Covia Announces Fourth Quarter and Full Year 2018 Results

• 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