Attached files

file filename
8-K - 8-K - Bison Merger Sub I, LLCd373191d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

FAIRMOUNT SANTROL ANNOUNCES FIRST-QUARTER 2017 RESULTS

 

    Volumes of 2.7 million tons up 10% sequentially, including Proppant Solutions volumes of 2.1 million tons up 13% sequentially

 

    Raw proppant sand volumes of 1.9 million tons up 10% sequentially, and coated proppant volumes of 161,000 tons up 59% sequentially

 

    Revenues of $172.6 million up 23% sequentially, including Proppant Solutions revenues of $141.0 million up 24% sequentially and Industrial and Recreational revenues of $31.6 million up 17% sequentially

CHESTERLAND, Ohio, May 4, 2017 (GLOBE NEWSWIRE) — Fairmount Santrol (NYSE:FMSA), a leading provider of high-performance sand and sand-based product solutions, today announced results for the first quarter ended March 31, 2017.

First-Quarter 2017 Results

First-quarter 2017 revenues were $172.6 million, up 23% from $140.5 million in the fourth quarter of 2016 and up 19% from $145.5 million in the first quarter of 2016. Overall volumes sold were 2.7 million tons for the quarter, up 10% from the fourth quarter of 2016 and an increase of 27% from 2.1 million tons in the first quarter of 2016.

For first-quarter 2017, the Company had a net loss of $11.6 million, or $(0.05) per diluted share, compared with a net loss of $19.9 million, or $(0.09) per diluted share, in the fourth quarter of 2016. Net loss for first-quarter 2016 was $11.8 million, or $(0.07) per diluted share.

Adjusted EBITDA for the first quarter of 2017 was $21.7 million, which excludes non-cash stock compensation expense of $2.4 million. First-quarter 2017 Adjusted EBITDA does not exclude start-up costs of $0.9 million related to the Company’s Brewer, Missouri and Maiden Rock, Wisconsin facilities, which are expected to be fully operational by mid-second quarter 2017. Fourth-quarter 2016 Adjusted EBITDA was $11.7 million and excluded a gain on the repurchase of debt of $5.1 million (net of professional fees and deferred financing fee write-

 

1


offs), asset impairments and other charges of $2.7 million, and non-cash stock compensation expense of $1.5 million. Professional fees of $1.2 million related to the fourth-quarter 2016 equity offerings were not excluded from Adjusted EBITDA. In the first quarter of 2016, Adjusted EBITDA totaled $10.0 million and excluded non-cash stock compensation expense of $1.7 million.

Jenniffer Deckard, President and Chief Executive Officer, said, “Our Proppant Solutions segment performed well during the first quarter as market conditions strengthened, driving strong revenue growth and improving profitability, while our Industrial & Recreational segment turned in another solid performance with good profitability growth. Our value-added products within both of our business segments had excellent growth during the quarter, demonstrating the differentiated market position of these products and their importance to our customers.”

Deckard added, “As expected, we were capacity-constrained throughout the quarter across most sand grades, with available capacity for finer grades of sand remaining particularly tight. This will be improved with the re-opening of our Brewer and Maiden Rock mines. These two facilities had modest volume shipments at the end of the first quarter, and we expect both of these mines to be fully operational by the middle of the second quarter. Pricing dynamics on raw frac sand remain favorable and we instituted price improvements in both the first and second quarters. We believe that market conditions will continue to strengthen in the near future, and we expect to implement additional price improvements in the third quarter.”

Business Segments

Proppant Solutions Segment

For the first quarter of 2017, Proppant Solutions volumes were 2.1 million tons, an increase of 13% compared with the fourth quarter of 2016 and up 36% compared with the prior-year period. Raw proppant sand volumes were 1.9 million tons, a 10% sequential increase and a 36% increase compared with the same period a year ago. Most volume growth in the quarter came from increased demand for coarser-grade raw sand, as finer-grade demand consistently approached or exceeded available capacity. Coated proppant volumes were 161,000 tons, a 59% increase

 

2


compared with the fourth quarter of 2016 and a 43% increase from the prior-year period. The increase in coated proppant volumes was due to improved resin-coated proppant and Propel SSP® sales as customers leveraged these products to gain further productivity and operational efficiency from well completion activity.

