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Covia Holdings Corp (CVIA) SEC Filing 8-K Material Event for the period ending Tuesday, August 14, 2018

Covia Holdings Corp

CIK: 1722287 Ticker: CVIA

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

COVIA ANNOUNCES SECOND-QUARTER 2018 RESULTS

 

   

Reported Volumes of 7.6 million tons; Reported Energy Volumes of 4.3 million tons; Reported Net Income from Continuing Operations of $17.1 million

 

   

Pro Forma Volumes of 10.0 million tons, up 10% sequentially; Pro Forma Energy Volumes of 6.2 million, up 11% sequentially; Pro Forma Adjusted EBITDA of $179 million, up 18% sequentially

 

   

Integration of Supply Chain Successfully Completed in June

 

   

Began Shipping Local West Texas Sand in July 2018

INDEPENDENCE, Ohio, August 14, 2018 (GLOBE NEWSWIRE) — Covia (NYSE:CVIA), a leading provider of minerals and material solutions for the Industrial and Energy markets, today announced results for the second quarter ended June 30, 2018. As a result of the merger that closed on June 1, 2018, Covia’s second-quarter 2018 reported results, under Generally Accepted Accounting Principles (“GAAP”), include the consolidated financial results of both Unimin Corporation (“Unimin”) and Fairmount Santrol Holdings Inc. (“Fairmount Santrol”) for the one month ended June 30, 2018, as well as the stand-alone results for Unimin for the two months ended May 31, 2018, including the high-purity quartz (“HPQ”) business, which is reported as discontinued operations. Selected pro forma financial results, which reflect combined Unimin and Fairmount Santrol operations for the entire quarter and exclude HPQ results, have been provided as exhibits to this release.

Reported Second-Quarter 2018 Results

Second-quarter 2018 reported Company volumes sold were 7.6 million tons, compared with 5.9 million tons in the first quarter of 2018 and 5.9 million tons in the second-quarter 2017. Reported revenues in second-quarter 2018 were $508.4 million, compared with $369.8 million in the first-quarter 2018 and $324.1 million in the second-quarter 2017. Reported net income from continuing operations for second-quarter 2018 was $17.1 million, or $0.14 per diluted share, compared with $36.8 million in the first-quarter 2018 and $30.2 million in the second quarter of 2017. As a result of the merger, second-quarter 2018 reported net income includes the pre-tax impact of $38.9 million of transaction-related expenses, $19.2 million in costs related to the fair value write-up of Fairmount Santrol inventories, and $12.3 million in charges related to a project termination following a post-merger synergy and capital optimization analysis.


Industrial Segment Reported Results

Second-quarter 2018 reported Industrial volumes were 3.3 million tons compared with 3.1 million tons in the second-quarter 2017. Reported revenues for the segment were $181.7 million and $166.7 million in second-quarter 2018 and 2017, respectively. Reported Industrial gross profit was $51.8 million in second-quarter of 2018 compared with $52.3 million in the second-quarter 2017.

Energy Segment Reported Results

Reported second-quarter 2018 Energy volumes were 4.3 million tons and 3.0 million tons in the first-quarter 2018. Revenues were $326.7 million compared with $207.5 million in the first-quarter 2018. Reported Energy gross profit totaled $101.3 million in the second-quarter 2018, an increase of $35.8 million from $65.5 million in the first quarter of 2018.

Pro Forma Combined Second-Quarter 2018 Results

On a pro forma basis, assuming the merger had closed, and the HPQ divestiture had taken place on the first day of the period(s), Covia volumes sold were 10.0 million tons, up 10% from the first quarter of 2018 and an increase of 9% from 9.2 million tons in the second quarter of 2017. Pro forma second-quarter 2018 revenues were $712.4 million, up 11% from $643.2 million in the first quarter of 2018 and 28% higher than the second quarter of 2017.

Pro forma net income from continuing operations for the second-quarter 2018 was $19.8 million, compared with pro forma net income from continuing operations of $65.5 million for the first quarter of 2018.

Pro forma Adjusted EBITDA for the second quarter of 2018 was $179.1 million compared with $151.7 million for the first quarter of 2018. Second-quarter 2018 pro forma Adjusted EBITDA includes West Texas mine start-up costs of $7.1 million and $19.2 million of charges related to the write-up of inventories as a result of the merger. Excluding these start-up costs and the impact from the write-up of inventories, pro forma Adjusted EBITDA would have been $205.4 million.


