U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net
income of $30.3 million, or $0.61 per basic and diluted share for
the year ended December 31, 2011, compared with net income of $11.4
million, or $0.23 per share for the same period in 2010. Included
in net income and earnings per share are non-recurring management
advisory fees of $9.3 million (or $0.12 per share, tax effected) in
2011 which includes a termination fee of $8.0 million which was
accrued at December 31, 2011 and paid on February 6, 2012, and $1.3
million (or $0.02 per share, tax effected) in 2010.
Net income for the fourth quarter of 2011 was $10.0 million, or
$0.19 per basic and diluted share, compared to $3.8 million, or
$0.07 per share for the same period in 2010. Included in fourth
quarter net income and earnings per share are non-recurring
management advisory fees of $8.3 million (or $0.11 per share, tax
effected) in 2011, and $0.3 million (or $0.01 per share, tax
effected) in 2010.
Summary Financial and Operating Data
($ in millions except statistics and per share)
Three Months Ended
December 31,
Year Ended
December 31,
2011 2010
2011 2010 Key Operating Statistics:
Tons Sold:
(000s)
Oil & Gas 590.4 430.0 2,018.1 1,522.2 Industrial &
Specialty Products 1,010.6 1,017.4
4,270.4 4,442.4 Total 1,601.0 1,447.4
6,288.5 5,964.6
ASP: (per
ton)
Oil & Gas $ 63.94 $ 42.72 $ 53.06 $ 45.69 Industrial &
Specialty Products $ 45.40 $ 40.13 $ 44.15 $
39.48 Total $ 52.24 $ 40.90 $ 47.00 $ 41.07
Income: Revenue $ 83.6 $ 59.5 $ 295.6 $ 245.0
Contribution Margin $ 33.6 $ 20.5 $ 114.4 $ 87.0 % Margin 40.2 %
34.4 % 38.7 % 35.5 % Adjusted EBITDA (a) $ 27.2 $ 16.0 $
93.6 $ 72.2 % Margin 32.5 % 27.0 % 31.7 % 29.5 % Net Income
$ 10.0 $ 3.8 $ 30.3 $ 11.4 EPS, Basic and Diluted
$ 0.19 $ 0.07 $ 0.61
$ 0.23 (a) A reconciliation of Adjusted
EBITDA, a non-GAAP financial measure, to net income, the most
comparable GAAP measure, and other important information appears on
page 7.
President and Chief Executive Officer Bryan Shinn commented,
“2011 was the best year in the history of U.S. Silica by almost
every measure. Our Oil & Gas contribution margin grew by 57%
and overall net income more than doubled. U.S. Silica has
differentiated logistics capabilities, premium Ottawa White®
products that are in high demand and a low-cost operations
platform. These competitive advantages position us well for
long-term success.”
2011 Full Year Financial Highlights
The Company reported full year 2011 revenues of $295.6 million,
an increase of $50.6 million, or 20.7%, from $245.0 million in
2010, driven by overall year over year volume and pricing increases
of 5.4% and 14.4%, respectively.
Sales in the Oil & Gas segment accounted for approximately
75% of the growth in 2011. Sales volume within our Oil & Gas
business increased by 32.6% in 2011, to over 2.0 million tons,
compared to 1.5 million tons in 2010. This growth was driven by
continued increased demand for our proppants as domestic drilling
and production activity continued to accelerate throughout the
year. Contribution margin for the Oil and Gas business was $67.6
million for the year ended December 31, 2011, as compared to $43.1
million in 2010.
2011 proved to be a strong year for our Industrial &
Specialty Products business as we continued to add high-value
customers to our portfolio to offset any softness in demand.
Contribution margins for the Industrial and Specialty Products
segment for the full year 2011 was $53.0 million, an increase of
15.2%, as compared to $46.0 million in 2010. Volume in our
Industrial & Specialty Products segment was down modestly due
to the re-marketing of product to our Oil & Gas segment.
SG&A expense was $23.3 million for the year ended December
31, 2011 as compared to $20.4 million for the same period in 2010.
The growth in SG&A was driven by increased staffing required to
meet the growth in the Oil & Gas business and to meet the
additional administrative requirements of a public company.
Interest expense was $18.4 million as compared to $23.0 million in
2010. The decline in interest expense year-over-year was due to the
Company refinancing its debt in June 2011.
Adjusted EBITDA increased 29.6%, or $21.4 million, to $93.6
million for the full year 2011, as compared to $72.2 million for
2010, driven by volume increases in our Oil & Gas segment, as
well as by increases in Average Sales Price (ASP) in both segments.
