Press Releases

Trecora Resources Reports Third Quarter 2016 Results

Download PDF

Key Capital Projects Continue on Schedule

Increased Capacity to Meet New Pentane Growth Through 2021

Conference Call at 4:30 pm ET Today

SUGAR LAND, Texas, Nov. 3, 2016 /PRNewswire/ -- Trecora Resources (NYSE: TREC) a leading provider of high purity specialty hydrocarbons and waxes, today announced financial results for the third quarter and nine months ended September 30, 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. (PRNewsFoto/Trecora Resources)

Trecora President and CEO Simon Upfill-Brown commented, "Despite a challenging petrochemical market environment, we saw a 16.4% sequential increase in prime product volume in the third quarter. Several important customer accounts increased their volume demands in the quarter which we expect will continue.  Additionally, as a result of our on-going capacity expansion investments, we are poised to benefit from the anticipated 60-70% increase in pentane volumes by 2021.

"At Trecora Chemical (TC), we reported year-over-year wax sales growth which was partially offset by a decrease in custom processing revenue. We are laying the groundwork for future growth and increased profitability at TC through significant capital and human resource investments while pursuing new wax opportunities and securing several new custom processing contract wins."

Third Quarter Financial 2016 Results

Total revenue in the third quarter was $57.1 million compared with $66.9 million in the third quarter of 2015. The decline in reported revenue was driven by a 16.0% decrease in petrochemical sales volume and a 4.3% decrease in the average sales price of petrochemical products, both compared with the third quarter of 2015. The lower average sales price was partially offset by a 5.0% year-over-year decrease in the average per-gallon cost of petrochemical feedstock which is the basis for the formula pricing for over 60% of the Company's petrochemical product sales.  However, feedstock cost increased 17.4% from the second 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 increased significantly in the third quarter from second quarter 2016 levels.  In addition, a $0.21 per gallon sequential decline in feed margins on byproduct sales negatively impacted third quarter gross margins.

Gross profit in the third quarter was $8.9 million, or 15.6% of total revenues, compared with $16.0 million, or 24.0% of total revenues, in the third quarter of 2015. Operating income for the third quarter was $4.1 million, compared with operating income of $11.1 million for the third quarter of 2015.

Net income for the third quarter was $0.7 million, or $0.03 per diluted share, compared with net income of $5.3 million, or $0.21 per diluted share, for the third quarter of 2015. Adjusted net income for the quarter was $2.1 million, or $0.08 per share1. Reported net income in the third quarters of 2016 and 2015 both reflect equity in losses of AMAK of $2.1 million. Adjusted EBITDA in the quarter was $7.2 million, representing a 12.7% margin, compared with Adjusted EBITDA of $13.9 million and a 20.7% margin in the year-ago period.

1 Based on adjusted net income of $2.098 million and 25,205,000 shares outstanding.

Mr. Upfill-Brown added, "Our advanced reformer and hydrogenation/distillation capital projects are proceeding on time and on budget. With new polyethylene plants in North America expected to add approximately eight million metric tons per year of manufacturing capacity by 2020, our second Canadian oil sands customer expected to come on-line in 2017, and several identified international opportunities, we are aggressively investing in new capital projects in order to position the Company to capture the anticipated significant increase in demand while continuing to serve the largest and most demanding customers in the chemical industry. We believe that these projects, combined with our D-Train expansion and new reformer unit at South Hampton Resources (SHR) and B Plant facility and hydrogenation/distillation unit at TC, have the potential to add an estimated $28 million to $36 million in annual EBITDA beginning in the 2018 to 2020 time frame."

South Hampton Resources
Petrochemical volume in the third quarter was 20.7 million gallons, compared with 24.6 million gallons in the third quarter of 2015. Prime product volume in the third quarter of 2016 was 15.8 million gallons, compared with 17.4 million gallons in the third quarter of 2015. Byproduct volume, which is sold at significantly lower margins than prime products, increased 41.9% sequentially, but declined 33.0% year-over-year, to 4.8 million gallons.

International volume represented 25.7% of total petrochemical volume during the quarter, up from 21.4% sequentially and 20.7% in the third quarter of 2015.

