Fairmount Santrol Holdings Inc
Fairmount Santrol — Debt Investor Presentation (May 2018)
62 slides from Fairmount Santrol's debt investor presentation, May 8, 2018
Slide 1: May 2018 Lender Presentation: Unimin and Fairmount Santrol to Create Covia
May 2018 Lender Presentation Covia Unimin and Fairmount Santrol to Create Filed by Fairmount Santrol Holdings Inc. Commission File No. 001-36670 Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Subject Company: F
Slide 2: Disclaimer and Forward Looking Statements
Disclaimer and Forward Looking Statements CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This presentation 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 Secu
Slide 3: Disclaimer and Forward Looking Statements (cont'd.)
Disclaimer and Forward Looking Statements (cont’d.) Note on Combined Company Data The combined company information included in this presentation has been prepared based on the arithmetic sum of the historical results of Fairmount Santrol and Unimin, and was not prepared in accordance with Regulation
Slide 4: Table of Contents
Table of Contents Introduction Pg. 5 Merger Rationale & Covia Overview Pg. 10 Sibelco Overview Pg. 14 Unimin Overview Pg. 17 Fairmount Santrol Overview Pg. 22 Credit Highlights & Covia Business Overview Pg. 27 Financial Overview Pg. 43 Industry Update Pg. 47 Transaction Overview Pg. 54 Appendix Pg.
Slide 5: Introduction
Section 1 Introduction Covia
Slide 6: Management Participants
Management Participants Kurt Decat Chief Financial Officer Jenniffer Deckard President, Chief Executive Officer (1) Covia Andrew Eich Executive Vice President, Chief Financial Officer (2) Covia Note: Covia (NYSE: CVIA) refers to the Combined Company following the closing of the merger Title reflects
Slide 7: Covia combination overview
Covia refers to the Combined Company following the closing of the merger Excludes Unimin’s high purity quartz business, which will be distributed to Sibelco. LTM Q1‘18 Pro Forma Adjusted EBITDA reflects preliminary Unimin estimates for the LTM period ended 3/31/2018. Covia LTM Q1‘18 Pro Forma Adjust
Slide 8: Sources, Uses & Pro Forma Capitalization
Sources, Uses & Pro Forma Capitalization Sources & Uses Current and Pro Forma Capitalization ~$701M of LTM Q1‘18 PF Adj. EBITDA (3) (4) ~$506M of PF‘17 FCF Before Debt Service (5) Within 2018, anticipate Net Leverage of ~2x, excluding synergies Source: Unimin’s Form S-4 and Company Filings Unimin ca
Slide 9: Covia Organizational Structure
Covia Organizational Structure ~35% ~65% New $200M Revolver New $1.65Bn Term Loan Existing Shareholders 100% Covia (NYSE: CVIA ) Operating Assets Covia Organizational Structure
Slide 10: Merger Rationale & Covia Overview
Section 2 Merger Rationale & Covia Overview Covia
Slide 11: Key Credit Highlights
Key Credit Highlights Longstanding, Blue-Chip Customer Base A leading asset footprint and national logistics network serving blue-chip customers across end markets Broad and loyal customer base with very high renewal rates and >2,000 total customers 4 Strong Credit Profile and Significant Cash Flow
Slide 12: Covia – Key Highlights
Industrial 40% Energy 60% Diverse Geographies Variety of Minerals An Industry Leader with Strong, Sustainable Competitive Advantages Covia – Key Highlights (1) Complementary Segments Drive Value (1) (3) Industrial Segment Energy Segment Synergies Significant Adj. EBITDA Through-The-Cycle (1) (4) Exc
Slide 13: Covia Strategy: Creating the Industry's Supplier of Choice
Covia Strategy: Creating the Industry’s Supplier of Choice Grow Covia’s Core Business Segments Integrate Unimin & Fairmount Santrol Realize Synergies Delever & Generate Cash Flow Through the Cycle Integration team in place and preparing for a quick end state integration and synergy capture Focus on
