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Exhibit 99.1

FAIRMOUNT SANTROL ANNOUNCES RECORD THIRD-QUARTER 2014 RESULTS

 

    QUARTERLY REVENUE OF $373.5 MILLION UP 41% OVER PRIOR YEAR

 

    NET INCOME OF $54.1 MILLION, OR $0.32 PER DILUTED SHARE, MORE THAN DOUBLE PRIOR YEAR; ADJUSTED EARNINGS PER DILUTED SHARE OF $0.35, UP 52% OVER PRIOR YEAR

 

    ADJUSTED EBITDA OF $116.9 MILLION UP 42% OVER SAME PERIOD LAST YEAR

 

    RAW SAND VOLUMES UP 37%, COATED PROPPANT VOLUMES UP 51% OVER PRIOR YEAR

 

    COMPANY EXPECTS 2014 FULL-YEAR ADJUSTED EBITDA IN THE RANGE OF $390 MILLION TO $395 MILLION

CHESTERLAND, Ohio, November 11, 2014 – Fairmount Santrol (NYSE: FMSA) today announced results for the third quarter ended September 30, 2014.

For the third quarter, net income was $54.1 million, or $0.32 per diluted share, compared with net income of $24.7 million, or $0.15 per diluted share, for the same period a year ago. Adjusted earnings per diluted share were $0.35, an increase of 52% over adjusted earnings per diluted share of $0.23 for the third quarter of last year. The increase in earnings was primarily due to a 37% increase in raw sand proppant volumes and a 51% increase in coated proppant volumes. The comparison of net income and earnings per share for the third quarters of 2014 and 2013 was impacted by a number of non-operating charges in both periods, which are provided in the accompanying table. Adjusted EBITDA for the third quarter of 2014 was $116.9 million, up 42% over third-quarter 2013 Adjusted EBITDA of $82.1 million.

“We are very pleased to report record results in our first earnings announcement since becoming a publicly-traded company on October 3,” said Jenniffer Deckard, president and chief executive officer. “In the third quarter, our proppant solutions business drove performance, achieving record levels in both volumes and profits. We remain focused on growing our business and creating value for our shareholders by increasing sand capacity and efficiencies, developing industry-leading resin and coating technologies, enhancing our logistics network, and building upon our commitment to sustainable development.”

Third-Quarter 2014 Results

Third-quarter revenue totaled $373.5 million, up 41% from $265.7 million for the same period last year. The increase in quarterly revenue was primarily due to increased sales volumes in the Company’s Proppant Solutions segment. Overall sales volumes increased to 2.6 million tons for the quarter, a 28% increase compared with 2.0 million tons in the third quarter of 2013. The overall volume growth was driven by the Proppant Solutions segment as industry dynamics accelerated demand in the marketplace for both raw sand and resin-coated proppants.

 

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Adjusted EBITDA was $116.9 million, an increase of 42% compared with $82.1 million during this period last year and an increase of almost 20% sequentially over the second quarter of 2014.

Business Segments

Fairmount Santrol operates two business segments based on the primary end markets the Company serves – Proppant Solutions and Industrial and Recreational Products (I&R). These complementary businesses sell to a wide range of customers across multiple end markets. This allows the Company to maximize both operating efficiencies and the recovery of its reserve base within its mining operations. Together, these segments offer a broad and innovative product suite that addresses more than 90% of the proppant market and multiple industrial end markets.

Proppant Solutions Segment

The Proppant Solutions business includes the mining, processing and distributing of high-performance sand and sand-based value-added (coated) proppants to the oil and gas exploration and production industry to enhance well productivity in hydraulic fracturing operations. Proppants are sized particles that are designed to hold fractures open after a hydraulic fracturing treatment. Resin-coated proppants provide proppant flowback resistance and greater strength to enhance conductivity at greater depths and closure stresses. The Proppant Solutions segment accounted for approximately 90% of the Company’s revenue in the third quarter of 2014.

Total volumes in the quarter for this segment were 1.9 million tons, up 40% from 1.4 million tons a year ago and up 10% sequentially from 1.8 million tons in the second quarter of 2014. Raw sand proppant volumes in the third quarter were 1.5 million tons compared with 1.1 million tons last year and a sequential increase of 11% from 1.4 million tons in the second quarter of 2014. Coated proppant volumes during the quarter were 0.40 million tons, an increase of 51% over volumes of 0.27 million tons in the third quarter of 2013 and a sequential increase of 7% from 0.37 million tons in the second quarter of 2014.

