Investor Presentation December 2016 Exhibit 99.1
Forward-Looking Statements This presentation contains forward-looking statements. These statements can be identified by the use of forward-looking terminology including “will,” “may,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” or other similar words. These statements discuss future expectations including company growth expectations, demand for our products, expectations regarding future prices, capacity expansion plans, market trends, liquidity, transportation services, commercial product launches and research and development plans and may contain projections of financial condition or of results of operations, or state other “forward-looking” information. These forward-looking statements involve risks and uncertainties. Many of these risks are beyond management’s control. When considering these forward-looking statements, you should keep in mind the risk factors, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other cautionary statements in the company’s SEC filings. Forward-looking statements are not guarantees of future performance or an assurance that our current assumptions or projections are valid. Our actual results and plans could differ materially from those expressed in any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information or future events, except as required by law. This presentation includes certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA. These non-GAAP financial measures are used as supplemental financial measures by our management to evaluate our operating performance and compare the results of our operations from period to period without regard to the impact of our financing methods, capital structure or non-operating income and expenses. Adjusted EBITDA is also used by our lenders to evaluate our compliance with covenants. We believe that these measures are meaningful to our investors to enhance their understanding of our financial performance. These measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP and may differ from similarly titled measures used by other companies. For a reconciliation of such measures to the most directly comparable GAAP term, please see the appendix of this presentation.
FAIRMOUNT SANTROL Two Complementary Business Segments Markets Served: Foundry Glass Sports and Recreation Specialty Products Building Products Water Filtration Markets Served: Oil and Gas 9-month 2016 Volumes 30% Company Volumes 1.9 million tons Segment Volume 9-month 2016 Volumes 70% Company Volumes 4.6 million tons Segment Volume
Enhance Efficiency Reduce Spending Manage Liquidity Invest in the Future Fairmount Santrol Positioned to Compete in All Market Cycles CONTINUED LONG TERM DIFFERENTIATORS Technology & Innovation Broad Product Portfolio Operational Scale & Efficiencies Leading Distribution & Unit Train Capabilities MANAGING THE DOWNCYCLE Commitment to People, Planet & Prosperity 3
FAIRMOUNT SANTROL Strong Execution Through the Downcycle Consolidated our operations into more cost-effective footprint Leveraging our terminal network and unit trains Reduced spend across all cost categories Renegotiated railcar leases and purchase contracts Investing in key areas with strong short-term payback Wedron, IL facility expansion and Menomonie reopening Coating technologies and coated products, including Propel SSP® Common equity offerings generated $439M in net proceeds Prepaid $372M in debt between Q2 2016 and Q4 2016 Cancelled and deferred 2017 & 2018 railcar commitments
Enhance Efficiency Reduce Spending Manage Liquidity Invest in the Future CORE LONG TERM DIFFERENTIATORS Technology & Innovation Broad Product Portfolio Operational Scale & Efficiencies Leading Distribution & Unit Train Capabilities MANAGING THE DOWNCYCLE Commitment to People, Planet & Prosperity FAIRMOUNT SANTROL A Leading Solutions Provider Differentiated in Every Area of the Value Chain
