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Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

FAIRMOUNT SANTROL ANNOUNCES THIRD-QUARTER 2017 RESULTS

 

    Volumes of 3.4 million tons up 5% sequentially, with Proppant Solutions volumes of 2.8 million tons up 9% sequentially

 

    Revenues of $280.1 million up 20% sequentially, with Proppant Solutions revenue growth of 26% sequentially

 

    Net income of $34.9 million or $0.15 per diluted share

 

    Adjusted EBITDA of $72.4 million, excluding $2.4 million of non-cash stock compensation expense, up over $25 million sequentially

 

    Debt refinanced with new, 5-year term loan and revolving credit facility

CHESTERLAND, Ohio, November 2, 2017 (GLOBE NEWSWIRE) — Fairmount Santrol (NYSE: FMSA), a leading provider of high-performance sand and sand-based product solutions, today announced results for the third quarter ended September 30, 2017.

Third-Quarter 2017 Results

Third-quarter 2017 revenues were $280.1 million, up 20% from $233.2 million in the second quarter of 2017 and up 108% from $134.8 million in the third quarter of 2016. Total Company volumes sold were 3.4 million tons for the quarter, up 5% from 3.3 million tons sold in the second quarter of 2017 and an increase of 42% from 2.4 million tons in the third quarter of 2016.

For third-quarter 2017, the Company had net income of $34.9 million, or $0.15 per diluted share, compared with net income of $10.5 million, or $0.05 per diluted share, in the second quarter of 2017. Net loss for third-quarter 2016 was $20.6 million, or $(0.11) per diluted share.

Adjusted EBITDA for the third quarter of 2017 was $72.4 million, which excludes non-cash stock compensation expense of $2.4 million. Second-quarter 2017 Adjusted EBITDA was $47.0 million, and excluded non-cash stock compensation expense of $2.8 million and $0.4 million from the write-off of deferred financing fees, but included $1.5 million in costs related to plant start-ups and $3.2 million of freight charges to move railcars into the Company’s active fleet.

 

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The Adjusted EBITDA loss for the third quarter of 2016 was $4.9 million, and excluded the impact from non-cash stock compensation expense of $1.8 million, but included $9.8 million in fees related to railcar renegotiations.

“Our team successfully leveraged our strengths to capitalize on improving market conditions in the third quarter, resulting in strong profitability growth,” said Jenniffer Deckard, President and Chief Executive Officer. “We continued to relentlessly implement efficiency initiatives to both maximize the utilization of our asset base and to minimize costs. We remain focused on short-term execution, while also prioritizing key strategic investments such as the building out of our Kermit, Texas, facility and enhancing our logistics network. This dual focus will position us to meet varied and growing demand while further improving our long-term value proposition to both customers and shareholders.”

Business Segments

Proppant Solutions Segment

For the third quarter of 2017, Proppant Solutions volumes were 2.8 million tons, an increase of 9% compared with the second quarter of 2017 and a 61% increase compared with the prior-year period. Raw proppant sand volumes were 2.6 million tons, a 9% sequential increase and a 58% increase compared with the same period a year ago. Coated proppant volumes were 215,000 tons, an 11% increase compared with the second quarter of 2017 and a 118,000 ton increase from the prior-year period.

Proppant Solutions revenues were $249.8 million in third-quarter 2017, a 26% increase compared with $198.8 million in the second quarter of 2017 and an increase of over $146 million compared with $103.1 million in the third quarter of 2016. Proppant Solutions revenues were favorably impacted by higher volumes and pricing, as well as growth in value-added proppant sales. Average raw proppant sand pricing in third-quarter 2017 increased more than $7 per ton compared with average pricing in second-quarter 2017, based on a consistent mix of product, grade and distribution channel sales.

 

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Proppant Solutions gross profit increased to $85.1 million, or over $30 per ton in the third quarter of 2017, compared with $54.4 million, or $21 per ton, in the second quarter of 2017. Second-quarter 2017 Proppant Solutions gross profit includes $1.5 million of costs related to plant start-ups and $3.2 million of freight charges to move stored railcars to the Company’s active fleet. The sequential improvement in Proppant Solutions gross profit is due to higher pricing and greater volumes coupled with an improved cost position, as the newly activated plants were more fully utilized and the Company had significantly lower costs from excess railcar storage and associated one-time freight charges. Gross profit for the segment in the third quarter of 2016 was $6.4 million.

