U.S. Silica Holdings, Inc. Announces Record Fourth Quarter and Full Year 2011 Results

FREDERICK, Md.--(BUSINESS WIRE)--Mar. 20, 2012-- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $30.3 million, or $0.61 per basic and diluted share for the year ended December 31, 2011, compared with net income of $11.4 million, or $0.23 per share for the same period in 2010. Included in net income and earnings per share are non-recurring management advisory fees of $9.3 million (or $0.12 per share, tax effected) in 2011 which includes a termination fee of $8.0 million which was accrued at December 31, 2011 and paid on February 6, 2012, and $1.3 million (or $0.02 per share, tax effected) in 2010.

Net income for the fourth quarter of 2011 was $10.0 million, or $0.19 per basic and diluted share, compared to $3.8 million, or $0.07 per share for the same period in 2010. Included in fourth quarter net income and earnings per share are non-recurring management advisory fees of $8.3 million (or $0.11 per share, tax effected) in 2011, and $0.3 million (or $0.01 per share, tax effected) in 2010.

Summary Financial and Operating Data

($ in millions except statistics and per share)           Three Months Ended

December 31,

Year Ended

December 31,

            2011 2010 2011 2010 Key Operating Statistics:

Tons Sold: (000s)

Oil & Gas 590.4 430.0 2,018.1 1,522.2 Industrial & Specialty Products   1,010.6     1,017.4     4,270.4     4,442.4   Total 1,601.0 1,447.4 6,288.5 5,964.6  

ASP: (per ton)

Oil & Gas $ 63.94 $ 42.72 $ 53.06 $ 45.69 Industrial & Specialty Products $ 45.40   $ 40.13   $ 44.15   $ 39.48   Total $ 52.24 $ 40.90 $ 47.00 $ 41.07   Income: Revenue $ 83.6 $ 59.5 $ 295.6 $ 245.0   Contribution Margin $ 33.6 $ 20.5 $ 114.4 $ 87.0 % Margin 40.2 % 34.4 % 38.7 % 35.5 %   Adjusted EBITDA (a) $ 27.2 $ 16.0 $ 93.6 $ 72.2 % Margin 32.5 % 27.0 % 31.7 % 29.5 %   Net Income $ 10.0 $ 3.8 $ 30.3 $ 11.4     EPS, Basic and Diluted     $ 0.19     $ 0.07     $ 0.61     $ 0.23   (a) A reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most comparable GAAP measure, and other important information appears on page 7.

President and Chief Executive Officer Bryan Shinn commented, "2011 was the best year in the history of U.S. Silica by almost every measure. Our Oil & Gas contribution margin grew by 57% and overall net income more than doubled. U.S. Silica has differentiated logistics capabilities, premium Ottawa White® products that are in high demand and a low-cost operations platform. These competitive advantages position us well for long-term success."

2011 Full Year Financial Highlights

The Company reported full year 2011 revenues of $295.6 million, an increase of $50.6 million, or 20.7%, from $245.0 million in 2010, driven by overall year over year volume and pricing increases of 5.4% and 14.4%, respectively.

Sales in the Oil & Gas segment accounted for approximately 75% of the growth in 2011. Sales volume within our Oil & Gas business increased by 32.6% in 2011, to over 2.0 million tons, compared to 1.5 million tons in 2010. This growth was driven by continued increased demand for our proppants as domestic drilling and production activity continued to accelerate throughout the year. Contribution margin for the Oil and Gas business was $67.6 million for the year ended December 31, 2011, as compared to $43.1 million in 2010.

2011 proved to be a strong year for our Industrial & Specialty Products business as we continued to add high-value customers to our portfolio to offset any softness in demand. Contribution margins for the Industrial and Specialty Products segment for the full year 2011 was $53.0 million, an increase of 15.2%, as compared to $46.0 million in 2010. Volume in our Industrial & Specialty Products segment was down modestly due to the re-marketing of product to our Oil & Gas segment.

SG&A expense was $23.3 million for the year ended December 31, 2011 as compared to $20.4 million for the same period in 2010. The growth in SG&A was driven by increased staffing required to meet the growth in the Oil & Gas business and to meet the additional administrative requirements of a public company. Interest expense was $18.4 million as compared to $23.0 million in 2010. The decline in interest expense year-over-year was due to the Company refinancing its debt in June 2011.

Adjusted EBITDA increased 29.6%, or $21.4 million, to $93.6 million for the full year 2011, as compared to $72.2 million for 2010, driven by volume increases in our Oil & Gas segment, as well as by increases in Average Sales Price (ASP) in both segments. Adjusted EBITDA margin increased to 31.7% in 2011 compared to 29.5% in 2010, due to growth in proppant volumes, strong pricing and good cost controls.

