- GAAP and adjusted EPS for the quarter of $0.41 and $0.43 per
diluted share, respectively
- Revenue increased 8% sequentially due to strong customer
demand and improved pricing
- Adjusted EBITDA increased 10% sequentially
- Oil & Gas segment contribution margin increased 10%
sequentially
- Industrial & Specialty Products segment contribution
margin increased 1% sequentially
- Repurchased $50 million of
debt at a discount to par using cash on hand in October
KATY,
Texas, Oct. 28,
2022 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA)
(the "Company"), a diversified industrial minerals company and the
leading last-mile logistics provider to the oil and gas industry,
today announced net income of $32.1
million, or $0.41 per diluted
share, for the third quarter ended September
30, 2022. The third quarter results were negatively impacted
by $2.1 million pre-tax, or
$0.02 per diluted share after-tax, of
charges primarily related to merger and acquisition related
expenses and optimization costs, partially offset by the gain on
extinguishment of debt, resulting in adjusted EPS (a non-GAAP
measure) of $0.43 per diluted
share.
These results compared with a net income of $22.9 million, or $0.29 per diluted share, for the
second quarter of 2022, which were negatively impacted
by $2.4 million pre-tax, or $0.03 per diluted share after-tax, of charges
primarily related to merger and acquisition related expenses and
facility closure costs, resulting in adjusted earnings per diluted
share of $0.32.
Bryan Shinn, Chief Executive
Officer, commented, "We delivered another exceptional quarter,
resulting in our strongest quarterly financial performance in the
last four years. These results were driven by continued robust
customer demand in both business segments and outstanding execution
by our talented team. We enjoyed a full quarter of price increases
to fight inflationary impacts in our Industrial & Specialty
Products segment, realized greater contract coverage at improved
prices in sand proppant, and delivered further margin expansion in
SandBox last-mile-logistics. This resulted in sequentially higher
revenue, earnings, and strong cash generation across the Company,
affording us the opportunity to repurchase an additional
$50 million of debt earlier this
month. So far this year, we have used our strong cash flow
generation to repurchase a total of $150
million of debt and expect to generate meaningful operating
cash flow in the fourth quarter and in 2023, which should further
strengthen our balance sheet and help us achieve our objective of
reducing net debt."
Third Quarter 2022
Highlights
Total Company
- Revenue of $418.8 million for the
third quarter of 2022 increased 8% compared with $388.5 million in the second quarter of 2022 and
increased 57% when compared with the third quarter of 2021.
- Overall tons sold of 4.624 million for the third quarter of
2022 decreased 1% compared with 4.652 million tons sold in the
second quarter of 2022 and increased 16% when compared with the
third quarter of 2021.
- Contribution margin of $131.8
million for the third quarter of 2022 increased 7% compared
with $123.3 million in the second
quarter of 2022 and increased 98% when compared with the third
quarter of 2021.
- Adjusted EBITDA of $102.7 million
for the third quarter of 2022 increased 10% compared with
$93.8 million in the second quarter
of 2022 and increased 158% when compared with the third quarter of
2021.
Oil & Gas
- Revenue of $267.5 million for the
third quarter of 2022 increased 10% when compared with $244.2 million in the second quarter of 2022 and
increased 89% when compared with the third quarter of 2021.
- Tons sold of 3.498 million for the third quarter of 2022
decreased 1% compared with 3.528 million tons sold in the second
quarter of 2022 and increased 20% when compared with the third
quarter of 2021.
- Segment contribution margin of $85.3
million, or $24.38 per ton,
increased 10% when compared with $77.4
million in the second quarter of 2022 and increased 232%
when compared with the third quarter of 2021.
Industrial & Specialty Products (ISP)
- Revenue of $151.4 million for the
third quarter of 2022 increased 5% compared with $144.3 million in the second quarter of 2022 and
increased 21% when compared with the third quarter of 2021.
- Tons sold of 1.126 million for the third quarter of 2022 were
relatively flat when compared with 1.124 million tons sold in the
second quarter of 2022 and increased 5% when compared with the
third quarter of 2021.
