, 2019 decreased $9 million compared to the year ended December 31, 2018, as a result of the $9 million gain on the sale of our Wickliffe Mill in 2018

Interest expense. Interest expense for the year ended December 31, 2019 decreased $31 million or 94% compared to the year ended December 31, 2018. Interest expense for the year ended December 31, 2018 included $15 million in non-cash accelerated amortization of debt issuance cost and discount associated with the voluntary principal prepayments and excess cash flow payments on our prior term loan facility. The remaining decrease in interest expense resulted from the reduction in amounts outstanding under our ABL Facility and the repayment and termination of our prior term loan facility in September 2018.

Other (income) expense. Other income for the year ended December 31, 2019 and December 31, 2018 included income of $18 million and $12 million, respectively, associated with the non-operating components of net periodic pension cost (income), including $13 million of pension settlement gain in the year ended December 31, 2019. Additionally, the year ended December 31, 2018 included $42 million of income related to the Settlement Agreement (see Note 16 to our Consolidated Financial Statements).

Income tax expense (benefit). Income tax benefit was $91 million for the year ended December 31, 2019, primarily attributable to a release of the income tax valuation allowances on all federal deferred tax assets and certain state tax credits. At December 31, 2019, we considered the existence of recent cumulative income from continuing operations as a source of positive evidence and concluded to reverse a portion of the income tax valuation allowance.

Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA

EBITDA consists of earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA reflects adjustments to EBITDA to eliminate the impact of certain items that we do not consider to be indicative of our ongoing performance. We use EBITDA and Adjusted EBITDA as a way of evaluating our performance relative to that of our peers and to assess compliance with our credit facilities. We believe that EBITDA and Adjusted EBITDA are non-GAAP operating performance measures commonly used in our industry that provide investors and analysts with measures of ongoing operating results, unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies.

We believe that the supplemental adjustments applied in calculating Adjusted EBITDA are reasonable and appropriate to provide additional information to investors.

Because EBITDA and Adjusted EBITDA are not measurements determined in accordance with GAAP and are susceptible to varying calculations, EBITDA and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. You should consider our EBITDA and Adjusted EBITDA in addition to, and not as a substitute for, or superior to, our operating or net income (loss), which are determined in accordance with GAAP.

3532

The following table reconciles Net income (loss) to EBITDA and Adjusted EBITDA for the periods presented:

		Year Ended December 31,
(Dollars in millions)		~~2018~~2019		~~2019~~2020		~~2020~~2021
Net income (loss)		$	~~171~~70	$	70(101)	$	(~~101~~3)
Income tax expense (benefit)		—(91)		(919)		(93)
Interest expense		332		21		12
Depreciation and amortization		~~111~~183		~~183~~153		~~153~~154
EBITDA		$	~~315~~164	$	~~164~~44	$	44150
Adjustments to EBITDA:
	Restructuring charges (1)	152		5212		1223
	Luke Mill post-closure costs (2)	—9		915		159
	Non-cash equity award compensation (3)	8		12		5
	Noncash equity award compensation (3)	12		5		5
	Gain on Sale of Androscoggin/Stevens Point Mills (4)	—		—(94)		~~(94)~~—
	Duluth and Wisconsin Rapids Mills idle costs(5)	—		—		37
	Loss on Sale of Duluth Mill (5)	—		—		3
	Androscoggin PM No. 3 startup (6)	10		—		—
	Duluth and Wisconsin Rapids mills idle/post-closure costs (6)	—		37		20
	Countervailing duty settlement (7)	(42)		—		—
	(Gain) loss on sale or disposal of assets (7)	2		4		(1)
	(Gain) loss on sale or disposal of assets (8)	(8)		2		4
	Other severance costs (8)	4		18		4
	Post-reorganization costs (9)	4		—		—
	Strategic initiatives costs (9)	6		—		—
	Other severance costs (10)	—		4		18
	Stockholders proxy solicitation costs (10)	1		4		—
	Strategic initiatives costs (11)	5		6		—
	Merger related costs (11)	—		—		6
	Stockholders proxy solicitation costs (12)	—		1		4
	Other items, net (12)	1		2		4
	Other items, net (13)	3		1		2
Adjusted EBITDA (13)		$	251	$	47	$	223
Adjusted EBITDA(14)		$	296	$	251	$	47

(1) For ~~2018~~2019, charges are ~~primarily~~ associated with the closure ~~and relocation~~ of ~~the~~our ~~Memphis~~Luke ~~office~~Mill ~~headquarters~~in ~~and~~June ~~closure of our Wickliffe Mill~~2019. For ~~2019~~2020, charges are associated with the closure of our Luke Mill and the closure of our Duluth Mill in ~~June~~December ~~2019~~2020. For ~~2020~~2021, charges are associated with the closure of our Luke Mill, ~~and~~ the closure of our Duluth Mill and of the No. 14 paper machine and certain other long-lived assets at our Wisconsin Rapids Mill in ~~December~~February ~~2020~~2021.

(2) Costs recorded after the permanent shutdown of our Luke Mill that are not associated with product sales or restructuring activities, including costs relating to the ongoing environmental remediation and monitoring efforts.

(3) Amortization of ~~non-cash~~noncash incentive compensation.

(4) Gain on the sale of outstanding membership interests in Verso Androscoggin, LLC in February 2020, which included our Androscoggin Mill and Stevens Point Mill.

(5) ~~Costs~~Loss ~~associated~~on ~~with~~ the ~~indefinite~~sale ~~idling~~ of our Duluth Mill ~~and Wisconsin Rapids Mill beginning~~ in ~~July~~May ~~2020, that are not associated with product sales or restructuring activity~~2021.

(6) ~~Costs~~ Idle/post-closure ~~incurred~~costs inassociated ~~connection~~ with ~~the~~our ~~upgrade~~Duluth ofand ~~the~~Wisconsin ~~previously~~Rapids ~~shuttered~~mills ~~No.~~that 3are ~~paper~~not ~~machine~~associated ~~and~~with ~~pulp~~product ~~line~~sales ator ~~our~~restructuring ~~Androscoggin Mill~~activity.

(7) ~~Countervailing~~Realized ~~duty~~(gain) ~~settlement~~loss ~~gains~~on ~~pursuant to~~ the ~~Settlement~~sale ~~Agreement~~or ~~(see~~disposal ~~Note~~of ~~16 to our Consolidated Financial Statements)~~assets.

(8) ~~Realized~~Severance ~~(gain)~~and ~~loss~~related onbenefit ~~the~~costs ~~sale~~not orassociated ~~disposal~~with ofrestructuring ~~assets, including a $9 million gain on the sale of our Wickliffe Mill in September 2018~~activities.

(9) ~~Fees~~ Professional fees and other charges associated with our ~~prior~~strategic ~~Chapter~~alternatives 11initiative, ~~cases~~including certain costs incurred in 2019 related to the Pixelle Sale.

(10) ~~Severance~~ ~~and~~Costs ~~related~~incurred ~~benefit~~in ~~costs~~connection ~~not~~with ~~associated~~the ~~with~~stockholders ~~restructuring~~proxy ~~activities~~solicitation contest.

(11) Professional fees and other charges associated with ~~our~~Merger ~~strategic~~related ~~alternatives initiative~~activity, including ~~certain~~the ~~costs~~Merger ~~incurred~~Agreement inentered ~~2019~~on ~~related~~December to19, ~~the~~2021 ~~Pixelle~~with ~~Sale~~BillerudKorsnäs.

(12) For ~~Costs~~2019 ~~incurred~~and in2020, ~~connection~~other miscellaneous adjustments. For 2021, professional fees and other changes associated with ~~the~~strategic ~~stockholders~~matters ~~proxy~~and ~~solicitation~~other ~~contest~~miscellaneous adjustments.

(13) ~~Other~~Adjusted ~~miscellaneous~~EBITDA ~~adjustments~~for 2019 and 2020, includes $13 million of income and $1 million of expense, respectively, related to pension settlements (see Note 13 to our Consolidated Financial Statements).

(14) Adjusted EBITDA for 2019 and 2020, include $13 million of income and $1 million of expense, respectively, related to pension settlements (see Note 12 to our Consolidated Financial Statements).33

Liquidity and Capital Resources

~~Our~~Sources ~~principal cash requirements include ongoing operating costs for working capital needs, capital expenditures for maintenance~~ and ~~strategic~~Uses investments in our mills and pension contributions. We believe our cash and cash equivalents at December 31, 2020, future cash generated from operations and, to the extent necessary, the availability under our ABL Facility will be sufficient to meet these needs for at least the next twelve months. While changes in these ongoing operating costs can impact operating cash generation, we believe that our planning and strategies on pricing and cost control have resulted in our improved liquidity in recent years. We also utilize factoring of accounts receivable from time to time (for example, discounted accelerated payment programs sponsored by customers) as an alternative source of funds when cost is favorable to our ABL Facility or due to other considerations. Our ability to sustain our working capital position is subject to a number of risks that we discuss in “Part I, Item 1A, Risk Factors.”Cash

Our principal cash requirements in both the short term and long term typically include ongoing operating costs for working capital needs, capital expenditures for maintenance and strategic investments in our mills, payment of dividends, and pension contributions. In the past year, we have also used cash for share purchases, including a tender offer, and to repurchase certain warrants associated with the pending Merger with BillerudKorsnäs. We believe our cash and cash equivalents at December 31, 2021, future cash generated from operations and, to the extent necessary, the availability under our ABL Facility (as defined below) will be sufficient to meet our principal cash requirements for at least the next twelve months. While changes in these ongoing operating costs can impact operating cash generation, we believe that our planning and strategies on pricing and cost control have resulted in our improved liquidity in recent years. We also utilize factoring of accounts receivable from time to time (for example, discounted accelerated payment programs sponsored by customers) as an alternative source of funds when cost is favorable to our ABL Facility or due to other considerations. Our ability to sustain our working capital position is subject to a number of risks that we discuss in “Part I, Item 1A, Risk Factors.” As of December 31, ~~2020~~2021, we had cash and cash equivalents of $~~137~~172 million while the outstanding balance of our ABL Facility was zero, with $21 million issued in letters of credit and $~~176~~103 million available for future borrowings.

OnShare ~~February~~Repurchases 26, 2020, our Board of Directors authorized up to $250 million of net proceeds from the Pixelle Sale to be used to repurchase outstanding shares of our common stock. During the year ended December 31, 2020, we purchased approximately 2.2 million shares of our common stock through open market purchases and ~~10b-5~~Outstanding programs under the share repurchase authorization at a weighted average cost of $13.39 per share. In conjunction with the declaration of the special cash dividend of $3.00 per share, or $101 million, on August 5, 2020, our Board of Directors reduced the total amount of the share repurchase authorization from $250 million to $150 million. As of December 31, 2020, $121 million of the $150 million authorized remained.Authorization

WeOn ~~initiated~~February a26, 2020, our Board of Directors authorized up to $0250 million of net proceeds from the Pixelle Sale to be used to repurchase outstanding shares of our common stock.10 In conjunction with the declaration of the special cash dividend of $3.00 per share, ~~quarterly~~for ~~dividend~~an ~~starting~~aggregate inof $101 million, on August 5, 2020, our Board of Directors reduced the ~~second~~total ~~quarter~~amount of ~~2020~~the share repurchase authorization from $250 million to $150 million. ~~See~~In ~~Note~~addition, on May 13, 2021, we commenced a modified Dutch auction tender offer to purchase for cash shares of our ~~Consolidated~~common ~~Financial~~stock ~~Statements~~for an aggregate purchase price of not more than $55 million. The tender offer expired on June 10, 2021. Through the tender offer, we accepted for ~~further~~payment ~~information~~approximately 3.0 million shares at a purchase price of $18.10 per share for an aggregate purchase price of approximately $56 million, including fees and expenses. The shares purchased through the tender offer were immediately retired.

OnDuring ~~February~~the 5,years ~~2021,~~ended ~~our~~December ~~Board~~31, of2020 ~~Directors~~and ~~declared~~2021, awe ~~quarterly~~purchased ~~cash~~approximately ~~dividend~~2.2 ofmillion $0and 1.103 ~~per~~million ~~share~~shares, respectively, of ~~Verso~~our common stock, ~~payable~~through onopen ~~March~~market 29purchases, ~~2021,~~a tomodified ~~stockholders~~Dutch ofauction ~~record~~tender onoffer ~~March~~and ~~18,~~10b5-1 ~~2021.~~programs Weunder ~~expect~~the toshare ~~continue~~repurchase toauthorization ~~pay~~at ~~quarterly~~a ~~cash~~weighted ~~dividends~~average cost of $013.1039 ~~per~~and ~~share~~$15.97 ofper ~~Verso common stock for the foreseeable future~~share, ~~subject to the approval of our Board of Directors~~respectively.

InAs ~~2021,~~of ~~Verso~~December ~~expects~~31, to2021, ~~make~~$45 ~~cash~~million ~~contributions~~of to the ~~pension plan of~~ $46150 million ~~(see~~share ~~Note~~repurchase 12authorization ~~to our Consolidated Financial Statements)~~remained.

During the year ended December 31, 2018, we made scheduled principal payments totaling $9 million, on our prior term loan facility. As a result of the excess cash flow requirement in our prior term loan facility, we were obligated to fund additional principal payments during the year ended December 31, 2018 of $21 million. We also elected to make additional voluntary principal prepayments on our prior term loan facility totaling $116 million during the year ended December 31, 2018, from available liquidity, including amounts borrowed under our ABL Facility. The mandatory and voluntary principal prepayments resulted in the full pay off of our prior term loan facility on September 10, 2018.Warrants

Dividends

We initiated a $0.10 per share quarterly dividend starting in the second quarter of 2020. See Note 2 and Note 14 to our Consolidated Financial Statements for further information.

Our Board of Directors declared the following dividends in 2021:

Quarter

Date Declared

Date of Record

Date Paid

Amount

1st

February 5

March 18

March 29

$0.10

2nd

May 7

June 17

June 29

$0.10

3rd

August 6

September 17

September 28

$0.10

4th

November 4

December 17

December 29

$0.10

Pension Plan Obligation

In 2022, we expect to make cash contributions to the pension plan of $21 million (see Note 13 to our Consolidated Financial Statements).

Other Material Cash Requirements

The following table reflects our payments in connection with contractual obligations as of :


			Payments Due by Period
(Dollars in millions)	Total		2022		2023-2024		2025-2026		Thereafter
Operating leases(1)	$	9	$	4	$	5	$	—	$	—
Finance leases	4		1		3		—		—

Purchase obligations(2)	16		8		7		1		—
Other long-term obligations(3)	30		4		10		3		13

Total	$	59	$	17	$	25	$	4	$	13

(1) The payments of $1 million for short-term leases are excluded from this table (see Note 9 to our Consolidated Financial Statements).

(2) Unconditional purchase obligations in the ordinary course of business for the purchase of certain raw materials, energy and services.

(3) Primarily consists of asset retirement obligations, employee related obligations and deferred compensation (see Note 11 to our Consolidated Financial Statements). Pension benefit obligation has been excluded from the table above (see Note 13 to our Consolidated Financial Statements).

Cash Flows

Our cash flows from operating, investing and financing activities, as reflected in the accompanying Consolidated Statements of Cash Flows, are summarized in the following table.

Year Ended December 31,

(Dollars in millions)

~~2018~~2019

~~2019~~2020

~~2020~~2021

Net cash provided by (used in):

Operating activities

~~283~~125

~~125~~(62)

~~(62)~~180

Investing activities

(52104)

~~(104)~~303

~~303~~(42)

Financing activities

(~~212~~5)

(5146)

(~~146~~103)

Change in cash and cash equivalents and restricted cash

1916

1695

9535

Operating Activities

Our operating cash flow requirements are primarily for salaries and benefits, the purchase of raw materials including wood fiber, wood pulp, chemicals and energy, and other expenses such as maintenance and warehousing costs. In ~~2020~~2021, our net cash ~~used~~provided inby operating activities of $62180 million primarily reflects noncash depreciation and amortization of $154 million, noncash restructuring charges of $11 million and cash provided by working capital related changes of $65 million, partially offset by a net loss of $~~101~~3 million, ~~adjusted for~~ noncash pension income of $1623 million, and pension plan contributions of $4925 million,. ~~gain~~The onnet ~~Sale~~cash ofprovided ~~Androscoggin/Stevens~~from ~~Point~~working ~~Mills~~capital ofrelated ~~$94~~changes ~~million~~was ~~and~~primarily attributable to reductions in finished goods inventory levels.

37In 2020, our net cash used in operating activities of $62 million primarily reflects a net loss of $101 million adjusted for noncash pension income of $16 million, pension plan contributions of $49 million, gain on Sale of Androscoggin/Stevens Point Mills of $94 million and deferred taxes of $9 million, partially offset by noncash depreciation and amortization of $153 million, $5 million of noncash restructuring charges related to the closure of our Duluth Mill, $5 million of equity award expense and cash provided by working capital related changes of $40 million. The net cash provided from working capital related changes was primarily attributable to collections on our accounts receivable and reductions in finished goods inventory levels, partially offset by payments that reduced our accounts payable and accrued liabilities.

deferred taxes of $9 million, partially offset by noncash depreciation and amortization of $153 million, $5 million of noncash restructuring charges related to the closure Duluth Mill, $5 million of equity award expense and cash provided by working capital related changes of $40 million. The net cash provided from working capital related changes was primarily attributable to collections on our accounts receivable and reductions in finished goods inventory levels, partially offset by payments that reduced our accounts payable and accrued liabilities.35

In 2019, our operating cash flow requirements are primarily for salaries and benefits, the purchase of raw materials including wood fiber, wood pulp, chemicals and energy, and other expenses such as maintenance and warehousing costs. In 2019, our net cash provided by operating activities of $125 million primarily reflects a net income of $70 million adjusted for noncash depreciation and amortization of $183 million, $20 million of noncash restructuring charges related to the closure of our Luke Mill and $12 million of equity award expense, partially offset by noncash pension income of $14 million, pension plan contributions of $42 million, deferred taxes of $91 million and cash used for working capital related changes of $16 million. The net cash used for working capital related changes was primarily attributable to payments that reduced our accounts payable and accrued liabilities, partially offset by collections on our accounts receivable.

