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Verso Paper (VRS)
Q2 2019 Earnings Call
Aug 08, 2019, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, and welcome to Verso Corporation's second-quarter 2019 earnings conference call. [Operator instructions] Please note, this conference is being recorded. A replay of this call will be available on the Investors page of Verso's website after 11 a.m. Eastern Time today.
At this time, I would like to turn the presentation over to Verso's treasurer, Tim Nusbaum. Please go ahead.
Tim Nusbaum -- Treasurer
Thank you, and good morning. The second-quarter 2019 financial results for Verso Corporation were announced this morning before the market opened. The earnings release, as well as a set of slides that we'll refer to during the call are available on the Investors page of Verso's website, www.versoco.com. Joining me on the call today is Les Lederer, interim chief executive officer; Allen Campbell, senior vice president and chief financial officer; and Mike Weinhold, president of graphic and specialty papers.
I'd like to remind everyone that in the course of the call, in order to give you a better understanding of our performance, we will be making certain forward-looking statements. These forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize or should underlying assumptions or estimates prove incorrect, actual results may vary materially from management's expectations. If you'd like further information regarding these risks and uncertainties associated with the business, please refer to our SEC filings, which are posted on our website, www.versoco.com on the Investors tab.
At this point, I'd like to turn the presentation over to Les Lederer.
Les Lederer -- Interim Chief Executive Officer
Thank you, Tim. Good morning, everyone, and thank you for joining us on this call this morning. As Tim indicated, with me today is Allen Campbell, who will walk through the financial slides and more fully explain our quarterly results. Mike Weinhold is also available to respond to questions regarding our commercial efforts.
In my remarks this morning, I want to review the state of our markets and the challenges we are facing as a result of current market conditions. Our second-quarter results were not only impacted by lower volumes, but was also impacted by a significant planned maintenance downtime at our Wisconsin Rapids facility, which lowered our second-quarter adjusted EBITDA by $19 million. Turning to Page 3 of the presentation deck, net sales for the quarter were $602 million, which were lower than the $620 million to $640 million of guidance which we had provided for the second quarter. Our adjusted EBITDA for the quarter was $44 million, resulting in an adjusted-EBITDA margin of 7.3%.
The year-to-date adjusted EBITDA through the second quarter was $113 million. Graphic paper shipments were lower, reflecting negative market trends, which were somewhat offset by the growth in our market for specialty and packaging papers and market pulp. While we expect the third quarter to produce better results than the second quarter of 2019, revenues are not, however, expected to meet the 2018 third-quarter levels. Notwithstanding mix issues, we were able to achieve and maintain year-over-year higher pricing levels in our core graphic products.
The decline in sales for the quarter resulted in peak inventory levels, but we are forecasting inventory levels to decline significantly by year end due to the expected seasonal pickup on sales, as well as the impact of our Luke Mill closure. While the demand for graphic products has declined over the years due to the migration to digital offerings, the most recent demand statistics for these products have decreased at an increasing rate. However, we believe that the current increased rate of decline has been impacted by the influx of imports and the continued higher level of customer inventories. For the remainder of the year, we expect our volumes to improve, both as a result of the seasonal pickup and an expected product restocking by our customers with paper prices expected to remain relatively stable.
We will, if necessary, however, continue to balance our product -- our production to our customer demand. We remain a significant participant in the graphic market, and we will have -- and while we have in the past undertaken initiatives to reduce our dependence on the graphic paper markets, we today still have 59% of our revenues in this space. This percentage needs to be further reduced. Turning to Page 4 of the presentation deck, we have outlined our past initiatives in both changing our product mix, as well as focusing on cost and liquidity issues.
Our investments in the specialty, packaging and pulp markets have grown our revenue share in these markets from 34% in the second quarter of 2018 to 41% in the second quarter of 2019. One of the capital projects initiated to achieve this product diversification was the July 2018 conversion and restart of paper machine number three at our Androscoggin Mill to produce linerboard, market pulp and kraft paper. Additional new product focus included the expansion of our ability to produce release liner for greater participation in that growing market, with the reconfiguration and enhancement of both PM4 at our Androscoggin Mill and PM3 at our Escanaba Mill. Adding to our entry into the packaging space on PM3 at Androscoggin, a capital project in the second quarter of this year was approved for our Duluth Mill for the production of 48,000 tons per year of recycled packaging products.
