UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 10, 2016

FAIRMOUNT SANTROL HOLDINGS INC.
(Exact name of registrant as specified in its charter)

 
					
Delaware	 	001-36670	 	34-1831554	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
		
8834 Mayfield Road, Chesterland, Ohio	 	44026	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (800) 255-7263
(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Item 2.02 Results of Operations and Financial Condition.
On March 10, 2016, the Company issued a press release providing information regarding earnings for the quarter and year ended December 31, 2015, which provided detail not included in previously issued reports. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1.
The information in this Current Report on Form 8-K, including the exhibit attached hereto, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.

Exhibit Number	  	Description	
		
99.1	  	Press release of the Company, dated March 10, 2016.	

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	 		 		 	Fairmount Santrol Holdings Inc.	
	 		 		 	(Registrant)	
				
Date: March 10, 2016	 		 		 		
				
	 		 		 	/s/ Mark E. Barrus	
	 		 		 	Mark E. Barrus	
	 		 		 	Interim Chief Financial Officer and Vice President of Accounting and Controls	

Exhibit Index

Exhibit Number	  	Description	
		
99.1	  	Press release of the Company, dated March 10, 2016.	

Exhibit 99.1

FOR IMMEDIATE RELEASE
FAIRMOUNT SANTROL ANNOUNCES FOURTH-QUARTER AND FULL-YEAR 2015 RESULTS
 
 	•	 	Fourth-quarter 2015 total company volumes down 5% sequentially, I&R volumes down 3% sequentially and Proppant Solutions volumes down 7% sequentially – with frac sand volumes down 4% sequentially and coated proppant volumes down 26% sequentially	
 
 	•	 	75% of fourth-quarter Northern White frac sand volumes shipped via unit train	
 
 	•	 	Full-year 2015 total volumes of 8.5 million tons down 12%, with raw frac sand volumes of 5.4 million tons down 5%, compared with 2014	
 
 	•	 	Full-year 2015 revenue of $828.7 million	
 
 	•	 	Full-year free cash flow of $122.0 million, after capital expenditures of $113.8 million, and resulting in cash balance of $171.5 million at December 31, 2015	
CHESTERLAND, Ohio – March 10, 2016 – Fairmount Santrol (NYSE: FMSA) today announced results for the fourth quarter and full year ended December 31, 2015.
Fourth-Quarter 2015 Results
Fourth-quarter 2015 revenue totaled $134.9 million, down 21% from $171.0 million in the third quarter of 2015, and down 62% from $353.8 million for the same period in 2014. Overall sales volumes were 1.9 million tons for the quarter, a decline of 5% from 2.0 million tons in the third quarter of 2015 and a decline of 23% from 2.5 million tons in the fourth quarter of 2014.
For the fourth quarter, the Company had a net loss of $90.8 million, or $(0.56) per diluted share, compared with a net loss of $46.2 million, or $(0.29) per diluted share, in the third quarter of 2015, and net income of $37.9 million, or $0.23 per diluted share, for the fourth quarter of 2014. The Company’s fourth-quarter net loss includes the impact of non-cash charges from a $69.2 million impairment of the goodwill balance; $7.3 million in impairments of plant assets which are being marketed for sale; $5.0 million from adjustments to accounts receivable and inventory reserve balances; and a tax benefit of $14.0 million. The accounts receivable and inventory balances were adjusted in accordance with accounting practices to adjust bad debt reserves given current market conditions and to value inventory levels to lower of current cost or market pricing. The tax benefit recognized in the fourth quarter was unfavorably impacted by recording a $27.2 million valuation allowance against certain tax asset carryforwards. The Company expects a cash tax refund in 2016 based on 2015 losses.
Adjusted EBITDA for the fourth quarter was $4.7 million compared with $21.8 million in the third quarter of 2015. The sequential decline was largely due to average proppant pricing declines of approximately 5%, and declines in resin-coated proppant volumes during, primarily, the month of December. Adjusted EDITDA for the fourth quarter also was negatively impacted by the $5.0 million of non-cash adjustments to accounts receivable and inventory balances as noted above.
Adjusted earnings per diluted share were $(0.10) for the fourth quarter, compared with $(0.05) in the third quarter of 2015 and $0.24 in the fourth quarter of 2014. Fourth-quarter adjusted earnings per diluted share excludes the after-tax impact of the goodwill impairment of $0.26 per diluted share, the after-tax impact of plant asset impairments and restructuring charges of $0.03 per diluted share, and the tax benefit of $0.17 per diluted share.
 
