KATY, Texas, July 31, 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 second quarter 2020 results, including a net loss
of $32.4 million, or $(0.44) per basic and diluted share.
The second quarter results were negatively impacted by
$33.4 million, or $0.35 per share, of charges related to asset
impairments, plant startup and expansion, facility closure costs,
and other adjustments, resulting in adjusted EPS for the second
quarter of $(0.09) per basic and
diluted share.
"I am extremely proud of our colleagues for delivering strong
second quarter results, while continuing to prioritize health and
safety, during these challenging times," said Bryan Shinn, chief executive officer. "Our
operations and logistics teams did a stellar job of rapidly and
aggressively right-sizing our cost structure to minimize the impact
of sharply lower oilfield activity and weaker demand for some
industrial sand products in the quarter. We have made commendable
progress but still have additional cost reduction opportunities,
particularly in the area of leased railcar costs. We continue to
actively work with key lessors to complete necessary lease
amendments to make our ongoing railcar costs sustainable over the
long term."
"In July, we are experiencing a rebound in whole grain
industrial sand sales as customers restart temporarily idled
plants. We also expect our filtration product lines to continue to
perform well, driven by robust consumer demand for food and
beverage products. In the third quarter, Oil & Gas segment
proppant volumes and SandBox loads are expected to increase
sequentially," he added.
"Finally, while many industry peers pursue financial
restructuring, we are keenly focused on serving our customers and
maintaining a strong balance sheet. We remain confident that the
strategic actions we have taken to further improve our cost
structure will pay off handsomely once we return to a more
normalized operating environment," he concluded.
Second Quarter 2020 Highlights
Total Company
- Revenue of $172.5 million for the
second quarter of 2020 compared with $269.6
million in the first quarter of 2020, down 36% sequentially
and down 56% from the second quarter of 2019.
- Overall tons sold of 1.904 million for the second quarter of
2020 compared with 4.161 million tons sold in the first quarter of
2020, down 54% sequentially and down 61% from the second quarter of
2019.
- Net loss of $32.4 million, or
$(0.44) per basic and diluted share,
for the second quarter of 2020, compared with net income of
$6.2 million, or $0.08 earnings per basic and diluted share, for
the second quarter of 2019.
- Contribution margin of $61.3
million for the second quarter of 2020 compared with
$76.2 million in the first quarter of
2020, down 20% sequentially and down 50% from the second quarter of
2019.
- Adjusted EBITDA of $40.8 million
for the second quarter of 2020 compared with $48.2 million in the first quarter of 2020, down
16% sequentially and down 52% from the second quarter of 2019.
Industrial and Specialty Products
- Revenue of $100.0 million for the
second quarter of 2020 compared with $113.9
million in the first quarter of 2020, down 12% sequentially
and down 18% from the second quarter of 2019.
- Tons sold totaled 0.792 million for the second quarter of 2020
compared with 0.959 million tons sold in the first quarter of 2020,
down 17% sequentially and down 19% from the second quarter of
2019.
- Segment contribution margin of $35.1
million, or $44.34 per ton,
for the second quarter of 2020 compared with $43.3 million in the first quarter of 2020, down
19% sequentially and down 30% from the second quarter of 2019.
The Industrial & Specialty Products segment experienced a
19% sequential decrease in contribution margin due to lower sales
volumes as a result of the temporary idling of some sand customer
facilities in the month of May and generally weaker demand from
housing and automotive end markets due to the impacts of COVID-19.
In addition to reduced volumes, the segment's contribution margin
was impacted by lower fixed cost absorption across mixed-use plants
and unfavorable customer mix.
Volumes and profits in the Company's filtration business,
however, were flat sequentially due to robust demand for filtration
media used in the food and beverage industry. In the second
quarter, the Company initiated multiple trials and bench-scale
testing for its blood plasma filtration product line with key
multinational biopharma customers that yielded promising initial
results. U.S. Silica also secured two new long-term contracts with
multinational building materials companies for both whole grain and
ground silica volumes.
