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Trecora Resources Reports Third Quarter 2019 Results

- Recently announced a definitive agreement to sell entire stake in AMAK for $70 million; targeted close in fourth quarter 2019

- Third quarter net income from continuing operations of $1.6 million compared to net loss from continuing operations of $(0.7) million in third quarter 2018

- Reliability and cost control drove third quarter Adjusted EBITDA from continuing operations of $6.9 million compared to $4.9 million in third quarter 2018, a 41% increase

- Reduced debt by $9.0 million in the third quarter and an additional $5 million in October

- Conference call at 10:00 am ET tomorrow, November 7, 2019

SUGAR LAND, Texas, Nov. 6, 2019 /PRNewswire/ -- Trecora Resources ("Trecora" or the "Company") (TREC), a leading provider of specialty hydrocarbons and waxes, today announced financial results for the third quarter ended September 30, 2019. 

TREC owns and operates a facility in southeast Texas which specializes in high purity hydrocarbons and other petrochemical manufacturing. TREC also owns and operates a leading manufacturer of specialty polyethylene waxes and provider of custom processing services located in the heart of the Petrochemical complex in Pasadena, Texas. In addition, TREC is a 35% owner of Al Masane Al Kobra Mining Co. For more information please access TREC's website at Trecora.com. (PRNewsFoto/Trecora Resources) (PRNewsfoto/Trecora Resources)

"Operational reliability, disciplined cost control and solid execution drove the Company's third quarter 2019 results, yielding net income from continuing operations of $1.6 million compared to net loss from continuing operations of $(0.7) million in third quarter 2018 and consolidated Adjusted EBITDA from continuing operations of $6.9 million compared to $4.9 million in the same period last year," said Pat Quarles, Trecora's President and Chief Executive Officer.

"On top of the improved operating results, we recently announced a definitive agreement to sell our entire stake in Al Masane Al Kobra Mining Co., or "AMAK", for $70 million in gross proceeds, with an expected close later in the fourth quarter and subject to government approvals and other closing conditions.  Upon close, we will have delivered on our commitment to monetize this asset which will enable us to significantly reduce our debt.  Further, what will remain after the completion of this transaction, is a Company with a singular focus on improving our operating businesses, a solid balance sheet and financial flexibility to create shareholder value," Mr. Quarles added.

Sami Ahmad, Trecora's Chief Financial Officer stated, "Consolidated gross margin improved to 15.3% in the third quarter 2019 from 9.3% in the third quarter 2018. This margin improvement was a result of lower feedstock costs, lower operating expenses and improved plant operations, specifically in our Specialty Petrochemicals segment, which saw its gross margins improve from 10.3% in third quarter 2018 to 18.9% in third quarter 2019.  Year-to-date consolidated gross margin was 15.3%, a sharp improvement from 11.8% in the same period last year. Strong operating cash flow in the quarter allowed for meaningful debt reduction of $9.0 million.  We further reduced debt by an additional $5 million in October bringing our total outstanding debt to approximately $84 million."

Mr. Quarles concluded, "Looking ahead, our focus continues to be the safe and reliable operation of our plants, the quality of our products, and disciplined management of costs and capital expenditures.  We expect fourth quarter results to be impacted by typical seasonal demand patterns and from a weather event on October 29th at our Silsbee facility which resulted in damage to one of our feedstock storage tanks and a shutdown of the plant.  We expect some loss of sales volumes and recovery costs."

Third Quarter 2019 Financial Results 
Net income from continuing operations in the third quarter of 2019 was $1.6 million, or $0.06 per diluted share1, compared to a net loss from continuing operations of $(0.7) million, or $(0.03) per diluted share2, in the third quarter of 2018. 

Total revenue in the third quarter of 2019 was $62.7 million compared to $73.4 million in the third quarter of 2018.  This year-over-year decrease was primarily due to a 4.8% decrease in Specialty Petrochemicals sales volume and a 9.2% decline in average selling prices, which was primarily due to lower feedstock costs.  Revenues from processing declined as compared to the third quarter of 2018, primarily due to the termination of a contract in the fourth quarter of 2018. 

Gross profit in the third quarter of 2019 was $9.6 million, or 15.3% of total revenues, compared to $6.8 million, or 9.3% of total revenues, in the third quarter of 2018.  Operating income in the third quarter of 2019 was $3.0 million compared to $0.3 million for the third quarter of 2018.  The improved margins were primarily driven by lower feedstock costs, operation of the Advanced Reformer unit and lower labor costs as a result of the cost reduction program implemented in December 2018.

