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) December 1, 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 8.01. | Other Events. |
As disclosed in Fairmount Santrol Holdings Inc.’s (the “Company’s”) Quarterly Report on Form 10-Q for the period ended September 30, 2016, the Company evaluated the reporting of its segments, Proppant Solutions and Industrial & Recreational Products. Previously, the segment results were reported based on segment contribution margin. Segment contribution margin included selling, general, and administrative expenses directly allocable to an operating segment and excluded certain corporate costs not associated with the operations of the segment. These corporate costs were separately stated, and included costs related to functional areas such as operations management, corporate purchasing, accounting, treasury, information technology, legal and human resources. After evaluation of the Company’s comparability to industry peers and practices, the Company’s CEO, who is the chief operating decision maker, changed the method to evaluate the Company’s operating segments’ performance based on segment gross margin. Segment gross margin does not include any selling, general, and administrative costs or corporate costs. The change to using segment gross margin results in an increase in segment profitability compared to segment contribution margin as allocable selling, general, and administrative costs were charged against segment contribution margin. This change was effective beginning the three months ended September 30, 2016.
For comparability purposes, the following is a reconciliation of previously reported segment contribution margin to segment gross margin for the periods presented. The Company has evaluated its Management Discussion and Analysis for these previous periods and determined that the explanations provided for the material variances of segment results are not impacted by the change of the measurement from segment contribution margin to segment gross margin.
Fairmount Santrol
Segment Reports
(unaudited)
| Three Months Ended | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
| March 31, 2015 |
June 30, 2015 |
September 30, 2015 |
December 31, 2015 |
March 31, 2016 |
June 30, 2016 |
September 30, 2016 |
2015 | 2014 | 2013 | |||||||||||||||||||||||||||||||
| (in thousands, except volume amounts) | (in thousands, except volume amounts) |
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| Volume (tons) |
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| Proppant Solutions |
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| Raw sand |
1,487,414 | 1,387,203 | 1,309,428 | 1,253,257 | 1,413,248 | 1,230,077 | 1,657,799 | 5,437,302 | 5,713,374 | 4,088,136 | ||||||||||||||||||||||||||||||
| Coated proppant |
290,568 | 206,572 | 154,902 | 114,414 | 112,704 | 59,826 | 96,532 | 766,456 | 1,475,095 | 1,028,567 | ||||||||||||||||||||||||||||||
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| Total Proppant Solutions |
1,777,982 | 1,593,775 | 1,464,330 | 1,367,671 | 1,525,952 | 1,289,903 | 1,754,331 | 6,203,758 | 7,188,469 | 5,116,703 | ||||||||||||||||||||||||||||||
| Industrial & Recreational Products |
534,021 | 641,482 | 569,971 | 555,495 | 587,178 | 661,244 | 668,333 | 2,300,969 | 2,425,756 | 2,461,750 | ||||||||||||||||||||||||||||||
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| Total volumes |
2,312,003 | 2,235,257 | 2,034,301 | 1,923,166 | 2,113,130 | 1,951,147 | 2,422,664 | 8,504,727 | 9,614,225 | 7,578,453 | ||||||||||||||||||||||||||||||
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| Revenues |
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| Proppant Solutions |
$ | 272,869 | $ | 188,150 | $ | 141,584 | $ | 107,480 | $ | 117,463 | $ | 82,102 | $ | 103,140 | $ | 710,083 | $ | 1,232,232 | $ | 856,212 | ||||||||||||||||||||
| Industrial & Recreational Products |
28,621 | 33,173 | 29,366 | 27,466 | 27,995 | 32,147 | 31,635 | 118,626 | 124,226 | 132,174 | ||||||||||||||||||||||||||||||
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| Total revenues |
301,490 | 221,323 | 170,950 | 134,946 | 145,458 | 114,249 | 134,775 | 828,709 | 1,356,458 | 988,386 | ||||||||||||||||||||||||||||||
| Segment Gross Profit |
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| Proppant Solutions |
90,110 | 43,594 | 26,788 | 14,734 | 16,592 | (13,529 | ) | 6,356 | 175,226 | 463,426 | 317,117 | |||||||||||||||||||||||||||||
| Industrial & Recreational Products |
8,832 | 12,599 | 12,483 | 10,724 | 10,402 | 13,649 | 13,546 | 44,638 | 41,578 | 43,427 | ||||||||||||||||||||||||||||||
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| Total gross profit |
98,942 | 56,193 | 39,271 | 25,458 | 26,994 | 120 | 19,902 | 219,864 | 505,004 | 360,544 | ||||||||||||||||||||||||||||||
| Segment Allocated Selling, General and Administrative Expenses |
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| Proppant Solutions |
6,291 | 8,178 | 7,849 | 82,098 | 3,984 | 60,869 | 6,356 | 104,416 | 32,647 | 20,797 | ||||||||||||||||||||||||||||||
| Industrial & Recreational Products |
1,756 | 13,493 | 3,285 | 855 | 1,556 | 1,643 | 13,546 | 19,389 | 7,105 | 8,662 | ||||||||||||||||||||||||||||||
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| Total segment expenses |
8,047 | 21,671 | 11,134 | 82,953 | 5,540 | 62,512 | 19,902 | 123,805 | 39,752 | 29,459 | ||||||||||||||||||||||||||||||
| Segment Contribution Margin as reported |
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| Proppant Solutions |
83,819 | 35,416 | 18,939 | (67,364 | ) | 12,608 | (74,398 | ) | — | 70,810 | 430,779 | 296,320 | ||||||||||||||||||||||||||||
| Industrial & Recreational Products |
7,076 | (894 | ) | 9,198 | 9,869 | 8,846 | 12,006 | — | 25,249 | 34,473 | 34,765 | |||||||||||||||||||||||||||||
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| Total segment contribution margin |
90,895 | 34,522 | 28,137 | (57,495 | ) | 21,454 | (62,392 | ) | — | 96,059 | 465,252 | 331,085 | ||||||||||||||||||||||||||||
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: December 1, 2016 | /s/ Michael F. Biehl | |||
| Michael F. Biehl | ||||
| Executive Vice President and Chief Financial Officer | ||||