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

- First quarter revenue of $269.6 million

- GAAP and adjusted EPS for the quarter of $(0.98) and $(0.03) per share, respectively

- Right-sized Oil & Gas segment structure through comprehensive cost reduction measures and continued optimization of manufacturing and transload network

- Industrial & Specialty Products segment delivered double-digit growth in profitability

KATY, Texas, May 1, 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 first quarter 2020 results, including a net loss of $72.3 million, or $(0.98) per basic and diluted share.

The first quarter results were negatively impacted by $103.9 million or $1.07 per share in goodwill and other asset impairments, $2.2 million or $0.02 per share in costs related to plant startup and expansion, $1.1 million or $0.01 per share in facility closure costs, $0.6 million or $0.01 per share related to merger and acquisition expenses, partly offset by $15.2 million or $0.16 per share in other adjustments, resulting in adjusted EPS for the first quarter of $(0.03) per basic and diluted share.

"I'd like to congratulate my colleagues on delivering a solid first quarter in 2020 while appropriately prioritizing personal health and safety," said Bryan Shinn, chief executive officer. "Despite the COVID-19 pandemic and energy market headwinds, we experienced minimal operational disruptions during the quarter thanks to the efforts of our team. While we recognize the challenges that lie ahead in our Oil & Gas segment, we are encouraged by the resilience of our Industrial & Specialty Products segment, which delivered double-digit profitability growth in the quarter."

"Looking ahead, we expect that our diatomaceous earth and specialty clay product lines in particular will continue to perform relatively well, spurred by strong demand for food and beverage filtration media. In our Oil & Gas segment, we expect that volumes and loads will directionally track completions activity, but, as with the 2015-2016 oilfield downturn, we expect to gain market share this year due to our attractive, low cost offerings," he added.

"We also remain laser focused on liquidity management and have rapidly aligned our cost structure and capacity with changing customer demand, which we believe will allow us to emerge from this downturn leaner, stronger and well-positioned to capitalize when the inevitable rebound occurs," he concluded.

First Quarter 2020 Highlights

Total Company

• Revenue of $269.6 million for the first quarter of 2020 compared with $339.1 million in the fourth quarter of 2019, down 20% sequentially and down 29% from the first quarter of 2019.
• Overall tons sold of 4.161 million for the first quarter of 2020 compared with 4.204 million tons sold in the fourth quarter of 2019, down 1% sequentially and down 14% from the first quarter of 2019.
• Contribution margin of $76.2 million for the first quarter of 2020 compared with $107.1 million in the fourth quarter of 2019, down 29% sequentially and down 26% from the first quarter of 2019.
• Net loss of $72.3 million, or $0.98 loss per basic and diluted share, for the first quarter of 2020, compared with net loss of $19.3 million, or $0.26 loss per basic and diluted share, for the first quarter of 2019.
• Adjusted EBITDA of $48.2 million for the first quarter of 2020 compared with $73.6 million in the fourth quarter of 2019, down 34% sequentially and down 30% from the first quarter of 2019.

Industrial and Specialty Products

• Revenue of $113.9 million for the first quarter of 2020 compared with $104.8 million in the fourth quarter of 2019, up 9% sequentially and down 4% from the first quarter of 2019.
• Tons sold totaled 0.959 million for the first quarter of 2020 compared with 0.842 million tons sold in the fourth quarter of 2019, up 14% sequentially and down 1% from the first quarter of 2019.
• Segment contribution margin of $43.3 million, or $45.20 per ton, for the first quarter of 2020 compared with $39.1 million in the fourth quarter of 2019, up 11% sequentially and down 3% from the first quarter of 2019.

The Industrial & Specialty Products segment experienced an 11% sequential increase in contribution margin, driven by overall growth in sales volumes and increased sales of higher-margin specialty products. In the first quarter, the Company grew its market share in the global diatomaceous earth filtration market by executing new contracts and extending current contracts with multiple multinational alcoholic beverage and brewing companies. The Company also raised prices and expanded margins in certain markets and signed a new contract with a global building products & equipment manufacturer, with volumes contracted through 2025.

Oil & Gas

• Revenue of $155.7 million for the first quarter of 2020 compared with $234.3 million in the fourth quarter of 2019, down 34% sequentially and down 40% from the first quarter of 2019.
• Tons sold of 3.202 million for the first quarter of 2020 compared with 3.362 million tons sold in the fourth quarter of 2019, down 5% sequentially and down 17% from the first quarter of 2019.
• Segment contribution margin of $32.9 million, or $10.27 per ton, for the first quarter of 2020 compared with $68.0 million in the fourth quarter of 2019, down 52% sequentially and down 44% from the first quarter of 2019.

In the Oil & Gas segment, the Company sold 3.202 million tons in the first quarter, down 5% from the prior quarter, as a result of slowing demand for Northern White Sand and the idling of the Tyler facility. However, pricing improved 3% during the quarter, driven primarily by gains in West Texas. The improvement in pricing, combined with significant cost reductions driven by the continued optimization of its transload network and efficiency improvements at its West Texas operations, resulted in a doubling of contribution margin dollars when adjusting for the one-time customer shortfall penalty recognized in the prior quarter.

In the first quarter, the Company signed a new contract with a leading energy customer. SandBox loads declined 14% during the quarter due to lower demand in the Mid-Con, South Texas and Rockies regions. The negotiated settlement acquisition of Arrows Up, which closed during the quarter, was accretive to first-quarter earnings and the Company is excited to welcome the Arrows Up team to its portfolio of dynamic offerings.

Capital Update

As of March 31, 2020, the Company had $144.7 million in cash and cash equivalents and $68.5 million, including $6.5 million allocated for letters of credit, available under its credit facilities. Total debt outstanding under our credit facilities as of March 31, 2020 was $1.244 billion.

Capital expenditures in the first quarter totaled $16.1 million and were primarily related to the payment of capital expenditures accrued in 2019 and improvements and expansions at the Company's industrial facilities in Millen, Georgia, and Columbia, South Carolina.

The Company's forecast of capital expenditures for the full year 2020 is expected to be $30.0 million, at the low end of the previously announced guidance of $30.0 to $40.0 million and 75% lower than 2019 capital expenditures of $118.4 million.

Outlook and Guidance

Due to the sharp decline in crude oil prices and the expected reduction in well completions, the Company expects its Oil & Gas segment sales next quarter to decline sharply. However, the Company's costs in this segment are highly variable and the Company will continue to right-size its operations accordingly. In response to these challenging conditions, the Company has idled or curtailed production at several facilities, reducing its staffed annual Oil & Gas production capacity from 24 million tons to 6 million tons.  

The Company expects a limited impact to its Industrial & Specialty Products segment, with sales volumes generally tracking GDP trends. The Company expects a decline in the segment's second-quarter sales as a result of temporary shutdowns by some customers in April and May related to COVID-19 and a slowing demand environment for some end markets like building products and automotive. However, the Company expects demand for other products, including diatomaceous earth and specialty clays used for the filtration of food and beverages, to remain relatively strong.

Conference Call

U.S. Silica will host a conference call for investors today, May 1, 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 13702887. The replay will be available through June 1, 2020.