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8-K - 8-K - U.S. SILICA HOLDINGS, INC.d685427d8k.htm

Exhibit 99.1

 

LOGO

News Release

U.S. Silica Holdings, Inc. Announces Fourth Quarter and Full Year 2013 Results

 

    Revenue for the quarter and the full year up 25.8% and 23.6%, respectively, year-over-year

 

    Full year overall sales volumes increased nearly 14% to 8.2 million tons

 

    Over 60% of oil and gas sales during the quarter made downstream via transloads

 

    Company reaffirming guidance for 2014 for adjusted EBITDA, capital expenditures and effective tax rate

Frederick, Md., Feb. 25, 2014 – U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $16.5 million or $0.31 per basic and diluted share for the fourth quarter ended Dec. 31, 2013 compared with net income of $21.8 million or $0.41 per basic and diluted share for the fourth quarter of 2012. As stated in a previous press release, results in the quarter were negatively impacted by severe winter storms in mid- and late December, reducing well completion activity, thus driving higher costs across our supply chain. The quarter was also negatively impacted by meaningful one-time costs, including a bad debt expense related to a customer bankruptcy.

Bryan Shinn, president and chief executive officer commented, “In 2013, we took several steps to position our Company for success going forward. We increased the speed with which we respond to customers by adding several new transloads near the major shale basins. We expanded the scale of our business by adding a state-of-the-art frac sand mine and plant in Sparta, Wisconsin and a resin-coated sand plant in Rochelle, Illinois. We strengthened our balance sheet and added top new talent to our team to support further growth of the Company. For 2014, we will be focused on improving the efficiency of our supply chain, bringing our new Utica operations online and carefully evaluating acquisition opportunities to expand our infrastructure and add additional mine production.”

Full Year 2013 Highlights

Total Company

 

    Revenue totaled $546.0 million compared with $441.9 million for the full year of 2012, an improvement of 23.6%.

 

    Overall sales volumes increased to 8.2 million tons, an increase of 13.8% over 2012 totals.

 

    Selling, general and administrative expense for the year totaled $49.8 million or 9.1% of revenue compared with $41.3 million or 9.3% of revenue for the full year 2012.

 

    Contribution margin was $202.9 million compared with $193.7 million for the full year 2012.

 

    Adjusted EBITDA was $160.7 million or 29.4% of revenue compared with $150.6 million or 34.1% of revenue for the full year 2012.

 

    Net income was $75.3 million or $1.41 per diluted share compared with $79.2 million or $1.50 per diluted share for the full year 2012.

Fourth Quarter 2013 Highlights

Total Company

 

    Revenue totaled $149.5 million compared with $118.8 million for the same period last year, an increase of 25.8%.

 

    Overall sales volumes increased to 2.1 million tons, a 19.9% improvement over the fourth quarter of 2012.

 

    Contribution margin for the quarter was $48.0 million compared with $50.5 million in the same period of the prior year.

 

    Adjusted EBITDA was $35.9 million or 24.0% of revenue versus $39.0 million or 32.8% of revenue for the same period last year.

 

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Oil and Gas

 

    Revenue for the quarter totaled $102.0 million compared with $70.9 million in the same period in 2012.

61% of total sales were made in basin via transloads compared with 32% in the fourth quarter of 2012.

 

    Overall sales volumes totaled 1.1 million tons compared with 785.8 thousand tons sold in the fourth quarter of 2012.

 

    Segment contribution margin was $34.2 million versus $37.5 million in the fourth quarter of 2012.

Industrial and Specialty Products

 

    Revenue for the quarter totaled $47.5 million compared with $47.9 million for the same period in 2012.

 

    Overall sales volumes totaled 1.0 million tons compared with 973.4 thousand tons sold in the same period last year.

 

    Segment contribution margin was $13.8 million versus $13.0 million in the fourth quarter of 2012.

Capital Update

As of Dec. 31, 2013, the Company had $153.2 million in cash and cash equivalents and short term investments and $41.0 million available under its credit facilities. Total long-term debt at Dec. 31, 2013 was $368.0 million. Capital expenditures in the fourth quarter totaled $13.6 million and were associated largely with the Company’s investment in a new frac sand mine and plant located near Utica, IL.

Outlook and Guidance

The Company is reiterating the guidance it provided in its press release dated Jan. 31, 2014. For the full year 2014, the Company anticipates adjusted EBITDA in range of $180 million to $200 million. In addition, the Company expects capital expenditures of between $75 million and $85 million and an effective tax rate of approximately 25 percent.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, Feb. 26, 2014 at 10:00 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 (866) 612-9923 or for international callers, (404) 537-3239. The conference passcode is 57596409. A replay will be available shortly after the call and can be accessed by dialing (800) 585-8367. The Passcode for the replay is 57596409. The replay of the call will be available through March 26, 2014.