HIGH-PURITY SANDS ENGINEERED RESIN-COATED SANDS TechniSand® Resin-Coated Sands Signature Gold TruCoat™ New, safer shell and core casting system Dramatically lowers in-plant smoke, odor and emissions while delivering superior performance HIGH-PERFORMANCE RESIN SYSTEMS Full Portfolio of Resin Solutions Offering high-quality traditional foundry resin systems Meeting industry demands by offering environmentally progressive resin systems with lower VOCs and HAPs Wedron Silica, Wedron Illinois Round grain 99.9% pure silica sand Best Sand, Chardon, Ohio Sub-angular round grains Foundry sand – ideal for helping reduce expansion defects in cores and molds Engineered bunker sands Colored sand Custom blended products BROAD PRODUCT PORTFOLIO – INDUSTRIAL & RECREATIONAL Only Integrated I&R Sand and Resin Solutions Provider product/ Characteristics
High-Purity Northern White Silica Sands Texas Gold™ Frac Sand Precured Resin-Coated Sand Higher Strength, resists proppant flowback and encapsulates fines Curable Resin-Coated Sand High Strength, Prevents proppant flowback and encapsulates fines Self-Suspending Proppant Propel SSP® improves operational efficiencies and enhances well productivity through fluid system and frac geometry optimization Tier 2 API Brown Sand 99.8% Mono-crystalline Silica Quartz NW Frac Sand WELL Pressures(1) BROAD PRODUCT PORTFOLIO - PROPPANT SOLUTIONS Products to Address All Well Environments 2,000-6,000 psi 2,000-9,000 psi 2,000-14,000 psi 2,000-16,000 psi Crush is attributable to underlying proppant; Propel SSP® can be utilized under all well pressures Product/ Characteristics (1) Based on 40/70 substrate
Sample of Operational Efficiencies from 6-Well Bakken Study: TECHNOLOGY & INNOVATION Propel SSP® – Patented Technology for Self-Suspending Proppant Transport and Frac Geometry Optimization Proving Productivity Gains and Operational Efficiencies Demonstrated Productivity Gains(1) Greater than 30% increase in 90-day cumulative oil production compared with offset wells Up to 50% decrease in water usage compared to slickwater designs Customers Trial applications continue to grow, with commercial adoption increasing When completion design optimized for use of Propel SSP
TECHNOLOGY & INNOVATION Propel SSP® – Proven Performance Continually increasing productivity gains across several basins Field Trial Stats 100+ wells 20 E&Ps Bakken/ Three Forks Canadian Bakken Codell/ Niobrara Mississippian Lime Utica Marcellus Eagle Ford Escondido Uinta Permian Pinedale +45% +21% Months Months
OPERATIONAL SCALE Cost-Effective Footprint with Ability to Quickly Increase Supply Current capacity similar to Q1 2015, but with a lower cost structure Reopened Menomonie in Q3 2016 Ability to quickly re-open four idled sand mines and three coating facilities with minimal capital expenditures Proppant Solutions’ Effective Sand Capacity (in millions of tons) Proppant Solutions’ Effective Coating Capacity (in millions of tons) 13.4 10.3 9.6 Other Facilities Other Facilities Other Facilities
FMSA Terminal FMSA Mining & Processing Unit Train Destination Unit Train Origin (Mining & Processing) ~70% of NWS shipped via unit trains in Q3 2016 >65% on average of frac sand sold in-basin Idled Terminals Idled Mining & Processing On-demand Terminals * Includes active and on-demand terminals Canada DISTRIBUTION Leveraging Our Terminal Network & Unit Train Capabilities Flagship Unit Train and In-Basin Sand Origins Lower Cost to Basin and Well Site 41* Destinations in Heart of Completions Activity (8 Unit Train-capable)
