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

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 1, 2016

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

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

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

 

Item 8.01.	Other Events.	
As disclosed in Fairmount Santrol Holdings Inc.’s (the “Company’s”) Quarterly Report on Form 10-Q for the period ended September 30, 2016, the Company evaluated the reporting of its segments, Proppant Solutions and Industrial & Recreational Products. Previously, the segment results were reported based on segment contribution margin. Segment contribution margin included selling, general, and administrative expenses directly allocable to an operating segment and excluded certain corporate costs not associated with the operations of the segment. These corporate costs were separately stated, and included costs related to functional areas such as operations management, corporate purchasing, accounting, treasury, information technology, legal and human resources. After evaluation of the Company’s comparability to industry peers and practices, the Company’s CEO, who is the chief operating decision maker, changed the method to evaluate the Company’s operating segments’ performance based on segment gross margin. Segment gross margin does not include any selling, general, and administrative costs or corporate costs. The change to using segment gross margin results in an increase in segment profitability compared to segment contribution margin as allocable selling, general, and administrative costs were charged against segment contribution margin. This change was effective beginning the three months ended September 30, 2016.
For comparability purposes, the following is a reconciliation of previously reported segment contribution margin to segment gross margin for the periods presented. The Company has evaluated its Management Discussion and Analysis for these previous periods and determined that the explanations provided for the material variances of segment results are not impacted by the change of the measurement from segment contribution margin to segment gross margin.

Fairmount Santrol
Segment Reports
(unaudited)

 	  	Three Months Ended	 	  	Year Ended December 31,	 	
 	  	March 31,
2015	 	  	June 30,
2015	 	 	September 30,
2015	 	  	December 31,
2015	 	 	March 31,
2016	 	  	June 30,
2016	 	 	September 30,
2016	 	  	2015	 	  	2014	 	  	2013	 	
 	  	(in thousands, except volume amounts)	 	  	(in thousands, except volume
amounts)	 	
Volume (tons)	  				  				 				  				 				  				 				  				  				  				
Proppant Solutions	  				  				 				  				 				  				 				  				  				  				
Raw sand	  	 	1,487,414	  	  	 	1,387,203	  	 	 	1,309,428	  	  	 	1,253,257	  	 	 	1,413,248	  	  	 	1,230,077	  	 	 	1,657,799	  	  	 	5,437,302	  	  	 	5,713,374	  	  	 	4,088,136	  	
Coated proppant	  	 	290,568	  	  	 	206,572	  	 	 	154,902	  	  	 	114,414	  	 	 	112,704	  	  	 	59,826	  	 	 	96,532	  	  	 	766,456	  	  	 	1,475,095	  	  	 	1,028,567	  	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Proppant Solutions	  	 	1,777,982	  	  	 	1,593,775	  	 	 	1,464,330	  	  	 	1,367,671	  	 	 	1,525,952	  	  	 	1,289,903	  	 	 	1,754,331	  	  	 	6,203,758	  	  	 	7,188,469	  	  	 	5,116,703	  	
Industrial & Recreational Products	  	 	534,021	  	  	 	641,482	  	 	 	569,971	  	  	 	555,495	  	 	 	587,178	  	  	 	661,244	  	 	 	668,333	  	  	 	2,300,969	  	  	 	2,425,756	  	  	 	2,461,750	  	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total volumes	  	 	2,312,003	  	  	 	2,235,257	  	 	 	2,034,301	  	  	 	1,923,166	  	 	 	2,113,130	  	  	 	1,951,147	  	 	 	2,422,664	  	  	 	8,504,727	  	  	 	9,614,225	  	  	 	7,578,453	  	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Revenues	  				  				 				  				 				  				 				  				  				  				
Proppant Solutions	  	$	272,869	  	  	$	188,150	  	 	$	141,584	  	  	$	107,480	  	 	$	117,463	  	  	$	82,102	  	 	$	103,140	  	  	$	710,083	  	  	$	1,232,232	  	  	$	856,212	  	
Industrial & Recreational Products	  	 	28,621	  	  	 	33,173	  	 	 	29,366	  	  	 	27,466	  	 	 	27,995	  	  	 	32,147	  	 	 	31,635	  	  	 	118,626	  	  	 	124,226	  	  	 	132,174	  	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total revenues	  	 	301,490	  	  	 	221,323	  	 	 	170,950	  	  	 	134,946	  	 	 	145,458	  	  	 	114,249	  	 	 	134,775	  	  	 	828,709	  	  	 	1,356,458	  	  	 	988,386	  	
Segment Gross Profit	  				  				 				  				 				  				 				  				  				  				
Proppant Solutions	  	 	90,110	  	  	 	43,594	  	 	 	26,788	  	  	 	14,734	  	 	 	16,592	  	  	 	(13,529	) 	 	 	6,356	  	  	 	175,226	  	  	 	463,426	  	  	 	317,117	  	
Industrial & Recreational Products	  	 	8,832	  	  	 	12,599	  	 	 	12,483	  	  	 	10,724	  	 	 	10,402	  	  	 	13,649	  	 	 	13,546	  	  	 	44,638	  	  	 	41,578	  	  	 	43,427	  	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total gross profit	  	 	98,942	  	  	 	56,193	  	 	 	39,271	  	  	 	25,458	  	 	 	26,994	  	  	 	120	  	 	 	19,902	  	  	 	219,864	  	  	 	505,004	  	  	 	360,544	  	
Segment Allocated Selling, General and Administrative Expenses	  				  				 				  				 				  				 				  				  				  				
Proppant Solutions	  	 	6,291	  	  	 	8,178	  	 	 	7,849	  	  	 	82,098	  	 	 	3,984	  	  	 	60,869	  	 	 	6,356	  	  	 	104,416	  	  	 	32,647	  	  	 	20,797	  	
Industrial & Recreational Products	  	 	1,756	  	  	 	13,493	  	 	 	3,285	  	  	 	855	  	 	 	1,556	  	  	 	1,643	  	 	 	13,546	  	  	 	19,389	  	  	 	7,105	  	  	 	8,662	  	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total segment expenses	  	 	8,047	  	  	 	21,671	  	 	 	11,134	  	  	 	82,953	  	 	 	5,540	  	  	 	62,512	  	 	 	19,902	  	  	 	123,805	  	  	 	39,752	  	  	 	29,459	  	
Segment Contribution Margin as reported	  				  				 				  				 				  				 				  				  				  				
Proppant Solutions	  	 	83,819	  	  	 	35,416	  	 	 	18,939	  	  	 	(67,364	) 	 	 	12,608	  	  	 	(74,398	) 	 	 	—  	  	  	 	70,810	  	  	 	430,779	  	  	 	296,320	  	
Industrial & Recreational Products	  	 	7,076	  	  	 	(894	) 	 	 	9,198	  	  	 	9,869	  	 	 	8,846	  	  	 	12,006	  	 	 	—  	  	  	 	25,249	  	  	 	34,473	  	  	 	34,765	  	
	  	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total segment contribution margin	  	 	90,895	  	  	 	34,522	  	 	 	28,137	  	  	 	(57,495	) 	 	 	21,454	  	  	 	(62,392	) 	 	 	—  	  	  	 	96,059	  	  	 	465,252	  	  	 	331,085	  	

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

	 		 	Fairmount Santrol Holdings Inc.
(Registrant)	
			
Date: December 1, 2016	 		 	/s/ Michael F. Biehl	
	 		 	Michael F. Biehl	
	 		 	Executive Vice President and Chief Financial Officer