Covia Holdings Corp - FORM 8-K - EX-99.1

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8-K - FORM 8-K - Covia Holdings Corp	d585752d8k.htm

Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE

COVIA ANNOUNCES SECOND-QUARTER 2018 RESULTS

•

Reported Volumes of 7.6 million tons; Reported Energy Volumes of 4.3 million tons; Reported Net Income from Continuing Operations of $17.1 million

•

Pro Forma Volumes of 10.0 million tons, up 10% sequentially; Pro Forma Energy Volumes of 6.2 million, up 11% sequentially; Pro Forma Adjusted EBITDA of $179 million, up 18% sequentially

•

Integration of Supply Chain Successfully Completed in June

•

Began Shipping Local West Texas Sand in July 2018

INDEPENDENCE, Ohio, August 14, 2018 (GLOBE NEWSWIRE) — Covia (NYSE:CVIA), a leading provider of minerals and material solutions for the Industrial and Energy markets, today announced results for the second quarter ended June 30, 2018. As a result of the merger that closed on June 1, 2018, Covia’s second-quarter 2018 reported results, under Generally Accepted Accounting Principles (“GAAP”), include the consolidated financial results of both Unimin Corporation (“Unimin”) and Fairmount Santrol Holdings Inc. (“Fairmount Santrol”) for the one month ended June 30, 2018, as well as the stand-alone results for Unimin for the two months ended May 31, 2018, including the high-purity quartz (“HPQ”) business, which is reported as discontinued operations. Selected pro forma financial results, which reflect combined Unimin and Fairmount Santrol operations for the entire quarter and exclude HPQ results, have been provided as exhibits to this release.

Reported Second-Quarter 2018 Results

Second-quarter 2018 reported Company volumes sold were 7.6 million tons, compared with 5.9 million tons in the first quarter of 2018 and 5.9 million tons in the second-quarter 2017. Reported revenues in second-quarter 2018 were $508.4 million, compared with $369.8 million in the first-quarter 2018 and $324.1 million in the second-quarter 2017. Reported net income from continuing operations for second-quarter 2018 was $17.1 million, or $0.14 per diluted share, compared with $36.8 million in the first-quarter 2018 and $30.2 million in the second quarter of 2017. As a result of the merger, second-quarter 2018 reported net income includes the pre-tax impact of $38.9 million of transaction-related expenses, $19.2 million in costs related to the fair value write-up of Fairmount Santrol inventories, and $12.3 million in charges related to a project termination following a post-merger synergy and capital optimization analysis.

Industrial Segment Reported Results

Second-quarter 2018 reported Industrial volumes were 3.3 million tons compared with 3.1 million tons in the second-quarter 2017. Reported revenues for the segment were $181.7 million and $166.7 million in second-quarter 2018 and 2017, respectively. Reported Industrial gross profit was $51.8 million in second-quarter of 2018 compared with $52.3 million in the second-quarter 2017.

Energy Segment Reported Results

Reported second-quarter 2018 Energy volumes were 4.3 million tons and 3.0 million tons in the first-quarter 2018. Revenues were $326.7 million compared with $207.5 million in the first-quarter 2018. Reported Energy gross profit totaled $101.3 million in the second-quarter 2018, an increase of $35.8 million from $65.5 million in the first quarter of 2018.

Pro Forma Combined Second-Quarter 2018 Results

On a pro forma basis, assuming the merger had closed, and the HPQ divestiture had taken place on the first day of the period(s), Covia volumes sold were 10.0 million tons, up 10% from the first quarter of 2018 and an increase of 9% from 9.2 million tons in the second quarter of 2017. Pro forma second-quarter 2018 revenues were $712.4 million, up 11% from $643.2 million in the first quarter of 2018 and 28% higher than the second quarter of 2017.

Pro forma net income from continuing operations for the second-quarter 2018 was $19.8 million, compared with pro forma net income from continuing operations of $65.5 million for the first quarter of 2018.