SHR SEGMENT INFORMATION*


THREE MONTHS ENDED




SEPTEMBER 30,




2016

2015

% Change

  Product sales

$47,250

$59,122

(20%)

  Processing fees

2,909

1,364

113%

  Net revenues

$50,159

60,486

(17%)

  Operating profit before depreciation and amortization

7,813

13,636

(43%)

  Operating profit

6,366

12,557

(49%)

  Depreciation and amortization

1,447

1,079

34%

  EBITDA

7,824

13,643

(43%)

  Capital expenditures

5,411

4,857

11%





  *Dollar amounts in thousands




 

Trecora Chemical
In the third quarter, TC generated revenues of $7.0 million, up 8.2% from $6.5 million in the third quarter of 2015. TC revenue included $4.9 million of wax product sales, up 19.6%, and $2.1 million of custom processing fees, lower by 11.1%, both compared with the third quarter of 2015.

EBITDA in the third quarter was about breakeven, compared with $1.4 million in the third quarter of 2015.

TC SEGMENT INFORMATION*


THREE MONTHS
ENDED



SEPTEMBER 30,



2016

2015

% Change

  Product sales

$4,864

$4,068

20%

  Processing fees

2,119

2,384

(11%)

  Net revenues

$6,983

$6,452

8%

  Operating profit before depreciation and amortization

118

1,393

(92%)

  Operating profit (loss)

(987)

178

(654%)

  Depreciation and amortization

1,105

1,215

(9%)

  EBITDA

44

1,399

(97%)

  Capital expenditures

4,066

1,766

130%





  *Dollar amounts in thousands




 

Al Masane Al Kobra Mining Company (AMAK)
Trecora reported equity in losses of AMAK of approximately $2.1 million during the third quarter of 2016. Exploration and renovation work, including installation of new equipment, continued during the quarter. Zinc and copper production is expected to resume late in the fourth quarter of 2016.

Year-to-Date 2016 Results
Total revenue for the nine months ended September 30, 2016, was $158.2 million, compared with revenue of $181.4 million in the first nine months of 2015.

Gross profit for the first nine months of 2016 was $32.3 million, compared with $45.8 million in the same period in 2015. Gross profit margin in the first nine months of 2016 was 20.4%, compared with 25.2% in the same period of 2015.

Net income for the first nine months of 2016 was $20.0 million, compared with $17.5 million in the same period of 2015. Diluted EPS were $0.80, compared with $0.69 in the same period of 2015. Net income benefitted from equity in earnings from AMAK of $5.1 million and a bargain purchase gain on the acquisition of B Plant of $11.5 million for an estimated combined impact of $0.43 per diluted share on an after-tax basis.

Adjusted EBITDA for the first nine months of 2016 was $25.3 million, compared with $38.7 million in the same period of 2015. Adjusted EBITDA margin in the first nine months of 2016 was 16.0%, compared with 21.4% in the same period of 2015.

South Hampton Resources
Petrochemical volume in the first nine months of 2016 was 58.0 million gallons, compared with 62.3 million gallons in the first nine months of 2015. Prime product volume in the first nine months of 2016 was 44.0 million gallons, compared with 46.7 million gallons in the first nine months of 2015. Byproduct volume, which is sold at lower margins, was down 10.2% year-over-year to 14.0 million gallons.

International volume represented 22.7% of total petrochemical volume during the first nine months of 2016.

SHR SEGMENT INFORMATION*


NINE MONTHS ENDED




SEPTEMBER 30,




2016

2015

% Change

  Product sales

$129,076

$158,647

(19%)

  Processing fees

6,769

4,409

54%

  Net revenues

$135,845

$163,056

(17%)

  Operating profit before depreciation and amortization

25,699

38,197

(33%)

  Operating profit

21,488

35,075

(39%)

  Depreciation and amortization

4,211

3,122

35%

  EBITDA

25,704

38,245

(33%)

  Capital expenditures

16,812

17,876

(6%)





  *Dollar amounts in thousands




 

Trecora Chemical
In the first nine months, TC generated revenues of $22.4 million, up 21.6% from $18.4 million from the first nine months of 2015.

