U.S. Silica Holdings, Inc. Announces First Quarter 2015 Results
- First quarter revenue of $204.0 million - Oil and Gas profitability up year-over-year but down sequentially - Industrial and Specialty Products profitability up year-over-year and sequentially - Generated positive operating cash flow in the quarter of $19.8 million
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, 2015
December 31, 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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