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Trecora Resources Reports Fourth Quarter and Full Year 2015 Results

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Record Fourth Quarter Gross Margin

Fourth Quarter Adjusted EBITDA Increased by 6% Year-over-Year

Full D-Train Capacity Test Completed in January

Conference Call at 4:30 pm ET Today

SUGAR LAND, Texas, March 3, 2016 /PRNewswire/ -- 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, 2015.

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)

Fourth Quarter and Full Year 2015 Financial Highlights

  • Petrochemical sales volume of 24.6 million gallons, up 13.7% from 21.6 million gallons in the fourth quarter of 2014. Record full year petrochemical sales volume of 86.9 million gallons, up 5.0% from 82.8 million gallons in 2014
  • Gross profit margin of 19.6% compared with 16.6% in the fourth quarter of 2014, and representing a record fourth quarter gross margin for the Company. Record full year gross profit margin of 24.5% compared with 15.8% in 2014
  • Operating income of $5.8 million, up 18.4% from $4.9 million in the fourth quarter of 2014. Record full year operating income of $36.0 million, up 41.4% from $25.5 million in 2014
  • Adjusted EBITDA of $8.6 million, or 14.2% of revenues, compared with $8.1 million, or 10.9% of revenues, in the fourth quarter of 2014. Record full year adjusted EBITDA of $47.3 million, or 19.6% of revenues, compared with $33.0 million, or 11.4% of revenues, in 2014

Fourth Quarter 2015 Results
Total revenue in the fourth quarter was $60.5 million compared with $74.1 million in the fourth quarter of 2014. The decline in reported revenue was driven by a 37.4% reduction in the average per gallon cost of petrochemical feedstock in the fourth quarter, which rolls over into the formula sales pricing mechanism for close to 60% of petrochemical product sales. Consequently, the average sales price of petrochemical products decreased by 29.5%.  The lower feedstock costs more than offset the formula-driven sales price reductions resulting in higher profit margins.

Gross profit margin increased to 19.6% in the fourth quarter of 2015, compared with 16.6% in the fourth quarter of 2014.  Operating income for the fourth quarter was $5.8 million compared with operating income of $4.9 million for the fourth quarter of 2014.  Total adjusted EBITDA was $8.6 million, an increase of 6.3% over adjusted EBITDA of $8.1 million in the year-ago period. The adjusted EBITDA margin increased to 14.2% in the fourth quarter of 2015, compared with 10.9% in the fourth quarter of 2014.

Net income for the fourth quarter was $1.1 million, or $0.05 per diluted share, compared with net income of $2.2 million, or $0.09 per diluted share, for the fourth quarter of 2014. Net income was negatively impacted by the reported loss in equity in the Al Masane Al Kobra Mining Company of $3.0 million, or approximately $0.08 per diluted share on an after-tax basis.

Trecora President and CEO Simon Upfill-Brown commented, "In 2015 we achieved profit margin improvement and made significant progress on our capacity expansion projects at South Hampton Resources and Trecora Chemical. We also generated record fourth quarter gross margins resulting from the continuation of lower feedstock prices and higher prime product sales. However, in addition to the reported equity loss from AMAK, there were several factors that negatively affected fourth quarter results, including deferred revenue of approximately $5.5 million, higher sales to our lower margin oil sands customer, declining prices for byproduct sales, effects of a strong dollar versus other currencies and pricing pressure in the petrochemical spot market.

"Despite these challenges, we are seeing some positive trends across the industry and have taken steps to improve our performance and capabilities.  The chemical industry's production capacity expansion on the Gulf Coast is well underway, and the increasing needs of polyethylene manufacturers and other markets we serve will drive our production volumes over the next several years.  Additionally, a new reformer unit at South Hampton, scheduled to come online in 2017, will produce a higher-value byproduct stream.  At Trecora Chemical, quality improvements have opened new markets and attracted new customers as evidenced by a substantial pickup in custom processing work in early 2016, which we expect to continue.  We are also positioned to double custom processing volume in 2017 compared to 2015 as the completion of our new hydrogenation and distillation project is expected in the third quarter of this year," Mr. Upfill-Brown added.

South Hampton Resources (SHR)
Petrochemical volume in the fourth quarter increased 13.7% to 24.6 million gallons, compared with 21.6 million gallons in the fourth quarter of 2014. Prime product volume in the fourth quarter of 2015 was 17.4 million gallons, a 6.1% increase year-over-year, driven primarily by strong sales to a Canadian oil sands customer. However, byproduct volume was up 37.1% at lower prices, thereby impacting profitability. SHR's D-Train completed its full capacity test in January and demonstrated the ability to process 6,000 barrels of feedstock a day, which is a 50% greater volume than originally projected.  The increase in D-Train capacity will allow for full production at SHR while performing inspection and maintenance on the other processing lines. 

