U.S. Silica Holdings, Inc. Announces Third Quarter 2020 Results

- Third quarter revenue of $176.5 million

- GAAP and adjusted EPS for the quarter of $(0.19) and $(0.15) per share, respectively

- Industrial & Specialty Products segment delivered 21% sequential growth in both volumes and profits

- Oil & Gas segment experienced 15% sequential increase in proppant volumes, 74% increase in SandBox delivered loads, and 20% growth in profits

KATY, Texas, Oct. 29, 2020 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA), a diversified industrial minerals company and the leading last-mile logistics provider to the oil and gas industry (the "Company"), today announced third quarter 2020 results, including a net loss of $14.0 million, or $(0.19) per basic and diluted share.

The third quarter results were negatively impacted by $3.8 million, or $0.04 per share, of charges related to asset impairments, merger and acquisition related expense, plant startup and expansion costs, facility closure costs, and other adjustments, resulting in adjusted EPS for the third quarter of $(0.15) per basic and diluted share.

"I'd like to commend our team on delivering outstanding third quarter results despite a challenging, though improving, macro backdrop," said Bryan Shinn, chief executive officer. "Our Industrial segment volumes and profits both rebounded sharply as demand in several key end markets improved materially."

"In our Oil & Gas segment, sand volumes rose 15% and our Sandbox delivered loads surged 74% as industry frac activity and well completions climbed during the quarter. Increased volumes and cost reduction measures including the remeasurement of railcar leases helped drive a 20% sequential jump in segment profitability. Our teams have worked diligently to right-size our cost structure, particularly in the Oil & Gas segment, and the results of those efforts are now apparent," he added.

"We have transformed this more volatile business and equipped it to perform well under a variety of market conditions, while simultaneously continuing to invest in and grow our more stable, higher-margin Industrials business," Shinn concluded.

Third Quarter 2020 Highlights

Total Company

• Revenue of $176.5 million for the third quarter of 2020 compared with $172.5 million in the second quarter of 2020, up 2% sequentially and down 51% from the third quarter of 2019.
• Overall tons sold of 2.239 million for the third quarter of 2020 compared with 1.904 million tons sold in the second quarter of 2020, up 18% sequentially and down 54% from the third quarter of 2019.
• Net loss of $14.0 million, or $(0.19) per basic and diluted share, for the third quarter of 2020, compared with a net loss of $23.0 million, or $(0.31) per basic and diluted share, for the third quarter of 2019.
• Contribution margin of $73.8 million for the third quarter of 2020 compared with $61.3 million in the second quarter of 2020, up 20% sequentially and down 22% from the third quarter of 2019.
• Adjusted EBITDA of $51.3 million for the third quarter of 2020 compared with $40.8 million in the second quarter of 2020, up 26% sequentially and down 12% from the third quarter of 2019.

Industrial and Specialty Products

• Revenue of $110.1 million for the third quarter of 2020 compared with $100.0 million in the second quarter of 2020, up 10% sequentially and down 8% from the third quarter of 2019.
• Tons sold totaled 0.957 million for the third quarter of 2020 compared with 0.792 million tons sold in the second quarter of 2020, up 21% sequentially and flat compared with the third quarter of 2019.
• Segment contribution margin of $42.4 million, or $44.26 per ton, for the third quarter of 2020 compared with $35.1 million in the second quarter of 2020, up 21% sequentially and down 5% from the third quarter of 2019.

The Industrial & Specialty Products segment experienced a 21% sequential increase in contribution margin as sales volumes increased 21%, spurred by stronger demand from several key industrial end markets such as glass, housing and automotive. Contribution margin also benefited by $2.4 million from the remeasurement of operating leases associated with the Company's fleet of rail cars.

In the third quarter, U.S. Silica executed a new supply agreement with a leading global biopharma company and gained momentum with additional trials for its blood plasma filtration product line. The Company is proud to announce it was awarded the 2020 Supplier of the Year by one of its key industrial customers, a leading multinational building products company.

Oil & Gas

• Revenue of $66.3 million for the third quarter of 2020 compared with $72.5 million in the second quarter of 2020, down 8% sequentially and down 73% from the third quarter of 2019.
• Tons sold of 1.282 million for the third quarter of 2020 compared with 1.112 million tons sold in the second quarter of 2020, up 15% sequentially and down 67% from the third quarter of 2019.
• Segment contribution margin of $31.5 million, or $24.55 per ton, for the third quarter of 2020 compared with $26.2 million in the second quarter of 2020, up 20% sequentially and down 38% from the third quarter of 2019.

In the Oil & Gas segment, the Company sold 1.282 million tons in the third quarter, up 15% from the prior quarter, led by a sequential improvement in frac activity and well completions. Contribution margin for the segment improved 20% sequentially to $31.5 million, driven primarily by cost reduction measures including an $18.2 million benefit from the remeasurement of rail leases and higher volumes, partially offset by lower shortfall penalties recorded during the quarter.

SandBox loads increased 74% during the quarter, as key customers in several basins ramped up their pace of well completions and added more frac crews. During the quarter, the Oil & Gas segment was awarded two new contracts, one with a leading oilfield services provider and one with an E&P in the Northeast.

Capital Update

As of September 30, 2020, the Company had $134.9 million in cash and cash equivalents and $49.6 million, including $25.4 million allocated for letters of credit, available under its credit facilities. Total debt outstanding under our credit facilities as of September 30, 2020 was $1.263 billion.

Capital expenditures in the third quarter totaled $4.5 million and were mainly related to growth capital projects at U.S. Silica's Millen, GA, and Columbia, SC, industrial facilities, as well as maintenance spending and cost improvement projects across the network. The Company's forecast of capital expenditures for the full year 2020 is approximately $30.0 million, unchanged from the previous guidance and 75% lower than 2019 capital expenditures of $118.4 million.

Outlook  and Guidance

In the Industrial and Specialty Products segment, the Company forecasts fourth quarter volumes to decline 5%-10% sequentially due to the typical seasonality in that business. Excluding the third quarter benefit from the remeasurement of railcar leases, the segment's contribution margin is expected to decline by roughly 10%, in line with the typical seasonal decline seen in past years.

Looking further out into 2021, though economic uncertainty remains, the Company's base case is that the ISP segment's volumes and contribution margin will continue to outperform U.S. GDP trends.

In the Oil & Gas segment, U.S. Silica expects an increase in fourth quarter volumes in the range of 20%-30%, driven by an expected increase in completion activity as operators continue to draw down inventories of drilled but uncompleted wells (DUCs). Adjusting for the third quarter rail lease benefit, the segment's contribution margin is expected to increase 5%-10% sequentially.  

For 2021, while uncertainty remains, the Company's base case scenario assumes a more balanced crude oil market, which should drive increased completion activity, higher frac sand demand and a stabilization of pricing.

Conference Call

U.S. Silica will host a conference call for investors today, October 29, 2020 at 7:30 a.m. Central Time to discuss these results. Hosting the call will be Bryan Shinn, chief executive officer, and Don Merril, executive vice president and chief financial officer. Investors are invited to listen to a live webcast of the conference call by visiting the "Investor Resources" section of the Company's website at www.ussilica.com. The webcast will be archived for one year. The call can also be accessed live over the telephone by dialing (877) 869-3847 or for international callers, (201) 689-8261. A replay will be available shortly after the call and can be accessed by dialing (877) 660-6853 or for international callers, (201) 612-7415. The conference ID for the replay is 13711449. The replay will be available through Nov. 28, 2020.