U.S. Silica Holdings, Inc. Announces First Quarter 2014 Results

- Revenue for the quarter up 47.2% year-over-year
- EPS of $0.34 per basic share; excluding additional M&A and business development expense, EPS of $0.37 per basic share
- Overall sales volumes for oil and gas frac sand increased 45% year-over-year to 1.3 million tons
- New Utica, IL mine and plant expected to come online late second quarter, adding 1.5 million tons of oil and gas capacity
- Company revising full-year 2014 adjusted EBITDA guidance to the high end of the range of $180 million to $200 million

FREDERICK, Md., April 29, 2014 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $18.4 million or $0.34 per basic and diluted share for the first quarter ended March 31, 2014 compared with net income of $17.3 million or $0.33 per basic share and $0.32 per diluted share for the first quarter of 2013. Earnings per share in the quarter were negatively impacted by $1.8 million or $0.03 per basic share for additional M&A and business development expense. Excluding this expense, net income for the first quarter ended March 31, 2014 was $19.7 million or $0.37 per basic and diluted share.

Bryan Shinn, president and chief executive officer commented, "Clearly, we are off to a very strong start in 2014, and the momentum has continued into Q2.  The strength and resiliency of our in-basin inventory model for oil and gas was demonstrated again as we have experienced minimal weather-related disruptions this year.  We are currently sold out of all grades of frac sand and believe that industry demand growth will continue to outpace planned supply additions. As the frac sand market tightened throughout Q1, we have been increasing prices in most basins while continuing to improve efficiencies.   On the industrial side of our business, we expect continued contribution margin gains as we implement various price increases and bring on new, value-added products during the year."

First Quarter 2014 Highlights

Total Company

• Revenue totaled $180.1 million compared with $122.3 million for the same period last year and up 20% sequentially over the fourth quarter of 2013.
• Overall sales volumes increased to 2.3 million tons, a 22.5% improvement over the first quarter of 2013 and up 10% sequentially over the fourth quarter of 2013.
• Contribution margin for the quarter was $54.8 million compared with $49.4 million in the same period of the prior year and up 14% sequentially over the fourth quarter of 2013.
• Adjusted EBITDA was $41.9 million versus $ 38.8 million for the same period last year and representing a 17% increase sequentially over the fourth quarter of 2013.

Oil and Gas

• Revenue for the quarter totaled $130.6 million compared with $73.6 million in the same period in 2013.
  69% of total sales were made in basin via transloads compared with 40% in the first quarter of 2013.
• Overall sales volumes totaled 1.3 million tons compared with 921.0 thousand tons sold in the first quarter of 2013.
• Segment contribution margin was $41.6 million versus $36.2 million in the first quarter of 2013.

Industrial and Specialty Products

• Revenue for the quarter totaled $49.5 million compared with $48.7 million for the same period in 2013.
• Overall sales volumes totaled 975.4 thousand tons compared with 964.9 thousand tons sold in the same period last year.
• Segment contribution margin was $13.2 million compared with $13.2 million in the first quarter of 2013.

Capital Update

As of March 31, 2014, the Company had $160.8 million in cash and cash equivalents and short term investments and $46.5 million available under its credit facilities. Total long-term debt at March 31, 2014 totaled $367.1 million. Capital expenditures in the first quarter totaled $10.6 million and were associated largely with the Company's investment in a new frac sand mine and plant located near Utica, Illinois, a new transload facility under construction in Odessa, Texas and other maintenance capital projects.

Outlook and Guidance

The Company is revising the guidance it provided in its press release dated Jan. 31, 2014. For the full-year 2014, the Company now anticipates adjusted EBITDA in the upper end of the range of $180 million to $200 million. The Company still expects capital expenditures of approximately $80 million and an effective tax rate of approximately 25 percent.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, April 30, 2014 at 9:00 a.m. Eastern Time to discuss these results. Hosting the call will be Bryan Shinn, president and chief executive officer and Don Merril, 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 (855) 325-2605 or for international callers, (970) 315-0758. The conference passcode is 27164815. A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056. The passcode for the replay is 27164815. The replay of the call will be available through May 30, 2014.

About U.S. Silica

U.S. Silica Holdings, Inc., a member of the Russell 2000 and S&P Small Cap 600 indexes, is one of the largest domestic producers of commercial silica, a specialized mineral that is a critical input into the oil and gas proppants end market.  The company also processes ground and unground silica sand for a variety of industrial and specialty products end markets such as glass, fiberglass, foundry molds, municipal filtration and recreational uses. During its 100-plus year history, U.S. Silica Holdings, Inc. has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 250 products to customers across these end markets. U.S. Silica Holdings, Inc. is headquartered in Frederick, MD.

Forward-looking Statements

Certain statements in this press release are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of this date. Forward-looking statements made include any statement that does not directly relate to any historical or current fact and may include, but are not limited to, statements regarding U.S. Silica's growth opportunities, strategy, future financial results, forecasts, projections, plans and capital expenditures, and the commercial silica industry. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are: (1) fluctuations in demand for commercial silica; (2) the cyclical nature of our customers' businesses; (3) operating risks that are beyond our control; (4) federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing; (5) our ability to implement our capacity expansion plans within our current timetable and budget; (6) loss of, or reduction in, business from our largest customers; (7) increasing costs or a lack of dependability or availability of transportation services or infrastructure; (8) our substantial indebtedness and pension obligations; (9) our ability to attract and retain key personnel; (10) silica-related health issues and corresponding litigation; (11) seasonal and severe weather conditions; and (12) extensive and evolving environmental, mining, health and safety, licensing, reclamation and other regulation (and changes in their enforcement or interpretation). Additional information concerning these and other factors can be found in U.S. Silica's filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

