U.S. Silica Holdings, Inc. Announces Fourth Quarter and Full Year 2014 Results

  
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FREDERICK, Md., Feb. 24, 2015 /PRNewswire/ --

• Revenue for the quarter and the full year up 67% and 61%, respectively
• Full year overall tons sold increased 34% to 10.9 million tons
• Oil and Gas tons sold for the year up over 65% versus the same period last year
• Net income for the full year of $121.5 million or $2.26 per basic share

U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $33.2 million or $0.62 per basic share and $0.61 per diluted share for the fourth quarter ended Dec. 31, 2014 compared with net income of $16.5 million or $0.31 per basic and diluted share for the fourth quarter of 2013. Excluding business development expense during the quarter of approximately $6.5 million or $0.10 per basic share, EPS was $0.72 per basic share. The quarter was also negatively impacted by a meaningful increase in bad debt expense of $6.9 million mostly related to the Company's assessment of a certain customer's current ability to pay its obligation to the Company.

"2014 was our best year by almost every measure, as evidenced by our record financial results and the substantial progress we made toward driving more speed, scale and strength across our organization," said Bryan Shinn, president and chief executive officer. "We expect 2015 to be a challenging year in light of lower oil prices but we have built our business and our balance sheet to capitalize on this type of market environment. Ultimately, I believe U.S. Silica will emerge as an even stronger company once oil and gas markets recover."

Full Year 2014 Highlights

Total Company

• Revenue totaled $876.7 million compared with $546.0 million for the full year of 2013, an improvement of 61%.
• Overall tons sold increased to 10.9 million tons, an increase of 34% over 2013 totals.
• Selling, general and administrative expense for the year totaled $89.0 million or 10% of revenue compared with $49.8 million or 9% of revenue for the full year 2013.
• Contribution margin was $317.2 million compared with $202.9 million for the full year 2013.
• Adjusted EBITDA was $246.2 million compared with $160.7 million for the full year 2013.
• Net income was $121.5 million or $2.26 per basic share and $2.23 per diluted share compared with $75.3 million or $1.42 per basic share and $1.41 per diluted share for the full year 2013.

Fourth Quarter 2014 Highlights

Total Company

• Revenue totaled $249.6 million compared with $149.5 million for the same period last year, an increase of 67%.
• Overall tons sold increased to 3.0 million tons, a 43% improvement over the fourth quarter of 2013.
• Selling, general and administrative expense for the quarter were greater than expected and totaled $35.7 million compared with $14.5 million for the fourth quarter of 2013. The increase in SG&A was due primarily to an $8.7 million increase in compensation expense mostly related to our annual bonus incentive plan, the $6.9 million increase in bad debt expense and a $6.4 million increase in business development expense.
• Contribution margin for the quarter was $93.9 million compared with $48.0 million in the same period of the prior year.
• Adjusted EBITDA was $67.0 million or 27% of revenue versus $35.9 million or 24% of revenue for the same period last year.

Oil and Gas

• Revenue for the quarter totaled $196.0 million compared with $102.0 million in the same period in 2013.
• Overall tons sold totaled 2.0 million tons compared with 1.1 million tons sold in the fourth quarter of 2013.
• 66% of total tons sold were made in basin compared with 61% in the fourth quarter of 2013.
• Segment contribution margin was $80.4 million versus $34.2 million in the fourth quarter of 2013.

Industrial and Specialty Products

• Revenue for the quarter totaled $53.5 million compared with $47.5 million for the same period in 2013.
• Overall tons sold totaled 1.0 million tons, a 2% increase compared with the same period last year.
• Segment contribution margin was $13.5 million versus $13.8 million in the fourth quarter of 2013 due to higher manufacturing costs in the quarter.

Capital Update

As of Dec. 31, 2014, the Company had $342.4 million in cash, cash equivalents and short term investments and $46.8 million available under its credit facilities. Total debt at Dec. 31, 2014 was $502.3 million compared with $371.5 million at December 31, 2013. Capital expenditures in the fourth quarter totaled $41.0 million and were associated largely with the Company's investments in various maintenance and growth initiatives.

Outlook and Guidance

Due to the current lack of visibility in our oil and gas business, the Company has decided to suspend guidance of Adjusted EBITDA until such time as we can gain more clarity around our customers' business activity levels and the associated demand for our products. Based on current market conditions, the Company anticipates that its capital expenditures for 2015 will be in a range of $100 million to $120 million.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, Feb. 25, 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 or for international callers, (201) 612-7415. The conference ID for the replay is 13599731. The replay of the call will be available through March 25, 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) 

For the Three Months Ended December 31,

2014

2013

Sales

$               249,589

$               149,474

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

157,700

102,875

Operating expenses

Selling, general and administrative

35,659

14,456

Depreciation, depletion and amortization

12,664

10,098

48,323

24,554

Operating income

43,566

22,045

Other (expense) income

Interest expense

(5,431)

(4,086)

Other income, net, including interest income

379

152

(5,052)

(3,934)

Income before income taxes

38,514

18,111

Income tax expense

(5,276)

(1,658)

Net income

$                 33,238

$                 16,453

Earnings per share:

Basic

$                     0.62

$                     0.31

Diluted

$                     0.61

$                     0.31

 

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands) 

December 31,

2014

2013

ASSETS

Current Assets:

