U.S. SILICA HOLDINGS, INC. FREDERICK, Md., April 28, 2015 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $14.8 million or $0.28 per basic and $0.27 per diluted share for the first quarter ended March 31, 2015 compared with net income of $18.4 million or $0.34 per basic share and diluted share for the first quarter of 2014. Earnings per share during the quarter were negatively impacted by $8.3 million of business development expenses, $7.6 million of which was related to an adverse, unanticipated arbitration ruling. The Company also incurred $1.4 million in restructuring costs for actions designed to help bring the business more in line with current market conditions. Excluding these additional expenses, EPS for the quarter was $0.40 per basic share.
"I am very proud of our performance in the quarter against the backdrop of rapidly falling oil prices and declining rig count. Our results demonstrate the strength of our business model, assets, team and customer base," said Bryan Shinn, president and chief executive officer. "However, given the magnitude of the reduction in drilling and completions activity, we expect that volumes and pricing of frac sand will remain under pressure, resulting in lower profitability in the second quarter. We will continue to work closely with our customers during this energy sector downturn to help them be more competitive and we expect to continue to gain market share," he added. "While we are clearly focused on maximizing near term business results, we are also continuing to focus on our longer term goals. Specifically, we plan to continue to strengthen our position in the oil and gas proppant market, grow and diversify our industrial business and prepare for future growth," Shinn noted.
First Quarter 2015 Highlights
Total Company
-- Revenue totaled $204.0 million compared with $180.1 million for the same
period last year, an increase of 13% year-over-year but an 18% decline
sequentially from the fourth quarter of 2014.
-- Overall tons sold increased to 2.7 million tons, a 16% improvement over
the first quarter of 2014 but a 12% decline sequentially from the fourth
quarter of 2014.
-- Contribution margin for the quarter was $67.7 million compared with
$54.8 million in the same period of the prior year, a 23% improvement
year-over-year but a decrease of 28% sequentially from the fourth
quarter of 2014.
-- Adjusted EBITDA was $51.3 million versus $41.9 million for the same
period last year, an increase of 22% on a year-over-year basis but a 23%
decline sequentially compared with the fourth quarter of 2014.
Oil and Gas
-- Revenue for the quarter totaled $148.8 million compared with $130.6
million in the same period in 2014, up 14% year-over-year but a 24%
decline sequentially from the fourth quarter of 2014.
-- 63% of tons sold were made in basin compared with 69% in the first
quarter of 2014 and 66% in the fourth quarter of 2014.
-- Overall tons sold totaled 1.7 million tons compared with 1.3 million
tons sold in the first quarter of 2014 and 2.0 million tons sold in the
fourth quarter of 2014.
-- Segment contribution margin was $52.2 million versus $41.6 million in
the first quarter of 2014, an increase of 25% on a year-over-year basis
but a decrease of 35% sequentially from the fourth quarter of 2014.
Industrial and Specialty Products
-- Revenue for the quarter totaled $55.2 million compared with $49.5
million for the same period in 2014, an increase of 12% year-over-year
and up 3% sequentially from the fourth quarter of 2014.
-- Overall tons sold totaled 1.0 million tons, an increase of 1% compared
with the first quarter of 2014 and a decrease of 4% sequentially
compared with the fourth quarter of 2014.
-- Segment contribution margin was $15.5 million compared with $13.2
million in the first quarter of 2014, an increase of 17% on a
year-over-year basis and up 15% sequentially from the fourth quarter of
2014.
Capital Update
As of March 31, 2015, the Company had $327.8 million in cash and cash equivalents and short term investments and $46.9 million available under its credit facilities. Total debt at March 31, 2015 was $494.2 million. Capital expenditures in the first quarter totaled $13.4 million and were associated largely with the Company's investment in a new frac sand mine and plant located near Fairchild, WI, a new transload facility near Odessa, Texas and other maintenance capital 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 it can gain more clarity around its customers' business activity levels and the associated demand for its products. Based on current market conditions, the Company anticipates that its capital expenditures for 2015 will be in a range of $60 million to $80 million.
