U.S. Silica Holdings, Inc. Announces Third Quarter 2020 Results
KATY, Texas, Oct. 29, 2020 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA), a diversified industrial minerals company and the leading last-mile logistics provider to the oil and gas industry (the "Company"), today announced third quarter 2020 results, including a net loss of $14.0 million, or $(0.19) per basic and diluted share.
The third quarter results were negatively impacted by $3.8 million, or $0.04 per share, of charges related to asset impairments, merger and acquisition related expense, plant startup and expansion costs, facility closure costs, and other adjustments, resulting in adjusted EPS for the third quarter of $(0.15) per basic and diluted share.
"I'd like to commend our team on delivering outstanding third quarter results despite a challenging, though improving, macro backdrop," said Bryan Shinn, chief executive officer. "Our Industrial segment volumes and profits both rebounded sharply as demand in several key end markets improved materially."
"In our Oil & Gas segment, sand volumes rose 15% and our Sandbox delivered loads surged 74% as industry frac activity and well completions climbed during the quarter. Increased volumes and cost reduction measures including the remeasurement of railcar leases helped drive a 20% sequential jump in segment profitability. Our teams have worked diligently to right-size our cost structure, particularly in the Oil & Gas segment, and the results of those efforts are now apparent," he added.
"We have transformed this more volatile business and equipped it to perform well under a variety of market conditions, while simultaneously continuing to invest in and grow our more stable, higher-margin Industrials business," Shinn concluded.
Third Quarter 2020 Highlights
Total Company
-- Revenue of $176.5 million for the third quarter of 2020 compared with
$172.5 million in the second quarter of 2020, up 2% sequentially and
down 51% from the third quarter of 2019.
-- Overall tons sold of 2.239 million for the third quarter of 2020
compared with 1.904 million tons sold in the second quarter of 2020, up
18% sequentially and down 54% from the third quarter of 2019.
-- Net loss of $14.0 million, or $(0.19) per basic and diluted share, for
the third quarter of 2020, compared with a net loss of $23.0 million, or
$(0.31) per basic and diluted share, for the third quarter of 2019.
-- Contribution margin of $73.8 million for the third quarter of 2020
compared with $61.3 million in the second quarter of 2020, up 20%
sequentially and down 22% from the third quarter of 2019.
-- Adjusted EBITDA of $51.3 million for the third quarter of 2020 compared
with $40.8 million in the second quarter of 2020, up 26% sequentially
and down 12% from the third quarter of 2019.
Industrial and Specialty Products
-- Revenue of $110.1 million for the third quarter of 2020 compared with
$100.0 million in the second quarter of 2020, up 10% sequentially and
down 8% from the third quarter of 2019.
-- Tons sold totaled 0.957 million for the third quarter of 2020 compared
with 0.792 million tons sold in the second quarter of 2020, up 21%
sequentially and flat compared with the third quarter of 2019.
-- Segment contribution margin of $42.4 million, or $44.26 per ton, for the
third quarter of 2020 compared with $35.1 million in the second quarter
of 2020, up 21% sequentially and down 5% from the third quarter of 2019.
The Industrial & Specialty Products segment experienced a 21% sequential increase in contribution margin as sales volumes increased 21%, spurred by stronger demand from several key industrial end markets such as glass, housing and automotive. Contribution margin also benefited by $2.4 million from the remeasurement of operating leases associated with the Company's fleet of rail cars.
In the third quarter, U.S. Silica executed a new supply agreement with a leading global biopharma company and gained momentum with additional trials for its blood plasma filtration product line. The Company is proud to announce it was awarded the 2020 Supplier of the Year by one of its key industrial customers, a leading multinational building products company.
Oil & Gas
-- Revenue of $66.3 million for the third quarter of 2020 compared with
$72.5 million in the second quarter of 2020, down 8% sequentially and
down 73% from the third quarter of 2019.
-- Tons sold of 1.282 million for the third quarter of 2020 compared with
1.112 million tons sold in the second quarter of 2020, up 15%
sequentially and down 67% from the third quarter of 2019.