Pro forma Adjusted EBITDA for the second quarter of 2018 was $179.1 million compared with $151.7 million for the first quarter of 2018. Second-quarter 2018 pro forma Adjusted EBITDA includes West Texas mine start-up costs of $7.1 million and $19.2 million of charges related to the write-up of inventories as a result of the merger. Excluding these start-up costs and the impact from the write-up of inventories, pro forma Adjusted EBITDA would have been $205.4 million.

Jenniffer Deckard, President and Chief Executive Officer, said, “We are very proud of the collective accomplishments of the Covia Team during our first quarter as a combined company. In addition to completing the merger, our people made significant progress on integrating the strengths of our two legacy organizations, including the full integration of our industry-leading supply chain. At the same time, we initiated the start-up of both of our local sand plants in West Texas, delivered overall higher volumes and lower costs, and benefited from improved pricing across the business.”

Industrial Segment Pro Forma Combined Results

Pro forma Industrial volumes in second-quarter 2018 were 3.8 million tons, relatively flat to pro forma volumes in second-quarter 2017. Volumes by end-market were consistent between the two periods.

Pro forma Industrial revenues for the second quarter of 2018 were $206.3 million, up from pro forma revenues of $201.1 million in the second quarter of 2017. The increase in pro forma revenue was due mainly to price increases instituted at the beginning of the year.

Pro forma Industrial gross profit was $62.1 million, which includes $1.2 million of non-cash expense related to the write-up of inventories. Excluding these non-cash charges, pro forma Industrial gross profit would have been $63.3 million in second-quarter 2018, compared with $67.5 million in the second quarter of 2017. The lower gross profit in the second quarter of 2018 was due to several cost factors, driven primarily by higher production and energy costs at certain facilities in the U.S. and Mexico.

Energy Segment Pro Forma Combined Results

Pro forma Energy volumes for the second-quarter 2018 were 6.2 million tons, an increase of 11% sequentially and 15% greater than the pro forma volumes in the second quarter of 2017. The increase in pro forma volumes was driven by both robust demand and increased production from the expansion at the Utica, Illinois, facility, the completion of process engineering changes, and favorable seasonal operating conditions.

Pro forma Energy revenues for second-quarter 2018 were $506.1 million, a 13% increase compared to pro forma Energy revenues of $449.6 million in the first quarter of 2018. Pro forma Energy revenues benefited sequentially from increased volumes and an average price increase on raw sand proppant of approximately $2 per ton for tons sold on a like-for-like basis.

Pro forma Energy gross profit for the second quarter of 2018 was $161.8 million, which includes $18.0 million of non-cash expense related to the write-up of inventories under GAAP as a result of the merger. Excluding this expense, pro forma gross profit would have been $179.8 million, or $29 per ton, in the second quarter of 2018, compared with pro forma Energy gross profit of $141.6 million, or $25 per ton, in the first quarter of 2018. The increase in pro forma gross profit was primarily the result of the previously mentioned price increase and lower production costs. Pro forma Energy gross profit for the second quarter of 2018 was also negatively impacted by $7.1 million in start-up costs at the Company’s Crane and Kermit mines in West Texas.

Ms. Deckard said, “As we move into the second half of the year, the outlook for the Industrial markets that we serve remains steady, and our teams continue to explore cross-selling and other attractive growth opportunities as a result of our now combined product and operational footprints. Within the proppant market, continued supply growth has begun to outpace the growth in demand, which will create pricing and volume pressure. We remain committed to capturing synergies, growing our total solutions offerings, and leveraging our industry-leading capabilities to outperform in the market.”

Balance Sheet and Other Information

On June 1, 2018, as part of the closing of the merger, the Company entered into a $1.65 billion Term Loan B Credit facility (“Term Loan B”) as well as a $200 million Senior Secured Revolving Credit facility. As of June 30, 2018, the Company had cash of $136.4 million, and the Company’s revolving credit facility remained undrawn, with $14.6 million committed for outstanding letters of credit.

Capital expenditures for the second half of the year are expected to be in the range of $110 million to $130 million primarily related to the completion of the Kermit and Crane facilities, the Seiling, Oklahoma, facility, and maintenance activities to support the Company’s asset base.