Specialty Petrochemicals  
Specialty Petrochemicals net income was $6.3 million in the third quarter of 2019, compared to net income of $2.5 million in the third quarter of 2018. Specialty Petrochemicals volume in the third quarter of 2019 was 20.5 million gallons, compared to 21.4 million gallons in the second quarter of 2019 and 21.6 million gallons in the third quarter of 2018. 

Prime product volume in the third quarter of 2019 was 16.4 million gallons, compared to 17.7 million gallons in the second quarter of 2019 and 17.0 million gallons in the third quarter of 2018.  By-product sales volume was 4.1 million gallons in the third quarter of 2019.  Adjusted EBITDA from continuing operations for Specialty Petrochemicals in the third quarter of 2019 was $9.9 million compared to $6.2 million in the third quarter of 2018.

Dollar amounts in thousands/rounding may apply 

THREE MONTHS
ENDED



SEPTEMBER 30,



2019

2018

 % Change 

Product sales 

$53,277

$61,675

(14%)

Processing fees 

1,208

2,056

(41%)

Gross revenues 

$54,485

$63,731

(15%)

Operating profit before depreciation and amortization 

10,414

6,167

69%

Operating profit 

7,448

3,516

112%

Net profit before taxes 

6,583

2,561

157%

Depreciation and amortization 

1,900

2,651

(28%)

Adjusted EBITDA from continuing operations

9.876

6,186

60%

Capital expenditures 

2,163

2,562

(16%)

Specialty Waxes 
Specialty Waxes net loss was $(2.1) million in the third quarter of 2019, compared to a net loss of $(1.2) million in the third quarter of 2018.  Specialty Waxes generated revenues of approximately $8.2 million in the third quarter of 2019, a $1.0 million decrease from the second quarter of 2019, and a $1.5 million decrease from the third quarter of 2018.  Revenue included $5.8 million of wax product sales and $2.4 million of processing revenues.  Wax sales volumes decreased approximately 4.5% from third quarter 2018 due to disruptions of wax feed supply from our suppliers.  Adjusted EBITDA from continuing operations for Specialty Waxes in the third quarter of 2019 was $(0.2) million compared to $0.4 million in the third quarter of 2018.

Dollar amounts in thousands/rounding may apply 

THREE MONTHS
ENDED




SEPTEMBER 30,




2019

2018

 % Change 

Product sales 

$5,834

$6,938

(16%)

Processing fees 

2,396

2,799

(14%)

Gross revenues 

$8,230

$9,737

(15%)

Operating profit before depreciation and amortization 

(260)

415

(163%)

Operating loss 

(1,808)

(936)

93%

Net loss before taxes 

(2,071)

(1,239)

67%

Depreciation and amortization 

1,548

1,351

15%

Adjusted EBITDA from continuing operations

(207)

377

(155%)

Capital expenditures 

361

1,094

(67%)

Year-to-Date 2019 Financial Results 
Net income from continuing operations in the first nine months of 2019 was $5.9 million, or $0.23 per diluted share3, compared to net income from continuing operations of $3.5 million, or $0.14 per diluted share4, for the same period in 2018. 

Total revenue in the first nine months of 2019 was $197.2 million, compared to $213.3 million for the same period in 2018, a decrease of 7.5%.  This decrease was primarily due to a decrease in the average selling price of Specialty Petrochemicals products of 5.8% and lower Specialty Petrochemicals processing revenue of $1.7 million.   

Gross profit in the first nine months of 2019 was $30.2 million, or 15.3% of total revenues, compared to $25.1 million, or 11.8% of total revenues, for the same period in 2018. Operating income in the first nine months of 2019 was $11.0 million, compared to operating income of $7.3 million for the same period in 2018.  The improved margins were primarily driven by lower feedstock costs, operation of the Advanced Reformer unit and lower labor costs as a result of the cost reduction program implemented in December 2018. 

Specialty Petrochemicals  
Specialty Petrochemicals net income was $17.1 million in the first nine months of 2019, compared to net income of $10.4 million for the same period in 2018.  Specialty Petrochemicals volume in the first nine months of 2019 was 64.4 million gallons, compared to 64.6 million gallons for the same period in 2018.  Prime product volume in the first nine months of 2019 was 51.8 million gallons, compared to 50.7 million gallons in the same period 2018.  Adjusted EBITDA from continuing operations for Specialty Petrochemicals in the first nine months of 2019 increased 50% to $31.1 million, compared to $20.7 million for the same period in 2018.