Conference Call
U.S. Silica will host a conference call for investors tomorrow, April 29, 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. The conference ID number for the replay is 13606608. The replay of the call will be available through May 29, 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)
Three Months Ended March 31,
----------------------------
2015 2014
---- ----
Sales $203,958 $180,095
Cost of goods sold
(excluding depreciation,
depletion and
amortization) 138,653 126,770
Operating expenses
Selling, general and
administrative 26,961 15,445
Depreciation, depletion
and amortization 13,243 9,589
------ -----
40,204 25,034
------ ------
Operating income 25,101 28,291
Other (expense) income
Interest expense (6,836) (3,808)
Other income, net,
including interest income 11 38
--- ---
(6,825) (3,770)
------ ------
Income before income taxes 18,276 24,521
Income tax expense (3,453) (6,150)
------ ------
Net income $14,823 $18,371
======= =======
Earnings per share:
Basic $0.28 $0.34
Diluted $0.27 $0.34
U.S. SILICA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
March 31, December 31,
2015 2014
---- ----
ASSETS
Current Assets:
Cash and
cash
equivalents $252,555 $267,281
Short-term
investments 75,253 75,143
Accounts
receivable,
net 96,355 120,881
Inventories,
net 65,035 66,712
Prepaid
expenses
and other
current
assets 10,775 9,267
Deferred
income
taxes, net 23,776 22,295
Income tax
deposits - 746
Total
current
assets 523,749 562,325
------- -------
Property,
plant and
mine
development,
net 565,337 565,755
Goodwill 68,647 68,647
Trade names 14,914 14,914
Customer
relationships,
net 6,824 6,984
Other
assets 13,882 12,317
------ ------
Total
assets $1,193,353 $1,230,942
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Book
overdraft $6,756 $4,215
Accounts
payable 56,699 85,781
Dividends
payable 6,738 6,805
Accrued
liabilities 13,922 17,911
Accrued
interest 60 60
Current
portion of
long-term
debt 3,321 3,329
Deferred
revenue 26,771 26,771
Income tax
payable 4,997 -
----- ---
Total
current
liabilities 119,264 144,872
------- -------
Long-term
debt 490,873 491,757
Deferred
revenue 59,224 64,722
Liability
for
pension
and other
post-
retirement
benefits 61,554 59,932
Deferred
income
taxes, net 47,918 49,749
Other long-
term
obligations 16,472 16,094
------ ------
Total
liabilities 795,305 827,126
------- -------
Stockholders' Equity:
Preferred
stock - -
Common
stock 540 539
Additional
paid-in
capital 193,140 191,086
Retained
earnings 240,683 232,551
Treasury
stock, at
cost (16,156) (542)
Accumulated
other
comprehensive
loss (20,159) (19,818)
------- -------
Total
stockholders'
equity 398,048 403,816
------- -------
Total
liabilities
and
stockholders'
equity $1,193,353 $1,230,942
========== ==========
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 March 31,
---------------------
2015 2014
---- ----
(in thousands)
Sales:
Oil & Gas Proppants $148,753 $130,584
Industrial & Specialty Products 55,205 49,511
------ ------
Total sales 203,958 180,095
Segment contribution margin:
Oil & Gas Proppants 52,195 41,628
Industrial & Specialty Products 15,456 13,187
------ ------
Total segment contribution margin 67,651 54,815
Operating activities excluded from
segment cost of goods sold (2,346) (1,490)
Selling, general and administrative (26,961) (15,445)
Depreciation, depletion and
amortization (13,243) (9,589)
Interest expense (6,836) (3,808)
Other income, net, including interest
income 11 38
--- ---
Income before income taxes $18,276 $24,521
======= =======
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 March 31,
--------------------
2015 2014
---- ----
(in thousands)
Net income $14,823 $18,371
Total interest expense, net of
interest income 6,940 3,873
Provision for taxes 3,453 6,150
Total depreciation, depletion and
amortization expenses 13,243 9,589
------ -----
EBITDA 38,459 37,983
Non-cash incentive compensation(1) 2,090 1,330
Post-employment expenses
(excluding service costs)(2) 868 381
Business development related
expenses(3) 8,328 1,925
Other adjustments allowable under
our existing credit agreements(4) 1,538 309
Adjusted EBITDA $51,283 $41,928
======= =======
(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 N - Pension and Post-
retirement Benefits to our
Financial Statements in Part 1,
Item 1 in our Quarterly Report on
Form 10-Q.
(3) Reflects expenses related to
business development activities
in connection with our growth and
expansion initiatives.
(4) Reflects miscellaneous adjustments
permitted under our existing
credit agreement, including such
items as restructuring costs and
employment agency fees.
Investor Contact:
Mike Lawson
Director of Investor Relations and Corporate Communications
301-682-0304
lawsonm@USSilica.com
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SOURCE U.S. Silica