In 2018, our net cash provided by operating activities of $283 million primarily reflects a net income of $171 million adjusted for noncash depreciation and amortization of $111 million, $19 million of noncash amortization of debt issuance cost and discount and $31 million of cash provided by working capital related changes, partially offset by pension plan contributions of $43 million.

Investing Activities

In 2021, our net cash used in investing activities of $42 million consisted primarily of $66 million of capital expenditures, partially offset by $10 million in deposits and net proceeds recognized from the sale of Luke Mill equipment, $6 million in proceeds from insurance recoveries and $6 million in net proceeds from the sale of our Duluth Mill.

In 2020, our net cash provided by investing activities of $303 million consisted primarily of $345 million in net proceeds from the sale of our Androscoggin and Stevens Point mills, partially offset by $48 million of capital expenditures.

In 2019, our net cash used in investing activities of $104 million consisted primarily of $105 million offor capital expenditures.

In 2018, our net cash used in investing activities of $52 million consisted primarily of $73 million for capital expenditures, of which $18 million related to the upgrade/restart of the No. 3 paper machine and pulp line at our Androscoggin Mill. Our capital expenditures were partially offset by $4 million in cash received from a grant administered by the Maine Technology Institute related to the No. 3 paper machine upgrade/restart and $17 million in proceeds from the sale of assets, of which $16 million related to the sale of our Wickliffe Mill.

Financing Activities

In 2021, our net cash used in financing activities of $103 million consisted primarily of $56 million in repurchases of our common stock, $12 million of cash dividends paid to stockholders, $10 million in repurchases of our warrants and $24 million in acquisition of treasury stock, consisting of $21 million of share repurchases and $3 million associated with the vesting of restricted stock units.

In 2020, our net cash used in financing activities of $146 million consisted primarily of $111 million of dividends paid to stockholders, $34 million in acquisition of treasury stock, as well as borrowings with offsetting payments on our ABL Facility.

In 2019, our net cash used in financing activities of $5 million consisted primarily of $3 million in acquisition of treasury stock, as well as borrowings with offsetting payments on our ABL Facility.

In 2018, our net cash used in financing activities of $212 million consisted primarily of $146 million in payments on the prior term loan facility, which included $9 million in scheduled principal payments, $21 million as a result of the excess cash flow requirement and $116 million in additional voluntary principal prepayments, and net payments of $65 million on our ABL Facility.

~~Credit~~Verso ~~Facilities~~Paper maintains an asset-based revolving credit facility, or, as amended from time to time, our “ABL Facility.” On May 10, 2021, Verso Paper entered into the Third Amendment to the ABL Facility, or the “Third ABL Amendment” to the ABL Facility. As a result of the Third ABL Amendment, the ABL Facility provides for revolving commitments of $200 million, with a $75 million sublimit for letters of credit and a $20 million sublimit for swingline loans. The amount of borrowings and letters of credit available to Verso Paper pursuant to our ABL Facility is limited to the lesser of $200 million or an amount determined pursuant to a borrowing base ($124 million as of December 31, 2021). As of December 31, 2021, there were no borrowings outstanding under our ABL Facility, $21 million issued in letters of credit and $103 million available for future borrowings. Verso Paper may request one or more incremental revolving commitments in an aggregate principal amount up to the greater of (i) $75 million or (ii) the excess of the borrowing base over the revolving facility commitments of $200 million; however, the lenders are not obligated to increase the revolving commitments upon any such request. Availability under our ABL Facility is subject to customary borrowing conditions. Our ABL Facility will mature on February 6, 2024.

OnOutstanding ~~July~~borrowings ~~15,~~under ~~2016~~our ABL Facility bear interest at an annual rate equal to, at the option of Verso Paper, ~~Holding~~either ~~LLC~~(i) a ~~entered~~customary ~~into~~London ainterbank ~~$375~~offered ~~million~~rate ~~asset-based~~plus ~~revolving~~an ~~credit~~applicable ~~facility,~~margin ranging from 1.25% to 1.75% or (ii) the “Federal Funds Rate plus an applicable margin ranging from 0.25% to 0.75%, determined based upon the average excess availability under our ABL Facility,”. ~~and~~Verso Paper also is required to pay a ~~$220~~commitment ~~million~~fee ~~senior~~for ~~secured~~the ~~term~~unused ~~loan~~portion ~~(with~~of ~~loan~~our ~~proceeds~~ABL Facility of ~~$198~~0.25% ~~million~~per ~~after~~year, based upon the ~~deduction~~average ofrevolver ~~the~~usage ~~original~~under ~~issue~~our ~~discount~~ABL ofFacility. ~~$22~~In ~~million)~~addition, ~~collectively~~pursuant ~~termed~~to the ~~“Credit~~Third ~~Facilities.”~~ABL ~~After~~Amendment, wecertain ~~completed~~modifications anwere ~~internal~~made ~~reorganization~~to the existing ABL Facility in ~~December~~order ~~2016~~to, ~~Verso~~among ~~Paper~~other ~~Holding~~things, ~~LLC~~provide ~~ceased~~for todetermination ~~exist~~of ~~and~~a ~~Verso~~benchmark ~~Paper~~replacement ~~became~~interest rate when LIBOR is no longer available, subject to the ~~borrower~~terms, ~~under~~and upon the ~~Credit~~satisfaction ~~Facilities~~of conditions, specified therein.

On September 10, 2018, Verso Paper repaid all of the loans under the prior term loan facility and the prior term loan facility was terminated.

On February 6, 2019, Verso Paper entered into a second amendment to our ABL Facility, or the “ABL Amendment.” As a result of our ABL Amendment, our ABL Facility provides for revolving commitments of $350 million, with a $100 million sublimit for letters of credit and a $35 million sublimit for swingline loans. Verso Paper may request one or more incremental revolving commitments in an aggregate principal amount up to the greater of (i) $75 million or (ii) the excess of the borrowing

base over the revolving facility commitments of $350 million; however, the lenders are not obligated to increase the revolving commitments upon any such request. Availability under our ABL Facility is subject to customary borrowing conditions. Our ABL Facility will mature on February 6, 2024.

Outstanding borrowings under our ABL Facility bear interest at an annual rate equal to, at the option of Verso Paper, either (i) a customary London interbank offered rate plus an applicable margin ranging from 1.25% to 1.75% or (ii) the Federal Funds Rate plus an applicable margin ranging from 0.25% to 0.75%, determined based upon the average excess availability under our ABL Facility. Verso Paper is also required to pay a commitment fee for the unused portion of our ABL Facility of 0.25% per year, based upon the average revolver usage under our ABL Facility.

The amount of borrowings and letters of credit available to Verso Paper pursuant to our ABL Facility is limited to the lesser of $350 million or an amount determined pursuant to a borrowing base ($197 million as of December 31, 2020). As of December 31, 2020, the outstanding balance of our ABL Facility was zero, with $21 million issued in letters of credit and $176 million available for future borrowings.

All obligations under our ABL Facility are unconditionally guaranteed by Verso Holding and certain of the subsidiaries of Verso Paper. The security interest with respect to our ABL Facility consists of a first-priority lien on certain assets of Verso Paper, Verso Holding and the other guarantor subsidiaries, including accounts receivable, inventory, certain deposit accounts, securities accounts and commodities accounts.

Our ABL Facility contains financial covenants requiring Verso, among other things, to maintain a minimum fixed charge coverage ratio if availability were to drop below prescribed thresholds. As of December 31, 2020, we were above the prescribed thresholds in our ABL Facility. Our ABL Facility also requires that certain payment conditions, as defined therein, are met in order for Verso to incur debt or liens, pay cash dividends, repurchase equity interest, prepay indebtedness, sell or dispose of assets and make investments in or merge with another company.36

Our ABL Facility contains financial covenants requiring Verso, among other things, to maintain a minimum fixed charge coverage ratio if availability were to drop below prescribed thresholds. As of December 31, 2021, we were above the prescribed thresholds in our ABL Facility. Our ABL Facility also requires that certain payment conditions, as defined therein, are met in order for Verso to incur debt or liens, pay cash dividends, repurchase equity interest, prepay indebtedness, sell or dispose of assets and make investments in or merge with another company.

If Verso Paper were to violate any of the covenants under our ABL Facility and were unable to obtain a waiver, it would be considered a default after the expiration of any applicable grace period. If Verso Paper were in default under our ABL Facility, then the lenders thereunder may exercise remedies in accordance with the terms thereof. In addition, if Verso Paper were in default under our ABL Facility, no additional borrowings under our ABL Facility would be available until the default was waived or cured. Our ABL Facility provides for customary events of default, including a cross-event of default provision with respect to any other existing debt instrument having an aggregate principal amount that exceeds $25 million.

As of December 31, ~~2020~~2021, we were in compliance with the financial covenants in our ABL Facility.

Off-Balance Sheet Arrangements

None.

Contractual Obligations

The following table reflects our payments in connection with contractual obligations as of December 31, 2020:

			Payments Due by Period
(Dollars in millions)	Total		2021		2022-2023		2024-2025		Thereafter
Operating leases(1)	$	15	$	8	$	6	$	1	$	—
Finance leases	6		2		3		1		—
Fiber supply agreements(2)	—		—		—		—		—
Purchase obligations(3)	80		21		35		20		4
Other long-term obligations(4)	33		5		7		6		15
Total	$	134	$	36	$	51	$	28	$	19
Other Commercial Obligations
Standby letters of credit(5)	$	21	$	21	$	—	$	—	$	—
Total	$	21	$	21	$	—	$	—	$	—

(1) The payments of $1 million for short-term leases are excluded from this table (see Note 8 to our Consolidated Financial Statements).

(2) The contractual obligations consist of the minimum required expenditure to be made pursuant to our fiber supply agreements

(3) Unconditional purchase obligations in the ordinary course of business for the purchase of certain raw materials, energy and services.

(4) Pension benefit obligation has been excluded from the Contractual Obligations table (see Note 12 to our Consolidated Financial Statements).

(5) We are required to post letters of credit or other financial assurance obligations with certain energy and other suppliers and certain other parties.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from fluctuations in our paper prices, interest rates, energy prices and commodity prices for our inputs.

Paper Prices

Our sales, which we report net of rebates, allowances and discounts, are a function of the number of tons of paper that we sell and the price at which we sell our paper. Paper prices historically have been a function of macroeconomic factors that influence supply and demand, and have been substantially more variable than volume and can change significantly over relatively short time periods. Price is also subject to volatility due to fluctuations in foreign exchange rates of the U.S. dollar relative to other currencies, especially the euro, which can lead to lower average sales price realization.

We are primarily focused on serving the following end-user markets: specialty converters, general commercial print, catalogs and magazine publishers. Coated paper demand is primarily driven by advertising and print media usage. Advertising spending and magazine and catalog circulation tend to correlate with gross domestic product in the United States, as they rise with a strong economy and contract with a weak economy, which impacts media spend which further impacts magazine and catalog subscriptions.

Many of our customers provide us with forecasts, which allows us to plan our production runs in advance, optimizing production over our integrated mill system and thereby reducing costs and increasing overall efficiency. Generally, our sales agreements do not extend beyond the calendar year, and they typically provide for quarterly or semiannual price adjustments based on market price movements.

We reach our end-users through several channels, including merchants, brokers, printers and direct sales to end-users. We sell our products to approximately 200 customers which comprise approximately ~~1,100~~900 end-user accounts. In ~~2020~~2021, our largest two customers, Central National-Gottesman and Veritiv Corporation, together accounted for 3324% of our net sales.

Interest Rates

As of December 31, ~~2020~~2021, we had no borrowings outstanding under our ABL Facility. Borrowings under our ABL Facility bear interest at a variable rate based on LIBOR or the Federal Funds Rate, in each case plus an applicable margin (see “Liquidity and Capital Resources - Credit Facilities” above for additional information).

An increase in interest rates would increase the costs of our variable rate debt obligations, if we were borrowing under our ABL Facility. While we may enter into agreements limiting our exposure to higher interest rates, any such agreements may not offer complete protection from this risk. In addition, ~~there~~certain istenors ~~currently~~of ~~uncertainty around whether~~ LIBOR ~~will~~ceased ~~continue~~publication toon ~~exist~~December ~~after~~31, 2021. ~~However,~~and ~~for~~other ~~U.S~~tenors ~~dollar~~of LIBOR, itwill ~~now~~cease ~~appears~~publication ~~that~~on ~~the relevant date may be deferred to~~ June 30, 2023 ~~for certain tenors~~ (including overnight and one, three, six and 12 months)~~, at which time the LIBOR administrator has indicated that it intends to cease publication of U~~.S. ~~dollar LIBOR.~~ Despite this ~~potential~~ deferral, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. IfIn ~~LIBOR~~addition, ~~ceases~~pursuant to ~~exist,~~the weThird ~~will~~ABL ~~need~~Amendment, tocertain ~~enter~~modifications ~~into~~were anmade ~~amendment~~ to ~~our~~the existing ABL Facility ~~and~~in weorder ~~cannot~~to, ~~predict~~among ~~what~~other ~~alternative~~things, ~~reference~~provide ~~rate~~for ~~would~~determination beof ~~negotiated~~a ~~with~~benchmark ~~our~~replacement ~~lenders.~~interest Ifrate ~~our~~when ~~lenders~~LIBOR ~~have~~is ~~increased~~no ~~costs~~longer ~~due to changes in LIBOR~~available, wesubject ~~may~~to ~~experience~~the ~~potential increases in interest rates on our variable rate debt~~terms, ~~which~~and ~~could~~upon ~~adversely~~the ~~impact~~satisfaction ~~our~~of ~~interest expense~~conditions, ~~results~~specified ~~of operations and cash flows~~therein.

Commodity Prices

We are subject to changes in our cost of sales caused by movements in underlying commodity prices. The principal components of our cost of sales are wood fiber, wood pulp, chemicals, energy, labor and maintenance. The cost of commodities, including wood fiber, wood pulp, chemicals, and energy, is the most variable component of our cost of sales because prices can fluctuate substantially, sometimes within a relatively short period of time. In addition, our aggregate commodity purchases fluctuate based on the volume of paper that we produce.

Wood Pulp. We source bleached wood pulp from market producers to supplement fiber requirements at our mills. The primary pulp procured is ~~Northern Bleached Softwood Kraft, or “~~NBSK.” ~~NBSK~~We ~~pulp~~expect isweather ~~produced~~events ~~using a chemical process, whereby softwood chips are combined with chemicals~~ and steam to separate the wood fibers. The fibers are washed and screened to remove the chemicals and lignin. Then the pulp is bleached to the necessary brightness. NBSK pulp provides a brighter fiber and the long fiber length from softwood pulp is beneficial for paper strength. We expect imbalances in supply and demand to create volatility in prices for ~~market~~ NBSK from time to time.

4138

Item 8. Financial Statements and Supplementary Data

Verso Corporation

Consolidated Financial Statements

Index to Financial Statements

Management’s Report on Internal Control Over Financial Reporting			4340
Reports of Deloitte & Touche LLP, Independent Registered Public Accounting Firm			44
Reports of Deloitte & Touche LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 34)			41
Consolidated Financial Statements
Consolidated Balance Sheets			4744
Consolidated Statements of Operations			4845
Consolidated Statements of Comprehensive Income (Loss)			4845
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)			4946
Consolidated Statements of Cash Flows			5047
Notes to Consolidated Financial Statements			5148

4239

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of Verso Corporation’s internal control over financial reporting as of December 31, ~~2020~~2021, based upon the guidelines established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Verso Corporation’s internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Based on the results of our evaluation, our management concluded that Verso Corporation’s internal control over financial reporting was effective as of December 31, ~~2020~~2021. We reviewed the results of management’s assessment with our Audit Committee.

The effectiveness of Verso Corporation’s internal control over financial reporting as of December 31, ~~2020~~2021, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report which appears below.

4340

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the ~~stockholders~~Stockholders and the Board of Directors of Verso Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Verso Corporation and subsidiaries (the "Company") as of December 31, ~~2020~~2021 and ~~2019~~2020, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, ~~2020~~2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2020~~2021 and ~~2019~~2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2020~~2021, in conformity with accounting principles generally accepted in the United States of America or International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2020~~2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated ~~March~~February 128, ~~2021~~2022, expressed an unqualified opinion on the Company's internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 8 to the financial statements, the Company has changed its method of accounting for leases in the year ended December 31, 2019, due to adoption of ASC Topic 842, Leases.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the ~~Company’s~~ financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the ~~U.S.~~US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Defined Benefit Plan Assets—Hedge Fund and Private Equity Fund Valuation—Refer to Note 1 and Note 1213 to the financial statements

Critical Audit Matter Description

The fair ~~value~~values of defined benefit plan assets in hedge funds and private equity funds are estimated using the net asset value (NAV) per share and total $8984 million as of December 31, ~~2020~~2021. To derive the estimated NAV per share, various methodologies are utilized, including, but not limited to, proprietary estimation models, quoted market prices, and third-party valuations for underlying securities within the investments; evaluation of contributions, distributions, interest, dividends, and management fees; as well as evaluation of the general market conditions and their correlation and impact on the investments.

Because the estimation of fair value of the hedge fund and private equity fund investments involves the use of complex proprietary models and unobservable inputs, auditing the valuation of these investments required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of the defined benefit plan’s hedge fund and private equity fund investments included the following, among others:

•We tested the design, implementation and operating effectiveness of the Company’s controls over the valuation of the defined benefit plan’s hedge fund and private equity fund investments as of December 31, ~~2020~~2021.

