Investor Presentation NOVEMBER 2017

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Transcription:

Investor Presentation NOVEMBER 2017

Forward-Looking Statements FORWARD-LOOKING INFORMATION 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 forwardlooking 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. NON-GAAP FINANCIAL MEASURES 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. 1

Two Complementary Business Segments 2016 VOLUMES (million tons) Industrial & Recreational (I&R) Proppant Solutions Key Markets Foundry Glass 2.5 28% 6.4 72% Key Markets Oil & Gas Sports & Recreation Building Products Filtration Complementary markets throughout business cycles Complementary products to leverage asset base 2

FAIRMOUNT SANTROL Long-Term Value Creators FAIRMOUNT SANTROL Core Differentiators for Long-Term Value Creation Technology & Innovation Broad Product Portfolio Operational Scale & Efficiencies Extensive Distribution and Unit Train Capabilities Commitment to People, Planet & Prosperity 3

TECHNOLOGY & INNOVATION AND BROAD PRODUCT PORTFOLIO - INDUSTRIAL & RECREATIONAL Only Fully Integrated I&R Sand and Resin Solutions Provider HIGH-PURITY SANDS CUSTOM BLENDING HIGH-PERFORMANCE RESIN SYSTEMS ENGINEERED RESIN-COATED SANDS PRODUCTS/ CHARACTERISTICS 99.9% pure silica Expert custom blends of sand, aggregates, minerals, colorants and other materials Traditional foundry resin systems & proprietary resins for advanced resin-coated proppants Engineered sand-based resin products Building products Foundries Building products Specialty products Foundries Foundries TARGET MARKETS Glass manufacturing Sports & recreation Golf courses - Colored play sand Water filtration - Sports turf Diverse base of over 800 customers contributes to the more steady dynamics of I&R 4

TECHNOLOGY & INNOVATION AND BROAD PRODUCT PORTFOLIO PROPPANT SOLUTIONS Products to Address All Well Environments Permian Sand RAW SAND Texas Gold Frac Sand Northern White Silica Sands RESIN-COATED SAND Precured Curable (Tempered) TRANSPORT TECHNOLOGY Propel SSP Permian Regional sand (Kermit) Tier 2, API Regional sand (Voca) Tier 1, API NWS 99.8% pure silica Strength Highest Increased Flowback Protection Increased Highest Increases: Reservoir Recovery Both IP & EUR (by optimizing well geometry) & Operational Efficiencies Conductivity Value Add 5

OPERATIONAL SCALE & EFFICIENCIES Broad Asset Base Provides Efficiency and Flexibility 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 - FMSA ANNUAL FRAC SAND CAPACITY (in millions of tons) 15.6 Shakopee Brewer Maiden Rock Menomonie Voca Kermit Wedron Active + Future Kermit Capacity >70% Coarse 26% 40/70-37% 100 mesh -37% Active + Future Kermit Capacity by Grade I & R ~ 900 million tons of proven reserves Flexibility to shift with market demand: + 3.5 million tons of annual I&R capacity Locations, grade mixes and logistic capabilities i.e.: increasing 4070 production at Wedron meeting coarser grades by other mines In 2018, regional and low-cost Wedron represent > 70% of active capacity Overall fines as a percent of total tons over 70% with ability to flex 6

EXTENSIVE DISTRIBUTION AND UNIT TRAIN CAPABILITIES Competitive Delivery into all Key Basins FMSA Proppant Terminal Unit Train Destination FMSA Mining & Processing Unit Train Origin (Mining & Processing) Coating Operation 7

EXTENSIVE DISTRIBUTION AND UNIT TRAIN CAPABILITIES Leveraging Our Logistics Network Focus on Increasing Utilization of Unit Trains 11 unit-train capable terminals and 4 originations Unit Trains: Reduce delivered cost by $6-$10/ton Increase railcar turns and overall efficiency of railcar fleet Terminal Network Over 70% of volumes are sold in-basin Over 40 proppant terminals in all key basins Focus on placing terminal as close to the well-site as possible, reducing last mile distance Customers have strong relationship with trucking firms; important as trucking resources tighten Ability to utilize terminals in Permian to help deliver Kermit production 80% 60% 40% 20% 0% PERCENTAGE OF NORTHERN WHITE SAND SHIPPED VIA UNIT TRAIN > 70% 2014 2015 2016 YTD 2017 8

Current Areas of Investor Focus 1) Market Supply and Demand 2) FMSA Kermit 3) Refinancing 9

CURRENT AREAS OF INVESTOR FOCUS - MARKET DEMAND Expected Increase in Proppant Demand for 2018 Increasing Number of Well Completions Higher Proppant Intensity Per Well 850 800 750 700 650 600 550 500 U.S. HORIZONTAL LAND RIG COUNT (1) 3,600-4,000 AVERAGE PROPPANT TONS PER U.S. HORIZONTAL WELL (2) 4,600-5,000 5,600-6,000 6,500-7,000 Higher average rig count vs. 2017 Increasing proportion of horizontal vs. vertical wells Higher proportion of wells drilled actually completed Well inventory drawdowns (reversal of 2017 DUC build) 2015 2016 2017 Est. 2018 Est. Modestly longer laterals More stages per well Higher proppant loading per lateral foot 2018 Proppant demand forecasted to reach 100 million tons (vs. ~ 75 million tons in 2017) Sources: (1) Baker Hughes (2) FMSA estimates based on public E&P presentations and internal estimates + PacWest Consulting Partners 10

