Trecora Resources Reports Second Quarter 2017 Results
SUGAR LAND, Texas, Aug. 3, 2017 /PRNewswire/ -- Trecora Resources (NYSE: TREC) a leading provider of high purity specialty hydrocarbons and waxes, today announced financial results for the second quarter ended June 30, 2017.
"We are pleased to report a strong operational quarter driven by a nearly 20% increase in prime product volume compared to the same quarter a year ago and continued progress on our transformational capital projects," said Simon Upfill-Brown, President and CEO. "Total revenue increased 27.1% compared to second quarter of 2016 as a result of increased average selling prices and strong volume growth, and while our gross margins were softer due to higher feedstock and operating costs, we reported an increase in adjusted EBITDA as compared to the previous quarter. More importantly, while our reported EPS was $0.03 per diluted share, this was significantly impacted by an equity loss attributable to the AMAK operations of $3.3 million, or a loss of $0.09 per diluted share. Excluding this impact, adjusted EPS was actually $0.12 per diluted share for the second quarter, showing significant quarterly improvement over the first quarter of 2017.
"We also reported another solid quarter at Trecora Chemical driven by a 31.8% year-over-year increase in revenue," continued Upfill-Brown. "Our new distillation unit generated revenue this quarter while our hydrogenation unit entered its initial start-up phase and is on track to provide additional revenue contributions in the third quarter. With these capital projects now reaching completion, combined with a full pipeline of custom processing projects, we expect continued growth throughout the second half of 2017.
"Finally, AMAK made solid progress within the mine operations as they continued to upgrade personnel and improve operations," said Upfill-Brown. "Although there were no copper or zinc concentrate sales in the second quarter, thereby causing a greater quarterly equity loss, concentrate deliveries to the port showed substantial increases with 54% more copper concentrate and 60% more zinc concentrate transported as compared to the first quarter. Shipments are expected in the third quarter. These actions, along with the exploration results, additional drilling set to start adjacent to Guyan, and a life of mine update for the copper and zinc assets expected in the fourth quarter, should continue the positive momentum into the second half of 2017."
Second Quarter 2017 Financial Results
Total revenue in the second quarter was $62.1 million, compared with $48.9 million in the second quarter of 2016, an increase of 27.1%. The increase in reported revenue was driven by a 5.4% increase in the average sales price of petrochemical products and a 22.6% increase in in petrochemical sales volume, compared with the second quarter of 2016. The higher average sales price was partially offset by an 18.2% year-over-year increase in the average per-gallon cost of petrochemical feedstock which is the basis for the formula pricing for about 60% of the Company's petrochemical product sales. Since formula pricing is based upon prior month feedstock averages, sales price increases tend to lag higher feedstock costs resulting in lower profit margins in the period.
Gross profit in the second quarter was $11.1 million, or 17.9% of total revenues, compared with $11.6 million, or 23.7% of total revenues, in the second quarter of 2016. Operating income for the second quarter was $5.2 million, compared with operating income of $5.9 million for the second quarter of 2016.
Net income for the second quarter was $0.8 million, or $0.03 per diluted share, compared with $10.3 million, or $0.41 per diluted share, for the second quarter of 2016. Adjusted net income for the quarter was $3.0 million, or $0.12 per share(1). Reported net income in the second quarter of 2017 reflected equity in loss of AMAK of $3.3 million, or an estimated $(0.09) per diluted share on an after-tax basis. Net income in the second quarter of 2016 reflected a bargain purchase gain on the acquired B Plant of $11.5 million and equity in losses for AMAK of $1.0 million for an estimated combined impact of $0.28 per diluted share on an after-tax basis.
Adjusted EBITDA in the quarter was $8.4 million, representing a 13.5% margin, compared with Adjusted EBITDA of $8.9 million, representing an 18.1% margin for the same period a year ago.
South Hampton Resources
Petrochemical volume in the second quarter was 20.8 million gallons, compared with 17.0 million gallons in the second quarter of 2016. Prime product volume in the second quarter of 2017 was 16.3 million gallons, compared with 13.6 million gallons in the second quarter of 2016. Byproduct volume, which is sold at significantly lower margins than prime products, increased 32.4% sequentially and 32.9% year-over-year, to 4.5 million gallons. Byproduct margins were lower year-over-year and from the first quarter of 2017.
International volume represented 22.1% of total petrochemical volume during the quarter, up from 19.6% sequentially and 21.4% from the second quarter of 2016.
SHR SEGMENT INFORMATION*
THREE MONTHS ENDED
JUNE 30,
--------
2017 2016 % Change
---- ---- --------
Product sales $50,508 $39,202 29%
Processing fees 2,071 2,419 (14%)
----- -----
Net revenues $52,579 $41,621 26%
Operating profit before
depreciation and
amortization 8,761 9,476 (8%)
Operating profit 7,217 8,048 (10%)
Profit before taxes 6,598 7,435 (11%)
Depreciation and
amortization 1,544 1,428 8%
EBITDA 8,755 9,470 (8%)
Capital expenditures $9,021 $5,739 57%
*Dollar amounts in
thousands/rounding may
apply
(1)Based on adjusted net income of $3.0 million and 25.0 million shares outstanding.