Oil & Gas
- Revenue of $72.5 million for the
second quarter of 2020 compared with $155.7
million in the first quarter of 2020, down 53% sequentially
and down 73% from the second quarter of 2019.
- Tons sold of 1.112 million for the second quarter of 2020
compared with 3.202 million tons sold in the first quarter of 2020,
down 65% sequentially and down 72% from the second quarter of
2019.
- Segment contribution margin of $26.2
million, or $23.53 per ton,
for the second quarter of 2020 compared with $32.9 million in the first quarter of 2020, down
20% sequentially and down 63% from the second quarter of 2019.
In the Oil & Gas segment, the Company sold 1.112 million
tons in the second quarter, down 65% from the prior quarter, as a
result of sharply lower frac activity and well completions.
However, despite the precipitous decline in oilfield activity,
proppant pricing declined only 3% sequentially thanks to the
strength of U.S. Silica's contract portfolio. The sharp reduction
in proppant volumes was offset by $16.7
million of customer shortfall penalties and solid execution
on the Company's cost-out program, which resulted in a 20% decline
in segment contribution margin.
SandBox loads declined 71% during the quarter, in line with the
reduction in completions activity, but are expected to increase
meaningfully in the third quarter as key customers return to work
and add more frac crews. During the quarter, SandBox was awarded
full-service work with three leading operators in the Permian and
Eagle Ford basins. The Company also signed a new
delivered-to-the-well agreement with a leading energy customer in
the quarter. With the recent addition of the Arrows Up offering to
the U.S. Silica portfolio, the Company believes it now has a
roughly one-third share in the last-mile logistics market.
Capital Update
As of June 30, 2020, the Company had $158.7 million in cash and cash equivalents and
$63.0 million, including $12.0 million allocated for letters of credit,
available under its credit facilities. Total debt outstanding under
our credit facilities as of June 30, 2020 was $1.266 billion.
Capital expenditures in the second quarter totaled $7.1 million and were primarily associated
with maintenance, cost improvement, and growth capital projects.
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
expects a rebound in third quarter whole grain and higher-margin
ground silica volumes as customers that had temporarily idled their
facilities in May ramp back up. U.S. Silica's outlook calls for
continued strength in its diatomaceous earth and specialty clays
business, where market demand for filtration media remains
robust.
As a result, the Company expects the ISP segment's contribution
margin to be up 5%-10% in the third quarter compared with the
second quarter. Fourth quarter volumes and profitability are
expected to be similar to third quarter levels, although visibility
remains limited given the highly uncertain economic
environment.
In the Oil & Gas segment, U.S. Silica forecasts a
mid-single-digits percentage increase in third quarter proppant
volumes and a meaningful increase in SandBox loads. However, due to
second quarter benefits from customer shortfall penalties, segment
contribution margin is expected to be down sequentially, but the
Company expects the underlying business should be stronger.
In the fourth quarter, the Company presently expects a
mid-single-digits sequential increase in both proppant volumes and
loads but acknowledges that visibility is limited. Unlike the past
two years, where E&P budget exhaustion has resulted in a
drop-off in fourth quarter activity, some customers have indicated
the potential for a modest sequential increase this year,
especially if WTI prices remain above $40/bbl.
