- 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 04, 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-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 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.
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 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 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.
| 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. | ||||||||
| 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 | ||||
| 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 | ||||||||
| Fairmount Santrol | |||||||||||
| Segment Reports | Three Months Ended December 31, | ||||||||||
| (unaudited) | Three Months Ended March 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 | ||||||||
| Fairmount Santrol | |||||||||||
| Non-GAAP Financial Measures | Three Months Ended December 31, | ||||||||||
| (unaudited) | Three Months Ended March 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. | |||||||||||