Credit Suisse On FMSA Sep 2016

7 September 2016
Americas/United States
Equity Research
Oil & Gas Equipment & Services
Fairmount Santrol Holdings,

Inc. (FMSA)
Rating NEUTRAL
Price (02-Sep-16,US$) 7.84 INITIATION
Target price (US$) 7.00
52-week price range
Market cap (US$ m)
8.70 - 1.23
1,500.68
No Rose Without a Thorn
Enterprise value (US$ m) 2,428.92
*Stock ratings are relative to the coverage universe in each ■ Positioned. From an operational perspective, FMSA is very well positioned
analyst's or each team's respective sector. to take advantage of the pending proppant market recovery, which we think
¹Target price is for 12 months.
[V] = Stock Considered Volatile (see Disclosure Appendix) will lead to revenue and margin expansion. FMSA has the largest low-cost
Research Analysts mine of its public competitors, exposure to the high-end and low-end of the
James Wicklund proppant market, access to 40-plus transload facilities, and is positioned on
214 979 4111
james.wicklund@credit-suisse.com
Class I railroads. And they have been doing it for 38 years.
Jacob Lundberg ■ The Problem. Debt. There are $1.2B in principal payments due by 2019
212 325 6785 ($6.50/share headwind) and FMSA will dole out an estimated ~$162M in
jacob.lundberg@credit-suisse.com
interest payments out of ~$323M in EBITDA we forecast over that period.
Charles Foote
Even with our bullish view of the sand industry, FMSA may have to do some
212 538 8444
charles.foote@credit-suisse.com things that will dilute the current equity value.
■ Focus. The company is pursuing three strategic initiatives: (1) realign the
cost structure, (2) enhance short-term liquidity, and (3) address the long-
term capital structure. Two tie directly to the debt issue and the first point is
driven by it. We expect issuance of equity, converts, and possibly high-yield
in the future to meet these objectives.
■ Sand Can. We are bullish on the proppant market for a number of reasons,
including: increasing use of sand per well, completion of drilled but
uncompleted wells (DUCs), and a steep industry cost curve. In a separate
industry deep dive released today, we detail why we think industry
demand will increase 48.6% / 27.1% YoY in 2017 / 2018. We are favorably
disposed to the fundamentals of the sand business and FMSA is one of the
established leaders in that industry.
■ Final Score. We initiate coverage with a Neutral rating and a $7 target price.
Our revenue estimates are above consensus based on our bullish frac sand
demand outlook. But our EBITDA estimates are in-line with consensus. We
expect resin coated sand demand to continue to wane (relative to other
proppants), of which FMSA is the largest supplier.
Share price performance Financial and valuation metrics
Year 12/15A 12/16E 12/17E 12/18E
EPS (CS adj.) (US$) 0.06 -0.48 -0.19 0.36
Prev. EPS (US$) - - - -
P/E (x) 130.3 -16.4 -41.7 21.9
P/E rel. (%) 617.9 -80.3 -224.3 128.7
Revenue (US$ m) 828.7 525.8 814.2 1,259.6
EBITDA (US$ m) 138.1 -7.8 81.9 237.1
OCFPS (US$) 1.44 -0.05 -0.10 0.36
P/OCF (x) 1.6 -166.7 -76.4 21.8
On 02-Sep-2016 the S&P 500 INDEX closed at 2179.98 EV/EBITDA (current) 18.7 -330.9 31.6 10.9
Daily Sep04, 2015 - Sep02, 2016, 09/04/15 = US$4.68 Net debt (US$ m) 1,066 928 979 941
Quarterly EPS Q1 Q2 Q3 Q4 ROIC (%) 13.88 -4.82 0.73 11.22
2015A 0.19 0.02 -0.05 -0.10 Number of shares (m) 191.41 IC (current, US$ m) 1,005.96
2016E -0.07 -0.17 -0.12 -0.11 Net debt (Next Qtr., US$ m) 930.0 EV/IC (x) 2.6
2017E -0.10 -0.06 -0.05 0.02 Net debt/tot eq (Next Qtr.,%) -21,547.4 Dividend (current, US$) -
Source: Company data, Thomson Reuters, Credit Suisse estimates
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit
Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware
that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report
as only a single factor in making their investment decision.
7 September 2016
Fairmount Santrol Holdings, Inc. (FMSA)

Price (02 Sep 2016): US$7.84; Rating: NEUTRAL; Target Price: US$7.00; Analyst: James Wicklund
Income Statement 12/15A 12/16E 12/17E 12/18E Per share 12/15A 12/16E 12/17E 12/18E
Revenue (US$ m) 828.7 525.8 814.2 1,259.6 No. of shares (wtd avg) 164 174 191 191
EBITDA 138 (8) 82 237 CS adj. EPS 0.06 (0.48) (0.19) 0.36
Depr. & amort. (67) (71) (65) (62) Prev. EPS (US$)
EBIT (US$) 69 (77) 11 169 Dividend (US$) 0.00 0.00 0.00 0.00
Net interest exp (62) (67) (66) (63) Dividend payout ratio 0.00 -0.00 -0.00 0.00
Associates - - - - Free cash flow per share 0.75 (0.23) (0.27) 0.20
Other adj. (2) 0 0 0 Earnings 12/15A 12/16E 12/17E 12/18E
PBT (US$) 5 (144) (55) 105 Sales growth (%) (38.9) (36.6) 54.9 54.7
Income taxes 5 61 19 (37) EBIT growth (%) (78.7) (211.1) 113.7 1503.8
Profit after tax 10 (83) (36) 68 Net profit growth (%) (94.5) (940.4) 56.8 290.9
Minorities (0) -0 -0 -0 EPS growth (%) (94.4) (893.1) 60.6 290.9
Preferred dividends - - - - EBITDA margin (%) 16.7 (1.5) 10.1 18.8
Associates & other 0 (0) 0 0 EBIT margin (%) 8.3 (14.6) 1.3 13.4
Net profit (US$) 10 (83) (36) 68 Pretax margin (%) 0.6 (27.3) (6.8) 8.4
Other NPAT adjustments (102) (60) 0 0 Net margin (%) 1.2 (15.8) (4.4) 5.4
Reported net income (92) (143) (36) 68
Valuation 12/15A 12/16E 12/17E 12/18E
Cash Flow 12/15A 12/16E 12/17E 12/18E EV/Sales (x) 3.10 4.62 3.05 1.94
EBIT 69 (77) 11 169 EV/EBITDA (x) 18.7 (330.9) 31.6 10.9
Net interest (62) (67) (66) (63) EV/EBIT (x) 37.2 (31.7) 235.8 14.5
Cash taxes paid - - - - P/E (x) 130.3 (16.4) (41.7) 21.9
Change in working capital 140 (6) (55) (68) Price to book (x) (21.0) (150.6) (38.5) 42.1
Other cash & non-cash items 89 141 91 32 Asset turnover 0.6 0.4 0.7 1.0
Cash flow from operations 236 (8) (20) 69
Returns 12/15A 12/16E 12/17E 12/18E
CAPEX (114) (31) (32) (30)
Free cashflow to the firm 122 (39) (51) 38 ROE stated-return on (%) 609.5 406.5 149.5 (4084.9)
ROIC (%) 0.1 (0.0) 0.0 0.1
Aquisitions - - - -
Divestments - - - - Interest burden (%) 0.07 1.87 (5.24) 0.62
Tax rate (%) (102.2) 42.3 35.0 35.0
Other investment/(outflows) (0) 4 0 0
Financial leverage (%) (20.22) (126.11) (28.63) 29.07
Cash flow from investments (114) (28) (32) (30)
Net share issue(/repurchase) 2 163 0 0 Gearing 12/15A 12/16E 12/17E 12/18E
Dividends paid 0 0 0 0 Net debt/equity (%) (1766.4) (10623.0 (2539.0) 2625.3
Issuance (retirement) of debt (21) (85) (28) (80) Net Debt to EBITDA (x) 7.7 Net) 12.0 4.0
Other 6 96 28 80 Interest coverage ratio (X) 1.1 Cash
(1.1) 0.2 2.7
Cashflow from financing activities (13) 174 (0) (0) Quarterly EPS Q1 Q2 Q3 Q4
Effect of exchange rates - - - - 2015A 0.19 0.02 -0.05 -0.10
Changes in Net Cash/Debt 109 138 (51) 38 2016E -0.07 -0.17 -0.12 -0.11
Net debt at start 1,176 1,066 928 979 2017E -0.10 -0.06 -0.05 0.02
Change in net debt (109) (138) 51 (38)
Net debt at end 1,066 928 979 941 Share price performance
Balance Sheet (US$) 12/15A 12/16E 12/17E 12/18E
Assets
Cash & cash equivalents 171 213 134 92
Account receivables 74 77 132 191
Inventory 70 75 105 135
Other current assets 44 50 50 50
Total current assets 360 415 420 469
Total fixed assets 871 732 698 666
Intangible assets and goodwill 112 109 109 109
Investment securities - - - -
Other assets 27 11 11 11
Total assets 1,369 1,267 1,239 1,255
Liabilities
Accounts payables 40 47 76 98
Short-term debt 18 17 69 1,030 On 02-Sep-2016 the S&P 500 INDEX closed at 2179.98
Other short term liabilities 28 20 20 20 Daily Sep04, 2015 - Sep02, 2016, 09/04/15 = US$4.68
Total current liabilities 86 84 166 1,148
Long-term debt 1,220 1,124 1,044 3
Other liabilities 123 68 68 68
Total liabilities 1,429 1,276 1,277 1,219
Shareholder equity (61) (9) (39) 36
Minority interests 1 0 0 0
Total liabilities and equity 1,369 1,267 1,239 1,255
Net debt 1,066 928 979 941
Source: Company data, Thomson Reuters, Credit Suisse estimates
Fairmount Santrol Holdings, Inc. (FMSA) 2

