(Mark One)


For the quarterly period ended March 31, 2022

OF 1934

For the transition period from _________ to __________

(Exact name of registrant as specified in its charter)
(State or other jurisdiction of(I.R.S. Employer Identification No.)
incorporation or organization)
1650 Hwy 6 South,Suite 19077478
Sugar Land,Texas
(Address of principal executive offices)(Zip code)

Registrant's telephone number, including area code: (281) 980-5522

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.10 per shareTRECNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes   X    No       

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S–T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   X    No      

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     Accelerated filer

Non-accelerated filer    Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Number of shares of the Registrant's Common Stock (par value $0.10 per share) outstanding at May 4, 2022: 23,651,141.


Item Number and Description

March 31, 2022 (Unaudited)December 31, 2021
ASSETS(thousands of dollars, except par value)
 Current Assets  
Cash$31,937 $30,535 
Trade receivables, net33,572 32,811 
Inventories20,355 21,134 
Prepaid expenses and other assets3,396 4,313 
Total current assets89,260 88,793 
Property, plant and equipment, net186,029 185,521 
Intangible assets, net10,601 11,056 
Lease right-of-use assets, net7,305 8,170 
TOTAL ASSETS$293,195 $293,540 
Current Liabilities
Accounts payable$12,387 $12,075 
Accrued liabilities7,123 5,873 
Current portion of long-term debt4,194 4,194 
Current portion of lease liabilities3,085 3,227 
Current portion of other liabilities620 626 
Total current liabilities27,409 25,995 
Long-term debt, net of current portion
36,658 37,707 
Lease liabilities, net of current portion
4,202 4,923 
Other liabilities, net of current portion
403 417 
Deferred income taxes24,771 24,525 
Total liabilities93,443 93,567 
Common stock - authorized 40 million shares of $0.10 par value; issued 25.1 million and 25.0 million and outstanding 23.7 million and 23.6 million in 2022 and 2021, respectively
2,508 2,499 
Additional paid-in capital63,406 63,260 
Treasury stock, at cost (1.4 million shares)
Retained earnings145,324 145,700 
Total equity199,752 199,973 
See notes to condensed consolidated financial statements.

 (thousands of dollars, except per share amounts)
Product sales$79,061 $51,565 
Processing fees4,153 3,020 
 83,214 54,585 
Cost of sales and processing
(including depreciation and amortization of $4,079 and $4,055, respectively)
75,321 52,240 
GROSS PROFIT7,893 2,345 
General and administrative7,533 7,332 
Depreciation228 226 
 7,761 7,558 
Interest expense(283)(302)
Miscellaneous income, net69 110 
NET INCOME (LOSS)$(376)$(4,404)
Basic Earnings (Loss) per Common Share
Net loss (dollars)$(0.02)$(0.18)
Basic weighted average number of common shares outstanding23,600 24,861 
Diluted Earnings (Loss) per Common Share
Net loss (dollars)$(0.02)$(0.18)
Diluted weighted average number of common shares outstanding23,600 24,861 
See notes to condensed consolidated financial statements.

 (thousands)(thousands of dollars)
December 31, 202124,990 $2,499 $63,260 $(11,486)$145,700 $199,973 $ $199,973 
Restricted Stock Units
Issued to Directors— — 133 — — 133 — 133 
Issued to Employees— — 22 — — 22 — 22 
Common Stock
Issued to Employees85 9 (9)— —  —  
Net Loss— — — — (376)(376)— (376)
March 31, 202225,075 $2,508 $63,406 $(11,486)$145,324 $199,752 $ $199,752 
December 31, 202024,833 $2,483 $61,311 $ $140,324 $204,118 $289 $204,407 
Restricted Stock Units
Issued to Directors— — 113 — — 113 — 113 
Issued to Employees— — 275 — — 275 — 275 
Common Stock
Issued to Employees61 7 (7)— —  —  
Net Loss— — — — (4,404)(4,404)— (4,404)
March 31, 202124,894 $2,490 $61,692 $ $135,920 $200,102 $289 $200,391 
See notes to condensed consolidated financial statements.

 (thousands of dollars)
Net Income (Loss)$(376)$(4,404)
Adjustments to Reconcile Net Income (Loss) To Net Cash Provided by Operating Activities:
Depreciation and Amortization3,851 3,820 
Amortization of Intangible Assets456 461 
Stock-based Compensation524 571 
Deferred Income Taxes246 (924)
Amortization of Loan Fees45 45 
Gain on Disposal of Assets (254)
Other Non-cash Items (Note 6)515  
Changes in Operating Assets and Liabilities:
(Increase) Decrease in Trade Receivables(762)(628)
(Increase) Decrease in Inventories779 1,206 
(Increase) Decrease in Prepaid Expenses and Other Assets916 2,803 
Increase (Decrease) in Accounts Payable and Accrued Liabilities1,527 1,282 
Increase (Decrease) in Other Liabilities(4)(147)
Net Cash Provided by Operating Activities7,717 3,831 
Additions to Property, Plant and Equipment(4,851)(4,781)
Proceeds from Sale of Property, Plant and Equipment 281 
Net Cash Used in Investing Activities(4,851)(4,500)
Repurchase of Common Stock (692)
Net Cash Paid Related to Stock-Based Compensation(370)(183)
Repayments of Long-Term Debt(1,094)(1,094)
Net Cash Used in Financing Activities(1,464)(1,969)
CASH AT END OF PERIOD$31,937 $53,026 
Supplemental disclosure of cash flow information: 
Cash payments for interest$237 $257 
Supplemental disclosure of non-cash items:
Capital expansion amortized to depreciation expense$11 $116 
Foreign taxes paid$ $1,054 
See notes to condensed consolidated financial statements.