Industrial and Recreational Products Segment

Industrial and Recreational volumes were 615,000 tons in third-quarter 2017, down 8% from the prior-year third quarter, driven by a shift of certain seasonal sales into the second quarter of 2017 and a slight decline in lower-margin raw sand sales over prior-year levels. Year-to-date volumes in the segment through the third quarter of 2017 were 1.9 million tons, roughly flat with year-to-date 2016 levels due to increased growth in higher-margin product sales that offset a decline in volumes.

Revenues for the segment were $30.3 million in third-quarter 2017, a 4% decrease from $31.6 million for third-quarter 2016. The decrease in revenue from third-quarter 2016 was primarily due to lower volumes in sales of raw sand, offset by greater sales of higher-margin products and higher pricing versus the prior-year period. Year-to-date, Industrial and Recreational revenues were $96.3 million, a 5% increase from $91.8 million for the comparable 2016 period.

In the third quarter of 2017, Industrial and Recreational gross profit was $14.4 million, or 47% of sales, compared with $13.5 million, or 43% of sales, in the third quarter of 2016. On a year-to-date basis, gross profit for the Industrial and Recreational Segment was $43.6 million, or 45% of sales, which represents 16% growth over year-to-date 2016 gross profit of $37.6 million. This segment continues to deliver year-over-year improvement in gross margin as a result of higher pricing, reductions in per ton operating costs, and a continued mix shift toward higher-margin products.

 

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Balance Sheet and Other Information

Through the first nine months of 2017, net cash generated by operating activities was $107.5 million, largely due to higher profitability over the period, offset somewhat by an increase in cash used for working capital as a result of increased sales. Net cash used in financing activities in the nine months ended September 30, 2017 was $60.5 million, primarily the result of the second-quarter debt prepayment of $50 million and the recurring scheduled debt service payments. Cash used in investing activities for the nine months ended September 30, 2017 was $53.6 million. In the third quarter, the Company paid the first leasehold interest installment of $20 million that was due for the mineral reserves on the Kermit property. Capital expenditures in the third quarter were $22.2 million, including stripping, maintenance and growth capital, and approximately $8.5 million spent on the new Kermit facility.

As of September 30, 2017, cash and cash equivalents totaled $188.3 million, and total debt was $794.5 million, resulting in net debt of $606.2 million. The Company recently announced a new $700 million Term Loan B maturing in 2022 and a $125 million asset-based revolving credit facility that expires in 2022, which replace its prior term loan and revolving credit facilities. As part of this refinancing, the Company also used existing cash to repay a portion of its long-term debt.

“The recent debt refinancing is another positive step in our measured approach to improve our capital structure and will provide us with additional liquidity and flexibility,” said Michael Biehl, Executive Vice President and Chief Financial Officer. “Reducing total debt levels remains a top priority for Fairmount Santrol, as evidenced by the debt prepayment we made earlier in the year and as part of the recent refinancing.”

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

 

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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, November 2, 2017, at 10 a.m. Eastern Time to discuss the Company’s 2017 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. 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 (833) 287-7902 or, for international callers, (647) 689-4466. The conference ID for the call is 95267930. 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 95267930. The replay of the call will be available through November 9, 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.