•We performed a retrospective review in which we compared the estimated fair value recorded by ~~Verso~~the Company in the December 31, ~~2019~~2020 financial statements, to the actual fair value of the defined benefit plan’s hedge fund and private equity fund (using the per- share NAV disclosed in the fund’s subsequently issued audited financial statements), to evaluate the appropriateness of management’s estimation process.

•We evaluated management’s ability to accurately estimate the fair value of hedge fund and private equity fund investments by performing a review of purchases and/or sales of hedge funds and private equity funds, initiated by ~~Verso~~the Company, that occurred close to December 31, ~~2020~~2021 (when available), taking those traded values into account as well as changes in market conditions between the observable transaction date and December 31, ~~2020~~2021.

•We rolled forward the valuation from each hedge fund or private equity fund’s most recently audited financial statements to December 31, ~~2020~~2021. This roll forward procedure included consideration of the Company’s transactions in the fund during the period as well as an estimate of the fund’s returns based on an appropriate benchmark or index. We then compared our independent fund valuation estimate to the December 31, ~~2020~~2021 balance recorded by the Company.

/s/ DELOITTE & TOUCHE LLP

Dayton, Ohio

~~March~~February 128, ~~2021~~2022

We have served as the Company's auditor since 2006.

4542

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Verso Corporation

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Verso Corporation and subsidiaries (the “Company”) as of December 31, ~~2020~~2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2020~~2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, ~~2020~~2021, of the Company and our report dated ~~March~~February 128, ~~2021~~2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Dayton, Ohio

~~March~~February 128, ~~2021~~2022


VERSO CORPORATION
CONSOLIDATED BALANCE SHEETS

	December 31,
(Dollars in millions, except per share amounts)	2020		2021
ASSETS
Current assets:
Cash and cash equivalents	$	137	$	172
Accounts receivable, net	83		106
Inventories	224		127
Assets held for sale	17		3
Prepaid expenses and other assets	5		7
Total current assets	466		415
Property, plant and equipment, net	613		523
Deferred tax assets	122		85
Intangibles and other assets, net	44		32
Total assets	$	1,245	$	1,055
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	80	$	99
Accrued and other liabilities	92		68
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		148
Other long-term liabilities	34		37

Total liabilities	561		356
Commitments and contingencies (Note 17)
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 33,374,336 shares issued and 29,144,507 outstanding on December 31, 2021; 40,000,000 Class B shares authorized with no shares issued and outstanding on December 31, 2020 and December 31, 2021)	—		—
Treasury stock -- at cost (2,743,884 shares on December 31, 2020 and 4,229,829 shares on December 31, 2021)	(39)		(63)
Paid-in-capital (including Warrants of $10 million on December 31, 2020 and $6 million on December 31, 2021)	705		645
Retained deficit	(42)		(57)
Accumulated other comprehensive income	60		174
Total equity	684		699
Total liabilities and equity	$	1,245	$	1,055

See Notes to Consolidated Financial Statements.


VERSO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
(Dollars in millions, except per share amounts)	2019		2020		2021
Net sales	$	2,444	$	1,359	$	1,278
Costs and expenses:
Cost of products sold (exclusive of depreciation and amortization)	2,138		1,334		1,062
Depreciation and amortization	183		153		154
Selling, general and administrative expenses	104		77		76
Restructuring charges	52		12		23
Other operating (income) expense	4		(89)		(8)
Operating income (loss)	(37)		(128)		(29)

Interest expense	2		1		2
Other (income) expense	(18)		(19)		(25)
Income (loss) before income taxes	(21)		(110)		(6)
Income tax expense (benefit)	(91)		(9)		(3)
Net income (loss)	$	70	$	(101)	$	(3)
Income (loss) per common share:
Basic	$	2.03	$	(2.95)	$	(0.09)
Diluted	2.00		(2.95)		(0.09)
Weighted average common shares outstanding (in thousands):
Basic	34,625		34,232		30,869
Diluted	35,134		34,232		30,869

See Notes to Consolidated Financial Statements.


VERSO CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Year Ended December 31,
(Dollars in millions)	2019		2020		2021
Net income (loss)	$	70	$	(101)	$	(3)
Other comprehensive income (loss), net of tax
Defined benefit pension plan:
Pension liability adjustment, net	2		(62)		114

Other comprehensive income (loss), net of tax	2		(62)		114
Comprehensive income (loss)	$	72	$	(163)	$	111

See Notes to Consolidated Financial Statements.


VERSO CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

	Class A			Class B
(Dollars in millions, shares in thousands)	Common Shares	Common Stock		Common Shares	Common Stock		Treasury Shares	Treasury Stock		Paid-in- Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity (Deficit)
Balance - December 31, 2018	34,570	$	—	—	$	—	86	$	(2)	$	686	$	102	$	120	$	906
Net income (loss)	—	—		—	—		—	—		—		70		—		70
Other comprehensive income (loss), net	—	—		—	—		—	—		—		—		2		2
Treasury shares	—	—		—	—		159	(3)		—		—		—		(3)
Common stock issued for restricted stock	379	—		—	—		—	—		—		—		—		—
Equity award expense	—	—		—	—		—	—		12		—		—		12
Balance - December 31, 2019	34,949	$	—	—	$	—	245	$	(5)	$	698	$	172	$	122	$	987
Net income (loss)	—	—		—	—		—	—		—		(101)		—		(101)
Other comprehensive income (loss), net	—	—		—	—		—	—		—		—		(62)		(62)
Treasury shares	—	—		—	—		2,499	(34)		—		—		—		(34)
Common stock issued for restricted stock	929	—		—	—		—	—		—		—		—		—
Dividends and dividend equivalents declared	—	—		—	—		—	—		2		(113)		—		(111)
Equity award expense	—	—		—	—		—	—		5		—		—		5

Balance - December 31, 2020	35,878	$	—	—	$	—	2,744	$	(39)	$	705	$	(42)	$	60	$	684
Net income (loss)	—	—		—	—		—	—		—		(3)		—		(3)
Other comprehensive income (loss), net	—	—		—	—		—	—		—		—		114		114
Treasury shares	—	—		—	—		1,486	(24)		—		—		—		(24)
Common stock issued for restricted stock and other awards	536	—		—	—		—	—		1		—		—		1
Dividends and dividend equivalents declared	—	—		—	—		—	—		—		(12)		—		(12)
Repurchase of common stock	(3,040)	—		—	—		—	—		(56)		—		—		(56)
Repurchase of warrants	—	—		—	—		—	—		(10)		—		—		(10)
Equity award expense	—	—		—	—		—	—		5		—		—		5

Balance - December 31, 2021	33,374	$	—	—	$	—	4,230	$	(63)	$	645	$	(57)	$	174	$	699

See Notes to Consolidated Financial Statements.

VERSO CORPORATION
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
	December 31,
	Year Ended December 31,
(Dollars in millions, except per share amounts)	2019		2020
(Dollars in millions)	2019		2020		2021
ASSETS
Cash Flows From Operating Activities:
Current assets:
Net income (loss)	$	70	$	(101)	$	(3)
Cash and cash equivalents	$	42	$	137
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Accounts receivable, net	155		83
Depreciation and amortization	183		153		154
Inventories	395		224
Noncash restructuring charges	20		5		11
Assets held for sale	—		17
Net periodic pension cost (income)	(14)		(16)		(23)
Prepaid expenses and other assets	7		5
Pension plan contributions	(42)		(49)		(25)
Total current assets	599		466
Amortization of debt issuance cost	1		—		1
Property, plant and equipment, net	945		613
Gain on Sale of Androscoggin/Stevens Point Mills	—		(94)		—
Deferred tax assets	92		122
Loss on Sale of Duluth Mill	—		—		3
Intangibles and other assets, net	59		44
Equity award expense	12		5		5
Total assets	$	1,695	$	1,245
(Gain) loss on sale or disposal of assets	2		4		1
LIABILITIES AND EQUITY
Gain on insurance recoveries	—		—		(6)
Current liabilities:
Deferred taxes	(91)		(9)		(3)
Accounts payable	$	188	$	80
Changes in assets and liabilities:
Accrued and other liabilities	103		92
Accounts receivable, net	44		32		(23)
Current maturities of long-term debt and finance leases	2		1
Inventories	(7)		79		92
Total current liabilities	293		173
Prepaid expenses and other assets	5		(2)		2
Long-term debt and finance leases	5		4
Accounts payable	(34)		(64)		13
Pension benefit obligation	369		350
Accrued and other liabilities	(24)		(5)		(19)
Other long-term liabilities	41		34
Net cash provided by (used in) operating activities	125		(62)		180
Total liabilities	708		561
Cash Flows From Investing Activities:
Commitments and contingencies (Note 16)
Proceeds from sale of assets	1		6		2
Equity:
Capital expenditures	(105)		(48)		(66)
Preferred stock -- par value $0.01 (50,000,000 shares authorized, no shares issued)	—		—
Net proceeds from Sale of Duluth Mill	—		—		6
Common stock -- par value $0.01 (210,000,000 Class A shares authorized with 34,949,430 shares issued and 34,704,367 outstanding on December 31, 2019 and 35,877,533 shares issued and 33,133,649 outstanding on December 31, 2020; 40,000,000 Class B shares authorized with no shares issued and outstanding on December 31, 2019 and December 31, 2020)	—		—
Proceeds from insurance recoveries	—		—		6
Treasury stock -- at cost (245,063 shares on December 31, 2019 and 2,743,884 shares onDecember 31, 2020)	(5)		(39)
Recognition of deposits and net proceeds from sale of Luke Mill equipment	—		—		10
Paid-in-capital (including Warrants of $10 million)	698		705
Net proceeds from Sale of Androscoggin/Stevens Point Mills	—		345		—
Retained earnings (deficit)	172		(42)
Net cash provided by (used in) investing activities	(104)		303		(42)
Accumulated other comprehensive income	122		60
Cash Flows From Financing Activities:
Total equity	987		684
Borrowings on ABL Facility	428		36		—
Total liabilities and equity	$	1,695	$	1,245
Payments on ABL Facility	(428)		(36)		—
Principal payment on finance lease obligations	(1)		(1)		(1)
Repurchase of warrants	—		—		(10)
Repurchase of common stock	—		—		(56)
Acquisition of treasury stock	(3)		(34)		(24)
Dividends paid to stockholders	—		(111)		(12)
Debt issuance costs	(1)		—		—
Net cash provided by (used in) financing activities	(5)		(146)		(103)
Change in Cash and cash equivalents and restricted cash	16		95		35
Cash and cash equivalents and restricted cash at beginning of period	28		44		139
Cash and cash equivalents and restricted cash at end of period	$	44	$	139	$	174
Supplementary cash flow disclosures:
Total interest paid	$	2	$	1	$	1
Total income taxes paid	3		—		—
Noncash investing and financing activities:
Right of use assets recorded upon adoption of ASC 842	24		—		—
Right of use assets obtained in exchange for new finance lease liabilities	8		1		1
Right of use assets obtained in exchange for new capitalized operating lease liabilities	2		8		1
See Notes to Consolidated Financial Statements.

VERSO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
	Year Ended December 31,
(Dollars in millions, except per share amounts)	2018		2019		2020
Net sales	$	2,682	$	2,444	$	1,359
Costs and expenses:
Cost of products sold (exclusive of depreciation and amortization)	2,321		2,138		1,334
Depreciation and amortization	111		183		153
Selling, general and administrative expenses	102		104		77
Restructuring charges	1		52		12
Other operating (income) expense	(5)		4		(89)
Operating income (loss)	152		(37)		(128)
Interest expense	33		2		1
Other (income) expense	(52)		(18)		(19)
Income (loss) before income taxes	171		(21)		(110)
Income tax expense (benefit)	—		(91)		(9)
Net income (loss)	$	171	$	70	$	(101)
Income (loss) per common share:
Basic	$	4.97	$	2.03	$	(2.95)
Diluted	4.88		2.00		(2.95)
Weighted average common shares outstanding (in thousands):
Basic	34,514		34,625		34,232
Diluted	35,096		35,134		34,232
See Notes to Consolidated Financial Statements.

VERSO CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
	Year Ended December 31,
(Dollars in millions)	2018		2019		2020
Net income (loss)	$	171	$	70	$	(101)
Other comprehensive income (loss), net of tax
Defined benefit pension plan:
Pension liability adjustment, net	(20)		2		(62)
Amortization of net actuarial loss	1		—		—
Other comprehensive income (loss), net of tax	(19)		2		(62)
Comprehensive income (loss)	$	152	$	72	$	(163)
See Notes to Consolidated Financial Statements.

VERSO CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
	Class A			Class B
(Dollars in millions, shares in thousands)	Common Shares	CommonStock		Common Shares	CommonStock		TreasuryShares	TreasuryStock		Paid-in-Capital		Retained Earnings(Deficit)		AccumulatedOtherComprehensive Income (Loss)		Total Stockholders’ Equity (Deficit)
Balance - December 31, 2017	34,173	$	—	291	$	—	9	$	—	$	676	$	(62)	$	132	$	746
Net income (loss)	—	—		—	—		—	—		—		171		—		171
Other comprehensive income (loss), net	—	—		—	—		—	—		—		—		(19)		(19)
Treasury shares	—	—		—	—		77	(2)		2		—		—		—
Common stock issued for restricted stock	106	—		—	—		—	—		—		—		—		—
Class B stock converted to Class A stock	291	—		(291)	—		—	—		—		—		—		—
Equity award expense	—	—		—	—		—	—		8		—		—		8
Reclassification of stranded tax effects (ASU 2018-02)	—	—		—	—		—	—		—		(7)		7		—
Balance - December 31, 2018	34,570	$	—	—	$	—	86	$	(2)	$	686	$	102	$	120	$	906
Net income (loss)	—	—		—	—		—	—		—		70		—		70
Other comprehensive income (loss), net	—	—		—	—		—	—		—		—		2		2
Treasury shares	—	—		—	—		159	(3)		—		—		—		(3)
Common stock issued for restricted stock	379	—		—	—		—	—		—		—		—		—
Equity award expense	—	—		—	—		—	—		12		—		—		12
Balance - December 31, 2019	34,949	$	—	—	$	—	245	$	(5)	$	698	$	172	$	122	$	987
Net income (loss)	—	—		—	—		—	—		—		(101)		—		(101)
Other comprehensive income (loss), net	—	—		—	—		—	—		—		—		(62)		(62)
Treasury shares	—	—		—	—		2,499	(34)		—		—		—		(34)
Common stock issued for restricted stock	929	—		—	—		—	—		—		—		—		—
Dividends and dividend equivalents declared	—	—		—	—		—	—		2		(113)		—		(111)
Equity award expense	—	—		—	—		—	—		5		—		—		5
Balance - December 31, 2020	35,878	$	—	—	$	—	2,744	$	(39)	$	705	$	(42)	$	60	$	684
See Notes to Consolidated Financial Statements.

VERSO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Year Ended December 31,
(Dollars in millions)	2018		2019		2020
Cash Flows From Operating Activities:
Net income (loss)	$	171	$	70	$	(101)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	111		183		153
Noncash restructuring charges	—		20		5
Net periodic pension cost (income)	(7)		(14)		(16)
Pension plan contributions	(43)		(42)		(49)
Amortization of debt issuance cost and discount	19		1		—
Gain on Sale of Androscoggin/Stevens Point Mills	—		—		(94)
Equity award expense	8		12		5
(Gain) loss on sale or disposal of assets	(8)		2		4
Deferred taxes	—		(91)		(9)
Prepayment premium on Term Loan Facility	1		—		—
Changes in assets and liabilities:
Accounts receivable, net	11		44		32
Inventories	(12)		(7)		79
Prepaid expenses and other assets	4		5		(2)
Accounts payable	40		(34)		(64)
Accrued and other liabilities	(12)		(24)		(5)
Net cash provided by (used in) operating activities	283		125		(62)
Cash Flows From Investing Activities:
Proceeds from sale of assets	17		1		6
Capital expenditures	(73)		(105)		(48)
Grant proceeds from Maine Technology Institute	4		—		—
Net proceeds from Sale of Androscoggin/Stevens Point Mills	—		—		345
Net cash provided by (used in) investing activities	(52)		(104)		303
Cash Flows From Financing Activities:
Borrowings on ABL Facility	442		428		36
Payments on ABL Facility	(507)		(428)		(36)
Payments on Term Loan Facility	(146)		—		—
Prepayment premium on Term Loan Facility	(1)		—		—
Principal payment on finance lease obligations	—		(1)		(1)
Acquisition of treasury stock	—		(3)		(34)
Dividends paid to stockholders	—		—		(111)
Debt issuance costs	—		(1)		—
Net cash provided by (used in) financing activities	(212)		(5)		(146)
Change in Cash and cash equivalents and restricted cash	19		16		95
Cash and cash equivalents and restricted cash at beginning of period	9		28		44
Cash and cash equivalents and restricted cash at end of period	$	28	$	44	$	139
Supplementary cash flow disclosures:
Total interest paid	$	16	$	2	$	1
Total income taxes paid	—		3		—
Noncash investing and financing activities:
Right of use assets recorded upon adoption of ASC 842	—		24		—
Right of use assets obtained in exchange for new finance lease liabilities	—		8		1
Right of use assets obtained in exchange for new capitalized operating lease liabilities	—		2		8
See Notes to Consolidated Financial Statements.

VERSO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF BUSINESS AND BASIS OF PRESENTATION

In this report, the term “Verso” refers to Verso Corporation, which is the ultimate parent entity and the issuer of Class A common stock listed on the New York Stock Exchange. Verso is the sole member of Verso Holding LLC, which is the sole member of Verso Paper Holding LLC. Verso does not have any assets, liabilities, operations or cash flows, other than investment in subsidiaries. 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. The term for any such entity includes its direct and indirect subsidiaries when referring to the entity’s consolidated financial condition or results. Unless otherwise noted, references to “the Company,” “we,” “us,” and “our” refer to Verso.

