Exhibit 99.1

 

 

Trecora Resources Fourth Quarter and Full Year 2016 Results

 

Completed Mechanical Construction of Distillation Unit

Record Annual Revenue at Trecora Chemical

Conference Call at 4:30 pm ET Today

 

SUGAR LAND, Texas, March 1, 2017 – Trecora Resources (NYSE: TREC) a leading provider of high purity specialty hydrocarbons and waxes, today announced financial results for the fourth quarter and year ended December 31, 2016.

 

“During 2016 we focused our resources and invested in building a strong foundation for future growth,” said Simon Upfill-Brown, President and Chief Executive Officer. “Our transformational capital projects continued to take shape as we positioned our business to increase capacity and profitability over the long-term to take advantage of the resurgence in the global chemical industry. While certain projects have experienced some slight delays, the completion of the distillation unit is a major milestone for Trecora Chemical (TC), which will benefit from increased demand for custom processing.

 

“Historically one of our softest quarters, we faced headwinds in the fourth quarter similar to what we experienced in previous quarters,” continued Mr. Upfill-Brown. “Challenging petrochemical market conditions, a continuation of a few specific customer volume shortfalls and somewhat lower margins for petrochemical products due to higher feedstock costs made year-over-year comparisons difficult. That said, we achieved near record quarterly revenue levels at TC driven by a 53% year-over-year increase in wax sales and 42% increase in custom processing revenue.

 

“Finally, we remain confident regarding the long-term prospects of our business reinforced by the expanded petrochemical production capacity on the Gulf Coast and anticipated stronger demand from polyethylene manufacturers,” said Mr. Upfill-Brown. “While we expect to achieve volume growth in the second half of 2017, we believe that 2018 will be the catalyst year for Trecora with the potential to deliver increased incremental EBITDA across all areas of the Company. Lastly, with the mine once again operational, we have the potential to monetize our investment in order to deliver significant value to our shareholders.”

 

Fourth Quarter Financial 2016 Results

Total revenue in the fourth quarter was $54.2 million compared with $60.5 million in the fourth quarter of 2015. The decline in reported revenue was driven by a 25.4% decrease in petrochemical sales volume, partially offset by a 10.1% increase in the average sales price of petrochemical products, compared with the fourth quarter of 2015. The higher average sales price was partially offset by an 8.5% year-over-year increase in the average per-gallon cost of petrochemical feedstock which is the basis for the formula pricing for about 60% of the Company’s petrochemical product sales. Average feedstock cost per gallon increased 5.1% from the third quarter of 2016. Since formula pricing is based upon prior month feedstock averages, sales price increases tend to lag higher feedstock costs resulting in lower profit margins. Byproduct sales decreased in the fourth quarter from a year ago and third quarter 2016 levels.

 

 

 

 

Gross profit in the fourth quarter was $7.7 million, or 14.1% of total revenues, compared with $11.3 million, or 18.6% of total revenues, in the fourth quarter of 2015. Operating income for the fourth quarter was $2.5 million, compared with operating income of $5.8 million for the fourth quarter of 2015.

 

Net loss for the fourth quarter was $0.8 million, or $0.03 per diluted share, compared with net income of $1.1 million, or $0.05 per diluted share, for the fourth quarter of 2015. Adjusted net income for the quarter was $1.6 million, or $0.06 per share1. Reported net income in the fourth quarters of 2016 and 2015 both reflect equity in losses of AMAK of $3.7 million and $3.0 million, respectively.

 

Adjusted EBITDA in the quarter was $5.7 million, representing a 10.6% margin, compared with Adjusted EBITDA of $8.6 million and a 14.2% margin in the year-ago period.

 

South Hampton Resources

Petrochemical volume in the fourth quarter was 18.4 million gallons, compared with 24.6 million gallons in the fourth quarter of 2015. Prime product volume in the fourth quarter of 2016 was 14.5 million gallons, compared with 17.4 million gallons in the fourth quarter of 2015. Excluding shipments to a Canadian oil sands customer, which experienced a significant production cutback early in 2016, prime product volume was lower by 4.4% from the prior year period. Byproduct volume, which is sold at significantly lower margins than prime products, decreased 18.9% sequentially and 45.5% year-over-year, to 3.9 million gallons.

 

International volume represented 22.7% of total petrochemical volume during the quarter, down from 25.7% sequentially and 31.9% in the fourth quarter of 2015.

