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Trecora Resources Reports First Quarter 2019 Results

First quarter Net Income of $1.8 million compared to a Net Loss of $5.3 million in the fourth quarter 2018 and Net Income of $2.4 million in the first quarter 2018
Improved reliability and cost control drove first quarter Adjusted EBITDA of $8.4 million compared to $2.0 million in fourth quarter 2018
First quarter EBITDA of $8.2 million compared to $(1.0) million in fourth quarter 2018
Prime Products sales volume of 17.6 million gallons
Recent AMAK study extended mine life to 9 years on measured and indicated basis
Continued development of Board of Directors and Leadership Team
Conference call at 10:00 am ET Tomorrow, May 7, 2019

SUGAR LAND, Texas, May 6, 2019 – Trecora Resources ("Trecora" or the "Company") (NYSE: TREC), a leading provider of specialty hydrocarbons and waxes, today announced financial results for the first quarter ended March 31, 2019.

“We reported first quarter 2019 financial results, with net income of $1.8 million, as compared to net income of $2.4 million in the first quarter of 2018. We also had consolidated Adjusted EBITDA of $8.4 million, up 17.1% compared to the first quarter 2018, and up $6.4 million from fourth quarter 2018. While we have additional improvements to make in our financial and operational performance, I am very pleased with the advances we made during the first quarter. We maintained our safety performance with zero injuries across the company, ran our assets efficiently, and executed key projects according to plan. These cornerstones of operational excellence drove our improved results this quarter,” said Pat Quarles, Trecora’s President and Chief Executive Officer.

AMAK had a net loss of $1.2 million for the first quarter of 2019 as compared to a net loss of $1.7 million for the fourth quarter of 2018. “AMAK continued to demonstrate improved operations and financial results. AMAK’s EBITDA for the first quarter was $7.1 million compared to $6.0 million in fourth quarter 2018,” Mr. Quarles noted.

“Trecora also continued the development of both our Board of Directors and Leadership Team, with first quarter key appointments of Karen Twitchell as Chair of the Board, Janet Roemer and Adam Peakes as new independent directors to the Board, and Joe Tanner as SVP, Commercial,” Mr Quarles added.

Sami Ahmad, Trecora's Chief Financial Officer stated, “In the first quarter prime product margin benefitted from the timing effect of rising feedstock costs. Looking ahead, as feedstock costs stabilize, we don’t expect this margin benefit to continue. On the revenue side, we expect continued solid demand for our key products in the second quarter. In particular, wax sales volumes are expected to increase following our first quarter planned outage at our Pasadena facility. On the cost side, we have a planned maintenance turnaround for a unit at our South Hampton facility in the second quarter, which will cost approximately $0.5 million.”

Mr. Quarles concluded, “The changes we are implementing are driving improvements in our financial results. Improved safety and reliability, productivity and commercial excellence remain the key drivers of our performance.”


First Quarter 2019 Financial Results 
Net income for the first quarter of 2019 was $1.8 million, or $0.07 per diluted share, compared with a net income of $2.4 million, or $0.09 per diluted share, for the first quarter of 2018. Adjusted net income for the first quarter of 2019 was $1.8 million, or $0.07 per share2.  Reported net income in the first quarter of 2019 includes the impact of equity in losses from AMAK of $0.1 million.

Total revenue in the first quarter was $65.1 million compared with $71.7 million in the first quarter of 2018, a decrease of 9.2%. This decline was primarily due to lower average selling prices of petrochemical products driven by lower feedstock costs, and a decline in by-product sales volume. Revenues from processing also declined as compared to the first quarter of 2018.   
 
Gross profit in the first quarter was $10.1 million, or 15.5% of total revenues, compared with $10.1 million, or 14.1% of total revenues, in the first quarter of 2018. Operating income for the first quarter was $3.8 million compared with operating income of $3.6 million for the first quarter of 2018. The improved margins were primarily driven by the decrease in feedstock costs and significantly improved reliability of the Advanced Reformer unit. The unit returned to service in the first week of January and ran reliably throughout the quarter.
 
 

Specialty Petrochemicals  
Specialty petrochemical net income was $6.1 million in the first quarter of 2019, compared to a net loss of $2.4 million in the fourth quarter of 2018. Specialty petrochemical volume in the first quarter was 22.5 million gallons compared with 25.1 million gallons in the fourth quarter of 2018, and 23.3 million gallons in the first quarter of 2018. Prime product volume in the first quarter was 17.6 million gallons compared with 18.7 million gallons in the fourth quarter of 2018, and 17.7 million gallons in the first quarter of 2018. By-product sales volume was 4.8 million gallons. Adjusted EBITDA for specialty petrochemicals increased to $11.4 million as compared to $2.0 million in the fourth quarter of 2018 and $8.4 million in the first quarter of 2018.

