EX-99.1 2 d485671dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

 

LOGO

News Release

U.S. Silica Holdings, Inc. Announces Third Quarter 2017 Results

 

    Revenue of $345 million up 19% sequentially

 

    Net income of $0.51 per basic share before adjustments

 

    Tons sold in Oil and Gas a record 3.1 million tons

 

    Board of Directors approves new Share Repurchase Program up to $100 million

Frederick, MD, Nov. 6, 2017 – U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $41.3 million or $0.51 per basic share, or $0.50 per diluted share, for the third quarter ended Sept. 30, 2017 compared with a net loss of $11.3 million or $(0.17) per basic and diluted share for the third quarter of 2016. The third quarter results were negatively impacted by $2.4 million in business development related expenses. Excluding this expense, net of the $0.9 million tax effect, EPS was $0.53 per basic share for the quarter.

“Robust market demand in our Oil and Gas business, coupled with record profitability from our Industrial and Specialty Products segment drove an exceptionally strong performance in the third quarter that led to a record Adjusted EBITDA for the total Company,” said Bryan Shinn, president and chief executive officer.

“In Oil and Gas, volumes were up 15% sequentially to a record 3.1 million tons, with capacity utilization running at nearly 100%. Pricing was up over 5% sequentially and our contribution margin per ton in Oil and Gas was $30.54. Our Sandbox unit had a very strong performance as well, exiting the quarter fully utilized with 52 crews online. Additionally, we signed five new long-term supply agreements during the quarter for both Northern White and local and regional sand, many of which included capacity reservation fees.

“Our ISP segment had record contribution margin during the quarter of $24 million, driven by a combination of strategic price increases and a better mix of higher margin products sold during the quarter,’’ Shinn concluded.

Third Quarter 2017 Highlights

Total Company

 

    Revenue totaled $345 million compared with $137.7 million for the same period last year, an increase of 151% on a year-over-year basis and an increase of 19% sequentially over the second quarter of 2017.

 

    Overall tons sold totaled 4.075 million, up 63% compared to 2.493 million tons sold in the third quarter of 2016 and an increase of 12% sequentially over the second quarter of 2017.

 

    Contribution margin for the quarter was $120.1 million, up 510% compared with $19.7 million in the same period of the prior year and up 27% sequentially from the second quarter of 2017.

 

    Adjusted EBITDA was $96.7 million compared with Adjusted EBITDA of $8.3 million in the third quarter of 2016 and $75.1 million in the second quarter of 2017.

Oil and Gas

 

    Revenue totaled $286.4 million compared with $86.8 million for the same period of 2016, up 230% on a year-over-year basis and an increase of 22% sequentially from the second quarter of 2017.

 

    Tons sold totaled 3.147 million, an increase of 95% over the 1.617 million tons sold in the third quarter of 2016, and an increase of 15% sequentially over the 2.745 million tons sold in the second quarter of 2017.

 

    66% of tons sold were in basin compared with the 62% sold in basin in the second quarter of 2017.

 

    Segment contribution margin was $96.1 million versus a loss of $1.9 million in the third quarter of 2016, and an increase of 35% over the $71.2 million in the second quarter of 2017.


Industrial and Specialty Products

 

    Revenue in the third quarter of 2017 totaled $58.7 million, an increase of 15% over the third quarter of 2016, and up 6% over the second quarter of 2017.

 

    Tons sold totaled 0.928 million, up 6% over the 0.876 million tons sold in the same period of 2016, and an increase of 4% compared with the second quarter of 2017.

 

    Segment contribution margin was $24 million compared to $21.6 million in the third quarter of 2016, an increase of 11% on a year-over-year basis and up 3% sequentially over the second quarter of 2017.

Capital Update and Share Repurchase Plan

As of Sept. 30, 2017, the Company had $463.7 million in cash and cash equivalents and $45.2 million available under its credit facilities. Total debt at Sept. 30, 2017 was $511.3 million. Capital expenditures in the third quarter totaled $130.7 million, and were associated largely with our previously announced growth projects and other maintenance and cost improvement capital projects.

