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.
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 https://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. |
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SOURCE Trecora Resources
