Cowen and Company 5 th Annual Ultimate Energy Conference Jenniffer Deckard, President and Chief Executive Officer Mark Barrus, Interim Chief Financial Officer Sharon VanZeeland, Vice President, Investor Relations & Business Development December 2, 2015
Forward-Looking Statements and Non-GAAP Financial Measures 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, capacity expansion plans, market trends, 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, Adjusted EBITDA and Adjusted EPS, and Adjusted Diluted EPS. 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 slides 21-23 of this presentation. 2
Two Complementary Business Segments Industrial & Recreational End Markets Include: Foundry Product Lines Include: Glass High-Purity Silica Sand Building Products Custom-Blended Sports and Recreation Materials Specialty Products Water Resin-Coated Sand Resin Oil & Gas Proppant Solutions Product Lines Include: Northern White Frac Sand Texas Gold Frac Sand (mined in Voca, TX) Resin-Coated Frac Sand Self-Suspending Proppant Technology, Propel SSP TM Activators Water-Soluble Ball Sealers (Bioballs) 3
Fairmount Santrol Positioned to Compete in All Market Cycles A Leading Solutions Provider Differentiated in Every Area of the Value Chain COMMITMENT TO PEOPLE, PLANET & PROSPERITY OPERATIONAL SCALE 800 million tons of proven mineral reserves 11 (7 active) sand facilities with 12.3 million tons of annual stated capacity 10 (6 active) coating facilities with 2.3 million tons of annual stated coating capacity DISTRIBUTION Industry-leading integrated logistics network with 40 terminals serving the oil and gas market Unit train capabilities: 6 destinations and 2 sand origin facilities PRODUCT PORTFOLIO Broad innovative product suite including Northern White, Texas Gold and value-added coated products Addresses over 95% of proppant market TECHNOLOGY AND INNOVATION State-of-the-art R&D facilities Phenolic resin manufacturing facility Proprietary product and process technologies, including Propel SSP TM 4
Industry s Most Comprehensive Operations and Logistics Footprint Comprehensive Logistics Platform and Vertically Integrated Operations with Access to Every Major U.S. Oil & Gas Basin International Operations Manufacturing Footprint Mining & Processing (11) (7 active) Coating Operations (10) (6 active) Research & Development (2) Resin Manufacturing (1) Specialty Products (4) Administrative Offices (6) Logistics Network Oil & Gas Terminals (40) Industrial & Recreational Terminals (9) Unit Train Destination (6) Unit Train Origin (2) Basin Play 5
Broad Suite of Product Solutions Designed to Address Wide Range of Complexities Across All Well Environments SOLUTIONS FOR ALL CLOSURE PRESSURES (1) ADDITIONAL SOLUTIONS Hyperprop PowerProp OptiProp G2 THS Super DC Coolset Super LC TLC Northern White API Frac Sand Texas Gold API Frac Sand 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Closure Pressure (000s psi) Raw Sand Resin-Coated Sand Resin-Coated Ceramic 1. Pressure performance data are specific to 20/40 mesh. Recommended range for each product based on optimal crush, conductivity, and price tradeoffs. Eliminate Flowback Reduce Fines Prevent Embedment 6
2015-2016: Proppant Intensity Continues to Increase Proppant Driver Expectations: Lower rig counts Greater rig efficiencies offset by fewer hours per rig = Flat wells per rig but when market rebounds, expect increasing well count and proppant per rig as rig utilization increases Proppant Intensity +20-25% Proppant Per Stage ~+10% 2,300 2,700 +26% additional anticipated increase 3,400 4,300 Flat lateral length Increased stages/foot (up ~10%) Increased proppant/stage (up ~10%) Stages Per Foot ~+10% = Proppant intensity up 20 to 25% Lateral Length Average Proppant Tons / US Horizontal Well Rig Efficiencies Drilling Hours/Rig 7 Wells per Rig 1Q 2014 4Q 2014 4Q 2015 4Q 2016 Sources Include public E&P presentations, internal estimates and order flow analysis PacWest Consulting Partners The Freedonia Group 7
Proppant Intensity Continues to Offset Rig Decline While FMSA Frac Sand Volumes Throughout 2015 Compare Favorably to Estimated Overall Frac Sand Market Q2 - Q4 2014 Q1 - Q3 2015 2,000 1,800 1,886 40 36.7 6,000 5,604 1,600 1,400 1,200 1,000 1,059 30 20 27.4 5,000 4,000 3,000 4,836 800 600 400 10 2,000 1,000 200 0 Average US Land Rig Count 0 Frac Sand Market Volumes in Millions of Tons 0 FMSA Frac Sand Volumes in Thousand of Tons Sources TPH PacWest Consulting Partners The Freedonia Group 8