Dollar amounts in thousands/rounding may apply
THREE MONTHS ENDED
 
 
 
MARCH 31,
 
 
 
2019

2,018

 % Change 
  Product sales

$55,490


$60,285

(8)%
  Processing fees
1,383

2,028

(32)%
  Gross revenues

$56,873


$62,313

(9)%
  Operating profit before depreciation and amortization
11,407

8,393

36%
  Operating profit
8,333

6,679

25%
  Net profit before taxes
7,135

6,054

18%
  Depreciation and amortization
  3,074

1,714

79%
  Adjusted EBITDA
11,405

8,390

36%
  Capital expenditures
1,378

10,283

(87)%
 
Specialty Waxes 
Specialty waxes net loss was $2.5 million for the first quarter of 2019 as compared to a net loss of $1.2 million in the first quarter of 2018. The specialty waxes segment generated revenues of $8.3 million in the first quarter, a $0.3 million decrease from the fourth quarter of 2018, and a $1.3 million decrease from the first quarter of 2018. Revenue included $6.0 million of wax product sales and $2.3 million of processing revenues. Wax sales volumes declined approximately 3.0% from fourth quarter 2018 due to planned maintenance turnaround at the Pasadena facility.  
Dollar amounts in thousands/rounding may apply
THREE MONTHS ENDED
 
 
 
MARCH 31,
 
 
 
2019

2,018

 % Change 
  Product sales

$6,003


$6,383

(6)%
  Processing fees
2,279

3,212

(29)%
  Gross revenues

$8,282


$9,595

(14)%
  Operating profit before depreciation and amortization
(849)

390

(318)%
  Operating profit
(2,197)

(914)

(140)%
  Net profit before taxes
(2,539)

(1,181)

(115)%
  Depreciation and amortization
 1,348

 1,304

3%
  Adjusted EBITDA
(887)

379

(334)%
  Capital expenditures
  509

745

(32)%

Al Masane Al Kobra Mining Company (“AMAK”) 
AMAK had a net loss of $1.2 million for the first quarter of 2019, compared with a net loss of $0.3 million in the first quarter of 2018. AMAK’s sales revenue was $20.7 million in the first quarter of 2019 an increase of 46.7% compared to the first quarter of 2018. AMAK’s EBITDA was $7.1 million in the first quarter 2019 compared to $7.8 million in the first quarter of 2018. The year-over-year decline in EBITDA was primarily due to increased selling, general and administrative expenses. Trecora reported equity in losses of approximately $0.1 million dollars in first quarter 2019 compared to equity in earnings of approximately $0.2 million in fourth quarter 2018. The Company’s ownership in AMAK remains at 33.4%. 

Earnings Call
Tomorrow’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 https://edge.media-server.com/m6/p/qzvwb2vm. 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 10:00 am Eastern start time; domestic callers (U.S. and Canada) should call +1-866-417-5724 or 
+1-409-217-8234 if calling internationally, using the conference ID 1399073. To listen to the playback, please call 1-855-859-2056 if calling within the United States or 1-404-537-3406 if calling internationally. Use pin number 1399073 for the replay.

Use of Non-GAAP Measures
This press release includes the use of both U.S. generally accepted accounting principles ("GAAP") and non-GAAP financial measures. The Company believes certain financial measures, such as EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Net Income, which are non-GAAP measures, provide users of our financial statements with supplemental information that may be useful in evaluating our operating performance. The Company believes 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.

These non-GAAP measures have been reconciled to the nearest GAAP measure in the tables below entitled Reconciliation of Selected GAAP Measures to Non-GAAP Measures.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin: We define EBITDA as net income (loss) plus interest expense (benefit) including derivative gains and losses, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA plus share-based compensation, plus restructuring and severance expenses, plus losses on extinguishment of debt, plus or minus equity in AMAK's earnings and losses or gains from equity issuances, and plus or minus gains or losses on acquisitions. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of revenue.

Adjusted Net Income (Loss): We define Adjusted Net Income (Loss) as net income (loss) plus or minus tax effected equity in AMAK's earnings and losses, minus tax effected restructuring and severance expenses, and adjustments for tax law changes in 2017.

Forward-Looking Statements
Some of the statements and information contained in this press release 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," "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, including, but not limited to: expectations regarding future market trends; expectations regarding our future strategic focuses and 2019 financial performance; and expectations regarding the timing and cost for planned maintenance at our facilities.

Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such statements. Such risks, uncertainties and factors include, but are not limited to: general economic conditions domestically and internationally; insufficient cash flows from operating activities; difficulties in obtaining financing on favorable conditions, or at all; outstanding debt and other financial and legal obligations; lawsuits; competition; industry cycles; feedstock, product and mineral prices; feedstock availability; technological developments; regulatory changes; environmental matters; foreign government instability; foreign legal and political concepts; foreign currency fluctuations; and other risks detailed in our latest Annual Report on Form 10-K, 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, and in our other filings with the Securities and Exchange Commission (the "SEC"). 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 press release and the information included in our prior releases, reports and other filings with the SEC, the information contained in this press release 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.


About Trecora Resources (TREC)
TREC owns and operates a specialty petrochemicals facility specializing in high purity hydrocarbons and other petrochemical manufacturing and a specialty wax facility, both located in Texas, and provides custom processing services at both facilities. 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:
Jean Marie Young
The Piacente Group, Inc.
212-481-2050


TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 
 
March 31, 2019 (Unaudited)
 
December 31, 2018
ASSETS
 
(thousands of dollars, except par value)
Current Assets
 
 
 
 
Cash
 
$
6,833

 
$
6,735

Trade receivables, net
 
25,737

 
27,112

Inventories
 
16,922

 
16,539

Prepaid expenses and other assets
 
4,535

 
4,664

Taxes receivable
 
182

 
182

Total current assets
 
54,209

 
55,232

 
 
 
 
 
  Plant, pipeline and equipment, net
 
192,855

 
194,657

 
 
 
 
 
Goodwill
 
21,798

 
21,798

Intangible assets, net
 
18,482

 
18,947

Investment in AMAK
 
37,357

 
38,746

Operating lease assets, net
 
16,137

 
-

Mineral properties in the United States
 
558

 
588

 
 
 
 
 
TOTAL ASSETS
 
341,396

 
329,968

LIABILITIES
 
 
 
 
Current Liabilities
 
 
 
 
Accounts payable
 
11,551

 
19,106

Accrued liabilities
 
5,053

 
5,439

Current portion of post-retirement benefit
 
19

 
19

Current portion of long-term debt
 
4,194

 
4,194

Current portion of operating lease
 
3,568

 
-

Current portion of other liabilities
 
871

 
733

Total current liabilities
 
25,256

 
29,491

 
 
 
 
 
Long-term debt, net of current portion
 
99,240

 
98,288

Post-retirement benefit, net of current portion
 
353

 
358

Operating lease, net of current portion
 
12,566

 
-

Other liabilities, net of current portion
 
755

 
994

Deferred income taxes
 
16,037

 
15,676

Total liabilities
 
154,207

 
144,807

 
 
 
 
 
EQUITY
 
 
 
 
Common stock‑authorized 40 million shares of $0.10 par value; issued 24.7 million and 24.6 million in 2019 and 2018 and outstanding 24.7 million and 24.6 million shares in 2019 and 2018, respectively
 
2,469

 
2,463

Additional paid-in capital
 
58,565

 
58,294

Common stock in treasury, at cost
 
(8)

 
(8)

Retained earnings
 
125,874

 
124,123

Total Trecora Resources Stockholders’ Equity
 
186,900

 
184,872

Noncontrolling Interest
 
289

 
289

Total equity
 
187,189

 
185,161

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 
341,396

 
329,968

 
 
 
 
 


TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

 
 
THREE MONTHS ENDED
MARCH 31,
 
 
2019
 
2018
 
 
(thousands of dollars, except per share amounts)
REVENUES
 
 
 
 
Specialty Petrochemical and Product Sales
 
$61,493
 
$66,699
Processing Fees
 
3,662

 
5,042

 
 
65,155

 
71,741

 
 
 
 
 
OPERATING COSTS AND EXPENSES
 
 
 
 
Cost of Sales and Processing
 
 
 
 
(including depreciation and amortization of $4,229 and $2,830, respectively)
 
55,082

 
61,601

 
 
 
 
 
    GROSS PROFIT
 
10,073

 
10,140

 
 
 
 
 
GENERAL AND ADMINISTRATIVE EXPENSES
 
 
 
 
General and Administrative
 
6,050

 
6,335

Depreciation
 
213

 
196

 
 
6,263

 
6,531

 
 
 
 
 
OPERATING INCOME
 
3,810

 
3,609

 
 
 
 
 
OTHER INCOME (EXPENSE)
 
 
 
 
Interest Income
 
5

 
7

Interest Expense
 
(1,499)

 
(878)

Loss on Extinguishment of Debt
 
-

 
-

Equity in Earnings (Losses) of AMAK
 
(59)

 
230

Miscellaneous Expense
 
(28)

 
(26)

 
 
(1,581)

 
(667)

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
2,229

 
2,942

 
 
 
 
 
INCOME TAX EXPENSE
 
478

 
590

 
 
 
 
 
NET INCOME
 
1,751

 
2,352

 
 
 
 