Jenniffer Deckard, President and Chief Executive Officer, said, “We are very proud of the collective accomplishments of the Covia Team during our first quarter as a combined company. In addition to completing the merger, our people made significant progress on integrating the strengths of our two legacy organizations, including the full integration of our industry-leading supply chain. At the same time, we initiated the start-up of both of our local sand plants in West Texas, delivered overall higher volumes and lower costs, and benefited from improved pricing across the business.”

Industrial Segment Pro Forma Combined Results

Pro forma Industrial volumes in second-quarter 2018 were 3.8 million tons, relatively flat to pro forma volumes in second-quarter 2017. Volumes by end-market were consistent between the two periods.

Pro forma Industrial revenues for the second quarter of 2018 were $206.3 million, up from pro forma revenues of $201.1 million in the second quarter of 2017. The increase in pro forma revenue was due mainly to price increases instituted at the beginning of the year.

Pro forma Industrial gross profit was $62.1 million, which includes $1.2 million of non-cash expense related to the write-up of inventories. Excluding these non-cash charges, pro forma Industrial gross profit would have been $63.3 million in second-quarter 2018, compared with $67.5 million in the second quarter of 2017. The lower gross profit in the second quarter of 2018 was due to several cost factors, driven primarily by higher production and energy costs at certain facilities in the U.S. and Mexico.

Energy Segment Pro Forma Combined Results

Pro forma Energy volumes for the second-quarter 2018 were 6.2 million tons, an increase of 11% sequentially and 15% greater than the pro forma volumes in the second quarter of 2017. The increase in pro forma volumes was driven by both robust demand and increased production from the expansion at the Utica, Illinois, facility, the completion of process engineering changes, and favorable seasonal operating conditions.

Pro forma Energy revenues for second-quarter 2018 were $506.1 million, a 13% increase compared to pro forma Energy revenues of $449.6 million in the first quarter of 2018. Pro forma Energy revenues benefited sequentially from increased volumes and an average price increase on raw sand proppant of approximately $2 per ton for tons sold on a like-for-like basis.


Pro forma Energy gross profit for the second quarter of 2018 was $161.8 million, which includes $18.0 million of non-cash expense related to the write-up of inventories under GAAP as a result of the merger. Excluding this expense, pro forma gross profit would have been $179.8 million, or $29 per ton, in the second quarter of 2018, compared with pro forma Energy gross profit of $141.6 million, or $25 per ton, in the first quarter of 2018. The increase in pro forma gross profit was primarily the result of the previously mentioned price increase and lower production costs. Pro forma Energy gross profit for the second quarter of 2018 was also negatively impacted by $7.1 million in start-up costs at the Company’s Crane and Kermit mines in West Texas.

Ms. Deckard said, “As we move into the second half of the year, the outlook for the Industrial markets that we serve remains steady, and our teams continue to explore cross-selling and other attractive growth opportunities as a result of our now combined product and operational footprints. Within the proppant market, continued supply growth has begun to outpace the growth in demand, which will create pricing and volume pressure. We remain committed to capturing synergies, growing our total solutions offerings, and leveraging our industry-leading capabilities to outperform in the market.”

Balance Sheet and Other Information

On June 1, 2018, as part of the closing of the merger, the Company entered into a $1.65 billion Term Loan B Credit facility (“Term Loan B”) as well as a $200 million Senior Secured Revolving Credit facility. As of June 30, 2018, the Company had cash of $136.4 million, and the Company’s revolving credit facility remained undrawn, with $14.6 million committed for outstanding letters of credit.

Capital expenditures for the second half of the year are expected to be in the range of $110 million to $130 million primarily related to the completion of the Kermit and Crane facilities, the Seiling, Oklahoma, facility, and maintenance activities to support the Company’s asset base.

Update on Greenfield Expansions

The Company’s Crane and Kermit facilities in West Texas have both begun start-up activities and the Company began shipping sand in July. Both facilities are expected to ramp up to full capacity by the end of the fourth quarter of 2018. Continued construction of the Company’s Seiling, Oklahoma, processing facility was approved by local authorities and this facility is expected to begin production in the fourth quarter of 2018.


