U.S. Silica Holdings, Inc. Reports Third Quarter 2023 Results
- GAAP and adjusted EPS for the quarter of $0.34 and $0.38 per diluted share, respectively
- Cash flow from operations of $76.7 million for the quarter
- Balance sheet strengthened with additional $25 million of debt extinguished
- Full year 2023 financial guidance reaffirmed
KATY, Texas, Nov. 3, 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 third quarter results for the period ended September 30, 2023.
"During the third quarter, we continued to advance our two-pronged growth strategy of expanding our Industrial & Specialty Products segment while strengthening our financial foundation," said Bryan Shinn, the Company's Chief Executive Officer. "We generated healthy cash flow from operations and Adjusted EBITDA, driven by strong customer demand compared to historical averages and supported by our lean cost structure. We also repurchased and extinguished an additional $25 million of debt, improving our balance sheet and leverage profile.
"In our Oil & Gas segment, the sequential decrease in drilling and completions activity drove lower demand for our products and services across all basins. Despite this, our financial results were strong compared to historical averages as pricing remained attractive and our cost reduction efforts helped to maintain high margin levels. Additionally, our new, patent-pending Guardian frac fluid filtration system is performing well and gaining momentum in the market. Frac companies that have trialed the Guardian are achieving positive outcomes through increased pump uptime and improved pump efficiency, with lower repair and maintenance costs.
"As we guided on last quarter's call, our Industrial & Specialty Products segment's volumes declined year-over-year due to mild economic softness, particularly for building products, diatomaceous earth fillers and filtration, and certain glass customers that performed maintenance projects after several years of high demand. Even so, we benefited from ongoing structural cost reductions along with improved product mix from sales to new markets, applications and products, as well as price increases, all of which enabled us to maintain year-over-year profitability levels.
"The strong results we've reported year-to-date give us reasonable confidence in reaffirming our full year 2023 guidance. Furthermore, our customer contracts, coupled with expected incremental cost and productivity improvements, provide strong visibility for the remainder of this year. We continue to expect Adjusted EBITDA to increase approximately 25% year-over-year, with robust cash flow from operations of approximately $265 million this year, while maintaining our strong leverage profile."
Third Quarter 2023 Financial Highlights
Net income for the third quarter was $26.9 million, or $0.34 per diluted share. The third quarter results were impacted by $3.8 million pre-tax, or $0.04 per diluted share after-tax, of charges primarily related to a non-recurring adjustment to depreciation and the loss on extinguishment of debt, resulting in adjusted EPS (a non-GAAP measure) of $0.38 per diluted share.
These results compared with net income of $46.3 million, or $0.59 per diluted share, for the second quarter of 2023, which was 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.
In the third 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 | Q3 2023 | Q2 2023 | Sequential | Q3 2022 | Year-over- |
Revenue | $ 367.0 | $ 406.8 | (10) % | $ 418.8 | (12) % |
Net Income | $ 26.9 | $ 46.3 | (42) % | $ 32.1 | (16) % |
Tons Sold | 4.121 | 4.459 | (8) % | 4.624 | (11) % |
Contribution Margin* | $ 129.2 | $ 150.7 | (14) % | $ 131.8 | (2) % |
Adjusted EBITDA* | $ 102.1 | $ 123.6 | (17) % | $ 102.7 | (1) % |
Oil & Gas Segment
- Third quarter 2023 results were driven by lower proppant volumes, fewer SandBox loads, and a decrease in average selling price per ton.
In millions | Q3 2023 | Q2 2023 | Sequential | Q3 2022 | Year-over- |
Revenue | $ 231.4 | $ 262.3 | (12) % | $ 267.5 | (13) % |
Tons Sold | 3.122 | 3.419 | (9) % | 3.498 | (11) % |
Contribution Margin* | $ 82.9 | $ 99.1 | (16) % | $ 85.3 | (3) % |
Industrial & Specialty Products (ISP) Segment
- Third quarter 2023 results were impacted by lower activity levels, partially offset by improvements in operational efficiencies, price increases, and product mix.
In millions | Q3 2023 | Q2 2023 | Sequential | Q3 2022 | Year-over- |
Revenue | $ 135.5 | $ 144.5 | (6) % | $ 151.4 | (10) % |
Tons Sold | 0.999 | 1.040 | (4) % | 1.126 | (11) % |
Contribution Margin* | $ 46.3 | $ 51.6 | (10) % | $ 46.5 | — % |
*Contribution Margin and Adjusted EBITDA are non-GAAP financial measures; see the discussion of non-GAAP information below and the reconciliation of GAAP to non-GAAP results included as an exhibit to this press release. |
Capital Update
As of September 30, 2023, the Company had $222.4 million in cash and cash equivalents and total debt of $867.6 million. The Company's $150.0 million Revolver had zero drawn with $20.8 million allocated for letters of credit and availability of $129.2 million. During the third quarter of 2023, the Company generated $76.7 million in cash flow from operations while capital expenditures totaled $13.6 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 market share expansion.
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 the remainder of this year and into next year.
The Company remains focused on generating cash flow from operations 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 ranging between $60-$65 million for the year.