7 September 2016
Portfolio Manager's Summary

■ The Good. FMSA is a low-cost provider of proppant, primarily to the oil and gas
industry. The company's Wedron mine is one of the (if not the) lowest-cost mines in
the entire industry. It has 7.5M tons of annual northern white frac sand capacity. The
low-cost nature of this mine is a structural competitive advantage that gives the
company a built in margin at nearly any point in the cycle. We expect proppant
demand to increase 48.6%/27.1% YoY in 2017/2018. Being a low-cost provider in the
only sub-market of oilfield services seeing real secular growth puts FMSA in a good
position. Even better, FMSA has exposure to regional sand with its Voca, TX, facility.
Regional sand has taken share during the industry downcycle. We expect this trend to
continue for the next two quarters, after which we think incremental demand will rotate
back to northern white sand.
■ The Bad. FMSA is the largest provider of resin-coated sand in the industry, which has
historically resulted in outsized revenue per ton relative to competitors. But for the
past few years, proppant demand skipped over resin coated sand, which has greater
crush strength than raw sand, but is not as expensive as or quite as good as
ceramics. The shale cycle saw ceramic use primarily in the high-pressure gradient
Haynesville shale, as in other basins operators opted for raw Ottawa/northern white
sand. Lately, the greatest demand has been for regional sand, even lower-quality
proppant material on cost and performance. As a result, we don't see the resin coated
market staging a comeback anytime soon. Furthermore, we think the majority of US
production growth will come from the Permian basin over the next two years. In the
Permian, many operators and private equity investors are interested in "flipping" their
properties as fast as possible. As a result, there is an intense focus on cost and IP
rates (these metrics are how transaction multiples are determined). This further
pressures demand, since this dynamic favors regional sand first and northern white
sand only after the market for regional sand tightens. There is simply less demand for
FMSA's tempered resin-coated proppant in the short to medium term. In addition,
FMSA has a very large overhang of rail cars. These costs will slowly alleviate, but they
represent a near-term profitability headwind. Last, in 2015, 43% of revenues came
from FMSA's top two customers (HAL and FTS International). The high dependence
on these two companies makes us cautious as well.
■ The 800-Pound Gorilla. What concerns us most is FMSA's debt burden. The
company has done a great job essentially eliminating liquidity issues through 2018 by
restructuring maturities with its banks and raising $161M in equity in July 2016. As a
result, the stock has jumped from a 2016 low of $1.27 (in January) to a 2016 high of
$8.70 (in July). The problem is there are still $1.2B in principal payments due between
now and 2019. (See Figure 1.) Fortunately, over $1.0B of the $1.2B is due in 2019,
which means there is time to adjust the capital structure. The cycle has bottomed and
will begin to recover, which will improve terms and reception to any restructuring
moves. But the almost inevitable dilution and of what magnitude, to the current ~$1.5B
equity market capitalization, keeps us on the sidelines with a Neutral rating.
■ Bringing Home the Bacon. Similar to its primary public competitor (SLCA), FMSA
has a stable Industrial & Recreation business that currently makes up 100% of total
company contribution margin (and will continue to do so for the next few quarters on
our estimates). We expect volumes to continue to remain flat over the next few years
and for product mix to be seasonal (Q2 is typically the strongest quarter).
■ Trending Now. Over the summer, SLCA acquired NBR (a regional sand mine in
Tyler, TX) and SandBox (a proppant logistics provider specializing in last-mile
logistics). These two acquisitions brought two new themes to light in the industry: (1)
the prevalence of regional sand and (2) the importance of last-mile logistics. As noted
above, FMSA is well positioned in the regional market, but not in last-mile logistics.

7 September 2016
There is great debate in the industry as to whether or not the sand miners should
enter the last-mile logistics space. It is a very fragmented market as well as hyper-
cyclical. Operations are outside of the sand miner's core competencies. Nevertheless,
as profit is more difficult to come by due to the commoditized nature of the proppant
itself, we think last-mile logistics could be the next frontier for innovation in the space.
FMSA's debt burden largely prohibits the company from making an acquisition to
capitalize on this trend.
Key Charts
Figure 1: FMSA Liquidity Waterfall
1,100 (1,030)
1,000
900
800
700
600
500
400
300 155 231 (51)
38 (80)
200 (28) 152 (162)
110
80 (4)
100
0
Source: Company data, Credit Suisse estimates
Figure 2: Quarterly Proppant Demand Figure 3: Industry Cost Curve

20.0 $50 80.0
75.0
18.0 $45 70.0
65.0 70.0
$40 $45.0
16.0
Capacity Availabe (M Tons)
57.5 60.0
Minegate Clearing Price
$35 $40.0
14.0
50.0
$30
12.0
$25 37.5 $35.0 40.0
10.0
$20
$22.5 30.0
8.0
$15 $17.5 $17.5
20.0
6.0 $10
4.0 10.0
$5
9.4 28.1 20.0 7.5 5.0 5.0
2.0 $0 0.0
<$15 $15-20 $20-25 $25-35 $35-40 >$40
0.0 Cost per Ton
Capacity (M Tons) Cumulative Capacity (M tons) Minegate Clearning Price
Source: Credit Suisse estimates, PropTester Source: Credit Suisse estimates

7 September 2016
Figure 4: FMSA Volumes by Segment Figure 5: FMSA Revenue by Segment

3.5 400
3.0 350
2.5 300
250
2.0
M Tons
200
1.5
150
1.0
100
0.5 50
0.0 0
Raw Sand Coated Proppant I&R

Proppant Solutions I&R
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
Elephants in the Room

In the following text, we identify and share our views on major questions surrounding
FMSA.
■ Will FMSA be able to generate enough cash to pay off its term loans due in 2019?
Alternatively, will other liquidity levers be available to make these upcoming
maturities a non-issue?
o The biggest issue we have with FMSA is its capital structure. As shown in
Figure 6, the company has $1.22B due between today and year-end 2019. In
late July, FMSA completed a $161M equity offering, which eliminated liquidity
issues through 2018 (the final year of our forecast period). While buying time
is important, the $1.02B due in 2019 remains a significant issue. We do not
think FMSA will generate FCF in 2017 (primarily due to a working capital
release as volumes ramp up). We think 2018 FCF will be positive with
~$237M in EBITDA. As a result, we see no option for the company except to
issue more equity, issue some form of convertible securities, or both, in the
near term. While FMSA likely has access to the high-yield market, we would
estimate the rate on any HY issuance would be 12-13% and would be the
most expensive option. FMSA is likely to continue efforts on restructuring
maturities, but that comes at a cost. Investor interest in the sector and
specifically proppants is a positive for these efforts. In Figure 8, we display
just how successful proppant equity transactions have been YTD. HCLP has
tapped the equity market three times and the five transactions total $554M in
gross proceeds.
o While there are numerous levers FMSA can pull to successfully navigate its
2019 maturities, there is simply too much downside if the company does not
(or cannot) pull the right levers. Furthermore, if FMSA is successful, there is
too much potential dilution to current equity holders. In Figures 6 and 7, we
detail each maturity as well as display our liquidity waterfall.

7 September 2016
Figure 6: FMSA Upcoming Debt Payments
Source: Company data
Figure 7: FMSA Liquidity Waterfall Figure 8: YTD Proppant Company Equity Raises
1,100 (1,030)
1,000
900
800
700
Com pany Date Gross Proceeds ($M)
600
HCLP 8/10/2016 80.3
500
400 FMSA 7/28/2016 171.0
300 155 231 (51)
200 (28) 152
38 (80)
(162)
HCLP 6/14/2016 53.0
110
80 (4)
100 HCLP 4/28/2016 50.0
0
SLCA 3/16/2018 200.0
TOTAL 554.3
Source: Company data, Credit Suisse estimates Source: Company data
■ How will recent trends of increased use of regional sand and focus on last-mile
logistics affect FMSA?
o FMSA's Voca, TX, mine (regional sand) is well positioned owing to its
meaningful delivered cost advantage into key basins in South and West
Texas, including the Eagle Ford and the Permian. Furthermore, FMSA has
the option to expand this facility if the company can access the necessary
capital and has the desire to expand. If regional sand continues to take share
from northern white sand, FMSA at least has the option organically to
participate in the continued market shift. As for last-mile logistics, FMSA is
inhibited due to its heavy debt burden. In all likelihood, vertical integration into
last-mile logistics would require an acquisition by FMSA. The company is
simply not in a position to make an acquisition due to its balance sheet woes.
In our view, this is an area in which SLCA, HCLP, and others could gain a
competitive advantage in the medium to long term.