Update on Greenfield Expansions

The Company’s Crane and Kermit facilities in West Texas have both begun start-up activities and the Company began shipping sand in July. Both facilities are expected to ramp up to full capacity by the end of the fourth quarter of 2018. Continued construction of the Company’s Seiling, Oklahoma, processing facility was approved by local authorities and this facility is expected to begin production in the fourth quarter of 2018.

Use of Certain GAAP and Non-GAAP Financial Measures

The Company defines EBITDA as net income from continuing operations before interest expense, income tax expense, depreciation, depletion and amortization. Adjusted EBITDA is defined as EBITDA before non-cash stock-based compensation, write-down of assets and certain other income or expenses. The Company defines Pro Forma Combined EBITDA as net income from continuing operations before interest expense, income tax expense, depreciation, depletion and amortization for the combined Unimin and Fairmount Santrol operations for the entire quarter and excludes HPQ results. Adjusted Pro Forma Combined EBITDA is defined as Pro Forma Combined EBITDA before non-cash stock-based compensation, asset impairments and certain other income or expenses. Pro forma financial results for 2018 and 2017, as shown in the exhibits attached to this release, include combined results of operations for Fairmount Santrol and Unimin for periods preceding the June 1, 2018 merger. Such presentation includes financial measures that are not in conformity with GAAP and do not conform with Securities and Exchange Commission rules for pro forma presentation. However, we believe that the additional non-GAAP financial measures will be helpful to investors in comparing current results with results of prior periods. These non-GAAP financial measures should not be considered a substitute for the financial results prepared in accordance with GAAP, but should be viewed in addition to the results as reported by the Company. The Company also believes Pro Forma Combined EBITDA and Pro Forma Combined Adjusted EBITDA are useful because they allow management to more effectively evaluate the Company’s operational performance and compare the results of our operations from period to period without regard to the Company’s financing costs or capital structure.

Conference Call

Covia will host a conference call and live webcast for analysts and investors today, August 14, 2018, at 10 a.m. Eastern Time to discuss the Company’s 2018 second-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. The call can also be accessed live by dialing (866) 393-4306 or, for international callers, (734) 385-2616. The conference ID for the call is 1294467. A replay will be available on the website and can be accessed by dialing (855) 859-2056 or (404) 537-3406. The passcode for the replay is 1294467. The replay of the call will be available through August 21, 2018.

About Covia

Covia is a leading provider of minerals and material solutions for the Industrial and Energy markets, representing the legacy and combined strengths from the June 2018 merger of Unimin and Fairmount Santrol. The Company is a leading provider of diversified mineral solutions to the glass, ceramics, coatings, polymers, construction, water filtration, sports and recreation markets. The Company offers a broad array of high-quality products, including high-purity silica sand, nepheline syenite, feldspar, clay, kaolin, lime, resin systems and coated materials, delivered through its comprehensive distribution network. Covia offers its Energy customers an unparalleled selection of proppant solutions, additives, and coated products to enhance well productivity and to address both surface and down-hole challenges in all well environments. Covia has built long-standing relationships with a broad customer base consisting of blue-chip customers. Underpinning these strengths is an unwavering commitment to safety and to sustainable development further enhancing the value that Covia delivers to all of its stakeholders. For more information, visit CoviaCorp.com.

Forward-Looking Statements

This press release contains statements which, to the extent they are not statements of historical or present fact, constitute “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those anticipated or implied in forward-looking statements are described in the information included in Covia’s Registration Statement on Form S-4, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other factors that are set forth in management’s discussion and analysis of Covia’s most recently filed reports with the Securities and Exchange Commission (“SEC”). These factors include: changes in prevailing economic conditions, including fluctuations in demand for, and pricing of, our products; potential business uncertainties relating to the merger, including potential disruptions to our business and operational relationships, our ability to achieve anticipated synergies, and the anticipated costs, timing and complexity of our integration efforts; 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; our ability to successfully

develop and market new 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, 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 Covia’s filings with the 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.