Nature of Business — Verso’s ~~core business platform~~ is as a producer of graphic paper, specialty paper, packaging paper and Northern Bleached Hardwood Kraft, or “NBHK,” pulp. ~~Verso’s~~These products are used primarily in media, ~~and~~ marketing applications, ~~including~~and ~~catalogs, magazines,~~ commercial printing applications,. ~~such~~Uses asinclude catalogs, magazines, high-end advertising brochures, ~~and~~ direct-mail advertising, and specialty applications, such as ~~flexible~~labeling ~~packaging~~ and ~~label~~other ~~and~~special ~~converting~~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. In 2018, 2019 and 2020, pulp net sales and gross margin, excluding depreciation and amortization expense, were each less than 10% of respective consolidated balances. 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 ~~one~~North ~~geographic~~America ~~location,~~(see ~~North~~Note ~~America~~18).

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 Verso’s 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 45). As consideration for the Pixelle Sale, Verso received $352 million in cash, which reflected certain adjustments related to our 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. The Pixelle Sale reduced the aggregate annual production capacity of Verso’s mills by approximately 660,000 tons. The Androscoggin and Stevens Point mills together represented approximately 22% of Verso’s revenues for the year ended December 31, 2019.

~~Idle of~~ 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. ~~Those~~including ~~alternatives included~~ restarting, selling or permanently closing one or both mills. ~~To assist in evaluating the possible sale of these idled mills,~~ Verso ~~has been working with outside advisors. 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 “stay-at-home” and other orders related to the COVID-19 pandemic have significantly reduced the use of print advertising in various industries, including retail, sports, entertainment and tourism. The production capacity of the Duluth Mill iswas 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. In the third quarter of 2020, Verso recognized $3 million in severance and benefit costs, included in Costs of products sold, associated with the idling of our Duluth Mill and in fourth quarter of 2020, Verso recognized $5 million in severance and benefit costs, included in Costs of products sold, associated with the idling of the Wisconsin Rapids Mill. On December 31, 2020, Verso decided to permanently shut down the Duluth Mill, which was subsequently sold on May 13, 2021 (see Note 5). 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. 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. See Note 1415 ~~and Note 18~~ for additional information.

COVID-19 Pandemic — The ~~outbreak~~COVID-19 ofpandemic ~~coronavirus~~has ~~disease,~~impacted orVerso’s ~~“COVID-19”,~~operations ~~which~~and ~~was~~financial ~~declared~~results bysince the ~~World~~first ~~Health~~quarter ~~Organization~~of to2020 beand acontinues ~~global~~to ~~pandemic,~~have isan ~~impacting~~impact ~~worldwide~~on ~~economic~~the ~~activity~~Company. InVerso serves as an ~~effort~~essential tomanufacturing ~~contain~~business and, ~~combat~~as a result, its mills have continued to be operational during the ~~spread~~pandemic in order to meet the ongoing needs of ~~COVID-19~~its customers, ~~government~~including those in other essential business sectors, which provide food, medical and hygiene products needed in a global health ~~authorities~~crisis. ~~around~~However, the ~~world~~guidelines ~~have~~and ~~taken~~orders ~~extraordinary~~enacted by federal, state and ~~wide-ranging~~local ~~actions~~governments in 2020 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.

5148

~~including~~There ~~orders~~continues to ~~close~~be ~~all~~significant ~~businesses~~uncertainties ~~not~~associated ~~deemed~~with ~~essential,~~the ~~quarantines and “stay~~COVID-~~at-home”~~19 ~~orders.~~pandemic, ~~Although~~including ~~some~~with ofrespect ~~these~~to ~~governmental~~the ~~restrictions~~resurgence ~~have~~of ~~since~~new ~~been~~and ~~lifted~~more orcontagious ~~scaled~~variants ~~back, recent surges~~ of ~~COVID-19~~the ~~and~~virus; the ~~discovery~~efficacy of ~~new~~the ~~variants~~vaccines ofintroduced to combat the virus ~~may~~and ~~lead~~the toor ~~restrictions~~public ~~being~~acceptance ~~implemented~~of insuch anvaccines; ~~effort~~and ~~to reduce~~ the ~~spread~~impact of COVID-19. ~~Verso~~on ~~serves~~economic ~~as an essential manufacturing business and~~conditions, asincluding awith ~~result,~~respect ~~Verso’s mills have continued~~ to belabor ~~operational~~market ~~during~~conditions, ~~this~~economic ~~time in order to meet the ongoing needs of its customers~~activity, ~~including~~consumer ~~those in other essential business sectors~~behavior, ~~which~~supply ~~provide~~chain ~~food,~~shortages ~~medical~~ and ~~hygiene~~disruptions ~~products needed in a global health crisis. The guidelines~~ and ~~orders~~inflationary ~~enacted~~pressure; byall ~~federal,~~of ~~state~~which ~~and~~could ~~local governments~~ have ~~impacted~~a ~~demand~~material ~~from~~impact ~~retailers,~~on ~~political~~the ~~campaigns~~Company’s business, ~~and~~financial ~~sports and entertainment events~~position, ~~driving~~results ~~reduced purchases~~ of ~~printed~~operations ~~materials~~ and ~~substantially~~cash ~~impacting Verso’s graphic paper business~~flows.

While Verso’s ~~COVID-19~~cannot ~~preparedness~~reasonably ~~and~~estimate ~~response team has been monitoring~~ the ~~pandemic~~full ~~and~~impact ~~related~~of ~~events~~COVID-19 ~~and~~on ~~preparing~~the ~~and~~business, ~~implementing~~financial ~~responses~~position, inresults ~~accordance~~of ~~with~~operations ~~the Centers for Disease Control~~ and ~~Prevention,~~cash ~~or “CDC~~flows,” ~~and~~ the ~~Occupational~~Company ~~Safety~~saw ~~and~~its ~~Health Administration~~sales, orvolume ~~“OSHA,”~~and ~~recommendations~~prices ascontinue ~~well~~to asrecover ~~federal,~~during ~~state and local guidelines~~2021.

~~While~~Basis ~~Verso~~of ~~cannot~~Presentation ~~reasonably~~— ~~estimate~~This ~~the~~report ~~full~~contains ~~impact of COVID-19 on~~ the ~~business,~~Consolidated ~~financial~~Financial ~~position,~~Statements ~~results~~ of ~~operations~~Verso ~~and~~as ~~cash~~of ~~flows~~December 31, ~~the~~2020 ~~pandemic will continue to have a negative impact on business~~ and ~~financial results. The full extent to which COVID-19 impacts Verso’s operations will depend on future developments~~2021, ~~which~~and ~~are~~for ~~highly uncertain, including, among others,~~ the ~~duration~~years ofended ~~the outbreak~~December 31, ~~new information that may emerge concerning the severity of COVID-19 and the actions taken~~2019, ~~especially~~2020 ~~those by governmental authorities, to contain its spread or treat its impact including the availability, effectiveness~~ and~~/or~~ ~~public acceptance of any U~~2021.S. ~~Food~~Intercompany balances and ~~Drug~~transactions ~~Administration~~are ~~approved~~eliminated ~~COVID-19~~in ~~vaccines~~consolidation.

Basis of Presentation — This report contains the Consolidated Financial Statements of Verso as of December 31, 2019 and 2020, and for the years ended December 31, 2018, 2019 and 2020. Intercompany balances and transactions are eliminated in consolidation.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or “GAAP,” requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.

Revenue Recognition — Verso generates revenue through product sales, and shipping terms generally indicate when the performance obligation has been fulfilled and control of products has been passed to the customer. Verso’s revenue transactions consist of a single performance obligation to transfer promised goods. Verso has pricing agreements with certain customers. These agreements usually define the mechanism for determining the sales price but do not impose a specific quantity on either party. Quantities to be delivered to the customer are determined at a point near the date of delivery through purchase orders or other written instructions Verso receives from the customer. Spot market sales are made through purchase orders or other written instructions. Revenue is recognized when a performance obligation has been fulfilled, which is typically when shipped from the mills or warehouses. For sales with shipping terms that transfer control at the destination point, revenue is recognized when the customer receives the goods and the performance obligation is complete. For sales with shipping terms that transfer control at the shipping point with Verso bearing responsibility for freight costs to the destination, Verso determined that a single performance obligation is fulfilled and revenue is recognized when the goods ship.

Revenue is measured as the consideration expected to be received in exchange for transferring product. Verso reduces the revenue recognized for estimated returns and other customer credits, such as discounts and volume rebates, based on the expected value to be realized. Verso does not have any significant payment terms as payment is received shortly after the point of sale. With respect to variable consideration, the amount of consideration expected to be received and revenue recognized includes the most likely amount of credits based on historical experience and terms of the arrangements. Revenues are adjusted at the earlier date of when the most likely amount of consideration expected to be received changes or as the consideration becomes fixed. Verso recognizes the cost of freight and shipping, when control has transferred to the customer, as fulfillment activities, in Cost of products sold on the Consolidated Statements of Operations. Sales taxes collected from customers are excluded from revenues. Incidental costs that are immaterial within the context of the contract are expensed when incurred.

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The following table presents the revenue disaggregated by product included in Net sales on the Consolidated Statements of Operations:

Year Ended December 31,

(Dollars in millions)

~~2018~~2019

~~2019~~2020

~~2020~~2021

Paper

2,~~476~~224

21,~~224~~175

1,~~175~~118

Pulp

~~139~~117

~~117~~118

~~118~~133

Packaging

67103

~~103~~66

6627

Net sales

2,~~682~~444

21,~~444~~359

1,~~359~~278

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

Year Ended December 31,

(Dollars in millions)

~~2018~~2019

~~2019~~2020

~~2020~~2021

End-users and Converters

1,~~091~~119

~~1,119~~476

~~476~~402

Brokers and Merchants

~~1,172~~936

~~936~~641

~~641~~664

Printers

~~419~~389

~~389~~242

~~242~~212

Net sales

2,~~682~~444

21,~~444~~359

1,~~359~~278

Two customers together accounted for 3025%, 2533% and 3324% of Verso’s net sales for the years ended December 31, ~~2018~~2019, ~~2019~~2020 and ~~2020~~2021, respectively.

Shipping and Handling Costs — Shipping and handling costs, such as freight to customer destinations, are included in Cost of products sold on the Consolidated Statements of Operations. When the sales price includes charges to customers for shipping and handling, such amounts are included in Net sales.

Planned Major Maintenance Costs — Costs for all repair and maintenance activities are expensed in the month that the related activity is performed or goods received under the direct expense method of accounting.

Environmental Costs and Obligations — In accordance ~~with~~Accounting ~~ASC~~Standards ~~Topic~~Codification, ~~410~~or “ASC,” Asset Retirement and Environmental Obligations, and ASC Topic 450, Contingencies, costs associated with environmental obligations, such as remediation costs, are accrued when such costs are probable and reasonably estimable. Such accruals are adjusted as further information develops or circumstances change. The ultimate aggregate financial impact with respect to these matters is subject to many uncertainties and could be material, but management cannot reasonably estimate the total amount or range of potential liability and additional costs at this time (see Note 1617).

Equity Compensation — Verso accounts for equity awards in accordance with ~~Accounting Standards Codification, or “~~ASC,” Topic 718, Compensation – Stock Compensation. ASC Topic 718 requires employee equity awards to be accounted for under the fair value method. Accordingly, share-based compensation is measured at the grant date based on the fair value of the award. Verso uses the straight-line attribution method to recognize share-based compensation over the service period of the award. Restricted stock units generally vest over 1 to 4 years. Verso has elected to recognize forfeitures as an adjustment to compensation expense in the same period as they occur.

Income Taxes — Verso accounts for income taxes using the liability method pursuant to ASC Topic 740, Income Taxes. Under this method, Verso recognizes deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and reported amounts using enacted tax rates in effect for the year the differences are expected to reverse. Verso regularly reviews deferred tax assets for recoverability based upon an analysis of all positive and negative evidence, including expected future book income based on historical data and the expected timing of the reversals of existing temporary differences. Although realization is not assured, management believes it is more likely than not that the recorded deferred tax assets, as adjusted for income tax valuation allowances, will be realized. Verso evaluates uncertain tax positions annually and considers whether the amounts recorded for income taxes are adequate to address its tax risk profile. Verso analyzes the potential tax liabilities of specific transactions and tax positions based on management’s judgment as to the expected outcome.

Earnings Per Share — Verso computes earnings per share by dividing net income or net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is

5350

computed by dividing net income or net loss by the weighted average number of shares outstanding, after giving effect to potentially dilutive common share equivalents outstanding during the period. Potentially dilutive common share equivalents are not included in the computation of diluted earnings per share if they are anti-dilutive.

Fair Value of Financial Instruments — The carrying amounts for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued and other liabilities approximate fair value due to the short maturity of these instruments. Verso determines the fair value of debt based on market information and a review of prices and terms available for similar obligations. See Note 910 and Note 1213 for additional information regarding fair value.

Verso uses fair value measurements for the initial recording of certain assets and liabilities, periodic remeasurement of certain assets and liabilities and disclosures. Fair value is generally defined as the exit price at which an asset or liability could be exchanged in a current transaction between willing, unrelated parties, other than in a forced or liquidation sale.

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions used to value the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:


▪ Level 1:			Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.
▪ Level 2:			Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
▪ Level 3:			Unobservable inputs reflecting management’s own assumption about the inputs used in pricing the asset or liability at the measurement date.

Cash and Cash Equivalents — Cash and cash equivalents can include highly liquid investments with a maturity of three months or less at the date of purchase.

Accounts Receivable — Verso maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. Verso manages credit risk related to trade accounts receivable by continually monitoring the creditworthiness of customers to whom credit is granted in the normal course of business. Trade accounts receivable balances were $~~145~~82 million and $82106 million at December 31, ~~2019~~2020 and ~~2020~~2021, respectively. Two customers together accounted for 2530% of accounts receivable as of December 31, ~~2019~~2020 and ~~two customers together accounted for 30% of accounts receivable as of December 31, 2020~~2021.

Verso establishes allowance for doubtful accounts based upon factors surrounding the credit risks of specific customers, historical trends and other information. Based on this assessment, an allowance is maintained that represents what is believed to be ultimately uncollectible from such customers. The allowance for doubtful accounts was less than $1 million at both December 31, ~~2019~~2020 and ~~2020~~2021.

Verso has accounts receivable factoring arrangements with a third-party financial institution. These arrangements do not contain recourse provisions which would obligate Verso in the event of its customers’ failure to pay. Receivables are considered sold when they are transferred beyond the reach of Verso and its creditors, the purchaser has the right to pledge or exchange the receivables and Verso has surrendered control over the transferred receivables. For the year ended December 31, ~~2019~~2020, Verso incurred factoring fees of less than $21 million in connection with $~~165~~78 million of accounts receivables sold without recourse. For the year ended December 31, ~~2020~~2021, Verso incurred factoring fees of less than $1 million in connection with $7862 million of accounts receivables sold without recourse. These fees were included in Other operating (income) expense on the Consolidated Statements of Operations.

Inventories and Replacement Parts and Other Supplies — Inventory values include all costs directly associated with manufacturing products such as materials, labor and manufacturing overhead. These values are presented at the lower of cost or net realizable value. Costs of raw materials, work-in-process and finished goods are determined using the first-in, first-out method. Replacement parts and other supplies are valued using the average cost method and are reflected in Inventories on the Consolidated Balance Sheets (see Note 34).

Property, Plant and Equipment — Property, plant and equipment is stated at cost, net of accumulated depreciation. Interest is capitalized on projects meeting certain criteria and is included in the cost of the assets. The capitalized interest is depreciated over the same useful lives as the related assets (see Note 56).

5451

Depreciation and amortization are computed using the straight-line method for all assets over the assets’ estimated useful lives. Estimated useful lives are as follows:


(Years)
Buildings and building improvements						20 - 40
Land improvements						10 - 20
Machinery and equipment						3 - 20
Furniture and office equipment						10
Computer hardware and software						3 - 7
Leasehold improvements						Over the shorter of the lease term or the useful life of the improvements

Intangible Assets — Verso accounts for intangible assets in accordance with ASC Topic 350, Intangibles – Goodwill and Other. The intangible assets are comprised of customer relationships with a useful life of 10 years and trademarks with a five-year useful life. Both are amortized on a straight-line basis. The fair value of trademarks was determined based on the Relief from Royalty method. Verso assumed a royalty rate of 0.25% and a five-year economic life for trademarks. The rate was based on analysis of market information.

Impairment of Long-Lived Assets — Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable, as measured by comparing their net book value to the estimated undiscounted future cash flows generated by their use. Impaired assets are recorded at estimated fair value, determined principally using discounted cash flows.

Deferred Issuance Costs — Debt issuance costs are included in Long-term debt as a reduction of the carrying amount of outstanding debt. Revolving credit facility debt issuance costs in excess of outstanding long-term debt are included in Intangibles and other assets, net on the Consolidated Balance Sheets. Debt issuance costs for term debt are amortized to interest expense using the effective interest method. Debt issuance costs for revolving debt are amortized to interest expense ratably over the life of the facility.

Asset Retirement Obligations — In accordance with ASC Topic 410, Asset Retirement and Environmental Obligations, a liability and an asset are recorded equal to the present value of the estimated costs associated with the retirement of long-lived assets where a legal or contractual obligation exists. The liability is accreted over time and the asset is depreciated over its useful life. Verso’s asset retirement obligations under this standard relate primarily to closure and post-closure costs for landfills. Costs of future expenditures for asset retirement obligations are discounted to their present value when the timing of expected cash flows are reliably determinable. Revisions to the liability could occur due to changes in the estimated costs or timing of closure or possible new federal or state regulations affecting the closure.