Proppant Solutions revenues were $141.0 million in first-quarter 2017, a 24% increase compared with $113.4 million in the fourth quarter of 2016 and a 20% increase compared with $117.5 million in the first quarter a year ago. Proppant Solutions revenues were positively impacted by higher pricing and a mix shift toward coated proppants, offset somewhat by a shift in mix toward FOB mine sales and coarser-grade proppant. Average raw proppant sand pricing in first-quarter 2017 increased over $4 per ton as compared to fourth-quarter 2016.

Proppant Solutions gross profit increased to $27.3 million, or 19.4% of sales, in the first quarter of 2017 compared with $17.1 million, or 15.1% of sales, in the fourth quarter of 2016. Gross profit for the segment in the first quarter of 2016 was $16.6 million, or 14.1% of sales.

Industrial and Recreational Products Segment

Industrial and Recreational volumes were 595,000 tons in first-quarter 2017, up 1% from both fourth-quarter 2016 and the prior-year first quarter.

Revenues for the segment were $31.6 million in first-quarter 2017, a 17% increase from $27.1 million in the fourth quarter and a 13% increase from $28.0 million for the first quarter a year ago. The increase from the prior-year period was primarily due to a shift toward value-added products in the recreation and building products business lines.

Gross profit for the segment was $13.5 million, or 42.7% of sales, in first-quarter 2017, compared with $11.2 million, or 41.3% of sales, in the fourth quarter of 2016. Gross profit for the segment in the first quarter of 2016 was $10.4 million, or 37.2% of sales.

Balance Sheet and Other Information

Through the first three months of 2017, net cash generated by operating activities was $26.0 million, which was caused in large part by an improved pricing environment, increased volumes and higher sales of value-added products. Net cash used in financing activities was $2.5 million, primarily a result of debt service payments. Capital expenditures were $7.0 million for the quarter ended March 31, 2017.

 

3


As of March 31, 2017, cash and cash equivalents totaled $210.7 million, and total debt was $845.1 million, compared with $194.1 million of cash and cash equivalents and total debt of $843.0 million as of December 31, 2016.

Outlook

Full-year 2017 capital expenditures are expected to approximate $47 million to $50 million.

Deckard concluded, “Market conditions in the second quarter are expected to remain strong, and, as our Maiden Rock and Brewer facilities ramp up production, we believe we are well-positioned to take advantage of increased market demand. In addition to these capacity increases, our recent price increases and expected growth in our value-added products should provide tailwinds for continued revenue and profitability improvement during the second quarter.”

Use of Certain GAAP and Non-GAAP Financial Measures

The Company defines EBITDA as net income before interest expense, income tax expense, depreciation, depletion and amortization. Adjusted EBITDA is defined as EBITDA before non-cash stock-based compensation, asset impairments, and certain other income or expenses. The Company believes EBITDA and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operational performance and compare the results of our operations from period to period without regard to our financing costs or capital structure.

Conference Call

Fairmount Santrol will host a conference call and live webcast for analysts and investors today, May 4, 2017, at 10 a.m. Eastern Time to discuss the Company’s 2017 first-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. To access the live

 

4


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 1412684. A replay will be available shortly after the call and can be accessed by dialing (800) 585-8367 or (416) 621-4642. The passcode for the replay is 1412684. The replay of the call will be available through May 11, 2017.

About Fairmount Santrol

Fairmount Santrol is a leading provider of high-performance sand and sand-based product solutions 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 expansive logistics capabilities include a wide-ranging network of distribution terminals and railcars 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 all three pillars of sustainable development, People, Planet and Prosperity. Correspondingly, the Company’s motto and action orientation is: “Do Good. Do Well.” For more information, visit FairmountSantrol.com.

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 continuing pressure on and fluctuations in demand for, and pricing of, our products; loss of, or reduction in business from the Company’s largest customers

 

5


or their failure to pay the Company; possible adverse effects of being leveraged, including interest rate, event of default or refinancing risks, as well as potentially limiting the Company’s ability to invest in certain market opportunities; the level of cash flows generated to provide adequate liquidity; our ability to successfully develop and market new products, including Propel SSP® and related products; 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 and realize efficiencies from capacity expansion plans, facility reactivation and cost reduction initiatives 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 Fairmount Santrol Holdings Inc.’s filings with the Securities and Exchange Commission (“SEC”). The risk factors and other factors noted in our filings with the SEC could cause our actual results to differ materially from those contained in any forward-looking statement.

