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8-K - FORM 8-K - U.S. SILICA HOLDINGS, INC.d235555d8k.htm

Exhibit 99.1

 

LOGO

News Release

U.S. Silica Holdings, Inc. Announces Second Quarter 2016 Results

 

    Revenue of $117.0 million decreased 5% sequentially

 

    Net loss for the quarter of $0.19 per basic share

 

    Tons sold in Oil and Gas down 6% sequentially

 

    Generated $5.1 million of operating cash flow

 

    Accretive acquisition of NBR Sands adds regional capacity with direct access to Texas shale basins

Frederick, Md., Aug. 2, 2016 – U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced a net loss of $12.0 million or $(0.19) per basic and diluted share for the second quarter ended June 30, 2016 compared with net income of $10.0 million or $0.19 per basic share and $0.18 per diluted share for the second quarter of 2015. The second quarter results were negatively impacted by $1.1 million in restructuring costs for actions designed to help bring the business more in line with current market conditions and $0.9 million of business development-related expense. Excluding these expenses, EPS was $(0.17) per basic share for the quarter.

“I’m very pleased with our overall performance in the quarter, especially given the continued headwinds we are facing in our oil and gas business,” said Bryan Shinn, president and chief executive officer. “Our industrial business had one of the best quarters in its 116-year history, we generated positive operating cash flow and subsequent to the end of the quarter used our best-in-class balance sheet to facilitate an accretive acquisition that enables us to profitably increase our market share in oil and gas.”

Second Quarter 2016 Highlights

Total Company

 

    Revenue totaled $117.0 million compared with $147.5 million for the same period last year, a decrease of 21% on a year-over-year basis and a decrease of 5% sequentially from the first quarter of 2016.

 

    Overall tons sold totaled 2.2 million, down 1% compared with the 2.3 million tons sold in the second quarter of 2015 and a decrease of 2% sequentially from the first quarter of 2016.

 

    Contribution margin for the quarter was $15.5 million, down 53% compared with $32.8 million in the same period of the prior year and down 13% sequentially from the first quarter of 2016.

 

    Adjusted EBITDA was $5.4 million compared with Adjusted EBITDA of $23.4 million for the same period last year, a decrease of 77% on a year-over-year basis and an increase of 2% sequentially compared with the first quarter of 2016.

Oil and Gas

 

    Revenue for the quarter totaled $64.9 million compared with $90.9 million in the same period in 2015, a decrease of 29% on a year-over-year basis and a decrease of 12% sequentially from the first quarter of 2016.

 

    Tons sold totaled 1.3 million, an increase of 9% compared with 1.2 million tons sold in the second quarter of 2015 and a decrease of 6% sequentially compared with the tons sold in the first quarter of 2016.

 

    55% of tons were sold in basin compared with 62% sold in basin in the second quarter of 2015, and 49% for the first quarter of 2016

 

    Segment contribution margin was a loss of $6.0 million versus a profit of $13.3 million in the second quarter of 2015, a decrease of 145% on a year-over-year basis.

 

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Industrial and Specialty Products

 

    Revenue for the quarter totaled $52.1 million compared with $56.7 million for the same period in 2015, a decrease of 8% on a year-over-year basis and an increase of 7% on a sequential basis from the first quarter of 2016.

 

    Tons sold totaled 0.9 million, a decrease of 13% on a year-over-year basis and an increase of 5% on a sequential basis compared with the first quarter of 2016.

 

    Segment contribution margin was $21.5 million compared with $19.5 million in the second quarter of 2015, an increase of 10% on a year-over-year basis and up 27% sequentially compared with the first quarter of 2016.

Capital Update

As of June 30, 2016, the Company had $454.2 million in cash and cash equivalents and $46.7 million available under its credit facilities. Total debt at June 30, 2016 was $490 million. Capital expenditures in the second quarter totaled $17.3 million and were associated largely with the Company’s purchase of reserves adjacent to its Ottawa, Illinois, facility and investments in various maintenance, expansion and cost improvement projects.

On July 15, 2016, the Company entered into an agreement and plan of merger to acquire all of the outstanding capital stock of New Birmingham, Inc., a low cost, regional frac sand producer with more than 20 years of quality reserves located near Tyler, Texas, for approximately $210 million, subject to customary adjustments at closing. The transaction is expected to close in August 2016.

Outlook and Guidance

Due to the current lack of visibility in its Oil and Gas business, the Company will continue to refrain from providing guidance for Adjusted EBITDA until such time as it can gain more clarity around our customers’ business activity levels and the associated demand for our products. Based on current market conditions, the Company anticipates that its capital expenditures for 2016, including the aforementioned reserves purchase, will be in the range of $28 million to $33 million.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, Aug. 3, 2016 at 9:00 a.m. Eastern Time to discuss these results. Hosting the call will be Bryan Shinn, president and chief executive officer and Don Merril, 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 number for the replay is 13640925. The replay of the call will be available through Sept. 2, 2016.

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 116-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 260 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

 

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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; (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 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.