Trecora Chemical
In the second quarter, TC generated revenues of $9.5 million, up 31.8% from $7.2 million in the second quarter of 2016. TC revenue included $6.5 million of wax product sales, up 26.0%, and $3.0 million of custom processing fees, up 46.4%, when compared with the second quarter of 2016.
The distillation portion of the hydrogenation/distillation unit project at TC is operational and contributed to revenue in the second quarter. The hydrogenation section recently initiated the start-up process and is expected to contribute to revenues in the third quarter. This unit provides TC with new capabilities to leverage relationships with existing petrochemical customers and drive new custom processing revenue.
EBITDA in the second quarter was $0.8 million, compared with $12.3 million in the second quarter of 2016. Excluding the bargain purchase gain from B Plant, TC's Adjusted EBITDA in the second quarter of 2016 was $0.7 million.
TC SEGMENT INFORMATION*
THREE MONTHS
ENDED
JUNE 30,
--------
2017 2016 % Change
---- ---- --------
Product sales $6,508 $5,164 26%
Processing fees 3,028 2,069 46%
----- -----
Net revenues $9,536 $7,233 32%
Operating profit before
depreciation and amortization 810 584 39%
Operating loss (198) (196) (1%)
Profit (loss) before taxes (269) 11,484 (102%)
Depreciation and amortization 1,008 780 29%
EBITDA 802 12,264 (93%)
Adjusted EBITDA (excluding
bargain purchase gain) 802 715 12%
Capital expenditures $4,931 $5,053 (2%)
*Dollar amounts in thousands/
rounding may apply
Al Masane Al Kobra Mining Company (AMAK)
Trecora reported equity in losses of AMAK of approximately $3.3 million during the second quarter of 2017. Operations are progressing according to schedule. Although no copper or zinc concentrate sales were recorded in the second quarter, inventory was built at the port and will be shipped in the third quarter. Guyan exploration results and mineral resources update are complete. Exploration results extending the life of the copper and zinc mine assets, are expected in the fourth quarter.
Year-to-Date 2017 Results
Total revenue for the six months ended June 30, 2017 was $117.7 million, compared with revenue of $101.1 million in the first six months of 2016.
Gross profit for the first six months of 2017 was $21.7 million, compared with $23.3 million in the same period in 2016. Gross profit margin in the first six months of 2017 was 18.5%, compared with 23.1% in the same period in 2016.
Net income for the first six months of 2017 was $2.3 million, compared with $17.5 million in the same period of 2016. Diluted EPS was $0.09, compared with $0.70 in the same period of 2016. Net income in the first half of 2017 was negatively affected by equity in losses of AMAK of $4.3 million. In the first half of 2016, net income benefitted from equity in earnings for AMAK of $4.4 million and a bargain purchase gain on the acquisition of B Plant of $11.5 million for an estimated combined benefit of $0.41 per diluted share on an after-tax basis.
Adjusted EBITDA for the first six months of 2017 was $15.7 million, compared with $18.0 million in the same period in 2016. Adjusted EBITDA margin in the first six months of 2017 was 13.4%, compared with 17.8% in the same period of 2016.
South Hampton Resources (SHR)
Petrochemical volume in the first half was 38.2 million gallons, compared with 37.4 million gallons in the first half of 2016. Prime product volume in the first half of 2017 was 30.2 million gallons, compared with 28.2 million gallons in the first half of 2016. Byproduct volume, which is sold at lower margins, was down 12.9% year-over-year to 8.0 million gallons.
International volume represented 20.9% of total petrochemical volume during the first half of 2017.
SHR SEGMENT INFORMATION*
SIX MONTHS ENDED
JUNE 30,
--------
2017 2016 % Change
---- ---- --------
Product sales $94,899 $81,826 16%
Processing fees 3,559 3,860 (8%)
----- -----
Net revenues 98,458 85,686 15%
Operating profit before
depreciation and amortization 16,975 17,886 (5%)
Operating profit 13,875 15,122 (8%)
Profit before taxes 12,601 13,884 (9%)
Depreciation and amortization 3,100 2,764 12%
EBITDA 16,949 17,880 (5%)
Capital expenditures 17,777 11,401 56%
*Dollar amount in thousands -
rounding may apply
Trecora Chemical (TC)
In the first half of 2017, TC generated revenues of $19.2 million, up 24.9% from $15.4 million for the first half of 2016.
