Le Lézard
Classified in: Mining industry, Oil industry, Business, Covid-19 virus
Subject: ERN

U.S. Silica Holdings, Inc. Announces Fourth Quarter and Full Year 2020 Results


KATY, Texas, Feb. 26, 2021 /PRNewswire/ -- U.S. Silica Holdings, Inc. (NYSE: SLCA) today announced net income of $4.6 million, or $0.06 per basic and diluted share, for the fourth quarter ended December 31, 2020, compared with a net loss of $292.9 million, or $3.99 per basic and diluted share, for the fourth quarter of 2019. The fourth quarter results were negatively impacted by $4.1 million of charges related to asset impairments, facility closure costs, a plant capacity expansion, and other expenses.  These charges were offset by an $8.3 million valuation change on a note payable.  Additionally, the Company recorded $27.2 million of shortfall penalties in our Oil and Gas segment, resulting in adjusted EPS of ($0.26) per basic and diluted share.

"I am proud of how our company successfully navigated 2020 and of our industry leading performance during the year in spite of the challenging macro-economic environment."  

"We delivered another strong financial quarter and substantially beat expectations through structural cost reductions, disciplined execution in oil and gas and a rebound in the industrial and specialty products segment."

"2021 is off to a good start with surging proppant demand and a continuing recovery in general industrial markets.  We are well positioned for success this year and beyond with numerous growth opportunities in our new product pipeline across a diverse set of markets and end uses," said Bryan Shinn, U.S. Silica chief executive officer.  

Full Year 2020 Highlights

Total Company

Fourth Quarter 2020 Highlights

Total Company

Industrial and Specialty Products

Oil & Gas

Capital Update

As of December 31, 2020, the Company had $150.9 million in cash and cash equivalents and total debt was $1.240 billion. Capital expenditures in 2020 totaled $34.5 million and were mainly related to growth projects in our ISP segment, as well as spending on equipment to expand our SandBox operations and other maintenance and cost improvement capital projects. During the fourth quarter of 2020, the Company generated $23.9 million in cash flow from operations.

Outlook and Guidance

Looking ahead to 2021 and beyond, the Company is well positioned for sustainable, long-term growth by servicing critical industries such as food and beverage production, housing, automotive, glass manufacturing, biopharma, and energy.  The Company has a pipeline of innovative, new products to service high growth, sustainable end uses including solar energy, wind power, cleaner air, green diesel, food safety and energy efficient buildings.

The Company continued to focus on its three strategic priorities in 2020, namely, 1) prioritizing free cash flow, 2) repositioning its Oil & Gas segment, and 3) growing its Industrial & Specialty Products segment.

The Company is focused on free cash flow and de-levering the balance sheet and intends on being cash flow positive in 2021, keeping an estimated $30-40 million of capital expenditures within operating cash flow.

Despite the continued macro-economic uncertainty, the Industrial & Specialty Products segment has proven its resiliency and is off to a good start in 2021 and growth is expected to outpace U.S. GDP.

The Company has repositioned the Oil & Gas segment by right sizing proppant capacity and reducing costs to match current and expected demand from well completions. The Company expects a robust recovery in energy sector proppant and last mile delivery demand especially in the first half of 2021 and expects the first quarter to be up 15-20% in volume sequentially, despite temporary headwinds from the unprecedented cold weather in February.

Conference Call

U.S. Silica will host a conference call for investors today, February 26, 2021 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" 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 13686713. The replay will be available through March 31, 2021.