Adjusted EBITDA margin increased to 31.7% in 2011 compared to 29.5%
in 2010, due to growth in proppant volumes, strong pricing and good
cost controls.
Net income for full year 2011 was $30.3 million, an increase of
more than 165% over 2010 net income of $11.4 million.
Fourth Quarter 2011 Financial Highlights
The Company reported fourth quarter 2011 revenues of $83.6
million, an increase of $24.1 million, or 40.5%, from $59.5 million
in 2010 driven by acceleration in demand for our natural proppants
during the fourth quarter. Overall sales volume increased 10.6%
during the fourth quarter of 2011 to 1.6 million tons, as compared
to 1.4 million tons in the fourth quarter of 2010.
Fourth quarter 2011 sales volume within our Oil & Gas
business increased by 37.3%, to over 590 thousand tons, compared to
430 thousand tons in 2010; sales volumes for our Industrial and
Specialty Products were mostly flat year over year.
SG&A expense was $6.9 million in the fourth quarter 2011 as
compared to $6.0 million for 2010.
Adjusted EBITDA increased 69.7%, or $11.2 million, to $27.2
million in the fourth quarter 2011, as compared to $16.0 million
for 2010, driven by accelerated volume increases in our Oil &
Gas Proppants segment, as well as by increases in Average Sales
Price (ASP) in both segments. Adjusted EBITDA margin percentage
increased for the fourth quarter 2011 to 32.5%, compared to 27.0%
in 2010.
Net income for the fourth quarter 2011 was $10.0 million, an
increase of more than 166% over 2010 net income of $3.8
million.
Capital Update
As of December 31, 2011, we had $59.2 million of cash on hand
and $24.0 million of available credit under our financing
facilities. Our total outstanding debt at December 31, 2011 was
$261.8 million.
U.S. Silica incurred capital expenditures of approximately $66.7
million in 2011, mainly due to spending on the planned expansions
of the Ottawa and Rockwood plants, which increased our aggregate
annual production capacity by more than 1.0 million tons. Both of
these expansion projects became operational late in the fourth
quarter of 2011. Capital spending in 2010 was $15.2 million.
Outlook
We currently estimate Revenue, Adjusted EBITDA and Capital
Expenditures for 2012 to be within the following ranges:
First
Quarter
2012
Full Year
2012
Revenue $92 - $97 million $395 - $420 million Adjusted EBITDA (a)
$34 - $36 million $140 - $150 million
Capital
Expenditures
$70 - $95 million (a) The Company is not able to provide a
reconciliation of projected Adjusted EBITDA to projected Net Income
due to the unknown effect, timing and potential significance of
certain income statement items. The methodology to reconcile
Adjusted EBITDA ton Net Income is disclosed in our 2011 Annual
Report on Form 10-K, as filed with the SEC, and included on page 7,
herein.
These projections are based on many estimates and are inherently
subject to change based on industry conditions, future decisions
made by management and the Board of Directors, and significant
economic, competitive and other uncertainties and
contingencies.
Conference Call
U.S. Silica will host a conference call for investors today,
March 20, 2012 at 10:00 a.m. Eastern Time to discuss these results.
Hosting the call will be Bryan A. Shinn, President and Chief
Executive Officer, William A. White, Chief Financial Officer, and
R. Dale Lynch, Vice President of Finance.
The call can be accessed live over the telephone by dialing
(877) 705-6003, or for international callers, (201) 493-6725. A
replay will be available shortly after the call and can be accessed
by dialing (877) 870-5176, or for international callers, (858)
384-5517. The passcode for the replay is 389786. The replay will be
available until April 3, 2012.
Interested parties may also listen to a simultaneous webcast of
the conference call by logging onto U.S. Silica’s website at
www.ussilica.com in the Investors Resources section. A replay of
the conference call will also be available for approximately 30
days following the call.
About U.S. Silica Holdings, Inc.
U.S. Silica Holdings, Inc., a Delaware corporation, is
the second largest domestic producer of commercial silica, a
specialized mineral that is a critical input into the oil and gas
proppants end market and a variety of attractive industrial and
specialty products end markets. During its 111-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 200 products to customers
across these end markets. U.S. Silica Holdings, Inc. is
headquartered in Frederick, Maryland.
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 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.
U.S. SILICA HOLDINGS, INC.
