U.S. Silica Holdings, Inc. Announces Fourth Quarter and Full Year 2019 Results
KATY, Texas, Feb. 25, 2020 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced a net loss of $292.9 million, or $3.99 per basic and diluted share, for the fourth quarter ended December 31, 2019, compared with a net loss of $256.1 million, or $3.44 per basic and diluted share, for the fourth quarter of 2018. The fourth quarter results were negatively impacted by $363.7 million or $3.76 per share in impairment expenses, $1.3 million or $0.01 per share in costs related to plant startup and expansion expenses, $16.3 million or $0.17 per share related to merger and acquisition expenses, $2.1 million or $0.02 per share in facility closure costs and $3.9 million or $0.04 per share in other adjustments, partially offset by a net $52.3 million or $0.54 per share customer shortfall penalty, resulting in adjusted EPS for the fourth quarter of a loss of $0.53 per basic and diluted share.
"I am proud of what we achieved in 2019 in the face of market headwinds in energy and uncertainty late in the year in broader industrials markets,'' said Bryan Shinn, U.S. Silica chief executive officer. "We continued to build, invest in and transform U.S. Silica for the long-term and had many successes.
We expanded our industrial capacity, delivering record segment profitability, and invested in next generation Sandbox equipment while achieving record load volumes. We also right sized our proppant business and completed startup of our two new West Texas mines. Across the enterprise we signed numerous new customer contracts during the year. At the same time, we significantly advanced our new offering pipeline while recording the safest year in my tenure at the company."
Full Year 2019 Highlights
Total Company
-- Revenue of $1.47 billion decreased 7% compared with $1.58 billion for
2018.
-- Net loss of $329.1 million, or $4.49 per basic and diluted share for
2019, compared with a net loss of $200.8 million, or $2.63 per basic and
diluted share for 2018.
-- Overall tons sold of 18.788 million for 2019 increased 4% compared with
18.059 million tons sold in 2018.
-- Contribution margin of $426.8 million for 2019 decreased 17% compared
with $512.9 million for 2018.
-- Adjusted EBITDA of $286.3 million for 2019 decreased 27% compared with
Adjusted EBITDA of $392.5 million for 2018.
Fourth Quarter 2019 Highlights
Total Company
-- Revenue of $339.1 million for the fourth quarter of 2019 decreased 6%
compared with $361.8 million in the third quarter of 2019 and 5% when
compared with the fourth quarter of 2018.
-- Overall tons sold of 4.204 million for the fourth quarter of 2019
decreased 13% compared with 4.850 million tons sold in the third quarter
of 2019 and 9% when compared with the fourth quarter of 2018.
-- Contribution margin of $107.1 million for the fourth quarter of 2019
increased 13% compared with $95.0 million in the third quarter of 2019
and 8% when compared with the fourth quarter of 2018.
-- Adjusted EBITDA of $73.6 million for the fourth quarter of 2019
increased 26% compared with $58.4 million in the third quarter of 2019
and 8% when compared with the fourth quarter of 2018.
Industrial and Specialty Products
-- Revenue of $104.8 million for the fourth quarter of 2019 decreased 12%
compared with $119.1 million in the third quarter of 2019 and 8% when
compared with the fourth quarter of 2018.
-- Tons sold totaled 0.842 million for the fourth quarter of 2019 decreased
12% compared with 0.954 million tons sold in the third quarter of 2019
and 10% when compared with the fourth quarter of 2018.
-- Segment contribution margin of $39.1 million, or $46.45 per ton, for the
fourth quarter of 2019 decreased 12% compared with $44.4 million in the
third quarter of 2019 and 12% when compared with the fourth quarter of
2018.
Oil & Gas
-- Revenue of $234.3 million for the fourth quarter of 2019 decreased 3%
compared with $242.7 million in the third quarter of 2019 and 4% when
compared with the fourth quarter of 2018.
-- Tons sold of 3.362 million for the fourth quarter of 2019 decreased 14%
compared with 3.896 million tons sold in the third quarter of 2019 and
decreased 9% when compared with the fourth quarter of 2018.