-- Segment contribution margin of $31.5 million, or $24.55 per ton, for the
third quarter of 2020 compared with $26.2 million in the second quarter
of 2020, up 20% sequentially and down 38% from the third quarter of
2019.
In the Oil & Gas segment, the Company sold 1.282 million tons in the third quarter, up 15% from the prior quarter, led by a sequential improvement in frac activity and well completions. Contribution margin for the segment improved 20% sequentially to $31.5 million, driven primarily by cost reduction measures including an $18.2 million benefit from the remeasurement of rail leases and higher volumes, partially offset by lower shortfall penalties recorded during the quarter.
SandBox loads increased 74% during the quarter, as key customers in several basins ramped up their pace of well completions and added more frac crews. During the quarter, the Oil & Gas segment was awarded two new contracts, one with a leading oilfield services provider and one with an E&P in the Northeast.
Capital Update
As of September 30, 2020, the Company had $134.9 million in cash and cash equivalents and $49.6 million, including $25.4 million allocated for letters of credit, available under its credit facilities. Total debt outstanding under our credit facilities as of September 30, 2020 was $1.263 billion.
Capital expenditures in the third quarter totaled $4.5 million and were mainly related to growth capital projects at U.S. Silica's Millen, GA, and Columbia, SC, industrial facilities, as well as maintenance spending and cost improvement projects across the network. The Company's forecast of capital expenditures for the full year 2020 is approximately $30.0 million, unchanged from the previous guidance and 75% lower than 2019 capital expenditures of $118.4 million.
Outlook and Guidance
In the Industrial and Specialty Products segment, the Company forecasts fourth quarter volumes to decline 5%-10% sequentially due to the typical seasonality in that business. Excluding the third quarter benefit from the remeasurement of railcar leases, the segment's contribution margin is expected to decline by roughly 10%, in line with the typical seasonal decline seen in past years.
Looking further out into 2021, though economic uncertainty remains, the Company's base case is that the ISP segment's volumes and contribution margin will continue to outperform U.S. GDP trends.
In the Oil & Gas segment, U.S. Silica expects an increase in fourth quarter volumes in the range of 20%-30%, driven by an expected increase in completion activity as operators continue to draw down inventories of drilled but uncompleted wells (DUCs). Adjusting for the third quarter rail lease benefit, the segment's contribution margin is expected to increase 5%-10% sequentially.
For 2021, while uncertainty remains, the Company's base case scenario assumes a more balanced crude oil market, which should drive increased completion activity, higher frac sand demand and a stabilization of pricing.
Conference Call
U.S. Silica will host a conference call for investors today, October 29, 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 "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 13711449. The replay will be available through Nov. 28, 2020.
About U.S. Silica
U.S. Silica Holdings, Inc. is a global performance materials company and last-mile logistics provider and is a member of the Russell 2000 Index. The Company is a leading producer of commercial silica used in a wide range of industrial applications and in the oil and gas industry. 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 400 diversified product types to customers across its multiple 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 23 mines and production facilities. The Company is headquartered in Katy, Texas and has offices in Reno, Nevada and Chicago, Illinois.