Net income for full year 2011 was $30.3 million, an increase of more than 165% over 2010 net income of $11.4 million.

Fourth Quarter 2011 Financial Highlights

The Company reported fourth quarter 2011 revenues of $83.6 million, an increase of $24.1 million, or 40.5%, from $59.5 million in 2010 driven by acceleration in demand for our natural proppants during the fourth quarter. Overall sales volume increased 10.6% during the fourth quarter of 2011 to 1.6 million tons, as compared to 1.4 million tons in the fourth quarter of 2010.

Fourth quarter 2011 sales volume within our Oil & Gas business increased by 37.3%, to over 590 thousand tons, compared to 430 thousand tons in 2010; sales volumes for our Industrial and Specialty Products were mostly flat year over year.

SG&A expense was $6.9 million in the fourth quarter 2011 as compared to $6.0 million for 2010.

Adjusted EBITDA increased 69.7%, or $11.2 million, to $27.2 million in the fourth quarter 2011, as compared to $16.0 million for 2010, driven by accelerated volume increases in our Oil & Gas Proppants segment, as well as by increases in Average Sales Price (ASP) in both segments. Adjusted EBITDA margin percentage increased for the fourth quarter 2011 to 32.5%, compared to 27.0% in 2010.

Net income for the fourth quarter 2011 was $10.0 million, an increase of more than 166% over 2010 net income of $3.8 million.

Capital Update

As of December 31, 2011, we had $59.2 million of cash on hand and $24.0 million of available credit under our financing facilities. Our total outstanding debt at December 31, 2011 was $261.8 million.

U.S. Silica incurred capital expenditures of approximately $66.7 million in 2011, mainly due to spending on the planned expansions of the Ottawa and Rockwood plants, which increased our aggregate annual production capacity by more than 1.0 million tons. Both of these expansion projects became operational late in the fourth quarter of 2011. Capital spending in 2010 was $15.2 million.

Outlook

We currently estimate Revenue, Adjusted EBITDA and Capital Expenditures for 2012 to be within the following ranges:

              First Quarter

2012

      Full Year

2012

Revenue $92 - $97 million $395 - $420 million Adjusted EBITDA (a) $34 - $36 million $140 - $150 million

Capital Expenditures

$70 - $95 million (a)   The Company is not able to provide a reconciliation of projected Adjusted EBITDA to projected Net Income due to the unknown effect, timing and potential significance of certain income statement items. The methodology to reconcile Adjusted EBITDA ton Net Income is disclosed in our 2011 Annual Report on Form 10-K, as filed with the SEC, and included on page 7, herein.

These projections are based on many estimates and are inherently subject to change based on industry conditions, future decisions made by management and the Board of Directors, and significant economic, competitive and other uncertainties and contingencies.

Conference Call

U.S. Silica will host a conference call for investors today, March 20, 2012 at 10:00 a.m. Eastern Time to discuss these results. Hosting the call will be Bryan A. Shinn, President and Chief Executive Officer, William A. White, Chief Financial Officer, and R. Dale Lynch, Vice President of Finance.

The call can be accessed live over the telephone by dialing (877) 705-6003, or for international callers, (201) 493-6725. A replay will be available shortly after the call and can be accessed by dialing (877) 870-5176, or for international callers, (858) 384-5517. The passcode for the replay is 389786. The replay will be available until April 3, 2012.

Interested parties may also listen to a simultaneous webcast of the conference call by logging onto U.S. Silica's website at http://www.ussilica.com in the Investors Resources section. A replay of the conference call will also be available for approximately 30 days following the call.

About U.S. Silica Holdings, Inc.

U.S. Silica Holdings, Inc., a Delaware corporation, is the second largest domestic producer of commercial silica, a specialized mineral that is a critical input into the oil and gas proppants end market and a variety of attractive industrial and specialty products end markets. During its 111-year history, U.S. Silica Holdings, Inc. has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 200 products to customers across these end markets. U.S. Silica Holdings, Inc. is headquartered in Frederick, Maryland.

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 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.