1

Full-Year 2015 Results
Full-year revenue totaled $828.7 million, compared with $1.36 billion in 2014. Sales volumes totaled 8.5 million tons, compared with 9.6 million tons in the prior year.
For full-year 2015, net loss was $92.1 million, or $(0.57) per diluted share, compared with net income of $170.4 million, or $1.03 per diluted share, for the prior year.
Full-year adjusted earnings per diluted share were $0.06 compared with adjusted earnings per diluted share of $1.07 for 2014. Adjusted earnings per diluted share excludes the after-tax impact of the goodwill impairment of $0.26 per diluted share, the after-tax impact of plant asset impairments and restructuring charges of $0.11 per diluted share, and the impact of the non-cash tax benefit of $0.27 per diluted share. Adjusted EBITDA for 2015 was $138.1 million, compared with Adjusted EBITDA of $397.3 million in 2014.
“Our overall fourth-quarter 2015 volumes were better than anticipated, despite the worsening conditions in the oil and gas industry,” said Jenniffer Deckard, President and Chief Executive Officer. “Our product portfolio, in-basin footprint and logistics flexibility enable us to provide our customers with multiple avenues to optimize their efficiencies and reduce their overall costs. These differentiators led us to better sustain overall volumes relative to the market trends, and to enhance our position as a supplier of choice as our customers continue with their initiatives to consolidate their proppant suppliers.”
Deckard added, “Although 2015 was a challenging year, our team has been both resilient and innovative, and we remain unwavering in our commitment to helping our customers succeed. The actions we’ve taken over the last 15 months to increase efficiencies and reduce costs throughout our business have enhanced our flexibility and our ability to maintain our market leadership position. The results of these actions will continue to have a positive impact on our business in 2016. We also will benefit from completing the phase two expansion of our low-cost and optimally located Wedron, Illinois, facility in the second quarter of 2016 and the continued expansion of our unit train capabilities and overall network flexibility. We believe Fairmount Santrol will remain commercially well-positioned to compete within the current market conditions, as well as to capitalize on the eventual recovery.”
Business Segments
Proppant Solutions Segment
Total Proppant Solutions volumes for the fourth quarter of 2015 were 1.4 million tons, down 7% compared with the third quarter of 2015 and down 28% compared with the prior-year period. Raw frac sand volumes were 1.3 million tons, down 4% sequentially and down 17% compared with volumes for the same period a year ago. Coated proppant volumes were 114,000 tons, down 26% versus the third quarter of 2015 and down 70% from the prior-year period. The Company’s percentage of products shipped FOB plant increased by six percentage points to 34% compared to the third quarter, with 66% of products sold in-basin in the fourth quarter.
Proppant Solutions revenue totaled $107.5 million in the fourth quarter, a 24% decrease compared with $141.6 million in the third quarter of 2015 and a 67% decrease compared with $324.4 million in the same period a year ago. The decrease in fourth-quarter Proppant Solutions revenue was due to average proppant pricing declines of approximately 5% sequentially, a shift in sales toward FOB plant shipments, and declines in resin-coated proppant volumes primarily in the month of December.
Adjusted contribution margin for the Proppant Solutions segment decreased to $9.5 million in the fourth quarter, from $22.1 million in the third quarter of 2015 and $112.8 million in the fourth quarter of 2014.
 