TC SEGMENT INFORMATION*
SIX MONTHS ENDED
JUNE 30,
--------
2017 2016 % Change
---- ---- --------
Product sales $13,016 $9,721 34%
Processing fees 6,183 5,647 10%
----- -----
Net revenues 19,199 15,368 25%
Operating profit before
depreciation and amortization 1,555 2,647 (41%)
Operating profit (loss) (469) 816 (157%)
Profit (loss) before taxes (559) 12,490 (104%)
Depreciation and amortization 2,024 1,831 11%
EBITDA 1,528 14,321 (89%)
Adjusted EBITDA (excluding
bargain purchase gain) 1,528 2,772 (45%)
Capital expenditures 10,056 6,993 44%
*Dollar amount in thousands -
rounding may apply
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=125362. 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 1-888-442-4145 or 1-719-457-2080 if calling internationally, using the conference ID 9848527. 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 9848527 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, 2016, 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:
Laurie Little
The Piacente Group
212-481-2050
trecora@tpg-ir.com
TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2017 2016
(unaudited)
----------
ASSETS (thousands of dollars)
------
Current Assets
Cash and cash equivalents $1,748 $8,389
Trade receivables, net 25,032 22,193
Inventories 15,118 17,871
Prepaid expenses and other
assets 3,574 3,511
Taxes receivable 3,200 3,983
----- -----
Total current assets 48,672 55,947
Plant, pipeline and
equipment, net 163,182 140,009
Goodwill 21,798 21,798
Other intangible assets,
net 21,738 22,669
Investment in AMAK 45,122 49,386
Mineral properties in the
United States 588 588
Other assets 42 87
--- ---
TOTAL ASSETS $301,142 $290,484
======== ========
LIABILITIES
-----------
Current Liabilities
Accounts payable $10,839 $13,306
Current portion of
derivative instruments 19 58
Accrued liabilities 4,596 2,017
Current portion of post-
retirement benefit 311 316
Current portion of long-
term debt 8,061 10,145
Current portion of other
liabilities 2,044 870
----- ---
Total current liabilities 25,870 26,712
Long-term debt, net of
current portion 81,002 73,107
Post-retirement benefit,
net of current portion 897 897
Other liabilities, net of
current portion 1,829 2,309
Deferred income taxes 23,589 23,083
------ ------
Total liabilities 133,187 126,108
------- -------
EQUITY
------
Common stock?authorized 40
million shares of $.10 par
value; issued 24.5 2,451 2,451
million in 2017 and 2016 and outstanding
24.3 million and 24.2 million shares in
2017 and 2016, respectively
Additional paid-in capital 54,653 53,474
Common stock in treasury,
at cost (203) (284)
Retained earnings 110,765 108,446
------- -------
Total Trecora Resources
Stockholders' Equity 167,666 164,087
Noncontrolling Interest 289 289
--- ---
Total equity 167,955 164,376
------- -------
TOTAL LIABILITIES AND
EQUITY $301,142 $290,484
======== ========
TRECORA RESOURCES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS
ENDED
JUNE 30, JUNE 30,
-------- --------
2017 2016 2017 2016
---- ---- ---- ----
(thousands of dollars)
REVENUES
Petrochemical and Product Sales $57,016 $44,366 $107,915 $91,547
Processing Fees 5,099 4,488 9,742 9,507
----- ----- ----- -----
62,115 48,854 117,657 101,054
OPERATING COSTS AND EXPENSES
Cost of Sales and Processing
(including depreciation and
amortization of $2,363,
$2,028, $4,746, and $4,247,
respectively) 51,008 37,280 95,932 77,709
------ ------ ------ ------
GROSS PROFIT 11,107 11,574 21,725 23,345
GENERAL AND ADMINISTRATIVE EXPENSES
General and Administrative 5,740 5,491 11,961 10,940
Depreciation 205 187 410 364
--- --- --- ---
5,945 5,678 12,371 11,304
----- ----- ------ ------
OPERATING INCOME 5,162 5,896 9,354 12,041
OTHER INCOME (EXPENSE)
Interest Expense (678) (607) (1,314) (1,235)
Bargain purchase gain from
acquisition -- 11,549 -- 11,549
Equity in Earnings (Losses) of
AMAK (3,298) (1,017) (4,264) 4,350
Miscellaneous Income (Expense) (22) 123 (64) 110
--- --- --- ---
(3,998) 10,048 (5,642) 14,774
