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8-K - 8-K - U.S. SILICA HOLDINGS, INC.d351407d8k.htm

LOGO

News Release

U.S. Silica Holdings, Inc. Announces Fourth Quarter and Full Year 2016 Results

 

    Fourth quarter revenue of $182.4 million and full year revenue of $559.6 million

 

    Net loss for the quarter of $(0.09) per basic share

 

    Tons sold in Oil and Gas segment up 29% sequentially

 

    Sold 75% of Oil and Gas tons in basin

 

    Capital Expenditures for 2017 expected in the range of $125 million to $150 million

Frederick, Md., Feb. 22, 2017 – U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced a net loss of $6.9 million or $(0.09) per basic and diluted share for the fourth quarter ended Dec. 31, 2016 compared with a net loss of $15.3 million or $(0.29) per basic and diluted share for the fourth quarter ended Dec. 31, 2015. The fourth quarter results were negatively impacted by $2.6 million of business development-related expenses, including acquisition-related costs for Sandbox and NBR Sands. Excluding these expenses, net of $1.0 million tax effect, EPS was $(0.07) per basic share for the quarter.

“Despite the many challenges, we made substantial progress in 2016 to make our Company leaner, stronger, more flexible and ultimately easier for customers to do business with, all of which we believe will enable us to further extend our industry-leading positions in both our Oil and Gas and Industrial and Specialty Products segments,’’ said Bryan Shinn, president and chief executive officer. “Looking ahead at 2017, we see strong demand for both sand proppant and last mile logistics in our Oil and Gas business and believe we have the right strategy and are well positioned to capitalize on these favorable market trends. For our Industrial segment, demand in most of our end use markets is anticipated to stay strong and we expect to continue to roll out new, higher margin products to drive bottom line growth,’’ he added.

Full Year 2016 Highlights

Total Company

 

    Revenue totaled $559.6 million compared with $643.0 million for the full year of 2015, a decrease of 13%.

 

    Net loss of $41.1 million or $(0.63) per basic and diluted share compared with net income of $11.9 million or $0.22 per basic and diluted share for the full year 2015.

 

    Overall tons sold were 9.9 million tons, virtually flat compared with 10.0 million tons for the full year 2015.

 

    Selling, general and administrative expense for the year totaled $67.7 million compared with $62.8 million for the full year 2015, an increase of 8%.

 

    Contribution margin was $90.4 million or 16% of revenue compared with $159.1 million or 25% of revenue for the full year 2015.

 

    Adjusted EBITDA was $39.6 million or 7% of revenue compared with $109.5 million or 17% of revenue for the full year 2015.

Fourth Quarter 2016 Highlights

Total Company

 

    Revenue totaled $182.4 million compared with $136.1 million for the same period last year, an increase of 34% on a year-over-year basis and an increase of 32% sequentially compared with the third quarter of 2016.

 

    Overall tons sold were 2.9 million, up 16% compared with the 2.5 million tons sold in the fourth quarter of 2015 and an increase of 15% sequentially from the third quarter of 2016.

 

    Contribution margin for the quarter was $37.5 million, up 69% compared with $22.1 million in the same period of the prior year and an increase of 90% sequentially from the third quarter of 2016.

 

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    Adjusted EBITDA was $20.7 million, up 92% compared with $10.8 million for the same period last year and an increase of 150% sequentially compared with the third quarter of 2016.

Oil and Gas

 

    Revenue for the quarter totaled $137.0 million, an increase of 54% compared with $88.8 million for the same period in 2015 and an increase of 58% sequentially compared with the third quarter of 2016.

 

    Tons sold totaled 2.1 million, up 34% compared with 1.6 million tons sold in the fourth quarter of 2015 and an increase of 29% sequentially from the third quarter of 2016.

 

    75% of tons were sold in basin compared with 54% in the fourth quarter of 2015 and 65% sold in basin in the third quarter of 2016.

 

    Segment contribution margin was $18.5 million, a 166% improvement compared with $7.0 million in the same period of the prior year and a $20.4 million increase sequentially from the third quarter of 2016.

Industrial and Specialty Products

 

    Revenue for the quarter totaled $45.4 million compared with $47.3 million for the same period in 2015, a decrease of 4% and a decrease of 11% on a sequential basis from the third quarter of 2016.

 

    Tons sold totaled 0.8 million tons, a decrease of 14% on a year-over-year basis and a decrease of 10% on a sequential basis compared with the third quarter of 2016.

 

    Segment contribution margin was $19.0 million compared with $15.2 million in the fourth quarter of 2015, an increase of 25% on a year-over-year basis and a decrease of 12% sequentially compared with the third quarter of 2016.

Capital Update

As of Dec. 31, 2016, the Company had $711.2 million in cash and cash equivalents and $46.0 million available under its credit facilities. Total debt at Dec. 31, 2016 was $513.2 million compared with $491.7 million at Dec. 31, 2015. Capital expenditures in the fourth quarter totaled $13.7 million and were associated largely with the Company’s investments in various maintenance, expansion and cost improvement projects.