2

Fairmount Santrol continues to enhance its unit train capabilities, which are of growing importance to its customers and to the Company’s ability to provide a cost-effective in-basin proppant solution. In the fourth quarter of 2015, the Company shipped approximately 75% of total Northern White sand volumes via 68 unit trains, compared with 55% of total Northern White sand volumes shipped via 56 unit trains during the third quarter. In addition to the expanded unit train capacities associated with the Wedron expansion, Fairmount Santrol recently added two new unit train-capable terminals, bringing its total number of unit train-capable destinations to seven, all of which are well-positioned to cost-effectively serve Proppant Solutions customers.
Industrial and Recreational Products Segment
Industrial and Recreational volumes were 0.55 million tons in the fourth quarter, down 3% from the third quarter of 2015 and down approximately 6% compared with the fourth quarter a year ago.
Revenue for the Industrial and Recreational segment was $27.5 million in the fourth quarter, down approximately 6% from the $29.4 million last quarter and $29.4 million for the same period a year ago.
Adjusted contribution margin for the Industrial and Recreational segment was $9.5 million versus $11.0 million in the third quarter of 2015 and $7.6 million in the fourth quarter of 2014. The increase in 2015 margins was predominantly due to product mix and to the Company’s lower-cost sourcing model.
Balance Sheet and Other Information
Cash and cash equivalents totaled $171.5 million as of December 31, 2015, and total debt was $1.24 billion compared with $1.25 billion at the end of 2014.
Capital expenditures during the fourth quarter were $22.2 million. Full-year capital expenditures totaled $113.8 million, with most of the spending associated with the expansion of the Company’s low-cost and optimally located Wedron, Illinois, sand processing facility.
The Company had a negative free cash flow, after capital expenditures, of $3.6 million during the fourth quarter and a positive free cash flow, after capital expenditures, of $122.0 million during calendar year 2015.
The Company expects 2016 capital expenditures to be between $15 million and $20 million.
Outlook
The Company is not providing earnings guidance due to the ongoing uncertainty in the oil and gas markets.
Definition and 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, transaction expenses, impairment of assets, loss on extinguishment of debt, gain or loss on disposal of assets, and certain other non-cash 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 methods or capital structure.
Segment contribution margin is defined as total revenues less the cost of goods sold to produce and deliver the products of each segment and less selling, general & administrative expenses that are directly attributable to each segment. The definition excludes certain corporate costs not associated with the operations of the segment.
 
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Conference Call
Fairmount Santrol will host a conference call and live webcast for analysts and investors today at 9 a.m. Eastern Time to discuss the Company’s 2015 fourth-quarter and full-year 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 at FairmountSantrol.com. 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 28907398. A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056 or (404) 537-3406. The passcode for the replay is 28907398. The replay of the call will be available through March 17, 2016.
About Fairmount Santrol
Fairmount Santrol is a leading provider of high-performance sand and sand-based products 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 global logistics capabilities include a wide-ranging network of distribution terminals and thousands of rail cars 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.
Investor contact:
Sharon Van Zeeland
440-279-0204
Sharon.VanZeeland@fairmountsantrol.com
Media contact:
Kristin Lewis
440-279-0245
Kristin.Lewis@fairmountsantrol.com
Cautionary Statement Concerning 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; 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; our ability to successfully develop and market new products, including Propel SSP™; 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 capacity expansion plans 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
 
4

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.
 
5

Fairmount Santrol
Condensed Consolidated Statements of Income
(unaudited)

 	  	Three Months Ended December 31,	 	 	Year Ended December 31,	 	
 	  	2015	 	 	2014	 	 	2015	 	 	2014	 	
 	  	(in thousands, except share and
per share amounts)	 	 	(in thousands, except share and
per share amounts)	 	
Revenue	  	$	134,946	  	 	$	353,756	  	 	$	828,709	  	 	$	1,356,458	  	
Cost of sales (excluding depreciation, depletion, amortization, and stock compensation expense shown separately)	  	 	109,488	  	 	 	220,569	  	 	 	608,845	  	 	 	851,454	  	
					
Operating expenses	  				 				 				 				
Selling, general and administrative expenses	  	 	19,128	  	 	 	35,105	  	 	 	80,666	  	 	 	114,227	  	
Depreciation, depletion and amortization expense	  	 	18,995	  	 	 	16,587	  	 	 	66,754	  	 	 	59,379	  	
Stock compensation expense	  	 	(2,655	) 	 	 	7,897	  	 	 	4,525	  	 	 	16,571	  	
Restructuring charges	  	 	7,850	  	 	 	—  	  	 	 	27,451	  	 	 	—  	  	
Goodwill impairment	  	 	69,246	  	 	 	—  	  	 	 	69,246	  	 	 	—  	  	
Other operating expense	  	 	1,635	  	 	 	2,551	  	 	 	1,357	  	 	 	3,163	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	  	 	(88,741	) 	 	 	71,047	  	 	 	(30,135	) 	 	 	311,664	  	
					