About U.S. Silica

U.S. Silica Holdings, Inc. is a 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 121-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 products to customers across our end markets. U.S. Silica's wholly-owned subsidiaries include EP Minerals and SandBox Logisticstm. EP Minerals is an industry leader in the production of products derived from diatomaceous earth, perlite, engineered clays, and non-activated clays. SandBox Logisticstm 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

This full-year and fourth-quarter 2020 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, 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; changes in oil and gas inventories; 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, 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


December 31,
2020


September 30,
2020


December 31,
2019

Total sales

$

227,277



$

176,472



$

339,059


Total cost of sales (excluding depreciation, depletion and amortization)

141,418



107,592



257,962


Operating expenses:






Selling, general and administrative

27,777



27,216



37,325


Depreciation, depletion and amortization

39,964



40,069



42,819


Goodwill and other asset impairments

2,644



222



363,717


Total operating expenses

70,385



67,507



443,861


Operating income (loss)

15,474



1,373



(362,764)


Other (expense) income:






Interest expense

(16,155)



(19,274)



(22,996)


Other income (expense), net, including interest income

8,758



(409)



443


Total other expense

(7,397)



(19,683)



(22,553)


Income (loss) before income taxes

8,077



(18,310)



(385,317)


Income tax (expense) benefit

(3,760)



4,094



91,892


Net income (loss)

$

4,317



$

(14,216)



$

(293,425)


Less: Net loss attributable to non-controlling interest

(250)



(254)



(554)


Net income (loss) attributable to U.S. Silica Holdings, Inc.

$

4,567



$

(13,962)



$

(292,871)








Earnings (loss) per share attributable to U.S. Silica Holdings, Inc.:






Basic

$

0.06



$

(0.19)



$

(3.99)


Diluted

$

0.06



$

(0.19)



$

(3.99)


Weighted average shares outstanding:






Basic

73,728



73,688



73,343


Diluted

74,328



73,688



73,343


Dividends declared per share

$

?



$

?



$

0.06


 


Year Ended


December 31,
2020


December 31,
2019

Total sales

$

845,885



$

1,474,477


Total cost of sales (excluding depreciation, depletion and amortization)

575,070



1,133,293


Operating expenses:




Selling, general and administrative

124,171



150,848


Depreciation, depletion and amortization

155,568



179,444


Goodwill and other asset impairments

110,688



363,847


Total operating expenses

390,427



694,139


Operating loss

(119,612)



(352,955)


Other (expense) income:




Interest expense

(79,885)



(95,472)


Other income (expense), net, including interest income

24,350



19,519


Total other expense

(55,535)



(75,953)


Loss before income taxes

(175,147)



(428,908)


Income tax benefit

60,025



99,151


Net loss

$

(115,122)



$

(329,757)


Less: Net loss attributable to non-controlling interest

(1,028)



(675)


Net loss attributable to U.S. Silica Holdings, Inc.

$

(114,094)



$

(329,082)






Loss per share attributable to U.S. Silica Holdings, Inc.:




Basic

$

(1.55)



$

(4.49)


Diluted

$

(1.55)



$

(4.49)


Weighted average shares outstanding:




Basic

73,634



73,253


Diluted

73,634



73,253


Dividends declared per share

$

0.02



$

0.25


 

U.S. SILICA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Unaudited; dollars in thousands)


December 31,
2020


December 31,
2019





ASSETS

Current Assets:




Cash and cash equivalents

$

150,920



$

185,740


Accounts receivable, net

206,934



182,238


Inventories, net

104,684



124,432


Prepaid expenses and other current assets

23,147



16,155


Income tax deposits

628



475


Total current assets

486,313



509,040


Property, plant and mine development, net

1,368,092



1,517,587


Operating lease right-of-use assets

37,469



53,098


Goodwill

185,649



273,524


Intangible assets, net

159,582



183,815


Other assets

9,842



16,170


Total assets

$

2,246,947



$

2,553,234



LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:




Accounts payable and accrued expenses

$

121,920



$

248,237


Current portion of operating lease liabilities

17,388



53,587


Current portion of long-term debt

42,042



18,463


Current portion of deferred revenue

13,545



15,111


Total current liabilities

194,895



335,398


Long-term debt, net

1,197,660



1,213,985


Deferred revenue

20,147



35,523


Liability for pension and other post-retirement benefits

48,169



58,453


Deferred income taxes, net

49,386



38,585


Operating lease liabilities

76,361



117,964


Other long-term obligations

33,538



36,746


Total liabilities

1,620,156



1,836,654


Stockholders' Equity:




Preferred stock

?