Subsequent to the end of the quarter, the Board of Directors approved a new Share Repurchase Plan to repurchase up to $100 million of the Company’s common stock. Commenting on the action, Shinn noted that, “U.S. Silica is the only Company in the sand space that has had the financial strength and flexibility to continually pay a quarterly dividend, fund growth projects, complete accretive acquisitions and make share repurchases, all while maintaining an industry-leading balance sheet.”

Outlook and Guidance

The Company anticipates that its capital expenditures for the full year 2017 will be at the high end of the second quarter guidance or approximately $375 million.

For the fourth quarter, we expect that sand volumes will likely be up in Oil & Gas but perhaps restrained by some frac crews extending their holiday time off, plant downtime due to planned maintenance and brief outages for capacity expansion work at a few mines. We do expect to see continued pricing upside in Oil & Gas during the fourth quarter. Contract interest is at an all-time high and we will continue to prioritize customers with capacity reservation fee contracts and long term partners in this tight market. For Sandbox, we expect strong growth and plan to increase from the 52 crews online at the end of the third quarter to 70 active crews by year end.

For 2018, the Company expects another strong year, driven by record demand for frac sand, increased opportunities for Sandbox and increased market penetration for some of ISP’s new, higher margin products. We are forecasting total industry demand for frac sand to be in the range of 90 million to 100 million tons, assuming a rig count that is essentially flat with today’s levels and proppant per well up 15-20% year-over-year. Additionally, the Company expects to invest significantly in Sandbox and is targeting to have over 100 crews online exiting 2018. Finally, ISP, which has grown contribution margin at a 10% CAGR for the last five years, is expected to continue this trend in 2018 with increased market penetration of new, higher margin products like our cool roof granules and by the introduction of additional attractive new products.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, Nov. 7, 2017 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, executive 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 13672060. The replay will be available through Dec. 7, 2017.

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 117-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 240 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.


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 and truckload drivers; (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, trucking 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.

SELECTED FINANCIAL DATA FROM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; dollars in thousands, except per share amounts)

 

     Three Months Ended  
     September 30, 2017     June 30, 2017     September 30, 2016  

Total sales

   $ 345,023     $ 290,465     $ 137,748  

Total cost of sales (excluding depreciation, depletion and amortization)

     227,923       197,411       119,426  

Operating expenses:

      

Selling, general and administrative

     29,602       26,012       18,472  

Depreciation, depletion and amortization

     24,673       23,626       17,175  
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     54,275       49,638       35,647  
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

     62,825       43,416       (17,325

Other income (expense):

      

Interest expense

     (8,347     (8,105     (6,684

Other income (expense), net, including interest income

     1,502       1,258       493  
  

 

 

   

 

 

   

 

 

 

Total other expense

     (6,845     (6,847     (6,191
  

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     55,980       36,569       (23,516

Income tax (expense) benefit

     (14,707     (7,110     12,177  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 41,273     $ 29,459     $ (11,339
  

 

 

   

 

 

   

 

 

 

Earnings (loss) per share:

      

Basic

   $ 0.51     $ 0.36     ($ 0.17

Diluted

   $ 0.50     $ 0.36     ($ 0.17

Weighted average shares outstanding:

      

Basic

     81,121       81,087       66,676  

Diluted

     81,783       81,945       66,676  

Dividends declared per share

   $ 0.06     $ 0.06     $ 0.06  


U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

     September 30, 2017     December 31, 2016  
     (unaudited)     (audited)  
ASSETS  

Current Assets:

    

Cash and cash equivalents

   $ 463,650     $ 711,225  

Accounts receivable, net

     206,099       89,006  

Inventories, net

     86,174       78,709  

Prepaid expenses and other current assets

     15,124       12,323  

Income tax deposits

     —         1,682  
  

 

 

   

 

 

 

Total current assets

     771,047       892,945  
  

 

 

   

 

 

 

Property, plant and mine development, net

     1,049,805       783,313  

Goodwill

     301,744       240,975  

Trade names

     33,068       32,318  

Intellectual property, net

     64,836       57,270  

Customer relationships, net

     51,433       50,890  

Other assets

     14,973       15,509  
  

 

 

   