During the Downcycle, E&Ps Making Tradeoffs Between Short-Term Costs and Mid-Term EURs and Well NPVs 23-well study proves proppant flowback prevention increases value by $115,000 per frac stage* in addition to delivering increased production as compared to raw frac sand 1,200 1,000 1,089 Q2 - Q4 2014 Q1 - Q3 2015 800 600 400 200 576 0 FMSA Resin Coated Proppant Volumes Resin coated proppant: Market and FMSA volumes down proportionately more than frac sand Recent Signals Indicate Returning Focus on EURs and Well NPVs As mega fracs enter second stage of flow production, E&Ps observing higher IPs but steep decline curves Resin-coated sand both increases IP and improves long term production (higher overall EUR) by keeping the proppant in place and reduces maintenance cost associated with proppant flowback Customers designing well completions with tail-in of resin coated proppant *Study was performed on vertical wells with single-stage fracs in August 2014 9
Near-Term Fairmount Santrol Focus: Actions to Manage Through the Market Challenges Enhance Efficiency 1. Consolidating our operations into a more cost-effective footprint 2. Refining and optimizing our logistics network to the benefit of both Fairmount Santrol and our customers Reduce Spending 3. Reducing spending across all cost categories Invest in the Future Manage Liquidity 4. Investing in key areas of the business Wedron, IL facility expansion Successful trials of Propel SSP TM 5. Working with lenders to provide flexibility and managing working capital and capital expenditures 10
Millions of Tons 1. Consolidating Our Operations into a More Cost-Effective Footprint Idled higher-cost sand facilities and optimizing use of lower-cost facilities Since December 2014, average production cost per ton reduced by: 14% across all frac sand grades, 35% for Northern White sand, and 25% for resin-coated products 12.0 Proppant Solutions Effective Sand Capacity 10.0 9.8 10.1 8.0 Wedron 7.1 6.0 Wedron Wedron 4.0 2.0 - January 2015 October 2015 1H 2016 11
2. Leveraging Our Terminal Network & Unit Train Capabilities to the Benefit of Both FMSA and Customers 51 unit trains shipped in Q3 26 unit trains shipped in October FMSA Terminal FMSA Active Proppant Solutions Mining & Processing Unit Train Destination Unit Train Origin 2 Unit Train API Sand Origins and 1 In-Basin API Sand Origin 40 Destinations in Heart of Completions Activity 12 Lower Cost to Basin and Well Site for FMSA and Customers
2. Progress in Managing the Cost and Delivery of Rail Cars Cost related to excess rail cars is between $4 and $5 per ton on third-quarter Proppant Solutions volumes Through negotiations with our suppliers: Accelerated the delivery of 600 cars into the third and fourth quarters of 2015 in exchange for zero car deliveries in 2016 and pushing 2,300 car deliveries out to 2017 and 2018 1,600 leases to expire in 2016 and 2,600 leases due to expire in 2017 & 2018 Q3 Managing Rail Car Deliveries 2015 Q4 2016 2017 2018 Entering Fleet 200* 150* 0 1,500 800 Expiring Leases 1,600 1,400 1,200 * Net of lease expirations 13
Dollars in Millions 3. Reducing Spending Across All Cost Categories SG&A was $18.3 million in the third quarter of 2015, down 5% from the second quarter, and down 40% from the fourth quarter of 2014 The Company s year-to-date adjusted SG&A* is $61.5 million, down 17% from the same period a year ago Focused on identifying opportunities for further cost reductions and efficiency improvements throughout the organization $40 SG&A by Quarter (4Q14 3Q15)* $30 $30.5 $24.0 $20 $19.2 $18.3 $10 $0 4Q14 1Q15 2Q15 3Q15 * Excluding IPO costs and restructuring charges 14
4. Investing in Key Areas of the Business: Lower-Cost, Optimally Located Wedron, IL Facility Expansion Expansion on track: 1.5 million tons by Q1 2016 and 1.5 million tons in Q2 2016 Why Wedron? Access to high-quality Northern White frac sand reserves Optimally located along Class 1 railway system Unit train capable Lower-cost delivery into key oil and gas basins 15
4. Investing in Key Areas of the Business: Propel SSP TM Propel SSP : A Self-Suspending Proppant Transport Solution Northern White Frac Sand & Water ENHANCED WELL PERFORMANCE Maximum propped surface area 100% conductivity regain No formation damage Enhances production curve Increase both IP & EUR OPERATIONAL EFFICIENCIES IN WELL COMPLETION Less water Less chemicals Less pump time Prevents screenouts No specialized equipment No water heating Northern White Frac Sand Propel SSP & Water 16