Covia

Condensed Consolidated Statements of Income

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
	(in thousands, except per share amounts)				(in thousands, except per share amounts)
Revenues	$	508,418	$	324,079	$	878,239	$	611,391
Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)		355,311		231,145		615,630		449,416

Operating expenses
Selling, general and administrative expenses^(A)		31,377		21,220		56,601		42,045
Depreciation, depletion and amortization expense		36,744		23,896		63,875		47,558
Other operating expense, net		12,944		813		12,944		1,836

Operating income from continuing operations		72,042		47,005		129,189		70,536

Interest expense, net		9,497		5,250		14,688		10,605
Other non-operating expense, net		38,923		—		44,223		—

Income from continuing operations before provision for income taxes		23,622		41,755		70,278		59,931
Provision for income taxes		6,454		11,566		16,324		16,370

Net income from continuing operations		17,168		30,189		53,954		43,561
Less: Net income from continuing operations attributable to the non-controlling interest		106		—		106		—

Net income from continuing operations attributable to Covia Holdings Corporation		17,062		30,189		53,848		43,561

Income from discontinued operations, net of tax		3,830		6,612		12,587		10,080

Net income attributable to Covia Holdings Corporation	$	20,892	$	36,801	$	66,435	$	53,641

Continuing operations earnings per share
Basic	$	0.14	$	0.25	$	0.44	$	0.36
Diluted		0.14		0.25		0.44		0.36

Discontinued operations earnings per share
Basic		0.03		0.06		0.11		0.09
Diluted		0.03		0.06		0.10		0.09

Earnings per share
Basic		0.17		0.31		0.55		0.45
Diluted	$	0.17	$	0.31	$	0.54	$	0.45

Weighted average number of shares outstanding
Basic		123,460		119,645		121,552		119,645
Diluted		124,166		119,645		122,258		119,645

(A) - Stock compensation expense of $793 for the three months and six months ended June 30, 2018 is included within selling, general, and administrative expenses.

Covia

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Six Months Ended June 30,
	2018			2017
	(in thousands)
Net income attributable to Covia Holdings Corporation	$	66,435		$	53,641
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization		68,396			52,779
Prepayment penalties on Senior Notes		2,213			—
Gain on disposal of fixed assets		(81	)		(107	)
Change in fair value of interest rate swaps		(1,581	)		—
Deferred income taxes and taxes payable		1,564			564
Stock compensation expense		3,193			—
Write-down of assets under construction		12,300			—
Net income from non-controlling interest		106			—
Other, net		4,653			(239	)
Change in operating assets and liabilities, net of business combination effect:
Accounts receivable		(44,469	)		(32,737	)
Inventories		1,210			(491	)
Prepaid expenses and other assets		(146	)		5,874
Accounts payable		3,362			6,477
Accrued expenses		(31,572	)		194

Net cash provided by operating activities		85,583			85,955

Cash flows from investing activities
Proceeds from sale of fixed assets		222			413
Capital expenditures		(115,709	)		(29,230	)
Cash of HPQ Co. distributed		(31,000	)		—
Payments to Fairmount Santrol Holdings Inc. shareholders, net of cash acquired		(64,697	)		—
Other investing activities		—			33

Net cash used in investing activities		(211,184	)		(28,784	)

Cash flows from financing activities
Proceeds from borrowings on term loan		1,650,000			49,815
Prepayment on Unimin Term Loans		(314,642	)		(205	)
Prepayment on Senior Notes		(100,000	)		—
Prepayment on Fairmount Santrol Holdings Inc. term loan		(695,625	)		—
Fees for Term Loan and Senior Notes prepayment		(36,733	)		—
Payments on capital leases and other long-term debt		(25,380	)		—
Fees for Revolver		(4,500	)		—
Cash Redemption payment		(520,377	)		—
Proceeds from share-based awards exercised or distributed		2			—
Tax payments for withholdings on share-based awards exercised or distributed		(1	)		—
Dividends paid		—			(50,000	)

