PR Newswire
KATY, Texas, July 27, 2023
- Net income increased 4% sequentially
- GAAP and adjusted EPS for the quarter of $0.59 and $0.60 per diluted share, respectively
- Oil & Gas segment contribution margin increased 28% year-over-year, driven by increased sand prices and expanded transportation margins for SandBox
- Industrial & Specialty Products segment contribution margin increased 20% sequentially, driven by price increases and greater sales of higher-margin products
- Operational performance improvements and cost reductions supported contribution margin expansions
- Cash flow from operations increased 125% sequentially
- Balance sheet strengthened with additional $25 million of debt extinguished
KATY, Texas, July 27, 2023 /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 its second quarter results for the period ended June 30, 2023.
"We continued to strengthen our balance sheet and provide innovative and differentiated products to the markets and customers we serve during the second quarter," said Bryan Shinn, the Company's Chief Executive Officer. "Our robust Adjusted EBITDA and meaningful cash flow from operations enabled us to extinguish an additional $25 million of debt, achieving our net leverage ratio target of 1.5x ahead of plan.
"In our Oil & Gas segment, we delivered continued strong financial performance despite lower completions activity across the U.S. oilfield market. While our volumes sold were lower sequentially, pricing held up well during the quarter and with our ability to quickly match costs to market demand, our overall Oil & Gas profit margin per ton increased on a sequential quarter basis. During the second quarter, we also launched a new patent-pending well site system called Guardian, which was developed to help customers improve their completions productivity and reduce well costs.
"We continued to execute on our growth strategy for the Industrial & Specialty Products segment in the second quarter. Segment contribution margin expanded substantially, both sequentially and year-over-year, and was driven by improved pricing, reduced costs, and a shift to higher-value products. Furthermore, the recent launch of our EverWhite® Pigment has been well received by our customers who are finding additional benefits and unique properties which could increase our addressable market exposure.
"Our financial performance has been strong through the first half of this year and we are reaffirming our guidance from last quarter, after considering numerous factors including the unpredictability of the energy market and commodity prices, the strengthening outlook in our Industrials segment, the positive visibility provided by strong customer contracts across the company, and additional cost and productivity improvements. We continue to forecast a 25% to 30% year-over-year increase in Adjusted EBITDA, anticipate that we'll generate approximately $250 million of operating cash flow in 2023, and we expect our net leverage ratio to remain around current levels of 1.5x through the remainder of this year."
Second Quarter 2023 Financial Highlights
Net income for the second quarter was $46.3 million, or $0.59 per diluted share. The second quarter results were impacted by $1.4 million pre-tax, or $0.01 per diluted share after-tax, of charges primarily related to the loss on extinguishment of debt, resulting in adjusted EPS (a non-GAAP measure) of $0.60 per diluted share.
These results compared with net income of $44.6 million, or $0.57 per diluted share, for the first quarter of 2023, which was impacted by $7.0 million pre-tax, or $0.07 per diluted share after-tax, of charges primarily related to the loss on extinguishment of debt and business optimization costs, resulting in adjusted EPS (a non-GAAP measure) of $0.64 per diluted share.
In the second quarter of 2023, the Company completed a $25 million voluntary term loan principal repayment, extinguishing the debt at par using excess cash on hand.
Total Company
In millions | Q2 2023 | Q1 2023 | Sequential | Q2 2022 | Year-over- |
Revenue | $406.8 | $442.2 | (8 %) | $388.5 | 5 % |
Net Income | $46.3 | $44.6 | 4 % | $22.9 | 102 % |
Tons Sold | 4.459 | 4.934 | (10 %) | 4.652 | (4 %) |
Contribution Margin* | $150.7 | $152.8 | (1 %) | $123.3 | 22 % |
Adjusted EBITDA* | $123.6 | $124.6 | (1 %) | $93.8 | 32 % |
Oil & Gas Segment
- Second quarter 2023 results were driven by lower proppant volumes and fewer SandBox loads, partially offset by reduced operational costs and stable sand pricing.
In millions | Q2 2023 | Q1 2023 | Sequential | Q2 2022 | Year-over- |
Revenue | $262.3 | $300.0 | (13 %) | $244.2 | 7 % |
Tons Sold | 3.419 | 3.921 | (13 %) | 3.528 | (3 %) |
Contribution Margin* | $99.1 | $109.9 | (10 %) | $77.4 | 28 % |
Industrial & Specialty Products (ISP) Segment
- Improvements in operational efficiencies, price increases, and beneficial product mix are driving GDP+ profitability.