Use of Certain GAAP and Non-GAAP Financial Measures

The Company defines EBITDA as net income from continuing operations before interest expense, income tax expense, depreciation, depletion and amortization. Adjusted EBITDA is defined as EBITDA before non-cash stock-based compensation, write-down of assets and certain other income or expenses. The Company defines Pro Forma Combined EBITDA as net income from continuing operations before interest expense, income tax expense, depreciation, depletion and amortization for the combined Unimin and Fairmount Santrol operations for the entire quarter and excludes HPQ results. Adjusted Pro Forma Combined EBITDA is defined as Pro Forma Combined EBITDA before non-cash stock-based compensation, asset impairments and certain other income or expenses. Pro forma financial results for 2018 and 2017, as shown in the exhibits attached to this release, include combined results of operations for Fairmount Santrol and Unimin for periods preceding the June 1, 2018 merger. Such presentation includes financial measures that are not in conformity with GAAP and do not conform with Securities and Exchange Commission rules for pro forma presentation. However, we believe that the additional non-GAAP financial measures will be helpful to investors in comparing current results with results of prior periods. These non-GAAP financial measures should not be considered a substitute for the financial results prepared in accordance with GAAP, but should be viewed in addition to the results as reported by the Company. The Company also believes Pro Forma Combined EBITDA and Pro Forma Combined Adjusted EBITDA are useful because they allow management to more effectively evaluate the Company’s operational performance and compare the results of our operations from period to period without regard to the Company’s financing costs or capital structure.

Conference Call

Covia will host a conference call and live webcast for analysts and investors today, August 14, 2018, at 10 a.m. Eastern Time to discuss the Company’s 2018 second-quarter 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. 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. The call can also be accessed live by dialing (866) 393-4306 or, for international callers, (734) 385-2616. The conference ID for the call is 1294467. A replay will be available on the website and can be accessed by dialing (855) 859-2056 or (404) 537-3406. The passcode for the replay is 1294467. The replay of the call will be available through August 21, 2018.


About Covia

Covia is a leading provider of minerals and material solutions for the Industrial and Energy markets, representing the legacy and combined strengths from the June 2018 merger of Unimin and Fairmount Santrol. The Company is a leading provider of diversified mineral solutions to the glass, ceramics, coatings, polymers, construction, water filtration, sports and recreation markets. The Company offers a broad array of high-quality products, including high-purity silica sand, nepheline syenite, feldspar, clay, kaolin, lime, resin systems and coated materials, delivered through its comprehensive distribution network. Covia offers its Energy customers an unparalleled selection of proppant solutions, additives, and coated products to enhance well productivity and to address both surface and down-hole challenges in all well environments. Covia has built long-standing relationships with a broad customer base consisting of blue-chip customers. Underpinning these strengths is an unwavering commitment to safety and to sustainable development further enhancing the value that Covia delivers to all of its stakeholders. For more information, visit CoviaCorp.com.

Forward-Looking Statements

This press release 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 Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those anticipated or implied in forward-looking statements are described in the information included in Covia’s Registration Statement on Form S-4, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other factors that are set forth in management’s discussion and analysis of Covia’s most recently filed reports with the Securities and Exchange Commission (“SEC”). These factors include: changes in prevailing economic conditions, including fluctuations in demand for, and pricing of, our products; potential business uncertainties relating to the merger, including potential disruptions to our business and operational relationships, our ability to achieve anticipated synergies, and the anticipated costs, timing and complexity of our integration efforts; loss of, or reduction in, business from the Company’s largest customers or their failure to pay the Company; 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; 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 and realize efficiencies from capacity expansion plans, and cost reduction initiatives 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 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 Covia’s filings with the 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.


Covia

Condensed Consolidated Statements of Income

(unaudited)

 

     Three Months Ended June 30,      Six Months Ended June 30,  
     2018      2017      2018      2017  
     (in thousands, except per share
amounts)
     (in thousands, except per share
amounts)
 

Revenues

   $ 508,418      $ 324,079      $ 878,239      $ 611,391  

Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)

     355,311        231,145        615,630        449,416  

Operating expenses

           

Selling, general and administrative expenses(A)

     31,377        21,220        56,601        42,045  

Depreciation, depletion and amortization expense

     36,744        23,896        63,875        47,558  

Other operating expense, net

     12,944        813        12,944        1,836  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income from continuing operations