 

SHR SEGMENT INFORMATION*

   THREE MONTHS ENDED     
   DECEMBER 31,     
   2016   2015   % Change 
Product sales  $44,185   $53,784    (18%)
Processing fees   1,997    1,393    43%
Net revenues  $46,182    55,177    (16%)
Operating profit before depreciation and amortization   6,187    9,366    (34%)
Operating profit   4,572    8,005    (43%)
Depreciation and amortization   1,615    1,361    19%
EBITDA   6,182    9,395    (34%)
Capital expenditures   6,136    6,482    (5%)
                
*Dollar amounts in thousands/rounding may apply               

 

 

1 Based on adjusted net income of $1.6 million and 25.0 million shares outstanding.

 

 

 

 

Trecora Chemical

In the fourth quarter, TC generated revenues of $8.0 million, up 49.4% from $5.4 million in the fourth quarter of 2015. TC revenue included $5.7 million of wax product sales, up 52.6%, and $2.3 million of custom processing fees, higher by 42.0%, both compared with the fourth quarter of 2015. The distillation mechanical construction portion of the hydrogenation and distillation unit project at TC has been completed. Once fully operational, this unit will provide TC with new capabilities to leverage relationships with existing petrochemical customers and drive new custom processing revenue. Start up of the hydrogenation section remains on track for early April.

 

EBITDA in the fourth quarter was $0.2 million, compared with $0.5 million in the fourth quarter of 2015.

 

TC SEGMENT INFORMATION*

   THREE MONTHS ENDED     
   DECEMBER 31,     
   2016   2015   % Change 
Product sales  $5,734   $3,757    53%
Processing fees   2,287    1,611    42%
Net revenues  $8,021   $5,368    49%
Operating profit before depreciation and amortization   278    653    (57%)
Operating loss   (693)   (376)   (84%)
Depreciation and amortization   971    1,029    (6%)
EBITDA   219    486    (55%)
Capital expenditures   6,488    1,292    402%
                
*Dollar amounts in thousands/rounding may apply               

 

Al Masane Al Kobra Mining Company (AMAK)

Trecora reported equity in losses of AMAK of approximately $3.7 million during the fourth quarter of 2016. The plant restarted its processing operations late in the quarter. In addition, processing of the gold-bearing waste dumps from historical mining at the Guyan mining license area was completed and the results are being evaluated. AMAK also commenced an extensive underground and surface exploration drilling campaign on copper and zinc ore bodies at Al Masane. Under the new operating model, the mining and processing operations will be managed by an owner's team with technical support and labor resources provided by a Turkish company with considerable experience in the mining industry.

 

2016 Full Year Results

For the year, Trecora generated total revenue of $212.4 million, compared with revenue of $242.0 million in the prior year.

 

Gross profit for 2016 was $39.9 million, compared with $57.0 million in 2015. Gross profit margin for the year was 18.8%, compared with 23.6% in 2015.

 

Net income for the full year of 2016 was $19.4 million, compared with $18.6 million in 2015. Diluted EPS were $0.78, compared with $0.74 in 2015. Net income benefitted from a gain from additional equity issuance by AMAK of $3.2 million and a bargain purchase gain on the acquisition of B Plant of $11.5 million offset slightly by equity in loss for AMAK of $1.5 million for an estimated combined impact of $0.34 per diluted share on an after-tax basis.

 

 

 

 

Adjusted EBITDA for the full year of 2016 was $31.0 million, compared with $47.3 million in 2015. Adjusted EBITDA margin in the year was 14.6%, compared with 19.6% in 2015.

 

South Hampton Resources

Petrochemical volume in 2016 was 76.4 million gallons, compared with 86.9 million gallons in 2015. Prime product volume in 2016 was 58.5 million gallons, compared with 64.1 million gallons in 2015. Byproduct volume, which is sold at lower margins, was down 21.4% year-over-year to 17.9 million gallons.

 

International volume represented 22.7% of total petrochemical volume in 2016.

 

SHR SEGMENT INFORMATION*

   YEAR ENDED     
   DECEMBER 31,     
   2016   2015   % Change 
Product sales  $173,262   $212,431    (18%)
Processing fees   8,766    5,802    51%
Net revenues  $182,028   $218,233    (17%)
Operating profit before depreciation and amortization   31,885    47,564    (33%)
Operating profit   26,060    43,080    (40%)
Depreciation and amortization   5,825    4,484    30%
EBITDA   31,886    47,640    (33%)
Capital expenditures   22,948    24,358    (6%)
                
*Dollar amounts in thousands/rounding may apply               

 

Trecora Chemical

In 2016, TC generated revenues of $30.4 million, up 27.9% from $23.7 million from 2015.