Net cash used in financing activities		(47,256	)		(390	)

Effect of foreign currency exchange rate changes		1,168			2,735

Increase (decrease) in cash and cash equivalents		(171,689	)		59,516

Cash and cash equivalents:
Beginning of period		308,059			183,361

End of period	$	136,370		$	242,877

Covia

Condensed Consolidated Balance Sheets

(unaudited)


	June 30, 2018			December 31, 2017
	(in thousands)
Assets
Current assets
Cash and cash equivalents	$	136,370		$	308,059
Accounts receivable, net		418,301			219,719
Inventories, net		183,164			79,959
Other receivables		34,780			27,963
Prepaid expenses and other current assets		20,871			16,322
Current assets of discontinued operations		—			66,906

Total current assets		793,486			718,928

Property, plant and equipment, net		2,653,792			1,136,104
Deferred tax assets, net		7,497			7,441
Goodwill		472,347			53,512
Intangibles, net		170,015			25,596
Other non-current assets		23,504			2,416
Non-current assets of discontinued operations		—			96,101

Total assets	$	4,120,641		$	2,040,098

Liabilities and Equity
Current liabilities
Current portion of long-term debt	$	19,920		$	50,045
Accounts payable		185,753			101,983
Accrued expenses		121,403			88,208
Current liabilities of discontinued operations		—			10,027

Total current liabilities		327,076			250,263

Long-term debt		1,615,666			366,967
Employee benefit obligations		99,490			97,798
Deferred tax liabilities, net		230,416			62,614
Other long-term liabilities		84,802			29,057
Non-current liabilities of discontinued operations		—			8,084

Total liabilities		2,357,450			814,783

Equity
Common stock		1,777			1,777
Additional paid-in capital		383,771			43,941
Retained earnings		1,984,892			1,918,457
Accumulated other comprehensive loss		(121,716	)		(128,228	)
Treasury stock at cost		(486,092	)		(610,632	)
Non-controlling interest		559			—

Total equity		1,763,191			1,225,315

Total liabilities and equity	$	4,120,641		$	2,040,098

Covia

Pro Forma Combined Segment Reports

(unaudited)

(in thousands)


	Three Months Ended June 30,
	2018						2017
	As Reported		Pre- Merger⁽¹⁾		Pro Forma Combined⁽²⁾		As Reported		Pre- Merger⁽³⁾		Pro Forma Combined⁽²⁾
Volumes (tons)
Energy		4,274		1,953		6,227		2,819		2,587		5,406
Industrial		3,346		470		3,816		3,119		687		3,806

Total volumes		7,620		2,423		10,043		5,938		3,274		9,212

Revenues
Energy	$	326,746	$	179,345	$	506,091	$	157,383	$	198,812	$	356,195
Industrial		181,672		24,649		206,321		166,696		34,414		201,110

Total revenues		508,418		203,994		712,412		324,079		233,226		557,305

Segment gross profit
Energy		101,288		60,553		161,841		40,616		52,233		92,849
Industrial		51,819		10,294		62,113		52,318		15,191		67,509

Total segment gross profit⁽⁴⁾	$	153,107	$	70,847	$	223,954	$	92,934	$	67,424	$	160,358

	Six Months Ended June 30,
	2018						2017
	As Reported		Pre- Merger⁽¹⁾		Pro Forma Combined⁽²⁾		As Reported		Pre- Merger⁽³⁾		Pro Forma Combined⁽²⁾
Volumes (tons)
Energy		7,250		4,588		11,838		5,281		4,669		9,950
Industrial		6,317		1,048		7,365		6,087		1,282		7,369

Total volumes		13,567		5,636		19,203		11,368		5,951		17,319

Revenues
Energy	$	534,207	$	421,526	$	955,733	$	287,606	$	339,805	$	627,411
Industrial		344,032		55,805		399,837		323,785		66,004		389,789

Total revenues		878,239		477,331		1,355,570		611,391		405,809		1,017,200

Segment gross profit
Energy		166,783		136,668		303,451		66,064		77,694		143,758
Industrial		95,826		21,440		117,266		95,911		28,111		124,022