This project is expected to be completed in the first quarter of 2020. We also continue to be focused on SG&A, as well as other overhead reductions and have a current initiative for additional reductions for 2020 that will remove additional costs in excess of $12 million. We have previously reduced our adjusted SG&A as a percentage of revenues from 4.2% in the first half of 2017 to 3.3% in the first half of 2019. Finally, we have effectively enhanced our financial flexibility by repaying and terminating our 220 million-dollar term loan in 2018, eliminating the company's OPEB liability of $28 million and reducing our letter of credit exposure by $42 million.
While these prior initiatives have benefited the company, we will need to continue to be proactive in initiating strategies to produce additional value-added products. With the expected company's cash generation ability and our borrowing capacity as a result of our debt repayment, we have significant flexibility in undertaking further strategic initiatives that benefit the company in the future. With the closure of our Luke Mill, we are -- we believe we are currently balancing supply and demand in the market. This balance should continue to be maintained by the announced graphic industry capacity conversions.
It is important to note that these conversions are not a permanent panacea to the issues we face, but will give us the necessary time to invest in capital projects in the company to allow us to reposition our assets as the markets for graphic products decline. Our plan is to make significant capital project investments in the business over the next two years. This will require a focus to be directed on the growth of specialty products, as well as packaging grades. The senior leadership team and I have spent significant time together, as well as with other senior managers in the company to address opportunities for the deployment of strategic capital to accelerate the move to higher growth product opportunities.
On Page 5 of this presentation, we outlined our current plan for growth and diversification, which has strategic capital deployed and completed in this plan. We will reduce our graphic tonnage over the next five years to 44% from the current level of 59%. Additionally, the graphic products that will continue to be produced at the company will be produced at the most cost-effective mills. We have determined that the planned strategic investment will require up to $120 million over this two-year period.
We plan to invest a portion of this capital allocation at our Androscoggin Mill, which we believe will enable us to improve the quality and reduce the cost of our unbleached containerboard and kraft paper grades on the number three machine at Androscoggin and to increase capacity of specialty products made on our paper machine number four. We have already begun improvements on Androscoggin's PM5 machine to improve the capacity of machine-glazed products made on this asset. Additionally, we are planning capital improvements at our Stevens Point Mill in order to enhance and improve our specialty product offerings. As I have already discussed, we have invested capital at our Duluth Mill to produce 48,000 tons annually of recycled kraft paper and containerboard, replacing a portion of the graphic grades made at the Duluth Mill.
The mill has run trial products of these grades and the customers have been very impressed with the products and are awaiting completion of the project. We are planning further conversions to recycle containerboard and recycle kraft to the Duluth Mill to mitigate the demand loss of the products currently produced at that mill. Notwithstanding the further planned conversion, we will still have the flexibility to produce supercalendered products at Duluth. In conjunction with this additional conversion, we have been awarded a grant from the state of Minnesota in the amount of $2 million to assist us in this conversion.
It is important to note that we intend to fund the strategic capital investments discussed this morning from cash generated from operations. As I mentioned on the last earnings call, I planned to visit all our mill locations in the second quarter. In my visits to our mills, I was impressed with the significant engagement of the mill's management teams. I believe that with our skill of mill management teams, along with our seasoned commercial organization, we are well positioned to accomplish our objectives with the planned capital.
Before turning the presentation over to Allen, I want to mention that since I've joined the company I have worked closely with our board of directors to address and find solutions for our challenges. Our board and I are committed to continue to focus the company in the strategic direction that is necessary to create value to our stakeholders over the long term. I will now turn the presentation over to Allen Campbell who will provide financial updates.
Allen Campbell -- Senior Vice President and Chief Financial Officer
Thank you, Les. Turning to Page 7, we highlight some key metrics for the quarter. If you look at paper shipments were down 11%. As Les mentioned, tough quarter for us in that time period.
Pulp was up 26% as last year we had an outage at [Inaudible} that precluded us from doing some sales of pulp that we returned this year. Net selling prices continued to be favorable. We're up 4% across our paper portfolio versus the prior year, down slightly $19 a ton from the prior quarter, and that's primarily due to the mix of product. Pulp was down 9%.
As you know, that's been a rollercoaster up and down on front pulp. But as you know, we purchased a significant amount of pulp, and we sell pulp. So we're somewhat balanced from that standpoint. Inventory, as Les mentioned, peaked in the second quarter.
That should decline through the rest of the year as we convert that inventory to cash. The mix of business, you could see in the chart at the far right that we've grown our pulp, packaging, and specialty business from 34% in second-quarter '18 to 41% in the second quarter of '19. On Page 8, we just pull off some of the financial highlights for the quarter. We talked about sales earlier.