 

TC SEGMENT INFORMATION*

   YEAR ENDED     
   DECEMBER 31,     
   2016   2015   % Change 
Product sales  $20,319   $15,506    31%
Processing fees   10,052    8,237    22%
Net revenues  $30,371   $23,743    28%
Operating profit before depreciation and amortization   3,044    4,550    (33%)
Operating profit (loss)   (864)   (1)   (864%)
Depreciation and amortization   3,908    4,551    (14%)
Adjusted EBITDA (excluding bargain purchase gain)   3,034    4,356    (30%)
Capital expenditures   17,547    6,889    155%
                
*Dollar amounts in thousands/rounding may apply               

 

Balance Sheet

As of December 31 2016, cash and cash equivalents were $8.4 million, compared with $18.6 million at the close of 2015. Inventory was $17.9 million, compared with $15.8 million at December 31, 2015. Excluding loan fees, total debt was $84.0 million, compared with $82.3 million at December 31, 2015. Capital expenditures during the fourth quarter were $12.7 million including the hydrogenation/distillation unit project, the new advanced reformer unit, and a new cooling tower along with various improvements throughout both facilities.

 

 

 

 

Other Matters

On March 1, 2017, Trecora Resources announced that the Audit Committee of its Board of Directors, following consultation with management and discussion with the Company’s independent registered public accounting firm, BKM Sowan Horan, LLP, concluded that there were errors in the accounting for its equity in earnings from its investment in AMAK in the second and third quarters of 2016. While the errors have a de minimis effect on net income and earnings per share (less than $0.01 per share) for the twelve months ended December 31, 2016, they do have an impact on net income of the second and third quarters of 2016. As a result, the second and third quarter Forms 10-Q should no longer be relied upon. The Company will restate these quarters on or before the due date for the filing of its 2016 Form 10-K.

 

Although the Company’s internal assessment is not complete, the Company has determined that it has a material weakness related to its controls surrounding the accounting for its investment in AMAK. Consequently, as a result of this material weakness, management will be unable to conclude that the Company’s internal controls over financial reporting are effective as of December 31, 2016. The final assessment of the Company’s internal controls will be included in the 2016 Annual Report on Form 10-K, which also will include an adverse opinion from BKM Sowan Horan, LLP with respect to the Company’s internal controls over financial reporting. The Company expects that the remediation of this material weakness will be completed prior to the filing of its first quarter 2017 Form 10-Q.

 

Earnings Call

Today'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 http://public.viavid.com/index.php?id=122862. 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 4:30 pm Eastern start time; domestic callers (U.S. and Canada) should call 1-888-208-1814 or 1-719-325-2297 if calling internationally, using the conference ID 6372176. To listen to the playback, please call 1-844-512-2921 if calling within the United States or 1-412-317-6671 if calling internationally. Use pin number 6372176 for the replay.

 

Use of Non-GAAP Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). This press release contains the non-GAAP measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Net Income. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

 

Forward-Looking Statements

Statements in this press release that are not historical facts are forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon our belief, as well as, assumptions made by and information currently available to us. Because such statements are based upon expectations as to future economic performance and are not statements of fact, actual results may differ from those projected. These risks, as well as others, are discussed in greater detail in Trecora Resources' filings with the Securities and Exchange Commission, including Trecora Resources' Annual Report on Form 10-K for the year ended December 31, 2015, and the Company's subsequent Quarterly Reports on Form 10-Q. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release.

 

 

 

 

About Trecora Resources (TREC)

TREC owns and operates a facility located in southeast Texas, just north of Beaumont, 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, the Company is the original developer and a 33.4% owner of Al Masane Al Kobra Mining Co., a Saudi Arabian joint stock company.