Trecora Resources (the “Company”) was incorporated in the State of Delaware in 1967. The Company's principal business activities are the manufacturing of various specialty petrochemical products, specialty waxes and providing custom processing services.
The Company’s specialty petrochemicals operations are primarily conducted through its wholly-owned subsidiary, Texas Oil and Chemical Co. II, Inc. (“TOCCO”). TOCCO owns all of the capital stock of South Hampton Resources, Inc. (“SHR”) and Trecora Chemical, Inc. (“TC”). SHR owns all of the capital stock of Gulf State Pipe Line Company, Inc. (“GSPL”). SHR owns and operates a specialty petrochemicals product facility in Silsbee, Texas which manufactures high purity hydrocarbons used primarily in polyethylene, packaging, polypropylene, expandable polystyrene, poly-iso/urethane foams, Canadian tar sands, and in the catalyst support industry. TC owns and operates a facility located in Pasadena, Texas which manufactures specialty waxes and provides custom processing services. These specialty waxes are used in the production of coatings, hot melt adhesives and lubricants. GSPL owns and operates pipelines that connect the SHR facility to a natural gas line, to SHR’s truck and rail loading terminal and to a major petroleum pipeline owned by an unaffiliated third party.
The Company previously owned a 55% ownership interest in an inactive mining corporation, Pioche Ely Valley Mines, Inc. (“PEVM”), which was previously presented as a non-controlling interest on the Company's financial statements. In November 2019, PEVM entered into a sales contract to sell all of its assets, which include 48 patented and 5 unpatented claims totaling approximately 1,500 acres. The sale was completed on November 1, 2021 and resulted in liquidation of substantially all of PEVM's remaining assets. Proceeds from the sale were used to repay outstanding indebtedness of PEVM owed to the Company. PEVM was legally dissolved on February 16, 2022.
For convenience in this report, the terms “Company”, “our”, “us”, “we” or “TREC” may be used to refer to Trecora Resources and its subsidiaries.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and, therefore, should be read in conjunction with the financial statements and related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 10, 2022, as amended by Amendment No. 1 to such Annual Report on Form 10-K, filed on April 29, 2022 (collectively, the “Annual Report on Form 10-K, as amended”).
The unaudited condensed consolidated financial statements included in this document have been prepared on the same basis as the annual financial statements and in management's opinion reflect all adjustments, including normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the interim periods presented. We have made estimates and judgments affecting the amounts reported in this document. The actual results that we experience may differ materially from our estimates. In the opinion of management, the disclosures included in these financial statements are adequate to make the information presented not misleading.
Operating results for the three months ended March 31, 2022 are not necessarily indicative of results for the year ending December 31, 2022.
We currently operate in two segments, Specialty Petrochemicals and Specialty Waxes. All revenue originates from sources in the United States and all long-lived assets owned are located in the United States.
Certain prior period balances have been reclassified to conform to the current period presentation in the condensed consolidated financial statements and the accompanying notes.

Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2020–04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contracts, hedging relationships, and other transactions impacted by reference rate reform. The provisions of ASU 2020-04 apply only to those transactions that reference the London Interbank Offer Rate or another reference rate expected to be discontinued due to reference rate reform. This guidance is effective from March 12, 2020 through December 31, 2022 and adoption is optional. We are currently evaluating the impact of ASU 2020-04 on our consolidated financial statements.
Trade receivables, net consisted of the following:
 March 31, 2022December 31, 2021
 (thousands of dollars)
Trade receivables$33,872 $33,111 
Less allowance for doubtful accounts(300)(300)
Total trade receivables, net$33,572 $32,811 
Trade receivables serve as collateral for our amended and restated credit agreement. See Note 10.
Inventories consisted of the following:
 March 31, 2022December 31, 2021
 (thousands of dollars)
Raw material$5,432 $2,348 
Work in process171 212 
Finished products14,752 18,574 
Total inventories$20,355 $21,134 
Inventory serves as collateral for our amended and restated credit agreement. See Note 10.
Inventory included Specialty Petrochemicals products in transit valued at approximately $6.4 million and $4.9 million at March 31, 2022 and December 31, 2021, respectively.
Prepaid expenses and other assets consisted of the following:
 March 31, 2022December 31, 2021
 (thousands of dollars)
Prepaid license$250 $500 
Prepaid insurance premiums 1,145 
Spare parts2,561 2,114 
Other prepaid expenses and assets585 554 
Total prepaid expenses and other assets$3,396 $4,313 