As you can see, operating income and net income were hit by a charge we had for Duluth Mill, totaled $116 million. If we adjust that out, you would have virtually the same property -- operating income as you did the prior year on less sales. Adjusted EBITDA of $44 million to $51 million, so 7.3% versus 7.9%. And making adjustments that you see in our appendix earnings per share adjusted basis of $0.42 versus $0.49.
We have a bridge on Page 9, walking our $51 million in adjusted EBITDA in the second-quarter last year to $44 million this year. Price mix still favorable for us over this time period, drove an extra $19 million to the bottom line. Volume is negative, but less the price, as you can see, so the negative $11 million hit. As far as downtime and ops, we had a $13 million movement down in the second quarter of this year, $9 million of that was related to downtime.
We had an $8 million of downtime at our Rapids Mill where we had a major maintenance of the boiler. We spent about $18 million of maintenance, $8 million of downtime and we had about $18 million roughly of capital also in that mill. So it's a large investment that we did on the maintenance side of that mill. We did take a couple of million dollars additional downtime at our Stevens Point Mill in the second quarter for inventory adjustment.
Ops was off $4 million as we had a few issues in a couple of our mills. Inflation, still negative for us, but the run rate on inflation is improving. So we were just off $2 million versus the prior-year same quarter. We offset that by our SG&A, cuts and savings of $2 million.
Pension was another $2 million hit this year versus last year. Last year was more of an income, less so this year. On Page 10, we highlight our balance sheet and our position where we are as far as liquidity. A very strong liquidity, very low leverage.
As it shows, we had $41 million in net debt at the end of the second quarter as we had seasonal usage of working capital, and we build inventory with the Duluth closure in the second quarter. Far right-hand side shows our net cash generated. We were down $2 million in the second quarter versus a gain of $42 million in the same quarter prior year. Biggest swings we had was primarily in our working capital.
As mentioned, we build inventory, we'll draw that down as we go forward, but that was the main driver. The maintenance was highlighted on Page 11 to help you understand our flow of numbers. Second quarter, as mentioned earlier, was pretty heavy spending. We spent $23 million in total.
That was up $20 million versus the quarter before where we only had $3 million. We expect to spend less in major maintenance in the third quarter and then drop off significantly in the fourth. So that's our expectation as we look going forward, a little bit higher than the prior year in the third quarter, but stepping down and then again stepping down materially in the fourth quarter. We highlight our mills below on what they're doing, which ones take the outage which month.
As far as our guidance for the third quarter, as Les mentioned, we're expecting sales to be higher than the second, not as strong as it was in prior year, primarily due by volume tons. Net sales in the range of 620 million to 640 million. Capital expenditures in the $34 million to $38 million range. Maintenance, we talked about just a second ago.
And then cash funding, third quarters are a major funding quarter, and so we expect the payments and somewhere in the contribution of $17 million to $20 million range. With that, that ends our formal presentation. We'd like to move to the Q&A section and open it up for questions.
Questions & Answers:
Operator
[Operator instructions] The first question comes from Jeff Van Sinderen from B. Riley FBR. Please go ahead.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
Hi, good morning. Can you speak to --
Les Lederer -- Interim Chief Executive Officer
Jeff, could you speak up just a bit.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
Sure. Can you hear me now?
Les Lederer -- Interim Chief Executive Officer
Yes, that's better. Thank you.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
OK. Great. Can you speak to what you're seeing so far on pricing in Q3 and what you anticipate for the remainder of the quarter on pricing?
Les Lederer -- Interim Chief Executive Officer
I want to make sure I heard you. You want to ask -- you're asking about third quarter pricing forecast, is that what you're asking?
Jeff Van Sinderen -- B. Riley FBR -- Analyst
Yes. I'm asking what you're seeing so far on pricing in Q3, and what you anticipate for the remainder of the quarter on pricing?
Les Lederer -- Interim Chief Executive Officer
Mike Weinhold is here, and he'll answer that question.
Mike Weinhold -- President of Graphic and Specialty Papers
Pricing in Q3, we -- as mentioned in the presentation, there's been mix running through our pricing. And so the mix is having somewhat of a negative impact on pricing overall. But generally speaking, pricing is fairly stable through the period.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
OK. And then maybe you can just -- I understand you guys built inventory, but maybe just touch on the inventory situation in the channel and then given the closure of Luke at roughly 400,000 tons [Inaudible] capacity exiting the system, what level of capacity utilization do you expect to run in Q3 at the legacy traffic paper side of the business? Are you running close to fully booked there or how should we think about that?