?


Common stock

827



823


Additional paid-in capital

1,200,023



1,185,116


Retained deficit

(395,496)



(279,956)


Treasury stock, at cost

(181,615)



(180,912)


Accumulated other comprehensive loss

(8,479)



(19,854)


Total U.S. Silica Holdings, Inc. stockholders' equity

615,260



705,217


Non-controlling interest

11,531



11,363


Total stockholders' equity

626,791



716,580


Total liabilities and stockholders' equity

$

2,246,947



$

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 certain corporate costs not associated with the operations of the segment. These unallocated costs include costs related to corporate functional areas such as sales, production and engineering, corporate purchasing, accounting, treasury, information technology, legal and human resources.

The following table sets forth a reconciliation of net income, the most directly comparable GAAP financial measure, to segment contribution margin. 

 


Three Months Ended


December 31,
2020


September 30,
2020


December 31,
2019

Sales:






Oil & Gas Proppants

$

120,344



$

66,343



$

234,273


Industrial & Specialty Products

106,933



110,129



104,786


Total sales

227,277



176,472



339,059


Segment contribution margin:






Oil & Gas Proppants

51,501



31,478



67,993


Industrial & Specialty Products

38,350



42,353



39,114


Total segment contribution margin

89,851



73,831



107,107


Operating activities excluded from segment cost of sales

(3,992)



(4,951)



(26,010)


Selling, general and administrative

(27,777)



(27,216)



(37,325)


Depreciation, depletion and amortization

(39,964)



(40,069)



(42,819)


Goodwill and other asset impairments

(2,644)



(222)



(363,717)


Interest expense

(16,155)



(19,274)



(22,996)


Other income (expense), net, including interest income

8,758



(409)



443


Income tax (expense) benefit

(3,760)



4,094



91,892


Net income (loss)

$

4,317



$

(14,216)



$

(293,425)


Less: Net loss attributable to non-controlling interest

(250)



(254)



(554)


Net income (loss) attributable to U.S. Silica Holdings, Inc.

$

4,567



$

(13,962)



$

(292,871)


 


Year Ended


December 31,
2020


December 31,
2019

Sales:




Oil & Gas Proppants

$

414,897



$

1,010,521


Industrial & Specialty Products

430,988



463,956


Total sales

845,885



1,474,477


Segment contribution margin:




Oil & Gas Proppants

142,041



248,594


Industrial & Specialty Products

159,176



178,215


Total segment contribution margin

301,217



426,809


Operating activities excluded from segment cost of sales

(30,402)



(85,625)


Selling, general and administrative

(124,171)



(150,848)


Depreciation, depletion and amortization

(155,568)



(179,444)


Goodwill and other asset impairments

(110,688)



(363,847)


Interest expense

(79,885)



(95,472)


Other income (expense), net, including interest income

24,350



19,519


Income tax benefit

60,025



99,151


Net loss

$

(115,122)



$

(329,757)


Less: Net loss attributable to non-controlling interest

(1,028)



(675)


Net loss attributable to U.S. Silica Holdings, Inc.

$

(114,094)



$

(329,082)


 

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 (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA:

 

(All amounts in thousands)

Three Months Ended


December 31,
2020


September 30,
2020


December 31,
2019

Net income (loss) attributable to U.S. Silica Holdings, Inc.

$

4,567



$

(13,962)



$

(292,871)


Total interest expense, net of interest income

15,858



19,801



22,366


Provision for taxes

3,760



(4,094)



(91,892)


Total depreciation, depletion and amortization expenses

39,964



40,069



42,819


EBITDA

64,149



41,814



(319,578)


Non-cash incentive compensation (1)

3,068



5,523



5,340


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

428



161



434


Merger and acquisition related expenses (3)

143



285



16,274


Plant capacity expansion expenses (4)

825



744



1,347


Contract termination expenses (5)

?



?



822


Goodwill and other asset impairments (6)

2,644



222



363,717


Business optimization projects (7)

28



24



?