( dollars in thousands, except per share amounts)

Three Months Ended March 31,

2014

2013

Sales

$ 180,095

$ 122,311

Cost of goods sold (excluding depreciation, depletion and amortization)

126,770

74,412

Operating expenses

Selling, general and administrative

15,445

12,404

Depreciation, depletion and amortization

9,589

8,278

25,034

20,682

Operating income

28,291

27,217

Other (expense) income

Interest expense

(3,808)

(3,576)

Other income, net, including interest income

38

122

(3,770)

(3,454)

Income before income taxes

24,521

23,763

Income tax expense

(6,150)

(6,486)

Net income

$ 18,371

$ 17,277

Earnings per share:

Basic

$ 0.34

$ 0.33

Diluted

$ 0.34

$ 0.32

 

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

March 31,

December 31,

2014

2013

(unaudited)

(audited)

ASSETS

Current Assets:

Cash and cash equivalents

$ 85,700

$ 78,256

Short-term investments

75,068

74,980

Accounts receivable, net

97,369

75,207

Inventories, net

51,171

64,212

Prepaid expenses and other current assets

13,890

11,104

Deferred income tax, net

18,022

17,737

Total current assets

341,220

321,496

Property, plant and mine development, net

443,406

442,116

Debt issuance costs, net

5,035

5,255

Goodwill

68,403

68,403

Trade names

10,436

10,436

Customer relationships, net

6,018

6,120

Other assets

8,659

9,635

Total assets

$ 883,177

$ 863,461

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Book overdraft

$ 2,529

$ 4,659

Accounts payable

46,431

37,376

Dividends payable

26

6,709

Accrued liabilities

10,879

10,823

Accrued interest

41

41

Current portion of long-term debt

3,489

3,488

Income tax payable

2,648

1,037

Total current liabilities

66,043

64,133

Long-term debt

367,090

367,963

Liability for pension and other post-retirement benefits

36,189

36,802

Deferred income tax, net

72,762

71,318

Other long-term obligations

14,445

13,951

Total liabilities

556,529

554,167

Commitments and contingencies

Stockholders' Equity:

Common stock

536

534

Preferred stock

-

-

Additional paid-in capital

180,340

174,799

Retained earnings

149,630

137,978

Treasury stock, at cost

-

-

Accumulated other comprehensive loss

(3,858)

(4,017)

Total stockholders' equity

326,648

309,294

Total liabilities and stockholders' equity

$ 883,177

$ 863,461

Non-GAAP Financial Measures

Segment Contribution Margin

Segment contribution margin is a key metric that management uses to evaluate our operating performance and to determine resource allocation between segments. Segment contribution margin excludes certain corporate costs not associated with the operations of the segment. These unallocated costs include costs related to corporate functional areas such as sales, production and engineering, corporate purchasing, accounting, treasury, information technology, legal and human resources.

The following table sets forth a reconciliation of income before income taxes, the most directly comparable GAAP financial measure, to segment contribution margin.

For the Three Months Ended March 31,

2014

2013

(in thousands)

Sales:

Oil & Gas Proppants

$ 130,584

$ 73,582

Industrial & Specialty Products

49,511

48,729

Total sales

180,095

122,311

Segment contribution margin:

Oil & Gas Proppants

41,628

36,162

Industrial & Specialty Products

13,187

13,246

Total segment contribution margin

54,815

49,408

Operating activities excluded from segment cost of goods sold

(1,490)

(1,509)

Selling, general and administrative

(15,445)

(12,404)

Depreciation, depletion and amortization

(9,589)

(8,278)

Interest expense

(3,808)

(3,576)

Other income, net, including interest income

38

122

Income (loss) before income taxes

$ 24,521

$ 23,763

Adjusted EBITDA

Adjusted EBITDA is not a measure of our financial performance or liquidity under GAAP and should not be considered as an alternative to net income as a measure of operating performance, cash flows from operating activities as a measure of liquidity or any other performance measure derived in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized, and excludes certain non-recurring charges that may recur in the future. Management compensates for these limitations by relying primarily on our GAAP results and by using Adjusted EBITDA only supplementally. Our measure of Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

The following table sets forth a reconciliation of net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA.

Three Months Ended March 31,

2014

2013

(in thousands)

Net income

$ 18,371

$ 17,277

Total interest expense, net of interest income

3,873

3,552

Provision for taxes

6,150

6,486

Total depreciation, depletion and amortization expenses

9,589

8,278

EBITDA

37,983

35,593

Non-cash incentive compensation(1)

1,330

678

Post-employment expenses (excluding service costs)(2)

381

586

Other adjustments allowable under our existing credit agreements(3)

2,234

1,930

Adjusted EBITDA

$ 41,928

$ 38,787

(1) Includes vesting of incentive equity compensation issued to our employees.

(2) Includes net pension cost and net post-retirement cost relating to pension and other post-retirement benefit obligations during the applicable period, but in each case excluding the service cost relating to benefits earned during such period. See Note M- Pension and Post-retirement Benefits to our Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(3) Reflects miscellaneous adjustments permitted under our existing credit agreement, including such items as expenses related to offerings of our common stock by our former controlling shareholder, business development activities related to our growth and expansion initiatives, one-time litigation fees, expenses related to debt refinancing and employment agency fees.

Investor Contact:
Michael Lawson
Director of Investor Relations and Corporate Communications 
(301) 682-0304
lawsonm@USSilica.com    

SOURCE U.S. Silica Holdings, Inc.