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 November 3, 2015 - 4:05 PM EST
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Trecora Resources Reports Third Quarter 2015 Results

Record Gross Profit Driven by Declining Feedstock Prices EBITDA Increased by 19% D-Train Initiated On-Specification Pentane Production in October Conference Call at 4:30 pm ET Today

SUGAR LAND, Texas, Nov. 3, 2015 /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, 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.

Third Quarter 2015 Financial Highlights

  • Gross profit of $16.6 million, up 27% from $13.0 million in the third quarter of 2014, and representing a record quarterly gross profit for the Company
  • Gross profit margin of 24.8% compared with 17.0% in the third quarter of 2014
  • Operating income of $11.1 million, up 25% from $8.8 million in the third quarter of 2014
  • Adjusted EBITDA of $13.9 million, or 20.7% of revenues, compared with $10.4 million, or 13.5% of revenues, in the third quarter of 2014
  • Net income for the third quarter was $5.3 million, or $0.21 per diluted share, compared with net income of $5.8 million, or $0.23 per diluted share, for the third quarter of 2014.  Net income was negatively impacted by the reported loss in equity in the Al Masane Al Kobra Mining Company of $2.1 million, or an estimated $0.05 per diluted share on an after tax basis.
  • Trecora Chemical contributes revenue of $6.5 million and EBITDA of $1.4 million

Third Quarter 2015 Results

Total revenue in the third quarter was $66.9 million compared with $76.9 million in the third quarter of 2014. The decline in reported revenue was driven by a 48.5% reduction in the average per gallon cost of petrochemical feedstock in the third quarter, which rolls over into the formula pricing mechanism for over 50% of petrochemical product sales. Consequently, the average sales price of petrochemical products decreased by 31.1%.  The lower feedstock costs more than offset the formula-driven price reductions resulting in higher profit margins.

Gross profit margin increased to 24.8% in the third quarter of 2015, compared with 17.0% in the third quarter of 2014.

Operating income for the third quarter was $11.1 million compared with operating income of $8.8 million for the third quarter of 2014. 

Total adjusted EBITDA was $13.9 million, an increase of 33.5% over adjusted EBITDA of $10.4 million in the year-ago period. The adjusted EBITDA margin increased to 20.7% in the third quarter of 2015, compared with 13.5% in the third quarter of 2014.

Net income for the third quarter was $5.3 million, or $0.21 per diluted share, compared with net income of $5.8 million, or $0.23 per diluted share, for the third quarter of 2014.  Net income was negatively impacted by the reported loss in equity in the Al Masane Al Kobra Mining Company of $2.1 million, or an estimated $0.05 per diluted share on an after tax basis.

Trecora President and CEO Simon Upfill-Brown commented, "In the third quarter we achieved a record quarterly gross profit and strong operational performance against a backdrop of lower feedstock prices that continued to impact our revenues. Our South Hampton Resources division generated solid results reflecting higher shipment volume, new customer orders and margin expansion from the third quarter of 2014. During the quarter, we were pleased to initiate the hydro de-sulfurization unit as part of our D-Train expansion initiative, and early in the fourth quarter, D-Train began producing on-specification pentanes – which is two months ahead of schedule. At Trecora Chemical, we benefitted from repeat orders from adhesives customers and additional custom processing projects. Finally, results at AMAK were affected by lower commodity prices and production issues related to shortages of production chemicals.  Despite the challenging conditions at AMAK, we remain focused on expanding the size of the mine and enhancing operational efficiencies and recoveries."

South Hampton Resources (SHR)
Petrochemical volume in the third quarter increased 14% to 24.6 million gallons, compared with 21.6 million gallons in the third quarter of 2014. Excluding Canadian oil sands, prime product volumes in the third quarter of 2015 were up 14% from a year ago, driven in part by shipments to new customers and our first ever bulk shipment to Saudi Arabia. SHR's D-Train expansion is well ahead of schedule.  International volume represented 20.7% of total petrochemical volume during the quarter, which is indicative of the decrease in oil sands shipments. SHR received its first order of nearly 400,000 gallons from a new Polyethylene facility in the Middle East.