Interest expense, net	  	 	16,077	  	 	 	9,797	  	 	 	62,242	  	 	 	60,842	  	
Other non-operating expense	  	 	—  	  	 	 	39	  	 	 	1,492	  	 	 	2,786	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) before provision for income taxes	  	 	(104,818	) 	 	 	61,211	  	 	 	(93,869	) 	 	 	248,036	  	
					
Provision (benefit) for income taxes	  	 	(13,996	) 	 	 	23,565	  	 	 	(1,939	) 	 	 	77,413	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	  	 	(90,822	)  	 	 	37,646	  	 	 	(91,930	)  	 	 	170,623	  	
Less: Net income attributable to the non-controlling interest	  	 	9	  	 	 	(267	) 	 	 	205	  	 	 	173	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss) attributable to Fairmount Santrol Holdings Inc.	  	$	(90,831	)  	 	$	37,913	  	 	$	(92,135	)  	 	$	170,450	  	

Earnings per share	  				 				 				 				
Basic	  	$	(0.56	) 	 	$	0.24	  	 	$	(0.57	) 	 	$	1.08	  	
Diluted	  	$	(0.56	) 	 	$	0.23	  	 	$	(0.57	) 	 	$	1.03	  	
					
Weighted average number of shares outstanding	  				 				 				 				
Basic	  	 	161,433,248	  	 	 	160,542,636	  	 	 	161,296,933	  	 	 	157,949,664	  	
Diluted	  	 	161,433,248	  	 	 	167,025,422	  	 	 	161,296,933	  	 	 	166,277,124	  	
 
6

Fairmount Santrol
Condensed Consolidated Statements of Cash Flows
(unaudited)

 	  	Year Ended December 31,	 	
 	  	2015	 	 	2014	 	
 	  	(in thousands, except per
share amounts)	 	
Net income (loss)	  	$	(91,930	) 	 	$	170,623	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  				 				
Depreciation and depletion	  	 	62,218	  	 	 	54,111	  	
Amortization	  	 	11,416	  	 	 	11,991	  	
Write-off of deferred financing costs	  	 	864	  	 	 	—  	  	
Write-off and impairment of intangibles and long-lived assets	  	 	7,954	  	 	 	200	  	
Impairment of goodwill	  	 	69,246	  	 	 	—  	  	
Inventory reserve adjustment	  	 	1,591	  	 	 	—  	  	
(Gain) loss on sale of fixed assets	  	 	8,712	  	 	 	854	  	
Unrealized loss on interest rate swaps	  	 	49	  	 	 	208	  	
Deferred income taxes	  	 	20,983	  	 	 	37,810	  	
Stock compensation expense	  	 	4,525	  	 	 	16,571	  	
Change in operating assets and liabilities, net of acquired balances:	  				 				
Accounts receivable	  	 	129,686	  	 	 	(66,406	) 	
Inventories	  	 	59,527	  	 	 	(13,264	) 	
Prepaid expenses and other assets	  	 	(3,272	) 	 	 	(23,454	) 	
Accounts payable	  	 	(38,698	) 	 	 	(1,456	) 	
Accrued expenses	  	 	(6,877	) 	 	 	17,488	  	
	  	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	235,994	  	 	 	205,276	  	

Cash flows from investing activities	  				 				
Proceeds from sale of fixed assets	  	 	—  	  	 	 	5,160	  	
Capital expenditures	  	 	(113,750	) 	 	 	(143,491	) 	
Purchase of business and assets	  	 	(250	) 	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(114,000	)  	 	 	(138,331	)  	

Cash flows from financing activities	  				 				
Proceeds from issuance of term loans	  	 	—  	  	 	 	41,000	  	
Payments on term debt	  	 	(13,532	) 	 	 	(12,512	) 	
Change in other long-term debt and capital leases	  	 	(6,975	) 	 	 	(4,830	) 	
Proceeds from borrowing on revolving credit facility	  	 	—  	  	 	 	32,267	  	
Payments on revolving credit facility	  	 	—  	  	 	 	(73,000	) 	
Settlement of contingent consideration	  	 	—  	  	 	 	(9,600	) 	
Proceeds from option exercises	  	 	1,767	  	 	 	6,540	  	
Purchase of treasury stock	  	 	—  	  	 	 	(662	) 	
Tax effect of stock options exercised and dividend equivalents	  	 	(1,472	) 	 	 	15,735	  	
Distributions to non-controlling interest	  	 	(301	) 	 	 	(702	) 	
Financing costs	  	 	(4,578	) 	 	 	(1,913	) 	
	  	 	 	 	 	 	 	 	