Property, plant and equipment consisted of the following:
March 31, 2022December 31, 2021
 (thousands of dollars)
Platinum catalyst metal$1,478 $1,478 
Catalyst4,325 4,325 
Land5,400 5,428 
Plant, pipeline and equipment286,491 282,780 
Construction in progress7,901 7,213 
Total property, plant and equipment$305,595 $301,224 
Less accumulated depreciation(119,566)(115,703)
Total property, plant and equipment, net$186,029 $185,521 
Property, plant and equipment serve as collateral for our amended and restated credit agreement. See Note 10.
In the first quarter of 2022, the Company donated approximately $0.5 million of land and other property, plant and equipment to a local municipal organization, which is included in other non-cash items on the condensed consolidated statement of cash flows.
Labor capitalized for construction was approximately $0.1 million and $0.6 million for the three months ended March 31, 2022 and 2021, respectively.
Construction in progress during the first three months of 2022 included pipeline upgrades and costs related to a scheduled plant turnaround late in the first quarter at our Specialty Petrochemicals facility. Construction in progress during the first three months of 2021 included costs for rebuild and restoration of a distillation tower.
The Company leases certain rail cars, rail equipment, office space and office equipment. The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain of being exercised.
Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets. Lease expense for these leases is recognized on a straight-line basis over the lease term.
The Company has no finance leases.
The components of lease expense were as follows:
($ in thousands)Classification in the Condensed Consolidated Statements of IncomeThree Months Ended March 31,
Operating lease cost (a)Cost of sales, exclusive of depreciation and amortization$1,164 $1,049 
Operating lease cost (a)Selling, general and administrative13 34 
Total lease cost $1,177 $1,083 
(a) Short-term lease costs were approximately $0.2 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively.
The Company had no variable lease expense, as defined by ASC 842, during the periods.

($ in thousands)Classification on the Condensed Consolidated Balance SheetsMarch 31, 2022December 31, 2021
OperatingOperating lease assets$7,305 $8,170 
Total lease right-of-use assets, net $7,305 $8,170 
OperatingCurrent portion of operating lease liabilities$3,085 $3,227 
OperatingOperating lease liabilities4,202 4,923 
Total lease liabilities $7,287 $8,150 
Three Months Ended
March 31,
($ in thousands)20222021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases$948 $903 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$ $19 
 March 31, 2022March 31, 2021
Weighted-average remaining lease term (in years): 
Operating leases2.93.5
Weighted-average discount rate:
Operating leases4.5 %4.5 %
Most of the Company’s lease contracts do not provide a readily determinable implicit rate. For these contracts, the Company’s estimated incremental borrowing rate is based on information available at the inception of the lease.
As of March 31, 2022, maturities of lease liabilities were as follows:
($ in thousands)Operating Leases
Total lease payments$7,752 
Less: Interest465 
Total lease obligations$7,287 
Intangible assets were recorded in relation to the acquisition of TC on October 1, 2014.

The following tables summarize the gross carrying amounts and accumulated amortization of intangible assets by major class:
 March 31, 2022
GrossAccumulated AmortizationNet
(thousands of dollars)
Customer relationships$16,852 $(8,426)$8,426 
Non-compete agreements94 (94) 
Licenses and permits1,471 (829)642 
Developed technology6,131 (4,598)1,533 
Total$24,548 $(13,947)$10,601 
 December 31, 2021
GrossAccumulated AmortizationNet
(thousands of dollars)
Customer relationships$16,852 $(8,145)$8,707 
Non-compete agreements94 (94) 
Licenses and permits1,471 (808)663 
Developed technology6,131 (4,445)1,686 
Total$24,548 $(13,492)$11,056 
Amortization expense for intangible assets included in cost of sales was approximately $0.5 million and $0.5 million for the three months ended March 31, 2022 and 2021, respectively.
Based on identified intangible assets that are subject to amortization as of March 31, 2022, we expect future amortization expenses for each period to be as follows:
TotalRemainder of 202220232024202520262027Thereafter
(thousands of dollars)
Customer relationships$8,426 $843 $1,123 $1,123 1,123 1,123 1,123 $1,968 
Licenses and permits642 64 86 86 86 86 86 148 
Developed technology1,533 460 613 460     
Total future amortization expense$10,601 $1,367 $1,822 $1,669 $1,209 $1,209 $1,209 $2,116 
Accrued liabilities consisted of the following:
 March 31, 2022December 31, 2021
 (thousands of dollars)
State taxes$288 $192 
Property taxes760  
Payroll1,179 1,406 
Royalties454 294 
Incentive compensation3,168 3,508 
Professional expenses 287 
Other1,109 186 
Total accrued liabilities$7,123 $5,873 