7 September 2016
■ FMSA is the largest provider of resin-coated proppant in the world. Will demand
for resin-coated proppant come back? If not, what are the implications for
FMSA?
o Of FMSA's two types of resin-coated proppant (tempered and curable), we
expect curable to come back with the rig count. (Curable is used in frac
flowback activity.) However, we do not think the tempered product will come
back as quickly for two reasons. First, all operators remain laser-focused on
cost in today's environment and all types of frac sand are much cheaper than
resin-coated proppant. Second, many operators have a "flipper" mentality.
Therefore, they complete wells with the mindset of minimizing cost and
maximizing IP in a roughly three-year period. Short-term costs matter more
than long-term performance. As a result, not only will tempered resin-coated
proppant lose share, northern white sand will struggle to take share from
regional sand.
■ How this will affect revenue per ton?

o As a result, we don't expect revenue per ton to return to above $100 per ton
until 2018 (revenue per ton was over $100 from 2012-2Q15). It will be a slow
grind back up. However, our industry demand forecast and eventual rotation
back to northern white sand both bode well for FMSA in the long term.
■ Will industry demand really return to 2014 levels? If so, what will happen to
FMSA's market share?
o Yes. We estimate proppant demand will be 33.2 / 49.4 / 62.8M tons in 2016 /
2017 / 2018, up 48.6% / 27.1% in 2017 / 2018 YoY, respectively. In our
industry deep dive, released today, we detail our methodology for how we
arrive at our estimates. In short, we think completion intensity will continue to
increase. As a result, sand per foot will continue to grind higher. From 2012-
14 (when demand hit peak), the proppant industry was much more
fragmented than it is today. Because logistics are so important, we think the
big three public players (which have the best logistics), will maintain market
share (at the worst) as demand rises.
Figure 9: Quarterly Proppant Demand

20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Source: Credit Suisse estimates, PropTester

7 September 2016
Company Overview
FMSA is the second-largest provider (by capacity) of sand-based proppant in the world.
The company is segmented in two divisions: proppant solutions (primary end market is oil
and gas) and industrial and recreational (I&R) products (multiple end markets including:
foundry, glass, sports and recreation, specialty products, building products, and water).
Historically, the I&R segment has much more stable margins and revenue than does the
Proppant Solutions segment. Demand from the I&R end markets is relatively stable and is
primarily influenced by key macroeconomic drivers, such as housing starts, light vehicle
sales, repair and remodel activity, and industrial production. Over the course of the oil and
gas industry downcycle, I&R revenues have gone from 8.7% (3Q14) of total revenues to
28.1% of total revenues (2Q16). We expect the revenue split to trend back toward 2014
levels through 2017 and in to 2018.
Furthermore, in 2Q16, the I&R segment made up over 100% of segment contribution
margin. In Figures 10 and 11, we display volumes by segment (including resin-coated
proppant) and revenues by segment, respectively. In Figure 12, we display adjusted
contribution margin by segment. Similar to revenue, I&R contribution margin, as a
percentage of total, has become a larger portion over the course of the industry
downcycle. We expect the I&R segment to be 100% of total contribution margin through
the end of 2016.
Figure 10: FMSA Volumes by Segment Figure 11: FMSA Revenues by Segment
3.5 400
3.0 350
2.5 300
250
2.0
M Tons
200
1.5
150
1.0
100
0.5 50
0.0 0
Raw Sand Coated Proppant I&R

Figure 12: FMSA Adjusted Contribution Margin by Segment

160
140
120
100
80
60
40
20
0
-20
-40

7 September 2016
FMSA had 798M tons of proven and probable mineral reserves as of August 2016. The
company had ten frac sand processing facilities with 16.8M tons of annual sand
processing capacity. Only two of these facilities are active today, totaling 9.0M tons of
active capacity. In addition, FMSA has nine coating facilities (three of which are active)
with 1.0M tons of active annual coating capacity. FMSA's Wedron mine is its flagship
facility. It is one of the lowest-cost facilities in the industry. (We estimate normalized
minegate production costs to be less than $15 per ton.) FMSA completed two 1.5M-ton
expansions to the facility, one in December 2015 and the other in April 2016. The facility
now has 8.5M tons of active capacity, 7.5M tons of which is northern white frac sand and
1.0M tons of which is resin-coated capacity. In addition, FMSA has 1.5M tons of regional
capacity from its Voca, TX, mine.
FMSA does not intend to further expand Wedron before re-opening one of its idle facilities.
There is potential to expand the Voca facility via a nearby area with another 100M tons of
available permitted reserves.
Within the Proppant Solutions segment, FMSA offers all different types of products (e.g.,
ceramic, resin-coated, northern white and regional silica sand) and is the only publicly
traded company to do so. Currently, FMSA is running its northern white sand mines at a
much lower utilization than its regional mines. In Figure 13, we display FMSA's different
proppant solutions products.
Figure 13: FMSA Proppant Solutions Products
FMSA is the largest provider of resin-coated proppant in the world. As shown in Figure 13,
FMSA offers two types of resin-coated sand: curable and tempered (procured). Curable
resin proppant is rig count driven, as it is primarily used to prevent proppant flow back in
fracking. Tempered product, the other type of resin-coated proppant is an alternative to
northern white and regional sand. In Q2, there was very little demand for this product.

7 September 2016
Consistent with our previously stated views, we think regional sand mines will continue to
hold market share for the next two quarters. Eventually, northern white sand mines will
begin to receive incremental volumes of sand as operators rotate back to performance
over cost savings. As the result of operators' desire to save money, we don't believe
FMSA's tempered resin-coated product will return to 2014 volumes in our forecast period
(though 2018). Through the downcycle, resin-coated proppant demand declined at a rate
similar to that of the rig count (driven by curable resin-coated proppant). We expect this
trend to continue in the upcycle. In contrast, we think industry proppant demand as a
whole will greatly outperform the rig count through 2018.
Figure 15: FMSA Resin Coated as % of Total

Figure 14: Total Resin-Coated Capacity Volumes
25%
20%
15%
10%
5%
0%
Source: PropTester Source: Company data, Credit Suisse estimates
The final type of proppant FMSA offers is self-suspending proppant (SSP). Like tempered
resin-coated proppant, SSP is a value-add product. SSP is a proppant and fluid system in
one. In some cases, it has resulted in 30-50% production enhancements. According to
management, SSP is in its second inning of commercialization and discussions with
operators on how to best use the technology are ongoing. Owing to the early-stage nature
of this technology, coupled with our view on industry trends toward regional sand, we don't
explicitly assign any additional sales or profit from SSP. Any further commercialization
would be upside to our current model.
FMSA has an extensive logistics system in North America and is capable of delivering
product via railroad, barge, and marine terminal. The company operates a logistics
network of 40-plus proppant distribution terminals and 10,100 railcars as of the end of Q2.
FMSA has unit train capabilities at two production facilities and eight in-basin terminals.
YTD, FMSA has discontinued activity at three transload terminals. Based on our
conversations with industry participants, we believe FMSA's logistics capabilities are a
source of sustained competitive advantage against smaller, private sand miners.
FMSA has exclusive rights (via ownership, lease or other means) at all of its 40-plus
distribution terminals. In Figure 16, we display FMSA's logistics network.

7 September 2016
Figure 16: FMSA Logistics Network and Mining Locations
Customers
During 2015 and 2014, FMSA's top ten customers represented 70% and 66% of revenues,
respectively. During the same periods, sales to FMSA's top two customers, HAL and FTS
International, accounted for 43% and 36% of revenues, respectively. The I&R segment
has over 770 customers and no one customer makes up a material amount of sales. While
customer concentration is high relative to many other industries, many of FMSA's peer
companies have a similar level of customer concentration. For instance, in 2015, SLCA's
two largest customers (HAL and SLB) accounted for 25% of total revenues.
Valuation
Our 12-month target price for FMSA equates to 10.4x our 2018 EBITDA estimate of
$237M. FMSA's historical median multiple is 10.4x, which we use based on our view that
2018 will be a mid-cycle year (keeping in mind that OFS stocks trade at peak multiples on
trough earnings and vice versa). Our EV/EBITDA valuation using 2016 and 2017
estimates derive minimal or negative equity value due to FMSA's lack of near-term
EBITDA and heavy debt burden. As a result, we use out-year (2018) estimates to value
the stock (as is the case with nearly every stock in our universe). In Figure 18, we display
our WACC calculation, in which we use current market interest rates to arrive at a WACC
of 9.6%. Using our WACC of 9.6% and discounting to 12 months from today gives us a
target price of $7. We assign 50% weight to this valuation methodology.

7 September 2016
We also run a DCF valuation. Based on the previously mentioned EBITDA, WACC, and
our published working capital and capex assumptions, we also arrive at a $7 target price.
We weight the two valuation methodologies equally to arrive at our $7 target price.
Figure 17: FMSA EV/EBITDA Valuation Figure 18: FMSA Credit Suisse WACC Calculation
WACC
Multiples FY2018E Beta 2.3
EBITDA 237 Risk-Free Rate 1.56%
Historical 1Y Forw ard Median Multiple 10.4x Equity Risk Premium 5.03%
Cost of Equity 13.4%
Implied Enterprise Value 2,471
EV Discounted to T+365 2,191
Cost of Debt 7.4%
Cash & Investments 204 Tax Rate 35%
Debt & Equivalents 1,201 After-Tax Cost of Debt 4.8%
Im plied Market Cap 1,194
Number of shares 181 Market Cap 1,500
Multiples-Based Value per Share $7 Outstanding Debt 1,201
WACC 9.6%
Source: Credit Suisse estimates Source: Credit Suisse estimates, the BLOOMBERG PROFESSIONAL™ service
Figure 19: FMSA Historical EV/EBITDA Multiple

100.0x
80.0x
60.0x
40.0x
20.0x
0.0x
Historical Multiple Median
Source: the BLOOMBERG PROFESSIONAL™ service
Enter Sandman: Industry Deep Dive

In conjunction with our initiation, we released an industry deep dive, outlining key themes
in the proppant industry today. In the following text, we highlight some major themes from
the note, as they relate to FMSA.
The Cost Curve