-- Segment contribution margin of $68.0 million, or $20.22 per ton, for the
fourth quarter of 2019 increased 34% compared with $50.6 million in the
third quarter of 2019 and 25% when compared with the fourth quarter of
2018.
Capital Update
As of Dec. 31, 2019, the Company had $185.7 million in cash and cash equivalents and $93.5 million available under its credit facilities. Total debt as of Dec. 31, 2019 was $1.232 billion. Capital expenditures in the fourth quarter totaled $20.5 million and were mainly related to growth projects in our ISP segment, as well as spending on equipment to expand our SandBox operations and other maintenance and cost improvement capital projects. During the fourth quarter of 2019, the Company generated $27.7 million in cash flow from operations.
Outlook and Guidance
In 2019, the Company made significant process in laying the groundwork to achieve its three strategic priorities in 2020, namely, 1) prioritizing free cash flow, 2) repositioning its Oil & Gas business, and 3) growing its Industrial & Specialty Products business.
In November of 2019, the Company announced a 10% reduction of its workforce that is expected to deliver annual SG&A savings of approximately $20 million. U.S. Silica took steps to optimize its asset portfolio by idling its highest-cost plants and improving efficiencies at existing plants.
The Company made significant progress in repositioning its Oil & Gas business and right sizing its proppant volumes to match current and expected demand from well completions. The Company continues to optimize its logistics network by eliminating sub-optimal shipments and exiting high cost transload sites while renegotiating transload fees and rail rates. The Company expects proppant demand in 2020 to increase by approximately 5% compared with 2019.
In 2019, the Company's last-mile business made significant investments in next generation equipment for Sandbox, expanded box payloads and offered customers a new gravity fed stand that is quieter, requires less maintenance and is less expensive to build. In 2020 we anticipate that SandBox pricing pressure will persist but not worsen.
U.S. Silica has continued to shift its Industrial and Specialty Products business toward higher margin products and is currently pursuing several growth platforms. For example, the Company is using innovative technology in milling that expands the Company's capabilities and further differentiates its products. The Company is targeting new, not-in-kind markets where customers are looking for an effective alternative to existing offerings. The Company has several new products in various stages of customer trials. In many cases, the sales cycles for these new products are long but the Company believes it is making good progress. The Company intends to increase the base Industrial and Specialty Products business through price increases, market share gains, a focus on new, higher-margin products and small, bolt-on acquisitions.
In 2020, the Company expects continued strength in many of its industrial end markets, especially residential housing and remodeling, driven by growing housing demand and historically low mortgage rates. The Federal National Mortgage Association (Fannie Mae) forecasts single-family housing starts in 2020 to increase 10% year-over-year. Despite an expected year-over-year slight contraction in light vehicle sales in 2020, the Company is optimistic with respect to its automotive end markets, which should benefit from low unemployment, strong consumer confidence and low finance rates. In its filtration end markets, however, the Company expects slight headwinds for some of its silica sand and diatomaceous earth product offerings due to the expected contraction in U.S. alcohol sales.
The Company expects to keep its capital expenditures in the range of $30 million to $40 million in 2020 and to be funded from its cash flow from operations.
Conference Call
U.S. Silica will host a conference call for investors today, Feb. 25, 2020 at 7:30 a.m. Central Time to discuss these results. Hosting the call will be Bryan Shinn, 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 "Investors" 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 13686713. The replay will be available through March 25, 2020.
About U.S. Silica
U.S. Silica Holdings, Inc. is a performance materials company and is a member of the Russell 2000. 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 120-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 25 mines and production facilities. The Company is headquartered in Katy, Texas and has offices in Reno, Nevada and Chicago, Illinois.
