U.S. Silica Holdings, Inc. Announces First Quarter 2019 Results
KATY, Texas, May 1, 2019 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced a net loss of $19.3 million, or $(0.26) per basic and diluted share, for the first quarter ended March 31, 2019, compared with net income of $31.3 million, or $0.39 per basic and diluted share, for the first quarter of 2018. The first quarter results were negatively impacted by $8.6 million or $0.09 per share in costs related to plant startup and expansion expenses, $4.8 million or $0.05 per share related to merger and acquisition expenses, $1.0 million or $0.01 per share in contract termination costs and $3.6 million or $0.03 per share in other adjustments, resulting in adjusted EPS loss for the first quarter of $(0.08) per basic and diluted share.
"We're off to a strong start to 2019, driven by record results from our Sandbox unit, a solid quarter from our Industrial business and better than expected results from our Oil and Gas sand business, as we saw a resurgence in both volumes and pricing for Northern White sand that has continued into the second quarter,'' said Bryan Shinn, president and chief executive officer.
First Quarter 2019 Highlights
Total Company
-- Revenue of $378.7 million for the first quarter of 2019 compared with
$357.4 million in the fourth quarter of 2018, up 6% sequentially and 3%
over the first quarter of 2018.
-- Overall tons sold of 4.830 million for the first quarter of 2019
compared with 4.637 million tons sold in the fourth quarter of 2018, up
4% sequentially and 17% over the first quarter of 2018.
-- Contribution margin of $103.1 million for the first quarter of 2019
compared with $98.8 million in the fourth quarter of 2018, up 4%
sequentially and down 14% over the first quarter of 2018.
-- Adjusted EBITDA of $68.8 million for the first quarter of 2019 compared
with $68.0 million in the fourth quarter of 2018, up 1% sequentially and
down 28% from the first quarter of 2018.
Industrial and Specialty Products
-- Revenue of $118.3 million for the first quarter of 2019 compared with
$113.8 million in the fourth quarter of 2018, up 4% sequentially and up
110% over the first quarter of 2018.
-- Tons sold totaled 0.966 million for the first quarter of 2019 compared
with 0.933 million tons sold in the fourth quarter of 2018, up 4%
sequentially and 10% over the first quarter of 2018.
-- Segment contribution margin of $44.6 million, or $46.12 per ton, for the
first quarter of 2019 compared with $44.6 million in the fourth quarter
of 2018, flat sequentially and up 117% over the first quarter of 2018.
Oil & Gas
-- Revenue of $260.5 million for the first quarter of 2019 compared with
$243.5 million in the fourth quarter of 2018, up 7% sequentially and
down 17% over the first quarter of 2018.
-- Tons sold of 3.864 million for the first quarter of 2019 compared with
3.704 million tons sold in the fourth quarter of 2018, up 4%
sequentially and 19% over the first quarter of 2018.
-- Segment contribution margin of $58.6 million, or $15.16 per ton, for the
first quarter of 2019 compared with $54.3 million in the fourth quarter
of 2018, up 8% sequentially and down 41% from the first quarter of 2018.
Capital Update
As of March 31, 2019, the Company had $161.6 million in cash and cash equivalents and $95.2 million available under its credit facilities. Total debt outstanding under our Credit Facility as of March 31, 2019 was $1.267 billion. Capital expenditures in the first quarter totaled $44.4 million and were mainly for engineering, procurement and construction of our growth projects, primarily Lamesa and equipment to expand our Sandbox operations, and other maintenance and cost improvement capital projects. During the first quarter the company generated $10.9 million in cash flow from operations.
Outlook and Guidance
The Company is making no changes to its previous guidance for capital expenditures for 2019, which are expected to be in the range of $100 million to $125 million.
We believe a robust U.S. economy, supported by strong job growth and moderate interest rates, bodes well for many of our end-use markets in our Industrial business. First quarter GDP numbers recently released show the strongest rate of first quarter growth in four years, according to the Commerce Department. Despite some early weakness, housing starts are expected to strengthen through the remainder of 2019 and big-ticket residential remodeling activity is expected to stay strong nationwide according to the National Association of Home Builders and Metrostudy. U.S. auto sales are expected to decline modestly year-over-year, according to the Center for Automotive Research but sales of premium wine, an important filtration market for us are expected to grow between 4 and 8 percent, according to the State of the Wine Industry for 2019 by Silicon Valley Bank.
For Oil and Gas, starting with sand proppants, demand and pricing for Northern White sand began to strengthen in the first quarter, and we remain optimistic that we'll see heightened activity around Northern White sand in the coming quarters. We expect Oil and Gas sand volumes will grow low to mid-single digits sequentially, driven by the continued ramp in West Texas volumes and the reactivation of some of our Northern White sand capacity.
For Sandbox, we believe that load volumes should be up more than 15 percent sequentially. We have several recent customer wins and a very robust pipeline of potential new opportunities. We are also seeing a trend toward larger jobs as more of our business today is being conducted directly with E&P companies.