Trecora Chemical (TC)
TC continues to make significant progress improving wax quality and consistency, with September generating the highest wax production volume by a significant margin. TC's third quarter revenue was $6.4 million, including $2.4 million of custom processing fees. While the expansion of the custom processing distillation and hydrogenation capability continues to progress, the expected completion has been delayed to the third quarter of 2016 as we optimize the design for specific projects.

Al Masane Al Kobra Mining Company (AMAK)
We reported a loss in equity in AMAK of approximately $2.1 million during the third quarter primarily due to a significant decline in commodity prices that resulted in an inventory write-down of $3.0 million for AMAK with our share being $1.1 million.  Third quarter results were also negatively impacted by operating issues resulting in unplanned downtime and lower recoveries than expected.  Copper recoveries returned to normal in September, as did zinc recoveries in early October. 

Year-to-Date 2015 Results
Total revenue for the nine months ended September 30, 2015 was $181.4 million, compared with revenue $215.6 million in the first nine months of 2014. Total TC revenue for the nine months ended September 30, 2015 was $18.4 million, which included $6.6 million of processing fees.

Gross profit for the first nine months of 2015 was $47.5 million, a 42% increase compared with $33.5 million in the same period in 2014.  Gross profit margin in the first nine months of 2015 was 26.2%, compared with 15.5% in the same period in 2014.

Adjusted EBITDA for the first nine months of 2015 was $38.7 million, up 54% compared with $25.2 million in the same period in 2014. Adjusted EBITDA margin in the first nine months of 2015 was 21.4%, compared with 11.7% in the same period of 2014.

Net income for the first nine months of 2015 was $17.5 million, representing an increase of 31% as compared with $13.4 million in the same period of 2014. Diluted EPS were $0.69 compared with $0.54 in the same period of 2014.

Balance Sheet
As of September 30, 2015, cash and cash equivalents were $14.9 million compared with $8.5 million at the close of 2014. Total debt was $75.2 million. Capital expenditures during the quarter were $6.7 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=116796.  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 1-888-337-8169 or 1-719-457-2627 if calling internationally, using the conference ID 1736924. 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 1736924 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.

Company Contact:
Nick Carter, Chairman
(409) 385-8300
ncarter@trecora.com

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

 


TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



SEPTEMBER 30,

2015

(unaudited)

DECEMBER 31,

2014

ASSETS

(thousands of dollars)

 Current Assets



  Cash and cash equivalents

$  14,877

$  8,506

  Trade receivables, net

22,830

28,271

  Inventories

12,513

12,815

  Prepaid expenses and other assets

3,824

3,257

  Taxes receivable

-

434

  Deferred income taxes

2,241

1,652

          Total current assets

56,285

54,935




  Plant, pipeline and equipment, net

91,370

73,811




  Goodwill

21,798

21,750

  Other intangible assets, net

25,019

26,235

  Investment in AMAK

50,658

53,023

  Mineral properties in the United States

588

588

  Other assets

1,053

1,732




     TOTAL ASSETS

$ 246,771

$ 232,074

 

LIABILITIES



  Current Liabilities



    Accounts payable

$  8,340

$  9,535

    Current portion of derivative instruments

138

362

    Accrued liabilities

5,872

5,020

    Accrued liabilities in Saudi Arabia

495

495

    Current portion of post-retirement benefit

292

286

    Current portion of long-term debt

8,000

7,000

    Current portion of other liabilities

1,608

2,183

          Total current liabilities

24,745

24,881




  Long-term debt, net of current portion

67,200

73,450

  Post-retirement benefit, net of current portion

649

649

  Derivative instruments, net of current portion

89

196

  Other liabilities, net of current portion

2,555

1,039

  Deferred income taxes

10,829

10,471

     Total liabilities

106,067

110,686




EQUITY



  Common stock‑authorized 40 million shares of $.10 par value; issued and outstanding 24.1 million and 24.0 million shares in 2015 and 2014, respectively

