- Fourth quarter 2018 volumes of 7.8 million tons; full year 2018 pro forma volumes of 35.2 million tons
- Fourth quarter 2018 revenues of $441 million; full year 2018 pro forma revenues of $2.3 billion
- Fourth quarter 2018 net loss from continuing operations of $48.1 million; full year 2018 pro forma net loss from continuing operations of $185.5 million
- Fourth quarter 2018 Adjusted EBITDA of $43.9 million; full year 2018 pro forma Adjusted EBITDA of $455.9 million
- Fourth quarter 2018 net cash provided by operating activities of $57.1 million
INDEPENDENCE, Ohio, March 21, 2019 (GLOBE NEWSWIRE) -- Covia (NYSE:CVIA), a leading provider of mineral-based and material solutions for the Industrial and Energy markets, today announced results for the fourth quarter and full year ended December 31, 2018. As a result of the merger that closed on June 1, 2018, Covia’s 2018 reported results under U.S. generally accepted accounting principles (“GAAP”) include the consolidated financial results of both Unimin Corporation (“Unimin”) and Fairmount Santrol Holdings Inc. (“Fairmount Santrol”) for the seven months ended December 31, 2018, as well as the stand-alone results for Unimin for the five months ended May 31, 2018, including the high-purity quartz (“HPQ”) business reported as discontinued operations. Selected pro forma financial results, which reflect combined Unimin and Fairmount Santrol operations prior to the merger and exclude HPQ results, have been provided as exhibits with this release.
Jenniffer Deckard, President and Chief Executive Officer, commented, “We are proud of our team’s integration efforts, which are nearing completion and ahead of schedule, as well as our ability to overcome significant market headwinds and deliver fourth quarter volumes that squarely met the guidance we provided for both our Industrial and Energy segments. Our Industrial segment again posted solid top-line results aided by steady economic growth and our unique and diverse combination of mineral, geographic and end market exposure. The overall Energy market was softer than we had initially anticipated, and we faced some challenges related to the ramp-up of our local sand plants; however, we successfully navigated these challenges by leveraging our well-positioned Energy assets to deliver solutions to our customers in all major basins.”
“So far in 2019, demand within our Industrial segment has been relatively flat, and we have instituted low single-digit percentage price increases, on average, across our Industrial portfolio. We anticipate improving demand as we progress through 2019,” Ms. Deckard added. “Energy volumes through most of the first quarter were similar to fourth quarter levels, but we have seen a noticeable strengthening of demand in March. While weather and start up-related challenges have created cost headwinds in the first quarter, we have recently made significant progress in scaling our local plants and have instituted a modest price increase for Northern White sand, and we anticipate additional price opportunities in the second quarter. These positive developments have given us momentum as we exit March, and we expect a meaningfully stronger second quarter.”
Ms. Deckard concluded, “Given our sharp focus on cash flow generation, we have also taken decisive actions to align our capacity and cost structure with current demand. We remain confident that our recent capacity and cost reduction initiatives, combined with synergy capture, capital discipline and our balanced and diverse business model, including our large base of Industrial profitability, will allow us to invest in our core businesses and generate cash flow to reduce net debt as we progress through 2019.”
Fourth Quarter 2018 Results
- Total volumes of 7.8 million tons, a decline of 4% sequentially driven primarily by lower Energy volumes and seasonality in the Industrial segment. Fourth quarter 2018 total volumes decreased 14% compared to the fourth quarter of 2017 on a pro forma basis.
- Total revenues of $441.3 million, a decline of 16% sequentially driven by modestly lower Energy volumes and pricing and normal Industrial seasonality. Fourth quarter 2018 total revenues were down 28% compared to the fourth quarter of 2017 on a pro forma basis due to lower Energy volumes and pricing partially offset by higher Industrial revenues.
- Net loss from continuing operations of $48.1 million, or $0.37 per share.
- Adjusted EBITDA of $43.9 million compared to $84.1 million in the third quarter 2018 and $127.8 million in the fourth quarter 2017 on a pro forma basis.
° Fourth quarter 2018 Adjusted EBITDA was negatively impacted by an $8.1 million gross margin loss from the Seiling and Kermit plants as they scaled production, and $3.6 million in non-cash inventory purchase accounting charges, partially offset by the positive impact of a $5.0 million revaluation of a contingent consideration liability. - Net cash flow provided by operating activities of $57.1 million.
Full Year 2018 Results
- Total volumes of 35.2 million tons, a decline of 2% compared to 2017 on a pro forma basis.
- Total revenues of $2.3 billion, an increase of 3% compared to 2017 on a pro forma basis.
- Net loss from continuing operations of $185.5 million on a pro forma basis.
° 2018 net loss from continuing operations was negatively impacted by $309.0 million in pre-tax charges resulting from $267.0 million of goodwill and asset impairment, $27.7 million of restructuring activities, and $14.3 million of non-cash stock compensation. - Adjusted EBITDA of $455.9 million, an increase of $3.4 million compared to 2017 on a pro forma basis.
° 2018 Adjusted EBITDA was negatively impacted by $28.3 million in non-cash inventory purchase accounting charges, and a $21.4 million gross margin loss from local sand plants as they started and scaled production, partially offset by the positive impact of a $5.0 million revaluation of a contingent consideration liability.
Fourth Quarter 2018 Segment Results
Industrial Segment Results
- Volumes of 3.5 million tons, up 1% from the fourth quarter of 2017 on a pro forma basis.
- Revenues of $185.7 million, up 2% from the fourth quarter of 2017 on a pro forma basis, aided by price increases instituted at the beginning of 2018.
- Segment gross profit of $50.5 million, down $3.4 million, or 6%, from the fourth quarter of 2017 on a pro forma basis due to continued higher utility costs in Mexico and lower fixed cost leverage at hybrid plants due to decreased Energy volumes.
° Segment gross profit for the fourth quarter was negatively impacted by $1.1 million of non-cash inventory purchase accounting charges.
Energy Segment Results
- Volumes of 4.4 million tons, down 3% sequentially.