Senior Secured Credit Facilities
As of March 31, 2022, the Company had no outstanding borrowings under the senior secured revolving credit facility (the “Revolving Facility”) and approximately $40.9 million in borrowings outstanding under the senior secured term loan facility (the “Term Loan Facility”) (and, together with the Revolving Facility, the “Credit Facilities”), in each case, under the Company's amended and restated credit agreement (as amended, the “ARC Agreement”). In addition, the Company had approximately $75 million of availability under our Revolving Facility at March 31, 2022. TOCCO’s ability to make additional borrowings under the Revolving Facility at March 31, 2022 was limited by, and in the future may be limited by, the Company's obligation to maintain compliance with the covenants contained in the ARC Agreement (including maintenance of a maximum Consolidated Leverage Ratio and minimum Consolidated Fixed Charge Coverage Ratio (each as defined in the ARC Agreement)).
For each fiscal quarter after December 31, 2019, TOCCO must maintain a maximum Consolidated Leverage Ratio of 3.50 to 1.00 (subject to temporary increase following certain acquisitions). TOCCO's Consolidated Leverage Ratio was 1.20 and 1.24 as of March 31, 2022 and December 31, 2021, respectively. Additionally, TOCCO must maintain a minimum Consolidated Fixed Charge Coverage Ratio as of the end of any fiscal quarter of 1.15 to 1.00. TOCCO's Consolidated Fixed Charge Coverage Ratio was 3.43 and 3.65 as of March 31, 2022 and December 31, 2021, respectively.
The maturity date for the ARC Agreement is July 31, 2023. As of March 31, 2022, the year to date effective interest rate for the Credit Facilities was 1.89%. The ARC Agreement contains a number of customary affirmative and negative covenants and the Company was in compliance with those covenants as of March 31, 2022.
For a summary of additional terms of the Credit Facilities, see NOTE 13, “LONG-TERM DEBT AND LONG-TERM OBLIGATIONS” to the consolidated financial statements set forth in the Annual Report on Form 10-K, as amended.

Debt Issuance Costs
Debt issuance costs of approximately $0.9 million were incurred in connection with the fourth amendment to the ARC Agreement in July 2018. Unamortized debt issuance costs of approximately $0.2 million and $0.3 million as of March 31, 2022 and December 31, 2021, respectively, have been netted against outstanding loan balances.
Long-term debt and long-term obligations are summarized as follows:
March 31, 2022December 31, 2021
(thousands of dollars)
Revolving Facility$ $ 
Term Loan Facility41,094 42,188 
Loan fees(242)(287)
Total long-term debt40,852 41,901 
Less current portion including loan fees4,194 4,194 
Total long-term debt, less current portion including loan fees$36,658 $37,707 
The Company is periodically named in legal actions arising from normal business activities. We evaluate the merits of these actions and, if we determine that an unfavorable outcome is probable and can be reasonably estimated, we will establish the necessary reserves. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.
Supplier Agreements
In accordance with our supplier agreements, on a recurring monthly basis, the Company commits to purchasing a determined volume of feedstock in anticipation of upcoming requirements. Feedstock purchases are invoiced and recorded when they are delivered. As of March 31, 2022 and December 31, 2021, the value of the remaining undelivered feedstock approximated $28.3 million and $19.7 million, respectively.

From time to time, we may incur shortfall fees due to feedstock purchases being below the minimum amounts prescribed by our agreements with our suppliers. Shortfall fee expenses were approximately $0.2 million and $0.4 million for the three months ended March 31, 2022 and 2021, respectively.
Environmental Remediation
Amounts charged to expense for various activities related to environmental monitoring, compliance, and improvements were approximately $0.1 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively.
In March 2021, the Company’s Board of Directors authorized the repurchase of up to $20 million in common stock by March 2023 (the “Share Repurchase Program”). The share repurchases will be executed from time to time on the open market, through privately negotiated transactions or through broker-negotiated purchases, in compliance with applicable securities law. The timing and amount of any shares of the Company’s stock that are repurchased under the Share Repurchase Program will be determined by the Company’s management based on its evaluation of market conditions and other factors, including the Company’s stock price, although the Share Repurchase Program may be suspended or discontinued at any time. The Company repurchased no shares during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the value of shares that may yet be purchased under the Share Repurchase Program is approximately $8.8 million.
The Stock Option Plan for Key Employees, as well as, the Non-Employee Director Stock Option Plan (hereinafter collectively referred to as the “Stock Option Plans”), were approved by the Company’s stockholders in July 2008. The Stock Option Plans allot for the issuance of up to 1,000,000 shares.
The Trecora Resources Stock and Incentive Plan (the “Plan”) was approved by the Company’s stockholders in June 2012. As amended, the Plan allots for the issuance of up to 2.5 million shares in the form of stock options or restricted stock unit awards.
The Company recognized stock-based compensation expense of approximately $0.5 million and $0.6 million for the three months ended March 31, 2022 and 2021, respectively.
Stock Option Awards
Awards granted under the provisions of the Stock Option Plans permit the purchase of our common stock at exercise prices equal to the closing price of Company common stock on the date the options were granted. The options have terms of 10 years and generally vest ratably over terms of 4 to 5 years. There were no awards issued during the three months ended March 31, 2022 or 2021, respectively.
A summary of the status of the Company’s awards is as follows:
Stock Option Awards
Weighted Average Exercise Price Per Share
Weighted Average Remaining Contractual Life
(in thousands)
Outstanding at January 1, 2022467,000 11.16 
Outstanding at March 31, 2022467,000 11.16 1.6$ 
Expected to vest $ 
Exercisable at March 31, 2022467,000 11.16 1.6$ 
The aggregate intrinsic value of options was calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock. At March 31, 2022, options to purchase approximately 0.1 million shares of common stock were in-the-money.
Since no awards were granted, the weighted average grant-date fair value per share of awards granted during the three months ended March 31, 2022 and 2021, respectively, was zero.