- Segment contribution margin of $46.5
million, or $41.32 per ton,
for the third quarter of 2022 increased 1% compared with
$45.9 million in the second quarter
of 2022 and increased 13% when compared with the third quarter of
2021.
Capital Update
As of September 30, 2022, the Company had $267.1 million in cash and cash equivalents and
total debt was $1.112 billion. The
Company's $100.0 million Revolver had
zero drawn, with $21.1 million
allocated for letters of credit, and availability of $78.9 million. During the third quarter of 2022,
the Company generated $66.3 million
in cash flow from operations and capital expenditures in the third
quarter totaled $11.1
million.
Outlook and Guidance
Looking forward to the fourth quarter, the Company's two
business segments remain well positioned in their respective
markets. The Company has a strong portfolio of industrial and
specialty products that serve numerous essential, high growth and
attractive end markets, supported by a robust pipeline of new
products under development. The Company also expects growth in its
underlying base business, coupled with pricing increases and
surcharges to continue to fight inflationary impacts.
The oil and gas industry is progressing through what is
anticipated to be a multi-year growth cycle. Strength in both WTI
crude oil and natural gas prices are promising for an active well
completions environment throughout the remainder of 2022 and into
2023.
The Company remains focused on generating free cash flow and
de-levering the balance sheet and intends on being operating cash
flow positive in 2022, keeping an estimated $40-$50 million of
capital expenditures within operating cash flow.
Conference Call
U.S. Silica will host a conference call for investors today,
October 28, 2022 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
"Investors- Events & Presentations" 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 13733714. The
replay will be available through November
28, 2022.
About U.S. Silica
U.S. Silica Holdings, Inc. is a global performance materials
company and is a member of the Russell 2000. The Company is a
leading producer of commercial silica used in the oil and gas
industry and in a wide range of industrial applications. Over
its 122-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 600 diversified
products to customers across our 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 has 28 operating mines and
processing facilities and is headquartered in Katy, Texas.
Forward-looking
Statements
This third quarter 2022 earnings release, as well as other
statements we make, contain "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 U.S. Silica's growth
opportunities, strategy, future financial results, forecasts,
projections, plans and capital expenditures, technological
innovations, 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; heightened levels of inflation and rising interest
rates; the effect of the COVID-19 pandemic on markets the Company
serves; supply chain and logistics constraints for our company and
our customers, 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; changes in oil and gas inventories; general economic,
political and business conditions in key regions of the world
including the ongoing conflict between Russia and Ukraine; pricing pressure; cost inflation;
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, and oil
and gas production; silica-related health issues and corresponding
litigation; and other risks and uncertainties detailed in this
press release and our most recent 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 hereof, 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
|
|
September
30,
2022
|
|
June 30,
2022
|
|
September
30,
2021
|
Total sales
|
$
418,813
|
|
$ 388,513
|
|
$
267,298
|
Total cost of sales
(excluding depreciation, depletion and amortization)
|
291,520
|
|
268,896
|
|
207,448
|
Operating
expenses:
|
|
|
|
|
|
Selling, general and
administrative
|
33,933
|
|
34,817
|
|
30,956
|
Depreciation,
depletion and amortization
|
34,500
|
|
34,715
|
|
39,981
|
Goodwill and other
asset impairments
|
—
|
|
—
|
|
11
|
Total operating
expenses
|
68,433
|
|
69,532
|
|
70,948
|
Operating income
(loss)
|
58,860
|
|
50,085
|
|
(11,098)
|
Other (expense)
income:
|
|
|
|
|
|
Interest
expense
|
(20,174)
|
|
(17,430)
|
|
(17,796)
|
Other income, net,
including interest income
|
3,576
|
|
2,099
|
|
2,580
|
Total other
expense
|
(16,598)
|
|
(15,331)
|
|
(15,216)
|
Income (loss) before
income taxes
|
42,262
|
|
34,754
|
|
(26,314)
|
Income tax (expense)
benefit
|
(10,259)
|
|
(11,919)
|
|
6,140
|
Net income
(loss)
|
$
32,003
|
|
$
22,835
|
|
$
(20,174)
|
Less: Net loss
attributable to non-controlling interest
|
(68)
|
|
(73)
|
|
(179)
|
Net income (loss)
attributable to U.S. Silica Holdings, Inc.