Investor contacts:

Indrani Egleston

440-214-3219

Indrani.Egleston@fairmountsantrol.com

Matthew Schlarb

440-214-3284

Matthew.Schlarb@fairmountsantrol.com

 

LOGO

Source: Fairmount Santrol

 

6


Fairmount Santrol

Condensed Consolidated Statements of Income (Loss)

(unaudited)

 

     Three Months Ended March 31,  
     2017     2016  
     (in thousands, except per share
amounts)
 

Revenues

   $ 172,583     $ 145,458  

Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)

     131,752       118,464  

Operating expenses

    

Selling, general and administrative expenses(A)

     22,470       18,278  

Depreciation, depletion and amortization expense

     19,442       18,586  

Asset impairments

     —         76  

Other operating expense (income)

     (1,060     330  
  

 

 

   

 

 

 

Loss from operations

     (21     (10,276

Interest expense, net

     12,537       17,262  

Other non-operating expense (income)

     —         (5
  

 

 

   

 

 

 

Loss before benefit from income taxes

     (12,558     (27,533

Benefit from income taxes

     (1,148     (15,754
  

 

 

   

 

 

 

Net loss

     (11,410     (11,779

Less: Net income (loss) attributable to the non-controlling interest

     178       (3
  

 

 

   

 

 

 

Net loss attributable to Fairmount Santrol Holdings Inc.

   $ (11,588   $ (11,776
  

 

 

   

 

 

 

Loss per share

    

Basic

   $ (0.05   $ (0.07

Diluted

   $ (0.05   $ (0.07

Weighted average number of shares outstanding

    

Basic

     223,739       161,446  

Diluted

     223,739       161,446  

(A) - Stock compensation expense of $2,416 for three months ended March 31, 2017 and $1,653 for three months ended March 31, 2016 are included within selling, general, and administrative expenses.

 

7


Fairmount Santrol

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

     Three Months Ended March 31,  
     2017     2016  
     (in thousands)  

Net loss

   $ (11,410   $ (11,779

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

    

Depreciation and depletion

     17,530       17,451  

Amortization

     3,130       2,827  

Reserve for doubtful accounts

     (447     1,878  

Asset impairments

     —         76  

Gain on sale of fixed assets

     (714     (112

Deferred income taxes and taxes payable

     119       (16,139

Refundable income taxes

     1,945       2,948  

Stock compensation expense

     2,416       1,653  

Change in operating assets and liabilities:

    

Accounts receivable

     (15,956     (9,608

Inventories

     (9,038     1,103  

Prepaid expenses and other assets

     (1,078     3,286  

Accounts payable

     12,981       1,980  

Accrued expenses and deferred revenue

     26,489       (4,150
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     25,967       (8,586
  

 

 

   

 

 

 

Cash flows from investing activities

    

Proceeds from sale of fixed assets

     957       588  

Capital expenditures and stripping costs

     (7,025     (13,744

Other investing activities

     (758     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (6,826     (13,156
  

 

 

   

 

 

 

Cash flows from financing activities

    

Payments on long-term debt

     (2,170     (3,128

Payments on capital leases and other long-term debt

     (817     (1,724

Proceeds from option exercises

     486       101  

Tax effect of stock options exercised, forfeited, or expired

     —         (738

Transactions with non-controlling interest

     (1     (535
  

 

 

   

 

 

 

Net cash used in financing activities

     (2,502     (6,024
  

 

 

   

 

 

 

Change in cash and cash equivalents related to assets classified as held-for-sale

     —         34  

Foreign currency adjustment

     (44     118  
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     16,595       (27,614
  

 

 

   

 

 

 

Cash and cash equivalents:

    

Beginning of period

     194,069       171,486  
  

 

 

   

 

 

 

End of period

   $ 210,664     $ 143,872  
  

 

 

   

 

 

 

 

8


Fairmount Santrol

Condensed Consolidated Balance Sheets

(unaudited)

 

     March 31, 2017     December 31, 2016  
     (in thousands)  

Assets

    

Current assets

    

Cash and cash equivalents

   $ 210,664     $ 194,069  

Accounts receivable, net

     95,345       78,942  

Inventories, net

     61,688       52,650  

Prepaid expenses and other assets

     6,240       7,065  

Refundable income taxes

     19,132       21,077  
  

 