 

Investor Relations Contact:

Matt Steinberg

The Piacente Group

212-481-2050

trecora@tpg-ir.com

 

 

 

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

  

December 31,

2016

(unaudited)

  

December 31,

2015

 
ASSETS  (thousands of dollars) 
Current Assets          
Cash and cash equivalents  $8,389   $18,623 
Trade receivables, net   22,193    19,474 
Inventories   17,871    15,804 
Prepaid expenses and other assets   3,511    2,392 
Taxes receivable   3,983    7,672 
Deferred income taxes   1,615    2,116 
Total current assets   57,562    66,081 
           
Plant, pipeline and equipment, net   140,009    96,907 
           
Goodwill   21,798    21,798 
Other intangible assets, net   22,669    24,549 
Investment in AMAK   49,386    47,697 
Mineral properties in the United States   588    588 
Other assets   87    171 
           
TOTAL ASSETS  $292,099   $257,791 
           
LIABILITIES          
Current Liabilities          
Accounts payable  $13,306   $8,090 
Current portion of derivative instruments   58    118 
Accrued liabilities   2,017    4,062 
Current portion of post-retirement benefit   316    294 
Current portion of long-term debt   10,145    8,061 
Current portion of other liabilities   870    2,050 
Total current liabilities   26,712    22,675 
           
Long-term debt, net of current portion   73,107    73,169 
Post-retirement benefit, net of current portion   897    649 
Derivative instruments, net of current portion   -    59 
Other liabilities, net of current portion   2,309    2,351 
Deferred income taxes   24,698    16,503 
Total liabilities   127,723    115,406 
           
EQUITY          

Common stock-authorized 40 million shares of $.10 par value; issued

24.2 million in 2016 and 2015 and outstanding 23.9 million and 24.2 million

in 2016 and 2015, respectively

   2,451    2,416 
Additional paid-in capital   53,474    50,662 
Common stock in treasury, at cost 0.3 million shares   (284)   - 
Retained earnings   108,446    89,018 
Total Trecora Resources Stockholders’ Equity   164,087    142,096 
Noncontrolling Interest   289    289 
Total equity   164,376    142,385 
           
TOTAL LIABILITIES AND EQUITY  $292,099   $257,791 

 

 

 

 

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

 

 

  

UNAUDITED

THREE MONTHS ENDED

  

 

YEAR ENDED

 
   DECEMBER 31,   DECEMBER 31, 
   2016   2015   2016   2015 
           (unaudited)     
   (thousands of dollars) 
REVENUES                    
Petrochemical and Product Sales  $49,919   $57,541   $193,581   $227,937 
Processing Fees   4,284    3,004    18,818    14,039 
    54,203    60,545    212,399    241,976 
                     
OPERATING COSTS AND EXPENSES                    
Cost of Sales and Processing                    
(including depreciation and amortization of $2,396, $2,252, $9,016, and $8,335, respectively)   46,551    49,288    172,497    184,967 
                     
GROSS PROFIT   7,652    11,257    39,902    57,009 
                     
GENERAL AND ADMINISTRATIVE EXPENSES                    
General and Administrative   4,909    5,357    20,434    20,243 
Depreciation   205    146    761    725 
    5,114    5,503    21,195    20,968 
                     
OPERATING INCOME   2,538    5,754    18,707    36,041 
                     
OTHER INCOME (EXPENSE)                    
Interest Expense   (182)   (499)   (1,985)   (2,217)
Bargain Purchase Gain from Acquisition   -    -    11,549    - 
Equity in Losses of AMAK   (3,740)   (2,961)   (1,479)   (5,325)
Gain from Additional Equity Issuance by AMAK   -    -    3,168    - 
Miscellaneous Expense   (66)   (143)   (28)   (137)
    (3,988)   (3,603)   11,225    (7,679)
                     
INCOME (LOSS) BEFORE INCOME TAXES   (1,450)   2,151    29,932    28,362 
                     
INCOME TAXES (BENEFIT)   (603)   1,029    10,504    9,764 
                     
NET INCOME (LOSS)   (847)   1,122    19,428    18,598 
                     
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST   --    --    --    -- 
                     
NET INCOME (LOSS) ATTRIBUTABLE TO TRECORA RESOURCES  $(847)  $1,122   $19,428   $18,598 
                     
Basic Earnings per Common Share                    
Net Income (Loss) Attributable to Trecora Resources (dollars)  $(0.04)  $0.05   $0.80   $0.76 
                     
Basic Weighted Average Number of Common Shares Outstanding   24,223    24,448    24,284    24,370 
                     
Diluted Earnings per Common Share                    
Net Income (Loss) Attributable to Trecora Resources (dollars)  $(0.03)  $0.05   $0.78   $0.74 
                     