The Company will provide more specific outlook and guidance on the upcoming conference call.
Conference Call
U.S. Silica will host a conference call for investors today, November 3, 2023, at 7:30 a.m. Central Time to discuss these results. Hosting the call will be Bryan Shinn, Chief Executive Officer and Kevin Hough, interim Executive Vice President, Chief Financial Officer and Chief Accounting 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 13741846. The replay will be available through December 3, 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 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 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 third 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 conflicts between Russia and Ukraine and between Israel and Hamas; 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. | |||||
Three Months Ended | |||||
September 30, | June 30, 2023 | September 30, | |||
Total sales | $ 366,961 | $ 406,784 | $ 418,813 | ||
Total cost of sales (excluding depreciation, depletion and | 240,957 | 259,773 | 291,520 | ||
Operating expenses: | |||||
Selling, general and administrative | 29,287 | 28,694 | 33,933 | ||
Depreciation, depletion and amortization | 35,822 | 33,546 | 34,500 | ||
Total operating expenses | 65,109 | 62,240 | 68,433 | ||
Operating income | 60,895 | 84,771 | 58,860 | ||
Other (expense) income: | |||||
Interest expense | (26,039) | (25,987) | (20,174) | ||
Other income, net, including interest income | 4,016 | 2,497 | 3,576 | ||
Total other expense | (22,023) | (23,490) | (16,598) | ||
Income before income taxes | 38,872 | 61,281 | 42,262 | ||
Income tax expense | (12,064) | (15,137) | (10,259) | ||
Net income | $ 26,808 | $ 46,144 | $ 32,003 | ||
Less: Net loss attributable to non-controlling interest | (101) | (115) | (68) | ||
Net income attributable to U.S. Silica Holdings, Inc. | $ 26,909 | $ 46,259 | $ 32,071 | ||
Earnings per share attributable to U.S. Silica Holdings, Inc.: | |||||
Basic | $ 0.35 | $ 0.60 | $ 0.42 | ||
Diluted | $ 0.34 | $ 0.59 | $ 0.41 | ||
Weighted average shares outstanding: | |||||
Basic | 77,125 | 77,089 | 75,587 | ||
Diluted | 78,700 | 78,338 | 77,770 | ||
Dividends declared per share | $ — | $ — | $ — | ||
U.S. SILICA HOLDINGS, INC. | |||
Unaudited | Audited | ||
September 30, 2023 | December 31, 2022 | ||
ASSETS | |||
Current Assets: | |||
Cash and cash equivalents | $ 222,435 | $ 280,845 | |
Accounts receivable, net | 183,434 | 208,631 | |
Inventories, net | 162,636 | 147,626 | |
Prepaid expenses and other current assets | 26,375 | 20,182 | |
Total current assets | 594,880 | 657,284 | |
Property, plant and mine development, net | 1,131,970 | 1,178,834 | |
Lease right-of-use assets | 43,342 | 42,374 | |
Goodwill | 185,649 | 185,649 | |
Intangible assets, net | 133,750 | 140,809 | |
Other assets | 11,383 | 9,630 | |
Total assets | $ 2,100,974 | $ 2,214,580 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||
Current Liabilities: | |||
Accounts payable and accrued expenses | $ 161,797 | $ 216,239 | |
Current portion of operating lease liabilities | 19,490 | 19,773 | |
Current portion of long-term debt | 19,763 | 19,535 | |
Current portion of deferred revenue | 5,479 | 16,275 | |
Income tax payable | 2,458 | 128 | |
Total current liabilities | 208,987 | 271,950 | |
Long-term debt, net | 847,849 | 1,037,458 | |
Deferred revenue | 13,100 | 14,477 | |
Liability for pension and other post-retirement benefits | 24,627 | 30,911 | |
Deferred income taxes, net | 94,000 | 64,636 | |
Operating lease liabilities | 58,922 | 64,478 | |
Other long-term liabilities | 28,467 | 25,976 | |
Total liabilities | 1,275,952 | 1,509,886 | |
Stockholders' Equity: | |||
Preferred stock | — | — | |
Common stock | 877 | 854 | |
Additional paid-in capital | 1,245,551 | 1,234,834 | |
Retained deficit | (233,268) | (351,084) | |
Treasury stock, at cost | (196,406) | (186,196) | |
Accumulated other comprehensive income (loss) | 1,578 | (1,723) | |
Total U.S. Silica Holdings, Inc. stockholders' equity | 818,332 | 696,685 | |
Non-controlling interest | 6,690 | 8,009 | |
Total stockholders' equity | 825,022 | 704,694 | |
Total liabilities and stockholders' equity | $ 2,100,974 | $ 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 expansion 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 | ||||
September 30, | June 30, 2023 | September 30, | |||
Sales: | |||||
Oil & Gas Proppants | $ 231,426 | $ 262,285 | $ 267,461 | ||
Industrial & Specialty Products | 135,535 | 144,499 | 151,352 | ||
Total sales | 366,961 | 406,784 | 418,813 | ||
Segment contribution margin: | |||||
Oil & Gas Proppants | 82,890 | 99,069 | 85,295 | ||
Industrial & Specialty Products | 46,347 | 51,595 | 46,526 | ||
Total segment contribution margin | 129,237 | 150,664 | 131,821 | ||
Operating activities excluded from segment cost of sales | (3,233) | (3,653) | (4,528) | ||