2,407

2,397

  Additional paid-in capital

50,112

48,282

  Retained earnings

87,896

70,420

  Total Trecora Resources Stockholders' Equity

140,415

121,099

  Noncontrolling Interest

289

289

   Total equity

140,704

121,388




     TOTAL LIABILITIES AND EQUITY

$ 246,771

$ 232,074

 


TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)





THREE MONTHS ENDED

NINE MONTHS ENDED


SEPTEMBER 30,

SEPTEMBER 30,


2015

2014

2015

2014


(thousands of dollars)

REVENUES





  Petrochemical and Product Sales

$ 63,190

$ 75,283

$ 170,396

$ 210,517

  Processing Fees

3,748

1,634

11,035

5,054


66,938

76,917

181,431

215,571






OPERATING COSTS AND EXPENSES





  Cost of  Sales and Processing





    (including depreciation and amortization of  $2,118, $881, $6,083, and $2,614 respectively)

50,313

63,873

133,909

182,112






   GROSS PROFIT

16,625

13,044

47,522

33,459






GENERAL AND ADMINISTRATIVE EXPENSES





  General and Administrative

5,368

4,086

16,656

12,430

  Depreciation

194

131

579

406


5,562

4,217

17,235

12,836






OPERATING INCOME

11,063

8,827

30,287

20,623






OTHER INCOME (EXPENSE)





  Interest Income

5

8

18

26

  Interest Expense

(535)

(70)

(1,718)

(169)

  Losses on Cash Flow Hedge Reclassified from OCI

-

(60)

-

(190)

  Equity in Losses of AMAK

(2,054)

(343)

(2,364)

(687)

  Miscellaneous Expense

2

2

(12)

(47)


(2,582)

(463)

(4,076)

(1,067)






  INCOME BEFORE INCOME TAXES

8,481

8,364

26,211

19,556






  INCOME TAXES

3,163

2,590

8,735

6,183






  NET INCOME

5,318

5,774

17,476

13,373






 NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

--

--

--

--






 NET INCOME ATTRIBUTABLE TO TRECORA RESOURCES

$ 5,318

$ 5,774

$ 17,476

$ 13,373






Basic Earnings per Common Share





  Net Income Attributable to Trecora Resources (dollars)

$ 0.22

$ 0.24

$ 0.72

$ 0.55






  Basic Weighted Average Number of Common Shares Outstanding

24,369

24,175

24,344

24,163






Diluted Earnings per Common Share





  Net Income Attributable to Trecora Resources (dollars)

$ 0.21

$ 0.23

$ 0.69

$ 0.54






  Diluted Weighted Average Number of Common Shares Outstanding

25,228

24,880

25,176

24,870

 

TRECORA RESOURCES AND SUBSIDIARIES

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



THREE MONTHS ENDED

30-Sep

NINE MONTHS ENDED

30-Sep



2015

2014

2015

2014


(thousands of dollars)






NET INCOME

$   5,318

$   5,774

$  17,476

$   13,373






Add back:





  Interest

535

130

1,718

359

  Taxes

3,163

2,590

8,735

6,183

  Depreciation and amortization

194

131

579

406

  Depreciation and amortization in cost of sales

2,118

881

6,083

2,614






EBITDA

$ 11,328

$ 9,506

$ 34,591

$ 22,935

Share based compensation

505

557

1,794

1,530

Equity in losses of AMAK

2,054

343

2,364

687

Adjusted EBITDA

$ 13,887

$  10,406

$  38,749

$  25,152






Revenue

$ 66,938

$ 76,917

$ 181,431

$215,571

Adjusted EBITDA Margin

(adjusted EBITDA/revenue)

20.7%

13.5%

21.4%

11.7%






Equity in losses of AMAK

$ 2,054

$ 343

$ 2,364

$ 687

Taxes at effective tax rate of 35%

719

120

827

240

Tax effected equity in losses of AMAK

$ 1,335

$ 223

$ 1,537

$ 447

Diluted weighted average number of shares

25,228

24,880

25,176

24,870

Estimated effect of AMAK losses on EPS

($0.05)

($0.01)

($0.06)

($0.02)




(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


Source: PR Newswire (November 3, 2015 - 4:05 PM EST)

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