Another one of the characteristics that makes the sand industry unique is its cost curve. In
our conversations with sand, service, and E&P companies alike, there is a consensus that
the industry has an abnormally steep cost curve at the minegate. As previously discussed,
we estimate total industry active capacity is 75M tons. We estimate about one-half of total
capacity can be extracted for less than $20 per ton (37.5M tons). Much of this sub-$20 per
ton capacity (notably, HCLP's Wyeville [1.9M tons] facility and likely FMSA's Wedron
facility [7.5M tons of frac sand]), can produce at ~$10 per ton and even can drop below
$10 per ton if utilization increases and fixed-cost under-absorption is alleviated. As shown
in our frac sand supply curve (Figure 20), although only one-half of the industry's active

7 September 2016
capacity can produce below $20 per ton, the minimum clearing price is lower, as there are
operators in today's stressed environment that continue to produce at a negative margin at
the minegate. Often times because these companies are able to deliver in-basin at a
cheap rate due to their physical location or advantaged freight rates and make a profit
through in-basin sales, while losing money on minegate sales.
Only a few mines in the entire industry are currently running near full capacity (Wyeville,
along with some regional sand mines). Therefore, cost per ton by mine/company is a
moving target. As utilization increases across the industry, costs per ton will come down
(improved fixed cost absorption). Nevertheless, we do not model a decrease in minegate
clearing price. As costs per ton fall, the increase in demand should support prices.
Owing to the variation in price per ton (factor of utilization) and to the significant supply
that was introduced to the market during the previous upcycle, it is difficult to know what
the cost curve looked like in 2012-15. As a result, we focused our research efforts on the
cost curve in a normalized environment. We use the cost curve shown in Figure 20 in our
company models.
Figure 20: Frac Sand Industry Cost Curve and Capacity
$50 80.0
75.0
$45 70.0
65.0 70.0
$40 $45.0
Capacity Availabe (M Tons)

57.5 60.0
Minegate Clearing Price
$35 $40.0
50.0
$30
$25 37.5 $35.0 40.0
$20
$22.5 30.0
$15 $17.5 $17.5
20.0
$10
10.0
$5
9.4 28.1 20.0 7.5 5.0 5.0
$0 0.0
<$15 $15-20 $20-25 $25-35 $35-40 >$40
Cost per Ton
Capacity (M Tons) Cumulative Capacity (M tons) Minegate Clearning Price
Source: Credit Suisse estimates
As evidenced by Figure 20, the slope of the curve increases rapidly from a $17.50 clearing
price to $40-plus clearing price. Being able to produce sand at a price below $20 is a
structural competitive advantage in this industry (so long as demand is sufficient to require
higher-cost supply in the market). Companies able to produce at this low cost have a built-
in margin at the minegate, as increased demand in the market pushes up prices. Of the
public sand companies, only HCLP, SLCA, and FMSA have the ability to produce below
$20 per ton (at certain mines). For the sake of our forecast, we assume the cost curve will
remain constant through 2018.
We are often asked: what characteristics make a mine low cost? In our conversations with
industry, we have identified that the key characteristics include: (1) geology of the
reserves, (2) royalty rate, (3) relative location of wet/dry plants, (4) machine types, and (5)
location of mine relative to rail access (perhaps most important). The conclusion here is
that large companies with established mines and know-how are in the best position. As
previously discussed, many of these characteristics influence our view that the industry
has relatively high barriers to entry.

7 September 2016
The Great Debate: Northern White v. Regional

SLCA's acquisition of NBR, a regional sand mine located in Tyler, TX, brought new light
on regional sand's rapid rise to its position in the market place today. SLCA projects
regional sand made up 41% of the sand market as of 1Q16. (See Figure 21.) We agree,
based on our conversations with industry participants.
Figure 21: Market Share by Sand Type
Source: SLCA
A few years ago, regional sand made up just 16% of the market. In the downcycle,
operators focused on costs and traded down to regional sand despite the performance
gap vs northern white sand. Concurrent to this trend, operators moved to boost IP rates by
increasing proppant intensity (sand per lateral foot). This drove share gains for regional
sand. In the Permian, regional sand has a $0.01-0.02 cost per pound advantage vs.
northern white, according to our industry contacts. To put that in context, in a well that
uses ~4M tons of sand (our estimate for Q3), this equates to between $40,000 and
$80,000 in cost savings. While this doesn't seem like much at first glance, the mindset of
private operators in the Permian (and elsewhere) is to flip mineral rights quickly. These
operators (often funded by private equity) are paid a multiple on the profitability and/or IP
of the wells. As a result, regional sand is an obvious choice, as costs are lower and there
is little impact on short-term IP rates.
Operators focused on long-term production and/or EUR are more likely to use northern
white sand. The long-term performance of regional sand is unclear, but is likely materially
inferior to that of northern white sand, given the intrinsic properties of the two sand types.
The key question is: which type of sand will deliver the incremental ton, northern white or
regional? We expect regional sand to at least maintain market share over the next two
quarters, as it will take time for the market to tighten. (See Figures 24 and 25.) In addition,
regional sand is more likely to be used in shallower wells (lower pressure, thus less of a
performance inferiority vs northern white sand). This is where many operators are drilling
and completing wells in the Permian today, which is the most active basin in North
America.
The other questions that are front of mind as it relates to regional sand are: (1) what is
capacity and (2) what is utilization? Some in the industry think regional mines are running
7 September 2016
at full capacity, implying all incremental demand must come from northern white sand
(which we think is the consensus view). We disagree. We estimate regional utilization is
73% and that northern white utilization is 37%. (See Figure 23.) As we show in Figure 22,
total industry capacity is 110M tons. Of that, we think 35M tons are idle or shut-in today
(meaning 75M tons are able to work). We assume 25% of shut-in/idle capacity is regional
sand and that 75% of shut-in/idle capacity is northern white sand (based on historical split,
also in Figure 22). This means the regional market is much tighter than the northern white
market; however, it also means there is room-to-run in the regional market as sand
demand climbs from trough and operators remain cost conscious.
In Figures 24 and 25, we frame a scenario in which regional sand receives every pound of
incremental demand and a scenario in which regional sand maintain current share. Using
our demand forecast, each of these scenarios, we estimate regional capacity tops out
around 2Q17 (when utilization of currently able to work capacity rises above 100%). At this
time a rotation back to northern white sand should occur.
Figure 22: Frac Sand Capacity by Grade and Type
Source: PropTester
Figure 23: Utilization by Sand Type

Sand Type Capacity % of Total Active Capacity Market Share Market Mix Utilization
Northern White 82.5 75.0% 56.50 60% 20.78 36.8%
Regional 27.5 25.0% 18.86 40% 13.85 73.4%
Total 109.99 75.36 34.63 46.0%
CS Projected Q3 Dem and Annualized 34.63
Source: Credit Suisse estimates, PropTester

7 September 2016
Figure 24: Regional Sand Maximum Share Scenario Figure 25: Regional Sand Maintain Share Scenario
(All Figures Annualized) (All Figures Annualized)
3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E 3Q16E 4Q16E 1Q17E 2Q17E 3Q17E 4Q17E
Market Mix Market Mix
Northern White 20.78 20.78 20.78 20.78 20.78 20.78 Northern White 20.78 22.37 22.19 27.71 32.90 35.72
Regional 13.85 16.51 16.20 25.40 34.05 38.76 Regional 13.85 14.92 14.79 18.47 21.93 23.81
Total Demand 34.63 37.29 36.98 46.18 54.83 59.53 Total Demand 34.63 37.29 36.98 46.18 54.83 59.53
Check 0.00 0.00 0.00 0.00 0.00 0.00 Check 0.00 0.00 0.00 0.00 0.00 0.00
Incremental Demand 2.664 -0.312 9.201 8.647 4.706 Incremental Demand 2.664 -0.312 9.201 8.647 4.706
Active Capacity Active Capacity

Northern White 56.50 56.50 56.50 56.50 56.50 56.50 Northern White 56.50 56.50 56.50 56.50 56.50 56.50
Regional 18.86 18.86 18.86 18.86 18.86 18.86 Regional 18.86 18.86 18.86 18.86 18.86 18.86
Total 75.36 75.36 75.36 75.36 75.36 75.36 Total 75.36 75.36 75.36 75.36 75.36 75.36
Utilization Utilization
Northern White 36.8% 36.8% 36.8% 36.8% 36.8% 36.8% Northern White 36.8% 39.6% 39.3% 49.0% 58.2% 63.2%
Regional 73.4% 87.6% 85.9% 134.7% 180.6% 205.5% Regional 73.4% 79.1% 78.4% 98.0% 116.3% 126.3%
Horizontal Rig Count 356 366 382 463 538 574 Horizontal Rig Count 356 366 382 463 538 574
Increase from 2Q16 9.5% 12.7% 17.5% 42.7% 65.6% 76.6% Increase from 2Q16 9.5% 12.7% 17.5% 42.7% 65.6% 76.6%
Well Count 2,225 2,278 2,179 2,657 3,096 3,303 Well Count 2,225 2,278 2,179 2,657 3,096 3,303
Increase from 2Q16 11.2% 13.8% 8.9% 32.8% 54.7% 65.1% Increase from 2Q16 11.2% 13.8% 8.9% 32.8% 54.7% 65.1%
Source: Credit Suisse estimates, PropTester Source: Credit Suisse estimates, Pro Logistics Group
It's a Logistics Game

In its second recent acquisition, SLCA purchased SandBox, a storage, handling, and
wellsite delivery company focused on the frac sand industry. The acquisition brought the
importance of and innovation in last-mile logistics into the limelight. In our conversations
with industry participants, last-mile logistics are becoming increasingly important, as
effective timing can reduce inefficiencies. As a consequence, this reduces operators'
costs.
Furthermore, operators place a high value on frac sand quality control (i.e., knowing a
delivery of sand is uniformly a particular mesh and quality [because it has been in the
same container since it left the mine] is value-add). At present, last-mile logistics are very
fragmented and dominated by mom-and-pop trucking and logistics companies. The major
pressure pumpers have little desire to enter the asset-heavy, hypercyclical trucking
business, which has created an opportunity for innovation in the fragmented last-mile
logistics space. For these reasons, we believe there is opportunity for sand mining
companies to further vertically integrate into last-mile logistics (as SLCA did earlier in the
quarter). Herein, we detail a few interesting private companies that we think could be
targets for the public companies. Of the companies mentioned, SandBox is the only one to
own significant market share.