Millions of tons CURRENT AREAS OF INVESTOR FOCUS MARKET SUPPLY AND DEMAND Current Tightness on Finer Grades Carries into 2018 2018: Even with 100% adoption of Permian sands, over 75 million tons of demand for non-permian supply¹ FMSA grade mix is well balanced to meet demand for sand supplied from outside the Permian 100 80 60 40 20 0 Permian Supply Permian Demand Non-Permian Demand 100 Mesh 40/70 Coarse Grades Permian Demand met by Permian supply 1- Key assumptions for 2018: 45M tons of Permian demand and 30M tons of nameplate capacity Permian demand is 40% 100 mesh, 40% 40/70 and 20% coarse grades Permian production is 80% 100 mesh and 20% 40/70 100% adoption of local Permian sands Over 75M tons of demand addressable by non-permian supply 11 100% 80% 60% 40% 20% 0% ~35% ~40% ~25% Demand Addressable by Non-Permian Supply ~30% ~40% ~30% FMSA Supply ex-kermit 100 Mesh 40/70 Coarse ~50% ~30% ~20% Non-Permian Market Supply

CURRENT AREAS OF INVESTOR FOCUS FMSA KERMIT FMSA Kermit Update Timeline on track Expected to begin production in Q2 2018 Forecasted to be operating at full capacity in Q4 2018 Contract Update Signed multiple contracts Expect to have 70%-80% of active capacity under contract when Kermit comes online Dune Sagebrush Lizard Mining plans designed to specifically focus on areas of low likelihood of DSL occurrence Leading initiative to work with local universities and other sand companies to increase DSL population in TX and NM Capex 12 FMSA Kermit Location FMSA Kermit Location $60-$70 million in total capex with $20-$25 million paid in 2017 and $40-$45 million paid in 2018 $30 million of leasehold interest payments already made; remaining $10 million to be paid in Q2 18

CURRENT AREAS OF INVESTOR FOCUS REFINANCING Improved Flexibility in Capital Structure Entered into new $700M Term Loan B on Nov. 1, 2017 Interest rate of LIBOR + 600 bps Matures in Q4 2022 New $125M ABL revolver Interest rate currently at LIBOR +175bps Drew on $50M as part of refinancing Repaid $32.7M in debt with cash on hand as part of refinancing Priorities are completing Kermit facility and reducing debt Capitalization Summary ($ in Millions) Jun. 30, 2017 Sep. 30, 2017 Pro-Forma post refinancing Cash $178.5 $188.3 $137.0¹ Debt Term Debt Due Sept 2019 784.9 782.7 0 Term B-2 Loan Due Q4 2022 0 0 700.0 ABL Revolver 0 0 50.0 Original Issue Discount (1.5) (1.3) (10.5) Other, net 12.7 13.1 13.4 Total Long Term Debt $796.1 $794.5 $752.9 Net Debt $617.6 $606.2 $615.9 1 Includes estimated $8.1 million of fees related to refinancing and $10.5 million impact of OID 13

PERFORMANCE UPDATE Financial Update and Outlook Third-quarter 2017 results Volumes: Total company +5% sequentially; Proppant Solutions +9% sequentially Nearly 95% utilization of capacity for Proppant Solutions Adjusted EBITDA: $72.4 million vs. $47.0 million in Q2 2017 Fourth-quarter 2017 outlook Flat proppant volumes due to capacity constraints Modest incremental capacity from Shakopee reopening will be offset by lower production from seasonal factors Coated proppant volumes likely to be impacted by customer budgets running out in back half of Q4 Consistent pricing in Q4 from Q3 levels, but expect to implement additional pricing improvements in Q1 2018 Proppant cost per ton expected to be flat to up slightly I&R volumes expected to be flat to up slightly versus Q4 16 with continued good growth in profitability 14

WHY INVEST IN FMSA? Industry Leader Well-Positioned for Growth STRONG MARKET DRIVERS KEY LONG-TERM VALUE CREATORS Dynamic onshore completions activity Increased proppant intensity per well Increased operator focus on long-term well productivity and flowback mitigation Continued solid demand in I&R Technology & innovation Broad product portfolio Operational scale & efficiencies Distribution & unit train capabilities Commitment to People, Planet & Prosperity 15

Appendix

Appendix: Reconciliation of Non-GAAP Financial Measures Adjusted EBITDA Three Months Ended, (in thousands) Sep. 30, 2017 Jun. 30, 2017 Net income (loss) $34,944 $10,483 Interest expense, net 12,110 12,983 Provision (benefit) for income taxes 2,754 502 Depreciation, depletion, and amortization expense 20,174 19,846 EBITDA $69,982 $43,832 Non-cash stock compensation expense 2,402 2,763 Write-off of deferred financing costs 0 389 Adjusted EBITDA $72,384 $46,984 17