EX-99.1 2 d537299dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

News Release

U.S. Silica Holdings, Inc. Announces Fourth Quarter and Full Year 2017 Results

 

    Fourth quarter revenue of $360.6 million and full year revenue of $1.24 billion

 

    Net income for the quarter of $0.89 per basic share and $1.79 per basic share for the full year

 

    U.S. tax reform resulted in a deferred income tax benefit of $35.8 million or $0.44 per basic share for the year ended Dec. 31, 2017

 

    Record 15.1 million tons sold Company-wide in 2017

 

    Capital expenditures in 2018 expected to be in the range of $325 million to $350 million

Frederick, Md., Feb. 21, 2018 – U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $72.0 million or $0.89 per basic share and $0.88 per diluted share for the fourth quarter ended Dec. 31, 2017, compared with a net loss of $6.9 million or $(0.09) per basic and diluted share for the fourth quarter of 2016. The fourth quarter results included a deferred income tax benefit of $35.8 million or $0.44 per basic share as a result of U.S. tax reform legislation passed in December 2017. The fourth quarter results were also negatively impacted by $9.9 million or $0.07 per basic share of business development-related expense, resulting in adjusted EPS for the quarter of $0.52 per basic share.

“We sold a record 3.2 million tons in Oil & Gas during the quarter, with relatively flat total contribution margin dollars sequentially, as we experienced some cost increases and lower Sandbox crew utilization due to a transitory slowdown in customer activity around the holidays and periodic disruptions to our business from the extreme winter weather,’’ said Bryan Shinn, president and chief executive officer.

“The Industrial & Specialty Products business continued to outperform the market,’’ Shinn noted. “Quarterly contribution margin for ISP of $21.3 million was up 12% on a year-over-year basis. We believe the ISP business can continue to grow its bottom line results at multiples of GDP as it benefits from an increasing mix of higher margin products,’’ he said.

“Looking back at 2017 in total, I am very pleased with the record results we delivered across the company and the significant progress the U.S. Silica team made toward our stated goal of substantially growing the profitability of our enterprise,” he concluded.

Full Year 2017 Highlights

Total Company

 

    Revenue totaled $1.24 billion compared with $559.6 million for the full year of 2016, an increase of 122%.

 

    Net income of $145.2 million or $1.79 per basic and $1.77 per diluted share compared with net loss of $41.1 million or $(0.63) per basic and diluted share for the full year 2016.

 

    Overall tons sold totaled 15.1 million tons compared with 9.9 million tons for the full year 2016.

 

    Contribution margin was $390.8 million, compared to $90.4 million for the full year 2016.

 

    Adjusted EBITDA was $307.7 million compared with Adjusted EBITDA of $39.6 million for the full year 2016.


Fourth Quarter 2017 Highlights

Total Company

 

    Revenue totaled $360.6 million compared with $182.4 million for the same period last year, an increase of 98% on a year-over-year basis and an increase of 5% sequentially over the third quarter of 2017.

 

    Overall tons sold totaled 4.022 million, up 40% compared to 2.872 million tons sold in the fourth quarter of 2016 and relatively flat sequentially with the third quarter of 2017.

 

    Contribution margin for the quarter was $117.1 million, up 212% compared with $37.5 million in the same period of the prior year and down 2% sequentially from the third quarter of 2017.

 

    Adjusted EBITDA was $93.2 million compared with Adjusted EBITDA of $20.7 million in the fourth quarter of 2016 and $96.7 million in the third quarter of 2017.

Oil and Gas

 

    Revenue totaled $306.0 million compared with $137.0 million for the same period of 2016, up 123% on a year-over-year basis and an increase of 7% sequentially from the third quarter of 2017.

 

    Tons sold totaled 3.171 million, an increase of 52% over the 2.081 million tons sold in the fourth quarter of 2016 and up slightly from the 3.147 million tons sold in the third quarter of 2017.

 

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

 

    Segment contribution margin was $95.8 million versus $18.5 million in the fourth quarter of 2016, and essentially flat with the $96.1 million in the third quarter of 2017.

Industrial and Specialty Products

 

    Revenue in the fourth quarter of 2017 totaled $54.5 million, an increase of 20% over the fourth quarter of 2016, and down 7% over the third quarter of 2017 due to normal seasonality.

 

    Tons sold totaled 0.851 million, an increase of 7% compared to the 0.792 million tons sold in the same period of 2016, and down 8% compared with the third quarter of 2017.

 

    Segment contribution margin was $21.3 million compared to $19.0 million in the fourth quarter of 2016, an increase of 12% on a year-over-year basis and down 11% sequentially from the third quarter of 2017.

Capital Update

As of Dec. 31, 2017, the Company had $384.6 million in cash and cash equivalents and $45.5 million available under its credit facilities. Total debt at Dec. 31, 2017 was $511.2 million. Capital expenditures in the fourth quarter totaled $95.1 million, and were associated largely with engineering, procurement and construction of the Company’s growth projects and maintenance and cost improvement capital projects. During fiscal 2017, the Company repurchased approximately $25 million in common shares and paid $20 million in dividends.