Conference Call
U.S. Silica will host a conference call for investors today, May 1, 2019 at 7:30 a.m. Central 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 13689413. The replay will be available through June 3, 2019.
About U.S. Silica
U.S. Silica Holdings, Inc. is a performance materials company and is a member of the Russell 2000 Index. The Company is a leading producer of commercial silica used in the oil and gas industry, and in a wide range of industrial applications. Over its 119-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 1,500 diversified products to customers across our end markets. U.S. Silica's wholly-owned subsidiaries include EP Minerals and SandBox Logistics(TM). EP Minerals is an industry leader in the production of products derived from diatomaceous earth, perlite, engineered clays, and non-activated clays. SandBox Logistics(TM) is a state-of-the-art leader in proppant storage, handling and well-site delivery, dedicated to making proppant logistics cleaner, safer and more efficient. The Company currently operates over 25 mines and production facilities. The Company is headquartered in Katy, Texas and has offices in Frederick, Maryland, Reno, Nevada and Chicago, Illinois.
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, outlook, guidance, 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 our products; (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 and/or mining; (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; (12) our ability to protect and enforce our intellectual property rights; and (13) 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
March 31, December 31, March 31,
2019 2018 2018
---
Total sales $
378,750 $
357,380 $
369,313
Total cost of sales (excluding depreciation, depletion and 297,538 287,038 260,910
amortization)
Operating expenses:
Selling, general and administrative 34,656 32,168 34,591
Depreciation, depletion and amortization 44,600 46,527 28,592
Goodwill and other asset impairments - 265,715
Total operating expenses 79,256 344,410 63,183
Operating income (loss) 1,956 (274,068) 45,220
Other (expense) income:
Interest expense (23,978) (21,281) (7,070)
Other income, net, including interest income 722 1,336 665
Total other expense (23,256) (19,945) (6,405)
(Loss) income before income taxes (21,300) (294,013) 38,815
Income tax benefit (expense) 1,972 37,938 (7,521)
Net (loss) income $
(19,328) $
(256,075) $
31,294
Less: Net (loss) income attributable to non-controlling interest (4) (13)
Net (loss) income attributable to U.S. Silica $
(19,324) $
(256,062) $
31,294
Holdings, Inc.
Earnings (loss) per share attributable to U.S. Silica Holdings, Inc.:
Basic $
(0.26) $
(3.44) $
0.39
Diluted $
(0.26) $
(3.44) $
0.39
Weighted average shares outstanding:
Basic 73,040 74,485 79,496
Diluted 73,040 74,485 80,309
Dividends declared per share $
0.06 $
0.06 $
0.06
U.S. SILICA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; dollars in thousands)
March 31, December 31,
2019 2018
---
ASSETS
Current Assets:
Cash and cash equivalents $
161,615 $
202,498
Accounts receivable, net 258,348 215,486
Inventories, net 143,149 162,087
Prepaid expenses and other current
assets 14,572 17,966
Income tax deposits 1,388 2,200
Total current assets 579,072 600,237
Property, plant and mine
development, net 1,820,102 1,826,303
Operating lease right-of-use
assets 209,699
Goodwill 273,524 261,340
Intangible assets, net 190,584 194,626
Other assets 16,459 18,334
Total assets $
3,089,440 $
2,900,840
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued
expenses $
223,611 $
216,400
Current portion of operating lease
liabilities 61,583
Current portion of long-term debt 13,112 13,327
Current portion of deferred revenue 28,838 31,612
Total current liabilities 327,144 261,339
Long-term debt, net 1,245,242 1,246,428
Deferred revenue 86,930 81,707
Liability for pension and other
post-retirement benefits 56,879 57,194
Deferred income taxes, net 131,053 137,239
Operating lease liabilities 149,040
Other long-term liabilities 59,054 64,629
Total liabilities 2,055,342 1,848,536
Stockholders' Equity:
Preferred stock -
Common stock 820 818
Additional paid-in capital 1,173,259 1,169,383
Retained earnings 43,920 67,854
Treasury stock, at cost (180,125) (178,215)
Accumulated other comprehensive loss (15,985) (15,020)
Total U.S. Silica Holdings, Inc.
stockholders' equity 1,021,889 1,044,820
Non-controlling interest 12,209 7,484
Total stockholders' equity 1,034,098 1,052,304
Total liabilities and stockholders'
equity $
3,089,440 $
2,900,840
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, the most directly comparable GAAP financial measure, to segment contribution margin.