     72,042        47,005        129,189        70,536  

Interest expense, net

     9,497        5,250        14,688        10,605  

Other non-operating expense, net

     38,923        —          44,223        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations before provision for income taxes

     23,622        41,755        70,278        59,931  

Provision for income taxes

     6,454        11,566        16,324        16,370  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income from continuing operations

     17,168        30,189        53,954        43,561  

Less: Net income from continuing operations attributable to the non-controlling interest

     106        —          106        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income from continuing operations attributable to Covia Holdings Corporation

     17,062        30,189        53,848        43,561  

Income from discontinued operations, net of tax

     3,830        6,612        12,587        10,080  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income attributable to Covia Holdings Corporation

   $ 20,892      $ 36,801      $ 66,435      $ 53,641  
  

 

 

    

 

 

    

 

 

    

 

 

 

Continuing operations earnings per share

           

Basic

   $ 0.14      $ 0.25      $ 0.44      $ 0.36  

Diluted

     0.14        0.25        0.44        0.36  

Discontinued operations earnings per share

           

Basic

     0.03        0.06        0.11        0.09  

Diluted

     0.03        0.06        0.10        0.09  

Earnings per share

           

Basic

     0.17        0.31        0.55        0.45  

Diluted

   $ 0.17      $ 0.31      $ 0.54      $ 0.45  

Weighted average number of shares outstanding

           

Basic

     123,460        119,645        121,552        119,645  

Diluted

     124,166        119,645        122,258        119,645  

(A) - Stock compensation expense of $793 for the three months and six months ended June 30, 2018 is included within selling, general, and administrative expenses.


Covia

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

     Six Months Ended June 30,  
     2018     2017  
     (in thousands)  

Net income attributable to Covia Holdings Corporation

   $ 66,435     $ 53,641  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation, depletion, and amortization

     68,396       52,779  

Prepayment penalties on Senior Notes

     2,213       —    

Gain on disposal of fixed assets

     (81     (107

Change in fair value of interest rate swaps

     (1,581     —    

Deferred income taxes and taxes payable

     1,564       564  

Stock compensation expense

     3,193       —    

Write-down of assets under construction

     12,300       —    

Net income from non-controlling interest

     106       —    

Other, net

     4,653       (239

Change in operating assets and liabilities, net of business combination effect:

    

Accounts receivable

     (44,469     (32,737

Inventories

     1,210       (491

Prepaid expenses and other assets

     (146     5,874  

Accounts payable

     3,362       6,477  

Accrued expenses

     (31,572     194  
  

 

 

   

 

 

 

Net cash provided by operating activities

     85,583       85,955  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Proceeds from sale of fixed assets

     222       413  

Capital expenditures

     (115,709     (29,230

Cash of HPQ Co. distributed

     (31,000     —    

Payments to Fairmount Santrol Holdings Inc. shareholders, net of cash acquired

     (64,697     —    

Other investing activities

     —         33  
  

 

 

   

 

 

 

Net cash used in investing activities

     (211,184     (28,784
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from borrowings on term loan

     1,650,000       49,815  

Prepayment on Unimin Term Loans

     (314,642     (205

Prepayment on Senior Notes

     (100,000     —    

Prepayment on Fairmount Santrol Holdings Inc. term loan

     (695,625     —    

Fees for Term Loan and Senior Notes prepayment

     (36,733     —    

Payments on capital leases and other long-term debt

     (25,380     —    

Fees for Revolver

     (4,500     —    

Cash Redemption payment

     (520,377     —    

Proceeds from share-based awards exercised or distributed

     2       —    

Tax payments for withholdings on share-based awards exercised or distributed

     (1     —    

Dividends paid

     —         (50,000
  

 

 

   

 

 

 

Net cash used in financing activities

     (47,256     (390
  

 

 

   

 

 

 

Effect of foreign currency exchange rate changes

     1,168       2,735  
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     (171,689     59,516  
  

 

 

   

 

 

 

Cash and cash equivalents:

    

Beginning of period

     308,059       183,361  
  

 

 

   

 

 

 

End of period

   $ 136,370     $ 242,877  
  

 

 

   

 

 

 


Covia    

Condensed Consolidated Balance Sheets    

(unaudited)    

 

     June 30, 2018     December 31, 2017  
     (in thousands)  

Assets

    

Current assets

    