As of December 31, ~~2019~~2020 and ~~2020~~2021, $2 million of restricted cash was included in Intangibles and other assets, net on the Consolidated Balance Sheets 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.

The following table presents activity related to asset retirement obligations for the periods presented. Long-term obligations are included in Other long-term liabilities and current portions are included in Accrued and other liabilities on the Consolidated Balance Sheets:

	Year Ended December 31,
(Dollars in millions)	~~2019~~2020		~~2020~~2021
Asset retirement obligations, beginning balance	$	1416	$	168
Settlement of existing liabilities	—		—
Accretion expense	21		1
Adjustments to existing liabilities (1)	—(9)		~~(9)~~4
Asset retirement obligations, ending balance	168		813
Less: Current portion	~~(1)~~—		—
Non-current portion of asset retirement obligations, ending balance	$	158	$	813

(1) ~~Includes~~In 2020, includes $7 million in asset retirement obligations that were assumed by the buyer in the Pixelle Sale (see Note 45).

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In addition to the above obligations, Verso may be required to remove ~~certain~~or ~~materials~~to ~~from~~remediate ~~facilities~~certain hazardous or topotentially ~~remediate~~hazardous ~~them~~materials in accordance with current regulations that govern the handling of ~~certain~~these ~~hazardous or potentially hazardous~~ materials. At this time, Verso believes that adequate information does not exist to reasonably estimate any such potential obligations. Accordingly, no liability for such remediation has been recorded.

Retirement benefits — Retirement plans cover substantially all of Verso’s employees. The defined benefit plans are funded in conformity with the funding requirements of applicable government regulations. Unrecognized prior service costs and actuarial gains and losses are amortized on a straight-line basis over the estimated remaining service periods of employees. Certain employees are covered by defined contribution plans. The employer contributions to these plans are based on a percentage of employees’ compensation or employees’ contributions.

Accumulated Other Comprehensive Income (Loss) — The following table summarizes the changes in Accumulated other comprehensive income (loss) by balance type for the years ended December 31, ~~2018~~2019, ~~2019~~2020 and ~~2020~~2021:

(Dollars in millions)
Accumulated other comprehensive income as of December 31, 2017	$	132
Accumulated other comprehensive income as of December 31, 2018	$	120
Pension and other postretirement adjustment, net	(19)
Reclassification of stranded tax effects (ASU 2018-02)	7
Net decrease in other comprehensive income	(12)
Accumulated other comprehensive income as of December 31, 2018	120
Pension adjustment, net	2
Net increase in other comprehensive income	2
Accumulated other comprehensive income as of December 31, 2019	122
Pension adjustment, net	(62)
Net decrease in other comprehensive income	(62)
Accumulated other comprehensive income as of December 31, 2020	$60	60
Pension adjustment, net	114
Net increase in other comprehensive income	114
Accumulated other comprehensive income as of December 31, 2021	$	174

~~Correction~~Related ofParty ~~previously~~Transactions ~~reported amounts~~ — ~~Subsequent~~Net tosales the original issuance of the Company’s 2019 Consolidated Financial Statements, Verso identified two adjustments necessary to correct deferred tax assets associated with Property, plant and equipment, net and Pension benefit obligation, on the Consolidated Balance Sheet as of December 31, 2019 and Income tax expense (benefit) on the Consolidated Statement of Operations for the ~~year~~years ended December 31, ~~2019.~~2020 ~~These errors occurred due to the incorrect measurement of the state deferred tax assets relating to bonus depreciation~~ and ~~the~~2021 ~~incorrect~~include ~~application~~sales ~~of the tax accounting for the minimum pension liability in Accumulated other comprehensive income. Management believes that the impact of these adjustments is immaterial~~ to ~~the previously issued Consolidated Financial Statements, based on an evaluation of both quantitative and qualitative factors. As~~ a ~~result,~~related ~~Verso~~party ~~corrected Deferred tax assets and Retained earnings (deficit) on the Consolidated Balance Sheet as~~ of ~~December 31, 2019, and Income tax expense (benefit) and Net income (loss) on the Consolidated Statement of Operations for the year ended December 31, 2019, reducing each by~~ $267 million. ~~Additionally, Verso corrected Income (loss) per common share on the Consolidated Statement of Operations for the year ended December 31, 2019, Retained earnings (deficit)~~ and ~~Total~~$67 ~~stockholders’ equity (deficit) as of December 31~~million, ~~2019~~respectively. onAccounts ~~the~~receivable ~~Consolidated~~associated ~~Statement~~with ofthis ~~Changes~~related inparty ~~Stockholders’~~was ~~Equity~~$4 ~~(Deficit)~~million ~~and~~at ~~Net~~both ~~income (loss) and Deferred taxes for the year ended~~ December 31, ~~2019~~2020 onand ~~the Consolidated Statement of Cash Flows, to reflect the impact of this matter~~2021.

~~The~~2. AGREEMENT ~~following~~AND ~~table~~PLAN ~~presents~~OF ~~the~~MERGER ~~as corrected line items in the Consolidated Balance Sheet as of December 31, 2019:~~

	December 31, 2019
(Dollars in millions)	As Reported		As Corrected
Deferred tax assets	$	118	$	92
Total assets	$	1,721	$	1,695
Retained earnings	$	198	$	172
Total equity	$	1,013	$	987
Total liabilities and equity	$	1,721	$	1,695

Merger Agreement

56On December 19, 2021, or the “Agreement Date,” Verso entered into an Agreement and Plan of Merger, or the “Merger Agreement,” with BillerudKorsnäs Inc., a Delaware corporation, or the “Parent,” West Acquisition Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent, or “Merger Sub,” and, solely for purposes of certain sections thereof (as specified therein), BillerudKorsnäs AB, a Swedish limited company, which we refer to as “Guarantor” or “BillerudKorsnäs.” Parent is a wholly owned subsidiary of Guarantor. Pursuant to the Merger Agreement, Merger Sub will merge with and into Verso, or the “Merger,” with Verso surviving the Merger as a wholly owned subsidiary of Parent.

~~The~~Effect ~~following~~on ~~table~~Capital ~~presents the as corrected line items in the Consolidated Statement of Operations for the year ended December 31, 2019:~~Stock

	December 31, 2019
(Dollars in millions, except per share amounts)	As Reported		As Corrected
Income tax expense (benefit)	$	(117)	$	(91)
Net income (loss)	$	96	$	70
Income (loss) per common share:
Basic	$	2.78	$	2.03
Diluted	$	2.74	$	2.00

On and subject to the terms and conditions set forth in the Merger Agreement, upon the effective time of the Merger, or the “Effective Time,” by virtue of the Merger, among other things, each issued and outstanding share of Verso’s Class A common stock (other than any shares of Class A common stock owned by the Company or owned by Guarantor or any subsidiary of Guarantor or any shares of Class A common stock as to which appraisal rights have been properly exercised in accordance with Delaware law), will be automatically cancelled and converted into the right to receive cash in an amount equal to $27.00 per share (without interest), or the “Per Share Price.”

Pursuant to the terms of the Merger Agreement, the Company will not pay a cash dividend for the first quarter ending March 31, 2022. The ~~following~~Merger ~~table~~Agreement ~~presents~~permits the asCompany ~~corrected~~to ~~line~~resume ~~items~~paying regular quarterly cash dividends commencing in the ~~Consolidated~~second ~~Statement~~quarter ofending ~~Cash~~June ~~Flows~~30, ~~for~~2022 in an amount not to exceed $0.10 per share and consistent with the ~~year~~Company’s ~~ended~~past ~~December~~practice ~~31,~~in ~~2019:~~terms of the timing of declaration and payment of such dividends.

	December 31, 2019
(Dollars in millions)	As Reported		As Corrected
Net income (loss)	$	96	$	70
Deferred taxes	$	(117)	$	(91)

The corrections above do not have an effect on net cash provided by operating activities or used in investing or financing activities on the Consolidated Statement of Cash Flows for the year ended December 31, 2019. See Note 11, Note 15 and Note 17 for further information.Warrants

2In December 2021, after our announcement of the pending Merger with BillerudKorsnäs, certain warrant holders notified Verso of their request for the company to repurchase their warrants. ~~RECENT~~ ~~ACCOUNTING~~See ~~PRONOUNCEMENTS~~Note 14 for additional information regarding the warrants.

~~Accounting~~Equity ~~Guidance Adopted in 2020~~Awards

~~ASC~~In ~~Topic~~accordance ~~350~~with the Merger Agreement, ~~Intangible~~at ~~Assets~~the Effective Time, (a) each time-vesting ~~Goodwill~~restricted &stock ~~Other.~~unit, Inor ~~August~~“RSU,” ~~2018~~of the Company outstanding as of the Agreement Date and still outstanding immediately prior to the Effective Time, whether vested or unvested, will automatically be cancelled and converted into the ~~Financial~~right ~~Accounting~~to ~~Standards~~receive ~~Board~~an amount in cash (without interest) equal to (i) the Per Share Price, multiplied by (ii) the total number of shares of Class A common stock subject to such RSU (including, for the avoidance of doubt, any dividend equivalents credited in respect of such RSU), or the “~~FASB~~RSU Consideration,” ~~issued~~and ~~Accounting~~(b) ~~Standards~~each ~~Update~~performance-vesting restricted stock unit of the Company, or each, a “~~ASU~~PSU,” ~~2018-15~~outstanding as of the Agreement Date and still outstanding immediately prior to the Effective Time, ~~Customer’s~~whether ~~Accounting~~vested ~~for~~or ~~Implementation~~unvested, ~~Costs~~will inautomatically abe ~~Cloud~~cancelled ~~Computing~~and ~~Arrangement~~converted ~~that~~into isthe aright ~~Service~~to ~~Contract~~receive an amount in cash (~~Topic~~without ~~350~~interest), ~~which~~equal ~~aligns~~to (i) the ~~accounting~~Per ~~for~~Share ~~such~~Price, ~~costs~~multiplied ~~with~~by ~~guidance~~(ii) onthe ~~capitalizing~~total ~~costs~~number ~~associated~~of ~~with~~shares ~~developing~~of orClass ~~obtaining~~A ~~internal~~common ~~use~~stock ~~software.~~subject ~~Verso~~to ~~adopted~~such ~~this~~PSU ~~guidance~~(including, onfor ~~January~~the 1avoidance of doubt, ~~2020~~any ondividend aequivalents ~~prospective~~credited ~~basis~~in ~~and~~respect of such PSU), with the ~~effect~~achievement onof the ~~Consolidated~~performance-based ~~Financial~~vesting ~~Statements~~metrics ~~was~~applicable ~~not~~to ~~material~~each PSU deemed achieved at the target level of performance, or the “PSU Consideration.”

~~ASC~~As ~~Topic~~promptly ~~326~~as reasonably practicable, ~~Financial~~but ~~Instruments~~in –any ~~Credit~~event ~~Losses.~~no Inlater ~~June~~than ~~2016,~~ten business days after the ~~FASB~~date ~~issued~~on ~~ASU~~which ~~2016-13~~the Merger closes, ~~Financial~~the ~~Instruments~~RSU -Consideration ~~Credit~~will ~~Losses~~be ~~(Topic~~paid ~~326):~~to ~~Measurement~~the holders of ~~Credit~~such ~~Losses~~RSUs onthrough ~~Financial~~the ~~Instruments,~~Company’s ~~which~~payroll ~~replaces~~system. The Merger Agreement provides that Parent will cause the ~~current~~Company ~~incurred~~to ~~loss~~pay ~~impairment~~the ~~method~~PSU ~~with~~Consideration aas ~~method~~soon ~~that~~as ~~reflects~~practicable ~~expected~~following ~~credit~~the ~~losses.~~last ~~Adoption~~day of ~~this~~the ~~standard~~applicable isperformance ~~through~~period, asubject ~~cumulative-effect~~to ~~adjustment~~the holder’s continued employment on such last day. However, in the event that the holder’s employment is terminated prior to ~~retained~~the ~~earnings~~last asday of the ~~effective~~performance ~~date.~~period ~~Verso~~without ~~adopted~~cause ~~this~~or ~~guidance~~due onto ~~January~~the 1holder’s death or disability or, ~~2020~~to the extent set forth in the applicable award or other applicable agreement, ~~and~~due to the ~~effect~~holder’s onresignation for good reason, the ~~Consolidated~~PSU ~~Financial~~Consideration ~~Statements~~payable ~~was~~with ~~not~~respect ~~material~~to the PSU shall be payable on such date notwithstanding such termination.

~~ASC~~Any ~~Topic~~equity ~~715,~~award ~~Compensation~~granted –following ~~Retirement~~the ~~Benefits~~Agreement –Date ~~Defined~~and ~~Benefit~~outstanding ~~Plans~~immediately –prior ~~General.~~to Inthe ~~August~~Effective ~~2018~~Time will be converted into a cash-based award in an amount equal to one-third (1/3) of the product of (x) the Per Share Price, multiplied by (y) the ~~FASB~~number ~~issued~~of ~~ASU~~shares ~~2018~~of Company Common Stock that would have been issuable under the Company RSU or Company PSU in respect of which the cash-14based award is issued (and, ~~Disclosure~~in ~~Framework~~the –case ~~Changes~~of toa Company PSU, with performance criteria deemed achieved at the ~~Disclosure~~target ~~Requirements~~level of performance), and including, for ~~Defined~~the ~~Benefit~~avoidance ~~Plans~~of doubt, ~~which~~any ~~adds~~dividend equivalents credited in respect of such Company RSU or Company PSU, ~~removes~~or ~~and~~the ~~clarifies~~“Converted ~~disclosure~~Cash-Based ~~requirements~~Award,” ~~related~~with such Converted Cash-Based Award vesting in full on December 31, 2022, subject to ~~defined~~the ~~benefit~~holder’s ~~pension~~continued ~~and~~employment ~~other~~on ~~postretirement~~such ~~plans~~date. WeHowever, ~~adopted~~in ~~this~~the ~~guidance~~event asthat ofthe ~~January~~holder’s 1employment is terminated without “cause,” ~~2020~~due to the holder’s death or “disability,” ~~and~~or, ~~changes~~to ~~are~~the ~~reflected~~extent ~~within~~set ~~our~~forth ~~benefit~~in ~~plan~~the ~~disclosures~~applicable award agreement, due to the holder’s resignation for “good reason,” in each case, prior to December 31, 2022, the Converted Cash-Based Award will continue to be payable on such date notwithstanding such earlier termination.

~~ASC~~Representations ~~Topic~~and ~~820,~~Warranties Fair Value Measurement. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which modifies disclosure requirements related to fair value measurement. Verso adopted this guidance on January 1, 2020, and ~~the~~Covenants; ~~effect~~Termination ~~on the Consolidated Financial Statements was not material.~~Fee

~~Accounting~~The ~~Guidance~~Company, ~~Not~~Guarantor, ~~Yet~~Parent ~~Adopted~~and Merger Sub have each made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants to use reasonable best efforts to obtain certain regulatory approvals, or the “Regulatory Approvals,” and antitrust clearance. In addition, in connection with obtaining the Regulatory Approvals, none of Guarantor, Parent or Merger Sub is required to take any action that would result in a Burdensome Condition (as defined in the Merger Agreement). Among other things, the Company has agreed, subject to certain exceptions, to conduct its business in all material respects in the ordinary course of business, from the Agreement Date until the Effective Time. In addition, the Merger Agreement provides for a termination fee of $24,690,000 million payable by the Company to Parent under certain circumstances described in the Merger Agreement.

~~ASC~~Closing 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. It is effective for annual periods, and interim periods within those years, beginning after December 15, 2020, and is not expected to have a material effect on the Consolidated Financial Statements.Conditions

57The closing of the Merger is subject to certain conditions, including, among other things: (a) the adoption of the Merger Agreement by the Company’s stockholders, (b) the expiration or termination of any applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or the “HSR Act,” (c) receipt of the Regulatory Approvals (without the imposition of a Burdensome Condition unless Parent, in its sole discretion, elects to accept an imposition of such Burdensome Condition), (d) the absence of any law or governmental order or other legal restraint or prohibition preventing the consummation of the Merger, (e) the accuracy of the other party’s representations and warranties (subject to certain materiality

~~3. INVENTORIES~~ 54

	December 31,
(Dollars in millions)	2019		2020
Raw materials	$	80	$	45
Work-in-process	51		31
Finished goods	233		125
Replacement parts and other supplies	31		23
Inventories	$	395	$	224

qualifiers), (f) the other party’s compliance in all material respects with its covenants under the Merger Agreement and (g) the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) since the Agreement Date. On January 11, 2022, Verso and BillerudKorsnäs made the filings required to be made under the HSR Act, and the applicable waiting period under the HSR Act expired on February 10, 2022.

The 4foregoing description of the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement is only a summary, does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which is attached as Exhibit 2. ~~DISPOSITIONS~~2 to this report and incorporated by reference herein. The Merger Agreement and the above description have been included to provide investors and security holders with information regarding the terms of the Merger Agreement. They are not intended to provide any other factual information about the Company or Parent. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of that agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement; and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them. Investors should be aware that the representations, warranties and covenants or any description thereof may not reflect the actual state of facts or condition of the Company or Parent. Moreover, information concerning the subject matter of the representations, warranties, and covenants may change after Agreement Date.

3. RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Guidance Adopted in 2021

Accounting Standards Codification Topic 740, Income Taxes. In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update, or “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 Consolidated Financial Statements was not material.