Slide 14: Sibelco Overview
Section 3 Sibelco Overview Covia
Slide 15: Sibelco – A Global Privately-Owned Leader in Our Industry Since 1872
Sibelco – A Global Privately-Owned Leader in Our Industry Since 1872 Our Vision ‘To be the best global material solutions company: market driven, operationally excellent, with a compelling culture.’ Global and Tier One Resources (1) Note: Sibelco data as of 2017 North America reflects Sibelco’s Unim
Slide 16: Sibelco – Resilient Performance & Conservative Financial Profile
Sibelco – Resilient Performance & Conservative Financial Profile Group Revenue (EUR Millions) (EUR Millions) Group EBITDA Leverage (Net Debt / EBITDA) 1.5x 1.1x 1.8x 1.6x 1.3x 1.9x 2.1x 1.2x Note: Sibelco financials prepared under IFRS accounting
Slide 17: Unimin Overview
Section 4 Unimin Overview Covia
Slide 18: Unimin has a Long, Successful Operating History
1970 Unimin founded through acquisition of silica companies in Virginia and Minnesota 1973 Sibelco investment in Unimin (67%) 2007 Acquired operations in HPQ, microcrystalline feldspar, nepheline syenite, ball clay, kaolin, calcium carbonate, Mexican silica and feldspar 2010 - 2014 $1 Bn investment
Slide 19: Unimin – A Leading, Diversified North American Mineral Company
Unimin – A Leading, Diversified North American Mineral Company $ $258M $1,295M 2017 Adj. EBITDA (1) 2017 Revenue (1) 38 Operating Terminals Access to Five Class 1 Railroads ~33Mt Capacity (3) ~477Mt Reserves 40 Plants (2) Leader in Safety ~2,400 Employees Reflects 2017A Revenue and Adjusted EBITDA,
Slide 20: Unimin's Industrial Business
Unimin’s Industrial Business Large, Resilient, and Growing Business Generating Strong Cash Flows Highly resilient and growing business generating strong cash flows with annual volume sales in excess of 10M tons for the last 10 years Owned and operated private railroad in West Virginia, New Jersey, V
Slide 21: Unimin's Energy Business
Unimin’s Energy Business A Leading Supplier of Proppants to the O&G Segments Well Cementing Additives Gravel Packing Sand Product Highlights High quality reserves produce monocrystalline silica grains that are spherical, stronger and have superior particle size distribution (within API specification
Slide 22: Fairmount Santrol Overview
Section 5 Fairmount Santrol Overview Covia
Slide 23: Fairmount Santrol – A Leading Provider of Silica-based Products
Fairmount Santrol – A Leading Provider of Silica-based Products $ $206M $960M 2017 Adj. EBITDA 2017 Revenue 56 Operating Terminals Access to Four Class 1 Railroads ~21Mt of Sand Capacity (1) ~893Mt Reserves 12 Sand Plants (1) Commitment to People, Planet & Prosperity ~1,000 Employees Wide Variety of
Slide 24: A Fully Integrated I&R Products Solutions Provider
A Fully Integrated I&R Products Solutions Provider Diverse base of >800 customers and multiple product lines contribute to the more steady dynamics of I&R Products / Characteristics Target End Markets 99.9% pure silica Engineered sand-based resin products Expert custom blends of sand, aggregates, mi
Slide 25: Energy Products to Address All Well Environments
Energy Products to Address All Well Environments Raw sand Tier 1, API NWS 99.8% pure silica Northern White Silica Sands Tier 2, API Regional sand (Voca) Texas Gold® Frac Sand Permian Regional sand (Kermit) Permian Sand Increases: Reservoir Recovery – Both IP & EUR (by optimizing well geometry) & Ope
Slide 26: Unimin Complements All Key Fairmount Santrol Value Drivers
Unimin Complements All Key Fairmount Santrol Value Drivers ü + ü ü ü ü ü Technology & Innovation A leader in proppant technology and innovation with largest portfolio of resin-coated products and Propel SSP® Broad Product Portfolio Broad suite of product offerings across multiple industries, mineral