Conference Call
U.S. Silica will host a conference call for investors today,
July 31, 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 13707078. The replay will be available through
August 31, 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™. EP
Minerals is an industry leader in the production of products
derived from diatomaceous earth, perlite, engineered clays, and
non-activated clays. SandBox Logistics™ 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; 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
|
|
June 30,
2020
|
|
March 31,
2020
|
|
June 30,
2019
|
Total
sales
|
$
|
172,537
|
|
|
$
|
269,599
|
|
|
$
|
394,854
|
|
Total cost of sales
(excluding depreciation, depletion and amortization)
|
124,743
|
|
|
201,317
|
|
|
294,160
|
|
Operating
expenses:
|
|
|
|
|
|
Selling, general and
administrative
|
39,126
|
|
|
30,052
|
|
|
38,659
|
|
Depreciation,
depletion and amortization
|
37,086
|
|
|
38,449
|
|
|
44,899
|
|
Goodwill and other
asset impairments
|
3,956
|
|
|
103,866
|
|
|
—
|
|
Total operating
expenses
|
80,168
|
|
|
172,367
|
|
|
83,558
|
|
Operating (loss)
income
|
(32,374)
|
|
|
(104,085)
|
|
|
17,136
|
|
Other (expense)
income:
|
|
|
|
|
|
Interest
expense
|
(22,179)
|
|
|
(22,277)
|
|
|
(23,765)
|
|
Other (expense)
income, net, including interest income
|
(1,670)
|
|
|
17,671
|
|
|
15,074
|
|
Total other
expense
|
(23,849)
|
|
|
(4,606)
|
|
|
(8,691)
|
|
(Loss) income before
income taxes
|
(56,223)
|
|
|
(108,691)
|
|
|
8,445
|
|
Income tax benefit
(expense)
|
23,605
|
|
|
36,086
|
|
|
(2,384)
|
|
Net (loss)
income
|
$
|
(32,618)
|
|
|
$
|
(72,605)
|
|
|
$
|
6,061
|
|
Less: Net loss
attributable to non-controlling interest
|
(264)
|
|
|
(260)
|
|
|
(89)
|
|
Net (loss) income
attributable to U.S. Silica Holdings, Inc.
|
$
|
(32,354)
|
|
|
$
|
(72,345)
|
|
|
$
|
6,150
|
|
|
|
|
|
|
|
(Loss) earnings per
share attributable to U.S. Silica Holdings, Inc.:
|
|
|
|
|
|
Basic
|
$
|
(0.44)
|
|
|
$
|
(0.98)
|
|
|
$
|
0.08
|
|
Diluted
|
$
|
(0.44)
|
|
|
$
|
(0.98)
|
|
|
$
|
0.08
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
Basic
|
73,620
|
|
|
73,467
|
|
|
73,301
|
|
Diluted
|
73,620
|
|
|
73,467
|
|
|
73,505
|
|
Dividends declared
per share
|
$
|
—
|
|
|
$
|
0.02
|
|
|
$
|
0.06
|
|
U.S. SILICA
HOLDINGS, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(Unaudited;
dollars in thousands)
|
|
|
June 30,
2020
|
|
December 31,
2019
|
|
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
158,676
|
|
|
$
|
185,740
|
|
Accounts receivable,
net
|
158,346
|
|
|
182,238
|
|
Inventories,
net
|
107,830
|
|
|
124,432
|
|
Prepaid expenses and
other current assets
|
33,046
|
|
|
16,155
|
|
Income tax
deposits
|
—
|
|
|
475
|
|
Total current
assets
|
457,898
|
|
|
509,040
|
|
Property, plant and
mine development, net
|
1,453,778
|
|
|
1,517,587
|
|
Operating lease
right-of-use assets
|
44,966
|
|
|
53,098
|
|
Goodwill
|
185,649
|
|
|
273,524
|
|
Intangible assets,
net
|
167,050
|
|
|
183,815
|
|
Other
assets
|
13,369
|
|
|
16,170
|