° Local sand volumes were approximately 700 thousand tons in the fourth quarter of 2018 versus nearly 180 thousand tons in the third quarter of 2018. - Revenues of $255.6 million, down 21% sequentially, driven by lower Northern White sand volumes and pricing and a mix shift toward FOB mine sales.
- Segment gross profit of $31.3 million, down $29.7 million sequentially, driven primarily by lower pricing and lower fixed cost leverage.
° Combined, the Company’s three local sand plants generated positive gross profit during the fourth quarter; however, segment gross profit for the fourth quarter of 2018 was negatively impacted by an $8.1 million gross margin loss from its Kermit and Seiling plants as they scaled production. Additionally, gross profit was negatively impacted by $2.5 million in non-cash inventory purchase accounting charges. Combined, these items totaled $10.6 million.
Full Year 2018 Segment Results
Industrial Segment Results
- Volumes of 14.5 million tons, similar to 2017 on a pro forma basis.
- Revenues of $784.3 million, up 3% over 2017 on a pro forma basis, with 2018 results aided by price increases.
- Segment gross profit of $224.6 million, down 6% from 2017 on a pro forma basis, driven by higher energy and stripping costs and unfavorable foreign exchange changes in Mexico.
° Segment gross profit was negatively impacted by $3.7 million of non-cash inventory purchase accounting charges.
Energy Segment Results
- Volumes of 20.7 million tons, down 4% from 2017, on a pro forma basis.
- Revenues of $1.5 billion, an increase of 3% from 2017, on a pro forma basis. 2018 results benefited from higher average pricing, particularly in the first half of the year.
- Segment gross profit of $395.7 million, down $20.6 million from 2017, on a pro forma basis.
° Segment gross profit for 2018 was negatively impacted by $24.6 million in non-cash inventory purchase accounting charges, $21.4 million in gross margin losses from the start-up and scaling of local sand facilities and $6.7 million in impairment charges from idled facilities. Combined, these items totaled $52.7 million.
Balance Sheet Update
- Total liquidity of $322 million as of December 31, 2018, which is composed of $134 million in cash and cash equivalents and $188 million availability on its revolving credit facility.
° The Company amended the terms of its revolving credit facility to relax its covenant and maintain the facility size of $200 million. - Capital expenditures totaled $75.6 million during the fourth quarter of 2018 as certain expenditures which were included in its previously communicated plans for 2019 were incurred earlier than expected.
Production Rationalization
- Covia has reduced effective annual capacity at its Tunnel City, Wisconsin plant by 2.0 million tons to 1.2 million tons.
- The previously announced idling of the two Voca, Texas facilities, with a combined 1.6 million tons of annual capacity, was completed in the first quarter of 2019.
- The Company has also idled its Guion, Arkansas coating plant.
Outlook
First quarter 2019 expectations are:
- Industrial volumes of 3.5 million tons, relatively flat to first quarter of 2018 on a pro forma basis.
- Energy volumes of 4.4 million tons, relatively flat sequentially.
Second quarter 2019 expectations are:
- Industrial volumes of 3.8 million tons, relatively flat to the second quarter of 2018 on a pro forma basis.
- Energy volumes of 5.0 million to 5.3 million tons.
Full year 2019 expectations are:
- 2019 selling, general and administrative expenses of $160 million to $170 million, which includes approximately $10 million in non-cash stock compensation.
- 2019 capital expenditures are expected to be in the range of $80 million to $100 million, compared to previous guidance of $90 million to $110 million.
Use of Certain Non-GAAP and Adjusted Financial Measures
Covia reports its financial results in accordance with GAAP. However, Covia’s management believes that certain non-GAAP financial measures help to facilitate comparisons of Company operating performance across periods. This release includes EBITDA and adjusted EBITDA, which are non-GAAP financial measures, including on a pro forma basis. Covia may also present other non-GAAP financial measures which are identified as “adjusted” results. A reconciliation of all non-GAAP financial measures to the most comparable GAAP financial measures is provided in exhibits attached to this release. Covia defines EBITDA as net income from continuing operations before interest expense, income tax expense, depreciation, depletion and amortization, and adjusted EBITDA as EBITDA before non-cash stock-based compensation, merger-related expenses, restructuring charges, asset impairments and certain other income or expenses. Covia defines pro forma 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 periods reported and excludes HPQ results. Adjusted pro forma EBITDA is defined by Covia as pro forma 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. 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 Covia. Covia also believes pro forma EBITDA and pro forma 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, March 21, 2019, at 8:30 a.m. Eastern Time to discuss its financial results. Interested parties 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 (ir.CoviaCorp.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. The call may also be accessed live by dialing (877) 273-6113 or, for international callers, (647) 689-5399. The conference ID for the call is 3864098. A replay will be available on the website and can be accessed by dialing (800) 585-8367 or (416) 621-4642. The passcode for the replay is 3864098. The replay of the call will be available through March 28, 2019.
About Covia
Covia is a leading provider of mineral-based 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, foundry, 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.
About the Merger
On June 1, 2018, Unimin completed a business combination (“merger”) whereby Fairmount Santrol, now known as Bison Merger Sub I, LLC, merged into a wholly-owned subsidiary of Unimin and ceased to exist as a separate corporate entity. Immediately following the consummation of the merger, Unimin changed its name to Covia Holdings Corporation and began operating under that name. The common stock of Fairmount Santrol was delisted from the NYSE prior to the market opening on June 1, 2018, and Covia commenced trading under the ticker symbol “CVIA” on that same date.