About U.S. Silica

U.S. Silica Holdings, Inc., a member of the Russell 2000 and S&P Small Cap 600 indexes, is one of the largest domestic producers of commercial silica, a specialized mineral that is a critical input into the oil and gas proppants end market. The company also processes ground and unground silica sand for a variety of industrial and specialty products end markets such as glass, fiberglass, foundry molds, municipal filtration and recreational uses. During its 100-plus year history, U.S. Silica Holdings, Inc. has developed core competencies in mining, processing, logistics and materials science that enable it to produce and cost-effectively deliver over 250 products to customers across these end markets. U.S. Silica Holdings, Inc. is headquartered in Frederick, MD.

 

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Forward-looking Statements

Certain statements in this press release are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and speak only as of this date. Forward-looking statements made include any statement that does not directly relate to any historical or current fact and may include, but are not limited to, statements regarding U.S. Silica’s growth opportunities, strategy, future financial results, forecasts, projections, plans and capital expenditures, and the commercial silica industry. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are: (1) fluctuations in demand for commercial silica; (2) the cyclical nature of our customers’ businesses; (3) operating risks that are beyond our control; (4) federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing; (5) our ability to implement our capacity expansion plans within our current timetable and budget; (6) loss of, or reduction in, business from our largest customers; (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

(dollars in thousands, except per share amounts)

 

     For the Three Months Ended December 31,  
     2013     2012  

Sales

   $ 149,474      $ 118,846   

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

     102,875        70,988   

Operating expenses

    

Selling, general and administrative

     14,456        11,542   

Depreciation, depletion and amortization

     10,098        7,179   
  

 

 

   

 

 

 
     24,554        18,721   
  

 

 

   

 

 

 

Operating income

     22,045        29,137   

Other (expense) income

    

Interest expense

     (4,086     (3,244

Other income, net, including interest income

     152        3,931   
  

 

 

   

 

 

 
     (3,934     687   
  

 

 

   

 

 

 

Income before income taxes

     18,111        29,824   

Income tax expense

     (1,658     (8,030
  

 

 

   

 

 

 

Net income

   $ 16,453      $ 21,794   
  

 

 

   

 

 

 

Earnings per share:

    

Basic

   $ 0.31      $ 0.41   

Diluted

   $ 0.31      $ 0.41   

 

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U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

     December 31,  
     2013     2012  
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 78,256      $ 61,022   

Short-term investments

     74,980        —     

Accounts receivable, net

     75,207        59,564   

Inventories, net

     64,212        39,835   

Prepaid expenses and other current assets

     11,104        6,738   

Deferred income tax, net

     17,737        10,108   
  

 

 

   

 

 

 

Total current assets

     321,496        177,267   
  

 

 

   

 

 

 

Property, plant and mine development, net

     442,116        414,218   

Debt issuance costs, net

     5,255        2,111   

Goodwill

     68,403        68,403   

Trade names

     10,436        10,436   

Customer relationships, net

     6,120        6,531   

Other assets

     9,635        7,844   
  

 

 

   

 

 

 

Total assets

   $ 863,461      $ 686,810   
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current Liabilities:

    

Book overdraft

   $ 4,659      $ 5,390   

Accounts payable

     37,376        37,333   

Dividends payable

     6,709        —     

Accrued liabilities

     10,823        9,481   

Accrued interest

     41        2   

Current portion of long-term debt

     3,488        2,433   

Income tax payable

     1,037        20,596   

Current portion of deferred revenue

     —          4,855   
  

 

 

   

 

 

 

Total current liabilities

     64,133        80,090   
  

 

 

   

 

 

 

Long-term debt

     367,963        252,992   

Liability for pension and other post-retirement benefits

     36,802        52,747   

Deferred income tax, net

     71,318        59,111   

Other long-term obligations

     13,951        10,176   
  

 

 

   

 

 

 

Total liabilities

     554,167        455,116   
  

 

 

   

 

 

 

Stockholders’ Equity:

    

Common stock

     534        529   

Preferred stock

     —          —     

Additional paid-in capital

     174,799        163,579   

Retained earnings

     137,978        82,731   

Treasury stock, at cost

     —          (970

Accumulated other comprehensive loss

     (4,017     (14,175
  

 

 

   

 

 

 

Total stockholders’ equity

     309,294        231,694   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 863,461      $ 686,810   
  

 

 

   

 

 

 

 

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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 income before income taxes, the most directly comparable GAAP financial measure, to segment contribution margin.