Outlook and Guidance

The Company anticipates that its capital expenditures for 2018 will be in the range of $325 million to $350 million, mostly due to the completion of capacity expansion projects started in 2017 and continued investments in Sandbox. The Company’s full year 2018 tax rate is expected to be in the range of 18% to 20%.

For the first quarter, we expect that volumes and pricing in Oil & Gas will be flat compared with the fourth quarter of 2017. Many of our customers were slow to restart completions after the holidays. Additionally, severe winter weather, especially early in the quarter, slowed completions activity and in some cases caused disruptions in customer supply chains. We believe these issues are transitory and in fact, have already seen a pickup in activity in February in both sand sales and Sandbox.

For ISP, we expect first quarter volumes may be up slightly from the fourth quarter of 2018 with the restart of a large customer’s plant and some additional new business. We also believe we will see some positive impact on margins from the previously announced price increases put into effect January 1st on about 50% of ISP total sales.

Conference Call

U.S. Silica will host a conference call for investors today, Feb. 21, 2018 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 Merrill, 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 13675931. The replay will be available through March 21, 2018.

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 118-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  
     December 31, 2017     September 30, 2017     December 31, 2016  

Total sales

   $ 360,566     $ 345,023     $ 182,373  

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

     254,706       227,923       148,411  

Operating expenses:

      

Selling, general and administrative

     29,637       29,602       19,167  

Depreciation, depletion and amortization

     27,335       24,673       21,194  
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     56,972       54,275       40,361  
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

     48,888       62,825       (6,399

Other income (expense):

      

Interest expense

     (7,244     (8,347     (7,998

Other income (expense), net, including interest income

     1,525       1,502       867  
  

 

 

   

 

 

   

 

 

 

Total other expense

     (5,719     (6,845     (7,131
  

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     43,169       55,980       (13,530

Income tax (expense) benefit

     28,783       (14,707     6,588  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 71,952     $ 41,273     $ (6,942
  

 

 

   

 

 

   

 

 

 

Earnings (loss) per share:

      

Basic

   $ 0.89     $ 0.51     $ (0.09

Diluted

   $ 0.88     $ 0.50     $ (0.09

Weighted average shares outstanding:

      

Basic

     81,014       81,121       75,539  

Diluted

     81,921       81,783       75,539  

Dividends declared per share

   $ 0.06     $ 0.06     $ 0.06  
     Year Ended        
     December 31, 2017     December 31, 2016        

Total sales

   $ 1,240,851     $ 559,625    

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

     867,515       477,295    

Operating expenses:

      

Selling, general and administrative

     107,592       67,727    

Depreciation, depletion and amortization

     97,233       68,134    
  

 

 

   

 

 

   

Total operating expenses

     204,825       135,861    
  

 

 

   

 

 

   

Operating income (loss)

     168,511       (53,531  

Other income (expense):

      

Interest expense

     (31,342     (27,972  

Other income (expense), net, including interest income

     (643     3,758    
  

 

 

   

 

 

   

Total other expense

     (31,985     (24,214  
  

 

 

   

 

 

   

Income (loss) before income taxes

     136,526       (77,745  

Income tax (expense) benefit

     8,680       36,689    
  

 

 

   

 

 

   

Net income (loss)

   $ 145,206     $ (41,056  
  

 

 

   

 

 

   

Earnings (loss) per share:

      

Basic

   $ 1.79     $ (0.63  

Diluted

   $ 1.77     $ (0.63  

Weighted average shares outstanding:

      

Basic

     81,051       65,037    

Diluted

     81,960       65,037    

Dividends declared per share

   $ 0.25     $ 0.25    


U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

     December 31, 2017     December 31, 2016  

ASSETS

 

Current Assets:

    

Cash and cash equivalents

   $ 384,567     $ 711,225  

Accounts receivable, net

     212,586       89,006  

Inventories, net

     92,376       78,709  

Prepaid expenses and other current assets

     13,715       12,323  

Income tax deposits

     —         1,682  
  

 

 

   

 

 

 

Total current assets

     703,244       892,945  
  

 

 

   

 

 

 

Property, plant and mine development, net

     1,169,155       783,313  

Goodwill

     272,079       240,975  

Trade names

     33,068       32,318  

Intellectual property, net

     64,786       57,270  

Customer relationships, net

     52,153       50,890  

Other assets

     12,798       15,509  
  

 

 

   

 

 

 

Total assets

   $ 2,307,283     $ 2,073,220  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current Liabilities:

    

Accounts payable

   $ 148,772     $ 70,778  

Dividends payable

     5,229       5,221  

Accrued liabilities

     16,841       13,034  

Accrued interest

     199       169  

Current portion of long-term debt

     4,504       4,821  

Current portion of capital leases

     706       2,237  

Current portion of deferred revenue

     36,128       13,700  

Income tax payable

     1,566       —    
  

 