The Company has no non-vested outstanding awards as of March 31, 2022.
Restricted Stock Unit Awards
Generally, restricted stock unit awards are granted annually to officers and directors of the Company under the provisions of the Plan. Restricted stock units are also granted ad hoc to attract or retain key personnel, and the terms and conditions under which these restricted stock units vest vary by award. The fair market value of restricted stock units granted is equal to the Company’s closing stock price on the date of grant. Restricted stock units granted to directors have a one year vesting period, while restricted stock units granted to officers generally vest ratably over 3 years. Certain awards also include vesting provisions based on performance metrics measured over a 3 year period. Upon vesting, the restricted stock units are settled by issuing one share of the Company's common stock per unit.
A summary of the status of the Company's restricted stock units activity is as follows:
Shares of Restricted Stock Units
Weighted Average Grant Date Price per Share
Outstanding at January 1, 2022586,444 7.32 
Granted194,266 8.78 
Outstanding at March 31, 2022616,829 7.57 
Expected to vest616,829 
We file an income tax return in the U.S. federal jurisdiction and a margin tax return in Texas. Previously, the Texas Comptroller selected the R&D credit calculations related to the 2014 and 2015 calendar years for audit. The state of Texas suspended examination of the 2014 and 2015 calendar years in order to perform a comprehensive review of audit procedures to provide consistency. During the fourth quarter of 2019, we received notice that Texas had completed review of its procedures and initiated additional requests for information which has been submitted for their review. We do not expect any material changes related to the Texas audits. Our federal and Texas tax returns remain open for examination for the years 2017 through 2020. As of March 31, 2022 and December 31, 2021, respectively, we recognized no adjustments for uncertain tax positions or related interest and penalties.
The effective tax rate varies from the federal statutory rate of 21%, primarily as a result of stock based compensation, state tax expense and other permanent items for the three months ended March 31, 2022 and 2021.
We operate through business segments according to the nature and economic characteristics of our products as well as the manner in which the information is used internally by our key decision maker, who is our Chief Executive Officer. Segment data may include rounding differences.
Our Specialty Petrochemicals segment includes SHR and GSPL. Our Specialty Waxes segment is TC. We also separately identify our corporate overhead which includes administrative activities such as legal, accounting, consulting, investor relations, officer and director compensation, corporate insurance, and other administrative costs.

 Three Months Ended March 31, 2022
 Specialty PetrochemicalsSpecialty WaxesCorporateConsolidated
 (in thousands)
Product sales$69,090 $9,971 $ $79,061 
Processing fees1,488 2,665  4,153 
Total revenues70,578 12,636  83,214 
Operating income (loss) before depreciation and amortization5,378 1,909 (2,854)4,433 
Operating income (loss)2,654 331 (2,853)132 
Income (loss) before taxes2,362 324 (2,768)(82)
Depreciation and amortization2,729 1,578  4,307 
Capital expenditures4,129 722  4,851 
 Three Months Ended March 31, 2021
 Specialty PetrochemicalsSpecialty WaxesCorporateConsolidated
 (in thousands)
Product sales$44,658 $6,907 $ $51,565 
Processing fees1,254 1,766  3,020 
Total revenues45,912 8,673  54,585 
Operating income (loss) before depreciation and amortization2,571 (481)(3,023)(933)
Operating income (loss)(231)(1,957)(3,025)(5,213)
Income (loss) before taxes(297)(1,954)(3,154)(5,405)
Depreciation and amortization2,802 1,476 3 4,281 
Capital expenditures3,567 1,214  4,781 
 March 31, 2022
 Specialty PetrochemicalsSpecialty WaxesCorporateEliminationsConsolidated
 (in thousands)
Intangible assets, net 10,601   10,601 
Total assets293,854 79,953 109,853 (190,465)293,195 
 December 31, 2021
 Specialty PetrochemicalsSpecialty WaxesCorporateEliminationsConsolidated
 (in thousands)
Intangible assets, net 11,056   11,056 
Total assets298,966 79,860 109,292 (194,578)293,540 
The following tables set forth the computation of basic and diluted net income (loss) per share for the three months ended March 31, 2022 and 2021, respectively.