Three Months Ended
March 31, December 31, March 31,
2019 2018 2018
Sales:
Oil & Gas Proppants $
260,477 $
243,546 $
312,930
Industrial & Specialty Products 118,273 113,834 56,383
Total sales 378,750 357,380 369,313
Segment contribution margin:
Oil & Gas Proppants 58,588 54,254 99,433
Industrial & Specialty Products 44,561 44,556 20,530
Total segment contribution margin 103,149 98,810 119,963
Operating activities excluded from segment cost of sales (21,937) (28,468) (11,560)
Selling, general and administrative (34,656) (32,168) (34,591)
Depreciation, depletion and amortization (44,600) (46,527) (28,592)
Goodwill and other asset impairments (265,715)
Interest expense (23,978) (21,281) (7,070)
Other income, net, including interest income 722 1,336 665
Income tax benefit (expense) 1,972 37,938 (7,521)
Net (loss) income $
(19,328) $
(256,075) $
31,294
Less: Net (loss) income attributable to non-controlling interest (4) (13)
Net (loss) income attributable to U.S. Silica Holdings, Inc. $
(19,324) $
(256,062) $
31,294
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:
(All amounts in thousands)
Three Months Ended
March 31, December 31, March 31,
2019 2018 2018
Net (loss) income attributable to U.S. Silica
Holdings, Inc. $
(19,324) $
(256,062) $
31,294
Total interest expense, net of interest income 22,920 21,446 5,855
Provision for taxes (1,972) (37,938) 7,521
Total depreciation, depletion and amortization
expenses 44,600 46,527 28,592
EBITDA 46,224 (226,027) 73,262
Non-cash incentive compensation (1) 4,045 3,725 6,254
Post-employment expenses (excluding service
costs) (2) 552 554 555
Merger and acquisition related expenses (3) 4,783 5,668 2,507
Plant capacity expansion expenses (4) 8,571 14,012 9,380
Contract termination expenses (5) 1,000 2,491
Goodwill and other asset impairments (6) 265,715
Business optimization projects (7) 6 54
Other adjustments allowable under the Credit
Agreement (8) 3,638 1,814 3,408
Adjusted EBITDA $
68,819 $
68,006 $
95,366
_________________
(1) Reflects equity-
based, non-cash
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.
Non-service net
periodic benefit
costs are not
considered
reflective of our
operating
performance because
these costs do not
exclusively
originate from
employee services
during the
applicable period
and may experience
periodic
fluctuations as a
result of changes
in non-operating
factors, including
changes in discount
rates, changes in
expected returns on
benefit plan
assets, and other
demographic
actuarial
assumptions.
(3) Merger and
acquisition related
expenses include
legal fees,
consulting fees,
bank fees,
severance costs,
certain purchase
accounting items
such as the
amortization of
inventory fair
value step-up,
information
technology
integration costs
and similar
charges. While
these costs are not
operational in
nature and are not
expected to
continue for any
singular
transaction on an
ongoing basis,
similar types of
costs, expenses and
charges have
occurred in prior
periods and may
recur in the future
as we continue to
integrate prior
acquisitions and
pursue any future
acquisitions.
(4) Plant capacity
expansion expenses
include expenses
that are not
inventoriable or
capitalizable as
related to plant
expansion projects
greater than $5
million in capital
expenditures or
plant start up
projects. While
these expenses are
not operational in
nature and are not
expected to
continue for any
singular project on
an ongoing basis,
similar types of
expenses have
occurred in prior
periods and may
recur in the future
as we continue to
pursue future plant
capacity expansion.
(5) Reflects contract
termination
expenses related to
strategically
exiting a service
contract and losses
related to sub-
leases. While these
expenses are not
operational in
nature and are not
expected to
continue for any
singular event on
an ongoing basis,
similar types of
expenses have
occurred in prior
periods and may
recur in the future
as we continue to
strategically
evaluate our
contracts.
(6) For the fourth
quarter of 2018,
reflects $164.2
million of goodwill
impairments, $97.0
million of long-
lived asset
impairments and
$4.5 million of
intangible asset
impairments in our
Oil & Gas Proppants
reporting segment
due to a decline in
demand for Northern
White sand caused
by some of our
customers shifting
to local in-basin
frac sands with
lower logistics
costs.
(7) Reflects costs
incurred related to
business
optimization
projects within our
corporate center,
which aim to
measure and improve
the efficiency,
productivity and
performance of our
organization. While
these costs are not
operational in
nature and are not
expected to
continue for any
singular project on
an ongoing basis,
similar types of
expenses may recur
in the future.
(8) Reflects
miscellaneous
adjustments
permitted under the
Credit Agreement.
The first quarter
of 2019 includes
$2.4 million
related to facility
closure costs and
$2.2 million of
loss contingencies
reserve, partially
offset by insurance
proceeds of $2.2
million. The first
quarter of 2018
includes a net loss
of $3.4 million on
divestitures of
assets, consisting
of $7.9 million of
contract
termination costs
and $1.3 million of
divestiture related
expenses such as
legal fees and
consulting fees,
partially offset by
a $5.8 million gain
on sale of assets.
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
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SOURCE U.S. Silica Holdings, Inc.