 

     For the Three Months Ended December 31,  
     2013     2012  
     (in thousands)  

Sales:

    

Oil and gas proppants

   $ 102,011      $ 70,920   

Industrial and specialty products

     47,463        47,926   
  

 

 

   

 

 

 

Total sales

     149,474        118,846   

Segment contribution margin:

    

Oil and gas proppants

     34,150        37,507   

Industrial and specialty products

     13,833        13,033   
  

 

 

   

 

 

 

Total segment contribution margin

     47,983        50,540   

Operating activities excluded from segment cost of good

     (1,384     (2,682

Selling, general and administrative

     (14,456     (11,542

Advisory fees to parent

     —          —     

Depreciation, depletion and amortization

     (10,098     (7,179

Interest expense

     (4,086     (3,244

Early extinguishment of debt

     —          —     

Other income, net, including interest income

     152        3,931   
  

 

 

   

 

 

 

Income (loss) before income taxes

   $ 18,111      $ 29,824   
  

 

 

   

 

 

 

 

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     For the Year Ended December 31,  
     2013     2012  
     (in thousands)  

Sales:

    

Oil and gas proppants

   $ 347,439      $ 243,765   

Industrial and specialty products

     198,546        198,156   
  

 

 

   

 

 

 

Total sales

     545,985        441,921   

Segment contribution margin:

    

Oil and gas proppants

     145,916        140,070   

Industrial and specialty products

     56,983        53,601   
  

 

 

   

 

 

 

Total segment contribution margin

     202,899        193,671   

Operating activities excluded from segment cost of goods sold

     (5,481     (8,285

Selling, general and administrative

     (49,759     (41,299

Depreciation, depletion and amortization

     (36,418     (25,099

Interest expense

     (15,341     (13,795

Early extinguishment of debt

     (480     —     

Other income, net, including interest income

     597        4,612   
  

 

 

   

 

 

 

Income (loss) before income taxes

   $ 96,017      $ 109,805   
  

 

 

   

 

 

 

 

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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 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.

 

     For the Three Months Ended December 31,  
     2013     2012  
     (in thousands)  

Net income

   $ 16,453      $ 21,794   

Total interest expense, net of interest income

     4,040        3,193   

Provision for taxes

     1,658        8,030   

Total depreciation, depletion and amortization expenses

     10,098        7,179   
  

 

 

   

 

 

 

EBITDA

     32,249        40,196   

Non-cash losses and charges (1)

     464        379   

Non-recurring expense (income)(2)

     (189     (3,737

Non-cash incentive compensation(3)

     803        668   

Post-employment expenses (excluding service costs)(4)

     517        450   

Other adjustments allowable under our existing credit agreements(5)

     2,051        1,015   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 35,895      $ 38,971   
  

 

 

   

 

 

 

 

(1) Includes non-cash losses and charges arising from adjustments to estimates of a future litigation liability.
(2) Includes gain on sale of assets for the three months ended December 31, 2013, and gain on insurance settlement for the three months ended December 31, 2012.
(3) Includes vesting of incentive equity compensation issued to our employees.
(4) 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.
(5) Reflects miscellaneous adjustments permitted under the Term Loan and the Revolver, including such items as expenses related to one-time litigation fees, Sarbanes-Oxley implementation, secondary stock offerings by Golden Gate Capital, reviewing growth initiatives and potential acquisitions and employment agency fees.

 

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     For the Year Ended December 31,  
     2013     2012  
     (in thousands)  

Net income

   $ 75,256      $ 79,154   

Total interest expense, net of interest income

     15,241        13,615   

Provision for taxes

     20,761        30,651   

Total depreciation, depletion and amortization expenses

     36,418        25,099   
  

 

 

   

 

 

 

EBITDA

     147,676        148,519   

Non-cash losses and charges (1)

     464        379   

Non-recurring expense (income)(2)

     (189     (4,206

Early extinguishment of debt(3)

     480        —     

Non-cash incentive compensation(4)

     3,039        2,330   

Post-employment expenses (excluding service costs)(5)

     2,071        1,794   

Other adjustments allowable under our existing credit agreements(6)

     7,150        1,773   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 160,691      $ 150,589   
  

 

 

   

 

 

 

 

(1) Includes non-cash deductions, losses and charges arising from adjustments to estimates of a future litigation liability and the decision by our hourly workforce at our Rockwood facility to withdraw from a pension plan administered by a third party.
(2) Includes the gain on insurance settlements of $0 and $(3,734) for the years ended December 31, 2013 and 2012, respectively. Includes the gain on sale of assets of $(189) and $(472) for the years ended December 31, 2013 and 2012, respectively.
(3) Includes natural gas hedging losses, purchase accounting adjustments, management bonuses and other expenses related to the Golden Gate Capital acquisition, as well as unamortized transaction fees and expenses arising from the refinancing of our Term Loan and Revolver.
(4) Includes vesting of incentive equity compensation issued to our employees.
(5) 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 R to our Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.
(6) Reflects miscellaneous adjustments permitted under our existing credit agreements, including such items as expenses related to offerings of our common stock by Golden Gate Capital, business development activities related to our growth and expansion initiatives, one-time litigation fees, expenses related to our refinancing and employment agency fees.

Investor Contact:

Michael Lawson

Director of Investor Relations and Corporate Communications

(301) 682-0304

lawsonm@USSilica.com

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