Forward-looking Statements
This full-year and fourth-quarter 2019 earnings release, as well as other statements we make, contain "forward-looking statements" within the meaning of the federal securities laws - that is, statements about the future, not about past events. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may include words such as "anticipate," "estimate," "expect," "project," "plan," "intend," "believe," "may," "will," "should," "could," "can have," "likely" and other words and terms of similar meaning. 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, ability to reduce costs or idle plants, 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 global economic conditions; fluctuations in demand for commercial silica, diatomaceous earth, perlite, clay and cellulose; fluctuations in demand for frac sand or the development of either effective alternative proppants or new processes to replace hydraulic fracturing; the entry of competitors into our marketplace; changes in production spending by companies in the oil and gas industry and changes in the level of oil and natural gas exploration and development; general economic, political and business conditions in key regions of the world; pricing pressure; weather and seasonal factors; the cyclical nature of our customers' business; our inability to meet our financial and performance targets and other forecasts or expectations; our substantial indebtedness and pension obligations, including restrictions on our operations imposed by our indebtedness; operational modifications, delays or cancellations; prices for electricity, natural gas and diesel fuel; our ability to maintain our transportation network; changes in government regulations and regulatory requirements, including those related to mining, explosives, chemicals, and oil and gas production; silica-related health issues and corresponding litigation; and other risks and uncertainties detailed in this press release and our most recent Forms 10-K, 10-Q, and 8-K filed with or furnished to the U.S. Securities and Exchange Commission. If one or more of these or other risks or uncertainties materialize (or the consequences of such a development changes), or should underlying assumptions prove incorrect, actual outcomes may vary materially from those reflected in our forward-looking statements. The forward-looking statements speak only as of the date hereof, and we disclaim any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
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 September December
31, 2019 30, 2019 31, 2018
---
Total sales $
339,059 $
361,814 $
357,380
Total cost of sales (excluding depreciation, depletion and amortization) 257,962 283,633 287,038
Operating expenses:
Selling, general and administrative 37,325 40,208 32,168
Depreciation, depletion and amortization 42,819 47,126 46,527
Goodwill and other asset impairments 363,717 130 265,715
---
Total operating expenses 443,861 87,464 344,410
---
Operating (loss) income (362,764) (9,283) (274,068)
Other (expense) income:
Interest expense (22,996) (24,733) (21,281)
Other income (expense), net, including interest income 443 3,280 1,336
---
Total other expense (22,553) (21,453) (19,945)
---
(Loss) income before income taxes (385,317) (30,736) (294,013)
Income tax benefit 91,892 7,671 37,938
Net (loss) income $
(293,425) $
(23,065) $
(256,075)
---
Less: Net loss attributable to non-controlling interest (554) (28) (13)
Net (loss) income attributable to U.S. Silica Holdings, Inc. $
(292,871) $
(23,037) $
(256,062)
===
(Loss) earnings per share attributable to U.S. Silica Holdings, Inc.:
Basic $
(3.99) $
(0.31) $
(3.44)
Diluted $
(3.99) $
(0.31) $
(3.44)
Weighted average shares outstanding:
Basic 73,343 73,328 74,485
Diluted 73,343 73,328 74,485
Dividends declared per share $
0.06 $
0.06 $
0.06
Year Ended
December December
31, 2019 31, 2018
Total sales $
1,474,477 $
1,577,298
Total cost of sales (excluding depreciation, depletion and amortization) 1,133,293 1,163,129
Operating expenses:
Selling, general and administrative 150,848 146,971
Depreciation, depletion and amortization 179,444 148,832
Goodwill and other asset impairments 363,847 281,899