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 we 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 2017 will be in the range of $125 million to $150 million.

Conference Call

U.S. Silica will host a conference call for investors tomorrow, Feb. 23, 2017 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, 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 13654614. The replay of the call will be available through March 23, 2017.

 

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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 117-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 240 products to over 1,200 customers across our end markets. The Company currently operates nine industrial sand production plants, nine oil and gas sand production plants and seven Sandbox distribution centers. 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 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 and truckload drivers; (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, trucking and other regulation (and changes in their enforcement or interpretation). Additional information concerning these and other factors can be found in U.S. Silica’s filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

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U.S. SILICA HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three Months Ended  
     December 31, 2016     September 30, 2016     December 31, 2015  
     (in thousands, except per share amounts)  

Sales

   $ 182,373     $ 137,748     $ 136,112  

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

     148,411       119,426       116,614  

Operating expenses

      

Selling, general and administrative

     19,167       18,472       15,682  

Depreciation, depletion and amortization

     21,194       17,175       16,378  
  

 

 

   

 

 

   

 

 

 
     40,361       35,647       32,060  
  

 

 

   

 

 

   

 

 

 

Operating loss

     (6,399     (17,325     (12,562

Other income (expense)

      

Interest expense

     (7,998     (6,684     (6,835

Other income (expense), net, including interest income

     867       493       (90
  

 

 

   

 

 

   

 

 

 
     (7,131     (6,191     (6,925
  

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (13,530     (23,516     (19,487

Income tax benefit

     6,588       12,177       4,167  
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (6,942   $ (11,339   $ (15,320
  

 

 

   

 

 

   

 

 

 

Loss per share:

      

Basic

   $ (0.09     ($0.17)     $ (0.29

Diluted

   $ (0.09     ($0.17)     $ (0.29

Weighted average shares outstanding:

      

Basic

     75,539       66,676       53,323  

Diluted

     75,539       66,676       53,323  

Dividends declared per share

   $ 0.06     $ 0.06     $ 0.06  
     Year Ended December 31,        
     2016     2015    
    

(in thousands, except per share amounts)

   

Sales

   $ 559,625     $ 642,989    

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

     477,295       495,066    

Operating expenses

      

Selling, general and administrative

     67,727       62,777    

Depreciation, depletion and amortization

     68,134       58,474    
  

 

 

   

 

 

   
     135,861       121,251    
  

 

 

   

 

 

   

Operating income (loss)

     (53,531     26,672    

Other income (expense)

      

Interest expense

     (27,972     (27,283  

Other income, net, including interest income

     3,758       728    
  

 

 

   

 

 

   
     (24,214     (26,555  
  

 

 

   

 

 

   

Income (loss) before income taxes

     (77,745     117    

Income tax benefit

     36,689       11,751    
  

 

 

   

 

 

   

Net income (loss)

   $ (41,056   $ 11,868    
  

 

 

   

 

 

   

Earnings (loss) per share:

      

Basic

   $ (0.63   $ 0.22    

Diluted

   $ (0.63   $ 0.22    

Weighted average shares outstanding:

      

Basic

     65,037       53,344    

Diluted

     65,037       53,601    

Dividends declared per share

   $ 0.25     $ 0.44    

 

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U.S. SILICA HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

 

     December 31,  
     2016     2015  
     (in thousands)  
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 711,225     $ 277,077  

Short-term investments

     —         21,849  

Accounts receivable, net

     89,006       58,706  

Inventories, net

     78,709       65,004  

Prepaid expenses and other current assets

     12,323       9,921  

Income tax deposits

     1,682       6,583  
  

 

 

   

 

 

 

Total current assets

     892,945       439,140  
  

 

 

   

 

 

 

Property, plant and mine development, net

     783,313       561,196  

Goodwill

     240,975       68,647  

Trade names

     32,318       14,474  

Intellectual property

     57,270       —    

Customer relationships, net

     50,890       6,453  

Other assets

     15,509       18,709  
  

 

 

   

 

 

 

Total assets

   $ 2,073,220     $ 1,108,619  
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current Liabilities:

    

Accounts payable

     70,778       49,631  

Dividends payable

     5,221       3,453  

Accrued liabilities

     13,034       11,708  

Accrued interest

     169       58  

Current portion of long-term debt

     4,821       3,330  

Current portion of capital leases

     2,237       —    

Current portion of deferred revenue

     13,700       15,738  
  

 

 

   

 

 

 

Total current liabilities

     109,960       83,918  
  

 

 

   

 

 

 

Long-term debt

     508,417       488,375  

Liability for pension and other post-retirement benefits

     56,746       55,893  

Deferred revenue

     58,090       59,676  

Deferred income taxes, net

     50,075       19,513  

Obligations under capital lease

     717       —    

Other long-term obligations

     15,925       17,077  
  

 

 

   

 

 

 

Total liabilities

     799,930       724,452  
  

 

 

   

 

 

 

Stockholders’ Equity:

    

Preferred stock

     —         —    

Common stock

     811       539  

Additional paid-in capital

     1,129,051       194,670  

Retained earnings

     163,173       220,974  

Treasury stock, at cost

     (3,869     (15,845

Accumulated other comprehensive loss

     (15,876     (16,171
  

 

 

   

 

 

 

Total stockholders’ equity

     1,273,290       384,167  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,073,220     $ 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 tables set forth a reconciliation of net income (loss), the most directly comparable GAAP financial measure, to segment contribution margin.