Caution Concerning Forward-Looking Statements
This 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 (“PSLRA”), and such statements are intended to qualify for the protection of the safe harbor provided by the PSLRA. The words “anticipate,” “estimate,” “expect,” “objective,” “goal,” “project,” “intend,” “plan,” “believe,” “will,” “should,” “may,” “target,” “forecast,” “guidance,” “outlook” and similar expressions generally identify forward-looking statements. Similarly, descriptions of the Company’s objectives, strategies, plans, goals or targets are also forward-looking statements. Forward-looking statements relate to the expectations of the Company’s management as to future occurrences and trends, including statements expressing optimism or pessimism about future operating results or events and projected sales, earnings, capital expenditures and business strategy. Forward-looking statements are based upon a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Forward-looking statements are based upon management’s then-current views and assumptions regarding future events and operating performance. Although the Company’s management believes the expectations expressed in forward-looking statements are based on reasonable assumptions within the bounds of its knowledge, forward-looking statements involve risks, uncertainties and other factors which may materially affect the Company’s business, financial condition, and results of operations or liquidity.
Forward-looking statements are not guarantees of future performance and actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to: changes in prevailing economic conditions, including fluctuations in supply of, demand for, and pricing of, the Company’s products; potential business uncertainties relating to the merger, including potential disruptions to the Company’s business and operational relationships, the Company’s ability to achieve anticipated synergies, and the anticipated costs, timing and complexity of the Company’s 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; the Company’s ability to successfully develop and market new products; the Company’s rights and ability to mine its property and its renewal or receipt of the required permits and approvals from government authorities and other third parties; the Company’s ability to implement and realize efficiencies from capacity expansion plans, and cost reduction initiatives within its 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 the Company’s 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; other operating risks beyond the Company’s control; the risks discussed in the Risk Factors section of the Company’s Amendment No. 2 to Form S-4 Registration Statement on Form S-4 as filed with the Securities and Exchange Commission (“SEC”) on April 23, 2018; and the other factors discussed from time to time in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC. This release should be read in conjunction with such filings, and you should consider all of such risks, uncertainties and other factors carefully in evaluating forward-looking statements.
You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures the Company makes on related subjects in its public announcements and SEC filing.
Covia | |||||||||||||||
Condensed Consolidated Statements of Income (Loss) | |||||||||||||||
(unaudited) | |||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(in thousands, except per share amounts) | (in thousands, except per share amounts) | ||||||||||||||
Revenues | $ | 441,330 | $ | 335,913 | $ | 1,842,937 | $ | 1,295,112 | |||||||
Cost of goods sold (excluding depreciation, depletion, and amortization shown separately) | 359,534 | 234,549 | 1,380,766 | 928,659 | |||||||||||
Operating expenses | |||||||||||||||
Selling, general and administrative expenses(A) | 45,828 | 32,832 | 145,593 | 99,087 | |||||||||||
Depreciation, depletion and amortization expense | 63,996 | 29,363 | 196,455 | 101,560 | |||||||||||
Goodwill and other asset impairments | (10,609 | ) | - | 267,034 | - | ||||||||||
Restructuring charges | 7,204 | - | 21,954 | - | |||||||||||
Other operating expense (income), net | (4,694 | ) | 1,273 | (5,024 | ) | 3,102 | |||||||||
Operating income (loss) from continuing operations | (19,929 | ) | 37,896 | (163,841 | ) | 162,704 | |||||||||
Interest expense, net | 24,997 | 2,019 | 60,322 | 14,653 | |||||||||||
Other non-operating expense (income), net | (1,327 | ) | 21,540 | 54,832 | 25,989 | ||||||||||
Income (loss) from continuing operations before benefit from income taxes | (43,599 | ) | 14,337 | (278,995 | ) | 122,062 | |||||||||
Provision (benefit) for income taxes | 4,511 | (45,285 | ) | 3,987 | (8,825 | ) | |||||||||
Net income (loss) from continuing operations | (48,110 | ) | 59,622 | (282,982 | ) | 130,887 | |||||||||
Less: Net income from continuing operations attributable to the non-controlling interest | 29 | - | 103 | - | |||||||||||
Net income (loss) from continuing operations attributable to Covia Holdings Corporation | (48,139 | ) | 59,622 | (283,085 | ) | 130,887 | |||||||||
Income from discontinued operations, net of tax | - | 10,763 | 12,587 | 23,284 | |||||||||||
Net income (loss) attributable to Covia Holdings Corporation | $ | (48,139 | ) | $ | 70,385 | $ | (270,498 | ) | $ | 154,171 | |||||
Continuing operations earnings (loss) per share | |||||||||||||||
Basic | $ | (0.37 | ) | $ | 0.50 | $ | (2.26 | ) | $ | 1.09 | |||||
Diluted | (0.37 | ) | 0.50 | (2.26 | ) | 1.09 | |||||||||
Discontinued operations earnings per share | |||||||||||||||
Basic | - | 0.09 | 0.10 | 0.20 | |||||||||||
Diluted | - | 0.09 | 0.10 | 0.20 | |||||||||||
Earnings (loss) per share | |||||||||||||||
Basic | (0.37 | ) | 0.59 | (2.16 | ) | 1.29 | |||||||||
Diluted | $ | (0.37 | ) | $ | 0.59 | $ | (2.16 | ) | $ | 1.29 | |||||
Weighted average number of shares outstanding | |||||||||||||||
Basic | 131,182 | 119,645 | 125,514 | 119,645 | |||||||||||
Diluted | 131,182 | 119,645 | 125,514 | 119,645 | |||||||||||
(A) - Stock compensation expense of $2,365 and $5,812 for the three months and year ended December 31, 2018, respectively, is included within selling, general, and administrative expenses.