 Three Months Ended
March 31, 2022
Three Months Ended
March 31, 2021
LossSharesPer Share
LossSharesPer Share
(in thousands, except per share amounts)
Net loss$(376)23,600 $(0.02)$(4,404)24,861 $(0.18)
Net loss$(376)23,600 $(0.02)$(4,404)24,861 $(0.18)
At March 31, 2022 and 2021, approximately 0.6 million and 0.7 million shares of unvested restricted stock units, respectively, were not included in the computation of diluted earnings per share because such restricted stock units would be anti-dilutive.
At March 31, 2022 and 2021, 0.5 million and 0.7 million shares of common stock, respectively, were issuable upon the exercise of outstanding stock options and were not included in the computation of diluted earnings per share because such options would be anti-dilutive.
Some of the statements and information contained in this Quarterly Report on Form 10-Q 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,” “can,” “shall,” “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.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other important factors that could cause the actual results, performance or our achievements, or industry results, to differ materially from historical results, any future results, or performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and factors include, but are not limited to the impacts of the COVID-19 pandemic on our business, financial results and financial condition and that of our customers, suppliers, and other counterparties; general economic and financial conditions domestically and internationally including the impact of rising inflation and supply chain issues; the ongoing impact of geopolitical conflict; the impact of actions by activist stockholders; insufficient cash flows from operating activities; our ability to attract and retain key employees; feedstock and product prices; feedstock availability and our ability to access third party transportation; competition; industry cycles; natural disasters or other severe weather events, health epidemics and pandemics (including the COVID-19 pandemic) and terrorist attacks; our ability to consummate, and the costs associated with, extraordinary transactions, including acquisitions, dispositions and other business combinations, and realize the financial and strategic goals of such transactions; technological developments and our ability to maintain, expand and upgrade our facilities; regulatory changes; environmental matters; lawsuits; outstanding debt and other financial and legal obligations; difficulties in obtaining additional financing on favorable conditions, or at all; local business risks in foreign countries, including civil unrest and military or political conflict, local regulatory and legal environments and foreign currency fluctuations; and other risks detailed in the Annual Report on Form 10-K, as amended, 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, under similar headings in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission (the “SEC”). Many of these risks and uncertainties are currently amplified by and will continue to be amplified by, or in the future may be amplified by, the COVID-19 pandemic and other natural disasters such as severe weather events.
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 report and the information included in our prior releases, reports and other filings with the SEC, the information contained in this report 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.
The following discussion and analysis of our financial results, as well as the accompanying unaudited condensed consolidated financial statements and related notes to condensed consolidated financial statements to which they refer, are the responsibility of our management. Our accounting and financial reporting fairly reflect our business model which is based on the manufacturing and marketing of specialty petrochemical products and waxes and providing custom manufacturing services.
The discussion and analysis of financial condition and the results of operations which appears below should be read in conjunction with “Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” of the Annual Report on Form 10-K, as amended.
Our preferred supplier position into the specialty petrochemicals market is derived from the combination of our reputation as a reliable supplier established over many years, the very high purity of our products, and a focused approach to customer service. In specialty waxes, we are able to deliver to our customers a product performance and price point that we believe is unique to our market; while the diversity of our custom processing assets and capabilities offers solutions to our customers that we believe are uncommon along the U.S. Gulf Coast. The specialty waxes business also delivers environmental circularity by using proprietary technology to convert waste products generated by suppliers' polyethylene production to high value solutions for our customers.
Enabling our success in these businesses is a commitment to operational excellence which establishes a culture that prioritizes the safety of our employees and communities in which we operate, the integrity of our assets and regulatory compliance. This commitment drives a change to an emphasis on forward-looking, leading-indicators of our results and proactive steps to continuously improve our performance. We bring the same commitment to excellence to our commercial activities where we focus on the value proposition to our customers while understanding opportunities to maximize our value capture through service and product differentiation, supply chain and operating cost efficiencies and diversified supply options. We believe our focus on execution, meeting the needs of our customers, and growing our business while maintaining prudent control of our costs, will significantly contribute to enhanced stockholder value.
Review of First Quarter 2022 Results
We reported first quarter 2022 net loss of approximately $0.4 million, an increase from net loss of $4.4 million in the first quarter of 2021. Sales volume of our Specialty Petrochemicals products increased 17.6% in the first quarter of 2022 as compared to the first quarter of 2021. Specialty Waxes sales revenue was up 44.4% compared to the first quarter 2021. First quarter 2022 results improved primarily due to increased pricing, the ongoing economic recovery and stronger demand from our end-use markets. Our first quarter 2021 results were significantly impacted by the prolonged period of sub-freezing temperatures and snow across the State of Texas and the region in February 2021 (the “Texas freeze event”) including reduced demand and higher natural gas and transportation costs.
Adjusted EBITDA was $5.8 million for the first quarter of 2022, compared with Adjusted EBITDA of $(0.1) million in the first quarter of 2021. Adjusted EBITDA increased due to increased selling prices and sales volumes. Additionally, the first quarter of 2021 was impacted by the Texas freeze event. As previously disclosed, the Company originally estimated the negative impact of the Texas freeze event to be approximately $5.0 million for the first quarter of 2021. This estimate was subsequently reduced to $3.5 million in the second quarter of 2021 due to a settlement agreement of $1.4 million with a utility provider.
See below for additional information about this measure and a reconciliation to the most directly comparable GAAP financial measure.
Non-GAAP Financial Measures
We include in this Quarterly Report on Form 10-Q the non-GAAP financial measures of EBITDA and Adjusted EBITDA and provide reconciliations from our most directly comparable GAAP financial measures to those measures.
We believe these financial measures provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. We also believe 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.
We define EBITDA as net income (loss) plus interest expense, income tax expense (benefit), and depreciation and amortization. In the third quarter of 2021, we redefined our non-GAAP measure Adjusted EBITDA to also exclude costs for professional services associated with M&A and strategic initiatives. We define Adjusted EBITDA as EBITDA net of the impact of items we do not consider indicative of our ongoing operating performance, including share-based compensation, gains or losses on disposal of assets, gains or losses on extinguishment of debt, costs for professional services associated with M&A and strategic initiatives and other non-recurring costs. The historical presentation of Adjusted EBITDA in this Quarterly Report on Form 10-Q has been recast to conform to the revised definition.
The following table presents a reconciliation of net income (loss), our most directly comparable GAAP financial performance measure for each of the periods presented, to EBITDA and Adjusted EBITDA.
Three Months Ended
March 31, 2022
Specialty PetrochemicalsSpecialty WaxesCorporateConsolidated
(in thousands)
Net income (loss)$1,765 $324 $(2,465)$(376)
Interest expense283 — — 283 
Income tax expense (benefit)597 — (303)294 
Depreciation and amortization206 22 — 228 
Depreciation and amortization in cost of sales2,523 1,556 — 4,079 
EBITDA$5,374 $1,902 $(2,768)$4,508 
Stock-based compensation— — 524 524 
Costs for professional services associated with M&A and strategic initiatives— — 210 210 
Other non-recurring costs*515 — — 515 
Adjusted EBITDA$5,889 $1,902 $(2,034)$5,757 
* Represents non-recurring charitable contribution as discussed in Note 6.
Three Months Ended
March 31, 2021
Specialty PetrochemicalsSpecialty WaxesCorporateConsolidated
(in thousands)
Net income (loss)$205 $(1,954)$(2,655)$(4,404)
Interest (income) expense302 — — 302 
Income tax expense (benefit)(486)— (515)(1,001)
Depreciation and amortization200 23 226 
Depreciation and amortization in cost of sales2,602 1,452 — 4,054 
EBITDA$2,823 $(479)$(3,167)$(823)
Stock-based compensation— — 571 571 
Gain on disposal of assets(254)— — (254)
Costs for professional services associated with M&A and strategic initiatives— — 370 370 
Adjusted EBITDA$2,569 $(479)$(2,226)$(136)
Liquidity and Capital Resources
Working Capital
Our approximate working capital days are summarized as follows:

March 31, 2022December 31, 2021March 31, 2021
Days sales outstanding in accounts receivable36.3 40.5 42.8 
Days sales outstanding in inventory22.0 26.1 19.4 
Days sales outstanding in accounts payable13.4 14.9 27.3 
Days of working capital44.9 51.6 34.8 
Our days sales outstanding in accounts receivable at March 31, 2022 was 36.3 days compared to 40.5 days at December 31, 2021. This decrease was primarily driven by relatively flat receivables as compared to the significant increase in sales revenue. Our days sales outstanding in inventory decreased by approximately 4.1 days from December 31, 2021 as we sold off existing inventory during a scheduled plant turnaround at our Specialty Petrochemicals facility late in the first quarter of 2022. Our days sales outstanding in accounts payable decreased due to the rising sales revenue, while actual accounts payable remained relatively flat as compared to December 31, 2021. Since days of working capital is calculated using the above three metrics, it decreased for the aforementioned reasons.
Our cash balance at March 31, 2022 was $31.9 million as compared to $30.5 million at December 31, 2021.
The change in cash is summarized as follows:Three Months Ended
March 31,
Net cash provided by (used in)(thousands of dollars)
Operating activities$7,717 $3,831 
Investing activities(4,851)(4,500)
Financing activities(1,464)(1,969)
Increase (decrease) in cash$1,402 $(2,638)
Cash$31,937 $53,026 
Operating Activities
Cash provided by operating activities totaled $7.7 million for the first three months of 2022, $3.9 million higher than the corresponding period in 2021. For the first three months of 2022, net income increased approximately $4.0 million as compared to the corresponding period in 2021, driven primarily by higher selling prices and expanding margins. Major non-cash items affecting income in the first three months of 2022 included the impact of depreciation and amortization of $4.3 million, stock-based compensation of $0.5 million and other non-cash items of $0.5 million. Major non-cash items affecting income in the first three months of 2021 included changes in depreciation and amortization of $4.3 million, deferred taxes of $(0.9) million, and stock-based compensation of $0.6 million.
Additional factors leading to the increase in cash provided by operating activities included:
Trade receivables increased approximately $0.8 million, primarily due to increases in sales prices. We do not expect any collection issues at this time.
Inventories decreased approximately $0.8 million driven primarily by the utilization of inventory to maintain customer shipments during a scheduled plant turnaround at our Specialty Petrochemicals facility late in the first quarter of 2022.
Prepaid and other assets decreased $0.9 million. In 2022, the Company elected to finance its insurance premiums, where in 2021 the annual insurance premium was paid in full at the beginning of the policy term.
Accounts payable and accrued liabilities increased $1.5 million primarily due to accrued payroll.
Investing Activities
Cash used in investing activities during the first three months of 2022 was approximately $4.9 million, representing a increase of approximately $0.4 million from the corresponding period of 2021. The funds used in investing activities during the first three months of 2022 were for additions to property, plant and equipment. The funds used in investing activities during the first three months of 2021 were for additions and rebuild and restoration of property, plant and equipment of approximately $4.8 million offset by proceeds from the sale of assets.