|
Total
assets
|
$
|
2,322,710
|
|
|
$
|
2,553,234
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities:
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
125,921
|
|
|
$
|
248,237
|
|
Current portion of
operating lease liabilities
|
45,015
|
|
|
53,587
|
|
Current portion of
long-term debt
|
38,456
|
|
|
18,463
|
|
Current portion of
deferred revenue
|
12,664
|
|
|
15,111
|
|
Total current
liabilities
|
222,056
|
|
|
335,398
|
|
Long-term debt,
net
|
1,210,518
|
|
|
1,213,985
|
|
Deferred
revenue
|
32,968
|
|
|
35,523
|
|
Liability for pension
and other post-retirement benefits
|
65,532
|
|
|
58,453
|
|
Deferred income
taxes, net
|
45,504
|
|
|
38,585
|
|
Operating lease
liabilities
|
100,667
|
|
|
117,964
|
|
Other long-term
liabilities
|
32,197
|
|
|
36,746
|
|
Total
liabilities
|
1,709,442
|
|
|
1,836,654
|
|
Stockholders'
Equity:
|
|
|
|
Preferred
stock
|
—
|
|
|
—
|
|
Common
stock
|
826
|
|
|
823
|
|
Additional paid-in
capital
|
1,192,068
|
|
|
1,185,116
|
|
Retained
deficit
|
(386,110)
|
|
|
(279,956)
|
|
Treasury stock, at
cost
|
(181,413)
|
|
|
(180,912)
|
|
Accumulated other
comprehensive loss
|
(22,910)
|
|
|
(19,854)
|
|
Total U.S. Silica
Holdings, Inc. stockholders' equity
|
602,461
|
|
|
705,217
|
|
Non-controlling
interest
|
10,807
|
|
|
11,363
|
|
Total stockholders'
equity
|
613,268
|
|
|
716,580
|
|
Total liabilities and
stockholders' equity
|
$
|
2,322,710
|
|
|
$
|
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
|
|
June 30,
2020
|
|
March 31,
2020
|
|
June 30,
2019
|
Sales:
|
|
|
|
|
|
Oil & Gas
Proppants
|
$
|
72,495
|
|
|
$
|
155,715
|
|
|
$
|
273,064
|
|
Industrial &
Specialty Products
|
100,042
|
|
|
113,884
|
|
|
121,790
|
|
Total sales
|
172,537
|
|
|
269,599
|
|
|
394,854
|
|
Segment contribution
margin:
|
|
|
|
|
|
Oil & Gas
Proppants
|
26,170
|
|
|
32,891
|
|
|
71,456
|
|
Industrial &
Specialty Products
|
35,119
|
|
|
43,348
|
|
|
50,145
|
|
Total segment
contribution margin
|
61,289
|
|
|
76,239
|
|
|
121,601
|
|
Operating activities
excluded from segment cost of sales
|
(13,495)
|
|
|
(7,957)
|
|
|
(20,907)
|
|
Selling, general and
administrative
|
(39,126)
|
|
|
(30,052)
|
|
|
(38,659)
|
|
Depreciation,
depletion and amortization
|
(37,086)
|
|
|
(38,449)
|
|
|
(44,899)
|
|
Goodwill and other
asset impairments
|
(3,956)
|
|
|
(103,866)
|
|
|
—
|
|
Interest
expense
|
(22,179)
|
|
|
(22,277)
|
|
|
(23,765)
|
|
Other (expense)
income, net, including interest income
|
(1,670)
|
|
|
17,671
|
|
|
15,074
|
|
Income tax benefit
(expense)
|
23,605
|
|
|
36,086
|
|
|
(2,384)
|
|
Net (loss)
income
|
$
|
(32,618)
|
|
|
$
|
(72,605)
|
|
|
$
|
6,061
|
|
Less: Net loss
attributable to non-controlling interest
|
(264)
|
|
|
(260)
|
|
|
(89)
|
|
Net (loss) income
attributable to U.S. Silica Holdings, Inc.
|
$
|
(32,354)
|
|
|
$
|
(72,345)
|
|
|
$
|
6,150
|
|
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
|
|
June 30,
2020
|
|
March 31,
2020
|
|
June 30,
2019
|
Net (loss) income
attributable to U.S. Silica Holdings, Inc.