Total segment gross profit⁽⁴⁾	$	262,609	$	158,108	$	420,717	$	161,975	$	105,805	$	267,780

	Three Months Ended March 31,
	2018						2017
	As Reported		Pre- Merger⁽⁵⁾		Pro Forma Combined⁽²⁾		As Reported		Pre- Merger⁽⁵⁾		Pro Forma Combined⁽²⁾
Volumes (tons)
Energy		2,976		2,635		5,611		2,462		2,082		4,544
Industrial		2,971		578		3,549		2,968		595		3,563

Total volumes		5,947		3,213		9,160		5,430		2,677		8,107

Revenues
Energy	$	207,461	$	242,181	$	449,642	$	130,223	$	140,993	$	271,216
Industrial		162,360		31,156		193,516		157,089		31,590		188,679

Total revenues		369,821		273,337		643,158		287,312		172,583		459,895

Segment gross profit
Energy		65,495		76,115		141,610		25,448		25,461		50,909
Industrial		44,007		11,146		55,153		43,593		12,920		56,513

Total segment gross profit⁽⁴⁾	$	109,502	$	87,261	$	196,763	$	69,041	$	38,381	$	107,422

(1)

2018 Pre-Merger financial results are for Fairmount Santrol Holdings Inc. (“Fairmount Santrol”), for the two and five months ended May 31, 2018, the day before the merger between Fairmount Santrol and Unimin Corporation (“Unimin”) occurred on June 1, 2018. Such results are based on Fairmount Santrol’s unaudited internal financial statements and have been prepared on a basis substantially consistent with Fairmount Santrol’s prior audited financial statements, but have not been reviewed by the Company’s independent auditors. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.

(2)

Pro forma financial results for 2018 and 2017 include combined results of operations for Fairmount Santrol and Unimin for periods preceding the June 1, 2018 merger. Such presentation includes financial information that is not in conformity with Securities and Exchange Commission rules or Generally Accepted Accounting Principles (“GAAP”) for pro forma presentation.

(3)	2017 Pre-Merger financial results are for Fairmount Santrol for the three and six months ended June 30, 2017, as previously reported by Fairmount Santrol. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.

(4)

As a result of the June 1, 2018 merger, inventories were written up to fair value under GAAP and $19.2 million of this write-up was expensed through cost of sales in June 2018 thereby reducing Gross Profit. Of this $19.2 million, $18.0 million and $1.2 million impacted the Energy and Industrial businesses for the three and six month period respectively.

(5)	2018 Pre-Merger and 2017 Pre-Merger financial results are for Fairmount Santrol for the three months ended March 31, 2018 and March 31, 2017, respectively, as previously reported by Fairmount Santrol. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.

Covia

Pro Forma Combined Statements of Income and Non-GAAP Financial Measures

(unaudited)

(in thousands)


	Three Months Ended June 30,
	2018							2017
	As Reported		Pre- Merger⁽¹⁾			Pro Forma Combined⁽²⁾		As Reported		Pre- Merger⁽³⁾		Pro Forma Combined⁽²⁾
Revenues	$	508,418	$	203,994		$	712,412	$	324,079	$	233,226	$	557,305
Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)⁽⁴⁾		355,311		133,146			488,457		231,145		165,802		396,947

Operating expenses
Selling, general and administrative expenses⁽⁵⁾		31,377		20,137			51,514		21,220		25,719		46,939
Depreciation, depletion and amortization expense		36,744		12,088			48,832		23,896		19,846		43,742
Other operating expense, net		12,944		(1,563	)		11,381		813		355		1,168

Operating income from continuing operations		72,042		40,186			112,228		47,005		21,504		68,509

Interest expense, net		9,497		11,903			21,400		5,250		12,983		18,233
Other non-operating expense, net⁽⁵⁾		38,923		24,723			63,646		—		144		144

Income from continuing operations before provision for income taxes		23,622		3,560			27,182		41,755		8,377		50,132

