U.S. Silica Holdings, Inc. Announces Fourth Quarter and Full Year 2015 Results

- Fourth quarter revenue of $136.1 million and full year revenue of $643.0 million
- Tons sold in Oil and Gas segment down 10% year-over-year
- Contribution margin for ISP of $70.1 million up 15% year-over-year
- Full year operating cash flow of $61.5 million, exceeded capital expenditures by $7.8 million
- Capital Expenditures for 2016 expected in the range of $15 million to $20 million

FREDERICK, Md., Feb. 23, 2016 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced a net loss of $15.3 million or $(0.29) per basic and diluted share for the fourth quarter ended Dec. 31, 2015 compared with 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. Our effective tax rate for the fourth quarter was 21%, resulting in a tax benefit of $4.2 million. Our fourth quarter results were negatively impacted by $2.1 million in costs for actions designed to help bring our business more in line with current market conditions, $2.4 million for business development related expenses, and $1.1 million in equipment write-off charges. Excluding these expenses and the tax benefit, our EPS was $(0.26) per basic share for the quarter.

"Our fourth quarter and full year results reflect the severe impact lower oil prices have had on our Oil and Gas business in 2015 but also underscore the relevance of being a low cost producer with a diversified business model and a strong balance sheet," said Bryan Shinn, president and chief executive officer. "Despite the headwinds, we increased market share in our Oil and Gas business by 50 percent, completed a record year for profitability in our Industrial and Specialty Products segment and generated free cash flow from operations. I believe the accomplishments achieved in 2015, coupled with the steps we are taking in 2016 to further reduce our costs, leverage our competitive advantages and protect our balance sheet will further strengthen our Company and position us well for long-term success," he added.

Full Year 2015 Highlights

Total Company

• Revenue totaled $643.0 million compared with $876.7 million for the full year of 2014, a decrease of 27%.
• Overall tons sold were 10.0 million tons compared with 10.9 million tons for 2014, a decrease of 8%.
• Selling, general and administrative expense for the year totaled $62.8 million compared with $89.0 million for the full year 2014, representing 10% of revenue for both years.  
• Contribution margin was $159.1 million or 25% of revenue compared with $317.2 million or 36% of revenue for the full year 2014.
• Adjusted EBITDA was $109.5 million or 17% of revenue compared with $246.2 million or 28% of revenue for the full year 2014.
• Net income was $11.9 million or $0.22 per basic share compared with $121.5 million or $2.26 per basic share for the full year 2014.

Fourth Quarter 2015 Highlights

Total Company

• Revenue totaled $136.1 million compared with $249.6 million for the same period last year, a decrease of 45%.
• Overall tons sold were 2.5 million tons, a decrease of 18% from the 3.0 million tons for the fourth quarter of 2014.
• Contribution margin for the quarter was $22.1 million compared with $93.9 million in the same period of the prior year, a decrease of 76%.
• Adjusted EBITDA was $10.8 million or 8% of revenue versus $67.0 million or 27% of revenue for the same period last year.

Oil and Gas

• Revenue for the quarter totaled $88.8 million compared with $196.0 million for the same period in 2014.
• 54% of tons were sold in basin compared with 66% in the fourth quarter of 2014.
• Tons sold totaled 1.6 million tons compared with 2.0 million tons sold in the fourth quarter of 2014.
• Segment contribution margin was $7.0 million versus $80.4 million in the fourth quarter of 2014.

Industrial and Specialty Products

• Revenue for the quarter totaled $47.3 million compared with $53.5 million for the same period in 2014.
• Tons sold totaled 0.9 million tons compared with 1.0 million tons sold in the fourth quarter of 2014.
• Segment contribution margin was $15.2 million versus $13.5 million in the fourth quarter of 2014.