|
$
32,071
|
|
$
22,908
|
|
$
(19,995)
|
|
|
|
|
|
|
Earnings (loss) per
share attributable to U.S. Silica Holdings, Inc.:
|
|
|
|
|
|
Basic
|
$
0.42
|
|
$
0.30
|
|
$
(0.27)
|
Diluted
|
$
0.41
|
|
$
0.29
|
|
$
(0.27)
|
Weighted average shares
outstanding:
|
|
|
|
|
|
Basic
|
75,587
|
|
75,508
|
|
74,523
|
Diluted
|
77,770
|
|
77,966
|
|
74,523
|
Dividends declared per
share
|
$
—
|
|
$
—
|
|
$
—
|
U.S. SILICA
HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited; dollars in thousands)
|
|
|
September 30,
2022
|
|
December 31,
2021
|
|
|
|
|
ASSETS
|
Current
Assets:
|
|
|
|
Cash and cash
equivalents
|
$
267,133
|
|
$
239,425
|
Accounts receivable,
net
|
236,231
|
|
202,759
|
Inventories,
net
|
143,198
|
|
115,713
|
Prepaid expenses and
other current assets
|
24,658
|
|
18,018
|
Total current
assets
|
671,220
|
|
575,915
|
Property, plant and
mine development, net
|
1,190,957
|
|
1,258,646
|
Lease right-of-use
assets
|
47,425
|
|
42,241
|
Goodwill
|
185,649
|
|
185,649
|
Intangible assets,
net
|
143,105
|
|
150,054
|
Other assets
|
9,239
|
|
7,095
|
Total
assets
|
$
2,247,595
|
|
$
2,219,600
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities:
|
|
|
|
Accounts payable and
accrued expenses
|
$
222,665
|
|
$
167,670
|
Current portion of
operating lease liabilities
|
19,255
|
|
14,469
|
Current portion of
long-term debt
|
22,770
|
|
18,285
|
Current portion of
deferred revenue
|
14,095
|
|
4,247
|
Income tax
payable
|
1,660
|
|
1,200
|
Total current
liabilities
|
280,445
|
|
205,871
|
Long-term debt,
net
|
1,089,713
|
|
1,193,135
|
Deferred
revenue
|
17,124
|
|
16,494
|
Liability for pension
and other post-retirement benefits
|
34,789
|
|
32,935
|
Deferred income taxes,
net
|
53,135
|
|
44,774
|
Operating lease
liabilities
|
69,269
|
|
75,130
|
Other long-term
liabilities
|
34,622
|
|
37,178
|
Total
liabilities
|
1,579,097
|
|
1,605,517
|
Stockholders'
Equity:
|
|
|
|
Preferred
stock
|
—
|
|
—
|
Common stock
|
853
|
|
845
|
Additional paid-in
capital
|
1,230,293
|
|
1,218,575
|
Retained
deficit
|
(382,674)
|
|
(429,260)
|
Treasury stock, at
cost
|
(185,657)
|
|
(186,294)
|
Accumulated other
comprehensive (loss) income
|
(2,816)
|
|
349
|
Total U.S. Silica
Holdings, Inc. stockholders' equity
|
659,999
|
|
604,215
|
Non-controlling
interest
|
8,499
|
|
9,868
|
Total stockholders'
equity
|
668,498
|
|
614,083
|
Total liabilities and
stockholders' equity
|
$
2,247,595
|
|
$
2,219,600
|
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 income (loss), the most directly
comparable GAAP financial measure, to segment contribution
margin.