Les Lederer -- Interim Chief Executive Officer
Yes. So as we've mentioned, we're still seeing somewhat of an overhang in inventory on the customer side that is decreasing, and we can see some indications of that through order patterns as we move into Q3. Our inventory levels are declining. And as Les mentioned, we expect those inventory levels to decline through the balance of the year.
From an operating-rate standpoint, you see the industry numbers, which certainly are much less utilization than it was last year. However, from a Verso standpoint, we have the impact of Duluth certainly helping the utilization of the rest of the graphic assets. So I would characterize the operating rates within Verso as not necessarily full but very healthy. And as indicated earlier, we're committed to balancing supply and demand as we go through the year, and we're also committed to reducing our inventories.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
OK. And capacity utilization at the A3 at this point. Just wondering what you're running there now? I think there was some evolution of product. Maybe you can touch on that, what you're producing at A3? What you expect to run into for capacity utilization? Thank you.
Mike Weinhold -- President of Graphic and Specialty Papers
Sure. It's Mike Weinhold. The capacity utilization is very strong on A3 machine. As mentioned, there's a lot of flexibility inherent in that project.
So we're running virgin products, virgin kraft linerboard, lightweight, both domestic and export. We've transitioned into the kraft bag segments, and that's going very well with Multiwall. We've done some campaign or trials to get into the loan and lease side. And as mentioned, we have utilized that asset for pulp from an internal pulp need standpoint.
So again, the utilization is very good and the flexibility on that asset continues to evolve. And as mentioned, additional capital will be spent up in that machine to provide even continued flexibility and migration into the kraft paper bag.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
OK. And then one more, if I could squeeze it in, for Les. Anything else you can give us any update, you can give us on the strategic review about -- you think there's a buyer in total for the company at this point?
Les Lederer -- Interim Chief Executive Officer
Well, we've mentioned publicly that we've retained Houlihan to look at strategic options. At this point, we have nothing more to report on that.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
OK. And then let me just kind of follow up on that. I mean, Les, you're clearly incentivized to sell the company. So how do you balance that directive with taking on big projects to getting, I think you said to 44% graphic over the next five years, if I heard you right.
Les Lederer -- Interim Chief Executive Officer
That's correct.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
And other than augmenting Androscoggin, I think you mentioned some of those projects of $120 million in capital investments. What else -- what other projects do you see undertaking, if anything, what else does that $120 million include?
Les Lederer -- Interim Chief Executive Officer
Well, as I mentioned in the presentation, we're putting capital into A3 for enhancement of kraft flexibility, both in cost projects -- cost reduction projects and the different products on the kraft product scheme. We're also putting money into A4 to enhance our release liner and to get more capacity out of that machine for specialty products. We're also putting capital into Stevens Point to augment and improve our specialty offerings. And then we're putting money into Duluth to enhance our recycled kraft capabilities.
As to your first question as to my incentives to sell the company, my incentive is to provide shareholder value. And at this point, we have not announced any sale of the company. And therefore, we have to make sure that we have options that are available to provide shareholder benefit. And at this point in time, we're focusing on strategic initiatives to improve the company's performance away from graphic products.
Jeff Van Sinderen -- B. Riley FBR -- Analyst
Got it. OK, thanks. Thanks for taking my questions.
Operator
The next question comes from Hamed Khorsand of BWS Financial. Please go ahead.
Hamed Khorsand -- BWS Financial Inc. -- Analyst
Hi, good morning. So first off, could you just elaborate here on the guidance for Q3. How much of that increase that you're seeing or expecting sequentially is driven by actual seasonal demand? And how much of it is impacted by not having any inventory available from Luke?
Les Lederer -- Interim Chief Executive Officer
Well, we expect seasonal demand to definitely pick up because the third quarters are historically stronger quarter -- strongest quarter. I'm not sure I understand your reference to Luke. Could you give me more color on that, please?
Hamed Khorsand -- BWS Financial Inc. -- Analyst
Well, your production overall is down, right, from a volume perspective. So I'm just trying to figure out why -- if it's supposed to your peak quarter, why isn't sales higher if pricing is holding steady?
Les Lederer -- Interim Chief Executive Officer
Well, as we mentioned, there is an inventory overhang that is dissipating, and we expect customers to restock. The strength of last year is a comparative, is because people were concerned about the lack of supply through mill closures. Customers restock their inventory, and they're working off that inventory at this point in time. So the fact that Luke is now closed, we're not producing those tons.