4. INVENTORIES


	December 31,
(Dollars in millions)	2020		2021
Raw materials	$	45	$	31
Work-in-process	31		18
Finished goods	125		61
Replacement parts and other supplies	23		17
Inventories	$	224	$	127

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. Following post-closing adjustments, including $8 million of final working capital received in the fourth quarter of 2020, the sale resulted in a gain of $94 million included in Other operating (income) expense on the Consolidated Statement of Operations for the year ended December 31, 2020. In connection with the Pixelle Sale, Verso provided certain transition services to Pixelle and recognized $5 million for these services on the Consolidated Statement of Operations during the year ended December 31, 2020 with $2 million recognized as a reduction of Cost of products sold and $3 million as a reduction of Selling, general and administrative expenses.

The following table summarizes the components of the gain on sale:


(Dollars in millions)
Cash proceeds	$	352
Less: costs to sell	(7)
Net cash proceeds	345
Less: assets and liabilities associated with the sale
Accounts receivable, net	40
Inventories	90
Property, plant and equipment, net	195
Write-off of intangible assets	5
Other assets	4
Accounts payable	(33)
Pension benefit obligation	(37)
Other liabilities	(13)
Gain on sale	$	94

Luke Mill Land Sale

On October 30, 2020, Verso received $4 million of cash proceeds for the sale of ancillary land associated with the Luke Mill with a net book value of $4 million.

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 was $11 million in cash due at various milestones., ~~Verso~~all ~~received~~of $8which ~~million in~~had ~~non-refundable~~been ~~deposits~~received ~~associated~~as ~~with~~of ~~the sale during the year ended~~ December 31, ~~2020, and an additional $1 million in the first quarter of~~ 2021. ~~Verso~~Management ~~expects~~determined tothat ~~receive an additional $1 million in~~ the ~~second~~control ~~quarter~~over ~~of 2021 and~~ the ~~final~~use ~~payment~~ of ~~$1 million by~~ the ~~third~~acquired ~~quarter~~assets ofhad ~~2021.~~transferred ~~The closing of the equipment purchase, including the transfer of title and ownership of the equipment~~ to the Purchaser, ~~will~~in ~~occur~~June ~~upon~~2021 ~~satisfactory completion of the disassembly~~ and ~~removal~~correspondingly ofrecognized the ~~equipment~~sale ~~and the receipt by Verso~~ of ~~all payments due from~~ the ~~Purchaser.~~two ~~The~~paper ~~machinery~~machines ~~has~~and ~~been~~related ~~classified~~assets ~~as held for sale~~ at ~~December~~that ~~31, 2020~~time.

~~Verso~~As ~~has evaluated the remaining assets~~ of ~~the~~December ~~Luke~~31, ~~Mill~~2020 and ~~has~~2021, ~~received~~Verso aclassified ~~letter~~$17 million ofand ~~intent~~$3 million, torespectively, ~~purchase~~in ~~these~~Assets ~~assets. Negotiations for a purchase agreement are ongoing. The Company has determined that these assets meet the criteria for~~ held for sale aton ~~December~~the ~~31,~~Consolidated ~~2020~~Balance Sheets.

~~In connection with these sales, Verso classified $17 million in assets as held for sale on the Consolidated Balance Sheet as of December 31, 2020.~~56

Sale of ~~Wickliffe~~Duluth Mill

On ~~August 16~~May 13, ~~2018~~2021, Verso ~~Paper~~Minnesota ~~entered~~Wisconsin ~~into a purchase agreement with Global Win Wickliffe~~ LLC, ~~pursuant~~an toindirect ~~which~~wholly ~~Verso~~owned ~~Paper~~subsidiary ~~agreed to sell, and Global Win Wickliffe LLC agreed to purchase, one~~ of Verso~~’s subsidiaries~~, ~~Verso~~entered ~~Wickliffe~~into ~~LLC~~an ~~for~~asset a purchase ~~price~~agreement ofwith ~~$16~~ST ~~million~~Paper in1, ~~cash. Verso Wickliffe~~ LLC ~~owned~~and ~~substantially~~sold all of the assets ~~that~~primarily ~~comprised~~related to Verso’s ~~Wickliffe,~~Duluth ~~Kentucky~~Mill ~~paper~~located ~~mill~~in ~~and~~Duluth, ~~related~~Minnesota ~~operations.~~for ~~Verso~~$7 million ~~previously~~in ~~announced~~cash, ~~its~~less ~~decision~~costs to ~~permanently~~sell ~~close~~of ~~the Wickliffe Mill in April 2016~~$1 million. The sale, ~~closed~~including onrelated ~~September~~selling 5costs, ~~2018, and~~ resulted in a ~~gain~~loss of $9 3 million, which is included in Other operating (income) expense on the Consolidated Statement of Operations for the year ended December 31, ~~2018~~2021.

56. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consist of the following:

	December 31,
(Dollars in millions)	~~2019~~2020		~~2020~~2021
Land and land improvements	$	4226	$	2627
Building and leasehold improvements	~~156~~116		~~116~~107
Machinery, equipment and other (1)	~~1,172~~850		~~850~~766
Construction-in-progress	4717		1757
Property, plant and equipment, gross	1,~~417~~009		~~1,009~~957
Accumulated depreciation (1)	(~~472~~396)		(~~396~~434)
Property, plant and equipment, net	$	~~945~~613	$	~~613~~523

(1) Includes finance lease assets and related amortization (see Note 89).

Interest costs capitalized, depreciation expense and finance lease asset amortization expense for the periods presented are as follows:

	Year Ended December 31,
(Dollars in millions)	~~2018~~2019		~~2019~~2020		~~2020~~2021
Interest costs capitalized	$	12	$	21	$	1—
Depreciation expense	~~105~~176		~~176~~147		~~147~~150
Finance lease asset amortization expense	—1		1		1

Property, plant and equipment as of December 31, ~~2018~~2019, ~~2019~~2020 and ~~2020~~2021 include $715 million, $153 million and $39 million, respectively, of capital expenditures that were unpaid and included in Accounts payable and Accrued and other liabilities on the Consolidated Balance Sheets.

59In June 2019, Verso completed the shutdown and closure of the Luke Mill. Depreciation expense for the year ended December 31, 2019 included $76 million in accelerated depreciation associated with this closure, which is included in Depreciation and amortization on the Consolidated Statement of Operations. In connection with the permanent shut down of the Duluth Mill in December 2020, Verso recognized $65 million of accelerated depreciation which is included in Depreciation and amortization on the Consolidated Statement of Operations for the year ended December 31, 2020. In connection with the permanent shutdown of the No. 14 paper machine and certain other long-lived assets at the Wisconsin Rapids Mill, Verso recognized $84 million of accelerated depreciation which is included in Depreciation and amortization on the Consolidated Statement of Operations for the year ended December 31, 2021 (see Note 15).

InDuring ~~June 2019~~2021, Verso ~~completed~~received ~~the~~$9 million ~~shutdown~~in ~~and~~insurance ~~closure~~recoveries ofassociated ~~the~~with ~~Luke~~a ~~Mill.~~2019 ~~Depreciation~~insurance ~~expense~~claim ~~for~~at the ~~year~~Quinnesec ~~ended~~Mill. ~~December~~These ~~31,~~recoveries ~~2019~~ included $76 6 million inrelated ~~accelerated~~to ~~depreciation~~property, ~~associated~~plant ~~with~~and ~~this~~equipment ~~closure,~~ which is included in ~~Depreciation~~Other ~~and~~operating ~~amortization~~(income) onexpense ~~the~~and ~~Consolidated Statement of Operations. In connection with the closure of the Duluth Mill, Verso recognized~~ $653 million ofrelated ~~accelerated~~to ~~depreciation~~business interruption which is included in ~~Depreciation~~Cost ~~and~~of ~~amortization~~products sold, both on the Consolidated Statement of Operations for the year ended December 31, ~~2020 (see Note 14)~~2021.

~~6. INTANGIBLES AND OTHER ASSETS, NET~~ 57

7. INTANGIBLES AND OTHER ASSETS, NET

Intangibles and other assets, net consist of the following:

	December 31,
(Dollars in millions)	~~2019~~2020		~~2020~~2021
Intangible assets:
Customer relationships, net of accumulated amortization of $9 million on December 31, 2019 and $9 million on December 31, 2020(1)	$	17	$	11
Customer relationships, net of accumulated amortization of $9 million on December 31, 2020(1) and $11 million on December 31, 2021	$	11	$	9
Trademarks, net of accumulated amortization of $11 million on December 31, 2019 and $12 million on December 31, 2020(1)	5		1
Trademarks, net of accumulated amortization of $12 million on December 31, 2020(1) and $13 million on December 31, 2021	1		—
Other assets:
Operating leases	14		149
Deferred compensation	4		43
Restricted cash	2		2
ABL Facility unamortized debt issuance cost, net	2		21
Other	1510		108
Intangibles and other assets, net	$	5944	$	4432

(1) In connection with the Pixelle Sale in 2020 (see Note 45), Customer relationships gross intangible asset was reduced by $6 million and related accumulated amortization was reduced by $2 million, and Trademarks gross intangible asset was reduced by $3 million and related accumulated amortization was reduced by $2 million.

Amortization expense related to intangible assets for the periods presented is as follows:

	Year Ended December 31,
(Dollars in millions)	~~2018~~2019		~~2019~~2020		~~2020~~2021
Customer Relationships	$	23	$	32	$	2
Trademarks	43		3		31

The estimated future amortization expense for intangible assets over the next five years is as follows:

(Dollars in millions)
2021	$	3
2022	$	2
2022	2
2023	2
2024	2
2025	2
2026	1

When events or circumstances indicate that the carrying amount of an asset may not be recoverable, Verso assesses the potential impairment of intangibles and other long-lived assets by comparing the expected undiscounted future cash flows to the carrying value of those assets.

6058

78. ACCRUED AND OTHER LIABILITIES

A summary of Accrued and other liabilities is as follows:

	December 31,
(Dollars in millions)	~~2019~~2020		~~2020~~2021
Payroll and employee benefit costs	$	5343	$	4331
Accrued sales rebates	1611		119
Operating lease liabilities	8		8
Accrued restructuring costs	2		7
Deferred income on Luke Mill equipment sale	—		8
Accrued energy	5		5
Accrued energy	7		5
Operating lease liabilities	8		4
Accrued environmental	2		5
Accrued taxes - other than income	4		4
Accrued freight	5		3
Accrued professional and legal fees	2		3
Accrued professional and legal fees	3		2
Accrued environmental	5		2
Accrued restructuring costs	2		2
Accrued freight	3		2
Other	3		1
Deferred income on Luke Mill equipment sale	8		—
Accrued and other liabilities	$	103	$	92
Other	1		1
Accrued and other liabilities	$	92	$	68

89. LEASES

Verso adopted ASC 842, Leases, on January 1, 2019. Verso leases certain office space, warehouses, vehicles and equipment under operating leases and certain equipment under finance leases. Leases with an initial term of 12 months or less, including any renewal options which are not reasonably certain of exercise in 12 months or less, are not recorded on the Consolidated Balance ~~Sheet~~Sheets. Verso recognizes lease expense for these leases on a straight line basis over the lease term and expects payments in ~~2021~~2022 for these short-term leases to be than less than $1 million. Certain assets include renewal terms that generally range from 1 month to 1 year. Certain warehouse leases include only a payment for variable space utilized, not based on an index or rate, and are therefore not used in the valuation of the right-of-use asset and lease obligations. The lease agreements do not include residual value guarantees and do not contain any restrictions or covenants.

The following table details right-of-use assets and associated obligations for operating and finance leases included on the Consolidated Balance Sheets for the periods presented:

		December 31,		December 31,
(Dollars in millions)	Classification	~~2019~~2020		~~2020~~2021
Assets:
Operating lease assets	Intangibles and other assets, net	$	14	$	149
Finance lease assets	Property, plant and equipment, net(1)	75		54
Total leased assets		$	2119	$	1913
Liabilities
Current liabilities:
Operating	Accrued and other liabilities	$	8	$	84
Finance	Current maturities of long-term debt and finance leases	21		1
Non-current liabilities:
Operating	Other long-term liabilities	6		65
Finance	Long-term debt and finance leases	54		43
Total lease liabilities		$	2119	$	1913

(1) Finance lease assets are recorded net of accumulated amortization.

6159

The following table details the costs associated with leasing transactions included on the Consolidated Statements of Operations for the periods presented:

		Year Ended		Year Ended
(Dollars in millions)	Classification	December 31, ~~2019~~2020		December 31, ~~2020~~2021
Operating lease cost	Cost of products sold (exclusive of depreciation and amortization)	$	1110	$	109
Operating lease cost	Selling, general and administrative expenses	1		1
Variable lease cost	Cost of products sold (exclusive of depreciation and amortization)	87		73
Short term lease cost	Cost of products sold (exclusive of depreciation and amortization)	3		31
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	1		1
Interest on lease liabilities	Interest expense	—		—
Net lease cost		$	2422	$	2215

The following table details the future lease payments associated with leases commenced as of December 31, ~~2020~~2021, including amounts for any renewal options that Verso has determined are reasonably certain to be exercised.

	Operating		Finance
(Dollars in millions)	Leases		Leases		Total
2021	$	8	$	2	$	10
2022	$	4	$	1	$	5
2022	4		2		6
2023	3		2		5
2023	2		1		3
2024	2		1		3
2024	1		1		2
2025	—		—		—
Thereafter	—		—		—
Total lease payments	159		64		2113
Imputed interest	~~(1)~~—		~~(1)~~—		~~(2)~~—
Present value of lease liabilities	$	149	$	54	$	1913

The following assumptions were used to determine the right-of-use assets and obligations associated with Verso’s leases for the periods presented. Verso uses its incremental borrowing rate to value the right-of-use asset and related obligations.

	December 31,		December 31,
	2019		2020
	2020		2021
Weighted average remaining lease term (years):
Operating leases	2.21		2.16
Finance leases	43.47		3.72
Weighted average discount rate:
Operating leases	42.37	%	2.70	%
Finance leases	3.84	%	3.40	%

The following table provides additional cash flow details associated with leases included inon the Consolidated Statements of Cash Flows for the periods presented:

	Year Ended		Year Ended
(Dollars in millions)	December 31, ~~2019~~2020		December 31, ~~2020~~2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$11	12	1110
Operating cash flows related to finance leases	—		—
Financing cash flows related to finance leases	1		1

~~Rental~~ ~~expense for operating leases classified under ASC 840, Leases, for the year ended December 31, 2018 was $12 million~~10. DEBT

As ~~9. DEBT~~of December 31, 2020 and 2021, Verso Paper had no outstanding borrowings on its ABL Facility (as defined below).

~~As of December 31, 2019 and 2020, Verso Paper had no outstanding borrowings on the ABL Facility (as defined below).~~60

During the year ended December 31, 2018, Verso Paper made scheduled principal payments totaling $9 million on the Term Loan Facility (as defined below). As a result of the excess cash flow requirement in the Term Loan Facility, Verso Paper was obligated to fund additional principal payments during the year ended December 31, 2018 of $21 million. Verso Paper also elected to make additional voluntary principal prepayments on the Term Loan Facility totaling $116 million during the year ended December 31, 2018, from available liquidity including amounts borrowed under the ABL Facility. The mandatory and voluntary principal prepayments resulted in the full pay off of the Term Loan Facility on September 10, 2018.

Amounts of interest expense (inclusive of amounts capitalized) and amounts of cash interest payments related to long-term debt for the periods presented, are as follows:

	Year Ended December 31,
(Dollars in millions)	~~2018~~2019		~~2019~~2020		~~2020~~2021
Interest expense (1)	$	153	$	32	$	21
Cash interest paid	162		21		1
Debt issuance cost and discount amortization (2)	191		1—		—1

(1) Represents interest expense incurred on the ~~Credit~~ABL ~~Facilities~~Facility, exclusive of amortization of debt issuance cost and discount and inclusive of amounts capitalized (see Note 56 for additional information on capitalized interest costs).

(2) Amortization of debt issuance cost and original issue discount, ~~including accelerated amortization associated with the early extinguishment of the Term Loan Facility and the ABL Amendment,~~ are included in Interest expense on the Consolidated Statements of Operations and in Amortization of debt issuance cost and discount on the Consolidated Statements of Cash Flows.

~~Credit~~ABL ~~Facilities~~Facility

~~On July 15, 2016,~~ Verso Paper ~~Holding~~is ~~LLC~~the ~~entered~~borrower ~~into~~under a $~~375~~200 million asset-based revolving credit facility, or the “ABL Facility,.” ~~and~~From aFebruary 6, 2019 until May 10, 2021, the ABL Facility provided for revolving commitments of $~~220~~350 million, ~~senior~~with ~~secured~~a ~~term~~$100 ~~loan~~million ~~(with~~sublimit ~~loan~~for ~~proceeds~~letters of credit and a $~~198~~35 million ~~after~~sublimit for swingline loans. On May 10, 2021, Verso Paper entered into a third amendment to the ~~deduction~~ABL Facility, or the “Third ABL Amendment.” As a result of the ~~original~~Third ~~issue~~ABL ~~discount~~Amendment, the ABL Facility provides for revolving commitments of $22200 million), orwith ~~the~~a ~~“Term~~$75 ~~Loan~~million ~~Facility,”~~sublimit for letters of credit and ~~collectively~~a ~~termed~~$20 ~~the~~million ~~“Credit~~sublimit ~~Facilities~~for swingline loans.” ~~After~~The amount of borrowings and letters of credit available to Verso Paper pursuant to the ~~Company~~ABL ~~completed~~Facility is limited to the lesser of $200 million or an ~~internal~~amount ~~reorganization~~determined inpursuant to a borrowing base ($124 million as of December 31, ~~2016~~2021). As of December 31, ~~Verso~~2021, ~~Paper~~the ~~Holding~~outstanding ~~LLC~~balance ~~ceased~~of tothe ~~exist~~ABL Facility was zero, with $21 million issued in letters of credit and ~~Verso~~$103 ~~Paper~~million ~~became~~available ~~the~~for ~~borrower~~future borrowings. Availability under the ~~Credit~~ABL ~~Facilities~~Facility is subject to customary borrowing conditions. The ABL Facility will mature on February 6, 2024.