Cash and cash equivalents

$               267,281

$                 78,256

Short-term investments

75,143

74,980

Accounts receivable, net

120,881

75,207

Inventories, net

66,712

64,212

Prepaid expenses and other current assets

9,267

7,140

Deferred income tax, net

22,295

17,737

Income tax deposits

746

-

Total current assets

562,325

317,532

Property, plant and mine development, net

565,755

442,116

Debt issuance costs, net

7,211

5,255

Goodwill

68,647

68,403

Trade names

14,914

10,436

Customer relationships, net

6,984

6,120

Other assets

12,317

13,599

Total assets

$            1,238,153

$               863,461

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Book overdraft

$                   4,215

$                   4,659

Accounts payable

85,781

37,376

Dividends payable

6,805

6,709

Accrued liabilities

17,911

10,823

Accrued interest

60

41

Current portion of long-term debt

4,718

3,488

Income tax payable

-

1,037

Current portion of deferred revenue

26,771

-

Total current liabilities

146,261

64,133

Long-term debt

497,579

367,963

Liability for pension and other post-retirement benefits

59,932

36,802

Deferred revenue

64,722

-

Deferred income tax, net

49,749

71,318

Other long-term obligations

16,094

13,951

Total liabilities

834,337

554,167

Stockholders' Equity:

Common stock

539

534

Preferred stock

-

-

Additional paid-in capital

191,086

174,799

Retained earnings

232,551

137,978

Treasury stock, at cost

(542)

-

Accumulated other comprehensive loss

(19,818)

(4,017)

Total stockholders' equity

403,816

309,294

Total liabilities and stockholders' equity

$            1,238,153

$               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 December 31,

2014

2013

(in thousands)

Sales:

Oil and gas proppants

$               196,043

$          102,011

Industrial and specialty products

53,546

47,463

Total sales

249,589

149,474

Segment contribution margin:

Oil and gas proppants

80,419

34,150

Industrial and specialty products

13,456

13,833

Total segment contribution margin

93,875

47,983

Operating activities excluded from segment cost of goods sold

(1,985)

(1,384)

Selling, general and administrative

(35,660)

(14,456)

Depreciation, depletion and amortization

(12,664)

(10,098)

Interest expense

(5,431)

(4,086)

Early extinguishment of debt

-

-

Other income, net, including interest income

379

152

Income (loss) before income taxes

$                 38,514

$            18,111

 

For the Year Ended December 31,

2014

2013

(in thousands)

Sales:

Oil and gas proppants

$          662,770

$          347,439

Industrial and specialty products

213,971

198,546

Total sales

876,741

545,985

Segment contribution margin:

Oil and gas proppants

256,137

145,916

Industrial and specialty products

61,102

56,983

Total segment contribution margin

317,239

202,899

Operating activities excluded from segment cost of goods sold

(7,082)

(5,481)

Selling, general and administrative

(88,971)

(49,759)

Depreciation, depletion and amortization

(45,019)

(36,418)

Interest expense

(18,202)

(15,341)

Early extinguishment of debt

-

(480)

Other income, net, including interest income

758

597

Income (loss) before income taxes

$          158,723

$            96,017

 

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 December 31,

2014

2013

(in thousands)

Net income

$                 33,238

$            16,453

  Total interest expense, net of interest income

5,325

4,040

  Provision for taxes

5,276

1,658

  Total depreciation, depletion and amortization expenses

12,664

10,098

  EBITDA

56,503

32,249

  Non-cash deductions, losses and charges (1)

207

464

  Loss on early extinguishment of debt (2)

-

-

  Non-cash incentive compensation (3)

2,681

803

  Post-employment expenses (excluding service costs) (4)

586

517

  Business development related expenses(5)

6,473

106

  Other adjustments allowable under our existing credit agreements (6)

563

1,756

  Adjusted EBITDA

$                 67,013

$            35,895

(1)     Includes non-cash deductions, losses and charges arising from adjustments to estimates of a future litigation liability and the decision by our hourly workforce at our Rockwood facility to withdraw from a pension plan administered by a third party.

 

(2)     Includes write-offs of debt issuance costs, legal fees and a prepayment penalty related to the early extinguishment of debt.

 

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

 

(4)    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.

 

(5)    Expenses related to business development activities related to our growth and expansion initiatives.

 

(6)    Reflects miscellaneous adjustments permitted under our existing credit agreement, including such items as  purchase accounting adjustments, one-time litigation fees, expenses related to debt refinancing, offerings of our common stock by our former controlling shareholder, employment agency fees.

 

For the Year Ended December 31,

2014

2013

(in thousands)

Net income

$               121,540

$            75,256

  Total interest expense, net of interest income

17,868

15,241

  Provision for taxes

37,183

20,761

  Total depreciation, depletion and amortization expenses

45,019

36,418

  EBITDA

221,610

147,676

  Non-cash deductions, losses and charges (1)

198

464

  Loss on early extinguishment of debt (2)

-

480

  Non-cash incentive compensation (3)

7,487

3,039

  Post-employment expenses (excluding service costs) (4)

1,730

2,071

  Business development related expenses(5)

11,450

1,430

  Other adjustments allowable under our existing credit agreements (6)

3,738

5,531

  Adjusted EBITDA

$               246,213

$          160,691

(1)     Includes non-cash deductions, losses and charges arising from adjustments to estimates of a future litigation liability and the decision by our hourly workforce at our Rockwood facility to withdraw from a pension plan administered by a third party.

 

(2)     Includes write-offs of debt issuance costs, legal fees and a prepayment penalty related to the early extinguishment of debt.

 

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

 

(4)    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.

 

(5)    Expenses related to business development activities related to our growth and expansion initiatives.

 

(6)    Reflects miscellaneous adjustments permitted under our existing credit agreement, including such items as  purchase accounting adjustments, one-time litigation fees, expenses related to debt refinancing, offerings of our common stock by our former controlling shareholder, employment agency fees.

 

 

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

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/us-silica-holdings-inc-announces-fourth-quarter-and-full-year-2014-results-300040668.html

SOURCE U.S. Silica