FAIRMOUNT SANTROL Progress in Rail Car Fleet Overhang Renegotiations completed for cancellation and deferral of railcars $49.5 million in purchase commitments cancelled Deferral of deliveries and $136.5 million in payments originally scheduled for 2017 & 2018 Deferred commitments include $3.9 million price increase on rail cars Cash savings of $15 million and $5 million expense reduction from Q4 16 through Q4 17 $9.8 million renegotiation fees incurred in Q3 2016 Future fleet size better aligned with anticipated demand 2016 2017 2018 2019 2020 2021 NET CHANGE IN RAILCARS 2016 - 2021 Q1 Q2 Q3 Q4 Entering Fleet 0 50 100 0 200 0 0 1,050 650 2,050 Expiring Leases -190 -130 -120 -300 -800 -1,050 -1,350 0 0 -3,950 Expected Change in Rail Cars -190 -80 -20 -300 -600 -1,050 -1,350 1,050 650 -1,900 Ending Cars in Fleet (include cust cars) 10,300 10,220 10,200 9,900 9,300 8,250 6,900 7,950 8,600 Avg. Cars in Storage 3,800 3,750 3,050 Cost Associated with Excess Rail Cars ~$8M ~$8M ~$6.5M Excess cost / ton ~$5.00 ~$6.25 ~$3.75
FAIRMOUNT SANTROL Improved Liquidity Position Q4 2014 Actual Q3 2016 Actual Pro Forma after Q4 Transactions Cash $76.9 $213.4 $195.9(1) Debt B-1 Due March 2017 319.9 16.8 0 2016 B-1 Extended Due July 2018 69.5 0 2015 B-1 Extended Due Sept. 2019 158.7 117.8 B-2 Due Sept. 2019 910.9 896.0 720.9 Other, net 21.8 3.1 3.1 Total Long Term Debt $1,252.6 $1,144.1 $841.8 Net Debt $1,175.7 $930.7 $645.9 Total Liquidity (2) $190.4 $230.8 $213.3 Capitalization Summary ($ in Millions) Phased approach to strengthen liquidity and the balance sheet Aligned cost structure with market conditions During Q3 & Q4 2016, equity offerings for total net proceeds of approximately $439M During Q2 & Q4 2016, prepaid or repurchased $372 million in term debt, leaving only 2019 maturities outstanding Notes: (1) Pro Forma cash is Q3 actual of $213.4 million plus $276.9 million net proceeds from October equity offering less $294.4 million used for debt repurchases and redemptions (2) Cash Balance + Revolver Availability
FAIRMOUNT SANTROL Solid Performance in Mixed Markets Sources: Baker Hughes (1) FMSA Demand Estimates FMSA Frac Sand Volumes (in millions of tons) Average U.S. Land Rig Count Frac Sand Market Volumes(1) (in millions of tons) Q2 16 Q3 16 +14% +26% +35% -24% -15% -13% Q1 16 Favorable FMSA volume demand trends in both falling and rising markets
Early signs of improvement in proppant market with continued positive tailwinds Average rig count expected to increase ~20% in 2017 from 2016 average count(3) Trend of increasing proppant intensity, driven by longer laterals and more proppant per stage DUC completions are expected to continue through 2017 FMSA recovery from Q2 2016 low through Q3 and Q4 2016 Increased volumes of both Frac Sand & Value Added Proppant Implemented average price increases on Northern White sands in late Q3 2016 I&R expected to show continued solid demand led by Glass, Building Products and Sports & Rec Average Proppant Tons per U.S. Horizontal Well(2) Looking Ahead – Positive Tailwinds ~ +25% Sources: (1) Baker Hughes (2) FMSA estimates based on public E&P presentations and internal estimates + PacWest Consulting Partners (3) Spears & Associates U.S. Horizontal Land Rig Count(1) ~ +20% - +25% 4,400 – 4,800 5,100– 5,500 ~ +15% -+20%
Financial Update Third Quarter 2016 Results Overall volumes of 2.4 million tons, up 24% sequentially Proppant volumes of 1.8 million tons, up 36% sequentially Revenues of $134.8M, up 18% sequentially Adjusted EBITDA loss of $4.9 million includes $9.8 million railcar renegotiation fee Instituting additional Northern White price increases that go into effect early in 2017 Secondary offering of 20 million shares by American Securities (option for 3 million additional shares) in December No dilution and all proceeds belong to American Securities American Securities’ ownership at 23% post offering (22% if option is exercised) October and November volumes strong; seasonality still expected in December
WHY INVEST IN FMSA? Leading Solutions Provider Differentiated in Every Area of the Value Chain Operational Scale & Optimized Cost Structure BROAD PRODUCT PORTFOLIO TECHNOLOGY & INNOVATION LEADING DISTRIBUTION & UNIT TRAIN CAPABILITIES
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Appendix
Appendix: Reconciliation of Non-GAAP Financial Measures