Forward-looking Statements
The presentation referred to above contains "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 the Company's growth opportunities, strategy, future financial results, forecasts, projections, plans and capital expenditures, technological innovations, ability to reduce costs or idle plants, the impacts of COVID-19 on the Company's operations, 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; the effect of the COVID-19 pandemic on markets the Company serves, 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; changes in oil and gas inventories; 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, pharmaceuticals, and oil and gas production; silica-related health issues and corresponding litigation; and other risks and uncertainties detailed in this press release and our 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 of the presentation referred to above, 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
September 30, June 30, 2020 September 30,
2020 2019
---
Total sales $
176,472 $
172,537 $
361,814
Total cost of sales (excluding depreciation,
depletion and amortization) 107,592 124,743 283,633
Operating expenses:
Selling, general and administrative 27,216 39,126 40,208
Depreciation, depletion and amortization 40,069 37,086 47,126
Goodwill and other asset impairments 222 3,956 130
Total operating expenses 67,507 80,168 87,464
Operating income (loss) 1,373 (32,374) (9,283)
Other (expense) income:
Interest expense (19,274) (22,179) (24,733)
Other (expense) income, net, including interest
income (409) (1,670) 3,280
Total other expense (19,683) (23,849) (21,453)
Loss before income taxes (18,310) (56,223) (30,736)
Income tax benefit 4,094 23,605 7,671
Net loss $
(14,216) $
(32,618) $
(23,065)
Less: Net loss attributable to non-controlling
interest (254) (264) (28)
Net loss attributable to U.S. Silica Holdings,
Inc. $
(13,962) $
(32,354) $
(23,037)
Loss per share attributable to U.S. Silica Holdings, Inc.:
Basic $
(0.19) $
(0.44) $
(0.31)
Diluted $
(0.19) $
(0.44) $
(0.31)
Weighted average shares outstanding:
Basic 73,688 73,620 73,328
Diluted 73,688 73,620 73,328
Dividends declared per share
$
$ $
0.06
U.S. SILICA HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; dollars in thousands)
September 30, December 31,
2020 2019
---
ASSETS
Current Assets:
Cash and cash equivalents $
134,923 $
185,740
Accounts receivable, net 173,827 182,238
Inventories, net 104,711 124,432
Prepaid expenses and other current
assets 44,280 16,155
Income tax deposits - 475
Total current assets 457,741 509,040
Property, plant and mine development,
net 1,415,636 1,517,587
Operating lease right-of-use assets 41,265 53,098
Goodwill 185,649 273,524
Intangible assets, net 164,632 183,815
Other assets 11,724 16,170
Total assets $
2,276,647 $
2,553,234
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $
128,193 $
248,237
Current portion of operating lease
liabilities 30,887 53,587
Current portion of long-term debt 44,248 18,463
Current portion of deferred revenue 15,531 15,111
Total current liabilities 218,859 335,398
Long-term debt, net 1,208,969 1,213,985
Deferred revenue 28,811 35,523
Liability for pension and other post-
retirement benefits 67,913 58,453
Deferred income taxes, net 40,334 38,585
Operating lease liabilities 76,827 117,964
Other long-term liabilities 31,268 36,746
Total liabilities 1,672,981 1,836,654
Stockholders' Equity:
Preferred stock -
Common stock 827 823
Additional paid-in capital 1,197,464 1,185,116
Retained deficit (400,061) (279,956)
Treasury stock, at cost (181,542) (180,912)
Accumulated other comprehensive loss (24,841) (19,854)
Total U.S. Silica Holdings, Inc.
stockholders' equity 591,847 705,217
Non-controlling interest 11,819 11,363
Total stockholders' equity 603,666 716,580
Total liabilities and stockholders'
equity $
2,276,647 $
2,553,234
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 selling, general, and administrative costs, corporate costs, plant capacity expenses, and facility closure costs.
The following table sets forth a reconciliation of net (loss) income, the most directly comparable GAAP financial measure, to segment contribution margin.
(All amounts in thousands)
Three Months Ended
September 30, September 30,
2020 June 30, 2020 2019
Sales:
Oil & Gas Proppants $
66,343 $
72,495 $
242,707
Industrial & Specialty Products 110,129 100,042 119,107
Total sales 176,472 172,537 361,814
Segment contribution margin:
Oil & Gas Proppants 31,478 26,170 50,557
Industrial & Specialty Products 42,353 35,119 44,397
Total segment contribution margin 73,831 61,289 94,954
Operating activities excluded from
segment cost of sales (4,951) (13,495) (16,773)
Selling, general and administrative (27,216) (39,126) (40,208)
Depreciation, depletion and
amortization (40,069) (37,086) (47,126)
Goodwill and other asset
impairments (222) (3,956) (130)
Interest expense (19,274) (22,179) (24,733)
Other (expense) income, net,
including interest income (409) (1,670) 3,280
Income tax benefit 4,094 23,605 7,671
Net loss $
(14,216) $
(32,618) $
(23,065)
Less: Net loss attributable to non-
controlling interest (254) (264) (28)
Net loss attributable to U.S.