7 September 2016
■ Solaris Oilfield Infrastructure. The goal of Solaris' system is to save space at the well
site and increase completion times. Solaris uses a rail-to-truck transload system and
mobile sand silo system to reduce truck demurrage, lower costs, and reduce silica dust
on site. The 12-silo system can hold 5M pounds of storage at the well site and can
deliver sand at an average rate of 23,000 pounds per minute. The system also has the
ability to simultaneously load and unload silos. (See Figures 26 and 27.)
Figure 26: Solaris Oilfield Infrastructure Figure 27: Solaris Oilfield Infrastructure
Source: Company data Source: Company data
■ SandCan. Similar to SandBox, SandCan's frac storage system is designed for

simplicity and allows the user to load the SandCan at any loading facility, ship it to
the wellsite, and use the SandCan direct to blender technology to place the sand in
the well. The direct-to-blender technology allows for 1M lbs. of constant frac sand
flow directly to the blender. This reduces wait time for the operator.
Figure 28: SandCan Figure 29: SandCan RT40
Source: Company data Source: Company data
The primary drawback to purchasing last-mile logistics is the price tag. SLCA paid $218M
for SandBox, which raised eyebrows. We don't have any financial data on SandBox, so it
is difficult to obtain a sense of an exact EBITDA multiple. If we use SLCA's estimate that
SandBox has 10% market share and assume sand demand in Q2 was 6.625M tons
(again, the mid-point of SLCA's range), it implies SLCA paid $82.3 per ton of sand, just
under the price per ton SLCA paid for regional capacity NBR. It's too early to tell whether
SLCA over/under paid due to (1) the lack of public precedent transactions and (2) all
synergies are not yet apparent. FMSA's and HCLP's balance sheet issues could make it
difficult to raise the necessary funds needed to make an acquisition of similar size in this
specific space.

7 September 2016
The other logistics element to consider in the frac sand industry is access to and
placement along rail lines. In general, transportation costs make up the majority of costs in
the sand value chain. (See Figure 30.) In Figure 32, we display a comprehensive map of
the public companies' rail distribution networks. In our view, the public companies have a
sustained competitive advantage from a rail logistics stand point. The two Class I rail lines
that run to the Permian (the source of most incremental sand volumes) are the UP and
BNSF. SLCA, HCLP, and FMSA all have access to at least one of these lines at mines
that are operating today. Furthermore, each of the companies have exclusive access to or
ownership of a transload facility in the Permian. Having exclusive access/ownership
means fewer delays in delivery, faster unloading of sand upon delivery, and easier
storage. Similar to sand quality, streamlined logistics are increasingly more important as
costs are squeezed out of the system.
Figure 30: Sources of Frac Sand Cost Figure 31: Required Freight Mileage from Wisconsin
Source: Pro Logistics Group Source: Credit Suisse estimates

7 September 2016
Figure 32: North American Proppant Logistics Map
Emerge Distribution/Logistics
Emerge Plants
Hi Crush Distribution/Logistics
Hi Crush Plants
Fairmount Distribution/Logistics
Fairmount Plants
U.S. Silica Distribution/Logistics
U.S. Silica Plants
Competition
In Figures 33 through 36, we compare the three sand companies that we cover on four
key metrics: percentage of volumes sold in-basin, market share by volume, revenue per
ton, and total revenue (indexed). FMSA consistently has the highest percentage of
volumes sold in-basin and the highest revenue per ton. These two go hand-in-hand.
FMSA's revenue per ton has declined much more rapidly than SLCA or HCLP due to
declining demand for FMSA's resin-coated products. Furthermore, in the market share by
volume graph, we see all three companies taking share. SLCA has been most resilient
over the past two quarters on the back of increased demand for regional sand.

7 September 2016
Figure 33: Percentage of Volume Sold In-Basin Figure 34: Market Share by Volume
90% 20%
85% 18%
80% 16%
75% 14%
70% 12%
65% 10%
60%
8%
55%
6%
50%
4%
45%
2%
40%
3Q14A 4Q14A 1Q15A 2Q15A 3Q15A 4Q15A 1Q16A 2Q16A 0%
FY2012A FY2013A FY2014A FY2015A 1Q16A 2Q16A
HCLP SLCA FMSA
HCLP SLCA FMSA
Figure 35: Indexed Revenue Figure 36: Revenue per Ton

180 $250
160
140 $200
120
100 $150
80
$100
60
40
$50
20
0
1Q14A 2Q14A 3Q14A 4Q14A 1Q15A 2Q15A 3Q15A 4Q15A 1Q16A 2Q16A $0
FY2012A FY2013A FY2014A FY2015A 1Q16A 2Q16A
HCLP SLCA FMSA
HCLP SLCA FMSA
HOLT® Analysis
Credit Suisse HOLT is a proprietary framework used by many investors globally to assess
companies' performance and valuation. HOLT uses an objective performance metric
known as Cash Flow Return on Investment (CFROI®) that corrects for accounting
distortions to capture companies' true economic performance. HOLT also has a unique
valuation framework based on a proprietary discounted cash flow methodology. HOLT
uses CFROI to forecast future cash flows and enables investors to reverse-engineer the
future operating performance implied by current market values.
As evidenced by Figure 37, relative to peers, FMSA has historically strong CFROI levels.
Furthermore, relative to five-year median CFROI levels (dark blue bar), FMSA appears
undervalued, as do SLCA and CRR. CRR is a much-less clean comp than SLCA, as CRR
only sells ceramic proppant. We do not expect demand for ceramic proppant to recover
any time soon (well after northern white and even resin-coated demand recover). In
addition, in Figure 38, we display FMSA's historical and market implied (2016 & 2017)
CFROI levels. Furthermore, in Figures 39 and 40, we display FMSA's EBITDA margins
and Asset Turns, two key inputs in the CFROI metric.

7 September 2016
Figure 37: C-Corp Proppant CFROI Comparison
CFROI 5-Yr Median CFROI LFY CFROI consensus forecast Market-Implied CFROI
20%
Return on capital - CFROI
10%
0%
-10%
CRR SLCA FMSA
Source: HOLT®
Figure 38: FMSA CFROI (Historical and Market Implied) and Discount Rate
25
20
15
10
-5
2011 2013 2015 2017 2019
Historical Forecast based on Research projection
Long term projections Discount Rate
Source: HOLT®
Figure 39: FMSA HOLT EBITDA Margin Figure 40: FMSA HOLT Asset Turns
40 0.8
35 0.7
30
25 0.6
20 0.5
15 0.4
10
0.3
5
0 0.2
-5 0.1
-10 0.0
2011 2013 2015 2017 2019 2011 2013 2015 2017 2019
Historical
Historical Forecast based on Research projection Long term projections Forecast based on Research projection
Source: HOLT® Source: HOLT®

7 September 2016
Management
Ownership
FMSA is 37.17% owned by American Securities LLC, a middle-market private equity firm
with over $10B in AUM. American Securities originally invested in FMSA in 2010 (51%
ownership upon completion) and led the company though its IPO in 2014. American
Securities currently holds two of ten board seats. Furthermore, FMSA management owns
a significant number of shares. Former CEO Charles Fowler owns 6.18% of shares
outstanding and current CEO Jenniffer Deckard owns an additional 2.53% of shares
outstanding. In Figure 41, we summarize FMSA's shareholder ownership.
Figure 41: FMSA Ownership Summary
37.17%
49.09%
2.83%
6.18%
2.20% 2.53%
American Securities LLC Fowler, Charles The Vanguard Group, Inc.
Deckard, Jenniffer D Clancey, Gerald L Other
Source: Thomson Reuters Datastream
Biographies
■ Jenniffer Deckard, President, CEO, and Director. Jenniffer Deckard has served as
President, CEO, and Director of Fairmount Santrol since 2013. Previously, Deckard
served as President from January 2011 until May 2013, Vice President of Finance and
Chief Financial Officer from 1999 until 2011, Corporate Controller from 1996 to 1999,
and Accounting Manager from 1994 until 1996. Deckard serves on the boards of the
Cleveland Foundation, the Chardon Healing Fund, and the First Tee of Cleveland. In
addition, she serves on the Case Western Weatherhead School of Management’s
Visiting Committee and the Board of Directors for the Fairmount Santrol Foundation.
Deckard received a B.S. from the University of Tulsa and an MBA from Case Western
Reserve University.
■ Michael Biehl, Executive Vice President and, CFO. Michael Biehl has served as
Executive Vice President and Chief Financial Officer since 2016. Prior to joining
Fairmount Santrol, Mr. Biehl served as Chief Financial Officer for Chart Industries
(GTLS). He previously held management positions at the former Oglebay Norton
Company and Ernst & Young LLP. Mr. Biehl is actively involved at St. Joseph Academy
and was recently appointed to Board Chairman for the 2016-17 and 2017-18 school

7 September 2016
years. Mr. Biehl holds a MBA from Northwestern University’s Kellogg School of
Management and a BBA (with a major in accounting) from Ohio University.
■ Gerald L. Clancey, Executive Vice President and, Chief Commercial Officer.