Selling, general and administrative | (29,287) | (28,694) | (33,933) | ||
Depreciation, depletion and amortization | (35,822) | (33,546) | (34,500) | ||
Interest expense | (26,039) | (25,987) | (20,174) | ||
Other income, net, including interest income | 4,016 | 2,497 | 3,576 | ||
Income tax expense | (12,064) | (15,137) | (10,259) | ||
Net income | $ 26,808 | $ 46,144 | $ 32,003 | ||
Less: Net loss attributable to non-controlling interest | (101) | (115) | (68) | ||
Net income attributable to U.S. Silica Holdings, Inc. | $ 26,909 | $ 46,259 | $ 32,071 | ||
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 | ||||
September 30, | June 30, 2023 | September 30, | |||
Net income attributable to U.S. Silica Holdings, Inc. | $ 26,909 | $ 46,259 | $ 32,071 | ||
Total interest expense, net of interest income | 23,912 | 24,368 | 19,495 | ||
Provision for taxes | 12,064 | 15,137 | 10,259 | ||
Total depreciation, depletion and amortization expenses | 35,822 | 33,546 | 34,500 | ||
EBITDA | 98,707 | 119,310 | 96,325 | ||
Non-cash incentive compensation (1) | 3,723 | 3,731 | 4,826 | ||
Post-employment expenses (excluding service costs) (2) | (1,001) | (839) | (535) | ||
Merger and acquisition related expenses (3) | 421 | 845 | 1,532 | ||
Plant capacity expansion expenses (4) | 59 | 32 | 32 | ||
Business optimization projects (5) | — | 90 | 550 | ||
Facility closure costs (6) | 123 | 71 | 270 | ||
Other adjustments allowable under the Credit Agreement (7) | 105 | 397 | (286) | ||
Adjusted EBITDA | $ 102,137 | $ 123,637 | $ 102,714 | ||
(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) | 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. | |
(6) | 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. | |
(7) | Reflects miscellaneous adjustments permitted under the Credit Agreement, such as recruiting fees and relocation costs. The three months ended September 30, 2023 also included recruiting costs of $0.2 million, adjustments to non-controlling interest of $0.1 million, restructuring costs of $0.2 million, a loss on the extinguishment of debt of $1.1 million, offset by proceeds of the sale of assets of $1.5 million. The three months ended June 30, 2023 also included costs related to recruiting of $0.5 million and $1.1 million related to the loss on extinguishment of debt, offset by proceeds of the sale of assets of $1.1 million. The three months ended September 30, 2022 also included recruiting costs of $0.2 million, adjustments to non-controlling interest of $0.2 million, restructuring costs of $0.8 million, weather events of $0.2 million, offset by a gain on the extinguishment of debt of $1.7 million, proceeds of the sale of assets of $0.3 million and other costs of $0.3 million. | |
Adjusted EPS
Adjusted EPS is diluted earnings or loss per share adjusted to exclude costs associated with merger & acquisition related activities and strategic business reviews, costs associated with business optimization, the effect of a non-recurring depreciation adjustment, and gain or loss on debt extinguishment.
Management believes Adjusted EPS is useful in providing period-to-period comparisons of the results of the Company's operations to assist investors in reviewing the Company's operating performance over time. Management believes it is useful to exclude certain items when comparing current performance to prior periods because these items can vary significantly depending on specific underlying transactions or events. Also, management believes certain excluded items may not relate specifically to current operating trends or be indicative of future results.
The following table sets forth a reconciliation from GAAP EPS to adjusted EPS:
Three Months Ended | |||||
September 30, 2023 | June 30, 2023 | September 30, 2022 | |||
Reported Diluted EPS | $ 0.34 | $ 0.59 | $ 0.41 | ||
Merger & Acquisition | — | 0.01 | 0.01 | ||
Business Optimization | — | — | 0.01 | ||
Depreciation Adjustment | 0.03 | — | — | ||
(Gain)/Loss on extinguishment of debt | 0.01 | 0.01 | — | ||
Other | — | (0.01) | — | ||
Total Adjustments | 0.04 | 0.01 | 0.02 | ||
Adjusted Diluted EPS | $ 0.38 | $ 0.60 | $ 0.43 | ||
Diluted Shares | 78,700 | 78,338 | 77,770 | ||
Forward-looking Non-GAAP Measures
A reconciliation of Adjusted EBITDA as used in our guidance, is a forward-looking non-GAAP financial measure, to the most directly comparable GAAP financial measure, is not provided because the Company is unable to provide such reconciliation without unreasonable effort. The inability to provide each reconciliation is due to the unpredictability of the amounts and timing of events affecting the items we exclude from the non-GAAP measure.
U.S. Silica Holdings, Inc.
Investor Contact
Patricia Gil
Vice President, Investor Relations & Sustainability
(281) 505-6011
[email protected]
SOURCE U.S. Silica Holdings, Inc.
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