Silica Holdings, Inc. $
(13,962) $
(32,354) $
(23,037)
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 (loss) 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 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:
(All amounts in
thousands)
Three Months Ended
September 30, September 30,
2020 June 30, 2020 2019
Net loss attributable
to U.S. Silica
Holdings, Inc. $
(13,962) $
(32,354) $
(23,037)
Total interest
expense, net of
interest income 19,801 21,295 23,711
Provision for taxes (4,094) (23,605) (7,671)
Total depreciation,
depletion and
amortization
expenses 40,069 37,086 47,126
EBITDA 41,814 2,422 40,129
Non-cash incentive
compensation (1) 5,523 4,388 3,722
Post-employment
expenses (excluding
service costs) (2) 161 527 426
Merger and
acquisition related
expenses (3) 285 386 4,873
Plant capacity
expansion expenses
(4) 744 2,390 3,918
Contract termination
expenses (5) 60
Goodwill and other
asset impairments
(6) 222 3,956 130
Business optimization
projects (7) 24 (4) 49
Facility closure
costs (8) 1,881 2,738 3,523
Gain on valuation
change of royalty
note payable (9) (2,004)
Other adjustments
allowable under the
Credit Agreement
(10) 675 23,963 3,583
Adjusted EBITDA $
51,329 $
40,766 $
58,409
(1) Reflects
equity-based
and other
equity-
related
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 if
we continue
to pursue
future plant
capacity
expansion.
(5) Reflects
contract
termination
expenses
related to
strategically
exiting a
service
contract.
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) The three
months ended
September 30,
2020 reflect
$0.2 million
of asset
impairments
related to
operating
lease right-
of-use
assets in our
Oil & Gas
Proppants
segment. The
three months
ended June
30, 2020
reflect $4.0
million of
asset
impairments
related to
long-lived
assets,
operating
lease right-
of-use
assets and
inventory
related to
idled
facilities in
our Oil & Gas
Proppants
segment. The
three months
ended
September 30,
2019 reflect
a $0.1
million asset
impairment
related to
rail cars
that will not
be utilized
before the
end of their
leases. See
Note G -
Inventories,
Note H -
Property,
Plant and
Mine
Development,
and Note Q -
Leases to our
Condensed
Consolidated
Financial
Statements in
Part I, Item
1 of our
Quarterly
Report on
Form 10-Q
for more
information.
(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 costs
incurred
related to
idled sand
facilities
and closed
corporate
offices,
including
severance
costs and
remaining
contracted
costs such as
office lease
costs,
maintenance,
and
utilities.
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.
The 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,
such as
recruiting
fees and
relocation
costs. The
three months
ended June
30, 2020 also
included $1.9
million in
transload
shortfalls
and exit
fees, $4.1
million in
inventory
adjustments,
$2.5 million
measurement
period
adjustment to
the gain
attributable
to the
bargain
purchase of
Arrows Up,
$3.1 million
in severance
costs, and
$11.8 million
in legal
expense due
to
unsuccessful
defense of a
small number
of our
patents. See
Note E -
Business
Combinations
to our
Condensed
Consolidated
Financial
Statements in
Part I, Item
1 of our
Quarterly
Report on
Form 10-Q for
more
information.
The three
months ended
September 30,
2019 also
included $6.2
million of
loss
contingencies
reserve,
partially
offset by
insurance
proceeds of
$2.2 million.
U.S. Silica Holdings, Inc.
Investor Contact
Arjun Sreekumar
Director of Investor Relations
281-394-9584
sreekumar@ussilica.com
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SOURCE U.S. Silica Holdings, Inc.