 
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
 
-

 
-

 
 
 
 
 
NET INCOME ATTRIBUTABLE TO TRECORA RESOURCES
 
1,751

 
2,352

 
 
 
 
 
Basic Earnings per Common Share
 
 
 
 
Net Income Attributable to Trecora Resources (dollars)
 
$
0.07

 
$
0.10

 
 
 
 
 
Basic Weighted Average Number of Common Shares Outstanding
 
24,653

 
24,343

 
 
 
 
 
Diluted Earnings per Common Share
 
 
 
 
Net Income Attributable to Trecora Resources (dollars)
 
$
0.07

 
$
0.09

 
 
 
 
 
Diluted Weighted Average Number of Common Shares Outstanding
 
25,027

 
25,231




TRECORA RESOURCES AND SUBSIDIARIES
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES3 

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
(thousands of dollars; rounding may apply)

 
THREE MONTHS ENDED 03/31/19
 
SPEC. WAX
SPEC. PETRO
CORP
TREC
NET INCOME (LOSS)
$
(2,539
)
$
6,142

$
(1,852
)
$
1,751

Interest
304

1,195

-

1,499

Taxes
-

994

(516)

478

Depreciation and amortization
24

169

20

213

Depreciation and amortization in cost of sales
1,324

2,905

-

4,229

EBITDA
(887)

11,405

(2,348)

8,170

Share based compensation
-

-

213

213

Equity in (earnings) losses of AMAK
-

-

59

59

Adjusted EBITDA
$
(887
)
$
11,405

$
(2,076
)
$
8,442

 
 
 
 
 
Revenue
8,282

56,873

-

65,155

Adjusted EBITDA Margin
 
20.1
%
 
13.0
%



 
THREE MONTHS ENDED 03/31/18
 
SPEC. WAX
SPEC. PETRO
CORP
TREC
NET INCOME (LOSS)
$
(1,181
)
$
4,970

$
(1,437
)
$
2,352

Interest
256

621

1

878

Taxes
-

1,085

(495)

590

Depreciation and amortization
22

166

8

196

Depreciation and amortization in cost of sales
1,282

1,548

-

2,830

EBITDA
379

8,390

(1,923)

6,846

Share based compensation
-

-

592

592

Equity in (earnings) losses of AMAK
-

-

(230)

(230)

Adjusted EBITDA
$
379

$
8,390

$
(1,561
)
$
7,208

 
 
 
 
 
Revenue
9,595

62,313

(167)

71,741

Adjusted EBITDA Margin
3.9%
13.5%
 
10.0%



 
THREE MONTHS ENDED 12/31/18
 
SPEC. WAX
SPEC. PETRO
CORP
TREC
NET INCOME (LOSS)
$
(1,734
)
$
(2,435
)
$
(1,120
)
$
(5,290
)
Interest
267

1,215

0

1,483

Taxes
-

351

(1,871)

(1,520)

Depreciation and amortization
24

107

18

148

Depreciation and amortization in cost of sales
1,333

2,805

-

4,138

EBITDA
(111)

2,043

(2,973)

(1,041)

Share based compensation
-

-

420

420

Restructuring & Severance Expenses
-

-

2,347

2,347

Equity in (earnings) losses of AMAK
-

-

229

229

Adjusted EBITDA
$
(111
)
$
2,043

$
23

$
1,955

 
 
 
 
 
Revenue
8,635

66,034

-

74,669

Adjusted EBITDA Margin
(1.30)%
3.1%
 
2.6%



 
Three Months Ended
 
3/31/19

12/31/18

3/31/18

 
(thousands of dollars)
AMAK Net Loss










$
(1,183
)
$
(1,694
)
$
(319
)
 
 
 
 
Finance and interest expense
445

391

397

Depreciation and amortization
7,325

8,588

7,701

Zakat and income taxes expense (benefit)
522

(1,287)

-

EBITDA
$
7,109

$
5,998

$
7,779



3 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.




Adjusted Net Income and Estimated EPS Impact
(thousands of dollars, except per share amounts; rounding may apply)

 
Three months ended
 
March 31,
 
2019

 
2018

Net Income
$
1,751

 
$
2,352

 
 
 
 
Restructuring & severance expenses
-

 
-

Equity in losses (earnings) of AMAK
59

 
(230)

Taxes at statutory rate of 21%
(12)

 
48

Tax effected adjustments
47

 
(182)

Adjusted Net Income
$
1,798

 
$
2,170

Diluted weighted average number of shares
25,027

 
25,231

 
 
 
 
Estimated effect on diluted EPS
$
0.000

 
$
0.01

(tax effected adjustments/diluted weighted average number of shares)
 
 
 




1


The following information was filed by Trecora Resources (TREC) on Tuesday, May 7, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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