International volume represented 31.9% of total petrochemical volume during the quarter, including a 24% year-over-year increase in shipments to a Canadian oil sands customer, which carries slightly lower margins than other petrochemical sales. Finally, fourth quarter deferred revenue was approximately $5.5 million and will be recognized in the first quarter of 2016; however, associated shipping costs were recorded in the fourth quarter.

Trecora Chemical (TC)
TC's fourth quarter revenue was $5.4 million, including $1.6 million of custom processing fees. Revenue at TC was impacted by the strengthening dollar in key markets, particularly Brazil and China. TC's EBITDA in the fourth quarter was $0.6 million.  TC's improvements in wax quality and consistency have resulted in customer wins – we shipped to two new adhesives customers in the quarter and gained approval from both a tape adhesives customer and a paint customer. For custom processing we ran three successful trials for new customers in the quarter and the installation of the distillation and hydrogenation unit remains on track for completion in the third quarter of 2016.

Al Masane Al Kobra Mining Company (AMAK)
Trecora reported a loss in equity in AMAK of approximately $3.0 million during the fourth quarter of 2015.  In November 2015, AMAK announced a temporary shutdown of the facility for extensive renovations to improve production efficiencies and precious metal recovery. Renovation work began in December 2015, and zinc and copper production is expected to resume in the fourth quarter of 2016. Certain operating expenses remained following the contract termination with the existing mine operator in late November, resulting in fourth quarter operating expenses that were only slightly lower than third quarter 2015 levels. More significant expense reductions are expected in the first quarter of 2016. Average spot prices for zinc and copper in the fourth quarter were down approximately 13% and 7%, respectively, compared with the third quarter.

2015 Full Year Results
For the year, Trecora generated total revenue of $242.0 million, compared with revenue of $289.6 million in the prior year.  Revenue for Trecora Chemical in 2015 was $23.7 million, which included $8.2 million of processing fees.

Gross profit for 2015 was $59.4 million, a 29.8% increase compared with $45.7 million in 2014.  Gross profit margin for the year was 24.5%, compared with 15.8% in 2014.

Adjusted EBITDA for the full year 2015 was $47.3 million, up 43.3% compared with $33.0 million in 2014. Adjusted EBITDA margin in the year was 19.6%, compared with 11.4% in 2014.

Net income for the full year 2015 was $18.6 million, or $0.74 per diluted share, an increase of 19.4% compared with $15.6 million, or $0.63 per diluted share, in 2014. Net income was negatively impacted by the reported loss in equity in the Al Masane Al Kobra Mining Company of $5.3 million, or an estimated $0.14 per diluted share on an after tax basis.

Balance Sheet
As of December 31, 2015, cash and cash equivalents were $18.6 million compared with $8.5 million at the close of 2014. Total debt was $82.3 million. Capital expenditures during the fourth quarter were $7.7 million, which included D-train expansion construction and expansion of custom processing capacity at Trecora Chemical.

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=118427.  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 1-888-556-4997 or 1-719-457-1512 if calling internationally, using the conference ID 4453621. To listen to the playback, please call 1-877-870-5176 if calling within the United States or 1-858-384-5517 if calling internationally. Use pin number 4453621 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: Adjusted EBITDA and Adjusted EBITDA Margin.  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, 2014, 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 35% owner of Al Masane Al Kobra Mining Co., a Saudi Arabian joint stock company.

Investor Relations Contact:
Don Markley
The Piacente Group
212-481-2050
trecora@tpg-ir.com

 


TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS





DECEMBER 31,

2015

DECEMBER 31,

2014

ASSETS

(thousands of dollars)

 Current Assets



  Cash and cash equivalents

$  18,623

$  8,506

  Trade receivables, net

19,474

28,271

  Inventories

15,804

12,815

  Prepaid expenses and other assets

2,664

3,257

  Taxes receivable

7,672

434

  Deferred income taxes

2,116

1,652

          Total current assets

66,353

54,935




  Plant, pipeline and equipment, net

96,907

73,811




  Goodwill

21,798

21,750

  Other intangible assets, net

24,549

26,235

  Investment in AMAK

47,697

53,023

  Mineral properties in the United States

588

588

  Other assets

919

1,732




     TOTAL ASSETS

$ 258,811

$ 232,074

 

LIABILITIES



  Current Liabilities



    Accounts payable

$  8,090

$  9,535

    Current portion of derivative instruments

118

362

    Accrued liabilities

4,062

5,020

    Accrued liabilities in Saudi Arabia

-

495

    Current portion of post-retirement benefit

294

286

    Current portion of long-term debt

8,333

7,000

    Current portion of other liabilities

2,050

2,183

          Total current liabilities

22,947

24,881




  Long-term debt, net of current portion

73,917

73,450

  Post-retirement benefit, net of current portion

649

649

  Derivative instruments, net of current portion

59

196

  Other liabilities, net of current portion

2,351

1,039

  Deferred income taxes

16,503

10,471

     Total liabilities

116,426

110,686




EQUITY



  Common stock‑authorized 40 million shares of $.10 par value; issued and outstanding
      
