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Trecora Resources Reports First Quarter 2016 Results

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Petrochemical Sales Volumes Increased 12.4% Year-over-Year

Trecora Chemical Achieves Record Quarterly Sales

Conference Call at 4:30 pm ET Today

SUGAR LAND, Texas, May 5, 2016 /PRNewswire/ -- Trecora Resources (NYSE: TREC) a leading provider of high purity specialty hydrocarbons and waxes, today announced financial results for the first quarter ended March 31, 2016.

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.

First Quarter 2016 Financial Highlights

  • Petrochemical sales volume of 20.4 million gallons, up 12.4% from 18.1 million gallons in the first quarter of 2015
  • Record Trecora Chemical (TC) quarterly sales of $8.1 million, an increase of 26.4% from $6.4 million in the first quarter of 2015
  • Gross profit margin of 22.5%, up from 19.6% on a sequential basis, but lower than 27.4% in the first quarter of 2015
  • Net income for the first quarter was $7.2 million, or $0.29 per diluted share, compared with net income of $5.8 million, or $0.23 per diluted share, for the first quarter of 2015.  Net income benefited from equity in earnings of Al Masane Al Kobra Mining Company (AMAK) of $5.4 million, or an estimated $0.14 per diluted share on an after-tax basis

First Quarter 2016 Results
Total revenue in the first quarter was $52.2 million compared with $55.1 million in the first quarter of 2015. The decline in reported revenue was driven by a 16.6% year-over-year reduction in the average per gallon cost of petrochemical feedstock, which is the basis for the formula pricing for nearly 60% of our petrochemical product sales. Consequently, the average sales price of petrochemical products decreased by 19.6% compared with the first quarter of 2015.

Gross profit was $11.8 million, or 22.5% of total revenues in the first quarter of 2016, compared with $15.1 million, or 27.4% of total revenues in the first quarter of 2015.  Operating income for the first quarter was $6.1 million compared with operating income of $9.7 million for the first quarter of 2015. 

Total Adjusted EBITDA was $9.2 million compared with Adjusted EBITDA of $12.7 million in the year-ago period and $8.6 million in the fourth quarter of 2015. Adjusted EBITDA margin was 17.6% in the first quarter of 2016 compared with 23.0% in the first quarter of 2015 and 14.2% in the fourth quarter of 2015.

Net income for the first quarter was $7.2 million, or $0.29 per diluted share, compared with net income of $5.8 million, or $0.23 per diluted share, for the first quarter of 2015. Net income benefited from equity in earnings for AMAK of $5.4 million, or an estimated $0.14 per diluted share on an after-tax basis. Equity in earnings for AMAK in the first quarter of 2015 was essentially breakeven.

Trecora President and CEO Simon Upfill-Brown commented, "Our first quarter results reflect higher year-over-year petrochemical sales volumes and record revenue at Trecora Chemical driven by improvement in both specialty wax sales and custom processing.  At South Hampton Resources, the increased capacity from our new D-train unit allowed us to maintain full production while performing maintenance on other processing lines.  We are also positioned to grow volumes further in 2017 as new chemical industry production projects come on line, and a second Canadian oil sands customer begins production.

"Trecora Chemical is off to a great start in 2016 with record wax volumes sold in the first quarter.  TC successfully launched an improved higher value product into three major applications and developed a low cost product that is competitive in the Asian market.  The recent acquisition of BASF's 6.5-acre plant adjacent to TC will create new opportunities for growth and enable significant operating efficiencies," Mr. Upfill-Brown added.

South Hampton Resources (SHR)
Petrochemical volume in the first quarter increased 12.4% to 20.4 million gallons, compared with 18.1 million gallons in the first quarter of 2015. Prime product volume in the first quarter of 2016 was 14.6 million gallons, a 4.0% increase year-over-year, driven primarily by an increase in sales to a Canadian oil sands customer. However, byproduct volume, which is sold at lower margins, was up 41.9% to 5.7 million gallons due to fewer pentanes in the feed.  The permit application for the new advanced reformer unit, which is designed to significantly enhance the value of the byproduct stream, has been filed. Engineering is on schedule, critical path equipment has been ordered and construction is expected to be completed by the second quarter of 2017.

International volume represented 20.7% of total petrochemical volume during the quarter, including a 21.8% year-over-year increase in shipments to oil sands customers, which carries slightly lower margins than other petrochemical sales.

Trecora Chemical (TC)
In the first quarter, TC generated record quarterly revenues of $8.1 million, including $4.6 million of wax product sales, up 35.7%, and $3.6 million of custom processing fees, up 16.2%, both compared with the first quarter of 2015. First quarter revenues included $1.7 million in custom processing fees generated during the twelve months ended March 31, 2016. Due to contract wording dealing with performance timing, annual recognition is required although the payments flow ratably. This is the last year remaining on that particular contract. TC's EBITDA in the first quarter was $2.1 million.

Earlier this week, TC acquired a 6.5-acre plant from BASF that is adjacent to its facility in Pasadena. The acquisition includes production equipment that expands TC's current high melt point separation competency and broadens TC's capabilities and potential markets. The site also includes substantial storage capacity, several rail and truck loading sites and utility tie-ins to TC.