4. Increased Production and Operational Efficiency Drive Customer Adoption of Propel SSP Customer Adoption Multiple customers plan to continue use of Propel SSP through 2016 Backed by Results of Recent Six-Well Field Trial in North Dakota s Williston Basin Increased 90-day cumulative oil production 39% compared with the geologic offset wells Specifically, in areas with lower porosity and permeability, production improved more than 80% Improved efficiency by not requiring fluid heating at 35 F and above 17
5. Managing Our Liquidity Increased cash balance to $179.5 million at end of Q3 and maintained similar balance through late November 30% reduction in inventory since 12/31/14 2015 capital expenditures reduced by $25 million to expected levels of $95 - $100 million 2016 Estimate of $10 - $15 million for base capital expenditures and $8 million for completion of Wedron expansion Proactively worked with lenders to increase flexibility: Extended $161.1 million of Term B-1 loans Q1 2017 maturity to Q3 2019 maturity Amended leverage ratio covenant to provide greater revolver flexibility, most notably: 2016: Replaced leverage ratio covenant with minimum EBITDA covenants 2014 30-Sep-15 Adj. LTM EBITDA $397.3 $233.8 Cash Balance $76.9 $179.5 Term Extended B-1 Loan Term B-1 $319.9 $156.3 Loan 160.3 Term B-2 Loan 911.1 904.5 Other Debt 21.6 20.4 TOTAL DEBT $1,252.6 $1,241.5 Gross Leverage 3.15X 5.31X Net Leverage 2.96X 4.54X Revolver Availability $28.5 Total Liquidity $208.0 2017: Increased leverage ratio covenant for first three quarters 18
Fairmount Santrol Positioned to Compete in All Market Cycles A Leading Solutions Provider Differentiated in Every Area of the Value Chain COMMITMENT TO PEOPLE, PLANET & PROSPERITY Customers Value our Differentiated Business Model Short to Mid-term Focus in Downcycle OPERATIONAL SCALE DISTRIBUTION Scalability and flexibility of sand and valued added coated product offerings to match market needs Advantaged distribution network with key unit train origins and destinations Enhance Efficiency Reduce Spending Invest in the Tightly managing costs and efficiencies in the near-term Selectively investing in key areas that will best position us today and for the eventual recovery PRODUCT PORTFOLIO TECHNOLOGY AND Future Manage Liquidity Proactively managing our liquidity and debt structure INNOVATION 19
Thank You & Questions www.fairmountsantrol.com 20
Appendix: Reconciliation of Non-GAAP Financial Measures 21
Appendix: Reconciliation of Non-GAAP Financial Measures 22
Appendix: Reconciliation of Non-GAAP Financial Measures Fairmount Santrol Non GAAP Financial Measures (unaudited) Reconciliation of adjusted EBITDA Quarter 4 Year Ended December 31, 2014 2014 2013 (in thousands, except per share amounts) (in thousands, except per share amounts) Net income attributable to FMSA Holdings Inc. $ 37,913 $ 170,450 $ 103,961 Interest expense, net 9,797 60,842 61,926 Provision for income taxes 23,565 77,413 45,219 Depreciation, depletion, and amortization expense 16,587 59,379 37,771 EBITDA 87,862 368,084 248,877 Non-cash stock compensation expense (1) 7,897 16,571 10,133 Management fees & expenses paid to sponsor (2) 38 864 2,928 Loss on extinguishment of debt (3) - - 11,760 Loss on disposal of assets (4) - 1,921 6,424 Transaction expenses (5) - 638 12,462 Initial Public Offering fees & expenses 4,575 9,213 - Adjusted EBITDA $ 100,372 $ 397,291 $ 292,584 (1) Represents stock-based awards issued to our employees, including one-time adjustment in Q3 2014 for modification to certain outstanding options. (2) Includes fees and expenses paid to American Securities for consulting and management services pursuant to a management consulting agreement. The agreement was terminated upon the Initial Public Offering in October 2014. (3) Represents write-off of a portion of the remaining unamortized deferred financing fees upon entering into a new credit facility. (4) Includes the loss related to the sale and disposal of certain assets, including property, plant and equipment, discontinued inventory and an investment in foreign operations. (5) Expenses associated with evaluation of potential acquisitions of businesses, some of which were completed. 23