OnOutstanding ~~February 6,~~borrowings ~~2019,~~under ~~Verso~~the ~~Paper~~ABL ~~entered~~Facility ~~into~~bear ainterest ~~second~~at ~~amendment~~an toannual ~~the~~rate ~~ABL~~equal ~~Facility~~to, orat the ~~“ABL~~option ~~Amendment.”~~of AsVerso aPaper, ~~result~~either of(i) a ~~the~~customary ~~ABL~~London ~~Amendment,~~interbank ~~the~~offered ~~ABL~~rate ~~Facility~~plus ~~provides~~an ~~for~~applicable ~~revolving~~margin ~~commitments~~ranging offrom ~~$350~~1.25% ~~million,~~to ~~with~~1.75% aor ~~$100~~(ii) the ~~million~~Federal ~~sublimit~~Funds ~~for~~Rate ~~letters~~plus ofan ~~credit~~applicable ~~and~~margin aranging ~~$35~~from ~~million~~0.25% ~~sublimit~~to ~~for swingline loans~~0.75%, ~~Verso~~determined ~~Paper~~based ~~may~~upon ~~request~~the ~~one~~average orexcess ~~more~~availability ~~incremental~~under ~~revolving~~the ~~commitments~~ABL inFacility. anVerso ~~aggregate~~Paper ~~principal~~is ~~amount~~also uprequired to ~~the~~pay ~~greater~~a ofcommitment ~~(i)~~fee ~~$75~~for ~~million or (ii)~~ the ~~excess~~unused portion of the ~~borrowing~~ABL ~~base~~Facility ~~over the~~of ~~revolving~~0.25% ~~facility~~per ~~commitments~~year, ofbased ~~$350~~upon ~~million;~~the ~~however,~~average ~~the~~revolver ~~lenders~~usage ~~are~~under ~~not~~the ~~obligated~~ABL toFacility. ~~increase~~The ~~the~~ABL ~~revolving~~Facility ~~commitments~~provides ~~upon~~for ~~any~~determination ~~such~~of ~~request.~~a ~~Availability~~benchmark ~~under~~replacement ~~the~~interest ~~ABL~~rate ~~Facility~~when LIBOR is ~~subject~~no tolonger ~~customary~~available, ~~borrowing~~subject ~~conditions.~~to ~~The~~the ~~ABL~~terms, ~~Facility~~and ~~will~~upon ~~mature~~the onsatisfaction ~~February 6~~of conditions, ~~2024~~specified therein.

~~Outstanding~~All ~~borrowings~~obligations under the ABL Facility ~~bear~~are ~~interest~~unconditionally atguaranteed anby ~~annual~~Verso ~~rate~~Holding ~~equal~~and ~~to,~~certain atof the ~~option~~subsidiaries of Verso Paper~~, either (i) a customary London interbank offered rate plus an applicable margin ranging from 1~~.~~25%~~ toThe ~~1.75%~~ABL orFacility ~~(ii) the~~is ~~Federal~~secured ~~Funds~~by ~~Rate~~a ~~plus~~first-priority anlien ~~applicable~~on ~~margin~~certain ~~ranging~~assets ~~from~~of ~~0.25%~~Verso ~~to 0.75%~~Paper, ~~determined based upon the average excess availability under the ABL Facility.~~ Verso ~~Paper~~Holding isand ~~also required to pay a commitment fee for~~ the ~~unused~~other ~~portion~~guarantor ofsubsidiaries, ~~the~~including ~~ABL~~accounts ~~Facility~~receivable, ofinventory, ~~0.25%~~certain ~~per~~deposit ~~year~~accounts, ~~based~~securities ~~upon~~accounts ~~the~~and ~~average~~commodities ~~revolver usage under the ABL Facility~~accounts.

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 ($197 million as of December 31, 2020). As of December 31, 2020, the outstanding balance of the ABL Facility was zero, with $21 million issued in letters of credit and $176 million available for future borrowings.

All obligations under the ABL Facility are unconditionally guaranteed by Verso Holding and certain of the subsidiaries of Verso Paper. The security interest with respect to the ABL Facility consists of a first-priority lien on certain assets of Verso Paper, Verso Holding and the other guarantor subsidiaries, including accounts receivable, inventory, certain deposit accounts, securities accounts and commodities accounts.

The ABL Facility contains financial covenants requiring Verso, among other things, to maintain a minimum fixed charge coverage ratio if availability were to drop below prescribed thresholds. The ABL Facility also requires that certain payment conditions, as defined therein, are met in order for Verso to incur debt or liens, pay cash dividends, repurchase equity interest, prepay indebtedness, sell or dispose of assets and make investments in or merge with another company.

6311. OTHER LONG-TERM LIABILITIES

The Term Loan Facility was scheduled to mature on October 14, 2021, with quarterly installments due of at least $4 million (subject to increase depending on excess cash flow) for each quarter ended in 2016 through maturity. The mandatory and voluntary principal prepayments resulted in the full pay off of the Term Loan Facility on September 10, 2018. Any voluntary prepayments by Verso Paper of the term loans under the Term Loan Facility were subject to customary “breakage” costs with respect to eurocurrency loans and a 2% prepayment premium until July 14, 2018, and a 1% prepayment premium after July 15, 2018, but before July 14, 2020, and thereafter no prepayment premium. The Company incurred $8 million of debt issuance costs associated with the Term Loan Facility and recorded this amount as a direct deduction of the debt liability, which was amortized over the life of the Term Loan Facility.

10. OTHER LONG-TERM LIABILITIES

Other long-term liabilities consist of the following:

	December 31,
(Dollars in millions)	~~2019~~2020		~~2020~~2021
Asset retirement obligations(1)	$	15	$	8
Asset retirement obligations	$	8	$	13
Employee related obligations	1516		1611
Operating lease liabilities	6		65
Deferred compensation	4		43
Other	1—		—5
Other long-term liabilities	$	4134	$	3437

~~(1) 2020 includes a reduction of $6 million in asset retirement obligations that were assumed in the Pixelle Sale (see Note 4).~~61

1112. EARNINGS PER SHARE

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

	Year Ended December 31,
	2018		2019		2020
	2019		2020		2021
Net income (loss) available to common stockholders (in millions)	$	~~171~~70	$	70(101)	$	(~~101~~3)
Weighted average common shares outstanding - basic (in thousands)	34,~~514~~625		34,~~625~~232		3430,~~232~~869
Dilutive shares from stock awards (in thousands)	~~582~~509		~~509~~—		—
Weighted average common shares outstanding - diluted (in thousands)	35,~~096~~134		3534,~~134~~232		3430,~~232~~869
Basic income (loss) per share	$	42.9703	$	(2.0395)	$	(20.9509)
Diluted income (loss) per share	$	42.8800	$	(2.0095)	$	(20.9509)

As a result of the net loss from continuing operations for the ~~year~~years ended December 31, 2020 and December 31, 2021, 0.8 million and 0.7 million restricted stock units were excluded from the calculation of diluted earnings per share as their inclusion would be anti-dilutive. As of December 31, 2019, 2020 and 2021, Verso ~~has~~had 21.3 8 million, ~~warrants outstanding at an adjusted exercise price of $21~~1.678 million ~~(prior~~and ~~to September 18, 2020 there were~~ 1.80 million warrants, respectively, outstanding at an exercise price of $27.86), ~~(see~~$21.67 ~~Note~~and ~~13)~~$20.66, respectively. As a result of the exercise price of the warrants exceeding the average market price of Verso’s common stock during ~~each of~~ the years ended December 31, ~~2018~~2019, ~~2019~~2020 and ~~2020~~2021, 1.8 million ~~warrants were excluded from the calculations of diluted earnings per share for the years ended December 31~~, ~~2018~~2.3 million and ~~2019, and 2~~1.3 million ~~warrants~~shares, respectively, were excluded from the calculation of diluted earnings per share ~~for the year ended December 31, 2020,~~ as their inclusion would be anti-dilutive. ~~The above table presents corrected 2019 amounts (see Note 1).~~

6413. RETIREMENT BENEFITS

12. RETIREMENT BENEFITS

Defined Benefit Plans

As of December 31, ~~2018~~2021, the Verso Paper Corp. Pension Plan for Hourly Employees (Androscoggin) and the NewPage Cash Balance Plan for Non-Bargained Employees were merged into the NewPage Retirement Plan for Bargained Hourly Employees to form a combined plan which was renamed the Verso Corporation Employee Pension Plan. ~~As of December 31, 2020, this plan~~ covers 5751% of Verso’s employees. The pension plan provides defined benefits based on years of service multiplied by a flat monetary benefit or based on a percentage of compensation as defined by the ~~respective~~ plan document. ~~All~~The ~~of the defined benefit~~ pension ~~plans~~plan ~~are~~is frozen to new entrants. ~~Some~~ However, some of the pension plan participants ~~previously in the NewPage Retirement Plan for Bargained Hourly Employees~~ continue to earn service accruals toward their pension benefits but no longer receive multiplier increases. ~~Verso~~In ~~employees~~addition, ~~previously~~some inpension ~~the~~plan ~~NewPage~~participants ~~Cash Balance Plan for Non-Bargained Employees~~ continue to earn annual interest credits, but no longer earn cash balance benefit credits. ~~Benefit accruals are frozen for employees previously in the Verso Paper Corp. Pension Plan for Hourly Employees (Androscoggin).~~

During the fourth quarter of 2019, Verso offered a voluntary lump-sum option, on a temporary basis, to certain terminated vested and retired participants in the Verso Corporation Employee Pension Plan. The election period to participate began October 24, 2019 and ended November 22, 2019. Lump-sum payments were distributed primarily in November and December 2019 with the remaining payments distributed in 2020, to those participants who were eligible and elected this form of payment. This action resulted in a settlement gain of $13 million, included in Other (income) expense on the Consolidated Statement of Operations for the year ended December 31, 2019.

During the third quarter of 2020, in connection with the completed transfer of the unfunded pension liabilities assumed by Pixelle, as part of the Pixelle Sale (see Note 45), Verso remeasured its pension plan assets and liabilities as of September 30, 2020. For the remeasurement, the discount rate was updated to 2.71% from 3.11%. The remeasurement resulted in a $162 million increase in Pension benefit obligation and a $119 million loss, net of tax, included in Accumulated other comprehensive income (loss) as of September 30, 2020, and a settlement loss of $1 million in the third quarter of 2020 included in Other operating (income) expense on the Consolidated Statement of Operations for the year ended December 31, 2020.

The following tables summarize the components of net periodic pension cost (income) of Verso’s pension plans for the periods presented:

	Year Ended December 31,
(Dollars in millions)	~~2018~~2019		~~2019~~2020		~~2020~~2021
Service cost	$	64	$	43	$	32
Interest cost	6065		6545		4538
Expected return on plan assets	(7370)		(7065)		(6563)
Settlement	—(13)		~~(13)~~1		1—
Net periodic pension cost (income)	$	(714)	$	(1416)	$	(1623)

The following table provides detail on net actuarial (gain) loss recognized in Accumulated other comprehensive (income) loss:

December 31,

(Dollars in millions)

~~2019~~2020

~~2020~~2021

Net actuarial (gain) loss, net of tax

(~~122~~60)

(60114)

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. On March 11, 2021, the government signed into law the American Rescue Plan Act of 2021, or “ARPA.” The ARPA provides for pension funding relief that reduced Verso’s 2021 required cash contributions to its pension plan to $25 million from $46 million. Contributions to the pension plans were $4342 million in ~~2018~~2019, $4249 million in ~~2019~~2020 and $4925 million in ~~2020~~2021. In ~~2021~~2022, Verso expects to make cash contributions to the pension plan of $4621 million.

The following table sets forth a reconciliation of the pension plans’ benefit obligations, plan assets and funded status for the periods presented:

	Year Ended December 31,
(Dollars in millions)	~~2019~~2020		~~2020~~2021
Change in Projected Benefit Obligation:
Benefit obligation at beginning of period	$	1,~~590~~542	$	1,~~542~~527
Settlement	(559)		~~(9)~~—
Service cost	4		3
Plan amendments	—		(3)
Interest cost	65		45
Service cost	3		2
Actuarial (gain) loss	170		113
Interest cost	45		38
Acquisitions/(divestitures)	—		(58)
Actuarial (gain) loss	113		(62)
Benefits paid	(85)		(87)
Acquisitions/(divestitures)	(58)		—
Curtailment	—		2
Benefits paid	(87)		(118)
Settlement payments	(147)		(24)
Curtailment	2		—
Benefit obligation at end of period	$	1,542	$	1,527
Settlement payments	(24)		—
Benefit obligation at end of period	$	1,527	$	1,384
Change in Plan Assets:
Plan assets at fair value at beginning of period	$	1,~~162~~173	$	1,~~173~~177
Settlement payments	(~~147~~24)		~~(24)~~—
Actual net return on plan assets	~~201~~87		87152
Employer contributions	4249		4925
Acquisitions/(divestitures)	—(21)		~~(21)~~—
Benefits paid	(8587)		(87118)
Plan assets at fair value at end of period	$	1,~~173~~177	$	1,~~177~~236
Funded (underfunded) status at end of period	$	(~~369~~350)	$	(~~350~~148)

During ~~2020~~2021, the largest contributor to the $~~113~~62 million actuarial ~~loss~~gain affecting the benefit obligation was the ~~decrease~~increase in the discount rate used to measure the benefit obligation, from 32.1157% as of December 31, ~~2019~~2020 to 2.5789% as of December 31, ~~2020~~2021. In addition, the mortality projection scale was updated, which decreased the benefit obligation, and the commencement assumption for terminated vested participants was updated to better align with expectations, which increased the benefit obligation. During ~~2019~~2020, the largest contributor to the $~~170~~113 million actuarial loss affecting the benefit obligation was the decrease in the discount rate used to measure the benefit obligation, from 43.1711% as of December 31, ~~2018~~2019 to 32.1157% as of December 31, ~~2019~~2020. In addition, ~~partially~~the ~~offset~~mortality byprojection ~~updates~~scale towas updated, which decreased the ~~mortality~~benefit ~~projection~~obligation, ~~scale~~and the commencement assumption for terminated vested participants was updated to better align with expectations, which increased the benefit obligation.

The following table summarizes expected future pension benefit payments from the plan:

(Dollars in millions)
2021	$	93
2022	$	106
2022	94
2023	100
2023	93
2024	96
2024	93
2025	95
2025	92
2026	93
2026 - 2030	441
2027 - 2031	424

Verso evaluates the actuarial assumptions annually as of December 31 (the measurement date), unless a significant event occurs during the year requiring a remeasurement (such as a plan amendment, settlement, or curtailment). Verso considers changes in these long-term factors based upon market conditions and the requirements of ASC Topic 715, Compensation—Retirement Benefits. These assumptions are used to calculate benefit obligations as of December 31 of the current year and pension expense to be recorded for the following year. The discount rate assumption reflects the yield on a portfolio of high quality fixed-income instruments that have a similar duration to the plan’s liabilities. The expected long-term rate of return assumption reflects the average return expected on the assets invested to provide for the plan’s liabilities.

The actuarial assumptions used in the defined benefit pension plans were as follows:

	Year Ended December 31,		Nine months ended September 30,		~~Nine~~Three months ended ~~September~~December 3031,		~~Three~~Year ~~months~~Ended ~~ended~~ December 31,
	2018		2019		2020		2020
	2019		2020		2020		2021
Weighted average assumptions used to determine benefit obligations as of end of period:
Discount rate	43.1711	%	32.1171	%	2.7157	%	2.5789	%
Rate of compensation increase	N/A		N/A		N/A		N/A
Weighted average assumptions used to determine net periodic pension cost for the period:
Discount rate	34.5117	%	43.1711	%	32.1171	%	2.7157	%
Rate of compensation increase	N/A		N/A		N/A		N/A
Expected long-term return on plan assets	67.5000	%	76.0050	%	6.50	%	6.5020	%
Cash balance interest credit rate	4.6049	%	4.4933	%	4.33	%	43.3332	%

The primary investment objective is to ensure, over the long-term life of the pension plan, an adequate pool of sufficiently liquid assets to support the benefit obligations. In meeting this objective, the pension plan seeks to achieve a high level of investment return through long-term stock and bond investment strategies, consistent with a prudent level of portfolio risk. The expected long-term rate of return on plan assets reflects the weighted average expected long-term rates of return for the broad categories of investments currently held in the plan (adjusted for expected changes), based on historical rates of return for each broad category, as well as factors that may constrain or enhance returns in the broad categories in the future. The expected long-term rate of return on plan assets is adjusted when there are fundamental changes in expected returns in one or more broad asset categories and when the weighted average mix of assets in the plan changes significantly.

The following table provides the pension plans’ asset allocation for the periods presented:

	Allocation of Plan Assets
	2019	Allocation on		2020	Allocation on
	2020	Allocation on		2021	Allocation on
	Targeted	December 31,		Targeted	December 31,
	Allocation	~~2019~~2020		Allocation	~~2020~~2021
Fixed income:	25-55%			25-55%
Cash and cash equivalent		31	%		111	%
Fixed income funds		3137	%		3734	%
Equity securities:	35-65%			35-65%
Domestic equity funds - large cap		3429	%		2925	%
Domestic equity funds - small cap		5	%		5	%
International equity funds		1718	%		1815	%
Other:	4-15%			4-15%
Hedge funds, private equity, real estate, commodities		10	%		10	%

ASC Topic 820, Fair Value Measurements and Disclosures, provides a common definition of fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions used to value the assets or liabilities (see Note 1).