Cash and cash equivalents

   $ 136,370     $ 308,059  

Accounts receivable, net

     418,301       219,719  

Inventories, net

     183,164       79,959  

Other receivables

     34,780       27,963  

Prepaid expenses and other current assets

     20,871       16,322  

Current assets of discontinued operations

     —         66,906  
  

 

 

   

 

 

 

Total current assets

     793,486       718,928  

Property, plant and equipment, net

     2,653,792       1,136,104  

Deferred tax assets, net

     7,497       7,441  

Goodwill

     472,347       53,512  

Intangibles, net

     170,015       25,596  

Other non-current assets

     23,504       2,416  

Non-current assets of discontinued operations

     —         96,101  
  

 

 

   

 

 

 

Total assets

   $ 4,120,641     $ 2,040,098  
  

 

 

   

 

 

 

Liabilities and Equity

    

Current liabilities

    

Current portion of long-term debt

   $ 19,920     $ 50,045  

Accounts payable

     185,753       101,983  

Accrued expenses

     121,403       88,208  

Current liabilities of discontinued operations

     —         10,027  
  

 

 

   

 

 

 

Total current liabilities

     327,076       250,263  

Long-term debt

     1,615,666       366,967  

Employee benefit obligations

     99,490       97,798  

Deferred tax liabilities, net

     230,416       62,614  

Other long-term liabilities

     84,802       29,057  

Non-current liabilities of discontinued operations

     —         8,084  
  

 

 

   

 

 

 

Total liabilities

     2,357,450       814,783  

Equity

    

Common stock

     1,777       1,777  

Additional paid-in capital

     383,771       43,941  

Retained earnings

     1,984,892       1,918,457  

Accumulated other comprehensive loss

     (121,716     (128,228

Treasury stock at cost

     (486,092     (610,632

Non-controlling interest

     559       —    
  

 

 

   

 

 

 

Total equity

     1,763,191       1,225,315  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 4,120,641     $ 2,040,098  
  

 

 

   

 

 

 


Covia    

Pro Forma Combined Segment Reports    

(unaudited)    

(in thousands)    

 

     Three Months Ended June 30,  
     2018      2017  
     As Reported      Pre-
Merger(1)
     Pro Forma
Combined(2)
     As Reported      Pre-
Merger(3)
     Pro Forma
Combined(2)
 

Volumes (tons)

                 

Energy

     4,274        1,953        6,227        2,819        2,587        5,406  

Industrial

     3,346        470        3,816        3,119        687        3,806  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total volumes

     7,620        2,423        10,043        5,938        3,274        9,212  

Revenues

                 

Energy

   $ 326,746      $ 179,345      $ 506,091      $ 157,383      $ 198,812      $ 356,195  

Industrial

     181,672        24,649        206,321        166,696        34,414        201,110  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     508,418        203,994        712,412        324,079        233,226        557,305  

Segment gross profit

                 

Energy

     101,288        60,553        161,841        40,616        52,233        92,849  

Industrial

     51,819        10,294        62,113        52,318        15,191        67,509  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total segment gross profit(4)

   $ 153,107      $ 70,847      $ 223,954      $ 92,934      $ 67,424      $ 160,358  
     Six Months Ended June 30,  
     2018      2017  
     As Reported      Pre-
Merger(1)
     Pro Forma
Combined(2)
     As Reported      Pre-
Merger(3)
     Pro Forma
Combined(2)
 

Volumes (tons)

                 

Energy

     7,250        4,588        11,838        5,281        4,669        9,950  

Industrial

     6,317        1,048        7,365        6,087        1,282        7,369  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total volumes

     13,567        5,636        19,203        11,368        5,951        17,319  

Revenues

                 

Energy

   $ 534,207      $ 421,526      $ 955,733      $ 287,606      $ 339,805      $ 627,411  

Industrial

     344,032        55,805        399,837        323,785        66,004        389,789  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     878,239        477,331        1,355,570        611,391        405,809        1,017,200  

Segment gross profit

                 

Energy

     166,783        136,668        303,451        66,064        77,694        143,758  

Industrial

     95,826        21,440        117,266        95,911        28,111        124,022  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total segment gross profit(4)

   $ 262,609      $ 158,108      $ 420,717      $ 161,975      $ 105,805      $ 267,780  
     Three Months Ended March 31,  
     2018      2017  
     As Reported      Pre-
Merger(5)
     Pro Forma
Combined(2)
     As Reported      Pre-
Merger(5)
     Pro Forma
Combined(2)
 