In millions | Q2 2023 | Q1 2023 | Sequential | Q2 2022 | Year-over- |
Revenue | $144.5 | $142.2 | 2 % | $144.3 | 0.1 % |
Tons Sold | 1.040 | 1.013 | 3 % | 1.124 | (7 %) |
Contribution Margin* | $51.6 | $42.9 | 20 % | $45.9 | 12 % |
*Contribution Margin and Adjusted EBITDA are non-GAAP financial measures; see the discussion of non-GAAP information below and the reconciliation of non-GAAP to GAAP results included as an exhibit to this press release. |
Capital Update
As of June 30, 2023, the Company had $187.0 million in cash and cash equivalents and total debt of $882.1 million. The Company's $150.0 million Revolver had zero drawn with $21.3 million allocated for letters of credit and availability of $128.7 million. During the second quarter of 2023, the Company generated $92.1 million in cash flow from operations while capital expenditures totaled $15.1 million.
Outlook and Guidance
Looking forward to the third 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.
The oil and gas industry is progressing through a multi-year growth cycle. Constructive through-cycle commodity prices are supportive of an active well completions environment over the next few years. The Company has strong contractual commitments for its sand production capacity for this year and is maintaining pricing discipline despite the current, short-term decline in well completions activity.
The Company remains focused on generating free cash flow and de-levering the balance sheet. It expects to produce significant operating cash flow in 2023, and projects investing at the high-end of capital expenditures guidance of $50-$60 million for the year.
Conference Call
U.S. Silica will host a conference call for investors tomorrow, July 28, 2023, 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 and find supporting materials 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 13739961. The replay will be available through August 28, 2023.
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 123-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 Logisticsâ„¢. EP Minerals is an industry leader in the production of products derived from diatomaceous earth, perlite, engineered clays, and non-activated clays. SandBox Logisticsâ„¢ 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 27 operating mines and processing facilities and two additional exploration stage properties across the United States and is headquartered in Katy, Texas.
Forward-looking Statements
This second quarter 2023 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 estimated and projected costs and cost reduction programs, reserves and finished products estimates, growth opportunities, strategy, future financial results, forecasts, projections, plans and capital expenditures, technological innovations, and the expected outcome or impact of pending or threatened litigation. 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; 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 | |||||
June 30, | March 31, 2023 | June 30, | |||
Total sales | $ 406,784 | $ 442,240 | $ 388,513 | ||
Total cost of sales (excluding depreciation, depletion and amortization) | 259,773 | 293,133 | 268,896 | ||
Operating expenses: | |||||
Selling, general and administrative | 28,694 | 29,163 | 34,817 | ||
Depreciation, depletion and amortization | 33,546 | 35,386 | 34,715 | ||
Total operating expenses | 62,240 | 64,549 | 69,532 | ||
Operating income | 84,771 | 84,558 | 50,085 | ||
Other (expense) income: | |||||
Interest expense | (25,987) | (24,061) | (17,430) | ||
Other income (expense), net, including interest income | 2,497 | (2,352) | 2,099 | ||
Total other expense | (23,490) | (26,413) | (15,331) | ||
Income before income taxes | 61,281 | 58,145 | 34,754 | ||
Income tax expense | (15,137) | (13,573) | (11,919) | ||
Net income | $ 46,144 | $ 44,572 | $ 22,835 | ||
Less: Net loss attributable to non-controlling interest | (115) | (76) | (73) | ||
Net income attributable to U.S. Silica Holdings, Inc. | $ 46,259 | $ 44,648 | $ 22,908 | ||
Earnings per share attributable to U.S. Silica Holdings, Inc.: | |||||