Provision for income taxes		6,454		811			7,265		11,566		520		12,086

Net income from continuing operations		17,168		2,749			19,917		30,189		7,857		38,046
Less: Net income from continuing operations attributable to the non-controlling interest		106		—			106		—		40		40

Net income from continuing operations attributable to Covia Holdings Corporation		17,062		2,749			19,811		30,189		7,817		38,006

Interest expense, net		9,497		11,903			21,400		5,250		12,983		18,233
Provision for income taxes		6,454		811			7,265		11,566		520		12,086
Depreciation, depletion and amortization expense		36,744		12,088			48,832		23,896		19,846		43,742

EBITDA		69,757		27,551			97,308		70,901		41,166		112,067

Costs and expenses related to the Merger⁽⁵⁾		38,923		24,723			63,646		—		144		144
Non-cash stock compensation expense⁽⁶⁾		793		5,063			5,856		—		2,763		2,763
Loss on debt extinguishment and repurchase⁽⁷⁾		—		—			—		—		389		389
Write-down of assets under construction⁽⁸⁾		12,300		—			12,300		—		—		—

Adjusted EBITDA	$	121,773	$	57,337		$	179,110	$	70,901	$	44,462	$	115,363


	Six Months Ended June 30,
	2018								2017
	As Reported		Pre- Merger⁽¹⁾			Pro Forma Combined⁽²⁾			As Reported		Pre- Merger⁽³⁾			Pro Forma Combined⁽²⁾
Revenues	$	878,239	$	477,332		$	1,355,571		$	611,391	$	405,809		$	1,017,200
Cost of goods sold (excluding depreciation, depletion,
and amortization shown separately)⁽⁴⁾		615,630		319,224			934,854			449,416		300,005			749,421

Operating expenses
Selling, general and administrative expenses⁽⁵⁾		56,601		44,156			100,757			42,045		48,189			90,234
Depreciation, depletion and amortization expense		63,875		29,313			93,188			47,558		39,288			86,846
Other operating expense, net		12,944		(2,292	)		10,652			1,836		(705	)		1,131

Operating income from continuing operations		129,189		86,931			216,120			70,536		19,032			89,568

Interest expense, net		14,688		25,686			40,374			10,605		25,520			36,125
Other non-operating expense, net⁽⁵⁾		44,223		28,057			72,280			—		144			144

Income from continuing operations before provision for income taxes		70,278		33,188			103,466			59,931		(6,632	)		53,299

Provision for income taxes		16,324		1,683			18,007			16,370		(628	)		15,742

Net income from continuing operations		53,954		31,505			85,459			43,561		(6,004	)		37,557
Less: Net income from continuing operations attributable to the non-controlling interest		106		3			109			—		218			218

Net income from continuing operations attributable to Covia Holdings Corporation		53,848		31,502			85,350			43,561		(6,222	)		37,339

Interest expense, net		14,688		25,686			40,374			10,605		25,520			36,125
Provision for income taxes		16,324		1,683			18,007			16,370		(628	)		15,742
Depreciation, depletion and amortization expense		63,875		29,313			93,188			47,558		39,288			86,846

EBITDA		148,735		88,184			236,919			118,094		57,958			176,052

Costs and expenses related to the Merger⁽⁵⁾		44,223		28,057			72,280			—		144			144
Non-cash stock compensation expense⁽⁶⁾		793		8,482			9,275			—		5,179			5,179
Loss on debt extinguishment and repurchase⁽⁷⁾		—		—			—			—		389			389
Write-down of assets under construction⁽⁸⁾		12,300		—			12,300			—		—			—

Adjusted EBITDA	$	206,051	$	124,723		$	330,774		$	118,094	$	63,670		$	181,764


	Three Months Ended March 31,
	2018								2017
	As Reported		Pre- Merger⁽⁹⁾			Pro Forma Combined⁽²⁾			As Reported		Pre- Merger⁽⁹⁾			Pro Forma Combined⁽²⁾
Revenues	$	369,821	$	273,338		$	643,159		$	287,312	$	172,583		$	459,895
Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)⁽⁴⁾		260,319		186,078			446,397			218,271		134,203			352,474