Net cash used in financing activities	  	 	(25,091	)  	 	 	(7,677	)  	

Change in cash and cash equivalents related to assets classified as held-for-sale	  	 	(1,376	) 	 	 	—  	  	
Foreign currency adjustment	  	 	(964	) 	 	 	(160	) 	
	  	 	 	 	 	 	 	 	
Increase in cash and cash equivalents	  	 	94,563	  	 	 	59,108	  	

Cash and cash equivalents:	  				 				
Beginning of period	  	 	76,923	  	 	 	17,815	  	
	  	 	 	 	 	 	 	 	
End of period	  	$	171,486	  	 	$	76,923	  	

7

Fairmount Santrol
Condensed Consolidated Balance Sheets
(unaudited)

 	  	December 31, 2015	 	 	December 31, 2014	 	
 	  	(in thousands)	 	
Assets	  				 				
Current assets	  				 				
Cash and cash equivalents	  	$	171,486	  	 	$	76,923	  	
Accounts receivable, net	  	 	73,566	  	 	 	206,094	  	
Inventories	  	 	70,494	  	 	 	131,613	  	
Deferred income taxes	  	 	—  	  	 	 	5,158	  	
Prepaid expenses and other assets	  	 	39,910	  	 	 	40,766	  	
Current assets classified as held-for-sale (includes cash, accounts receivable, inventories, and property, plant, and equipment)	  	 	4,218	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Total current assets	  	 	359,674	  	 	 	460,554	  	
Property, plant and equipment, net	  	 	870,997	  	 	 	841,274	  	
Deferred income taxes	  	 	834	  	 	 	—  	  	
Goodwill	  	 	15,301	  	 	 	84,677	  	
Intangibles, net	  	 	96,482	  	 	 	100,769	  	
Other assets	  	 	25,671	  	 	 	26,742	  	
	  	 	 	 	 	 	 	 	
Total assets	  	$	1,368,959	  	 	$	1,514,016	  	

Liabilities and Equity	  				 				
Current liabilities	  				 				
Current portion of long-term debt	  	$	17,536	  	 	$	17,274	  	
Accounts payable	  	 	40,421	  	 	 	88,542	  	
Accrued expenses	  	 	26,785	  	 	 	36,025	  	
Current liabilities directly related to current assets classified as held-for-sale (includes accounts payable and accrued expenses)	  	 	934	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	
Total current liabilities	  	 	85,676	  	 	 	141,841	  	
			
Long-term debt	  	 	1,220,280	  	 	 	1,235,365	  	
Deferred income taxes	  	 	89,569	  	 	 	74,351	  	
Other long-term liabilities	  	 	33,802	  	 	 	28,985	  	
	  	 	 	 	 	 	 	 	
Total liabilities	  	 	1,429,327	  	 	 	1,480,542	  	
			
Equity	  				 				
Common stock	  	 	2,391	  	 	 	2,387	  	
Additional paid-in capital	  	 	776,705	  	 	 	771,888	  	
Retained earnings	  	 	405,044	  	 	 	497,179	  	
Accumulated other comprehensive income (loss)	  	 	(17,693	) 	 	 	(12,809	) 	
Treasury stock at cost	  	 	(1,227,663	) 	 	 	(1,227,663	) 	
Non-controlling interest	  	 	848	  	 	 	2,492	  	
	  	 	 	 	 	 	 	 	
Total equity (deficit)	  	 	(60,368	) 	 	 	33,474	  	
	  	 	 	 	 	 	 	 	
Total liabilities and equity	  	$	1,368,959	  	 	$	1,514,016	  	

8

Fairmount Santrol
Non-GAAP Financial Measures
(unaudited)