Slide 27: Credit Highlights & Covia Business Overview
Section 6 Credit Highlights & Covia Business Overview Covia
Slide 28: Broad, Low-Cost, Advantaged Distribution Network
Based on LTM Q1‘18 Pro Forma Adjusted EBITDA, which reflects preliminary LTM Adjusted EBITDA as of 3/31/2018 and includes targeted synergies of approximately $150M A leading supply chain network in North America with advantaged distribution Strategically located facilities and terminals serve key oi
Slide 29: Diversified and Balanced End Market Exposure
Balanced industrial minerals and proppants production with diverse offerings and customer segments driving profitability Diversified and Balanced End Market Exposure 1 Covia Volume; tons in millions, LTM (12/31/2017) Total Covia Gross Profit; 2015A – 2017A Average Sales Volumes Balanced Profitabilit
Slide 30: Covia's Minerals Serve a Wide Variety of Industries
Covia’s Minerals Serve a Wide Variety of Industries 1 Silica Nepheline Syenite Feldspar Olivine Clay & Kaolin Ceramics ü Lime Coated Products DustShield Glass ü Filtration ü Colored Play Sand Custom Blending Coatings & Polymers ü Sports & Recreation ü Resin Systems Metals & Castings ü Oil & Gas ü ü
Slide 31: Leading Size & Scale
2017A Reserves (1) Source: Unimin’s Form S-4 and Company Filings Note: SLCA figures are not pro forma for the acquisition of EP Minerals announced on 3/22/2018 due to lack of disclosed data Reflects proven and probable reserves for all companies except HCLP and SND, which report proven reserves only
Slide 32: Covia Platform Has A Leading Operational Footprint
Covia Platform Has A Leading Operational Footprint Includes two Permian mining facilities under construction and two inactive processing facilities Note: Locations represented as accurately as possible, indicative only Footprint of more than 50 processing & coating plants across North America (1) Ac
Slide 33: Broad and Complementary Distribution Network
Broad and Complementary Distribution Network 3 Terminals Terminals Mexico Canada Canadian Pacific BNSF CSX CN Excludes in-basin plants Includes O&G and Industrial Note: Assets and selected rail lines represented as accurately as possible, indicative only Broad Based, Low-Cost and Highly Flexible Sup
Slide 34: Highly Complementary Large-Scale Terminal Network
Rail capacities reflect primary rail serving facilities; regional capacities reflect trucking and barge Unimin figures include owned and exclusively controlled terminals as well as expansions currently underway, but exclude 3rd party terminals utilized Combined distribution network has access to all
Slide 35: Illustrative Synergy Example
Fairmount cost advantage to the DJ Unimin cost advantage to the Bakken Illustrative figures based on public tariff rates Plants with similar distances shipping to the same play can have vastly different transportation costs based on origin rail rate structures Commentary Rates between similar lanes
Slide 36: Longstanding, Blue-Chip Customer Base
Selected Industrial Customers Longstanding, Blue-Chip Customer Base Selected Energy Customers 4 A leading asset footprint and national logistics network allows Covia to serve blue-chip customers across end markets Broad and loyal customer base comprised of S&P 500 and industry-leading companies Long
Slide 37: Industrial Minerals Attributes
Industrial Minerals Attributes Covia has strong gross profit margins relative to listed industrial peers Highly resilient industrial business delivers much less volatility than the proppant industry Covia Has a Stable and Profitable Industrial Business Resilient and predictable earnings and cash flo
Slide 38: Resilient Cash Flow Generation Through-the-Cycle