 

   

 

 

 

Total current assets

     393,069       353,803  

Property, plant and equipment, net

     722,461       727,735  

Deferred income taxes

     1,244       1,244  

Goodwill

     15,301       15,301  

Intangibles, net

     94,186       95,341  

Other assets

     9,023       9,486  
  

 

 

   

 

 

 

Total assets

   $ 1,235,284     $ 1,202,910  
  

 

 

   

 

 

 

Liabilities and Equity

    

Current liabilities

    

Current portion of long-term debt

   $ 11,617     $ 10,707  

Accounts payable

     51,545       37,263  

Accrued expenses and deferred revenue

     45,435       26,185  
  

 

 

   

 

 

 

Total current liabilities

     108,597       74,155  

Long-term debt

     833,492       832,306  

Deferred income taxes

     6,893       7,057  

Other long-term liabilities

     43,105       38,272  
  

 

 

   

 

 

 

Total liabilities

     992,087       951,790  

Equity

    

Common stock

     2,422       2,422  

Additional paid-in capital

     297,190       297,649  

Retained earnings

     252,831       264,852  

Accumulated other comprehensive loss

     (18,683     (19,002

Treasury stock at cost

     (290,813     (294,874

Non-controlling interest

     250       73  
  

 

 

   

 

 

 

Total equity

     243,197       251,120  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,235,284     $ 1,202,910  
  

 

 

   

 

 

 

 

9


Fairmount Santrol

Segment Reports

(unaudited)

 

     Three Months Ended March 31,      Three Months Ended
December 31,
 
     2017      2016      2016  
     (in thousands, except volume amounts)      (in thousands, except
volume amounts)
 

Volume (tons)

        

Proppant Solutions

        

Raw sand

     1,920,833        1,413,248        1,743,318  

Coated proppant

     161,498        112,704        101,429  
  

 

 

    

 

 

    

 

 

 

Total Proppant Solutions

     2,082,331        1,525,952        1,844,747  

Industrial & Recreational Products

     595,378        587,178        586,898  
  

 

 

    

 

 

    

 

 

 

Total volumes

     2,677,709        2,113,130        2,431,645  
  

 

 

    

 

 

    

 

 

 

Revenues

        

Proppant Solutions

   $ 140,993      $ 117,463      $ 113,439  

Industrial & Recreational Products

     31,590        27,995        27,092  
  

 

 

    

 

 

    

 

 

 

Total revenues

     172,583        145,458        140,531  

Segment gross profit

        

Proppant Solutions

     27,346        16,592        17,082  

Industrial & Recreational Products

     13,485        10,402        11,201  
  

 

 

    

 

 

    

 

 

 

Total segment gross profit

     40,831        26,994        28,283  

 

10


Fairmount Santrol

Non-GAAP Financial Measures

(unaudited)

 

     Three Months Ended March 31,     Three Months
Ended December 31,
 
     2017     2016     2016  
     (in thousands)     (in thousands)  

Reconciliation of Adjusted EBITDA

      

Net loss attributable to Fairmount Santrol Holdings Inc.

   $ (11,588   $ (11,776   $ (19,905

Interest expense, net

     12,537       17,262       15,324  

Provision (benefit) for income taxes

     (1,148     (15,754     (655

Depreciation, depletion, and amortization expense

     19,442       18,586       17,875  
  

 

 

   

 

 

   

 

 

 

EBITDA

     19,243       8,318       12,639  

Non-cash stock compensation expense(1)

     2,416       1,653       1,504  

Asset impairments(2)

     —         76       2,494  

Write-off of deferred financing costs(3)

     —         —         2,618  

Gain on repurchase of debt(4)

     —         —         (8,178

Transaction expenses(5)

     —         —         450  

Other charges(6)

     —         —         180  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 21,659     $ 10,047     $ 11,707  
  

 

 

   

 

 

   

 

 

 
      

 

(1) Represents the non-cash expense for stock-based awards issued to our employees and outside directors.
(2) Non-cash charges associated with the impairment of mineral reserves, other long-lived assets, and an international production facility.
(3) Represents the write-off of deferred financing fees in relation to term loan repurchases.
(4) Gain related to the discount on term loan repurchases.
(5) Expenses associated with term loan repurchases.
(6) Loss on the curtailment of a pension plan.

 

11