U.S. Silica Holdings, Inc. Announces First Quarter 2015 Results

- First quarter revenue of $204.0 million
- Oil and Gas profitability up year-over-year but down sequentially
- Industrial and Specialty Products profitability up year-over-year and sequentially
- Generated positive operating cash flow in the quarter of $19.8 million

FREDERICK, Md., April 28, 2015 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $14.8 million or $0.28 per basic and $0.27 per diluted share for the first quarter ended March 31, 2015 compared with net income of $18.4 million or $0.34 per basic share and diluted share for the first quarter of 2014. Earnings per share during the quarter were negatively impacted by $8.3 million of business development expenses, $7.6 million of which was related to an adverse, unanticipated arbitration ruling. The Company also incurred $1.4 million in restructuring costs for actions designed to help bring the business more in line with current market conditions. Excluding these additional expenses, EPS for the quarter was $0.40 per basic share.

"I am very proud of our performance in the quarter against the backdrop of rapidly falling oil prices and declining rig count. Our results demonstrate the strength of our business model, assets, team and customer base," said Bryan Shinn, president and chief executive officer. "However, given the magnitude of the reduction in drilling and completions activity, we expect that volumes and pricing of frac sand will remain under pressure, resulting in lower profitability in the second quarter. We will continue to work closely with our customers during this energy sector downturn to help them be more competitive and we expect to continue to gain market share," he added. "While we are clearly focused on maximizing near term business results, we are also continuing to focus on our longer term goals. Specifically, we plan to continue to strengthen our position in the oil and gas proppant market, grow and diversify our industrial business and prepare for future growth," Shinn noted.

First Quarter 2015 Highlights

Total Company

• Revenue totaled $204.0 million compared with $180.1 million for the same period last year, an increase of 13% year-over-year but an 18% decline sequentially from the fourth quarter of 2014.
• Overall tons sold increased to 2.7 million tons, a 16% improvement over the first quarter of 2014 but a 12% decline sequentially from the fourth quarter of 2014.
• Contribution margin for the quarter was $67.7 million compared with $54.8 million in the same period of the prior year, a 23% improvement year-over-year but a decrease of 28% sequentially from the fourth quarter of 2014.
• Adjusted EBITDA was $51.3 million versus $41.9 million for the same period last year, an increase of 22% on a year-over-year basis but a 23% decline sequentially compared with the fourth quarter of 2014.

Oil and Gas

• Revenue for the quarter totaled $148.8 million compared with $130.6 million in the same period in 2014, up 14% year-over-year but a 24% decline sequentially from the fourth quarter of 2014.
• 63% of tons sold were made in basin compared with 69% in the first quarter of 2014 and 66% in the fourth quarter of 2014.
• Overall tons sold totaled 1.7 million tons compared with 1.3 million tons sold in the first quarter of 2014 and 2.0 million tons sold in the fourth quarter of 2014.
• Segment contribution margin was $52.2 million versus $41.6 million in the first quarter of 2014, an increase of 25% on a year-over-year basis but a decrease of 35% sequentially from the fourth quarter of 2014.

Industrial and Specialty Products

• Revenue for the quarter totaled $55.2 million compared with $49.5 million for the same period in 2014, an increase of 12% year-over-year and up 3% sequentially from the fourth quarter of 2014.
• Overall tons sold totaled 1.0 million tons, an increase of 1% compared with the first quarter of 2014 and a decrease of 4% sequentially compared with the fourth quarter of 2014.
• Segment contribution margin was $15.5 million compared with $13.2 million in the first quarter of 2014, an increase of 17% on a year-over-year basis and up 15% sequentially from the fourth quarter of 2014.

Capital Update

As of March 31, 2015, the Company had $327.8 million in cash and cash equivalents and short term investments and $46.9 million available under its credit facilities. Total debt at March 31, 2015 was $494.2 million. Capital expenditures in the first quarter totaled $13.4 million and were associated largely with the Company's investment in a new frac sand mine and plant located near Fairchild, WI, a new transload facility near Odessa, Texas and other maintenance capital projects.

Outlook and Guidance

Due to the current lack of visibility in its Oil and Gas business, the Company will continue to refrain from providing guidance for Adjusted EBITDA until such time as it can gain more clarity around its customers' business activity levels and the associated demand for its products. Based on current market conditions, the Company anticipates that its capital expenditures for 2015 will be in a range of $60 million to $80 million.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, April 29, 2015 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 (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. The conference ID number for the replay is 13606608. The replay of the call will be available through May 29, 2015.