In accordance with accounting guidance ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent), certain investments have been valued using the net asset value, or “NAV,” per share (or its equivalent) practical expedient and are therefore not classified in the fair value hierarchy. The fair value amounts presented in these tables for investments are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the reconciliation of changes in the plan's benefit obligations and fair value of plan assets above.

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(or its equivalent) practical expedient and are therefore not classified in the fair value hierarchy. The fair value amounts presented in these tables for investments are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the reconciliation of changes in the plan's benefit obligations and fair value of plan assets above.

The following table sets forth by level, within the fair value hierarchy, the pension plans’ assets at fair value as of the periods presented:

(Dollars in millions)	Total		Level 1		Level 2		Level 3		Assets Valued at NAV Practical Expedient
December 31, 2021
Cash and cash equivalent	$	132	$	—	$	132	$	—	$	—
Fixed income	418		12		406		—		—
Domestic equity - large cap	309		—		—		—		309
International equity	191		82		—		—		109
Domestic equity - mid cap	1		—		—		1		—
Domestic equity - small cap	60		1		—		—		59
Other (hedge funds, private equity, real estate, commodities)	129		17		—		—		112
Total assets at fair value(1)	$	1,240	$	112	$	538	$	1	$	589
December 31, 2020
Cash and cash equivalent	$	10	$	—	$	10	$	—	$	—
Fixed income	431		7		424		—		—
Domestic equity - large cap	344		—		1		—		343
International equity	217		95		—		—		122
Domestic equity - mid cap	1		—		—		1		—
Domestic equity - small cap	54		3		—		—		51
Other (hedge funds, private equity, real estate, commodities)	122		13		—		—		109
Total assets at fair value(1)	$	1,179	$	118	$	435	$	1	$	625
December 31, 2019
Cash and cash equivalent	$	38	$	—	$	38	$	—	$	—
Fixed income	360		—		347		13		—
Domestic equity - large cap	394		—		1		—		393
International equity	202		78		—		1		123
Domestic equity - small cap	60		1		—		—		59
Other (hedge funds, private equity, real estate, commodities)	119		14		—		—		105
TTotal assets at fair value	$	1,173	$	93	$	386	$	14	$	680

(1) Excludes net payables of $2 million and $4 million as of December 31, 2020 and 2021, which consists of interest, dividends, and receivables and payables related to pending securities sales and purchases.

The following table sets forth a summary of the changes in the fair value of the pension plan’s Level 3 assets, which are corporate debt and equity securities, for the years ended December 31, ~~2019~~2020 and ~~2020~~2021:

(Dollars in millions)	Fair Value
Balance, December 31, 2018	$	4
Purchase of securities	16
Sale of securities	(3)
Change in the fair value of current securities	(2)
Transfers into Level 3	—
Transfers out of Level 3	(1)
Balance, December 31, 2019	$	14
Purchase of securities	1
Sale of securities	—
Change in the fair value of current securities	—
Transfers out of Level 3	(14)
Balance, December 31, 2020	$1	1
Sale of securities	—
Change in the fair value of current securities	—
Balance, December 31, 2021	$	1

For the ~~year~~years ended December 31, ~~2019 and December 31,~~ 2020, $~~1 million and $~~14 million, ~~respectively~~ of investments transferred from Level 3 to Level 2 and Level 1 due to changes in the observability of significant inputs.

The majority of investments are comprised of investments in publicly traded mutual funds and common/collective trusts. Publicly traded mutual funds are valued based on their publicly traded exchange value and common/collective trusts are valued using a NAV provided by the manager of each fund. The NAV is based on the underlying net assets owned by the fund, divided by the number of shares or units outstanding. The fair value of the underlying securities within the fund, which are generally traded on an active market, are valued at the closing price reported on the active market on which those individual securities are traded.

The table below sets forth the fair values of investments, whose fair values are estimated at December 31, ~~2020~~2021, using the NAV per share derived by the fund managers as a practical expedient that have unfunded commitments and/or redemption restrictions. To derive the estimated NAV per share, the fund managers apply various methodologies, including, but not limited ~~to, use of proprietary estimation models, quoted market prices or third-party valuations for underlying securities within the~~

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to, use of proprietary estimation models, quoted market prices or third-party valuations for underlying securities within the investments, evaluating contributions, distributions, interest, dividends and management fees, as well as evaluating the general market conditions and their correlation and impact on the investments.

	December 31, 2020
	December 31, 2021
(Dollars in millions)	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Debt securities hedge fund (1)	78$	74	0$	—	Semi-Annually	90 days
Private equity (2)	1110		21		N/A	N/A
	$	8984	$	21

(1) The fund’s objective is to achieve superior risk-adjusted total returns by investing primarily in public and private non-investment grade and non-rated debt securities. Securities and other instruments acquired by the fund may include all types of debt obligations consisting primarily of public and private non-investment grade and nonrated debt, convertible bonds, preferred stock, bank debt, middle market loans and notes, trade claims, liquidating trusts, assignments, options swaps and any other securities with fixed-income characteristics, including, without limitation, debentures, notes deferred interest, pay-in-kind or zero coupon bonds, mortgages and mortgage-backed securities, collateralized mortgage obligations and other real estate-related instruments. The fund may also acquire common or preferred stock, warrants to purchase common or preferred stock and any other equity interests.

(2) This category consists of several private equity funds some of which invest in limited partnerships which make equity-oriented investments in young, growing or emerging companies or entities. Additionally, the funds can invest in limited partnerships or other pooled investment vehicles which, in turn, make investments in management buy-in, management buy-out, leveraged buy-out, mezzanine, special situation and recapitalization transactions or other partnerships either directly or purchased in the secondary market, as well as investments in mezzanine, distressed and venture debt. These funds invest in a wide range of industries primarily in the United States. These investments cannot be redeemed. Instead, distributions are received when the underlying assets of the funds are liquidated.

Defined Contribution Plans

Verso also sponsors defined contribution plans for certain employees. Employees may elect to contribute a percentage of their salary on a pre-tax and/or after-tax basis, subject to regulatory limitations, into an account with an independent trustee which can then be invested in a variety of investment options at the employee’s discretion. Verso may also contribute to the employee’s account depending upon the requirements of the plan. For certain employees, these employer contributions may be in the form of a specified percentage of each employee’s total compensation or in the form of discretionary profit-sharing that may vary depending on the achievement of certain company objectives. Certain defined contribution benefits are provided in accordance with collective bargaining agreements. Expenses under these plans are presented below.

	Year Ended December 31,
(Dollars in millions)	~~2018~~2019		~~2019~~2020		~~2020~~2021
Defined Contribution Plans
Non-elective employer contribution	$	1413	$	138	$	87
Employer 401(k) matching contributions	14		149		97

1314. EQUITY

See Note 2 for information regarding the Merger Agreement, which affects the existing default treatment of certain of our equity awards.

Equity Awards

The Verso Corporation Performance Incentive Plan, or the “2016 Incentive Plan,” became effective on July 15, 2016 and no stock awards were issued on that date. The maximum number of shares of Class A ~~Common~~common ~~Stock~~stock authorized to be issued or transferred pursuant to awards under the 2016 Incentive Plan is 3.6 million. As of December 31, ~~2020~~2021, we had 2.1 2 million shares of Class A common stock reserved for future issuance under the 2016 Incentive Plan. The Compensation Committee of the Board of Directors is the administrator of the 2016 Incentive Plan. Under the 2016 Incentive Plan, stock awards may be granted to employees, consultants and directors upon approval by the Board of Directors.

During ~~2020~~2021, Verso granted 0.23 million ~~time-based~~RSUs ~~restricted stock units~~ and 0.2 million ~~performance-based~~PSUs ~~restricted stock units~~ to its executives and certain senior managers. The ~~performance~~PSU awards granted vest on the performance determination date following the end of the performance period, ~~subject~~as tomeasured ausing ~~comparison~~an ofadjusted ~~annualized~~EBITDAP ~~total~~(earnings ~~shareholder~~before ~~return~~interest, ortaxes, ~~“TSR~~depreciation,” ofamortization ~~Verso~~and topension expense/income) metric and a ~~select~~return ~~group~~on ofinvested ~~peer~~capital ~~companies~~metric over a 3-year period ending December 31, ~~2022~~2023. The vesting criteria of the ~~performance~~PSU awards meet the definition of a ~~market~~performance condition for accounting purposes. The ~~full grant date value of the performance awards will be recognized over the remaining vesting period assuming that the employee is employed continuously to the vesting date. The~~ number of shares which will ultimately vest at the vesting date ranges from 0% to 150% based on Verso stock performance relative to the peer group during the performance period. The compensation expense associated with these performance awards was determined using the Monte Carlo valuation methodology.

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Ondate ~~May~~ranges ~~11,~~from ~~2020,~~0% ~~the~~to ~~threshold~~200% ~~requirement~~of ~~for~~the ~~vesting~~number of ~~achieving~~PSUs agranted 5%based ~~annualized~~on ~~TSR was eliminated for~~ performance ~~units~~during ~~granted in 2019 and 2020. This change was considered a modification of each award and required Verso to incur additional compensation cost for~~ the ~~incremental difference in the fair value between the modified award (post~~3-~~modification)~~year ~~and~~cumulative ~~original~~performance ~~award (pre-modification) over the remaining vesting~~ period. The ~~incremental~~compensation ~~difference~~expense ~~was~~associated ~~$1.60~~with ~~and~~these ~~$3.75~~performance ~~per~~awards ~~unit~~is ~~for~~currently ~~the~~estimated ~~2019~~at ~~and 2020 performance grants, respectively~~200%.

~~Verso~~On ~~recognized~~March ~~equity~~5, ~~award~~2021, ~~expense~~Verso ofmodified $8certain ~~million,~~outstanding ~~$12~~restricted ~~million~~stock ~~and~~unit $5awards ~~million~~as ~~for~~part ~~the~~of ~~years~~a ~~ended~~retention ~~December~~arrangement ~~31,~~for ~~2018,~~its ~~2019~~former ~~and~~Chief ~~2020,~~Financial ~~respectively.~~Officer ~~Equity~~who ~~award~~retired ~~expense~~on ~~for~~June ~~the~~30, ~~year~~2021. ~~ended~~As ~~December 31~~modified, ~~2020~~his ~~included~~PSUs ~~$0.3~~will ~~million~~remain ~~related~~outstanding toand ~~the~~may ~~accelerated~~vest ~~vesting~~on ofa ~~108~~pro-rata ~~thousand~~basis ~~performance-~~based ~~restricted~~on ~~stock~~Verso’s ~~units~~achievement ~~and~~of ~~155~~established ~~thousand~~targets. ~~time-based~~In ~~restricted~~addition, ~~stock~~the ~~units.~~next ~~Amounts~~tranche ~~are~~of ~~net~~his ofRSUs ~~the~~vested ~~cancellation~~at ofJune ~~103~~30, ~~thousand~~2021. ~~time-based~~The ~~and~~foregoing ~~102 thousand~~changes ~~performance-based~~were ~~restricted~~considered ~~stock~~a ~~units~~modification and ~~dividend~~resulted ~~equivalent~~in ~~units,~~a ~~pursuant~~revaluation toof ~~separation~~his ~~agreements~~2019 ~~with~~and ~~key~~2020 ~~members~~PSUs ofto ~~management.~~a Asfair value of ~~December~~$0.67 31and $8.66, ~~2020~~respectively, ~~there~~and ~~was~~a $4revaluation ~~million~~ of ~~unrecognized~~each ~~compensation~~of ~~cost~~his ~~related~~2018, to2019 ~~the~~and ~~0.8~~2020 ~~million~~RSUs ~~non-~~that vested ~~restricted~~as ~~stock~~a ~~units,~~result ~~which~~of isthe ~~expected~~modification to bea ~~recognized~~fair ~~over~~value ~~the weighted average period~~ of 1$13.~~8 years~~32.

On May 11, 2020, the threshold requirement for vesting of achieving a 5% annualized TSR was eliminated for PSU’s granted in 2019 and 2020. This change was considered a modification of each award and required Verso to incur additional compensation cost for the incremental difference in the fair value between the modified award (post-modification) and original award (pre-modification) over the remaining vesting period. The incremental difference was $1.60 and $3.75 per unit for the 2019 and 2020 PSU grants, respectively.

Verso recognized equity award expense of $12 million, $5 million and $5 million for the years ended December 31, 2019, 2020 and 2021, respectively. Equity award expense for the year ended December 31, 2020 included $0.3 million related to the accelerated vesting of 108 thousand PSUs and 155 thousand RSUs. Amounts are net of the cancellation of 103 thousand RSU’s and 102 thousand PSUs and dividend equivalent units, pursuant to separation agreements with key members of management. As of December 31, 2021, there was $7 million of unrecognized compensation cost related to the 0.7 million non-vested RSUs, which is expected to be recognized over the weighted average period of 1.9 years.

Time-based Restricted Stock Units

The following table summarizes activity for the ~~time-based restricted stock units~~RSUs:

(In thousands, except per share amounts)	Restricted Stock UnitsOutstanding	Weighted Average Grant Date Fair Value per Share
Non-vested at December 31, 2017	583	$	6.89
Non-vested at December 31, 2018	678	$	10.04
Granted	204	17.75
Vested	(106)	7.42
Forfeited	(3)	14.08
Non-vested at December 31, 2018	678	10.04
Granted	192	20.57
Vested	(154)	14.16
Forfeited	(137)	13.81
Non-vested at December 31, 2019	579	11.55
Granted	250	15.55
Dividend equivalent units (1)	167	—
Vested	(405)	10.00
Forfeited	(170)	13.76
Non-vested at December 31, 2020	421	$9.95	~~9.95~~
Granted	283	14.41
Dividend equivalent units (1)	9	—
Vested	(361)	10.23
Forfeited	(73)	11.85
Non-vested at December 31, 2021	279	$	14.41

(1) Dividend equivalent units on certain restricted stock unit awards for dividends related to the stock units granted but not yet vested at the time cash dividends were paid.

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Performance-based Restricted Stock Units

The following table summarizes activity for the ~~performance-based restricted stock units~~PSUs:

	Restricted Stock UnitsOutstanding	Weighted Average Grant Date Fair Value per Share
(In thousands, except per share amounts)
Non-vested at December 31, 2017	—	$	—
Non-vested at December 31, 2018	638	$	22.26
Granted	640	22.25
Vested	—	—
Forfeited	(2)	18.22
Non-vested at December 31, 2018	638	22.26
Granted	244	17.35
Vested	(233)	20.92
Forfeited	(11)	17.50
Non-vested at December 31, 2019	638	18.84
Granted	206	16.38
Dividend equivalent units (1)	136	—
Incremental shares vested (2)	161	—
Vested	(555)	21.05
Forfeited	(162)	13.71
Non-vested at December 31, 2020	424	$12.21	~~12.21~~
Granted	206	12.82
Dividend equivalent units (1)	9	—
Incremental shares vested (2)	13	—
Vested	(146)	12.83
Forfeited	(77)	10.59
Non-vested at December 31, 2021	429	$	11.26

(1) Dividend equivalent units on certain 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 awards at 150% of ~~granted~~target level of shares ~~associated~~vested ~~with~~in 2020 and 113% of the ~~2017~~target ~~performance~~level ~~awards~~of shares vested in 2021.

Share ~~Repurchase~~Repurchases and Outstanding 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’s Class A common stock. In conjunction with the declaration of the special cash dividend of $3.00 per share, orfor an aggregate of $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 year ended December 31, 2020, Verso purchased under its share repurchase authorization approximately 2.2 million ~~shares~~ of its Class A common stock through open market purchases and ~~10b~~10b5-51 programs ~~under~~at a weighted average cost of $13.39 per share. During the year ended December 31, 2021, Verso purchased under its share repurchase authorization (i) approximately 1.3 million shares of its Class A common stock through open market purchases and 10b5-1 programs at a weighted average cost of $1315.3997 per share and (ii) approximately 3.0 million shares at a purchase price of $18.10 per share through the modified Dutch auction tender offer discussed below. As of December 31, ~~2020~~2021, $~~121~~ 45 million of the $150 million ~~authorized~~share repurchase authorization remained.

~~Cash~~On ~~dividends~~May on13, 2021, Verso commenced a modified Dutch auction tender offer to purchase for cash shares of ~~Verso~~its Class A common stock ~~during~~for an aggregate purchase price of not more than $55 million and at a price per share of Class A common stock of not less than $16.00 and not more than $18.30 per share. The tender offer expired on June 10, 2021. Through the ~~year~~tender ~~ended~~offer, ~~December~~Verso 31accepted for purchase approximately 3.0 million shares of its Class A common stock at a purchase price of $18.10 per share for an aggregate purchase price of approximately $56 million, ~~2020~~including ~~are~~fees ~~shown~~and expenses. The shares of common stock purchased through the tender offer were immediately retired. The excess purchase price over par value was recorded as a reduction to Paid-in capital on the ~~following~~Consolidated ~~table:~~Balance Sheet during the year end December 31, 2021.

Quarter

Date Declared

Date of Record

Date Paid

Amount

2nd

May 12

June 15

June 29

0.10

3rd

August 5

September 18

September 28

0.10

3rd

August 5

September 18

September 28

3.00

4th

November 9

December 18

December 29

0.10

OnCash ~~February~~dividends 5,on ~~2021,~~shares ~~Verso’s Board~~ of ~~Directors~~Verso ~~declared~~Class aA ~~quarterly~~common ~~cash~~stock ~~dividend~~during ofthe ~~$0.10~~year ~~per~~ended ~~share~~December ~~of Verso common stock~~31, ~~payable on March 29,~~ 2021, toare ~~stockholders~~shown ofin ~~record~~the onfollowing ~~March 18, 2021.~~table:

Quarter

Date Declared

Date of Record

Date Paid

Amount

1st

February 5

March 18

March 29

0.10

2nd

May 7

June 17

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