Capital Update

As of Dec. 31, 2015, the Company had $298.9 million in cash and cash equivalents and short term investments and $46.7 million available under its credit facilities. Total debt at Dec. 31, 2015 was $491.7 million compared with $495.1 million at Dec. 31, 2014. Capital expenditures in the fourth quarter totaled $15.5 million and were associated largely with the Company's investments in various maintenance, expansion and cost improvement 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 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 2016 will be in the range of $15 million to $20 million.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, Feb. 24, 2016 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 13629907. The replay of the call will be available through March 24, 2016.

About U.S. Silica

U.S. Silica is a leading producer of commercial silica used in the oil and gas industry, and in a wide range of industrial applications. Over its 116-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. The Company operates on a platform of ethics, safety and sustainability.

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.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended December 31, 

2015

2014

(in thousands, except per share amounts)

Sales

$                       136,112

$                       249,589

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

116,614

157,700

Operating expenses

Selling, general and administrative

15,682

35,659

Depreciation, depletion and amortization

16,378

12,664

32,060

48,323

Operating income (loss)

(12,562)

43,566

Other income (expense)

Interest expense

(6,835)

(5,431)

Other income (expense), net, including interest income

(90)

379

(6,925)

(5,052)

Income (loss) before income taxes

(19,487)

38,514

Income tax benefit (expense)

4,167

(5,276)

Net income (loss)

$                       (15,320)

$                         33,238

Earnings (loss) per share:

Basic

$                           (0.29)

$                             0.62

Diluted

$                           (0.29)

$                             0.61

Weighted average shares outstanding:

Basic

53,323

53,838

Diluted

53,520

54,340

Dividends declared per share

$                             0.06

$                             0.13

Year Ended December 31,

2015

2014

(in thousands, except per share amounts)

Sales

$                       642,989

$                       876,741

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

495,066

566,584

Operating expenses

Selling, general and administrative

62,777

88,971

Depreciation, depletion and amortization

58,474

45,019

121,251

133,990

Operating income 

26,672

176,167

Other income (expense)

Interest expense

(27,283)

(18,202)

Other income, net, including interest income

728

758

(26,555)

(17,444)

Income before income taxes

117

158,723

Income tax benefit (expense)

11,751

(37,183)

Net income 

$                         11,868

$                       121,540

Earnings (loss) per share:

Basic

$                             0.22

$                             2.26

Diluted

$                             0.22

$                             2.24

Weighted average shares outstanding:

Basic

53,344

53,719

Diluted

53,601

54,296

Dividends declared per share

$                             0.44

$                             0.50

 

U.S. SILICA HOLDINGS, INC.

 CONSOLIDATED BALANCE SHEETS

December 31,

2015

2014

(in thousands)

ASSETS

Current Assets:

Cash and cash equivalents

$             277,077

$           263,066

Short-term investments

21,849

75,143

Accounts receivable, net

58,706

120,881

Inventories, net

65,004

66,712

Prepaid expenses and other current assets

9,921

9,267

Deferred income taxes, net

-

22,295

Income tax deposits

6,583

746

Total current assets

439,140

558,110

Property, plant and mine development, net

561,196

565,755

Goodwill

68,647

68,647

Trade names

14,474

14,914

Customer relationships, net

6,453

6,984

Other assets

18,709

12,317

Total assets

$          1,108,619

$        1,226,727

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

49,631

85,781

Dividends payable

3,453

6,805

Accrued liabilities

11,708

17,911

Accrued interest

58

60

Current portion of long-term debt

3,330

3,329

Current portion of deferred revenue

15,738

26,771

Total current liabilities

83,918

140,657

Long-term debt

488,375

491,757

Liability for pension and other post-retirement benefits

55,893

59,932

Deferred revenue

59,676

64,722

Deferred income taxes, net

19,513

49,749

Other long-term obligations

17,077

16,094

Total liabilities

724,452

822,911

Stockholders' Equity:

Preferred stock

-

-

Common stock

539

539

Additional paid-in capital

194,670

191,086

Retained earnings

220,974

232,551

Treasury stock, at cost

(15,845)

(542)

Accumulated other comprehensive loss

(16,171)

(19,818)

Total stockholders' equity

384,167

403,816

Total liabilities and stockholders' equity

$          1,108,619

$        1,226,727

 

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 tables set forth a reconciliation of income before income taxes, the most directly comparable GAAP financial measure, to segment contribution margin.