|
|
(All amounts
in thousands)
|
Three Months
Ended
|
|
September
30,
2022
|
|
June 30,
2022
|
|
September
30,
2021
|
Sales:
|
|
|
|
|
|
Oil & Gas
Proppants
|
$
267,461
|
|
$
244,246
|
|
$
141,848
|
Industrial &
Specialty Products
|
151,352
|
|
144,267
|
|
125,450
|
Total sales
|
418,813
|
|
388,513
|
|
267,298
|
Segment contribution
margin:
|
|
|
|
|
|
Oil & Gas
Proppants
|
85,295
|
|
77,353
|
|
25,723
|
Industrial &
Specialty Products
|
46,526
|
|
45,915
|
|
41,003
|
Total segment
contribution margin
|
131,821
|
|
123,268
|
|
66,726
|
Operating activities
excluded from segment cost of sales
|
(4,528)
|
|
(3,651)
|
|
(6,876)
|
Selling, general and
administrative
|
(33,933)
|
|
(34,817)
|
|
(30,956)
|
Depreciation, depletion
and amortization
|
(34,500)
|
|
(34,715)
|
|
(39,981)
|
Goodwill and other
asset impairments
|
—
|
|
—
|
|
(11)
|
Interest
expense
|
(20,174)
|
|
(17,430)
|
|
(17,796)
|
Other income, net,
including interest income
|
3,576
|
|
2,099
|
|
2,580
|
Income tax (expense)
benefit
|
(10,259)
|
|
(11,919)
|
|
6,140
|
Net income
(loss)
|
$
32,003
|
|
$
22,835
|
|
$
(20,174)
|
Less: Net loss
attributable to non-controlling interest
|
(68)
|
|
(73)
|
|
(179)
|
Net income (loss)
attributable to U.S. Silica Holdings, Inc.
|
$
32,071
|
|
$
22,908
|
|
$
(19,995)
|
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
|
|
September
30,
2022
|
|
June 30,
2022
|
|
September
30,
2021
|
Net income (loss)
attributable to U.S. Silica Holdings, Inc.
|
$
32,071
|
|
$
22,908
|
|
$
(19,995)
|
Total interest expense,
net of interest income
|
19,495
|
|
17,278
|
|
17,778
|
Provision for
taxes
|
10,259
|
|
11,919
|
|
(6,140)
|
Total depreciation,
depletion and amortization expenses
|
34,500
|
|
34,715
|
|
39,981
|
EBITDA
|
96,325
|
|
86,820
|
|
31,624
|
Non-cash incentive
compensation (1)
|
4,826
|
|
5,295
|
|
5,450
|
Post-employment
expenses (excluding service costs) (2)
|
(535)
|
|
(744)
|
|
(2,140)
|
Merger and acquisition
related expenses (3)
|
1,532
|
|
2,089
|
|
504
|
Plant capacity
expansion expenses (4)
|
32
|
|
49
|
|
782
|
Goodwill and other
asset impairments (5)
|
—
|
|
—
|
|
11
|
Business optimization
projects (6)
|
550
|
|
—
|
|
33
|
Facility closure costs
(7)
|
270
|
|
440
|
|
218
|
Other adjustments
allowable under the Credit Agreement (8)
|
(286)
|
|
(163)
|
|
3,279
|
Adjusted
EBITDA
|
$
102,714
|
|
$
93,786
|
|
$
39,761
|
|
|
|
(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, professional fees, bank fees,
severance costs, and other employee related costs. 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)
|
No impairment charges
were recorded for the three months ended September 30, 2022 or June
30, 2022. Impairment charges of $11 thousand were recorded for the
three months ended September 30, 2021.
|
(6)
|
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.
|
(7)
|
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.
|
(8)
|
Reflects miscellaneous
adjustments permitted under the Credit Agreement, such as
recruiting fees and relocation costs. The three and nine months
ended September 30, 2022 also included costs related to weather
events and supplier and logistical issues of $1.1 million,
severance restructuring of $1.0 million, an adjustment to
non-controlling interest of $0.5 million, partially offset by net
proceeds of the sale of assets of $1.3 million and $1.7 million
related to the gain on extinguishment of debt. The three months
ended September 30, 2021 also included $3.3 million of transload
shortfall and exit fees.
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U.S. Silica Holdings, Inc.
Investor
Contact
Patricia Gil
Vice President, Investor Relations
(281) 505-6011
gil@ussilica.com
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SOURCE U.S. Silica Holdings, Inc.