TC SEGMENT INFORMATION*


NINE MONTHS ENDED




SEPTEMBER 30,




2016

2015

% Change

  Product sales

$14,585

$11,749

24%

  Processing fees

7,766

6,626

17%

  Net revenues

$22,351

$18,375

22%

  Operating profit before depreciation and amortization

2,774

3,897

(29%)

  Operating profit (loss)

(171)

375

(146%)

  Depreciation and amortization

2,945

3,522

(16%)

  EBITDA

14,364

3,870

271%

  Adjusted EBITDA (excluding bargain purchase gain)

2,815

3,870

(27%)

  Capital expenditures

11,059

5,664

95%





  *Dollar amounts in thousands




 

Balance Sheet
As of September 30, 2016, cash and cash equivalents were $7.6 million, compared with $18.6 million at the close of 2015. Inventory was $18.4 million, compared with $15.8 million at December 31, 2015. Excluding loan fees, total debt was $79.0 million, compared with $82.3 million at December 31, 2015. Capital expenditures during the third quarter were $9.5 million including the hydrogenation/distillation unit project, the new advanced reformer unit, and a new cooling tower 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=121473. 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 1-877-681-3375 or 1-719-325-4773 if calling internationally, using the conference ID 2950905. 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 2950905 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



SEPTEMBER 30,
2016
(unaudited)

DECEMBER 31,
2015

ASSETS

(thousands of dollars)

 Current Assets



  Cash and cash equivalents

$  7,587

$  18,623

  Trade receivables, net

19,829

19,474

  Inventories

18,376

15,804

  Prepaid expenses and other assets

3,939

2,392

  Taxes receivable

3,578

7,672

  Deferred income taxes

1,703

2,116

          Total current assets

55,012

66,081




  Plant, pipeline and equipment, net

129,738

96,907




  Goodwill

21,798

21,798

  Other intangible assets, net

23,134

24,549

  Investment in AMAK

52,776

47,697

  Mineral properties in the United States

588

588

  Other assets

109

171




     TOTAL ASSETS

$ 283,155

$ 257,791

LIABILITIES



  Current Liabilities



    Accounts payable

$  9,229

$  8,090

    Current portion of derivative instruments

80

118

    Accrued liabilities

4,228

4,062

    Current portion of post-retirement benefit

480

294

    Current portion of long-term debt

8,061

8,061

    Current portion of other liabilities

771

2,050

          Total current liabilities

22,849

22,675




  Long-term debt, net of current portion

70,123

73,169

  Post-retirement benefit, net of current portion

649

649

  Derivative instruments, net of current portion

8

59

  Other liabilities, net of current portion

2,383

2,351

  Deferred income taxes

22,817

16,503

     Total liabilities

118,829

115,406




EQUITY



  Common stock‑authorized 40 million shares of $.10 par value; issued and outstanding 24.2 million and 24.1 million shares in 2016 and 2015, respectively

2,451

2,416

  Additional paid-in capital

52,804

50,662

  Common stock in treasury, at cost 0.3 million shares

(284)

-

  Retained earnings

109,066

89,018

  Total Trecora Resources Stockholders' Equity

164,037

142,096

  Noncontrolling Interest

289

289

   Total equity

164,326

142,385




     TOTAL LIABILITIES AND EQUITY

$ 283,155

$ 257,791

 

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)



THREE MONTHS ENDED

NINE MONTHS ENDED


SEPTEMBER 30,

SEPTEMBER 30,


2016

2015

2016

2015


(thousands of dollars)

REVENUES





  Petrochemical and Product Sales

$ 52,115

$ 63,190

$ 143,662

$ 170,396

  Processing Fees

5,027

3,748

14,534

11,035


57,142

66,938

158,196

181,431






OPERATING COSTS AND EXPENSES





Cost of Sales and Processing (including depreciation and amortization of $2,373, $2,118, $6,620, and $6,083 , respectively)

48,237

50,903

123,946

135,679






   GROSS PROFIT

8,905

16,035

32,250

45,752






GENERAL AND ADMINISTRATIVE EXPENSES





  General and Administrative

4,585

4,778

15,525

14,886

  Depreciation

192

194

556

579


4,777

4,972

16,081

15,465






OPERATING INCOME

4,128

11,063

16,169

30,287






OTHER INCOME (EXPENSE)





  Interest Expense

(568)

(535)

(1,803)

(1,718)

  Bargain purchase gain from acquisition

-

-

11,549

-

  Equity in Earnings (Losses) of AMAK

(2,089)

(2,054)

5,079

(2,364)

  Miscellaneous Income (Expense)

(72)

7

38

6


(2,729)

(2,582)

14,863

(4,076)






  INCOME BEFORE INCOME TAXES

1,399

8,481

31,032

26,211






  INCOME TAXES

659

3,163

10,984

8,735






  NET INCOME

740

5,318

20,048

17,476






 NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

--

--

--

--






 NET INCOME ATTRIBUTABLE TO TRECORA RESOURCES

$ 740

$ 5,318

$ 20,048

$ 17,476






Basic Earnings per Common Share





  Net Income Attributable to Trecora Resources (dollars)