Gerald Clancey has served as Executive Vice President, Chief Commercial Officer
since 2015. In this role, he has responsibility for Domestic and International Sales into
the Proppant and Industrial & Recreational channels as well as leadership for Supply
Chain and Logistics. Previously, Mr. Clancey served as Executive Vice President of
Supply Chain and I&R since 2011 and Vice President of Sales for I&R from 2002 to
2011. He served as General Sales Manager for the company’s TechniSand resin-
coated foundry division from 1998 to 2002. He was past President for the Foundry
Educational Foundation and served several terms on the Board of Directors. Clancey
received a B.S. from Kent State University and an M.B.A. from the University of Notre
Dame.
■ Matthew F. LeBaron, Chairman of the Board. Matthew LeBaron has served as

Chairman of the Board since 2010. He joined American Securities in 1999 and left in
2015 to start a new firm, LeBaron Brown Industries. Previously, LeBaron was a private
equity investor at Bain Capital, Inc. and a consultant at The Boston Consulting Group.
He is Chairman of the Board of FiberMark, GT Technologies, Lakeside Energy, Liberty
Tire Recycling and The United Distribution Group. He received a B.A. from Amherst
College and an M.B.A. from the Harvard Business School.
Compensation
FMSA's compensation framework is focused on promoting overall performance and
maximizing long-term shareholder value. For fiscal 2016, executive compensation is
directly linked to: (1) operating performance, measured by EBITDA; (2) managing liquidity,
measured by cash-on-hand and (3) achievement of sustainable development goals. In
general, awards, bonuses and other compensation make up over 50% of executive
officer's total salary. In 2015, all executive officers had their total compensation reduced as
a result of lower awards, bonuses and other compensation.
Investment Risks
Risks to our $7 target price and Neutral rating include: (1) if the current trend of increasing
proppant use per lateral foot were to halt or reverse, (2) if FMSA's customer base were to
aggressively build out its own logistics infrastructure and (3) if customers continue using
lower-quality sand in favor of Northern White frac sand or resin coated proppant.
Investment risks for FMSA include the following. Of FMSA's shares, 37.17% are owned by
American Securities, a private equity firm; American Securities holds two of ten board
seats. FMSA operations are subject to the cyclicality of the end markets that it services.
FMSA is significantly exposed to the oil and gas industry and thus particularly exposed to
the cyclicality of that industry. FMSA's top ten customers accounted for 43% of its 2015
revenues. The company is subject to extensive environmental, health, and safety
regulations that carry significant compliance costs. Inhalation of respirable crystalline silica
is associated with the lung disease silicosis; related health issues and litigation could have
an adverse effect on the business.

Figure 42: FMSA Income Statement

FY2012A FY2013A FY2014A FY2015A 1Q16A 2Q16A 3Q16E 4Q16E FY2016E 1Q17E 2Q17E 3Q17E 4Q17E FY2017E 1Q18E 2Q18E 3Q18E 4Q18E FY2018E
INCOME STATEMENT
Sales
Oil & Gas 757.9 856.2 1,232.2 710.1 117.5 82.1 99.2 109.2 407.9 112.9 155.7 192.3 234.7 695.6 216.8 249.1 320.6 354.5 1,141.0
Industrial & Specialty Products 127.3 132.2 124.2 118.6 28.0 32.1 28.5 29.2 117.8 28.0 32.5 29.7 28.4 118.6 28.0 32.5 29.7 28.4 118.6
Total Sales 885.190 988.4 1,356.5 828.7 145.5 114.2 127.7 138.4 525.8 140.9 188.2 222.1 263.0 814.2 244.8 281.6 350.4 382.9 1,259.6
Consensus
FMSA
COGS 502.4 627.8 851.5 608.8 118.5 114.1 112.3 120.6 465.5 123.6 156.0 185.2 202.4 667.2 201.3 213.6 243.8 263.0 921.8
Gross Profit 382.8 360.5 505.0 219.9 27.0 0.1 15.3 17.8 60.3 17.3 32.2 36.9 60.6 147.0 43.4 67.9 106.6 119.9 337.8
SG&A 65.4 81.9 114.2 80.7 16.6 14.6 14.0 15.2 60.5 11.3 15.1 17.8 21.0 65.1 19.6 22.5 28.0 30.6 100.8
DD&A 27.7 37.8 59.4 66.8 18.6 18.1 17.2 16.9 70.8 16.6 16.4 16.2 16.1 65.4 15.9 15.7 15.5 15.3 62.4
Other 11.2 13.0 7.4 3.4 2.0 0.7 1.5 1.5 5.7 1.5 1.5 1.5 1.5 6.0 1.5 1.5 1.5 1.5 6.0
Operating Incom e 278.4 228.0 324.0 69.0 (10.2) (33.3) (17.4) (15.8) (76.7) (12.1) (0.8) 1.4 22.0 10.5 6.5 28.2 61.6 72.4 168.7
Consensus
Other (Expense) Incom e
Interest Expense 56.7 61.9 60.8 62.2 17.3 16.6 16.8 16.4 67.0 16.8 16.4 16.2 16.3 65.7 16.2 16.3 15.4 15.5 63.4
Other income, net 1.9 16.2 2.5 1.8 (0.0) 0.0 0.0 0.0 (0.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pre-Tax Incom e 219.8 149.9 260.7 5.0 (27.5) (49.9) (34.2) (32.2) (143.7) (28.9) (17.2) (14.8) 5.8 (55.1) (9.8) 12.0 46.2 56.9 105.3
Income Tax Expense 70.4 45.2 81.9 (5.1) (15.7) (21.8) (12.0) (11.3) (60.8) (10.1) (6.0) (5.2) 2.0 (19.3) (3.4) 4.2 16.2 19.9 36.8
Tax rate 32% 30% 31% (102%) 57% 44% 35% 35% 42% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35%
Net Incom e 149.5 104.7 178.8 10.1 (11.7) (28.1) (22.2) (20.9) (83.0) (18.8) (11.2) (9.7) 3.8 (35.8) (6.3) 7.8 30.0 37.0 68.4
Non Controlling Interest 0.6 0.7 0.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Incom e to Attributable to FMSA 148.9 104.0 178.6 9.9 (11.7) (28.1) (22.2) (20.9) (83.0) (18.8) (11.2) (9.7) 3.8 (35.8) (6.3) 7.8 30.0 37.0 68.4
Earnings per Share
Basic $32.46 $22.66 $1.13 $0.06 ($0.07) ($0.17) ($0.12) ($0.11) ($0.48) ($0.10) ($0.06) ($0.05) $0.02 ($0.19) ($0.03) $0.04 $0.16 $0.19 $0.36
Diluted $30.80 $21.47 $1.07 $0.06 ($0.07) ($0.17) ($0.12) ($0.11) ($0.48) ($0.10) ($0.06) ($0.05) $0.02 ($0.19) ($0.03) $0.04 $0.16 $0.19 $0.36
Consensus
Shares Outstanding
Basic 4.6 4.6 157.9 161.3 161.4 161.6 181.2 190.8 173.8 190.8 190.8 190.8 190.8 190.8 190.8 190.8 190.8 190.8 190.8
Diluted 4.8 4.8 166.2 164.0 161.4 161.6 181.2 190.8 173.8 190.8 190.8 190.8 190.8 190.8 190.8 190.8 190.8 190.8 190.8
Adjusted EBITDA Reconciliation

Net Income 170.5 (92.1) (11.8) (87.9) (22.2) (20.9) (142.8) (18.8) (11.2) (9.7) 3.8 (35.8) (6.3) 7.8 30.0 37.0 68.4
Total Interest Expense 60.8 62.2 17.3 16.6 16.8 16.4 67.0 16.8 16.4 16.2 16.3 65.7 16.2 16.3 15.4 15.5 63.4
Provision for Taxes 77.4 (1.9) (15.8) (63.0) (12.0) (11.3) (102.0) (10.1) (6.0) (5.2) 2.0 (19.3) (3.4) 4.2 16.2 19.9 36.8
DD&A 59.4 66.8 18.6 18.1 17.2 16.9 70.8 16.6 16.4 16.2 16.1 65.4 15.9 15.7 15.5 15.3 62.4
GAAP EBITDA 303.7 248.9 368.1 34.9 8.3 (116.2) (0.2) 1.1 (107.0) 4.5 15.6 17.6 38.1 75.9 22.3 43.9 77.1 87.7 231.1
Non-Cash Incentive Compensation 16.6 4.5 1.7 3.9 1.5 1.5 8.6 1.5 1.5 1.5 1.5 6.0 1.5 1.5 1.5 1.5 6.0
Asset Impairments 0.0 2.6 0.1 90.6 0.0 0.0 90.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Charges 8.0 78.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Restructuring Charges 4.6 17.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adjusted EBITDA 318.7 292.6 397.3 138.1 10.0 (21.8) 1.3 2.6 (7.8) 6.0 17.1 19.1 39.6 81.9 23.8 45.4 78.6 89.2 237.1
7 September 2016
24
Figure 43: FMSA Balance Sheet