 

     For the Three Months Ended  
     December 31, 2016     September 30, 2016     December 31, 2015  
     (in thousands)        

Sales:

      

Oil & Gas Proppants

   $ 136,977     $ 86,782     $ 88,842  

Industrial & Specialty Products

     45,396       50,966       47,270  
  

 

 

   

 

 

   

 

 

 

Total sales

     182,373       137,748       136,112  

Segment contribution margin:

      

Oil & Gas Proppants

     18,486       (1,897     6,956  

Industrial & Specialty Products

     19,021       21,587       15,184  
  

 

 

   

 

 

   

 

 

 

Total segment contribution margin

     37,507       19,690       22,140  

Operating activities excluded from segment cost of goods sold

     (3,545     (1,368     (2,642

Selling, general and administrative

     (19,167     (18,472     (15,682

Depreciation, depletion and amortization

     (21,194     (17,175     (16,378

Interest expense

     (7,998     (6,684     (6,835

Other income (expense), net, including interest income

     867       493       (90

Income tax benefit

     6,588       12,177       4,167  
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (6,942   $ (11,339   $ (15,320
  

 

 

   

 

 

   

 

 

 
     Year Ended December 31,        
     2016     2015    
     (in thousands)    

Sales:

      

Oil & Gas Proppants

   $ 362,550     $ 430,435    

Industrial & Specialty Products

     197,075       212,554    
  

 

 

   

 

 

   

Total sales

     559,625       642,989    

Segment contribution margin:

      

Oil & Gas Proppants

     11,445       88,928    

Industrial & Specialty Products

     78,988       70,137    
  

 

 

   

 

 

   

Total segment contribution margin

     90,433       159,065    

Operating activities excluded from segment cost of goods sold

     (8,103     (11,142  

Selling, general and administrative

     (67,727     (62,777  

Depreciation, depletion and amortization

     (68,134     (58,474  

Interest expense

     (27,972     (27,283  

Other income, net, including interest income

     3,758       728    

Income tax benefit

     36,689       11,751    
  

 

 

   

 

 

   

Net income (loss)

   $ (41,056   $ 11,868    
  

 

 

   

 

 

   

 

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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 tables set forth a reconciliation of net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA.

 

     Three Months Ended  
     December 31, 2016     September 30, 2016     December 31, 2015  
     (in thousands)        

Net loss

   $ (6,942   $ (11,339   $ (15,320

Total interest expense, net of interest income

     7,048       6,211       6,617  

Provision for taxes

     (6,588     (12,177     (4,167

Total depreciation, depletion and amortization expenses

     21,194       17,175       16,378  
  

 

 

   

 

 

   

 

 

 

EBITDA

     14,712       (130     3,508  

Non-cash incentive compensation (1)

     3,032       3,720       2,033  

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

     260       (184     834  

Business development related expenses (3)

     2,571       4,667       2,358  

Other adjustments allowable under our existing credit agreement (4)

     96       185       2,044  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 20,671     $ 8,258     $ 10,777  
  

 

 

   

 

 

   

 

 

 

 

(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 P - Pension and Post-retirement Benefits to our Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
(3) Reflects expenses related to business development activities in connection with our growth and expansion initiatives, including acquisition-related costs for our NBI Acquisition and Sandbox Acquisition completed in August 2016.
(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 $0.2 million and $2.1 million, respectively, for the three months ended December 31, 2016 and 2015.

 

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     Year Ended December 31,  
     2016      2015  
     (in thousands)  

Net income (loss)

   $ (41,056    $ 11,868  

Total interest expense, net of interest income

     25,779        26,578  

Provision for taxes

     (36,689      (11,751

Total depreciation, depletion and amortization expenses

     68,134        58,474  
  

 

 

    

 

 

 

EBITDA

     16,168        85,169  

Non-cash incentive compensation (1)

     12,107        3,857  

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

     1,040        3,335  

Business development related expenses (3)

     8,206        10,701  

Other adjustments allowable under our existing credit agreements (4)

     2,033        6,446  
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 39,554      $ 109,508  
  

 

 

    

 

 

 

 

(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 P - Pension and Post-retirement Benefits to our Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
(3) Reflects expenses related to business development activities in connection with our growth and expansion initiatives, including acquisition-related costs for our NBI Acquisition and Sandbox Acquisition completed in August 2016.
(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 $3.5 million and $4.8 million, respectively, for the years ended December 31, 2016 and 2015. The year ended December 31, 2016 amount includes a gain on insurance settlement of $1.5 million.

Investor Contact:

Michael Lawson

Vice President of Investor Relations and Corporate Communications

(301) 682-0304

lawsonm@USSilica.com

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