Volumes (tons)

                 

Energy

     2,976        2,635        5,611        2,462        2,082        4,544  

Industrial

     2,971        578        3,549        2,968        595        3,563  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total volumes

     5,947        3,213        9,160        5,430        2,677        8,107  

Revenues

                 

Energy

   $ 207,461      $ 242,181      $ 449,642      $ 130,223      $ 140,993      $ 271,216  

Industrial

     162,360        31,156        193,516        157,089        31,590        188,679  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     369,821        273,337        643,158        287,312        172,583        459,895  

Segment gross profit

                 

Energy

     65,495        76,115        141,610        25,448        25,461        50,909  

Industrial

     44,007        11,146        55,153        43,593        12,920        56,513  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total segment gross profit(4)

   $ 109,502      $ 87,261      $ 196,763      $ 69,041      $ 38,381      $ 107,422  


(1)

2018 Pre-Merger financial results are for Fairmount Santrol Holdings Inc. (“Fairmount Santrol”), for the two and five months ended May 31, 2018, the day before the merger between Fairmount Santrol and Unimin Corporation (“Unimin”) occurred on June 1, 2018. Such results are based on Fairmount Santrol’s unaudited internal financial statements and have been prepared on a basis substantially consistent with Fairmount Santrol’s prior audited financial statements, but have not been reviewed by the Company’s independent auditors. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.    

(2)

Pro forma financial results for 2018 and 2017 include combined results of operations for Fairmount Santrol and Unimin for periods preceding the June 1, 2018 merger. Such presentation includes financial information that is not in conformity with Securities and Exchange Commission rules or Generally Accepted Accounting Principles (“GAAP”) for pro forma presentation.    

(3)

2017 Pre-Merger financial results are for Fairmount Santrol for the three and six months ended June 30, 2017, as previously reported by Fairmount Santrol.    Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.    

(4)

As a result of the June 1, 2018 merger, inventories were written up to fair value under GAAP and $19.2 million of this write-up was expensed through cost of sales in June 2018 thereby reducing Gross Profit. Of this $19.2 million, $18.0 million and $1.2 million impacted the Energy and Industrial businesses for the three and six month period respectively.    

(5)

2018 Pre-Merger and 2017 Pre-Merger financial results are for Fairmount Santrol for the three months ended March 31, 2018 and March 31, 2017, respectively, as previously reported by Fairmount Santrol. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.    


Covia    

Pro Forma Combined Statements of Income and Non-GAAP Financial Measures    

(unaudited)    

(in thousands)    

 

     Three Months Ended June 30,  
     2018      2017  
     As
Reported
     Pre-
Merger(1)
    Pro Forma
Combined(2)
     As
Reported
     Pre-
Merger(3)
     Pro Forma
Combined(2)
 

Revenues

   $ 508,418      $ 203,994     $ 712,412      $ 324,079      $ 233,226      $ 557,305  

Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)(4)

     355,311        133,146       488,457        231,145        165,802        396,947  

Operating expenses

                

Selling, general and administrative expenses(5)

     31,377        20,137       51,514        21,220        25,719        46,939  

Depreciation, depletion and amortization expense

     36,744        12,088       48,832        23,896        19,846        43,742  

Other operating expense, net

     12,944        (1,563     11,381        813        355        1,168  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Operating income from continuing operations

     72,042        40,186       112,228        47,005        21,504        68,509  

Interest expense, net

     9,497        11,903       21,400        5,250        12,983        18,233  

Other non-operating expense, net(5)

     38,923        24,723       63,646        —          144        144  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Income from continuing operations before provision for income taxes

     23,622        3,560       27,182        41,755        8,377        50,132  

Provision for income taxes

     6,454        811       7,265        11,566        520        12,086  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income from continuing operations

     17,168        2,749       19,917        30,189        7,857        38,046  

Less: Net income from continuing operations attributable to the non-controlling interest

     106        —         106        —          40        40  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Net income from continuing operations attributable to Covia Holdings Corporation

     17,062        2,749       19,811        30,189        7,817        38,006  

Interest expense, net

     9,497        11,903       21,400        5,250        12,983        18,233  

Provision for income taxes

     6,454        811       7,265        11,566        520        12,086  

Depreciation, depletion and amortization expense

     36,744        12,088       48,832        23,896        19,846        43,742  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