BALANCE SHEET
Current Assets
Cash & Cash Equivalents 11.9 17.8 76.9 171.5 143.9 61.6 213.8 212.8 212.8 184.4 155.5 138.8 134.0 134.0 140.7 136.6 67.1 91.9 91.9
Accounts Receivable, Net 123.4 146.9 206.1 73.6 82.6 63.9 70.8 76.7 76.7 78.3 101.4 115.9 131.5 131.5 125.1 142.3 175.2 191.4 191.4
Inventories 91.4 118.3 131.6 70.5 69.4 56.7 71.0 75.4 75.4 74.8 89.3 98.3 104.8 104.8 105.9 111.4 125.6 135.0 135.0
Deferred Income Taxes 5.3 11.7 5.2 0.0 33.2 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8
Prepaid Expenses and Other Assets 5.0 10.6 40.8 44.1 2.9 43.4 43.4 43.4 43.4 43.4 43.4 43.4 43.4 43.4 43.4 43.4 43.4 43.4 43.4
Total Current Assets 237.0 305.3 460.6 359.7 332.0 232.4 405.7 415.1 415.1 387.6 396.4 403.2 420.4 420.4 421.9 440.5 418.0 468.5 468.5
Non-Current Assets
Property, Plant and Equipment, Net 375.2 748.8 841.3 871.0 862.2 756.7 744.2 732.0 732.0 723.4 714.9 706.5 698.2 698.2 690.0 681.9 673.9 666.0 666.0
Goodw ill 35.1 87.5 84.7 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3 15.3
Intangibles, Net 0.4 106.2 100.8 96.5 95.4 94.1 94.1 94.1 94.1 94.1 94.1 94.1 94.1 94.1 94.1 94.1 94.1 94.1 94.1
Other Assets 31.9 35.6 26.7 26.5 11.1 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6 10.6
Total Non-Current Assets 442.6 978.1 1,053.5 1,009.3 984.0 876.6 864.2 851.9 851.9 843.3 834.8 826.4 818.2 818.2 810.0 801.9 793.9 786.0 786.0
Total Assets 679.6 1,283.4 1,514.0 1,369.0 1,316.0 1,109.1 1,269.8 1,267.0 1,267.0 1,230.9 1,231.2 1,229.6 1,238.6 1,238.6 1,231.8 1,242.3 1,211.9 1,254.5 1,254.5
Current Liabilities
Current Portion of Long-Term Debt 3.3 15.7 17.3 17.5 100.3 30.7 16.7 16.7 16.7 0.0 0.0 69.5 69.5 69.5 69.5 69.5 1,032.7 1,030.0 1,030.0
Accounts Payable 43.5 90.0 88.5 40.4 37.5 34.3 42.6 46.9 46.9 47.6 60.2 69.6 76.0 76.0 76.8 80.7 91.0 97.9 97.9
Accrued Expenses 28.3 28.7 36.0 27.7 22.4 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1 20.1
Total Current Liabilities 75.1 134.4 141.841 85.676 160.2 85.1 79.4 83.7 83.745 67.7 80.4 159.2 165.6 165.576 166.4 170.3 1,143.9 1,148.0 1,148.0
Non-Current Liabilities
Long-Term Debt 827.9 1,246.5 1,235.4 1,220.3 1,119.6 1,115.9 1,127.0 1,124.3 1,124.3 1,121.6 1,118.9 1,046.6 1,043.9 1,043.9 1,041.2 1,038.5 3.0 3.0 3.0
Deferred Income Taxes 36.5 46.9 74.4 89.6 73.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5 26.5
Other Long-Term Liabilities 26.1 21.1 29.0 33.8 36.3 41.2 41.2 41.2 41.2 41.2 41.2 41.2 41.2 41.2 41.2 41.2 41.2 41.2 41.2
Total Non-Current Liabilities 890.5 1,314.4 1,338.7 1,343.7 1,229.4 1,183.5 1,194.7 1,192.0 1,192.0 1,189.2 1,186.5 1,114.3 1,111.6 1,111.6 1,108.9 1,106.1 70.7 70.7 70.7
Total Liabilities 965.5 1,448.8 1,480.5 1,429.3 1,389.6 1,268.6 1,274.1 1,275.7 1,275.7 1,257.0 1,266.9 1,273.5 1,277.2 1,277.2 1,275.2 1,276.5 1,214.6 1,218.7 1,218.7
Equity
Common Shares 0.1 0.1 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4
Additional Paid in Capital 722.1 735.4 771.9 776.7 777.7 783.0 944.0 944.0 944.0 944.0 944.0 944.0 944.0 944.0 944.0 944.0 944.0 944.0 944.0
Retained Earnings 222.8 326.7 497.2 405.0 393.3 305.4 299.7 295.2 295.2 278.0 268.3 260.1 265.4 265.4 260.6 269.8 301.3 339.8 339.8
Accumulated Other Comprehensive Loss (9.2) (3.5) (12.8) (17.7) (19.7) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0) (23.0)
Shares in Treasury (1,225.3) (1,227.0) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7) (1,227.7)
Noncontroling Interest 3.6 3.0 2.5 0.8 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3
Total Equity (285.9) (165.4) 33.5 (60.4) (73.6) (159.6) (4.3) (8.7) (8.7) (26.0) (35.7) (43.8) (38.6) (38.6) (43.4) (34.1) (2.6) 35.8 35.8
Total Liabilities and Equity 679.6 1,283.4 1,514.0 1,369.0 1,316.0 1,109.1 1,269.8 1,267.0 1,267.0 1,230.9 1,231.2 1,229.6 1,238.6 1,238.6 1,231.8 1,242.3 1,211.9 1,254.5 1,254.5
7 September 2016
25
Figure 44: FMSA Statement of Cash Flows

STATEMENT OF CASH FLOWS
Operating Activities
Net income 149.5 104.7 170.6 (91.9) (11.8) (87.9) (22.2) (20.9) (142.8) (18.8) (11.2) (9.7) 3.8 (35.8) (6.3) 7.8 30.0 37.0 68.4
Adjustm ents
Depreciation and depletion 27.6 35.9 54.1 62.2 17.5 16.8 17.2 16.9 68.4 16.6 16.4 16.2 16.1 65.4 15.9 15.7 15.5 15.3 62.4
Amortization of deferred financing costs 6.6 6.2 12.0 11.4 2.8 2.9 0.0 0.0 5.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization of original issue discount 0.0 0.4 0.0 8.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization of intangible assets 0.1 1.9 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Non-cash portion of loss on extinguishment of debt 0.0 11.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Impairment of long-lived assets 0.3 0.0 0.9 8.7 (0.1) 90.8 0.0 0.0 90.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Unrealized loss (gain) on interest rate sw aps (0.1) 3.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Deferred income taxes 10.1 0.8 37.8 21.0 (16.1) (43.8) 15.0 15.0 (29.9) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Stock compensation expense 11.4 10.1 16.6 76.2 1.7 3.9 1.5 1.5 8.6 1.5 1.5 1.5 1.5 6.0 1.5 1.5 1.5 1.5 6.0
Other 0.0 0.0 0.0 0.0 2.0 (5.2) 0.0 0.0 (3.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Change in operating assets and liabilities
Accounts receivable (3.5) (23.5) (66.4) 129.7 (9.6) 20.1 (6.8) (5.9) (2.3) (1.6) (23.1) (14.5) (15.7) (54.8) 6.4 (17.2) (32.8) (16.3) (59.9)
Inventories 4.5 0.2 (13.3) 59.5 1.1 2.4 (14.3) (4.5) (15.2) 0.6 (14.5) (9.0) (6.4) (29.3) (1.1) (5.5) (14.2) (9.4) (30.2)
Prepaid expenses and other assets (2.7) (10.3) (23.5) (3.3) 6.2 (2.5) 0.0 0.0 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Accounts payable (14.3) 46.5 (1.5) (38.7) 2.0 (1.7) 8.3 4.4 12.9 0.7 12.6 9.3 6.4 29.0 0.8 4.0 10.3 6.8 21.9
Accrued expenses (3.0) (12.6) 17.5 (6.9) (4.2) (0.6) 0.0 0.0 (4.7) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net cash from operating activities 186.4 174.6 205.3 236.0 (8.6) (4.6) (1.4) 6.4 (8.2) (0.9) (18.2) (6.1) 5.6 (19.6) 17.1 6.2 10.3 34.9 68.5
Investing Activities
Proceeds from sale of fixed assets 1.7 0.0 5.2 0.0 0.6 3.3 0.0 0.0 3.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Capital expenditures (109.0) (111.5) (143.5) (113.8) (13.7) (8.2) (4.7) (4.7) (31.3) (8.1) (8.0) (7.9) (7.8) (31.6) (7.7) (7.6) (7.5) (7.4) (30.2)
Purchase of companies and asset acquisitions 0.0 (468.0) 0.0 (0.3) 0.0 (0.2) 0.0 0.0 (0.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net cash used in investing activities (107.4) (579.5) (138.3) (114.0) (13.2) (5.0) (4.7) (4.7) (27.6) (8.1) (8.0) (7.9) (7.8) (31.6) (7.7) (7.6) (7.5) (7.4) (30.2)
Financing Activities
Proceeds from issuance of term loans 0.0 1,227.0 41.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Payments on term debt (115.0) (841.0) (12.5) (13.5) (3.1) (72.4) (2.8) (2.8) (81.0) (19.4) (2.7) (2.7) (2.7) (27.6) (2.7) (2.7) (72.2) (2.7) (80.4)
Change in other long-term debt and capital leases (5.6) (2.4) (4.8) (7.0) (1.7) (2.4) 0.0 0.0 (4.1) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Proceeds from revolving credit facility 0.0 148.1 32.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Payments on revolving credit facility 0.0 (107.1) (73.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Proceeds from issuance of common stock 0.7 1.3 6.5 1.8 0.1 1.9 161.0 0.0 163.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Purchase of treasury stock (1.0) (1.7) (0.7) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Tax effect of stock options exercised 0.9 1.8 15.7 (1.5) (0.7) (0.6) 0.0 0.0 (1.3) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Transactions w ith noncontrolling interest 0.0 (1.3) (0.7) 0.0 (0.5) (0.0) 0.0 0.0 (0.6) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Tax effect for deferred stockholder payments 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financing costs 0.0 (14.2) (11.5) (4.9) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net cash provided by (used in) financing activities (119.1) 410.5 (7.7) (25.1) (6.0) (73.4) 158.2 (2.8) 76.0 (19.4) (2.7) (2.7) (2.7) (27.6) (2.7) (2.7) (72.2) (2.7) (80.4)
Foreign currency adjustment 0.1 0.3 (0.2) (2.3) 0.2 0.8 0.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Increase (decrease) in cash and cash equivalents (39.9) 5.9 59.1 94.6 (27.6) (82.2) 152.1 (1.0) 41.3 (28.4) (28.9) (16.7) (4.9) (78.8) 6.7 (4.1) (69.5) 24.8 (42.0)
Cash beginning of period 51.8 11.9 17.8 76.9 171.5 143.9 61.6 213.8 171.5 212.8 184.4 155.5 138.8 212.8 134.0 140.7 136.6 67.1 134.0
Cash end of year period 11.9 17.8 76.9 171.5 143.9 61.6 213.8 212.8 212.8 184.4 155.5 138.8 134.0 134.0 140.7 136.6 67.1 91.9 91.9
7 September 2016
26
Companies Mentioned (Price as of 02-Sep-2016)
CARBO Ceramics (CRR.N, $12.31)
Chart Industries, Inc. (GTLS.OQ, $31.22)
Fairmount Santrol Holdings, Inc. (FMSA.K, $7.84, NEUTRAL[V], TP $7.0)
Halliburton (HAL.N, $43.32)
Hi-Crush Partners, LP (HCLP.N, $15.03)
Schlumberger (SLB.N, $78.55)
U.S. Silica (SLCA.N, $40.94)
Union Pacific (UNP.N, $95.28)
Disclosure Appendix
Important Global Disclosures
James Wicklund and Jacob Lundberg each certify, with respect to the companies or securities that the individual analyzes, that (1) the views
expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her
compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
3-Year Price and Rating History for Halliburton (HAL.N)
HAL.N Closing Price Target Price