 	  	Three Months Ended December 31,	 	  	Year Ended December 31,	 	
 	  	        2015        	 	 	        2014        	 	  	          2015          	 	 	          2014          	 	
 	  	(in thousands, except per share
amounts)	 	  	(in thousands, except per share
amounts)	 	
Reconciliation of adjusted EBITDA	  				 				  				 				
Net income (loss) attributable to Fairmount Santrol Holdings Inc.	  	$	(90,831	)  	 	$	37,913	  	  	$	(92,135	)  	 	$	170,450	  	
Interest expense, net	  	 	16,077	  	 	 	9,797	  	  	 	62,242	  	 	 	60,842	  	
Provision (benefit) for income taxes	  	 	(13,996	) 	 	 	23,565	  	  	 	(1,939	) 	 	 	77,413	  	
Depreciation, depletion, and amortization expense	  	 	18,995	  	 	 	16,587	  	  	 	66,754	  	 	 	59,379	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
EBITDA	  	 	(69,755	)  	 	 	87,862	  	  	 	34,922	  	 	 	368,084	  	
					
Non-cash stock compensation expense (1)	  	 	(2,655	) 	 	 	7,897	  	  	 	4,525	  	 	 	16,571	  	
Management fees & expenses paid to sponsor (2)	  	 	—  	  	 	 	38	  	  	 	—  	  	 	 	864	  	
Loss on disposal of assets (3)	  	 	7,288	  	 	 	—  	  	  	 	7,915	  	 	 	1,921	  	
Transaction expenses (4)	  	 	—  	  	 	 	—  	  	  	 	—  	  	 	 	638	  	
Impairment of long-lived assets (5)	  	 	299	  	 	 	—  	  	  	 	2,635	  	 	 	—  	  	
Restructuring and other charges (6)	  	 	263	  	 	 	—  	  	  	 	17,528	  	 	 	—  	  	
Write-off of deferred financing costs (7)	  	 	—  	  	 	 	—  	  	  	 	864	  	 	 	—  	  	
Impairment of goodwill (8)	  	 	69,246	  	 	 	—  	  	  	 	69,246	  	 	 	—  	  	
Other non-recurring charges (9)	  	 	—  	  	 	 	—  	  	  	 	465	  	 	 	—  	  	
Initial Public Offering fees & expenses	  	 	—  	  	 	 	4,575	  	  	 	—  	  	 	 	9,213	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Adjusted EBITDA	  	$	4,686	  	 	$	100,372	  	  	$	138,100	  	 	$	397,291	  	

(1)	Represents the cost in the period for stock-based awards issued to our employees.	
(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)	Includes losses related to the sale and disposal of certain assets in property, plant, and equipment.	
(4)	Expenses associated with evaluation of potential acquisitions of businesses, some of which were completed.	
(5)	Expenses associated with the impairment of a foreign production facility.	
(6)	Expenses associated with restructuring activities and plant closures, including pension withdrawal and other liabilities, asset impairments and severance payments.	
(7)	Represents the write-off of deferred financing fees in relation to the amendment of our Revolving Credit Facility.	
(8)	Expenses associated with the impairment of goodwill in the Proppant Solutions segment.	
(9)	Expenses associated with an audit of our Employee Stock Bonus Plan.	

Reconciliation of adjusted earnings	  				 				  				 				
Net income (loss) attributable to Fairmount Santrol Holdings Inc.	  	$	(90,831	) 	 	$	37,913	  	  	$	(92,135	) 	 	$	170,450	  	
After-tax effect of adjustments noted above*	  	 	46,258	  	 	 	2,768	  	  	 	59,192	  	 	 	7,582	  	
Year-to-date tax liability due to change in effective tax rate	  	 	27,934	  	 	 	—  	  	  	 	42,865	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Adjusted Net income (loss) attributable to Fairmount Santrol Holdings Inc.	  	$	(16,639	) 	 	$	40,681	  	  	$	9,922	  	 	$	178,032	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
*Excludes non-cash stock compensation expense and uses a marginal tax rate of 40%	  				 				  				 				
					
Earnings per share	  				 				  				 				
Basic	  	$	(0.56	) 	 	$	0.24	  	  	$	(0.57	) 	 	$	1.08	  	
Diluted	  	$	(0.56	) 	 	$	0.23	  	  	$	(0.57	) 	 	$	1.03	  	
					
Adjusted earnings per share	  				 				  				 				
Basic	  	$	(0.10	) 	 	$	0.25	  	  	$	0.06	  	 	$	1.13	  	
Diluted	  	$	(0.10	) 	 	$	0.24	  	  	$	0.06	  	 	$	1.07	  	
					