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 1,164 15,944 3,712 26,815
INCOME TAXES 332 5,692 1,393 9,339
--- ----- ----- -----
NET INCOME 832 10,252 2,319 17,476
NET LOSS ATTRIBUTABLE TO
NONCONTROLLING -- -- -- --
INTEREST
NET INCOME ATTRIBUTABLE TO
TRECORA RESOURCES $832 $10,252 $2,319 $17,476
==== ======= ====== =======
Basic Earnings per Common Share
Net Income Attributable to
Trecora Resources (dollars) $0.03 $0.42 $0.10 $0.72
Basic Weighted Average Number of
Common Shares Outstanding 24,256 24,204 24,248 24,344
====== ====== ====== ======
Diluted Earnings per Common Share
Net Income Attributable to
Trecora Resources (dollars) $0.03 $0.41 $0.09 $0.70
Diluted Weighted Average Number
of Common Shares Outstanding 25,034 24,885 25,044 24,985
====== ====== ====== ======
TRECORA RESOURCES AND SUBSIDIARIES
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES(1)
Adjusted EBITDA Margin
(rounding may apply)
THREE MONTHS ENDED 6/30/17 THREE MONTHS ENDED 6/30/16
-------------------------- --------------------------
TC SHR CORP TREC TC SHR CORP TREC
--- --- ---- ---- --- --- ---- ----
NET INCOME (LOSS) $(269) $4,477 $(3,376) $832 $7,443 $6,092 $(3,283) $10,252
Interest 63 613 2 678 - 606 1 607
Taxes - 2,121 (1,789) 332 4,041 1,344 307 5,692
Depreciation and amortization 21 168 16 205 16 164 7 187
Depreciation and amortization in cost of sales 987 1,376 - 2,363 764 1,264 - 2,028
--- ----- --- ----- --- ----- --- -----
EBITDA 802 8,755 (5,147) 4,410 12,264 9,470 (2,968) 18,766
Share based compensation - - 656 656 - - 627 627
Bargain purchase gain - - - - (11,549) (11,549)
Equity in losses of AMAK - - 3,298 3,298 - - 1,017 1,017
--- --- ----- ----- --- --- ----- -----
Adjusted EBITDA $802 $8,755 $(1,193) $8,364 $715 $9,470 $(1,324) $8,861
==== ====== ======= ====== ==== ====== ======= ======
Revenue 9,536 52,579 62,115 7,233 41,621 48,854
Adjusted EBITDA Margin 8.4% 16.7% 13.5% 9.9% 22.8% 18.1%
(adjusted EBITDA/revenue)
SIX MONTHS ENDED 6/30/17 SIX MONTHS ENDED 6/30/16
------------------------ ------------------------
TC SHR CORP TREC TC SHR CORP TREC
--- --- ---- ---- --- --- ---- ----
NET INCOME (LOSS) $(559) $8,459 $(5,581) $2,319 $8,449 $8,893 $134 $17,476
Interest 63 1,248 3 1,314 - 1,232 3 1,235
Taxes - 4,142 (2,749) 1,393 4,041 4,991 307 9,339
Depreciation and amortization 42 335 32 409 36 312 16 364
Depreciation and amortization in cost of sales 1,982 2,765 - 4,747 1,795 2,452 - 4,247
----- ----- --- ----- ----- ----- --- -----
EBITDA 1,528 16,949 (8,295) 10,182 14,321 17,880 460 32,661
Share based compensation - - 1,289 1,289 - - 1,274 1,274
Bargain purchase gain - - - - (11,549) - - (11,549)
Equity in losses (earnings) of AMAK - - 4,264 4,264 - - (4,350) (4,350)
--- --- ----- ----- --- --- ------ ------
Adjusted EBITDA $1,528 $16,949 $(2,742) $15,735 $2,772 $17,880 $(2,616) $18,036
====== ======= ======= ======= ====== ======= ======= =======
Revenue 19,199 98,458 117,657 15,368 85,686 101,054
Adjusted EBITDA Margin 8.0% 17.2% 13.4% 18.0% 20.9% 17.8%
(adjusted EBITDA/revenue)
Adjusted Net Income and Estimated EPS Impact
(rounding may apply)
Three months ended Six months ended
------------------ ----------------
6/30/2017 6/30/2016 6/30/2017 6/30/2016
--------- --------- --------- ---------
NET INCOME $832 $10,252 $2,319 $17,476
Bargain
purchase
gain $0 ($11,549) $0 ($11,549)
Equity in
(earnings)
losses of
AMAK 3,298 $1,017 $4,264 ($4,350)
Taxes at
statutory
rate of 35% $1,154 ($3,686) ($1,492) $5,565
------ ------- ------- ------
Tax effected
equity in
AMAK, gain
on
additional
equity
issuance by
AMAK and
bargain
purchase
gain $2,144 ($6,846) $2,772 ($10,334)
Adjusted Net
Income $2,976 $3,406 $5,091 $7,142
====== ====== ====== ======
Diluted
weighted
average
number of
shares 25,034 24,885 25,044 24,985
Estimated
effect on
diluted EPS ($0.09) $0.28 ($0.11) $0.41
(tax effected equity in
AMAK, gain on
additional equity
issuance by AMAK, and
bargain purchase gain/
diluted weighted
average number of
shares)
(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
