U.S. Silica Holdings, Inc. Announces First Quarter 2017 Results

- Revenue of $244.8 million up 34% sequentially
- Net income of $0.03 per basic share before adjustments
- Tons sold in Oil and Gas segment up 22% sequentially
- 67% of Oil and Gas tons sold in basin
- Cash and cash equivalents at March 31, 2017 of $660.9 million

FREDERICK, Md., April 24, 2017 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $2.5 million or $0.03 per basic and diluted share for the first quarter ended March 31, 2017 compared with a net loss of $11.0 million or $(0.20) per basic and diluted share for the first quarter of 2016. The first quarter results were negatively impacted by $1.5 million in business development related expenses and $6.3 million in costs related to the restructuring of a vendor contract. Excluding these expenses, net of the $2.9 million tax effect, EPS was $0.09 per basic share for the quarter.

''I'm very pleased with the strong performances we saw from both of our operating segments during the quarter,'' said Bryan Shinn, president and chief executive officer. ''Continued industry recovery and powerful secular trends are driving record demand for our products and services in Oil and Gas while our Industrial and Specialty Products segment continues to make great progress in growing its bottom line through a combination of strategic price increases and the roll out of more higher margin products.''

First Quarter 2017 Highlights

Total Company

• Revenue totaled $244.8 million compared with $122.5 million for the same period last year, an increase of 100% on a year-over-year basis and an increase of 34% sequentially from the fourth quarter of 2016.
• Overall tons sold totaled 3.4 million, up 49% compared with 2.3 million tons sold in the first quarter of 2016 and an increase of 18% sequentially from the fourth quarter of 2016.
• Contribution margin for the quarter was $59.1 million, up 233% compared with $17.7 million in the same period of the prior year and up 57% sequentially from the fourth quarter of 2016.
• Adjusted EBITDA was $42.7 million compared with Adjusted EBITDA of $5.3 million for the same period last year, an increase of 713% on a year-over-year basis and an increase of 107% sequentially from the fourth quarter of 2016.

Oil and Gas

• Revenue for the quarter totaled $193.0 million compared with $73.9 million in the same period in 2016, an increase of 161% on a year-over-year basis and an increase of 41% sequentially from the fourth quarter of 2016.
• Tons sold totaled 2.5 million, an increase of 79% compared with the 1.4 million tons sold in the first quarter of 2016 and an increase of 22% sequentially compared with the tons sold in the fourth quarter of 2016.
• 67% of tons were sold in basin compared with 75% sold in basin in the fourth quarter of 2016.
• Segment contribution margin was $38.8 million versus $0.9 million in the first quarter of 2016, an increase of 4,464% on a year-over-year basis and an increase of 110% sequentially compared with the fourth quarter of 2016.

Industrial and Specialty Products

• Revenue for the quarter totaled $51.8 million compared with $48.6 million for the same period in 2016, an increase of 7% on a year-over-year basis and an increase of 14% on a sequential basis from the fourth quarter of 2016.
• Tons sold totaled 0.9 million, relatively flat on a year-over-year basis and an increase of 9% on a sequential basis compared with the fourth quarter of 2016.
• Segment contribution margin was $20.2 million compared with $16.9 million in the first quarter of 2016, an increase of 20% on a year-over-year basis and up 6% sequentially compared with the fourth quarter of 2016.

Capital Update

As of March 31, 2017, the Company had $660.9 million in cash and cash equivalents and $46.0 million available under its credit facilities. Total debt at March 31, 2017 was $512.5 million. Capital expenditures in the first quarter totaled $23.6 million and were associated largely with engineering, procurement and construction of the Company's growth projects and maintenance and cost improvement capital projects.

Outlook and Guidance

The Company anticipates that its capital expenditures for 2017 will be in the range of $125 million to $150 million.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, April 25, 2017 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, 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. The conference ID number for the replay is 13658614. The replay of the call will be available through May 25, 2017.

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 117-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, and Houston, Texas.

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 and truckload drivers; (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, trucking 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.