Basic | $ 0.60 | $ 0.58 | $ 0.30 | ||
Diluted | $ 0.59 | $ 0.57 | $ 0.29 | ||
Weighted average shares outstanding: | |||||
Basic | 77,089 | 76,517 | 75,508 | ||
Diluted | 78,338 | 78,292 | 77,966 | ||
Dividends declared per share | $ — | $ — | $ — | ||
U.S. SILICA HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) | |||
Unaudited | Audited | ||
June 30, 2023 | December 31, 2022 | ||
ASSETS | |||
Current Assets: | |||
Cash and cash equivalents | $ 186,961 | $ 280,845 | |
Accounts receivable, net | 194,679 | 208,631 | |
Inventories, net | 161,820 | 147,626 | |
Prepaid expenses and other current assets | 13,678 | 20,182 | |
Total current assets | 557,138 | 657,284 | |
Property, plant and mine development, net | 1,148,681 | 1,178,834 | |
Lease right-of-use assets | 43,619 | 42,374 | |
Goodwill | 185,649 | 185,649 | |
Intangible assets, net | 136,097 | 140,809 | |
Other assets | 10,182 | 9,630 | |
Total assets | $ 2,081,366 | $ 2,214,580 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current Liabilities: | |||
Accounts payable and accrued expenses | $ 156,973 | $ 216,239 | |
Current portion of operating lease liabilities | 19,654 | 19,773 | |
Current portion of long-term debt | 10,152 | 19,535 | |
Current portion of deferred revenue | 8,244 | 16,275 | |
Income tax payable | 3,362 | 128 | |
Total current liabilities | 198,385 | 271,950 | |
Long-term debt, net | 871,913 | 1,037,458 | |
Deferred revenue | 13,355 | 14,477 | |
Liability for pension and other post-retirement benefits | 28,343 | 30,911 | |
Deferred income taxes, net | 85,444 | 64,636 | |
Operating lease liabilities | 61,937 | 64,478 | |
Other long-term liabilities | 27,649 | 25,976 | |
Total liabilities | 1,287,026 | 1,509,886 | |
Stockholders' Equity: | |||
Preferred stock | — | — | |
Common stock | 877 | 854 | |
Additional paid-in capital | 1,241,828 | 1,234,834 | |
Retained deficit | (260,177) | (351,084) | |
Treasury stock, at cost | (196,162) | (186,196) | |
Accumulated other comprehensive income (loss) | 857 | (1,723) | |
Total U.S. Silica Holdings, Inc. stockholders' equity | 787,223 | 696,685 | |
Non-controlling interest | 7,117 | 8,009 | |
Total stockholders' equity | 794,340 | 704,694 | |
Total liabilities and stockholders' equity | $ 2,081,366 | $ 2,214,580 | |
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, the most directly comparable GAAP financial measure, to segment contribution margin.
(All amounts in thousands) | Three Months Ended | ||||
June 30, | March 31, 2023 | June 30, | |||
Sales: | |||||
Oil & Gas Proppants | $ 262,285 | $ 300,013 | $ 244,246 | ||
Industrial & Specialty Products | 144,499 | 142,227 | 144,267 | ||
Total sales | 406,784 | 442,240 | 388,513 | ||
Segment contribution margin: | |||||
Oil & Gas Proppants | 99,069 | 109,897 | 77,353 | ||
Industrial & Specialty Products | 51,595 | 42,929 | 45,915 | ||
Total segment contribution margin | 150,664 | 152,826 | 123,268 | ||
Operating activities excluded from segment cost of sales | (3,653) | (3,719) | (3,651) | ||
Selling, general and administrative | (28,694) | (29,163) | (34,817) | ||
Depreciation, depletion and amortization | (33,546) | (35,386) | (34,715) | ||
Interest expense | (25,987) | (24,061) | (17,430) | ||
Other income (expense), net, including interest income | 2,497 | (2,352) | 2,099 | ||
Income tax expense | (15,137) | (13,573) | (11,919) | ||
Net income | $ 46,144 | $ 44,572 | $ 22,835 | ||
Less: Net loss attributable to non-controlling interest | (115) | (76) | (73) | ||
Net income attributable to U.S. Silica Holdings, Inc. | $ 46,259 | $ 44,648 | $ 22,908 | ||
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, the most directly comparable GAAP financial measure, to Adjusted EBITDA:
(All amounts in thousands) | Three Months Ended | ||||
June 30, | March 31, 2023 | June 30, | |||
Net income attributable to U.S. Silica Holdings, Inc. | $ 46,259 | $ 44,648 | $ 22,908 | ||
Total interest expense, net of interest income | 24,368 | 21,568 | 17,278 | ||
Provision for taxes | 15,137 | 13,573 | 11,919 | ||
Total depreciation, depletion and amortization expenses | 33,546 | ||||