     69,757        27,551       97,308        70,901        41,166        112,067  

Costs and expenses related to the Merger(5)

     38,923        24,723       63,646        —          144        144  

Non-cash stock compensation expense(6)

     793        5,063       5,856        —          2,763        2,763  

Loss on debt extinguishment and repurchase(7)

     —          —         —          —          389        389  

Write-down of assets under construction(8)

     12,300        —         12,300        —          —          —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 121,773      $ 57,337     $ 179,110      $ 70,901      $ 44,462      $ 115,363  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 


     Six Months Ended June 30,  
     2018     2017  
     As
Reported
     Pre-
Merger(1)
    Pro Forma
Combined(2)
    As
Reported
     Pre-
Merger(3)
    Pro Forma
Combined(2)
 

Revenues

   $ 878,239      $ 477,332     $ 1,355,571     $ 611,391      $ 405,809     $ 1,017,200  

Cost of goods sold (excluding depreciation, depletion,

              

and amortization shown separately)(4)

     615,630        319,224       934,854       449,416        300,005       749,421  

Operating expenses

              

Selling, general and administrative expenses(5)

     56,601        44,156       100,757       42,045        48,189       90,234  

Depreciation, depletion and amortization expense

     63,875        29,313       93,188       47,558        39,288       86,846  

Other operating expense, net

     12,944        (2,292     10,652       1,836        (705     1,131  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income from continuing operations

     129,189        86,931       216,120       70,536        19,032       89,568  

Interest expense, net

     14,688        25,686       40,374       10,605        25,520       36,125  

Other non-operating expense, net(5)

     44,223        28,057       72,280       —          144       144  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Income from continuing operations before provision for income taxes

     70,278        33,188       103,466       59,931        (6,632     53,299  

Provision for income taxes

     16,324        1,683       18,007       16,370        (628     15,742  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income from continuing operations

     53,954        31,505       85,459       43,561        (6,004     37,557  

Less: Net income from continuing operations attributable to the non-controlling interest

     106        3       109       —          218       218  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income from continuing operations attributable to Covia Holdings Corporation

     53,848        31,502       85,350       43,561        (6,222     37,339  

Interest expense, net

     14,688        25,686       40,374       10,605        25,520       36,125  

Provision for income taxes

     16,324        1,683       18,007       16,370        (628     15,742  

Depreciation, depletion and amortization expense

     63,875        29,313       93,188       47,558        39,288       86,846  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

EBITDA

     148,735        88,184       236,919       118,094        57,958       176,052  

Costs and expenses related to the Merger(5)

     44,223        28,057       72,280       —          144       144  

Non-cash stock compensation expense(6)

     793        8,482       9,275       —          5,179       5,179  

Loss on debt extinguishment and repurchase(7)

     —          —         —         —          389       389  

Write-down of assets under construction(8)

     12,300        —         12,300       —          —         —    
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 206,051      $ 124,723     $ 330,774     $ 118,094      $ 63,670     $ 181,764  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
     Three Months Ended March 31,  
     2018     2017  
     As
Reported
     Pre-
Merger(9)
    Pro Forma
Combined(2)
    As
Reported
     Pre-
Merger(9)
    Pro Forma
Combined(2)
 

Revenues

   $ 369,821      $ 273,338     $ 643,159     $ 287,312      $ 172,583     $ 459,895  

Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)(4)

     260,319        186,078       446,397       218,271        134,203       352,474  

Operating expenses

              

Selling, general and administrative expenses(5)

     25,224        24,019       49,243       20,825        22,470       43,295  

Depreciation, depletion and amortization expense

     27,131        17,225       44,356       23,662        19,442       43,104  

Other operating expense, net

     —          (729     (729     1,023        (1,060     (37
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income from continuing operations

     57,147        46,745       103,892       23,531        (2,472     21,059  

Interest expense, net

     5,191        13,783       18,974       5,355        12,537       17,892  

Other non-operating expense, net(5)

     5,300        3,334       8,634       —          —         —    
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Income from continuing operations before provision for income taxes

     46,656        29,628       76,284       18,176        (15,009     3,167  

Provision for income taxes

     9,870        872       10,742       4,804        (1,148     3,656  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income from continuing operations