Facility Closure Costs (8)

1,377



1,881



2,114


Gain on valuation change of royalty note payable (9)

(8,263)



?



(750)


Other adjustments allowable under the Credit Agreement (10)

(817)



675



3,857


Adjusted EBITDA

$

63,582



$

51,329



$

73,577


 

(All amounts in thousands)

Year Ended


December 31,
2020


December 31,
2019

Net loss attributable to U.S. Silica Holdings, Inc.

$

(114,094)



$

(329,082)


Total interest expense, net of interest income

79,148



92,063


Provision for taxes

(60,025)



(99,151)


Total depreciation, depletion and amortization expenses

155,568



179,444


EBITDA

60,597



(156,726)


Non-cash incentive compensation (1)

15,827



15,906


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

1,729



1,735


Merger and acquisition related expenses (3)

1,423



32,021


Plant capacity expansion expenses (4)

6,149



17,576


Contract termination expenses (5)

?



1,882


Goodwill and other asset impairments (6)

110,688



363,847


Business optimization projects (7)

67



55


Facility closure costs (8)

7,093



12,718


Gain on valuation change of royalty note payable (9)

(8,263)



(16,854)


Other adjustments allowable under the Credit Agreement (10)

8,612



14,165


Adjusted EBITDA

$

203,922



$

286,325


 




(1)

Reflects equity-based non-cash 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.



(5)

Reflects contract termination expenses related to strategically exiting a service contract and losses related to sub-leases. 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)

During 2020, there was an unprecedented drop in global demand combined with the breakdown of the Organization of the Petroleum Exporting Countries and other oil producing nations ("OPEC+") agreement to restrict oil production that led to one of the largest annual crude oil inventory builds in history.  This led to a sharp reduction in global crude oil prices.  Containment measures and other economic, travel, and business disruptions caused by COVID-19 also affected refinery activity and future demand for crude oil, and consequently, the services and products of our Oil & Gas Proppants segment.  As a result, impairment charges of $11.8 million of long-lived assets, $6.8 million of inventory, $3.4 million of operating lease right-of-use assets, and $86.1 million of goodwill were recorded in our Oil & Gas Proppants segment.  Additionally, $2.5 million of impairment charges were recorded for other intangible assets in our Industrial & Specialty Products segment due to the discontinuance of a minor product line. For the fourth quarter and year ended 2019, reflects $243.1 million of long-lived asset impairments, $115.4 million of operating lease right-of-use asset impairments, $4.1 million of inventory asset impairments, and $1.2 million of intangible asset impairments in our Oil and Gas Proppants reporting segment.  These impairments were related to a sharp decline in customer demand for Northern White frac sand and for regional non-in-basin frac sand as more tons are produced and sold in-basin, along with significant price decreases of frac sand.  Additionally, given these events, we also experienced a significant decline in the utilization of our sand railcar fleet in our transload network leading to a significant number of rail cars being put into storage and no longer used to deliver sand to our customers. 



(7)

Reflects costs incurred related to business optimization projects mainly 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 mainly related to idled sand facilities and closed corporate offices, including severance costs and remaining contracted costs such as office lease costs, and common area maintenance fees.  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.  This 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. For 2020, includes $1.6 million in transload shortfalls and exit fees, $4.6 million in inventory adjustments, $6.0 million in severance costs, and $11.8 million in legal expense due to the unsuccessful defense of a small number of our patents, offset by $15.2 million related to the gain attributable to the bargain purchase of Arrows Up. For 2019, includes $6.2 million of loss contingencies reserve as well as restructuring costs for actions that will provide future savings, storm damage costs, recruiting fees, relocation costs and a loss on sale of assets, partially offset by insurance proceeds of $2.2 million.  While these gains and costs are not operational in nature and are not expected to continue for any singular event on an ongoing basis, similar types of gains and expenses have occurred in prior periods and may recur in the future.


 

 

Investor Contacts  

Donald A. Merril

EVP and Chief Financial Officer

(301) 682-0302

[email protected]

SOURCE U.S. Silica Holdings, Inc.


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