|
$
|
(32,354)
|
|
|
$
|
(72,345)
|
|
|
$
|
6,150
|
|
Total interest
expense, net of interest income
|
21,295
|
|
|
22,194
|
|
|
23,053
|
|
Provision for
taxes
|
(23,605)
|
|
|
(36,086)
|
|
|
2,384
|
|
Total depreciation,
depletion and amortization expenses
|
37,086
|
|
|
38,449
|
|
|
44,899
|
|
EBITDA
|
2,422
|
|
|
(47,788)
|
|
|
76,486
|
|
Non-cash incentive
compensation (1)
|
4,388
|
|
|
2,847
|
|
|
2,799
|
|
Post-employment
expenses (excluding service costs) (2)
|
527
|
|
|
613
|
|
|
323
|
|
Merger and
acquisition related expenses (3)
|
386
|
|
|
609
|
|
|
6,091
|
|
Plant capacity
expansion expenses (4)
|
2,390
|
|
|
2,190
|
|
|
3,740
|
|
Contract termination
expenses (5)
|
—
|
|
|
—
|
|
|
—
|
|
Goodwill and other
asset impairments (6)
|
3,956
|
|
|
103,866
|
|
|
—
|
|
Business optimization
projects (7)
|
(4)
|
|
|
19
|
|
|
—
|
|
Facility closure
costs (8)
|
2,738
|
|
|
1,097
|
|
|
4,654
|
|
Gain on valuation
change of royalty note payable (9)
|
—
|
|
|
—
|
|
|
(14,100)
|
|
Other adjustments
allowable under the Credit Agreement (10)
|
23,963
|
|
|
(15,207)
|
|
|
5,527
|
|
Adjusted
EBITDA
|
$
|
40,766
|
|
|
$
|
48,246
|
|
|
$
|
85,520
|
|
|
|
|
(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 six months ended
June 30, 2020 reflect $107.8 million of asset impairments related
to goodwill, long-lived assets, operating lease right-of-use assets
and inventory related to idled facilities in our Oil & Gas
Proppants segment. See Note G - Inventories, Note H -
Property, Plant and Mine Development, Note I - Goodwill and
Intangible Assets, 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. The six months
ended June 30, 2020 also includes $1.6 million in severance costs
and $17.6 million related to the gain attributable to the bargain
purchase of Arrows Up. 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 June 30, 2019 included $4.2 million of loss
contingencies reserve. The six months ended June 30, 2019
included $6.4 million of loss contingencies reserve, partially
offset by insurance proceeds of $2.2 million.
|
Supplemental Information
1) What was the cash flow from operations for
the second quarter of 2020 and do you expect to be free cash flow
positive in 2020?
Cash flow from operations in the second quarter totaled
$23.7 million and we generated
$16.6 million in free cash flow after
capital expenditures and $15.1
million after capital expenditures and dividend payments. We
expect to end 2020 with more cash on the balance sheet than we
started the year with.
2) What is the capex guidance for the full year
2020? What is the split between maintenance and growth
capex?
We expect capital expenditures in 2020 to be approximately
$30.0 million, unchanged from our
previous guidance and 75% lower compared with 2019 capital
expenditures. The split between maintenance and growth capex is
approximately 50-50.
3) How much Oil & Gas sand capacity has U.S.
Silica idled to date?
To date, U.S. Silica has idled seven facilities and reduced
capacity at six other facilities, thereby reducing its staffed
annual Oil & Gas production capacity from 24 million tons to
less than 6 million tons.
4) What impact on your business do you expect as
a result of several of your public and private peers undergoing
restructuring?
We expect minimal impact to our business in the near-term as a
result of peer bankruptcies and continue to monitor the situation
closely. We have seen some early indications that certain
customers, both on the Oil & Gas side and the Industrial side,
may want to switch to financially stronger suppliers like U.S.
Silica to ensure reliability and surety of supply.
U.S. Silica Holdings, Inc.
Investor Contacts
Arjun
Sreekumar
Manager, Treasury and Investor Relations
281-394-9584
sreekumar@ussilica.com
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SOURCE U.S. Silica Holdings, Inc.