 

   

 

 

 

Total current liabilities

     213,945       109,960  
  

 

 

   

 

 

 

Long-term debt, net

     506,732       508,417  

Deferred revenue

     82,286       58,090  

Obligations under capital lease

     —         717  

Liability for pension and other post-retirement benefits

     52,867       56,746  

Deferred income taxes, net

     29,856       50,075  

Other long-term obligations

     25,091       15,925  
  

 

 

   

 

 

 

Total liabilities

     910,777       799,930  
  

 

 

   

 

 

 

Stockholders’ Equity:

    

Preferred stock

     —         —    

Common stock

     812       811  

Additional paid-in capital

     1,147,084       1,129,051  

Retained earnings

     287,992       163,173  

Treasury stock, at cost

     (25,456     (3,869

Accumulated other comprehensive loss

     (13,926     (15,876
  

 

 

   

 

 

 

Total stockholders’ equity

     1,396,506       1,273,290  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,307,283     $ 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  
     December 31, 2017     September 30, 2017     December 31, 2016  
     (dollars in thousands)  

Sales:

      

Oil & Gas Proppants

   $ 306,020     $ 286,369     $ 136,977  

Industrial & Specialty Products

     54,546       58,654       45,396  
  

 

 

   

 

 

   

 

 

 

Total sales

     360,566       345,023       182,373  

Segment contribution margin:

      

Oil & Gas Proppants

     95,823       96,087       18,486  

Industrial & Specialty Products

     21,319       23,978       19,021  
  

 

 

   

 

 

   

 

 

 

Total segment contribution margin

     117,142       120,065       37,507  

Operating activities excluded from segment cost of sales

     (11,282     (2,965     (3,545

Selling, general and administrative

     (29,637     (29,602     (19,167

Depreciation, depletion and amortization

     (27,335     (24,673     (21,194

Interest expense

     (7,244     (8,347     (7,998

Other income (expense), net, including interest income

     1,525       1,502       867  

Income tax (expense) benefit

     28,783       (14,707     6,588  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 71,952     $ 41,273     $ (6,942
  

 

 

   

 

 

   

 

 

 
     Year Ended        
     December 31, 2017     December 31, 2016        
     (dollars in thousands)        

Sales:

      

Oil & Gas Proppants

   $ 1,020,365     $ 362,550    

Industrial & Specialty Products

     220,486       197,075    
  

 

 

   

 

 

   

Total sales

     1,240,851       559,625    

Segment contribution margin:

      

Oil & Gas Proppants

     301,972       11,445    

Industrial & Specialty Products

     88,781       78,988    
  

 

 

   

 

 

   

Total segment contribution margin

     390,753       90,433    

Operating activities excluded from segment cost of sales

     (17,417     (8,103  

Selling, general and administrative

     (107,592     (67,727  

Depreciation, depletion and amortization

     (97,233     (68,134  

Interest expense

     (31,342     (27,972  

Other income (expense), net, including interest income

     (643     3,758    

Income tax (expense) benefit

     8,680       36,689    
  

 

 

   

 

 

   

Net income (loss)

   $ 145,206     $ (41,056  
  

 

 

   

 

 

   


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 supplement ally. 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  
     December 31, 2017     September 30, 2017     December 31, 2016  
     (dollars in thousands)  

Net income (loss)

   $ 71,952     $ 41,273     $ (6,942

Total interest expense, net of interest income

     6,019       6,900       7,048  

Provision for taxes

     (28,783     14,707       (6,588

Total depreciation, depletion and amortization expenses

     27,335       24,673       21,194  
  

 

 

   

 

 

   

 

 

 

EBITDA

     76,523       87,553       14,712  

Non-cash incentive compensation(1)

     6,531       6,567       3,032  

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

     308       194       260  

Business development related expenses(3)

     9,904       2,355       2,571  

Other adjustments allowable under our existing credit agreements(4)

     (23     7       96  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 93,243     $ 96,676     $ 20,671  
  

 

 

   

 

 

   

 

 

 
     Year Ended        
     December 31, 2017     December 31, 2016        
     (dollars in thousands)        

Net income (loss)

   $ 145,206     $ (41,056  

Total interest expense, net of interest income

     25,871       25,779    

Provision for taxes

     (8,680     (36,689  

Total depreciation, depletion and amortization expenses

     97,233       68,134    
  

 

 

   

 

 

   

EBITDA

     259,630       16,168    

Non-cash incentive compensation(1)

     25,050       12,107    

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

     1,231       1,040    

Business development related expenses(3)

     15,288       8,206    

Other adjustments allowable under our existing credit agreements(4)

     6,504       2,033    
  

 

 

   

 

 

   

Adjusted EBITDA

   $ 307,703     $ 39,554    
  

 

 

   

 

 

   

 

(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 M - Pension and Post-retirement Benefits to our Financial Statements in Part II, Item 8 of our Annual Report on Form-10K.
(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