 

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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 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

 

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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

 

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Fairmount Santrol

Condensed Consolidated Statements of Income (Loss)

(unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
         2017             2016             2017             2016      
    

(in thousands, except per share

amounts)

   

(in thousands, except per share

amounts)

 

Revenues

   $ 280,050     $ 134,775     $ 685,859     $ 394,482  

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

     180,582       114,873       475,470       347,466  

Operating expenses

        

Selling, general and administrative expenses(A)

     31,105       17,242       79,438       60,560  

Depreciation, depletion and amortization expense

     20,174       17,759       59,462       54,401  

Asset impairments

     —         —         —         90,654  

Restructuring charges

     —         —         —         1,155  

Other operating expense (income)

     (1,594     9,362       (2,299     9,266  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     49,783       (24,461     73,788       (169,020

Interest expense, net

     12,110       16,175       37,630       50,043  

Other non-operating income

     —         —         —         (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before provision (benefit) for income taxes

     37,673       (40,636     36,158       (219,058

Provision (benefit) for income taxes

     2,754       (20,013     2,126       (98,786
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     34,919       (20,623     34,032       (120,272

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

     (25     2       193       15  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Fairmount Santrol Holdings Inc.

   $ 34,944     $ (20,625   $ 33,839     $ (120,287
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share

        

Basic

   $ 0.16     $ (0.11   $ 0.15     $ (0.71

Diluted

   $ 0.15     $ (0.11   $ 0.15     $ (0.71

Weighted average number of shares outstanding

        

Basic

     224,082       183,620       223,947       168,904  

Diluted

     226,400       183,620       229,304       168,904  

 

(A) - Stock compensation expense of $2,402 and $1,799 for the three months ended September 30, 2017 and 2016, respectively, and $7,582 and $7,366 for the nine months ended September 30, 2017 and 2016, respectively, are included within selling, general, and administrative expenses.


Fairmount Santrol

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

     Nine Months Ended September 30,  
             2017                     2016          
     (in thousands)  

Net income (loss)

   $ 34,032     $ (120,272

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

    

Depreciation and depletion

     53,638       50,891  

Amortization

     9,508       8,471  

Reserve for doubtful accounts

     (421     2,645  

Write-off of deferred financing costs

     389       —    

Asset impairments

     —         90,654  

Inventory write-downs and reserves

     1,266       10,302  

(Gain) loss on disposal of fixed assets

     (404     315  

Deferred income taxes and taxes payable

     3,965       (80,248

Stock compensation expense

     7,582       7,366  

Change in operating assets and liabilities:

    

Accounts receivable

     (75,707     (5,035

Inventories

     (16,920     7,039  

Prepaid expenses and other assets

     (2,745     1,873  

Refundable income taxes

     20,255       5,922  

Accounts payable

     20,659       4,723  

Accrued expenses and deferred revenue

     52,373       3,875  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     107,470       (11,479
  

 

 

   

 

 

 

Cash flows from investing activities

    

Proceeds from sale of fixed assets

     3,124       5,630  

Capital expenditures and stripping costs

     (36,470     (28,712

Leasehold interest payments for sand reserves

     (20,000     —    

Earnout payments

     (250     (1,631
  

 

 

   

 

 

 

Net cash used in investing activities

     (53,596     (24,713
  

 

 

   

 

 

 

Cash flows from financing activities

    

Payments on long-term debt

     (6,469     (8,670

Prepayments on term loans

     (50,000     (69,580

Payments on capital leases and other long-term debt

     (3,491     (5,067

Proceeds from option exercises

     563       3,950  

Proceeds from primary stock offering

     —         161,862  

Tax payments for withholdings on share-based awards exercised or distributed

     (1,097     (3,650

Tax effect of stock options exercised, forfeited, or expired

     —         (1,051

Transactions with non-controlling interest

     40       (551
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (60,454     77,243  
  

 

 

   

 

 

 

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

     —         1,376  

Foreign currency adjustment

     768       (479
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (5,812     41,948  
  

 

 

   

 

 

 

Cash and cash equivalents:

    

Beginning of period

     194,069       171,486  
  

 

 

   

 

 

 

End of period

   $ 188,257     $ 213,434  
  

 

 

   

 

 

 


Fairmount Santrol

Condensed Consolidated Balance Sheets

(unaudited)

 

     September 30, 2017     December 31, 2016  
     (in thousands)  

Assets

    

Current assets

    

Cash and cash equivalents

   $ 188,257     $ 194,069  

Accounts receivable, net

     155,070       78,942  

Inventories, net

     68,304       52,650  

Prepaid expenses and other assets

     6,843       7,065  

Refundable income taxes

     823       21,077  
  

 