Al Masane Al Kobra Mining Company (AMAK)
Trecora reported equity in earnings of AMAK of approximately $5.4 million during the first quarter of 2016.  As previously announced, AMAK reached a positive settlement with the former operator of its mine in Saudi Arabia.  The settlement includes a first quarter 2016 reduction in previously accrued operating expenses of approximately $16.2 million that more than offset AMAK's first quarter operating losses. Renovation work continued during the quarter, and zinc and copper production is expected to resume in the fourth quarter of 2016.

Balance Sheet
As of March 31, 2016, cash and cash equivalents were $14.2 million compared with $18.6 million at the close of 2015. Total debt was $79.2 million. Capital expenditures during the first quarter were $7.6 million including equipment purchased for the hydrogenation project, the new advanced reformer unit, a new cooling tower, and a new custom processing unit along with various improvements throughout both facilities.

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=119026. 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 1-888-417-8465 or 1-719-325-2354 if calling internationally, using the conference ID 6524888. 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 6524888 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, 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 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



MARCH 31,

2016

(unaudited)

DECEMBER 31,

2015

ASSETS

(thousands of dollars)

   Current Assets



      Cash and cash equivalents

$  14,152

$  18,623

      Trade receivables, net

18,779

19,474

      Inventories

17,325

15,804

      Prepaid expenses and other assets

2,229

2,392

      Taxes receivable

5,495

7,672

      Deferred income taxes

2,671

2,116

           Total current assets

60,651

66,081




  Plant, pipeline and equipment, net

102,387

96,907




  Goodwill

21,798

21,798

  Other intangible assets, net

24,079

24,549

  Investment in AMAK

53,075

47,697

  Mineral properties in the United States

588

588

  Other assets

151

171




     TOTAL ASSETS

$ 262,729

$ 257,791

LIABILITIES



    Current Liabilities



      Accounts payable

$  7,053

$  8,090

      Current portion of derivative instruments

107

118

      Accrued liabilities

3,678

4,062

      Current portion of post-retirement benefit

296

294

      Current portion of long-term debt

8,061

8,061

      Current portion of other liabilities

760

2,050

          Total current liabilities

19,955

22,675




  Long-term debt, net of current portion

71,153

73,169

  Post-retirement benefit, net of current portion

649

649

  Derivative instruments, net of current portion

40

59

  Other liabilities, net of current portion

2,201

2,351

  Deferred income taxes

18,464

16,503

     Total liabilities

112,462

115,406




EQUITY



     Common stock‑authorized 40 million shares of $.10 par value; issued and outstanding 24.2 million shares in 2016 and 2015

2,420

2,416

    Additional paid-in capital

51,316

50,662

    Retained earnings

96,242

89,018

    Total Trecora Resources Stockholders' Equity

149,978

142,096

    Noncontrolling Interest

289

289

     Total equity

150,267

142,385




     TOTAL LIABILITIES AND EQUITY

$ 262,729

$ 257,791

 

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) 



THREE MONTHS  ENDED


MARCH 31,


2016

2015

REVENUES

(thousands of dollars)




  Petrochemical and Product Sales

$47,181

$ 50,541

  Processing Fees

5,019

4,602


52,200

55,143




OPERATING COSTS AND EXPENSES



    Cost of  Sales and Processing



       (including depreciation and amortization of  $2,219 and $2,026, respectively)

40,429

40,020




   GROSS PROFIT

11,771

15,123




GENERAL AND ADMINISTRATIVE EXPENSES



  General and Administrative

5,449

5,175

  Depreciation

177

215


5,626

5,390




OPERATING INCOME

6,145

9,733




OTHER INCOME (EXPENSE)



    Interest Income

4

6

    Interest Expense

(628)

(613)

    Equity in Earnings of AMAK

5,367

59

    Miscellaneous Income (Expense)

(17)

26


4,726

(522)




  INCOME BEFORE INCOME TAXES

10,871

9,211




  INCOME TAXES

3,647

3,427




  NET INCOME

7,224

5,784




 NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

--

--




 NET INCOME ATTRIBUTABLE TO TRECORA RESOURCES

$ 7,224

$ 5,784




Basic Earnings per Common Share



  Net Income Attributable to Trecora Resources (dollars)

$ 0.30

$ 0.24




  Basic Weighted Average Number of Common Shares Outstanding

24,484

24,309




Diluted Earnings per Common Share



  Net Income Attributable to Trecora Resources (dollars)

$ 0.29

$ 0.23




  Diluted Weighted Average Number of Common Shares Outstanding

25,085

25,144

 

TRECORA RESOURCES AND SUBSIDIARIES

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

(in thousands except per share amounts)


THREE MONTHS ENDED

31-Mar



2016

2015



NET INCOME

$   7,224

$   5,784




Add back:



    Interest

628

613

    Taxes

3,647

3,427

    Depreciation and amortization

177

215

    Depreciation and amortization in cost of sales

2,219

2,026




EBITDA

$ 13,895

$ 12,065

Share based compensation

647

701

Equity in earnings of AMAK

(5,367)

(59)

Adjusted EBITDA

$ 9,175

$  12,707




Revenue

$ 52,200

$ 55,143

Adjusted EBITDA Margin

(adjusted EBITDA/revenue)

17.6%

23.0%




Equity in earnings of AMAK

$ 5,367

$ 59

Taxes at effective tax rate of 35%

1,878

21

Tax effected equity in earnings of AMAK

$ 3,489

$ 38

Diluted weighted average number of shares

25,085

25,144

Estimated effect of AMAK earnings on EPS

$0.14

$0.00


(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