Volume increases in the Proppant Solutions segment are being driven by strong market conditions for both raw sand and resin-coated proppants. Increased well counts and proppant intensity are driving unprecedented demand for both high-quality raw sand and resin-coated

 

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proppants. Additionally, well conditions and depths are driving further demand for the performance-enhancing properties of the Company’s resin-coated proppants. Further, the Company’s investments in additional processing capacity and logistics capabilities have well positioned Fairmount Santrol to capitalize on the growth in demand.

Proppant Solutions revenues for the quarter totaled $340.7 million, up 47% compared with $232.2 million for the same period in 2013, and a sequential increase of 13% from the second quarter of 2014. The significant increase in revenues reflects the increased volumes for both raw sand and resin-coated proppants noted above as well as the cumulative effect of price increases realized on raw sand in 2014. The Company also saw increased volumes in resin-coated proppants driven by the Company’s strategic placement of new terminals in the Permian basin and by continued demand for the characteristics provided by the Company’s curable specialty products.

Segment contribution margin was $125.1 million versus $82.4 million in the third quarter of 2013, an increase of 52%.

Industrial and Recreational Products Segment

The I&R segment provides high-quality sand and coated products, strong technical leadership and applications knowledge to the foundry, building products, sports and recreation, glassmaking and filtration industries.

Volume sold during the quarter totaled approximately 638,300 tons compared with approximately 632,000 tons sold in the third quarter of 2013.

I&R revenue for the quarter totaled $32.8 million compared with $33.5 million in the same period in 2013.

Segment contribution margin was $10.0 million versus $10.1 million in the third quarter of 2013.

Additional Operational Highlights

 

    Three terminals added – During the third quarter, the Company opened three new terminals. The Ada and Altus Oklahoma terminals are both in the mid-continent region bringing us to eight proppant terminals in that region. In addition, Fairmount Santrol opened a new terminal in Ohio, which is barge capable and serves the northeast region. All of these new terminals help improve logistics for the Company’s customers by positioning product supply closer to the wellhead. These new additions bring the Company’s total number of terminals serving all US basins to 49.

 

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    Illinois capacity expansion – In mid-October, Fairmount Santrol announced it had received a favorable permit ruling from the Illinois Environmental Protection Agency that gives the Company the option to expand the sand mining, processing and coating capacity of its Wedron, Illinois, operations. The permit ruling provides the Company with flexibility to expand the facility’s sand capacity over the next 18 months from its current 4.4 million tons per year by up to an additional 3.5 million tons and allows for increased coating capacity for its value-added products. The Company will add 0.5 million tons of that newly permitted sand mining and processing capacity by January 2015 at the Wedron, Illinois facility.

 

    Missouri facility operations – The Company also expects to begin full-scale operations at its Brewer, Missouri sand facility by January 2015, providing an additional 1.0 million tons per year of Northern White sand processing capacity.

Capital Update

As of September 30, 2014, the Company had $45.1 million in cash and cash equivalents and $113.5 million available under its credit facilities. Total long-term debt at September 30, 2014 was $1.25 billion. The Company’s leverage ratio was 3.47 at September 30, 2014 compared with 4.28 a year ago. Capital expenditures in the third quarter totaled $25.9 million and were associated with the completion of the Company’s unit train capacity expansions and investments in additional sand processing and Propel SSP production capacities.

 

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Business Outlook

For the full-year 2014, the Company expects to report Adjusted EBITDA in the range of $390 million to $395 million, an increase of 33% to 35% over 2013 Adjusted EBITDA of $293 million. “Based on robust current demand levels and feedback from customers, we are confident in meeting our full-year projections for a record 2014,” Deckard said. “We will continue to monitor the market closely as we complete our planning process for 2015, and we will share our expectations for next year in our fourth-quarter earnings release and conference call in early February.”

Conference Call

Fairmount Santrol will host a conference call and live webcast for analysts and investors today at 10 a.m. Eastern Time to discuss the Company’s 2014 third-quarter financial results. Investors are invited to listen to a live audio webcast of the conference call which will be accessible on the Investor Relations section of the Company’s website at www.fairmountsantrol.com. To access the live webcast, please log in 15 minutes prior to the start of the call to download and install any necessary audio software. An archived replay of the call will also be available on the website following the call. The call can also be accessed live by dialing (877) 201-0168 or for international callers, (647) 788-4901. The passcode for the call is 21477314. A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056 or (404) 537-3406. The passcode for the replay is 21477314. The replay of the call will be available through November 18, 2014.