Resilient Cash Flow Generation Through-the-Cycle 5 Covia’s Significant Adjusted EBITDA Through-The-Cycle (1) (2) (3) Energy Segment Industrial Segment Synergies Excludes Unimin’s high purity quartz business, which will be distributed to Sibelco; includes targeted synergies of approximately $150M in
Slide 39: Substantial Synergies Identified and Well Documented
Substantial Synergies Identified and Well Documented Immediate and Substantial Synergies Expected at Low Implementation Costs (1) Origin-Destination Pairing Optimization Account Consolidation Procurement SG&A Targeted synergies of approximately $150M annually 50% of synergies expected within 12 mont
Slide 40: Strong Balance Sheet Supporting Ample Liquidity
Pro forma liquidity of ~$254M with $200M of Revolver availability undrawn at close and $54M of cash (1) No other funded debt or near-term maturities Disciplined financial policy committed to maintaining a conservative balance sheet Target average net leverage of ~2x through the cycle Strong Balance
Slide 41: Best in Class Management Team with Extensive Industry Experience
Best in Class Management Team with Extensive Industry Experience Years of Industry Experience Prior Positions ~24 President and Chief Executive Officer of Fairmount Santrol since 2013 Previously served as Vice President of Finance and CFO, Corporate Controller, and Accounting Manager of Fairmount Sa
Slide 42: Sibelco – Supportive, Value-Added and Conservative Business Partner
Sibelco – Supportive, Value-Added and Conservative Business Partner Note: Sibelco data as of 2017 Sibelco is not a listed company; shares are traded on the OTC Euronext Expert Market A leading global producer of industrial minerals with operations in >40 countries Founded in 1872 and still privately
Slide 43: Financial Overview
Section 7 Financial Overview Covia
Slide 44: Conservative, Disciplined and Liquidity-Focused Financial Policy
Conservative, Disciplined and Liquidity-Focused Financial Policy Covia’s financial policy is to conservatively manage leverage, maintain ample liquidity and pursue a disciplined growth strategy Proven history of maintaining a conservative balance sheet Key philosophy and objective of Sibelco Within
Slide 45: Covia Historical Financials
Covia Historical Financials Revenue Gross Profit Adjusted EBITDA (excl. Synergies) (1) Capital Expenditures SG&A and other corporate cost items allocated by segment volume contribution; see appendix for reconciliation of Net Income to Adjusted EBITDA for Unimin and Fairmount Santrol
Slide 46: Covia Historical Financials – Key Financial Figures
Covia Historical Financials Key Financial Figures Source: Unimin’s Form S-4, Company filings, and preliminary management estimates Note: 2015 – 2017 financials prepared under US GAAP Preliminary Covia estimates of results for the quarters ended 3/31/2017 and 3/31/2018
Slide 47: Industry Update
Section 8 Industry Update Covia
Slide 48: 2018 Tailwinds in Industrial End Markets
2018 Tailwinds in Industrial End Markets Industrial Production +3.2% YoY growth vs. 2.0% in 2017 (1) Consumer Confidence at 130.8 (2) highest level since 2000 and above 2017 average of 120.5 2018 Construction Spending Forecast +4.0% (4) Foundry Spending Growth +4.7% vs. 2017 (3) Industrial profitabi
Slide 49: Industrial End Market Overview – Demand
Stability of Demand GDP+ Growth? Industrial End Market Overview – Demand Company Products Demand Drivers Applications GDP Consumer Trends Auto Silica Nepheline Syenite Container Float Feldspar Clay & Kaolin DustShield Fiberglass Display Glass Housing Construction Consumer Trends Silica Nepheline Sye
Slide 50: Expected Increase in Proppant Demand for 2018
+40% Expected Increase in Proppant Demand for 2018 2018 Proppant Demand Forecasted to Reach 100+ Million Tons (vs. ~75 Million Tons in 2017) U.S. Horizontal Land Rig Count Higher average rig count vs. 2017 Increasing proportion of horizontal vs. vertical wells Higher proportion of wells drilled actu