 

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U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 

     Three Months Ended June 30,  
     2016     2015  

Sales

   $ 116,994      $ 147,511   

Cost of goods sold (excluding depreciation, depletion and amortization)

     102,707        117,200   

Operating expenses

    

Selling, general and administrative

     14,585        6,575   

Depreciation, depletion and amortization

     15,209        13,695   
  

 

 

   

 

 

 
     29,794        20,270   
  

 

 

   

 

 

 

Operating income (loss)

     (15,507     10,041   

Other income (expense)

    

Interest expense

     (6,647     (6,928

Other income, net, including interest income

     608        498   
  

 

 

   

 

 

 
     (6,039     (6,430
  

 

 

   

 

 

 

Income (loss) before income taxes

     (21,546     3,611   

Income tax benefit

     9,555        6,342   
  

 

 

   

 

 

 

Net income (loss)

   $ (11,991   $ 9,953   
  

 

 

   

 

 

 

Earnings (loss) per share:

    

Basic

   ($ 0.19   $ 0.19   

Diluted

   ($ 0.19   $ 0.18   

Weighted average shares outstanding:

    

Basic

     63,417        53,303   

Diluted

     63,417        53,857   

Dividends declared per share

   $ 0.06      $ 0.13   

 

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U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

     June 30,
2016
    December 31,
2015
 
     (unaudited)     (audited)  
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 454,208      $ 277,077   

Short-term investments

     —          21,849   

Accounts receivable, net

     54,293        58,706   

Inventories, net

     67,158        65,004   

Prepaid expenses and other current assets

     8,899        9,921   

Income tax deposits

     1,145        6,583   
  

 

 

   

 

 

 

Total current assets

     585,703        439,140   
  

 

 

   

 

 

 

Property, plant and mine development, net

     555,487        561,196   

Goodwill

     68,647        68,647   

Trade names

     14,474        14,474   

Customer relationships, net

     6,205        6,453   

Deferred income taxes, net

     1,314        —     

Other assets

     17,323        18,709   
  

 

 

   

 

 

 

Total assets

   $ 1,249,153      $ 1,108,619   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current Liabilities:

    

Accounts payable

   $ 48,217      $ 49,631   

Dividends payable

     4,080        3,453   

Accrued liabilities

     11,538        11,708   

Accrued interest

     57        58   

Current portion of long-term debt

     3,336        3,330   

Deferred revenue

     4,622        15,738   
  

 

 

   

 

 

 

Total current liabilities

     71,850        83,918   
  

 

 

   

 

 

 

Long-term debt

     486,705        488,375   

Deferred revenue

     67,537        59,676   

Liability for pension and other post-retirement benefits

     63,887        55,893   

Deferred income taxes, net

     —          19,513   

Other long-term obligations

     17,828        17,077   
  

 

 

   

 

 

 

Total liabilities

     707,807        724,452   

Stockholders’ Equity:

    

Preferred stock

     —          —     

Common stock

     639        539   

Additional paid-in capital

     381,349        194,670   

Retained earnings

     190,964        220,974   

Treasury stock, at cost

     (10,850     (15,845

Accumulated other comprehensive loss

     (20,756     (16,171
  

 

 

   

 

 

 

Total stockholders’ equity

     541,346        384,167   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 1,249,153      $ 1,108,619   
  

 

 

   

 

 

 

 

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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 June 30,  
     2016      2015  
     (unaudited; in thousands)  

Sales:

     

Oil & Gas Proppants

   $ 64,926       $ 90,855   

Industrial & Specialty Products

     52,068         56,656   
  

 

 

    

 

 

 

Total Sales

     116,994         147,511   

Segment contribution margin:

     

Oil & Gas Proppants

     (5,995      13,257   

Industrial & Specialty Products

     21,486         19,531   
  

 

 

    

 

 

 

Total segment contribution margin

     15,491         32,788   

Operating activities excluded from segment cost of goods sold

     (1,204      (2,477

Selling, general and administrative

     (14,585      (6,575

Depreciation, depletion and amortization

     (15,209      (13,695

Interest expense

     (6,647      (6,928

Other income, net, including interest income

     608         498   

Income tax benefit

     9,555         6,342   
  

 

 

    

 

 

 

Net income (loss)

   $ (11,991    $ 9,953   
  

 

 

    

 

 

 

 

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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 non-recurring charges that may recur in the future. Management compensates for these limitations by relying primarily on our GAAP results and by using Adjusted EBITDA only supplementally. Our measure of Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

The following table sets forth a reconciliation of net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA:

 

     For the Three Months Ended June 30,  
     2016      2015  
     (unaudited; in thousands)  

Net income (loss)

   $ (11,991    $ 9,953   

Total interest expense, net of interest income

     6,150         6,537   

Provision for taxes

     (9,555      (6,342

Total depreciation, depletion and amortization expenses

     15,209         13,695   
  

 

 

    

 

 

 

EBITDA

     (187      23,843   

Non-cash incentive compensation (1)

     3,449         (2,179

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

     199         868   

Business development related expenses (3)

     861         (375

Other adjustments allowable under our existing credit agreement (4)

     1,051         1,286   
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 5,373       $ 23,443   
  

 

 

    

 

 

 

 

(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 K - Pension and Post-retirement Benefits to our Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.
(3) Reflects expenses related to business development activities in connection with our growth and expansion initiatives.
(4) Reflects miscellaneous adjustments permitted under our existing credit agreement, including such items as restructuring costs for actions that will provide future cost savings. Restructuring costs were $1.1 million and $0.8 million, respectively, for the three months ended June 30, 2016 and 2015.

Investor Contact:

Michael Lawson

Director of Investor Relations and Corporate Communications

(301) 682-0304

lawsonm@USSilica.com                                                                   #

 

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