24.2 million and 24.0 million shares in 2015 and 2014, respectively

2,416

2,397

  Additional paid-in capital

50,662

48,282

  Retained earnings

89,018

70,420

  Total Trecora Resources Stockholders' Equity

142,096

121,099

  Noncontrolling Interest

289

289

   Total equity

142,385

121,388




     TOTAL LIABILITIES AND EQUITY

$ 258,811

$ 232,074

 


TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME





UNAUDITED

THREE MONTHS ENDED

YEAR ENDED


DECEMBER 31,

DECEMBER 31,


2015

2014

2015

2014


(thousands of dollars)

REVENUES





  Petrochemical and Product Sales

$ 57,541

$ 70,350

$ 227,937

$ 280,866

  Processing Fees

3,004

3,723

14,039

8,777


60,545

74,073

241,976

289,643






OPERATING COSTS AND EXPENSES





  Cost of Sales and Processing





    (including depreciation and amortization of  $2,252, $2,502,  $8,335, and $5,116 respectively)

48,698

61,788

182,607

243,900






   GROSS PROFIT

11,847

12,285

59,369

45,743






GENERAL AND ADMINISTRATIVE EXPENSES





  General and Administrative

5,947

7,272

22,603

19,701

  Depreciation

146

154

725

560


6,093

7,426

23,328

20,261






OPERATING INCOME

5,754

4,859

36,041

25,482






OTHER EXPENSE





  Interest Expense

(499)

(1,061)

(2,217)

(1,042)

  Losses on Cash Flow Hedge Reclassified from OCI

-

(188)

-

(378)

  Equity in Losses of AMAK

(2,961)

(385)

(5,325)

(1,072)

  Miscellaneous Expense

(143)

(63)

(137)

(272)


(3,603)

(1,697)

(7,679)

(2,764)






INCOME BEFORE INCOME TAXES

2,151

3,162

28,362

22,718






INCOME TAXES

1,029

964

9,764

7,147






NET INCOME

1,122

2,198

18,598

15,571






NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

--

--

--

--






NET INCOME ATTRIBUTABLE TO TRECORA RESOURCES

$ 1,122

$ 2,198

$ 18,598

$ 15,571






Basic Earnings per Common Share





  Net Income Attributable to Trecora Resources (dollars)

$ 0.05

$ 0.09

$ 0.76

$ 0.64






  Basic Weighted Average Number of Common Shares Outstanding

24,448

24,261

24,370

24,188






Diluted Earnings per Common Share





  Net Income Attributable to Trecora Resources (dollars)

$ 0.05

$ 0.09

$ 0.74

$ 0.63






  Diluted Weighted Average Number of Common Shares Outstanding

25,203

24,972

25,181

24,896

 

TRECORA RESOURCES AND SUBSIDIARIES
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES(1)





THREE MONTHS ENDED

31-Dec

YEAR ENDED

31-Dec



2015

2014

2015

2014


(thousands of dollars)






NET INCOME

$   1,122

$   2,198

$  18,598

$   15,571






Add back:





  Interest

507

1,061

2,232

1,042

  Derivative (gains) losses on interest rate swap

(8)

188

(15)

378

  Taxes

1,029

964

9,764

7,147

  Depreciation and amortization

146

154

725

560

  Depreciation and amortization in cost of sales

2,252

2,502

8,335

5,116






EBITDA

$ 5,048

$ 7,067

$ 39,639

$ 29,814

Share based compensation

559

611

2,353

2,141

Equity in losses of AMAK

2,961

385

5,325

1,072

Adjusted EBITDA

$ 8,568

$  8,063

$  47,317

$  33,027






Revenue

$ 60,545

$ 74,073

$ 241,976

$289,643

Adjusted EBITDA Margin

(adjusted EBITDA/revenue)

14.2%

10.9%

19.6%

11.4%






Equity in losses of AMAK

$ 2,961

$ 385

$ 5,325

$ 1,072

Taxes at effective tax rate of 35%

1,036

135

1,864

375

Tax effected equity in losses of AMAK

$ 1,925

$ 250

$ 3,461

$   697

Diluted weighted average number of shares

25,203

24,972

25,181

24,896

Estimated effect of AMAK losses on EPS

($0.08)

($0.01)

($0.14)

($0.03)






(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 conjunction with our consolidated financial statements prepared in accordance with GAAP.

 

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SOURCE Trecora Resources