Slide 51: Growing Demand Across All Basins
Growing Demand Across All Basins (Tons in millions) 100M Tons or more in 2018 Coarse 40/70 100 Mesh 40/70 ~75M tons of demand supplied outside of the Permian Key assumptions: 50M tons of Permian demand 35M tons average Permian capacity in 2018 (~45M tons by end of 2018) 2018 Permian production = 80%
Slide 52: Permian Assets Strategically Placed to Meet Local Needs
Permian Assets Strategically Placed to Meet Local Needs Combined 6 million ton capacity Two plants in complementary locations with attractive grade mix scheduled to come online in Q2 ‘18 Strategically located terminal network Carlsbad Hobbs Lamesa Snyder Big Spring Midland Odessa San Angelo Pecos Ri
Slide 53: Well Suited to Meet Demand Across All Basins
Well Suited to Meet Demand Across All Basins Source: Covia management estimates Operational & Logistics Footprint Northern White Supplier of Choice in All Basins ~75M tons Northern White Demand Mix (Permian + Rest of North America) Covia Industry Production by grade well balanced to meet demand Scal
Slide 54: Transaction Overview
Section 9 Transaction Overview Covia
Slide 55: Summary Terms: Senior Secured Credit Facilities
Summary Terms: Senior Secured Credit Facilities Borrower: Unimin Corporation (the “Borrower”) Joint Lead Arrangers: Barclays and BNP Paribas Corporate Ratings: Ba3 / BB Facility Ratings: Ba3 / BB (RR: 3) Facility: Revolver Term Loan Amount: $200,000,000 $1,650,000,000 Tenor: 5 years 7 years Indicati
Slide 56: Key Dates
Key Dates Date Activity May 3 Release Fairmount Santrol Q1 Earnings May 8 Bank Meeting in NYC May 22 Term Loan Commitments Due Late May / Early June Close and Fund Revolver and Term Loan Syndication Timeline May 2018 S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Slide 57: Q&A
Q&A Longstanding, Blue-Chip Customer Base 4 Strong Credit Profile and Significant Cash Flow Generation 5 Strong Management Team with Conservative Long-Term Investor 6 A Leading Materials Solutions Provider with a High Quality Asset Portfolio 2 Broad, Low-Cost, Advantaged Distribution Network 3 Diver
Slide 58: Appendix
Covia Appendix
Slide 59: Unimin Historical Financials
Unimin Historical Financials Unimin revenue decreased 27% from 2015 to 2016, but saw a 33% uptick from 2016 to 2017 Energy: gross profit increased at a 25% CAGR from 2015 to 2017 Experienced significant momentum in 2017 with a rebound in rig count and frac sand demand 64% increase in 2017 volumes as
Slide 60: Fairmount Santrol Historical Financials
Fairmount Santrol Historical Financials FMSA revenue decreased 35% from 2015 to 2016, but saw a 79% uptick from 2016 to 2017 (‘15 – ‘17 CAGR of 8%) FMSA gross profit increased at a 17% CAGR from 2015 to 2017 Proppant Solutions: gross profit increased at an 18% CAGR from 2015 to 2017 2017 segment rev
Slide 61: Unimin Reconciliation of Net Income (Loss) to Adj. EBITDA
Unimin Reconciliation of Net Income (Loss) to Adj. EBITDA Adjustments Description Goodwill and other asset impairments for 2016 represent impairment charges for a terminal that was closed and the writedown of greenfield land; goodwill and other asset impairments for 2015 represent impairment charges
Slide 62: Fairmount Santrol Reconciliation of Net Income (Loss) to Adj. EBITDA
Fairmount Santrol Reconciliation of Net Income (Loss) to Adj. EBITDA Description Represents the non-cash expense for stock-based awards issued to FMSA’s employees and outside directors Non-cash charges in 2016 are associated with the impairment of mineral reserves and other long-lived assets; charge
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