COMBINED STATEMENTS OF OPERATIONS

    Year Ended December 31, 2011   2010 2009 (in thousands, except per share amounts) Sales $ 295,596 $ 244,953 $ 191,623 Cost of goods sold (excluding depreciation, depletion and amortization) 181,196 157,994 136,200 Operating expenses Selling, general and administrative 23,348 20,413 10,672 Advisory fees to parent 9,250 1,250 1,250 Depreciation, depletion and amortization   20,999     19,305     17,887     53,597     40,968     29,809   Operating income 60,803 45,991 25,614 Other (expense) income Interest expense (18,407 ) (23,034 ) (28,228 ) Early extinguishment of debt (6,043 ) (10,195 ) - Other income, net, including interest income   1,062     959     4,894     (23,388 )   (32,270 )   (23,334 ) Income before income taxes 37,415 13,721 2,280 Income tax (expense) benefit   (7,162 )   (2,329 )   3,259   Net income $ 30,253   $ 11,392   $ 5,539     Earnings per share: Basic $ 0.61 $ 0.23 $ 0.11 Diluted $ 0.61 $ 0.23 $ 0.11  

U.S. SILICA HOLDINGS, INC.

COMBINED BALANCE SHEETS

    December 31, 2011     2010 (in thousands) ASSETS Current Assets: Cash and cash equivalents $ 59,199 $ 64,500 Accounts receivable, net 46,600 30,044 Inventories, net 29,307 22,418 Prepaid expenses and other current assets 8,561 3,191 Deferred income taxes, net 28,007 4,557 Income tax receivable   3,895     2,150   Total current assets   175,569     126,860   Property, plant and mine development, net 336,788 287,595 Debt issuance costs, net 1,291 1,322 Goodwill 68,403 68,403 Trade names 10,436 10,436 Customer relationships, net 6,942 7,353 Other assets   6,367     6,565   Total assets $ 605,796   $ 508,534     LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Book overdraft $ 5,588 $ 3,727 Accounts payable 36,579 12,027 Accrued liabilities 9,875 8,949 Accrued interest 1,659 101 Current portion of long-term debt 6,364 1,510 Current portion of deferred revenue   10,393     6,512   Total current liabilities   70,458     32,826   Long-term debt 255,425 236,932 Note payable to parent 15,000 15,000 Liability for pension and other post-retirement benefits 52,078 49,460 Deferred revenue 2,128 13,077 Deferred income taxes, net 75,915 53,124 Other long-term obligations   12,858     10,551   Total liabilities 483,862 410,970   Commitments and contingencies   Stockholders' Equity: Common stock - $0.01 par value, 100,000,000 authorized shares, 50,000,000 shares issued and outstanding 500 500 Additional paid-in capital 103,757 102,519 Retained earnings (accumulated deficit) 30,038 (215 ) Accumulated other comprehensive loss   (12,361 )   (5,240 ) Total stockholders' equity   121,934     97,564   Total liabilities and stockholders' equity $ 605,796   $ 508,534  

Non-GAAP Financial Measures

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.

 

Three Months Ended
December 31,

  Year Ended

December 31,

2011   2010 2011   2010   Net income $ 10,045 $ 3,772 $ 30,253 $ 11,392 Total interest expense, net of interest income 3,374 5,221 18,347 22,989 Provision for taxes (benefit) 371 (151 ) 7,162 2,329 Total depreciation, depletion and amortization expenses   5,363     5,040     20,999     19,305 EBITDA 19,153 13,882 76,761 56,015 Non-cash deductions, losses and charges (1) (526 ) 762 (526 ) 1,364 Non-recurring expenses (income) (2) (733 ) - (2,028 ) - Transaction expenses (3) - - 6,043 10,669 Permitted management fees and expenses (4) 8,312 312 9,250 1,250 Non-cash incentive compensation (5) 555 96 1,237 383 Post-employment expenses (excluding service costs) (6) 422 550 1,689 2,113 Other adjustments allowable under our existing credit agreements (7)   269     39     1,131     358

Adjusted EBITDA

$ 27,452   $ 15,641   $ 93,557   $ 72,152

__________

(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 non-recurring expenses related to a former insurer's liquidation.   (3) Includes natural gas hedging losses, purchase accounting adjustments, management bonuses and other expenses related to the Golden Gate Capital acquisition, as well as unamortized transaction fees and expenses arising from the refinancing of our Term Loan Facility.   (4) Includes fees and expense paid to Golden Gate Capital for ongoing consulting and management services provided pursuant to an Advisory Agreement entered into in connection with our acquisition by Golden Gate Capital. At December 31, 2011, we recorded an accrual for $8.0 million related to the termination fee paid to Golden Gate Capital in connection with our initial public offering on January 31, 2012.   (5) Includes vesting of incentive equity compensation issued to our employees.   (6) 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.   (7) Reflects miscellaneous adjustments permitted under our existing credit agreements, including such items as expenses related to reviewing potential acquisitions and costs associated with relocating the corporate headquarters.

Source: U.S. Silica Holdings, Inc.

U.S. Silica Holdings, Inc.
855-SILICA-7 (855-745-4227)
Email: IR@ussilica.com