$ 0.03

$ 0.22

$ 0.82

$ 0.72






  Basic Weighted Average Number of Common Shares Outstanding

24,507

24,369

24,498

24,344






Diluted Earnings per Common Share





  Net Income Attributable to Trecora Resources (dollars)

$ 0.03

$ 0.21

$ 0.80

$ 0.69






  Diluted Weighted Average Number of Common Shares Outstanding

25,205

25,228

25,158

25,176

 

TRECORA RESOURCES AND SUBSIDIARIES

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


Adjusted EBITDA Margin



THREE MONTHS ENDED 09/30/16


THREE MONTHS ENDED 09/30/15


TC

SHR

CORP

TREC


TC

SHR

CORP

TREC

NET INCOME (LOSS)

$(691)

$3,988

$ (2,557)

$  740


$ 119

$8,671

$(3,472)

$5,318

Interest

-

565

3

568


-

532

3

535

Taxes

(372)

1,824

(793)

659


65

3,361

(263)

3,163

Depreciation and amortization

25

156

11

192


22

154

18

194

Depreciation and amortization in cost of sales

1,082

1,291

-

2,373


1,193

925

-

2,118

EBITDA

44

7,824

(3,336)

4,532


1,399

13,643

(3,714)

11,328

Share based compensation

-

-

608

608


-

-

505

505

Equity in losses of AMAK

-

-

2,089

2,089


-

-

2,054

2,054

Adjusted EBITDA

$44

$7,824

$  (639)

$ 7,229


$1,399

$13,643

$(1,155)

$13,887











Revenue

6,983

50,159


57,142


6,452

60,486


66,938

Adjusted EBITDA Margin

0.6%

15.6%


12.7%


21.7%

22.6%


20.7%

(adjusted EBITDA/revenue)











NINE MONTHS ENDED 09/30/16


NINE MONTHS ENDED 09/30/15


TC

SHR

CORP

TREC


TC

SHR

CORP

TREC

NET INCOME (LOSS)

$7,386

$13,253

$(591)

$ 20,048


$ 226

$ 23,201

$ (5,951)

$ 17,476

Interest

-

1,797

6

1,803


-

1,711

7

1,718

Taxes

4,041

6,443

500

10,984


122

10,211

(1,598)

8,735

Depreciation and amortization

60

468

28

556


64

497

18

579

Depreciation and amortization in cost of sales

2,877

3,743

-

6,620


3,458

2,625

-

6,083

EBITDA

14,364

25,704

(57)

40,011


3,870

38,245

(7,524)

34,591

Share based compensation

-

-

1,882

1,882


-

-

1,794

1,794

Bargain purchase gain

(11,549)

-

-

(11,549)


-

-

-

-

Equity in (earnings) losses of AMAK

-

-

(5,079)

(5,079)


-

-

2,364

2,364

Adjusted EBITDA

$2,815

$25,704

$(3,254)

$25,265


$ 3,870

$38,245

$ (3,366)

$ 38,749











Revenue

22,351

135,844


158,195


18,375

163,056


181,431

Adjusted EBITDA Margin

12.6%

18.9%


16.0%


21.1%

23.5%


21.4%

(adjusted EBITDA/revenue)










 

Adjusted Net Income and Estimated EPS Impact



Three months ended

Nine months ended


9/30/2016

9/30/2015

9/30/2016

9/30/2015

NET INCOME

$740

$5,318

$20,048

$17,476






Bargain purchase gain

$0

$0

$11,549

$0

Equity in (earnings) losses of AMAK

$2,089

$2,054

($5,079)

$2,364

Taxes at statutory rate of 35%

($731)

($719)

$5,820

($827)

Tax effected equity in AMAK and bargain purchase gain

$1,358

$1,335

($10,808)

$1,537

Adjusted Net Income

$2,098

$6,653

$9,240

$19,013

Diluted weighted average number of shares

25,205

25,228

25,158

25,176

Estimated effect on diluted EPS (tax effected equity in AMAK and bargain purchase gain/diluted weighted average number of shares)

($0.05)

($0.05)

$0.43

($0.06)


(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.

 

Logo - http://photos.prnewswire.com/prnh/20150106/167307LOGO

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/trecora-resources-reports-third-quarter-2016-results-300357185.html

SOURCE Trecora Resources