Total operating expenses 694,139 577,702
Operating (loss) income (352,955) (163,533)
Other (expense) income:
Interest expense (95,472) (70,564)
Other income (expense), net, including interest income 19,519 4,144
Total other expense (75,953) (66,420)
(Loss) income before income taxes (428,908) (229,953)
Income tax benefit 99,151 29,132
Net (loss) income $
(329,757) $
(200,821)
Less: Net loss attributable to non-controlling interest (675) (13)
Net (loss) income attributable to U.S. Silica Holdings, Inc. $
(329,082) $
(200,808)
(Loss) earnings per share attributable to U.S. Silica Holdings, Inc.:
Basic $
(4.49) $
(2.63)
Diluted $
(4.49) $
(2.63)
Weighted average shares outstanding:
Basic 73,253 76,453
Diluted 73,253 76,453
Dividends declared per share $
0.25 $
0.25
U.S. SILICA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; dollars in thousands)
December December
31, 2019 31, 2018
---
ASSETS
Current Assets:
Cash and cash equivalents $
185,740 $
202,498
Accounts receivable, net 182,238 215,486
Inventories, net 124,432 162,087
Prepaid expenses and other current assets 16,155 17,966
Income tax deposits 475 2,200
---
Total current assets 509,040 600,237
---
Property, plant and mine development, net 1,517,587 1,826,303
Operating lease right-of-use assets 53,098
Goodwill 273,524 261,340
Intangible assets, net 183,815 194,626
Other assets 16,170 18,334
---
Total assets $
2,553,234 $
2,900,840
===
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $
248,237 $
216,400
Current portion of operating lease liabilities 53,587
Current portion of long-term debt 18,463 13,327
Current portion of deferred revenue 15,111 31,612
Total current liabilities 335,398 261,339
---
Long-term debt, net 1,213,985 1,246,428
Deferred revenue 35,523 81,707
Liability for pension and other post-retirement benefits 58,453 57,194
Deferred income taxes, net 38,585 137,239
Operating lease liabilities 117,964
Other long-term obligations 36,746 64,629
Total liabilities 1,836,654 1,848,536
---
Stockholders' Equity:
Preferred stock -
Common stock 823 818
Additional paid-in capital 1,185,116 1,169,383
Retained (deficit) earnings (279,956) 67,854
Treasury stock, at cost (180,912) (178,215)
Accumulated other comprehensive loss (19,854) (15,020)
Total U.S. Silica Holdings, Inc. stockholders' equity 705,217 1,044,820
---
Non-controlling interest 11,363 7,484
Total stockholders' equity 716,580 1,052,304
---
Total liabilities and stockholders' equity $
2,553,234 $
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
December September December
31, 2019 30, 2019 31, 2018
Sales:
Oil & Gas Proppants $
234,273 $
242,707 $
243,546
Industrial & Specialty Products 104,786 119,107 113,834
Total sales 339,059 361,814 357,380
Segment contribution margin:
Oil & Gas Proppants 67,993 50,557 54,255
Industrial & Specialty Products 39,114 44,397 44,556
Total segment contribution margin 107,107 94,954 98,811
Operating activities excluded from segment cost of sales (26,010) (16,773) (28,469)
Selling, general and administrative (37,325) (40,208) (32,168)
Depreciation, depletion and amortization (42,819) (47,126) (46,527)
Goodwill and other asset impairments (363,717) (130) (265,715)
Interest expense (22,996) (24,733) (21,281)
Other income (expense), net, including interest income 443 3,280 1,336
Income tax benefit 91,892 7,671 37,938
Net (loss) income $
(293,425) $
(23,065) $
(256,075)
Less: Net loss attributable to non-controlling interest (554) (28) (13)
Net (loss) income attributable to U.S. Silica Holdings, Inc. $
(292,871) $
(23,093) $
(256,062)
Year Ended
December December
31, 2019 31, 2018
Sales:
Oil & Gas Proppants $
1,010,521 $
1,182,991
Industrial & Specialty Products 463,956 394,307
Total sales 1,474,477 1,577,298
Segment contribution margin:
Oil & Gas Proppants 248,594 357,846
Industrial & Specialty Products 178,215 155,084
Total segment contribution margin 426,809 512,930
Operating activities excluded from segment cost of sales (85,625) (98,761)
Selling, general and administrative (150,848) (146,971)
Depreciation, depletion and amortization (179,444) (148,832)
Goodwill and other asset impairments (363,847) (281,899)