Covia | |||||||
Condensed Consolidated Statements of Cash Flows | |||||||
(unaudited) | |||||||
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Net income (loss) attributable to Covia Holdings Corporation | $ | (270,498 | ) | $ | 154,171 | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation, depletion, and amortization | 200,525 | 112,705 | |||||
Amortization of deferred financing fees | 3,489 | - | |||||
Prepayment penalties on Senior Notes | 2,213 | - | |||||
Goodwill and other asset impairments | 267,034 | - | |||||
Restructuring charges | 21,154 | - | |||||
Inventory write-downs | 6,744 | - | |||||
Loss on disposal of fixed assets | 107 | - | |||||
Change in fair value of interest rate swaps, net | (296 | ) | - | ||||
Deferred income tax benefit | (6,542 | ) | (47,215 | ) | |||
Stock compensation expense | 8,212 | - | |||||
Net income from non-controlling interest | 103 | - | |||||
Other, net | (7,507 | ) | (1,308 | ) | |||
Change in operating assets and liabilities, net of business combination effect: | |||||||
Accounts receivable | 105,850 | (55,554 | ) | ||||
Inventories | 14,653 | (7,383 | ) | ||||
Prepaid expenses and other assets | (6,067 | ) | 5,101 | ||||
Accounts payable | (59,062 | ) | 32,405 | ||||
Accrued expenses | (32,725 | ) | 39,285 | ||||
Net cash provided by operating activities | 247,387 | 232,207 | |||||
Cash flows from investing activities | |||||||
Proceeds from sale of fixed assets | 3,180 | 695 | |||||
Capital expenditures | (264,052 | ) | (108,854 | ) | |||
Cash of HPQ Co. distributed to Sibelco prior to Merger | (31,000 | ) | - | ||||
Payments to Fairmount Santrol Holdings Inc. shareholders, net of cash acquired | (64,697 | ) | - | ||||
Other investing activities | - | 770 | |||||
Net cash used in investing activities | (356,569 | ) | (107,389 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from borrowings on Term Loan | 1,650,000 | - | |||||
Payments on Term Loan | (8,250 | ) | - | ||||
Proceeds from borrowings on term debt | - | 49,642 | |||||
Payments on term debt | - | (103 | ) | ||||
Prepayment on Unimin Term Loans | (314,642 | ) | - | ||||
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 | (36,818 | ) | - | ||||
Fees for Revolver | (4,500 | ) | - | ||||
Cash Redemption payment to Sibelco | (520,377 | ) | - | ||||
Proceeds from share-based awards exercised or distributed | 464 | - | |||||
Tax payments for withholdings on share-based awards exercised or distributed | (318 | ) | - | ||||
Dividends paid | - | (50,000 | ) | ||||
Net cash used in financing activities | (66,799 | ) | (461 | ) | |||
Effect of foreign currency exchange rate changes | 2,052 | 341 | |||||
Increase (decrease) in cash and cash equivalents | (173,929 | ) | 124,698 | ||||
Cash and cash equivalents: | |||||||
Beginning of period | 308,059 | 183,361 | |||||
End of period | $ | 134,130 | $ | 308,059 | |||
Covia | |||||||
Condensed Consolidated Balance Sheets | |||||||
(unaudited) | |||||||
December 31, 2018 | December 31, 2017 | ||||||
(in thousands) | |||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 134,130 | $ | 308,059 | |||
Accounts receivable, net | 267,268 | 219,719 | |||||
Inventories, net | 162,970 | 79,959 | |||||
Other receivables | 40,306 | 27,963 | |||||
Prepaid expenses and other current assets | 20,941 | 16,322 | |||||
Current assets of discontinued operations | - | 66,906 | |||||
Total current assets | 625,615 | 718,928 | |||||
Property, plant and equipment, net | 2,834,361 | 1,136,104 | |||||
Deferred tax assets, net | 8,740 | 7,441 | |||||
Goodwill | 131,655 | 53,512 | |||||
Intangibles, net | 137,113 | 25,596 | |||||
Other non-current assets | 18,633 | 2,416 | |||||
Non-current assets of discontinued operations | - | 96,101 | |||||
Total assets | $ | 3,756,117 | $ | 2,040,098 | |||
Liabilities and Equity | |||||||
Current liabilities | |||||||
Current portion of long-term debt | $ | 15,482 | $ | 50,045 | |||
Accounts payable | 145,070 | 101,983 | |||||
Accrued expenses | 130,161 | 88,208 | |||||
Current liabilities of discontinued operations | - | 10,027 | |||||
Total current liabilities | 290,713 | 250,263 | |||||
Long-term debt | 1,612,887 | 366,967 | |||||
Employee benefit obligations | 54,789 | 97,798 | |||||
Deferred tax liabilities, net | 267,350 | 62,614 | |||||
Other non-current liabilities | 75,425 | 29,057 | |||||
Non-current liabilities of discontinued operations | - | 8,084 | |||||
Total liabilities | 2,301,164 | 814,783 | |||||
Equity | |||||||
Common stock | 1,777 | 1,777 | |||||
Additional paid-in capital | 388,027 | 43,941 | |||||
Retained earnings | 1,647,959 | 1,918,457 | |||||
Accumulated other comprehensive loss | (95,225 | ) | (128,228 | ) | |||
Treasury stock at cost | (488,141 | ) | (610,632 | ) | |||
Non-controlling interest | 556 | - | |||||
Total equity | 1,454,953 | 1,225,315 | |||||
Total liabilities and equity | $ | 3,756,117 | $ | 2,040,098 | |||
Covia
Pro Forma Segment Information
(unaudited)
(in thousands)
Three Months Ended December 31, | |||||||||||||||||||
2018 | 2017 | ||||||||||||||||||
Covia, As Reported | — | — | Covia, As Reported | Fairmount Santrol Pre-Merger(1) | Covia Pro Forma Combined(2) | ||||||||||||||
Volumes (tons) | |||||||||||||||||||
Energy | 4,354 | — | — | 2,854 | 2,777 | 5,631 | |||||||||||||