About Fairmount Santrol

Fairmount Santrol, is a leading provider of high-performance sand and sand-based products used by oil and gas exploration and production companies to enhance the productivity of their wells. The Company also provides high-quality products, strong technical leadership and applications knowledge to end users in the foundry, building products, water filtration, glass, and sports and recreation markets. Its global logistics capabilities include a wide-ranging network of distribution terminals and thousands of rail cars that allow the company to effectively serve customers wherever they operate. As one of the nation’s longest continuously operating mining organizations, Fairmount Santrol has developed a strong commitment to sustainable development, environmental stewardship, and operational safety. Correspondingly, the company’s motto and action orientation is: “Do Good. Do Well.” For more information, visit www.fairmountsantrol.com

Investor contact:

Sharon Van Zeeland

440-279-0204

Sharon.VanZeeland@fairmountsantrol.com

 

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Media contact:

Kristin Lewis

440-279-0245

Kristin.Lewis@fairmountsantrol.com

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. These factors include: changes in prevailing economic conditions, including fluctuations in demand for, and pricing of, industrial and recreational sand; our rights and ability to mine our property and our renewal or receipt of the required permits and approvals from government authorities and other third parties; our ability to implement capacity expansion plans within our time and budgetary parameters; increasing costs or a lack of dependability or availability of transportation services or infrastructure and geographic shifts in demand; changing legislative and regulatory initiatives relating to our business, including environmental, mining, health and safety, licensing, reclamation and other regulation relating to hydraulic fracturing (and changes in their enforcement and interpretation); silica-related health issues and corresponding litigation; seasonal and severe weather conditions and other operating risks that are beyond our control.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the prospectus filed with the Securities and Exchange Commission in connection with our initial public offering. The risk factors and other factors noted in our prospectus could cause our actual results to differ materially from those contained in any forward-looking statement.

 

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Fairmount Santrol Condensed Statement of Income and Earnings per Share

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2014      2013      2014      2013  
     (in thousands, except per share amounts)      (in thousands, except per share amounts)  

Revenue

   $ 373,479       $ 265,667       $ 1,002,702       $ 713,908   

Cost of sales (excluding depreciation, depletion, amortization, and stock compensation shown separately)

     228,583         165,666         630,885         432,072   

Operating expenses

           

Selling, general, and administrative expenses

     29,954         22,885         79,122         59,165   

Depreciation, depletion, and amortization expense

     15,270         8,957         42,792         24,510   

Stock compensation expense

     4,361         2,022         8,674         5,731   

Other operating expense

     940         68         612         740   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations

     94,371         66,069         240,617         191,690   

Interest expense, net

     16,567         16,224         51,045         42,765   

Loss on extinguishment of debt

     —           11,760         —           11,760   

Other non-operating expense

     2,206         2,037         2,747         2,607   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before provision for income taxes

     75,598         36,048         186,825         134,558   

Provision for income taxes

     21,436         11,032         53,848         40,726   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     54,162         25,016         132,977         93,832   

Less: Net income attributable to non-controlling interest

     85         269         440         521   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to FMSA Holdings, Inc.

   $ 54,077       $ 24,747       $ 132,537       $ 93,311   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share

           

Basic

   $ 0.34       $ 0.16       $ 0.84       $ 0.60   

Diluted

   $ 0.32       $ 0.15       $ 0.80       $ 0.57   

 

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Fairmount Santrol Condensed Balance Sheet

 

     September 30, 2014     December 31, 2013  
     (in thousands)  

Assets

    

Current Assets

    

Cash and cash equivalents

   $ 45,098      $ 17,815   

Accounts receivable, net

     234,098        146,851   

Inventories

     130,530        118,349   

Deferred incomes taxes

     12,741        11,748   

Prepaid expenses and other assets

     8,872        10,575   
  

 

 

   

 

 

 

Total current assets

     431,339        305,338   

Property, plant, and equipment, net

     798,453        748,838   

Goodwill

     87,279        87,452   

Intangibles, net

     102,272        106,236   

Other assets

     28,185        35,567   
  

 

 

   

 

 

 

Total assets

   $ 1,447,528      $ 1,283,431   
  

 

 

   

 

 

 

Liabilities and Equity

    

Current liabilities

    

Current portion of long-term debt

   $ 15,597      $ 15,687   

Accounts payable

     98,935        89,998   

Accrued expenses

     45,500        28,706   
  

 

 

   

 

 

 

Total current liabilities

     160,032        134,391   

Long-term debt

     1,235,885        1,246,459   

Deferred income taxes

     50,539        46,851   

Other long-term liabilities

     22,737        21,088   
  

 

 

   

 

 

 

Total liabilities

     1,469,193        1,448,789   

Equity

    