And therefore, I don't think that there's a correlation between the production and sales. We have inventory that was created because of the Luke closure, and we're going to utilize that inventory in selling to our customers. So it is a typically stronger third quarter. It's not going to be as strong as last year for the reasons I just gave you.
Hamed Khorsand -- BWS Financial Inc. -- Analyst
And then how much of competitive pressures are you seeing in the market for graphic papers? And do you think you've lost market share?
Les Lederer -- Interim Chief Executive Officer
Well, let me let Mike respond to that. Go ahead, Mike.
Mike Weinhold -- President of Graphic and Specialty Papers
The competitive pressures obviously exist in the marketplace. We don't believe we lost market share. We will lose a little bit of market share going forward because of the closure of Luke. And we have seen a pickup of imports and coated freesheet sheets.
And those imports have gained market share, primarily coming in from the Koreans and from the Europeans. But by and large, we believe we're holding our own within the marketplace, but the competitive pressures obviously exist.
Hamed Khorsand -- BWS Financial Inc. -- Analyst
OK. And then also, could you just talk about the returns you're expecting on these new projects that you're planning over the next two years? And what kind of free cash flow you would expect to generate once those are implemented?
Les Lederer -- Interim Chief Executive Officer
Those are extra questions. I mean, we're not going to disclose the cash flow assumptions we have on that at this point in time. But I will tell you that the projects exceed our minimum return requirements that we have on allocating capital in the company. And we are not undertaking these projects in any manner, but to improve and to enhance the cash flow and the earnings capability of the company.
But at this point, we're not ready to share specific items on each of those capital projects.
Hamed Khorsand -- BWS Financial Inc. -- Analyst
OK. So my last question, just on that comment, is this more of an offensive move or defensive? Do you think the market is going to deteriorate even faster, if you look out next two years that you've got to make these moves? Or is this really offensive because no one else is doing this?
Les Lederer -- Interim Chief Executive Officer
Take a look at what we're doing specifically. We have a machine at Androscoggin that makes scrap products currently, and it's devoted to those scrap products. We're enhancing the cost structure of that machine. And we're also giving us more product diversification on that machine.
On A4, which is a special machine that makes release liner at Androscoggin, we're improving the capabilities of that machine to produce more product. And at Stevens Point, we're putting in capital to improve our product offerings at Stevens Point. And finally, we are taking the Duluth Mill which has had somewhat of a declining demand and converting that to a product that has greater demand possibilities and potential in the future. And so the issue is, is it offensive or defensive.
We believe we're doing the right things in our current machine configurations to improve and enhance those products. So I don't characterize it as offensive or defensive. It is growth opportunities we have on those machines.
Hamed Khorsand -- BWS Financial Inc. -- Analyst
OK. Thank you.
Les Lederer -- Interim Chief Executive Officer
Thanks, Hamed.
Operator
[Operator instructions] The next question comes from Adam Ritzer, a private investor. Please go ahead.
Adam Ritzer -- Private Investor
Good morning. Thanks for taking my call. I guess, my question -- first question is, you guys said your inventory peak in Q2 expected to decline significantly by year end. What do you view as significant? How much inventory can we work out of what we built up the first half of the year, do you think?
Les Lederer -- Interim Chief Executive Officer
Well, we're not going to get into specific numbers at this point. In talking with Mike and the other commercial team members, the sales that we believe we can generate in the third quarter, especially in the months of August and September that we will have a significant decline in inventory. We will have some downtime in the third quarter, which will help in getting some inventory declines as well. But we're not going to get into specific numbers at this point in time.
Adam Ritzer -- Private Investor
OK. And the other thing you mentioned was the demand decline now is increasing at a faster rate, and you said it was due to the inventory build and also the imports out there. But I know when I've talked to you guys, you seemed very positive on the import reductions and the plant closures coming from Europe over the next, I don't know, 12 to 24 months. Have you seen a change?
Les Lederer -- Interim Chief Executive Officer
No, no. Go ahead, finish your question. I'm sorry.
Adam Ritzer -- Private Investor
No, I'm just trying to figure out -- I know there's a lot of plant closures coming from Europe, but you kind of indicated that the import situation is not changing, and you're expecting the demand decline to increase faster. I'm just trying to figure out exactly what's going on.