COMBINED STATEMENTS OF
OPERATIONS
Year Ended December 31, 2011
2010 2009 (in thousands, except per share
amounts) Sales $ 295,596 $ 244,953 $ 191,623 Cost of goods sold
(excluding depreciation, depletion and amortization) 181,196
157,994 136,200 Operating expenses Selling, general and
administrative 23,348 20,413 10,672 Advisory fees to parent 9,250
1,250 1,250 Depreciation, depletion and amortization 20,999
19,305 17,887 53,597
40,968 29,809 Operating income
60,803 45,991 25,614 Other (expense) income Interest expense
(18,407 ) (23,034 ) (28,228 ) Early extinguishment of debt (6,043 )
(10,195 ) — Other income, net, including interest income
1,062 959 4,894 (23,388 )
(32,270 ) (23,334 ) Income before income taxes 37,415
13,721 2,280 Income tax (expense) benefit (7,162 )
(2,329 ) 3,259 Net income $ 30,253 $ 11,392
$ 5,539 Earnings per share: Basic $ 0.61 $
0.23 $ 0.11 Diluted $ 0.61 $ 0.23 $ 0.11
U.S. SILICA HOLDINGS, INC.
COMBINED BALANCE SHEETS
December 31, 2011
2010 (in thousands) ASSETS Current
Assets: Cash and cash equivalents $ 59,199 $ 64,500 Accounts
receivable, net 46,600 30,044 Inventories, net 29,307 22,418
Prepaid expenses and other current assets 8,561 3,191 Deferred
income taxes, net 28,007 4,557 Income tax receivable 3,895
2,150 Total current assets 175,569
126,860 Property, plant and mine development,
net 336,788 287,595 Debt issuance costs, net 1,291 1,322 Goodwill
68,403 68,403 Trade names 10,436 10,436 Customer relationships, net
6,942 7,353 Other assets 6,367 6,565
Total assets $ 605,796 $ 508,534
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
Liabilities: Book overdraft $ 5,588 $ 3,727 Accounts payable
36,579 12,027 Accrued liabilities 9,875 8,949 Accrued interest
1,659 101 Current portion of long-term debt 6,364 1,510 Current
portion of deferred revenue 10,393 6,512
Total current liabilities 70,458 32,826
Long-term debt 255,425 236,932 Note payable to parent 15,000
15,000 Liability for pension and other post-retirement benefits
52,078 49,460 Deferred revenue 2,128 13,077 Deferred income taxes,
net 75,915 53,124 Other long-term obligations 12,858
10,551 Total liabilities 483,862 410,970
Commitments and contingencies
Stockholders’ Equity:
Common stock - $0.01 par value, 100,000,000 authorized shares,
50,000,000 shares issued and outstanding 500 500 Additional paid-in
capital 103,757 102,519 Retained earnings (accumulated deficit)
30,038 (215 ) Accumulated other comprehensive loss (12,361 )
(5,240 ) Total stockholders’ equity 121,934
97,564 Total liabilities and stockholders’ equity $
605,796 $ 508,534
Non-GAAP Financial Measures
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.
Three Months EndedDecember
31,
Year Ended
December 31,
2011 2010 2011 2010
Net income $ 10,045 $ 3,772 $ 30,253 $ 11,392 Total interest
expense, net of interest income 3,374 5,221 18,347 22,989 Provision
for taxes (benefit) 371 (151 ) 7,162 2,329 Total depreciation,
depletion and amortization expenses 5,363
5,040 20,999 19,305 EBITDA 19,153
13,882 76,761 56,015 Non-cash deductions, losses and charges (1)
(526 ) 762 (526 ) 1,364 Non-recurring expenses (income) (2) (733 )
- (2,028 ) - Transaction expenses (3) - - 6,043 10,669 Permitted
management fees and expenses (4) 8,312 312 9,250 1,250 Non-cash
incentive compensation (5) 555 96 1,237 383 Post-employment
expenses (excluding service costs) (6) 422 550 1,689 2,113 Other
adjustments allowable under our existing credit agreements (7)
269 39 1,131 358
Adjusted EBITDA
$ 27,452 $ 15,641 $ 93,557 $ 72,152
__________
(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 non-recurring expenses related to a former insurer’s
liquidation. (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 Facility. (4) Includes fees and
expense paid to Golden Gate Capital for ongoing consulting and
management services provided pursuant to an Advisory Agreement
entered into in connection with our acquisition by Golden Gate
Capital. At December 31, 2011, we recorded an accrual for $8.0
million related to the termination fee paid to Golden Gate Capital
in connection with our initial public offering on January 31, 2012.
(5) Includes vesting of incentive equity compensation issued
to our employees. (6) 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. (7) Reflects miscellaneous adjustments permitted
under our existing credit agreements, including such items as
expenses related to reviewing potential acquisitions and costs
associated with relocating the corporate headquarters.
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