Industrial | 3,483 | — | — | 2,882 | 581 | 3,463 | |||||||||||||
Total volumes | 7,837 | — | — | 5,736 | 3,358 | 9,094 | |||||||||||||
Revenues | |||||||||||||||||||
Energy | $ | 255,611 | — | — | $ | 182,638 | $ | 245,193 | $ | 427,831 | |||||||||
Industrial | 185,719 | — | — | 153,275 | 28,743 | 182,018 | |||||||||||||
Total revenues | 441,330 | — | — | 335,913 | 273,936 | 609,849 | |||||||||||||
Segment gross profit(3) | |||||||||||||||||||
Energy | 31,252 | — | — | 59,711 | 76,332 | 136,043 | |||||||||||||
Industrial | 50,544 | — | — | 41,653 | 12,253 | 53,906 | |||||||||||||
Total segment gross profit | $ | 81,796 | — | — | $ | 101,364 | $ | 88,585 | $ | 189,949 | |||||||||
Year Ended December 31, | |||||||||||||||||||
2018 | 2017 | ||||||||||||||||||
Covia, As Reported | Fairmount Santrol Pre-Merger(1) | Covia Pro Forma Combined(2) | Covia, As Reported | Fairmount Santrol Pre-Merger(1) | Covia Pro Forma Combined(2) | ||||||||||||||
Volumes (tons) | |||||||||||||||||||
Energy | 16,101 | 4,588 | 20,689 | 11,216 | 10,278 | 21,494 | |||||||||||||
Industrial | 13,480 | 1,048 | 14,528 | 12,070 | 2,478 | 14,548 | |||||||||||||
Total volumes | 29,581 | 5,636 | 35,217 | 23,286 | 12,756 | 36,042 | |||||||||||||
Revenues | |||||||||||||||||||
Energy | $ | 1,114,424 | $ | 421,526 | $ | 1,535,950 | $ | 655,937 | $ | 834,749 | $ | 1,490,686 | |||||||
Industrial | 728,513 | 55,805 | 784,318 | 639,175 | 125,046 | 764,221 | |||||||||||||
Total revenues | 1,842,937 | 477,331 | 2,320,268 | 1,295,112 | 959,795 | 2,254,907 | |||||||||||||
Segment gross profit(3) | |||||||||||||||||||
Energy | 258,996 | 136,668 | 395,664 | 181,715 | 234,567 | 416,282 | |||||||||||||
Industrial | 203,175 | 21,440 | 224,615 | 184,738 | 54,027 | 238,765 | |||||||||||||
Total segment gross profit | $ | 462,171 | $ | 158,108 | $ | 620,279 | $ | 366,453 | $ | 288,594 | $ | 655,047 | |||||||
Three Months Ended September 30, | |||||||||||||||||||
2018 | 2017 | ||||||||||||||||||
Covia, As Reported | — | — | Covia, As Reported | Fairmount Santrol Pre-Merger(1) | Covia Pro Forma Combined(2) | ||||||||||||||
Volumes (tons) | |||||||||||||||||||
Energy | 4,497 | — | — | 3,081 | 2,832 | 5,913 | |||||||||||||
Industrial | 3,680 | — | — | 3,101 | 615 | 3,716 | |||||||||||||
Total volumes | 8,177 | — | — | 6,182 | 3,447 | 9,629 | |||||||||||||
Revenues | |||||||||||||||||||
Energy | $ | 324,606 | — | — | $ | 185,693 | $ | 249,751 | $ | 435,444 | |||||||||
Industrial | 198,762 | — | — | 162,115 | 30,299 | 192,414 | |||||||||||||
Total revenues | 523,368 | — | — | 347,808 | 280,050 | 627,858 | |||||||||||||
Segment gross profit(3) | |||||||||||||||||||
Energy | 60,961 | — | — | 55,940 | 80,542 | 136,482 | |||||||||||||
Industrial | 56,805 | — | — | 47,174 | 13,663 | 60,837 | |||||||||||||
Total segment gross profit | $ | 117,766 | — | — | $ | 103,114 | $ | 94,205 | $ | 197,319 | |||||||||
__________
(1) 2018 Fairmount Santrol Pre-Merger financial results for the year ended December 31, 2018 are for Fairmount Santrol Holdings Inc. ("Fairmount Santrol"), for the 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. 2017 Fairmount Santrol Pre-Merger financial results are for Fairmount Santrol for the three months and year ended December 31, 2017 and three months ended September 30, 2017, as previously reported by Fairmount Santrol.
(2) The unaudited Covia Pro Forma Combined financial results include the aggregate results of operations for legacy Fairmount Santrol and legacy Unimin including periods preceding the June 1, 2018 merger in addition to the Covia, As Reported results for periods on and after the date of the merger.
(3) As a result of the June 1, 2018 merger, legacy Fairmount Santrol inventories were written up to fair value under Generally Accepted Accounting Principles ("GAAP"). For the three months ended December 31, 2018, $3.6 million of this write-up was expensed through cost of sales thereby reducing segment gross profit. Of this $3.6 million for the three months ended December 31, 2018, $2.5 million and $1.1 million impacted the Energy and Industrial segments, respectively. For the year ended December 31, 2018, $28.3 million of this write-up was expensed through cost of sales thereby reducing segment gross profit. Of this $28.3 million for the year ended December 31, 2018, $24.6 million and $3.7 million impacted the Energy and Industrial segments, respectively. For the three months ended September 30, 2018, $5.5 million of this write-up was expensed through cost of sales thereby reducing segment gross profit. Of this $5.5 million, $4.1 million and $1.4 million impacted the Energy and Industrial segments, respectively.
Additionally, for the year ended December 31, 2018, the Company recognized $6.7 million of impairment charges in the Energy segment cost of sales, related to inventories located at recently idled facilities, thereby reducing segment gross profit.
In the three months and year ended December 31, 2018, Energy segment gross profit was negatively impacted by $8.1 million and $21.4 million, respectively from the in-basin facilities due to start-up costs and losses as they were scaling production. In the three months ended September 30, 2018, Energy segment gross profit was negatively impacted by $6.3 million from the in-basin facility losses as they were scaling production.