Diluted Weighted Average Number of Common Shares Outstanding   25,039    25,203    24,982    25,181 

 

 

 

 

TRECORA RESOURCES AND SUBSIDIARIES

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES(1)

 

Adjusted EBITDA Margin

(rounding may apply)

 

   THREE MONTHS ENDED 12/31/16   THREE MONTHS ENDED 12/31/15 
   TC   SHR   CORP   TREC   TC   SHR   CORP   TREC 
NET INCOME (LOSS)  $(752)  $2,752   $(2,847)  $(847)  $(421)  $4,297   $(2,754)  $1,122 
Interest   -    180    2    182    -    498    1    499 
Taxes   -    1,635    (2,238)   (603)   (122)   3,239    (2,088)   1,029 
Depreciation and amortization   20    170    15    205    23    115    8    146 
Depreciation and amortization in cost of sales   951    1,445    -    2,396    1,006    1,246    -    2,252 
EBITDA   219    6,182    (5,068)   1,333    486    9,395    (4,834)   5,048 
Share based compensation   -    -    670    670    -    -    559    559 
Equity in losses of AMAK   -    -    3,740    3,740    -    -    2,961    2,961 
Adjusted EBITDA  $219   $6,182   $(658)  $5,743   $486   $9,395   $(1,314)  $8,568 
                                         
Revenue   8,021    46,182         54,203    5,368    55,177         60,545 
Adjusted EBITDA Margin   2.7%   13.4%        10.6%   9.1%   17.0%        14.2%
(adjusted EBITDA/revenue)                                        

 

   TWELVE MONTHS ENDED 12/31/16   TWELVE MONTHS ENDED 12/31/15 
   TC   SHR   CORP   TREC   TC   SHR   CORP   TREC 
NET INCOME (LOSS)  $6,634   $16,005   $(3,211)  $19,428   $(195)  $27,498   $(8,705)  $18,598 
Interest   -    1,977    8    1,985    -    2,209    8    2,217 
Taxes   4,041    8,078    (1,615)   10,504    -    13,450    (3,686)   9,764 
Depreciation and amortization   80    638    43    761    87    612    26    725 
Depreciation and amortization in cost of sales   3,828    5,188    -    9,016    4,464    3,871    -    8,335 
EBITDA   14,583    31,886    (4,775)   41,694    4,356    47,640    (12,358)   39,639 
Share based compensation   -    -    2,552    2,552    -    -    2,353    2,353 
Bargain purchase gain   (11,549)   -    -    (11,549)   -    -    -    - 
Gain from additional equity issuance by AMAK   -    -    (3,168)   (3,168)                    
Equity in (earnings) losses of AMAK   -    -    1,479    1,479    -    -    5,325    5,325 
Adjusted EBITDA  $3,034   $31,886   $(3,912)  $31,008   $4,356   $47,640   $(4,680)  $47,317 
                                         
Revenue   30,371    182,028         212,399    23,743    218,233         241,976 
Adjusted EBITDA Margin   10.0%   17.5%        14.6%   18.3%   21.8%        19.6%
(adjusted EBITDA/revenue)                                        

 

 

 

 

Adjusted Net Income and Estimated EPS Impact

(rounding may apply)

  

   Three months ended   Year ended 
   12/31/2016   12/31/2015   12/31/2016   12/31/2015 
NET INCOME (LOSS)  $(847)  $1,122   $19,428   $18,598 
                     
Bargain purchase gain  $0   $0   $(11,549)  $0 
Equity in losses of AMAK  $3,740   $2,961   $1,479   $5,325 
Gain on additional equity issuance by AMAK   -    -   $(3,168)   - 
Taxes at statutory rate of 35%  $(1,309)  $(1,036)  $4,633   $(1,864)
Tax effected equity in AMAK, gain on additional equity issuance by AMAK and bargain purchase gain  $2,431   $1,925   $(8,605)  $3,461 
Adjusted Net Income  $1,584   $3,047   $10,823   $22,059 
Diluted weighted average number of shares   25,039    25,203    24,982    25,181 
Estimated effect on diluted EPS
(tax effected equity in AMAK, gain on additional equity issuance by AMAK, and bargain purchase gain/diluted weighted average number of shares)
  $(0.10)  $(0.08)  $0.34   $(0.14)

 

(1) This press release includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunctiowh our consolidated financial statements prepared in accordance with GAAP.

 

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