Class A common stock

     2,352        2,339   

Class B common stock

     6        2   

Additional paid-in capital

     749,841        733,088   

Retained earnings

     459,266        326,729   

Accumulated other comprehensive income/(loss)

     (8,432     (3,536

Treasury stock at cost

     (1,227,663     (1,227,001

Non-controlling interest

     2,965        3,021   
  

 

 

   

 

 

 

Total equity/(deficit)

     (21,665     (165,358
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,447,528      $ 1,283,431   
  

 

 

   

 

 

 

 

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Segment Report

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2014      2013      2014      2013  
     (in thousands, except volume amounts)      (in thousands, except volume amounts)  

Volume (tons)

           

Proppant Solutions

           

Raw sand

     1,542,665         1,123,134         4,197,775         2,756,165   

Coated proppant

     402,002         266,013         1,099,376         767,276   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Proppant Solutions

     1,944,667         1,389,147         5,297,151         3,523,441   

Industrial & Recreational Products

     638,270         632,044         1,831,725         1,893,100   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total volumes

     2,582,937         2,021,191         7,128,876         5,416,541   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue

           

Proppant Solutions

   $ 340,667       $ 232,176       $ 907,852       $ 610,462   

Industrial & Recreational Products

     32,812         33,491         94,850         103,446   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

     373,479         265,667         1,002,702         713,908   

Segment contribution margin

           

Proppant Solutions

     125,063         82,444         317,991         232,711   

Industrial & Recreational Products

     10,049         10,086         26,884         27,088   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total segment contribution margin

     135,112         92,530         344,875         259,799   

Operating expenses excluded from segment contribution margin

           

Selling, general, and administrative expenses

     20,170         15,414         52,180         37,128   

Depreciation, depletion, and amortization expense

     15,270         8,957         42,792         24,510   

Stock compensation expense

     4,361         2,022         8,674         5,731   

Other operating expense

     940         68         612         740   

Interest expense, net

     16,567         16,224         51,045         42,765   

Loss on extinguishment of debt

     —           11,760         —           11,760   

Other non-operating expense

     2,206         2,037         2,747         2,607   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before provision for income taxes

   $ 75,598       $ 36,048       $ 186,825       $ 134,558   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Non-GAAP Financial Measures

Reconciliation of adjusted EBITDA

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2014      2013      2014      2013  
     (in thousands)      (in thousands)  

Net income attributable to FMSA Holdings, Inc.

   $ 54,077       $ 24,747       $ 132,537       $ 93,311   

Interest expense, net

     16,567         16,224         51,045         42,765   

Provision for income taxes

     21,436         11,032         53,848         40,726   

Depreciation, depletion, and amortization

     15,270         8,957         42,792         24,510   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     107,350         60,960         280,222         201,312   

Non-cash stock compensation expense(1)

     4,361         2,022         8,674         5,731   

Management fees & expenses paid to
sponsor(2)

     285         2,037         826         2,607   

Loss on extinguishment of debt(3)

     —           11,760         —           11,760   

(Gain)/loss on disposal of assets(4)

     1,921         —           1,921         —     

Transaction expenses(5)

     —           5,354         638         7,053   

Initial Public Offering fees & expenses

     3,017         —           4,638         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 116,934       $ 82,133       $ 296,919       $ 228,463   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Represents stock- based awards issued to our employees, including one time adjustment in Q3 2014 for modification to certain outstanding options.
(2) Includes fees and expenses paid to American Securities for consulting and management services pursuant to a management consulting agreement.
(3) Upon entering into new credit facilities, we were required to write-off a portion of the remaining unamortized deferred financing fees.
(4) Includes the loss related to the sale and disposal of certain assets in property, plant and equipment.
(5) Expenses associated with evaluation of potential acquisitions of businesses, some of which were completed.

Reconciliation of adjusted earnings

 

                                                                           

Net Income attributable to FMSA Holdings Inc.

   $ 54,077       $ 24,747       $ 132,537       $ 93,311   

After-tax effect of adjustments noted above*

     3,708         13,597         5,696         15,208   

Adjusted net income attributable to FMSA Holdings Inc.

   $ 57,785       $ 38,344       $ 138,233       $ 108,519   

 

* except non-cash stock compensation expense

 

                                                                           

Earnings per share

           

Basic

   $ 0.34       $ 0.16       $ 0.84       $ 0.60   

Diluted

   $ 0.32       $ 0.15       $ 0.80       $ 0.57   

Adjusted Earnings per share

           

Basic

   $ 0.37       $ 0.25       $ 0.88       $ 0.70   

Diluted

   $ 0.35       $ 0.23       $ 0.83       $ 0.66   

 

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