Date (US$) (US$) Rating
04-Sep-13 49.08 58.00 O
22-Oct-13 51.78 63.00
11-Nov-13 55.30 70.00
21-Apr-14 62.92 78.00
23-Jun-14 70.37 79.00
21-Jul-14 71.00 95.00
20-Oct-14 52.92 79.00
10-Nov-14 53.63 70.00
13-Nov-14 53.79 R
02-May-16 42.05 46.00 O O U T PERFO RM
REST RICT ED
01-Jun-16 42.15 49.00
* Asterisk signifies initiation or assumption of coverage.
3-Year Price and Rating History for Hi-Crush Partners, LP (HCLP.N)
HCLP.N Closing Price Target Price

13-Nov-13 30.70 33.00 O
18-Feb-14 38.94 43.00
08-Apr-14 40.33 R
10-Apr-14 38.25 43.00 O
16-May-14 44.96 46.00
08-Jul-14 60.30 65.00
22-Aug-14 61.73 80.00
10-Nov-14 44.03 60.00
08-May-15 31.37 35.00 N
06-Aug-15 17.23 19.00 O U T PERFO RM
REST RIC T ED
04-Sep-15 14.44 17.50 N EU T RA L
27-Oct-15 5.16 4.50
21-Dec-15 5.44 6.00
28-Apr-16 8.14 R
29-Apr-16 7.00 6.00 N
05-May-16 6.51 7.00
01-Jun-16 9.00 12.00 O
14-Jun-16 11.93 R
23-Jun-16 12.16 12.00 O
02-Aug-16 11.34 16.00
10-Aug-16 12.87 R
11-Aug-16 12.87 16.00 O

3-Year Price and Rating History for Schlumberger (SLB.N)
SLB.N Closing Price Target Price

21-Oct-13 93.48 105.00 N
17-Jan-14 90.21 108.00 O
17-Apr-14 99.91 120.00
27-Jun-14 117.80 137.00
21-Jul-14 113.04 142.00
20-Oct-14 94.60 135.00
10-Nov-14 98.29 141.00
03-Dec-14 86.76 100.00
07-Jan-15 81.71 89.00
16-Jan-15 81.33 86.00 N EU T RA L
O U T PERFO RM
17-Jul-15 83.71 89.00 REST RICT ED
26-Aug-15 70.09 R
04-Apr-16 72.64 80.00 O
01-Jun-16 75.86 87.00
3-Year Price and Rating History for U.S. Silica (SLCA.N)
SLCA.N Closing Price Target Price

21-Dec-15 18.20 25.00 O*
24-Feb-16 16.23 22.00
27-Apr-16 26.59 29.00
01-Jun-16 29.02 32.00
20-Jul-16 36.54 40.00
03-Aug-16 36.99 42.00
O U T PERFO RM
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's
total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:
Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.
*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which
consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and
Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total
return relative to the analyst's coverage universe which consists of all companies covered by the anal yst within the relevant sector, with Outperforms representing the
most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings
are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S . and Canadian
ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within
an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An
Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned
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Target Price and Rating

Valuation Methodology and Risks: (12 months) for Fairmount Santrol Holdings, Inc. (FMSA.K)
Method: Our 12-month target price for FMSA equates to 10.4x our 2018 EBITDA estimate of $237M. FMSA's historical median multiple is 10.4x,
which we use based on our view that 2018 will be a mid-cycle year (keeping in mind that OFS stocks trade at peak multiples on trough
earnings and vice versa). Using our WACC of 9.6% and discounting to 12-months from today gives us a target price of $7. We assign
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view the company's balance sheet.
Risk: Risks to our $7 target price and Neutral rating include: (1) if the current trend of increasing proppant use per lateral foot were to halt or
reverse, (2) if FMSA's customer base were to aggressively build out its own logistics infrastructure, and (3) if customers continue using
lower-quality sand in favor of Northern White frac sand or resin coated proppant. Investment risks for FMSA include the following. Of
FMSA's shares, 37.17% are owned by American Securities, a private equity firm; American Securities holds two of ten board seats. FMSA
operations are subject to the cyclicality of the end markets that it services. FMSA is significantly exposed to the oil and gas industry and
thus particularly exposed to the cyclicality of that industry. FMSA's top ten customers accounted for 43% of its 2015 revenues. The
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Credit Suisse On FMSA Sep 2016

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7 September 2016

Fairmount Santrol Holdings,

Fairmount Santrol Holdings, Inc. (FMSA)

Fairmount Santrol Holdings, Inc. (FMSA) 2

Portfolio Manager's Summary

Fairmount Santrol Holdings, Inc. (FMSA) 3

Source: Company data, Credit Suisse estimates

Figure 2: Quarterly Proppant Demand Figure 3: Industry Cost Curve

Capacity (M Tons) Cumulative Capacity (M tons) Minegate Clearning Price

Source: Credit Suisse estimates, PropTester Source: Credit Suisse estimates

Fairmount Santrol Holdings, Inc. (FMSA) 4

Figure 4: FMSA Volumes by Segment Figure 5: FMSA Revenue by Segment

Raw Sand Coated Proppant I&R

Elephants in the Room

Fairmount Santrol Holdings, Inc. (FMSA) 5

Figure 6: FMSA Upcoming Debt Payments

Source: Company data

Source: Company data, Credit Suisse estimates Source: Company data

Fairmount Santrol Holdings, Inc. (FMSA) 6

■ How this will affect revenue per ton?

Figure 9: Quarterly Proppant Demand

Source: Credit Suisse estimates, PropTester

Fairmount Santrol Holdings, Inc. (FMSA) 7

Raw Sand Coated Proppant I&R

Figure 12: FMSA Adjusted Contribution Margin by Segment

Proppant Solutions I&R

Source: Company data, Credit Suisse estimates

Fairmount Santrol Holdings, Inc. (FMSA) 8

Figure 13: FMSA Proppant Solutions Products

Source: Company data

Fairmount Santrol Holdings, Inc. (FMSA) 9

Figure 15: FMSA Resin Coated as % of Total

Source: PropTester Source: Company data, Credit Suisse estimates

Fairmount Santrol Holdings, Inc. (FMSA) 10

Figure 16: FMSA Logistics Network and Mining Locations

Source: Company data

Fairmount Santrol Holdings, Inc. (FMSA) 11

Figure 19: FMSA Historical EV/EBITDA Multiple

Historical Multiple Median

Source: the BLOOMBERG PROFESSIONAL™ service

Enter Sandman: Industry Deep Dive

The Cost Curve

Fairmount Santrol Holdings, Inc. (FMSA) 12

Figure 20: Frac Sand Industry Cost Curve and Capacity

Capacity Availabe (M Tons)

$25 37.5 $35.0 40.0

Capacity (M Tons) Cumulative Capacity (M tons) Minegate Clearning Price

Source: Credit Suisse estimates

Fairmount Santrol Holdings, Inc. (FMSA) 13

The Great Debate: Northern White v. Regional

Figure 21: Market Share by Sand Type

Figure 22: Frac Sand Capacity by Grade and Type

Figure 23: Utilization by Sand Type

CS Projected Q3 Dem and Annualized 34.63

Source: Credit Suisse estimates, PropTester

Fairmount Santrol Holdings, Inc. (FMSA) 15

Active Capacity Active Capacity

It's a Logistics Game

Fairmount Santrol Holdings, Inc. (FMSA) 16

Source: Company data Source: Company data

■ SandCan. Similar to SandBox, SandCan's frac storage system is designed for

Figure 28: SandCan Figure 29: SandCan RT40

Source: Company data Source: Company data