Weighted average number of shares outstanding	  				 				  				 				
Basic	  	 	161,433,248	  	 	 	160,542,636	  	  	 	161,296,933	  	 	 	157,949,664	  	
Diluted	  	 	161,433,248	  	 	 	167,025,422	  	  	 	161,296,933	  	 	 	166,277,124	  	
 
9

Fairmount Santrol
Segment Reports
(unaudited)

 	  	Three Months Ended December 31,	 	  	Year Ended December 31,	 	
 	  	2015	 	 	2014	 	  	2015	 	 	2014	 	
 	  	(in thousands, except volume
amounts)	 	  	(in thousands, except volume
amounts)	 	
Volume (tons)	  				 				  				 				
Proppant Solutions	  				 				  				 				
Raw sand	  	 	1,253,257	  	 	 	1,515,599	  	  	 	5,437,302	  	 	 	5,713,374	  	
Coated proppant	  	 	114,414	  	 	 	375,719	  	  	 	766,456	  	 	 	1,475,095	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total Proppant Solutions	  	 	1,367,671	  	 	 	1,891,318	  	  	 	6,203,758	  	 	 	7,188,469	  	
					
Industrial & Recreational Products	  	 	555,495	  	 	 	594,031	  	  	 	2,300,969	  	 	 	2,425,756	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total volumes	  	 	1,923,166	  	 	 	2,485,349	  	  	 	8,504,727	  	 	 	9,614,225	  	

Revenue	  				 				  				 				
Proppant Solutions	  	$	107,480	  	 	$	324,380	  	  	$	710,083	  	 	$	1,232,232	  	
Industrial & Recreational Products	  	 	27,466	  	 	 	29,376	  	  	 	118,626	  	 	 	124,226	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total revenue	  	 	134,946	  	 	 	353,756	  	  	 	828,709	  	 	 	1,356,458	  	
					
Segment contribution margin	  				 				  				 				
Proppant Solutions	  	 	(67,364	) 	 	 	112,788	  	  	 	70,810	  	 	 	430,779	  	
Industrial & Recreational Products	  	 	9,869	  	 	 	7,589	  	  	 	25,249	  	 	 	34,473	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total segment contribution margin	  	 	(57,495	) 	 	 	120,377	  	  	 	96,059	  	 	 	465,252	  	
					
Adjusted segment contribution margin	  				 				  				 				
Proppant Solutions	  				 				  				 				
Segment contribution margin	  	 	(67,364	) 	 	 	112,788	  	  	 	70,810	  	 	 	430,779	  	
Restructuring charges & other adjustments	  	 	76,833	  	 	 	—  	  	  	 	82,357	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Proppant Solutions adjusted segment contribution margin	  	 	9,469	  	 	 	112,788	  	  	 	153,167	  	 	 	430,779	  	
					
Industrial & Recreational Products	  				 				  				 				
Segment contribution margin	  	 	9,869	  	 	 	7,589	  	  	 	25,249	  	 	 	34,473	  	
Restructuring charges & other adjustments	  	 	(410	) 	 	 	—  	  	  	 	13,507	  	 	 	—  	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Industrial & Recreational Products adjusted segment contribution margin	  	 	9,459	  	 	 	7,589	  	  	 	38,756	  	 	 	34,473	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Total adjusted segment contribution margin	  	 	18,928	  	 	 	120,377	  	  	 	191,923	  	 	 	465,252	  	
					
Operating expenses excluded from segment contribution margin	  				 				  				 				
Selling, general, and administrative expenses	  	 	12,617	  	 	 	22,295	  	  	 	53,118	  	 	 	74,475	  	
Depreciation, depletion, and amortization expense	  	 	18,995	  	 	 	16,587	  	  	 	66,754	  	 	 	59,379	  	
Stock compensation expense	  	 	(2,655	) 	 	 	7,897	  	  	 	4,525	  	 	 	16,571	  	
Corporate restructuring charges and other operating expense	  	 	2,289	  	 	 	2,551	  	  	 	2,299	  	 	 	3,163	  	
Interest expense, net	  	 	16,077	  	 	 	9,797	  	  	 	62,242	  	 	 	60,842	  	
Other non-operating expense	  	 	—  	  	 	 	39	  	  	 	990	  	 	 	2,786	  	
	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	
Income (loss) before provision for income taxes	  	$	(104,818	) 	 	$	61,211	  	  	$	(93,869	) 	 	$	248,036	  	

10