Covia
Pro Forma Net Income (Loss) Information & Reconciliation to Non-GAAP Measures (unaudited)
The following table reconciles EBITDA and Adjusted EBITDA, non-GAAP financial measures, to the most directly comparable GAAP measure, net income (loss) from continuing operations (amounts in thousands)
Three Months Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||
As Reported | Fairmount Santrol Pre-Merger | Merger Pro Forma Adjustments(1) | Covia Pro Forma Combined(2) | As Reported | Fairmount Santrol Pre-Merger(3) | Merger Pro Forma Adjustments(1) | Covia Pro Forma Combined(2) | ||||||||||||||||||
Revenues | $ | 441,330 | — | $ | - | $ | 441,330 | $ | 335,913 | $ | 273,936 | $ | - | $ | 609,849 | ||||||||||
Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)(4) | 359,534 | — | - | 359,534 | 234,549 | 185,351 | - | 419,900 | |||||||||||||||||
Operating expenses | |||||||||||||||||||||||||
Selling, general and administrative expenses | 45,828 | — | - | 45,828 | 32,832 | 33,802 | (6,835 | ) | 59,799 | ||||||||||||||||
Depreciation, depletion and amortization expense | 63,996 | — | (16,672 | ) | 47,324 | 29,363 | 17,411 | 14,171 | 60,945 | ||||||||||||||||
Goodwill and other asset impairments | (10,609 | ) | — | - | (10,609 | ) | - | - | - | - | |||||||||||||||
Restructuring charges | 7,204 | — | - | 7,204 | - | - | - | - | |||||||||||||||||
Other operating expense (income), net | (4,694 | ) | — | - | (4,694 | ) | 1,273 | 1,227 | - | 2,500 | |||||||||||||||
Operating income (loss) from continuing operations | (19,929 | ) | — | 16,672 | (3,257 | ) | 37,896 | 36,145 | (7,336 | ) | 66,705 | ||||||||||||||
Interest expense, net | 24,997 | — | (372 | ) | 24,625 | 2,019 | 18,778 | (183 | ) | 20,614 | |||||||||||||||
Loss on debt extinguishment and repurchase | - | — | - | - | - | 2,898 | - | 2,898 | |||||||||||||||||
Other non-operating expense, net | (1,327 | ) | — | (1,289 | ) | (2,616 | ) | 21,540 | - | (19,300 | ) | 2,240 | |||||||||||||
Income (loss) from continuing operations before provision (benefit) for income taxes | (43,599 | ) | — | 18,333 | (25,266 | ) | 14,337 | 14,469 | 12,147 | 40,953 | |||||||||||||||
Provision (benefit) for income taxes | 4,511 | — | 4,216 | 8,727 | (45,285 | ) | (6,196 | ) | 4,494 | (46,987 | ) | ||||||||||||||
Net income (loss) from continuing operations | (48,110 | ) | — | 14,117 | (33,993 | ) | 59,622 | 20,665 | 7,653 | 87,940 | |||||||||||||||
Less: Net income from continuing operations attributable to the non-controlling interest | 29 | — | - | 29 | - | 104 | - | 104 | |||||||||||||||||
Net income (loss) from continuing operations attributable to Covia Holdings Corporation | (48,139 | ) | — | 14,117 | (34,022 | ) | 59,622 | 20,561 | 7,653 | 87,836 | |||||||||||||||
Interest expense, net | 24,997 | — | (372 | ) | 24,625 | 2,019 | 18,778 | (183 | ) | 20,614 | |||||||||||||||
Provision (benefit) for income taxes | 4,511 | — | 4,216 | 8,727 | (45,285 | ) | (6,196 | ) | 4,494 | (46,987 | ) | ||||||||||||||
Depreciation, depletion and amortization expense | 63,996 | — | (16,672 | ) | 47,324 | 29,363 | 17,411 | 14,171 | 60,945 | ||||||||||||||||
EBITDA | 45,365 | — | 1,289 | 46,654 | 45,719 | 50,554 | 26,135 | 122,408 | |||||||||||||||||
Non-cash stock compensation expense(5) | 2,365 | — | - | 2,365 | - | 2,489 | - | 2,489 | |||||||||||||||||
Costs and expenses related to the Merger and integration(6) | 3,156 | — | (1,289 | ) | 1,867 | 19,300 | 6,835 | (26,135 | ) | - | |||||||||||||||
Restructuring expenses(7) | 3,599 | — | - | 3,599 | - | - | - | - | |||||||||||||||||
Goodwill and other asset impairments(8) | (10,609 | ) | — | - | (10,609 | ) | - | - | - | - | |||||||||||||||
Write-off deferred financing fees and loss on debt extinguishment and repurchase(9) | - | — | - | - | - | 2,898 | - | 2,898 | |||||||||||||||||
Adjusted EBITDA | $ | 43,876 | — | $ | - | $ | 43,876 | $ | 65,019 | $ | 62,776 | $ | - | $ | 127,795 | ||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||
As Reported | Fairmount Santrol Pre-Merger(1) | Merger Pro Forma Adjustments(1) | Pro Forma Combined(2) | As Reported | Fairmount Santrol Pre-Merger(3) | Merger Pro Forma Adjustments(1) | Pro Forma Combined(2) | ||||||||||||||||||
Revenues | $ | 1,842,937 | $ | 477,332 | $ | - | $ | 2,320,269 | $ | 1,295,112 | $ | 959,795 | $ | - | $ | 2,254,907 | |||||||||
Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)(4) | 1,380,766 | 319,224 | - | 1,699,990 | 928,659 | 671,201 | - | 1,599,860 | |||||||||||||||||
Operating expenses | |||||||||||||||||||||||||
Selling, general and administrative expenses | 145,593 | 44,156 | - | 189,749 | 99,087 | 113,240 | (8,312 | ) | 204,015 | ||||||||||||||||
Depreciation, depletion and amortization expense | 196,455 | 29,313 | (15,085 | ) | 210,683 | 101,560 | 69,410 | 60,593 | 231,563 | ||||||||||||||||
Goodwill and other asset impairments | 267,034 | - | - | 267,034 | - | - | - | - | |||||||||||||||||
Restructuring charges | 21,954 | - | - | 21,954 | - | - | - | - | |||||||||||||||||
Other operating expense (income), net | (5,024 | ) | (2,292 | ) | - | (7,316 | ) | 3,102 | (1,072 | ) | - | 2,030 | |||||||||||||
Operating income (loss) from continuing operations | (163,841 | ) | 86,931 | 15,085 | (61,825 | ) | 162,704 | 107,016 | (52,281 | ) | 217,439 | ||||||||||||||
Interest expense, net | 60,322 | 25,686 | 8,428 | 94,436 | 14,653 | 56,408 | 30,876 | 101,937 | |||||||||||||||||
Loss on debt extinguishment and repurchase | - | - | - | - | - | 2,898 | - | 2,898 | |||||||||||||||||