SELECTED FINANCIAL DATA FROM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share amounts) 

Three Months Ended

March 31, 2017

December 31, 2016

March 31, 2016

Total sales

$               244,797

$                 182,373

$            122,510

Total cost of sales (excluding depreciation, depletion and amortization)

187,475

148,411

106,751

Operating expenses:

Selling, general and administrative

22,341

19,167

15,503

Depreciation, depletion and amortization

21,599

21,194

14,556

           Total operating expenses

43,940

40,361

30,059

       Operating income (loss)

13,382

(6,399)

(14,300)

Other income (expense):

Interest expense

(7,646)

(7,998)

(6,643)

Other income (expense), net, including interest income

(4,928)

867

1,790

           Total other expense

(12,574)

(7,131)

(4,853)

       Income (loss) before income taxes

808

(13,530)

(19,153)

Income tax benefit

1,714

6,588

8,150

   Net income (loss)

$                   2,522

$                    (6,942)

$            (11,003)

Earnings (loss) per share:

Basic

$0.03

($0.09)

($0.20)

Diluted

$0.03

($0.09)

($0.20)

Weighted average shares outstanding:

Basic

80,983

75,539

54,470

Diluted

82,244

75,539

54,470

Dividends declared per share

$0.06

$0.06

$0.06

 

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands) 

March 31, 2017

December 31, 2016

(unaudited)

(audited)

ASSETS

Current Assets:

Cash and cash equivalents

$                 660,903

$                 711,225

Accounts receivable, net

139,970

89,006

Inventories, net

69,458

78,709

Prepaid expenses and other current assets

12,401

12,323

Income tax deposits

1,397

1,682

Total current assets

884,129

892,945

Property, plant and mine development, net

806,288

783,313

Goodwill

242,301

240,975

Trade names

32,318

32,318

Intellectual property, net

57,524

57,270

Customer relationships, net

49,882

50,890

Other assets

14,798

15,509

Total assets

$              2,087,240

$              2,073,220

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$                   71,951

$                   70,778

Dividends payable

5,223

5,221

Accrued liabilities

13,202

13,034

Accrued interest

69

169

Current portion of long-term debt

5,034

4,821

Current portion of capital leases

2,190

2,237

Current portion of deferred revenue

18,926

13,700

Total current liabilities

116,595

109,960

Long-term debt

507,484

508,417

Deferred revenue

66,360

58,090

Obligations under capital lease

425

717

Liability for pension and other post-retirement benefits

56,363

56,746

Deferred income taxes, net

49,643

50,075

Other long-term obligations

16,474

15,925

Total liabilities

813,344

799,930

Stockholders' Equity:

Preferred stock

—

—

Common stock

812

811

Additional paid-in capital

1,131,253

1,129,051

Retained earnings

160,600

163,173

Treasury stock, at cost

(3,422)

(3,869)

Accumulated other comprehensive loss

(15,347)

(15,876)

Total stockholders' equity

1,273,896

1,273,290

Total liabilities and stockholders' equity

$              2,087,240

$              2,073,220

 

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 net income (loss) the most directly comparable GAAP financial measure, to segment contribution margin.

For the Three Months Ended

March 31, 2017

December 31, 2016

March 31, 2016

(in thousands)

Sales:

Oil & Gas Proppants

$               192,959

$               136,977

$                 73,865

Industrial & Specialty Products

51,838

45,396

48,645

Total sales

244,797

182,373

122,510

Segment contribution margin:

Oil & Gas Proppants

38,841

18,486

851

Industrial & Specialty Products

20,216

19,021

16,893

Total segment contribution margin

59,057

37,507

17,744

Operating activities excluded from segment cost of sales

(1,735)

(3,545)

(1,985)

Selling, general and administrative

(22,341)

(19,167)

(15,503)

Depreciation, depletion and amortization

(21,599)

(21,194)

(14,556)

Interest expense

(7,646)

(7,998)

(6,643)

Other income (loss), net, including interest income

(4,928)

867

1,790

Income tax benefit

1,714

6,588

8,150

Net income (loss)

$                   2,522

$                  (6,942)

$                (11,003)

 

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 (loss) the most directly comparable GAAP financial measure, to Adjusted EBITDA:

For the Three Months Ended

March 31, 2017

December 31, 2016

March 31, 2016

(in thousands)

Net income (loss)

$                   2,522

$                  (6,942)

$                (11,003)

Total interest expense, net of interest income

6,311

7,048

6,370

Provision for taxes

(1,714)

(6,588)

(8,150)

Total depreciation, depletion and amortization expenses

21,599

21,194

14,556

    EBITDA

28,718

14,712

1,773

Non-cash incentive compensation(1)

5,510

3,032

1,906

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

489

260

765

Business development related expenses(3)

1,486

2,571

107

Other adjustments allowable under our existing credit agreements(4)

6,509

96

701

    Adjusted EBITDA

$                 42,712

$                 20,671

$                   5,252

(1)

Reflects equity-based compensation expense.

(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 L - Pension and Post-retirement Benefits to our Financial Statements in Part 1, Item 1 of this 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. The 2017 amount includes a contract restructuring cost of $6.3 million.

 

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

          

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SOURCE U.S. Silica Holdings, Inc.