U.S. Silica Holdings, Inc. Announces Second Quarter 2014 Results

- Revenue of $205.8 million up 59% year-over-year
- EPS of $0.53 per basic share; excluding additional M&A and business development expenses of $0.02, EPS of $0.55 per basic share
- Total volumes sold in oil and gas of 1.5 million tons a 53% improvement over same period last year
- New Utica, IL frac sand mine and plant online and expected to fully ramp by September 1st
- Company increasing guidance for Adjusted EBITDA to a range of $215 million to $225 million, including Cadre
- Cadre acquisition expected to close July 31, adding 800,000 tons of annual capacity

FREDERICK, Md., July 29, 2014 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $28.7  million or $0.53 per basic and diluted share for the second quarter ended June 30, 2014 compared with net income of $20.2 million or $0.38 per basic and diluted share for the second quarter of 2013. Excluding M&A and business development expenses of $1.7 million or $0.02 per basic share during the quarter, EPS was $0.55 per basic share and diluted share.

Bryan Shinn, president and chief executive officer commented, "I'm extremely pleased with the performance of our oil and gas and industrial businesses. The robust demand we continue to see in oil and gas drove higher pricing and margins for both of our operating units during the quarter. We're moving quickly to add more capacity through both Greenfield developments and M&A to assure adequate supply for our customers going forward."

Second Quarter 2014 Highlights

Total Company

• Revenue totaled $205.8 million compared with $129.8 million for the same period last year and up 14% sequentially over the first quarter of 2014.
• Overall sales volumes increased to 2.6 million tons, a 27% improvement over the second quarter of 2013 and up 13% sequentially over the first quarter of 2014.
• Contribution margin for the quarter was $74.7 million compared with $50.8 million in the same period of the prior year and up 36% sequentially over the first quarter of 2014.
• Adjusted EBITDA was $59.8 million versus $ 41.0 million for the same period last year and representing a 43% increase sequentially over the first quarter of 2014.

Oil and Gas

• Revenue for the quarter totaled $149.3 million compared with $77.7 million in the same period in 2013.
• Overall tons sold totaled 1.5 million tons compared with 988 thousand tons sold in the second quarter of 2013.
• 68% of tons sold were made in basin via transloads compared with 42% in the second quarter of 2013.
• Segment contribution margin was $57.1 million versus $35.5 million in the second quarter of 2013.

Industrial and Specialty Products

• Revenue for the quarter totaled $56.5 million compared with $52.2 million for the same period in 2013.
• Overall tons sold totaled 1.095 million tons compared with 1.060 million tons sold in the same period last year.
• Segment contribution margin was $17.6 million compared with $15.4 million in the second quarter of 2013.

Capital Update

As of June 30, 2014, the Company had $181.1 million in cash and cash equivalents and short term investments and $46.7 million available under its credit facilities. Total long-term debt at June 30, 2014 totaled $366.2 million. Capital expenditures in the second quarter totaled $7.4 million and were associated largely with the Company's investment in a new frac sand mine and plant located near Utica, Illinois, a new transload facility under construction in Odessa, Texas and other maintenance capital projects.

Outlook and Guidance

The Company is increasing the guidance it provided in its press release dated April 29, 2014. For the full-year 2014, the Company now anticipates Adjusted EBITDA in the range of $215 million to $225 million, which includes a small contribution from our Cadre acquisition. The Company is also revising guidance for capital expenditures and its full-year effective tax rate. The Company now expects capital expenditures in the range of $95 million to $105 million and an effective tax rate of approximately 27 percent.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, July 30, 2014 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 (855) 325-2605 or for international callers, (970) 315-0758. The conference passcode is 71727515. A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056. The passcode for the replay is 71727515. The replay of the call will be available through August 29, 2014.

About U.S. Silica

U.S. Silica Holdings, Inc., a member of the Russell 2000 and S&P Small Cap 600 indexes, is one of the largest domestic producers of commercial silica, a specialized mineral that is a critical input into the oil and gas proppants end market.  The company also processes ground and unground silica sand for a variety of industrial and specialty products end markets such as glass, fiberglass, foundry molds, municipal filtration and recreational uses. During its 100-plus 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 250 products to customers across these end markets. U.S. Silica Holdings, Inc. is headquartered in Frederick, MD.