 

   

 

 

 

Total current assets

     419,297       353,803  

Property, plant and equipment, net

     767,408       727,735  

Deferred income taxes

     1,244       1,244  

Goodwill

     15,301       15,301  

Intangibles, net

     95,234       95,341  

Other assets

     7,740       9,486  
  

 

 

   

 

 

 

Total assets

   $ 1,306,224     $ 1,202,910  
  

 

 

   

 

 

 

Liabilities and Equity

    

Current liabilities

    

Current portion of long-term debt

   $ 11,772     $ 10,707  

Accounts payable

     69,173       37,263  

Accrued expenses and deferred revenue

     85,660       26,185  
  

 

 

   

 

 

 

Total current liabilities

     166,605       74,155  

Long-term debt

     782,735       832,306  

Deferred income taxes

     10,728       7,057  

Other long-term liabilities

     50,300       38,272  
  

 

 

   

 

 

 

Total liabilities

     1,010,368       951,790  

Equity

    

Common stock

     2,423       2,422  

Additional paid-in capital

     300,281       297,649  

Retained earnings

     298,258       264,852  

Accumulated other comprehensive loss

     (16,750     (19,002

Treasury stock at cost

     (288,662     (294,874

Non-controlling interest

     306       73  
  

 

 

   

 

 

 

Total equity

     295,856       251,120  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,306,224     $ 1,202,910  
  

 

 

   

 

 

 


Fairmount Santrol

Segment Reports

(unaudited)

 

     Three Months Ended September 30,      Nine Months Ended September 30,      Three Months Ended
June 30,
 
         2017              2016              2017              2016              2017      
     (in thousands, except volume amounts)      (in thousands, except volume amounts)     

(in thousands, except

volume amounts)

 

Volume (tons)

              

Proppant Solutions

              

Raw sand

     2,616,649        1,657,799        6,931,129        4,301,124        2,393,647  

Coated proppant

     214,882        96,532        569,622        269,062        193,242  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Proppant Solutions

     2,831,531        1,754,331        7,500,751        4,570,186        2,586,889  

Industrial & Recreational Products

     614,738        668,333        1,896,947        1,916,755        686,831  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total volumes

     3,446,269        2,422,664        9,397,698        6,486,941        3,273,720  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Revenues

              

Proppant Solutions

   $ 249,751      $ 103,140      $ 589,556      $ 302,705      $ 198,812  

Industrial & Recreational Products

     30,299        31,635        96,303        91,777        34,414  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     280,050        134,775        685,859        394,482        233,226  

Segment gross profit

              

Proppant Solutions

     85,101        6,356        166,820        9,419        54,373  

Industrial & Recreational Products

     14,367        13,546        43,569        37,597        15,717  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total segment gross profit

     99,468        19,902        210,389        47,016        70,090  


Fairmount Santrol

Non-GAAP Financial Measures

(unaudited)

 

    Three Months Ended September 30,     Nine Months Ended September 30,     Three Months
Ended June 30,
 
        2017             2016             2017             2016             2017      
    (in thousands)     (in thousands)     (in thousands)  

Reconciliation of Adjusted EBITDA

         

Net income (loss) attributable to Fairmount Santrol Holdings Inc.

  $ 34,944     $ (20,625   $ 33,839     $ (120,287   $ 10,483  

Interest expense, net

    12,110       16,175       37,630       50,043       12,983  

Provision (benefit) for income taxes

    2,754       (20,013     2,126       (98,786     520  

Depreciation, depletion, and amortization expense

    20,174       17,759       59,462       54,401       19,846  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

    69,982       (6,704     133,057       (114,629     43,832  

Non-cash stock compensation expense(1)

    2,402       1,799       7,582       7,366       2,763  

Asset impairments(2)

    —         —         —         90,654       —    

Write-off of deferred financing costs(3)

    —         —         389       —         389  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 72,384     $ (4,905   $ 141,028     $ (16,609   $ 46,984  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 and other long-lived assets.
(3) Represents the write-off of deferred financing fees in relation to term loan prepayment.