Financing Activities
Cash used in financing activities during the first three months of 2022 was approximately $1.5 million versus cash used in financing activities of $2.0 million during the corresponding period of 2021. During the first three months of 2022, we made mandatory payments totaling $1.1 million on our Term Loan Facility. During the first three months of 2021, we made a mandatory payment of $1.1 million on our Term Loan Facility and repurchased shares of our common stock under our Share Repurchase Program.
Capital Resources and Requirements
Capital expenditures increased $0.1 million, or 1%, from 2021 to 2022. During the first three months of 2022 we expended approximately $1.5 million on upgrades to the pipeline for GSPL and approximately $0.7 million for a scheduled plant turnaround.
At March 31, 2022, we had $31.9 million in cash and cash equivalents and borrowing availability of approximately $75 million on our Revolving Facility. We believe the Company is able to support its operating requirements and capital expenditures through internally generated funds supplemented with cash on our balance sheet and availability under our ARC Agreement in both the short-term (i.e., the next 12 months) and the long-term (i.e. beyond the next 12 months). See Note 11 for additional discussion regarding credit availability.
Our material cash requirements include the following contractual and other obligations.
Debt. Long-term debt obligations approximate $40.9 million as discussed in Note 10.
Leases. The majority of our approximately $7.3 million of operating lease obligations are for railcars as discussed in Note 8.
Other Purchase Obligations. Purchase obligations of approximately $28.3 million are primarily related to commitments for our undelivered feedstock and capital construction projects as discussed in Note 12.
Results of Operations
Comparison of Three Months Ended March 31, 2022 and 2021

Specialty Petrochemicals Segment

Three Months Ended March 31,
 20222021Change% Change
 (thousands of dollars)
Product Sales$69,090 $44,658 $24,432 54.7 %
Processing1,488 1,254 234 18.7 %
Gross Revenue$70,578 $45,912 $24,666 53.7 %
Volume of Sales (gallons)
Specialty Petrochemicals Products20,223 17,201 3,022 17.6 %
Prime Product Sales16,556 14,675 1,881 12.8 %
By-product Sales3,667 2,526 1,141 45.2 %
Cost of Sales$64,363 $42,869 21,494 50.1 %
Gross Margin8.8 %6.6 %2.2 %
Total Operating Expense*21,348 20,357 991 4.9 %
Natural Gas Expense*2,009 2,976 (967)(32.5)%
Operating Labor Costs*3,199 3,348 (149)(4.5)%
Transportation Costs*6,280 4,606 1,674 36.3 %
General & Administrative Expense3,355 3,074 281 9.1 %
Depreciation and Amortization**2,729 2,802 (73)(2.6)%
Adjusted EBITDA5,889 2,569 3,320 129.2 %
Capital Expenditures4,129 3,567 562 15.8 %
* Included in cost of sales
**Includes $2,523 and $2,602 for the first quarter of 2022 and 2021, respectively, which is included in operating expense
Gross Revenue
Gross Revenue for our Specialty Petrochemicals segment increased for the first quarter 2022 compared to the first quarter 2021 by 53.7%, primarily due to higher selling prices and higher sales volumes for prime products and by-products which were adversely impacted during the first quarter of 2021 by the Texas freeze event and the ongoing COVID-19 pandemic.
Product Sales