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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

( dollars in thousands, except per share amounts) 

Three Months Ended June 30,

2014

2013

Sales

$           205,801

$           129,828

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

132,417

80,297

Operating expenses

Selling, general and administrative

19,267

10,099

Depreciation, depletion and amortization

10,341

8,890

29,608

18,989

Operating income

43,776

30,542

Other (expense) income

Interest expense

(4,013)

(3,535)

Other income, net, including interest income

221

63

(3,792)

(3,472)

Income before income taxes

39,984

27,070

Income tax expense

(11,330)

(6,878)

Net income

$             28,654

$             20,192

Earnings per share:

Basic

$                 0.53

$                 0.38

Diluted

$                 0.53

$                 0.38

 

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands) 

June 30, 

December 31,

2014

2013

(unaudited)

(audited)

ASSETS

Current Assets:

Cash and cash equivalents

$             105,974

$               78,256

Short-term investments

75,101

74,980

Accounts receivable, net

108,452

75,207

Inventories, net

58,650

64,212

Prepaid expenses and other current assets

8,936

6,347

Deferred income tax, net

18,582

17,737

Income tax deposits

5,074

-

Total current assets

380,769

316,739

Property, plant and mine development, net

441,450

442,116

Debt issuance costs, net

4,815

5,255

Goodwill

68,403

68,403

Trade names

10,436

10,436

Customer relationships, net

5,915

6,120

Other assets

11,073

14,392

Total assets

$             922,861

$             863,461

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Book overdraft

$                  3,466

$                  4,659

Accounts payable

52,826

37,376

Dividends payable

6,770

6,709

Accrued liabilities

13,020

10,823

Accrued interest

41

41

Current portion of long-term debt

3,489

3,488

Income tax payable

-

1,037

Total current liabilities

79,612

64,133

Long-term debt

366,218

367,963

Liability for pension and other post-retirement benefits

34,431

36,802

Deferred income tax, net

74,203

71,318

Other long-term obligations

14,913

13,951

Total liabilities

569,377

554,167

Commitments and contingencies

Stockholders' Equity:

Preferred stock

-

-

Common stock

538

534

Additional paid-in capital

185,155

174,799

Retained earnings

171,540

137,978

Treasury stock, at cost

-

-

Accumulated other comprehensive loss

(3,749)

(4,017)

Total stockholders' equity

353,484

309,294

Total liabilities and stockholders' equity

$             922,861

$             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 June 30,

2014

2013

(in thousands)

Sales:

Oil & Gas Proppants

$                   149,331

$               77,672

Industrial & Specialty Products

56,470

52,156

Total sales

205,801

129,828

Segment contribution margin:

Oil & Gas Proppants

57,060

35,475

Industrial & Specialty Products

17,615

15,358

Total segment contribution margin

74,675

50,833

Operating activities excluded from segment cost of goods sold

(1,291)

(1,302)

Selling, general and administrative

(19,267)

(10,099)

Depreciation, depletion and amortization

(10,341)

(8,890)

Interest expense

(4,013)

(3,535)

Other income, net, including interest income

221

63

Income (loss) before income taxes

$                     39,984

$               27,070

 

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, it 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 June 30,

2014

2013

(in thousands)

Net income

$               28,654

$               20,192

Total interest expense, net of interest income

3,811

3,522

Provision for taxes

11,330

6,878

Total depreciation, depletion and amortization expenses

10,341

8,890

   EBITDA

54,136

39,482

Non-cash incentive compensation(1)

2,053

704

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

381

586

Other adjustments allowable under our existing credit agreement(3)

3,215

213

   Adjusted EBITDA

$               59,785

$               40,985

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

(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 M- Pension and Post-retirement Benefits to our Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. 

(3) Reflects miscellaneous adjustments permitted under our existing credit agreement, including such items as expenses related to offerings of our common stock by our former controlling shareholder, business development activities related to our growth and expansion initiatives, one-time litigation fees, expenses related to debt refinancing and employment agency fees. 

 

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

 

SOURCE U.S. Silica Holdings, Inc.