Les Lederer -- Interim Chief Executive Officer
Let's put the -- let's put it into context. Imports have affected the supply demand dynamic. The closures and the conversions that have been announced are future issues, OK? And when those conversions in the U.S. at Catawba and at -- we had conversions at PCA's mill and Wallula, we have Nine Dragons announce conversions at Biron, those capacity takeouts will enhance our ability to have a greater -- lesser supply to deal with the demand.
The issue of imports not only come from Europe, but come from Asia, especially in the sheets market. So the demand itself -- the movement to digital offerings are increasing and we're not denying that fact. So when I say demand is declining at an increasing rate, you take a look at the statistics and those percentages that have dropped on demand are on reality, and that's why we're moving toward other products to give us a less concentration in the graphic markets. But imports will decline from Europe as the European companies convert their assets to other products, as well.
But on a current basis, it is what it is. Those conversions will take place over the next two years possibly.
Adam Ritzer -- Private Investor
OK. Got it. And then, I know the prior question was asked on your capital allocation plan. You wouldn't talk about how much EBITDA you're expecting, but you did say it exceeds your minimal returns.
Can you explain what those minimal returns are?
Les Lederer -- Interim Chief Executive Officer
Again, we would like to keep that to ourselves at this point. We have talked to our board of directors. We've gone through the capital plan with our board. We haven't approved any specific project at this point in time.
But we've gone through with our board, the forecast on cash flows and EBITDA. The board was satisfied that, that is a proper allocation of capital at this point in time, and they're very serious about making sure that the shareholders get the return that is warranted. And they have had no issue with the presentations we've made.
Adam Ritzer -- Private Investor
OK. But you have a stock now trading, I don't know, by my math, maybe 2 times EBITDA. So do you think it's wise to invest $120 million? You're not telling us what kind of EBITDA or returns you expect. But are you saying that's better than buying back your stock at 2 times EBITDA? I don't really understand it.
Les Lederer -- Interim Chief Executive Officer
Well, again, I'm not going to go into the issue of whether we should buy back stock this morning or not. The issue is we have gone to our board of directors with a capital plan that will enhance our product offerings, enhance our cash flows, and enhance our EBITDA. And that's all I can tell you at this point.
Adam Ritzer -- Private Investor
OK. Thanks for taking my questions. I appreciate it.
Les Lederer -- Interim Chief Executive Officer
Thanks, Adam.
Operator
The next question comes from Robert Cathey of SCW Capital. Please go ahead.
Robert Cathey -- SCW Capital LP -- Analyst
Hey, good morning. I just want to see if you could comment any further on the conversions and takeout and just the timing of those, particularly the European takeout and then those that are coming out of the United States?
Les Lederer -- Interim Chief Executive Officer
Well, Mike, do you want to take that as far being specific?
Mike Weinhold -- President of Graphic and Specialty Papers
We know -- you know as far as public announcements. So our belief is the store Oulu conversion will take place in 2020, and that will have about 1 million ton impact on coated freesheet sheets. We do not have exact timing on the Catawba conversion. Biron, I believe some of the conversion has already started on one of their assets.
So I think as Les characterized it, we expect these conversions over the next 12 to 24 months to certainly have an impact on the graphic paper markets and a positive impact.
Robert Cathey -- SCW Capital LP -- Analyst
Right. OK. OK. And then I guess, just would add, I guess, it would be helpful to us, maybe in the future as shareholders to better understand the return profiles that you guys are looking for.
I understand the reluctance to not commit to a buyback, potentially a dividend. But I think given the stocks now back close to kind of where it emerged from post bankruptcy, there's -- maybe for some investors avoiding that information so to the degree you guys might provide more in the future, I think that would be helpful for all of this. In the meantime, appreciate what you guys are doing.
Les Lederer -- Interim Chief Executive Officer
OK. Thank you.
Operator
Seeing that there are no further questions, I would like to turn the conference back over to Mr. Campbell for closing remarks.
Allen Campbell -- Senior Vice President and Chief Financial Officer
We'd like to thank each of you for your interest in Verso and appreciate your time and look forward to continuing working with you. Thank you very much.
Operator
[Operator signoff]
Duration: 37 minutes
Call participants:
Tim Nusbaum -- Treasurer
Les Lederer -- Interim Chief Executive Officer
Allen Campbell -- Senior Vice President and Chief Financial Officer
Jeff Van Sinderen -- B. Riley FBR -- Analyst
Mike Weinhold -- President of Graphic and Specialty Papers
Hamed Khorsand -- BWS Financial Inc. -- Analyst
Adam Ritzer -- Private Investor
Robert Cathey -- SCW Capital LP -- Analyst