 

Three Months Ended December 31,

2015

2014

(in thousands)

Sales:

   Oil & Gas Proppants

$                 88,842

$               196,043

   Industrial & Specialty Products

47,270

53,546

Total sales

136,112

249,589

Segment contribution margin:

   Oil & Gas Proppants

6,956

80,419

   Industrial & Specialty Products

15,184

13,456

Total segment contribution margin

22,140

93,875

Operating activities excluded from segment cost of goods sold

(2,642)

(1,985)

Selling, general and administrative

(15,682)

(35,660)

Depreciation, depletion and amortization

(16,378)

(12,664)

Interest expense

(6,835)

(5,431)

Other income (expense), net, including interest income

(90)

379

Income (loss) before income taxes

$                (19,487)

$                 38,514

 Year Ended December 31, 

2015

2014

(in thousands)

Sales:

   Oil & Gas Proppants

$               430,435

$               662,770

   Industrial & Specialty Products

212,554

213,971

Total sales

642,989

876,741

Segment contribution margin:

   Oil & Gas Proppants

88,928

256,137

   Industrial & Specialty Products

70,137

61,102

Total segment contribution margin

159,065

317,239

Operating activities excluded from segment cost of goods sold

(11,142)

(7,082)

Selling, general and administrative

(62,777)

(88,971)

Depreciation, depletion and amortization

(58,474)

(45,019)

Interest expense

(27,283)

(18,202)

Other income, net, including interest income

728

758

Income before income taxes

$                      117

$               158,723

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 tables set forth a reconciliation of net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA.

 

Three Months Ended December 31,

2015

2014

(in thousands)

Net income

$                (15,320)

$                 33,238

Total interest expense, net of interest income

6,617

5,325

Provision for taxes

(4,167)

5,276

Total depreciation, depletion and amortization expenses (1)

16,378

12,664

EBITDA

3,508

56,503

Non-cash incentive compensation (2)

2,033

2,681

Post-employment expenses (excluding service costs) (3)

834

586

Business development related expenses (4)

2,358

6,473

Other adjustments allowable under our existing credit agreement (5)

2,044

770

Adjusted EBITDA

$                 10,777

$                 67,013

(1)

Includes $1.1 million equipment write-offs mainly due to discontinuation of certain industrial and specialty products.  

(2)

Reflects stock-based compensation expense.

(3)

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 P - Pension and Post-retirement Benefits to our Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

(4)

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

(5)

Reflects miscellaneous adjustments permitted under our existing credit agreement, including such items as restructuring costs and certain employment agency fees. Restructuring costs were $2.1 million for the three months ended December 31, 2015, consisting of severance expense and costs for other actions that will provide future cost savings.

 

Year Ended December 31,

2015

2014

(in thousands)

Net income

$                 11,868

$               121,540

Total interest expense, net of interest income

26,578

17,868

Provision for taxes

(11,751)

37,183

Total depreciation, depletion and amortization expenses (1)

58,474

45,019

EBITDA

85,169

221,610

Non-cash incentive compensation (2)

3,857

7,487

Post-employment expenses (excluding service costs) (3)

3,335

1,730

Business development related expenses (4)

10,701

11,450

Other adjustments allowable under our existing credit agreement (5)

6,446

3,936

Adjusted EBITDA

$               109,508

$               246,213

(1)

Includes $1.1 million equipment write-offs mainly due to discontinuation of certain industrial and specialty products.  

(2)

Reflects stock-based compensation including adjustments for the revaluation of performance share units.

(3)

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 P - Pension and Post-retirement Benefits to our Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

(4)

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

(5)

Reflects miscellaneous adjustments permitted under our existing credit agreement, including such items as restructuring costs and certain employment agency fees. Restructuring costs were $4.8 million for 2015 consisting of severance expense and costs for other actions that will provide future cost savings.

 

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

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SOURCE U.S. Silica Holdings, Inc.