Dollar amounts in thousands/rounding may apply 

NINE MONTHS
ENDED



SEPTEMBER 30,



2019

2018

 % Change 

Product sales 

$167,351

$178,094

(6%)

Processing fees 

4,117

5,769

(29%)

Gross revenues 

$171,468

$183,863

(7%)

Operating profit before depreciation and amortization 

31,849

20,655

54%

Operating profit 

22,885

14,635

56%

Net profit before taxes 

22,093

12,474

61%

Depreciation and amortization 

7,899

6,020

31%

Adjusted EBITDA from continuing operations

31,134

20,701

50%

Capital expenditures 

5,002

16,374

(69%)

Specialty Waxes 
Specialty Waxes had a net loss of $(5.6) million in the first nine months of 2019 compared to a net loss of $(2.9) million for the same period in 2018.  Specialty Waxes had revenues of $25.8 million in the first nine months of 2019, a 13.0% decrease from the same period of 2018.  Revenues included $18.6 million of wax product sales and $7.2 million of processing revenues.  Wax sales volumes in the first nine months of 2019 decreased approximately 9.1% from the same period 2018 due to the planned maintenance turnaround at our Pasadena facility in the first quarter of 2019, along with disruptions of wax feed supply from our suppliers which constrained production.  Adjusted EBITDA from continuing operations for Specialty Waxes in the first nine months of 2019 was $(0.4) million, compared to $1.9 million for the same period in 2018.

Dollar amounts in thousands/rounding may apply 

NINE MONTHS ENDED




SEPTEMBER 30,




2019

2018

 % Change 

Product sales 

$18,582

$20,755

(10%)

Processing fees 

7,191

8,863

(19%)

Gross revenues 

$25,773

$29,618

(13%)

Operating profit (loss) before depreciation and amortization 

(343)

1,969

(117%)

Operating loss 

(4,638)

(2,051)

126%

Net loss before taxes 

(5,623)

(2,926)

92%

Depreciation and amortization 

4,295

4,020

7%

Adjusted EBITDA from continuing operations

(361)

1,896

(119%)

Capital expenditures 

1,296

2,716

(52%)

Earnings Call
Tomorrow's conference call and presentation slides will be simulcast live on the Internet, and can be accessed on the investor relations section of the Company's website at http://www.trecora.com or at https://edge.media-server.com/mmc/p/px3dfufz. A replay of the call will also be available through the same link.

To participate via telephone, callers should dial in five to ten minutes prior to the 10:00 am Eastern start time; domestic callers (U.S. and Canada) should call +1-866-417-5724 or +1-409-217-8234 if calling internationally, using the conference ID 5790838. To listen to the playback, please call 1-855-859-2056 if calling within the United States or 1-404-537-3406 if calling internationally. Use pin number 5790838 for the replay.

Use of Non-GAAP Measures
This press release includes the use of both U.S. generally accepted accounting principles ("GAAP") and non-GAAP financial measures. The Company believes certain financial measures, such as EBITDA from continuing operations and Adjusted EBITDA from continuing operations, which are non-GAAP measures, provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. The Company believes that such non-GAAP measures, when read in conjunction with our operating results presented under GAAP, can be used to better assess our performance from period to period and relative to performance of other companies in our industry, without regard to financing methods, historical cost basis or capital structure. These measures are not measures of financial performance or liquidity under GAAP and should be considered in addition to, and not as a substitute for, analysis of our results under GAAP.

These non-GAAP measures have been reconciled to the nearest GAAP measure in the tables below entitled Reconciliation of Selected GAAP Measures to Non-GAAP Measures.

EBITDA from continuing operations and Adjusted EBITDA from continuing operations: We define EBITDA from continuing operations as net income from continuing operations plus interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA from continuing operations as EBITDA from continuing operations plus stock-based compensation, plus restructuring and severance expenses, plus losses on extinguishment of debt, and plus or minus gains or losses on acquisitions.

Forward-Looking Statements
Some of the statements and information contained in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding the Company's financial position, business strategy and plans and objectives of the Company's management for future operations and other statements that are not historical facts, are forward-looking statements. Forward-looking statements are often characterized by the use of words such as "outlook," "may," "will," "should," "could," "expects," "plans," "anticipates," "contemplates," "proposes," "believes," "estimates," "predicts," "projects," "potential," "continue," "intend," or the negative of such terms and other comparable terminology, or by discussions of strategy, plans or intentions, including, but not limited to: expectations regarding future market trends; expectations regarding our future strategic focuses and 2019 financial performance; and expectations regarding the consummation of the sale of our stake in AMAK and the use of proceeds therefrom, including the realization of expected benefits to the Company from the application of such proceeds.

Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such statements. Such risks, uncertainties and factors include, but are not limited to: general economic conditions domestically and internationally; insufficient cash flows from operating activities; difficulties in obtaining financing on favorable conditions, or at all; outstanding debt and other financial and legal obligations; lawsuits; competition; industry cycles; feedstock, product and mineral prices; feedstock availability; technological developments; regulatory changes; environmental matters; foreign government instability; foreign legal and political concepts; foreign currency fluctuations; not completing, or not completely realizing the anticipated benefits from, the sale of our stake in AMAK; receipt and timing of necessary governmental approvals for the sale of our stake in AMAK; and other risks detailed in our latest Annual Report on Form 10-K, including but not limited to "Part I, Item 1A. Risk Factors" and "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" therein, and in our other filings with the Securities and Exchange Commission (the "SEC"). There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements. In addition, to the extent any inconsistency or conflict exists between the information included in this press release and the information included in our prior releases, reports and other filings with the SEC, the information contained in this press release updates and supersedes such information. Forward-looking statements are based on current plans, estimates, assumptions and projections, and, therefore, you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

About Trecora Resources (TREC)
TREC owns and operates a specialty petrochemicals facility specializing in high purity hydrocarbons and other petrochemical manufacturing and a specialty wax facility, both located in Texas, and provides custom processing services at both facilities. In addition, the Company is the original developer and a 33.3% owner of AMAK, a Saudi Arabian joint stock company.

Investor Relations Contact:
Jason Finkelstein
The Piacente Group, Inc.
212-481-2050
trecora@tpg-ir.com





1

Based on 25.1 million shares outstanding.

2

Based on 25.2 million shares outstanding.

3

Based on 25.1 million shares outstanding.

4

Based on 25.1 million shares outstanding.

 

TRECORA RESOURCES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS













September 30,
2019
(Unaudited)


December 31,
2018

ASSETS


(thousands of dollars, except par value)

Current Assets





Cash


$                9,157


$               6,735

Trade receivables, net


25,497


27,112

Inventories


13,285


16,539

Investment in AMAK (held-for-sale)


34,090


38,746

Prepaid expenses and other assets


3,726


4,664

Taxes receivable


182


182

Total current assets


85,937


93,978






  Plant, pipeline and equipment,net


190,345


194,657






Goodwill


21,798


21,798

Intangible assets, net


17,551


18,947

Operating lease assets, net


14,364


-

Mineral properties in the United States


562


588






TOTAL ASSETS


330,557


329,968

LIABILITIES





Current Liabilities





Accounts payable


10,203


19,106

Accrued liabilities


7,270


5,439

Current portion of long-term debt


4,194


4,194

Current portion of operating lease


3,247


-

Current portion of other liabilities


1,011


752

Total current liabilities


25,925


29,491






Long-term debt, net of current portion


85,143


98,288

Operating lease, net of current portion


11,117


-

Other liabilities, net of current portion


906


1,352

Deferred income taxes


16,646


15,676

Total liabilities


139,737


144,807






EQUITY





Common stock‑authorized 40 million shares of $0.10 par value; issued 24.7 million and 24.6 million in 2019 and 2018 and outstanding 24.7 million and 24.6 million shares in 2019 and 2018, respectively


2,472


2,463

Additional paid-in capital


59,202


58,294

Common stock in treasury, at cost


(2)


(8)

Retained earnings


128,859


124,123

Total Trecora Resources Stockholders' Equity


190,531


184,872

Noncontrolling Interest


289


289

Total equity


190,820


185,161






TOTAL LIABILITIES AND EQUITY


330,557


329,968

 

TRECORA RESOURCES AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)




THREE MONTHS ENDED
SEPTEMBER 30,


NINE MONTHS ENDED
SEPTEMBER 30,



2019


2018


2019


2018



(thousands of dollars, except per share amounts)

REVENUES









Specialty Petrochemical and Product Sales


$    59,111


$    68,613


$  185,933


$  198,881

Processing Fees


3,604


4,803


11,308


14,382



62,715


73,416


197,241


213,263










OPERATING COSTS AND EXPENSES









Cost of Sales and Processing









(including depreciation and amortization of $3,254, $3,813, $11,611 and $9,480, respectively)


53,148


66,574


167,036


188,139










    GROSS PROFIT


9,567


6,842


30,205


25,124










GENERAL AND ADMINISTRATIVE EXPENSES









General and Administrative


6,401


6,327


18,532


17,216

Depreciation


208


205


629


592



6,609


6,532


19,161


17,808










OPERATING INCOME


2,958


310


11,044


7,316










OTHER INCOME (EXPENSE)









Interest Income


-


5


5


26

Interest Expense


(1,211)


(924)


(4,111)


(2,617)

Loss on Extinguishment of Debt


-


315


-


315

Miscellaneous Expense


74


(28)