About U.S. Silica

U.S. Silica Holdings, Inc., a member of the Russell 2000, is a leading producer of commercial silica used in the oil and gas industry, and in a wide range of industrial applications. Over its 115-year history, U.S. Silica has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 260 products to customers across our end markets. The Company currently operates nine industrial sand production plants and eight oil and gas sand production plants. The Company is headquartered in Frederick, Maryland and also has offices located in Chicago, Illinois, Houston, Texas and Shanghai, China. The Company operates on a platform of ethics, safety and sustainability. U.S. Silica is a founding member of Wisconsin Industrial Sand Association (WISA) and has been recognized by the Wisconsin Department of Natural Resources (WDNR) as a partner in the WDNR Green Tier program. In becoming a Green Tier participant, U.S. Silica demonstrates its commitment to achieving superior environmental and economic performance.

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 or failure of our customers to pay amounts due to us; (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,

2015

2014

Sales

$               203,958

$               180,095

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

138,653

126,770

Operating expenses

Selling, general and administrative

26,961

15,445

Depreciation, depletion and amortization

13,243

9,589

40,204

25,034

Operating income

25,101

28,291

Other (expense) income

Interest expense

(6,836)

(3,808)

Other income, net, including interest income

11

38

(6,825)

(3,770)

Income before income taxes

18,276

24,521

Income tax expense

(3,453)

(6,150)

Net income

$                 14,823

$                 18,371

Earnings per share:

Basic

$                     0.28

$                     0.34

Diluted

$                     0.27

$                     0.34

 

 

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands) 

March 31,
2015

December 31,
2014

ASSETS

Current Assets:

Cash and cash equivalents

$           252,555

$           267,281

Short-term investments

75,253

75,143

Accounts receivable, net

96,355

120,881

Inventories, net

65,035

66,712

Prepaid expenses and other current assets

10,775

9,267

Deferred income taxes, net

23,776

22,295

Income tax deposits

-

746

Total current assets

523,749

562,325

Property, plant and mine development, net

565,337

565,755

Goodwill

68,647

68,647

Trade names

14,914

14,914

Customer relationships, net

6,824

6,984

Other assets

13,882

12,317

Total assets

$        1,193,353

$        1,230,942

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Book overdraft

$               6,756

$               4,215

Accounts payable

56,699

85,781

Dividends payable

6,738

6,805

Accrued liabilities

13,922

17,911

Accrued interest

60

60

Current portion of long-term debt

3,321

3,329

Deferred revenue

26,771

26,771

Income tax payable

4,997

-

Total current liabilities

119,264

144,872

Long-term debt

490,873

491,757

Deferred revenue

59,224

64,722

Liability for pension and other post-retirement benefits

61,554

59,932

Deferred income taxes, net

47,918

49,749

Other long-term obligations

16,472

16,094

Total liabilities

795,305

827,126

Stockholders' Equity:

Preferred stock

-

-

Common stock

540

539

Additional paid-in capital

193,140

191,086

Retained earnings

240,683

232,551

Treasury stock, at cost

(16,156)

(542)

Accumulated other comprehensive loss

(20,159)

(19,818)

Total stockholders' equity

398,048

403,816

Total liabilities and stockholders' equity

$        1,193,353

$        1,230,942

 

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,

2015

2014

(in thousands)

Sales:

Oil & Gas Proppants

$               148,753

$          130,584

Industrial & Specialty Products

55,205

49,511

Total sales

203,958

180,095

Segment contribution margin:

Oil & Gas Proppants

52,195

41,628

Industrial & Specialty Products

15,456

13,187

Total segment contribution margin

67,651

54,815

Operating activities excluded from segment cost of goods sold

(2,346)

(1,490)

Selling, general and administrative

(26,961)

(15,445)

Depreciation, depletion and amortization

(13,243)

(9,589)

Interest expense

(6,836)

(3,808)

Other income, net, including interest income

11

38

Income before income taxes

$                 18,276

$            24,521

 

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

 

For the Three Months Ended March 31,

2015

2014

(in thousands)

Net income

$ 14,823

$ 18,371

Total interest expense, net of interest income

6,940

3,873

Provision for taxes

3,453

6,150

Total depreciation, depletion and amortization expenses

13,243

9,589

EBITDA

38,459

37,983

Non-cash incentive compensation(1)

2,090

1,330

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

868

381

Business development related expenses(3)

8,328

1,925

Other adjustments allowable under our existing credit agreements(4)

1,538

309

Adjusted EBITDA

$ 51,283

$ 41,928

(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 N - Pension and Post-retirement Benefits to our Financial Statements in Part 1, Item 1 in our Quarterly Report on Form 10-Q.

(3)

Reflects expenses related to business development activities in connection with our growth and expansion initiatives.

(4)

Reflects miscellaneous adjustments permitted under our existing credit agreement, including such items as restructuring costs and employment agency fees.

 

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

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SOURCE U.S. Silica