Other non-operating expense, net | 54,832 | 28,057 | (79,169 | ) | 3,720 | 25,989 | - | (19,300 | ) | 6,689 | |||||||||||||||
Income (loss) from continuing operations before provision (benefit) for income taxes | (278,995 | ) | 33,188 | 85,826 | (159,981 | ) | 122,062 | 47,710 | (63,857 | ) | 105,915 | ||||||||||||||
Provision (benefit) for income taxes | 3,987 | 1,683 | 19,740 | 25,410 | (8,825 | ) | (5,715 | ) | (23,627 | ) | (38,167 | ) | |||||||||||||
Net income (loss) from continuing operations | (282,982 | ) | 31,505 | 66,086 | (185,391 | ) | 130,887 | 53,425 | (40,230 | ) | 144,082 | ||||||||||||||
Less: Net income from continuing operations attributable to the non-controlling interest | 103 | 3 | - | 106 | - | 297 | - | 297 | |||||||||||||||||
Net income (loss) from continuing operations attributable to Covia Holdings Corporation | (283,085 | ) | 31,502 | 66,086 | (185,497 | ) | 130,887 | 53,128 | (40,230 | ) | 143,785 | ||||||||||||||
Interest expense, net | 60,322 | 25,686 | 8,428 | 94,436 | 14,653 | 56,408 | 30,876 | 101,937 | |||||||||||||||||
Provision (benefit) for income taxes | 3,987 | 1,683 | 19,740 | 25,410 | (8,825 | ) | (5,715 | ) | (23,627 | ) | (38,167 | ) | |||||||||||||
Depreciation, depletion and amortization expense | 196,455 | 29,313 | (15,085 | ) | 210,683 | 101,560 | 69,410 | 60,593 | 231,563 | ||||||||||||||||
EBITDA | (22,321 | ) | 88,184 | 79,169 | 145,032 | 238,275 | 173,231 | 27,612 | 439,118 | ||||||||||||||||
Non-cash stock compensation expense(5) | 5,812 | 8,482 | - | 14,294 | - | 10,071 | - | 10,071 | |||||||||||||||||
Costs and expenses related to the Merger and integration(6) | 52,979 | 28,057 | (79,169 | ) | 1,867 | 19,300 | 8,312 | (27,612 | ) | - | |||||||||||||||
Restructuring expenses(7) | 27,660 | - | - | 27,660 | - | - | - | - | |||||||||||||||||
Goodwill and other asset impairments(8) | 267,034 | - | - | 267,034 | - | - | - | - | |||||||||||||||||
Write-off of deferred financing costs and loss on debt extinguishment and repurchase(9) | - | - | - | - | - | 3,287 | - | 3,287 | |||||||||||||||||
Adjusted EBITDA | $ | 331,164 | $ | 124,723 | $ | - | $ | 455,887 | $ | 257,575 | $ | 194,901 | $ | - | $ | 452,476 | |||||||||
Three Months Ended September 30, | |||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||
As Reported | Fairmount Santrol Pre-Merger(1) | Merger Pro Forma Adjustments(1) | Pro Forma Combined(2) | As Reported | Fairmount Santrol Pre-Merger(3) | Merger Pro Forma Adjustments(1) | Pro Forma Combined(2) | ||||||||||||||||||
Revenues | $ | 523,368 | — | $ | - | $ | 523,368 | $ | 347,808 | $ | 280,050 | $ | - | $ | 627,858 | ||||||||||
Cost of goods sold (excluding depreciation, depletion, and amortization shown separately)(4) | 405,602 | — | - | 405,602 | 244,694 | 185,845 | - | 430,539 | |||||||||||||||||
Operating expenses | |||||||||||||||||||||||||
Selling, general and administrative expenses | 43,164 | — | - | 43,164 | 24,210 | 31,105 | (1,333 | ) | 53,982 | ||||||||||||||||
Depreciation, depletion and amortization expense | 68,584 | — | (10,392 | ) | 58,192 | 24,639 | 17,497 | 14,206 | 56,342 | ||||||||||||||||
Goodwill and other asset impairments | 265,343 | — | - | 265,343 | - | - | - | - | |||||||||||||||||
Restructuring charges | 14,750 | — | - | 14,750 | - | - | - | - | |||||||||||||||||
Other operating expense (income), net | (974 | ) | — | - | (974 | ) | (6 | ) | (1,594 | ) | - | (1,600 | ) | ||||||||||||
Operating income (loss) from continuing operations | (273,101 | ) | — | 10,392 | (262,709 | ) | 54,271 | 47,197 | (12,873 | ) | 88,595 | ||||||||||||||
Interest expense, net | 23,530 | — | (372 | ) | 23,158 | 5,104 | 12,110 | 9,429 | 26,643 | ||||||||||||||||
Other non-operating expense, net | 9,043 | — | (5,600 | ) | 3,443 | 1,374 | - | - | 1,374 | ||||||||||||||||
Income from continuing operations before provision for income taxes | (305,674 | ) | — | 16,364 | (289,310 | ) | 47,793 | 35,087 | (22,302 | ) | 60,578 | ||||||||||||||
Provision (benefit) for income taxes | (16,848 | ) | — | 3,764 | (13,084 | ) | 20,090 | 1,156 | (8,252 | ) | 12,994 | ||||||||||||||
Net income (loss) from continuing operations | (288,826 | ) | — | 12,600 | (276,226 | ) | 27,703 | 33,931 | (14,050 | ) | 47,584 | ||||||||||||||
Less: Net income (loss) from continuing operations attributable to the non-controlling interest | (32 | ) | — | - | (32 | ) | - | (25 | ) | - | (25 | ) | |||||||||||||
Net income (loss) from continuing operations attributable to Covia Holdings Corporation | (288,794 | ) | — | 12,600 | (276,194 | ) | 27,703 | 33,956 | (14,050 | ) | 47,609 | ||||||||||||||
Interest expense, net | 23,530 | — | (372 | ) | 23,158 | 5,104 | 12,110 | 9,429 | 26,643 | ||||||||||||||||
Provision (benefit) for income taxes | (16,848 | ) | — | 3,764 | (13,084 | ) | 20,090 | 1,156 | (8,252 | ) | 12,994 | ||||||||||||||
Depreciation, depletion and amortization expense | 68,584 | — | (10,392 | ) | 58,192 | 24,639 | 17,497 | 14,206 | 56,342 | ||||||||||||||||
EBITDA | (213,528 | ) | — | 5,600 | (207,928 | ) | 77,536 | 64,719 | 1,333 | 143,588 | |||||||||||||||
Non-cash stock compensation expense(5) | 2,654 | — | - | 2,654 | - | 2,402 | - | 2,402 | |||||||||||||||||
Costs and expenses related to the Merger and integration(6) | 5,600 | — | (5,600 | ) | - | - | 1,333 | (1,333 | ) | - | |||||||||||||||
Restructuring expenses(7) | 24,061 | — | - | 24,061 | - | - | - | - | |||||||||||||||||
Goodwill and other asset impairments(8) | 265,343 | — | - | 265,343 | - | - | - | - | |||||||||||||||||