 

 

 

Total assets

   $ 2,286,906     $ 2,073,220  
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY  

Current Liabilities:

    

Accounts payable

   $ 140,188     $ 70,778  

Dividends payable

     5,231       5,221  

Accrued liabilities

     17,494       13,034  

Accrued interest

     123       169  

Current portion of long-term debt

     4,735       4,821  

Current portion of capital leases

     1,090       2,237  

Current portion of deferred revenue

     33,089       13,700  

Income tax payable

     8,341       —    
  

 

 

   

 

 

 

Total current liabilities

     210,291       109,960  
  

 

 

   

 

 

 

Long-term debt, net

     506,569       508,417  

Deferred revenue

     89,373       58,090  

Obligations under capital lease

     168       717  

Liability for pension and other post-retirement benefits

     52,472       56,746  

Deferred income taxes, net

     60,735       50,075  

Other long-term obligations

     18,503       15,925  
  

 

 

   

 

 

 

Total liabilities

     938,111       799,930  
  

 

 

   

 

 

 

Stockholders’ Equity:

    

Preferred stock

     —         —    

Common stock

     812       811  

Additional paid-in capital

     1,140,554       1,129,051  

Retained earnings

     221,132       163,173  

Treasury stock, at cost

     —         (3,869

Accumulated other comprehensive loss

     (13,703     (15,876
  

 

 

   

 

 

 

Total stockholders’ equity

     1,348,795       1,273,290  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,286,906     $ 2,073,220  
  

 

 

   

 

 

 


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 net income (loss) the most directly comparable GAAP financial measure, to segment contribution margin.

 

     For the Three Months Ended  
     September 30, 2017      June 30, 2017      September 30, 2016  
     (dollars in thousands)  

Sales:

        

Oil & Gas Proppants

   $ 286,369      $ 235,018      $ 86,782  

Industrial & Specialty Products

     58,654        55,447        50,966  
  

 

 

    

 

 

    

 

 

 

Total sales

     345,023        290,465        137,748  

Segment contribution margin:

        

Oil & Gas Proppants

     96,087        71,222        (1,897

Industrial & Specialty Products

     23,978        23,267        21,587  
  

 

 

    

 

 

    

 

 

 

Total segment contribution margin

     120,065        94,489        19,690  

Operating activities excluded from segment cost of sales

     (2,965      (1,435      (1,368

Selling, general and administrative

     (29,602      (26,012      (18,472

Depreciation, depletion and amortization

     (24,673      (23,626      (17,175

Interest expense

     (8,347      (8,105      (6,684

Other income (loss), net, including interest income

     1,502        1,258        493  

Income tax (expense) benefit

     (14,707      (7,110      12,177  
  

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 41,273      $ 29,459      $ (11,339
  

 

 

    

 

 

    

 

 

 


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 (loss) the most directly comparable GAAP financial measure, to Adjusted EBITDA:

 

     For the Three Months Ended  
     September 30, 2017      June 30, 2017      September 30, 2016  
     (dollars in thousands)  

Net income (loss)

   $ 41,273      $ 29,459      $ (11,339

Total interest expense, net of interest income

     6,900        6,641        6,211  

Provision for taxes

     14,707        7,110        (12,177

Total depreciation, depletion and amortization expenses

     24,673        23,626        17,175  
  

 

 

    

 

 

    

 

 

 

EBITDA

     87,553        66,836        (130

Non-cash incentive compensation(1)

     6,567        6,442        3,720  

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

     194        240        (184

Business development related expenses(3)

     2,355        1,543        4,667  

Other adjustments allowable under our existing credit agreements(4)

     7        11        185  
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 96,676      $ 75,072      $ 8,258  
  

 

 

    

 

 

    

 

 

 

 

(1) Reflects equity-based compensation expense.
(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 L - Pension and Post-retirement Benefits to our Financial Statements in Part 1, Item 1 of this 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.


Investor Contacts

Michael Lawson

Vice President of Investor Relations and Corporate Communications

301-682-0304

lawsonm@ussilica.com

Nick Shaver

Investor Relations Manager

281-394-9630

shavern@ussilica.com