Operating expenses
Selling, general and administrative expenses⁽⁵⁾		25,224		24,019			49,243			20,825		22,470			43,295
Depreciation, depletion and amortization expense		27,131		17,225			44,356			23,662		19,442			43,104
Other operating expense, net		—		(729	)		(729	)		1,023		(1,060	)		(37	)

Operating income from continuing operations		57,147		46,745			103,892			23,531		(2,472	)		21,059

Interest expense, net		5,191		13,783			18,974			5,355		12,537			17,892
Other non-operating expense, net⁽⁵⁾		5,300		3,334			8,634			—		—			—

Income from continuing operations before provision for income taxes		46,656		29,628			76,284			18,176		(15,009	)		3,167

Provision for income taxes		9,870		872			10,742			4,804		(1,148	)		3,656

Net income from continuing operations		36,786		28,756			65,542			13,372		(13,861	)		(489	)
Less: Net income from continuing operations attributable to the non-controlling interest		—		3			3			—		178			178

Net income from continuing operations attributable to Covia Holdings Corporation		36,786		28,753			65,539			13,372		(14,039	)		(667	)

Interest expense, net		5,191		13,783			18,974			5,355		12,537			17,892
Provision for income taxes		9,870		872			10,742			4,804		(1,148	)		3,656
Depreciation, depletion and amortization expense		27,131		17,225			44,356			23,662		19,442			43,104

EBITDA		78,978		60,633			139,611			47,193		16,792			63,985

Costs and expenses related to the Merger⁽⁵⁾		5,300		3,334			8,634			—		—			—
Non-cash stock compensation expense⁽⁶⁾		—		3,419			3,419			—		2,416			2,416
Loss (gain) on debt extinguishment and repurchase⁽⁷⁾		—		—			—			—		—			—
Write-down of assets under construction⁽⁸⁾		—		—			—			—		—			—

Adjusted EBITDA	$	84,278	$	67,386		$	151,664		$	47,193	$	19,208		$	66,401

(1)

(2)

Pro forma financial results for 2018 and 2017 include combined results of operations for Fairmount Santrol and Unimin for periods preceding the June 1, 2018 merger. Such presentation includes financial measures that are not in conformity with Generally Accepted Accounting Principles (“GAAP”) and do not conform with Securities and Exchange Commission rules for pro forma presentation. However, we believe that the additional non-GAAP financial measures will be helpful to investors in comparing current results with results of prior periods. These non-GAAP financial measures should not be considered a substitute for the financial results prepared in accordance with GAAP, but should be viewed in addition to the results as reported by the Company.

(3)	2017 Pre-Merger financial results are for Fairmount Santrol for the three and six months ended June 30, 2017, as previously reported by Fairmount Santrol. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.

(4)

(5)	Costs and expenses related to the Merger with Fairmount Santrol include legal, accounting, financial advisory services, severance, debt extinguishment, and other expenses. Additionally, it includes stock compensation expense related to accelerated awards as a result of the Merger.

(6)	Represents the non-cash expense for stock-based awards issued to Fairmount Santrol employees and outside directors. Stock compensation expenses are reported in SG&A.

(7)	Represents the write-off of deferred financing fees related to an amendment to Fairmount Santrol’s Revolving Credit Facility in 2017. This expense was reported by Fairmount Santrol in Other operating expense for the three months ended June 30, 2017.

(8)	Represents charges from a terminated project due to post-Merger synergies and capital optimization.

(9)	2018 Pre-Merger and 2017 Pre-Merger financial results are for Fairmount Santrol for the three months ended March 31, 2018 and March 31, 2017, respectively, as previously reported by Fairmount Santrol. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.

Investor contact:

Matthew Schlarb

440-214-3284

Matthew.Schlarb@coviacorp.com

Source: Covia

Covia Holdings Corp - FORM 8-K - EX-99.1 - August 14, 2018

Attached files

Covia Holdings Corp Reports