Adjusted EBITDA | $ | 84,130 | — | $ | - | $ | 84,130 | $ | 77,536 | $ | 68,454 | $ | - | $ | 145,990 | ||||||||||
__________
(1) The unaudited pro forma condensed financial information presents the Company’s combined results as if the Merger had occurred on January 1, 2017. The pro forma financial information was prepared to give effect to events that are (i) directly attributable to the Merger; (ii) factually supportable; and (iii) expected to have a continuing impact on the Company’s results. All material intercompany transactions during the periods presented have been eliminated. These pro forma results include adjustments for interest expense that would have been incurred to finance the transaction and reflect purchase accounting adjustments for additional depreciation, depletion and amortization on acquired property, plant and equipment and intangible assets in prior periods which resulted in a reduction to depreciation, depletion and amortization in the current periods. The pro forma results exclude Merger related transaction costs and expenses that were incurred in conjunction with the transaction for all periods presented. 2018 Fairmount Santrol Pre-Merger financial results for the year ended December 31, 2018 are for Fairmount Santrol Holdings Inc. ("Fairmount Santrol"), for the five months ended May 31, 2018, the day before the merger between Fairmount Santrol and Unimin Corporation ("Unimin") occurred on June 1, 2018.
(2) The unaudited Covia Pro Forma Combined financial results include the aggregate results of operations for legacy Fairmount Santrol and legacy Unimin including periods preceding the June 1, 2018 merger in addition to the Covia, As Reported results for periods on and after the date of the merger.
(3) 2017 Fairmount Santrol Pre-Merger financial results are for Fairmount Santrol for the three months and year ended December 31, 2017 and three months ended September 30, 2017, as previously reported by Fairmount Santrol.
(4) As a result of the June 1, 2018 merger, legacy Fairmount Santrol inventories were written up to fair value under Generally Accepted Accounting Principles ("GAAP"). For the three months ended December 31, 2018, $3.6 million of this write-up was expensed through cost of sales thereby reducing segment gross profit. Of this $3.6 million for the three months ended December 31, 2018, $2.5 million and $1.1 million impacted the Energy and Industrial segments, respectively. For the year ended December 31, 2018, $28.3 million of this write-up was expensed through cost of sales thereby reducing segment gross profit. Of this $28.3 million for the year ended December 31, 2018, $24.6 million and $3.7 million impacted the Energy and Industrial segments, respectively. For the three months ended September 30, 2018, $5.5 million of this write-up was expensed through cost of sales thereby reducing segment gross profit. Of this $5.5 million, $4.1 million and $1.4 million impacted the Energy and Industrial segments, respectively.
Additionally, for the year ended December 31, 2018, the Company recognized $6.7 million of impairment charges in the Energy segment cost of sales, related to inventories located at recently idled facilities, thereby reducing segment gross profit.
In the three months and year ended December 31, 2018, Energy segment gross profit was negatively impacted by $8.1 million and $21.4 million, respectively from the in-basin facilities due to start-up costs and losses as they were scaling production. In the three months ended September 30, 2018, Energy segment gross profit was negatively impacted by $6.3 million from the in-basin facility losses as they were scaling production.
(5) Represents the non-cash expense for stock-based awards issued to employees and outside directors. Stock compensation expenses are reported in Selling, general & administrative expenses ("SG&A").
(6) Costs and expenses related to the Merger with Fairmount Santrol include legal, accounting, financial advisory services, severance, debt extinguishment, and integration expenses. Additionally, it includes stock compensation expense related to accelerated awards as a result of the Merger.
(7) Represents expenses associated with restructuring activities as a result of the Merger and idled plant facilities, including, inventory write-downs, pension and severance expenses, in addition to other liabilities recognized. For the year ended December 31, 2018 and for the three months ended September 30, 2018, inventory write-downs of $6.7 million are recorded in cost of goods sold. In the three months and year ended December 31, 2018, pension related income of $3.6 million and $1.0 million are recorded in Other non-operating expense, net. In the three months ended September 30, 2018, pension related expenses of $2.6 million is recorded in Other non-operating expense, net.
(8) Represents expenses associated with the impairment of goodwill in the Energy segment and the impairment of assets from recently idled facilities for the three months and year ended December 31, 2018. Also includes charges from a terminated project for the year ended December 31, 2018 due to post-Merger synergies and capital optimization.
(9) Represents write-off of deferring financing fees and debt extinguishment losses related to the legacy Fairmount Santrol debt refinancing and prepayment activities in 2017.
Investor contact:
Matthew Schlarb
440-214-3284
Matthew.Schlarb@coviacorp.com
Source: Covia