Interest expense (95,472) (70,564)
Other income (expense), net, including interest income 19,519 4,144
Income tax benefit 99,151 29,132
Net (loss) income $
(329,757) $
(200,821)
Less: Net loss attributable to non-controlling interest (675) (13)
Net (loss) income attributable to U.S. Silica Holdings, Inc. $
(329,082) $
(200,808)
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
December September December
31, 2019 30, 2019 31, 2018
Net (loss) income attributable to U.S. Silica Holdings, Inc. $
(292,871) $
(23,037) $
(256,062)
Total interest expense, net of interest income 22,366 23,711 21,446
Provision for taxes (91,892) (7,671) (37,938)
Total depreciation, depletion and amortization expenses 42,819 47,126 46,527
EBITDA (319,578) 40,129 (226,027)
Non-cash incentive compensation (1) 5,340 3,722 3,725
Post-employment expenses (excluding service costs) (2) 434 426 554
Merger and acquisition related expenses (3) 16,274 4,873 5,668
Plant capacity expansion expenses (4) 1,347 3,918 14,012
Contract termination expenses (5) 822 60 2,491
Goodwill and other asset impairments (6) 363,717 130 265,715
Business optimization projects (7) 49 54
Facility Closure Costs (8) 2,114 3,523
Gain on valuation change of royalty note payable (9) (750) (2,004)
Other adjustments allowable under the Credit Agreement (10) 3,857 3,583 1,814
Adjusted EBITDA $
73,577 $
58,409 $
68,006
(All amounts in thousands) Year Ended
December December
31, 2019 31, 2018
Net (loss) income attributable to U.S. Silica Holdings, Inc. $
(329,082) $
(200,808)
Total interest expense, net of interest income 92,063 64,689
Provision for taxes (99,151) (29,132)
Total depreciation, depletion and amortization expenses 179,444 148,832
EBITDA (156,726) (16,419)
Non-cash incentive compensation (1) 15,906 22,337
Post-employment expenses (excluding service costs) (2) 1,735 2,206
Merger and acquisition related expenses (3) 32,021 34,098
Plant capacity expansion expenses (4) 17,576 59,112
Contract termination expenses (5) 1,882 2,491
Goodwill and other asset impairments (6) 363,847 281,899
Business optimization projects (7) 55 1,980
Facility closure costs (8) 12,718 529
Gain on valuation change of royalty note payable (9) (16,854)
Other adjustments allowable under the Credit Agreement (10) 14,165 4,290
Adjusted EBITDA $
286,325 $
392,523
__________
(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.
(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 and
year ended
2019,
reflects
$243.1
million of
long-lived
asset
impairments,
$115.4
million of
operating
lease right-
of-use asset
impairments,
$4.1 million
of inventory
asset
impairments,
and $1.2
million of
intangible
asset
impairments
in our Oil
and Gas
Proppants
reporting
segment.
These
impairments
were related
to a sharp
decline in
customer
demand for
Northern
White frac
sand and for
regional non-
in-basin
frac sand as
more tons are
produced and
sold in-
basin, along
with
significant
price
decreases of
frac sand.
Additionally,
given these
events, we
also
experienced a
significant
decline in
the
utilization
of our sand
railcar fleet
in our
transload
network
leading to a
significant
number of
rail cars
being put
into storage
and no longer
used to
deliver sand
to our
customers.
For the
fourth
quarter and
year ended
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
declining
shift in
demand for
Northern
White sand
caused by
some of our
customers
shifting to
local in-
basin frac
sands with
lower
logistics
costs. For
the year
ended 2018,
it also
reflects a
$16.2 million
asset
impairment
related to
the closure
of our resin
coating
facility and
associated
product
portfolio
during the
second
quarter of
2018.
(7) Reflects costs
incurred
related to
business
optimization
projects
mainly 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 costs
incurred
mainly
related to
idled sand
facilities
and closed
corporate
offices,
including
severance
costs and
remaining
contracted
costs such as
office lease
costs, and
common area
maintenance
fees. While
these costs
are not
operational
in nature and
are not
expected to
continue for
any singular
event on an
ongoing
basis,
similar types
of expenses
may recur in
the future.