330


(67)



(1,137)


(1,262)


(3,776)


(2,973)










INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES


1,821


(952)


7,268


4,343










INCOME TAX EXPENSE (BENEFIT)


238


(236)


1,412


854










INCOME (LOSS) FROM CONTINUING OPERATIONS


1,583


(716)


5,856


3,489










LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX


1,002


893


1,120


531










NET INCOME (LOSS)


581


(1,609)


4,736


2,958










Basic Earnings per Common Share









Net income (loss) from continuing operations (dollars)


$         0.06


$      (0.03)


$         0.24


$         0.14

Net loss from discontinued operations, net of tax (dollars)


(0.04)


(0.04)


(0.05)


(0.02)

Net income (loss) (dollars)


$         0.02


$      (0.07)


$         0.19


$         0.12










Basic Weighted Average Number of Common Shares Outstanding


24,717


24,483


24,689


24,397










Diluted Earnings per Common Share









Net income (loss) from continuing operations (dollars)


$         0.06


$      (0.03)


$         0.23


$         0.14

Net loss from discontinued operations, net of tax (dollars)


(0.04)


(0.04)


(0.04)


(0.02)

Net income (loss) (dollars)


$         0.02


$      (0.07)


$         0.19


$         0.12










Diluted Weighted Average Number of Common Shares Outstanding


25,053


25,175


25,077


25,138










 

 

 

TRECORA RESOURCES AND SUBSIDIARIES

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES


EBITDA from continuing operations and Adjusted EBITDA from continuing operations

(thousands of dollars; rounding may apply)



Three months ended


Three months ended


9/30/2019


9/30/2018


SPEC. PETRO

SPEC. WAX

CORP

TREC


SPEC. PETRO

SPEC. WAX

CORP

TREC

NET INCOME (LOSS)

$      6,278

$   (2,071)

$  (3,626)

$        581


$    2,504

$  (1,239)

$  (2,874)

$   (1,609)

Loss from discontinued operations, net of tax

-

-

(1,002)

(1,002)


-

-

(893)

(893)

Income (Loss) from continuing operations

$      6,278

$   (2,071)

$  (2,624)

$     1,583


$    2,504

$  (1,239)

$  (1,981)

$      (716)

Interest

895

316

-

1,211


659

265

-

924

Taxes

803

-

(565)

238


372

-

(608)

(236)

Depreciation and amortization

171

24

13

208


165

24

16

205

Depreciation and amortization in cost of sales

1,729

1,524

1

3,254


2,486

1,327

-

3,813

EBITDA from continuing operations

9,876

(207)

(3,175)

6,494


6,186

377

(2,573)

3,990

Share based compensation

-

-

415

415


-

-

630

630

Loss on extinguishment of debt

-

-

-

-


-

-

315

315

Adjusted EBITDA from continuing operations

$      9,876

$      (207)

$  (2,760)

$     6,909


$    6,186

$      377

$  (1,628)

$    4,935











Revenue

54,485

8,230

-

62,715


63,731

9,737

(52)

73,416












Nine months ended


Nine months ended


9/30/2019


9/30/2018


SPEC. PETRO

SPEC. WAX

CORP

TREC


SPEC. PETRO

SPEC. WAX

CORP

TREC

NET INCOME (LOSS)

$    17,086

$   (5,623)

$  (6,727)

$     4,736


$  10,402

$  (2,926)

$  (4,518)

$    2,958

Loss from discontinued operations, net of tax

-

-

(1,120)

(1,120)


-

-

(531)

(531)

Income (Loss) from continuing operations

$    17,086

$   (5,623)

$  (5,607)

$     5,856


$  10,402

$  (2,926)

$  (3,987)

$    3,489

Interest

3,143

967

1

4,111


1,892

802

(77)

2,617

Taxes

3,006

-

(1,594)

1,412


2,387

-

(1,533)

854

Depreciation and amortization

512

72

45

629


492

68

32

592

Depreciation and amortization in cost of sales

7,387

4,223

1

11,611


5,528

3,952

-

9,480

EBITDA from continuing operations

31,134

(361)

(7,154)

23,619


20,701

1,896

(5,565)

17,032

Share based compensation

-

-

973

973


-

-

1,002

1,002

Loss on extinguishment of debt

-

-

-

-


-

-

315

315

Adjusted EBITDA from continuing operations

$    31,134

$      (361)

$  (6,181)

$   24,592


$  20,701

$   1,896

$  (4,248)

$  18,349











Revenue

171,468

25,773

-

197,241


183,863

29,618

(218)

213,263

 

Cision

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