     36,786        28,756       65,542       13,372        (13,861     (489

Less: Net income from continuing operations attributable to the non-controlling interest

     —          3       3       —          178       178  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income from continuing operations attributable to Covia Holdings Corporation

     36,786        28,753       65,539       13,372        (14,039     (667

Interest expense, net

     5,191        13,783       18,974       5,355        12,537       17,892  

Provision for income taxes

     9,870        872       10,742       4,804        (1,148     3,656  

Depreciation, depletion and amortization expense

     27,131        17,225       44,356       23,662        19,442       43,104  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

EBITDA

     78,978        60,633       139,611       47,193        16,792       63,985  

Costs and expenses related to the Merger(5)

     5,300        3,334       8,634       —          —         —    

Non-cash stock compensation expense(6)

     —          3,419       3,419       —          2,416       2,416  

Loss (gain) on debt extinguishment and repurchase(7)

     —          —         —         —          —         —    

Write-down of assets under construction(8)

     —          —         —         —          —         —    
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 84,278      $ 67,386     $ 151,664     $ 47,193      $ 19,208     $ 66,401  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 


 

(1)

2018 Pre-Merger financial results are for Fairmount Santrol Holdings Inc. (“Fairmount Santrol”), for the two and five months ended May 31, 2018, the day before the merger between Fairmount Santrol and Unimin Corporation (“Unimin”) occurred on June 1, 2018. Such results are based on Fairmount Santrol’s unaudited internal financial statements and have been prepared on a basis substantially consistent with Fairmount Santrol’s prior audited financial statements, but have not been reviewed by the Company’s independent auditors. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.    

(2)

Pro forma financial results for 2018 and 2017 include combined results of operations for Fairmount Santrol and Unimin for periods preceding the June 1, 2018 merger. Such presentation includes financial measures that are not in conformity with Generally Accepted Accounting Principles (“GAAP”) and do not conform with Securities and Exchange Commission rules for pro forma presentation. However, we believe that the additional non-GAAP financial measures will be helpful to investors in comparing current results with results of prior periods. These non-GAAP financial measures should not be considered a substitute for the financial results prepared in accordance with GAAP, but should be viewed in addition to the results as reported by the Company.    

(3)

2017 Pre-Merger financial results are for Fairmount Santrol for the three and six months ended June 30, 2017, as previously reported by Fairmount Santrol. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.    

(4)

As a result of the June 1, 2018 merger, inventories were written up to fair value under GAAP and $19.2 million of this write-up was expensed through cost of sales in June 2018 thereby reducing Gross Profit. Of this $19.2 million, $18.0 million and $1.2 million impacted the Energy and Industrial businesses, respectively, for the three and six month period ended June 30, 2018.    

(5)

Costs and expenses related to the Merger with Fairmount Santrol include legal, accounting, financial advisory services, severance, debt extinguishment, and other expenses. Additionally, it includes stock compensation expense related to accelerated awards as a result of the Merger.    

(6)

Represents the non-cash expense for stock-based awards issued to Fairmount Santrol employees and outside directors. Stock compensation expenses are reported in SG&A.    

(7)

Represents the write-off of deferred financing fees related to an amendment to Fairmount Santrol’s Revolving Credit Facility in 2017. This expense was reported by Fairmount Santrol in Other operating expense for the three months ended June 30, 2017.    

(8)

Represents charges from a terminated project due to post-Merger synergies and capital optimization.    

(9)

2018 Pre-Merger and 2017 Pre-Merger financial results are for Fairmount Santrol for the three months ended March 31, 2018 and March 31, 2017, respectively, as previously reported by Fairmount Santrol. Both Fairmount Santrol and Unimin reported financial results on a calendar fiscal year.

Investor contact:

Matthew Schlarb

440-214-3284

Matthew.Schlarb@coviacorp.com

Source: Covia

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Ticker: CVIA
CIK: 1722287
Form Type: 8-K Corporate News
Accession Number: 0001193125-18-247790
Submitted to the SEC: Tue Aug 14 2018 6:34:00 AM EST
Accepted by the SEC: Tue Aug 14 2018
Period: Tuesday, August 14, 2018
Industry: Mining And Quarrying Of Nonmetallic Minerals No Fuels
Events:
  1. Earnings Release
  2. Financial Exhibit

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