(9) Gain on
valuation
change of
royalty note
payable due
to a change
in estimate
of future
tonnages and
sales related
to the sand
shipped from
our Tyler,
Texas
facility.
This gain is
not
operational
in nature and
is not
expected to
continue for
any singular
event on an
ongoing
basis.
(10) Reflects
miscellaneous
adjustments
permitted
under the
Credit
Agreement.
For 2019,
includes $6.2
million of
loss
contingencies
reserve as
well as
restructuring
costs for
actions that
will provide
future
savings,
storm damage
costs,
recruiting
fees,
relocation
costs and a
loss on sale
of assets,
partially
offset by
insurance
proceeds of
$2.2 million.
For 2018,
includes
storm damage
costs,
recruiting
fees,
relocation
costs, and a
net loss of
$0.7 million
on
divestitures
of assets,
consisting of
$5.2 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.
While these
gains and
costs are not
operational
in nature and
are not
expected to
continue for
any singular
event on an
ongoing
basis,
similar types
of gains and
expenses have
occurred in
prior periods
and may recur
in the
future.
Supplemental Information
1) What was the cash flow from operations for the fourth quarter of 2019 and do you expect to be free cash flow positive in 2020?
For the fourth quarter of 2019, cash flow from operations totaled $27.7 million. Based on our current forecast, we expect to generate free cash flow in 2020 after capex and dividends.
2) What are the underlying assumptions of the plan to reduce gross debt and has the plan changed given your updated outlook for the Oil & Gas segment?
We remain committed to de-levering the balance sheet and will use our free cash flow opportunistically to repurchase debt. Decisions to repurchase debt will be examined on a quarterly basis and will be subject to the level of business activity in the period and other needs for cash.
3) What is the capex guidance for the full year 2020? What is the split between maintenance and growth capex?
We have budgeted between $30 million and $40 million in capex for the full year 2020. We expect that maintenance capital will be approximately $15 million with the remaining capital to be spent on growth projects for our Industrial and Specialty Products segment and to a lesser extent our SandBox unit. We intend to fund all our capital projects in 2020 with cash flow from operations.
4) Did you institute annual price increases for ISP products in 2020 and are those price increases sticking?
Yes, we raised prices for most of our non-contracted silica sand, aggregate diatomaceous earth and clay products used primarily in foundry, paints, coatings, elastomers, roofing, chemicals, recreation, building products, agricultural, pet litter and other applications.
Price increases ranged up to 6 percent, depending on the product and grade. Additionally, prices for whole grain glass sand increased by up to 4 percent.
The price increases are being instituted to support the continued investments the Company is making in upgrading its capacity to meet the growing demand for its products and to offset rising production costs. Most of the price increases are sticking.
5) What is your estimate of how much Northern White Sand capacity has come offline through the end of the fourth quarter?
A recent third-party study estimated that upwards of 40 million tons per annum of Northern White Sand capacity had been idled through the end of 2019.
6) How much Oil & Gas sand capacity has U.S. Silica idled to date?
To date, U.S. Silica has idled one Northern White Sand mine and two regional sand mines and has curtailed production at 4 other facilities by cutting shifts and days and hours worked, for a total of approximately 8 million tons per year currently offline.
7) What is the status of your Crane and Lamesa mines in the Permian?
In the fourth quarter, we believe that Crane and Lamesa were two of the most heavily utilized frac sand mines in the Permian Basin.
8) What is the year-over-year frac sand demand outlook for 2020? What is the breakout for Northern White Sand?
In 2020, we believe that frac sand demand will increase by approximately 5% over 2019. For Northern White Sand specifically, we estimate approximately 20-25 million tons of demand against 40-50 million tons of active supply.
Investor Contacts
Michael Lawson
Vice President of Investor Relations and Corporate Communications
301-682-0304
lawsonm@ussilica.com
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SOURCE U.S. Silica Holdings, Inc.
