PR Newswire | Nov 3, 2020 04:06PM EST

11/03 15:05 CST

Trecora Resources Reports Third Quarter 2020 Results- Successful completion of AMAK sale resulting in net cash proceeds of $61 million- Paydown of $31.1 million of debt; Bank debt of $47.1 million vs. $78.2 million at the end of June; Total cash balance of $51.9 million at end of September- Third quarter net income of $22.4 million (which includes the net gain from the sale of AMAK of $21.3 million)- Third quarter Adjusted EBITDA from continuing operations of $7.1 million, a 69% increase from second quarter- Conference call at 10:00 am ET tomorrow, November 4, 2020 SUGAR LAND, Texas, Nov. 3, 2020

SUGAR LAND, Texas, Nov. 3, 2020 /PRNewswire/ -- Trecora Resources ("Trecora" or the "Company") (NYSE: TREC), a leading provider of specialty hydrocarbons and specialty waxes, today announced financial results for the third quarter ended September 30, 2020.

Executive Commentary

"The successful closing of the AMAK1 sale was a landmark event for our Company. The proceeds allowed us to pay down $31 million of debt, and increase our cash balance to nearly $52 million. Trecora's recent results and accomplishments reflect our fundamental resilience in spite of historical challenges. Our third quarter saw good recovery in sales volumes from the depressed business conditions in the second quarter, despite the impact of multiple hurricanes on our customers in the Gulf Coast," said Pat Quarles, Trecora's President and Chief Executive Officer.

"This has been a transformational year for Trecora. Earlier, we implemented a management system across the Company that prioritized and reinforced safety, reliable operations and accountability, all while advancing the sustainability of our assets. We have now developed a diversified and value generating portfolio of growth projects to deliver sustainable organic growth, requiring little capital. This has already resulted in value creation of $4 million in annualized incremental EBITDA in 2020, with expectations of further significant growth next year and thereafter," concluded Mr. Quarles.

Sami Ahmad, Trecora's Chief Financial Officer stated, "With the milestone divestiture of our non-core interest in AMAK completed, we have streamlined the company structure and narrowed our focus to specialty chemicals, all while dramatically reducing our credit facility leverage ratio to 1.6 times, thus enhancing our financial flexibility for growth.

"Third quarter results improved sequentially from the depressed levels in the second quarter. Specialty Petrochemicals sales volumes for the third quarter increased more than 16% from the second quarter but were down 13% from the same period last year. Third quarter demand for Specialty Petrochemicals sales were impacted by weakened markets, including durable goods such as automotive and construction and year-over-year results continued to be impacted by the effect on global demand due to the COVID-19 pandemic," concluded Mr. Ahmad.

Third Quarter 2020 Financial Results

Net income in the third quarter of 2020 was $22.4 million, or $0.88 per diluted share2, which includes the net gain from the sale of AMAK of $21.3 million, compared to net income of $0.6 million, or $0.02 per diluted share3, in the third quarter of 2019. Net income from continuing operations in the third quarter of 2020 was $1.1 million, or $0.04 per diluted share2, compared to net income from continuing operations of $1.6 million, or $0.06 per diluted share3, in the third quarter of 2019. Adjusted EBITDA from continuing operations was $7.1 million for the third quarter of 2020, compared with Adjusted EBITDA from continuing operations of $6.9 million in the third quarter of 2019. Adjusted EBITDA from continuing operations improved due to higher Specialty Waxes revenue and reduced corporate expenses, partially offset by lower sales volumes for prime products and by-products in our Specialty Petrochemicals segment, both of which were impacted by COVID-19.

Total revenue in the third quarter of 2020 was $47.7 million compared to $62.7 million in the third quarter of 2019. This 23.9% year-over-year decrease was primarily due to lower selling prices resulting from the sharp decline in feedstock costs relative to the same period a year ago. In addition, gross revenue was reduced by lower sales volumes for prime products and by-products which were impacted by COVID-19.

Gross profit in the third quarter of 2020 was $8.5 million, or 17.7% of total revenues, compared to $9.6 million, or 15.3% of total revenues in the third quarter of 2019. Operating income in the third quarter of 2020 was $2.5 million compared to operating income of $3.0 million for the third quarter of 2019.

Specialty Petrochemicals

Specialty Petrochemicals net income was $4.2 million in the third quarter of 2020, compared to net income of $6.3 million in the third quarter of 2019. Specialty Petrochemicals volume in the third quarter of 2020 was 17.9 million gallons, compared to 15.3 million gallons in the second quarter of 2020 and 20.5 million gallons in the third quarter of 2019. Sales volume of our Specialty Petrochemicals products decreased 12.9% year-over-year, due to lower sales to the polyethylene end-use markets as well as lower sales to Canadian oil sands customers. Sales to other end-use markets were also generally weaker compared to the same period last year due to the COVID-19 pandemic.

Prime product volume in the third quarter of 2020 was 14.7 million gallons, compared to 13.1 million gallons in the second quarter of 2020 and 16.4 million gallons in the third quarter of 2019. By-product sales volume was 3.1 million gallons in the third quarter of 2020. Adjusted EBITDA from continuing operations for Specialty Petrochemicals in the third quarter of 2020 was $8.5 million compared to $5.0 million in the second quarter of 2020 and $9.4 million in the third quarter of 2019.

Dollar amounts in thousands/rounding may apply THREE MONTHS ENDED

SEPTEMBER 30,

2020 2019 % Change

Product sales $37,580 $53,277 (29.5%)

Processing fees 1,644 1,208 36.1%

Gross revenues $39,224 $54,485 (28.0%)

Operating profit before depreciation and amortization 8,538 10,414 (18.0%)

Operating profit 5,871 7,448 (21.2%)

Net profit before taxes 5,311 6,583 (19.3%)

Depreciation and amortization 2,667 1,900 40.3%

Adjusted EBITDA 8,485 9,376 (9.5%)

Capital expenditures 2,084 2,163 (3.6%)

Specialty Waxes

Specialty Waxes net loss was $1.3 million in the third quarter of 2020, compared to a net loss of $2.1 million in the third quarter of 2019. Specialty Waxes generated revenues of approximately $8.5 million in the third quarter of 2020, a $0.2 million increase from $8.3 million in the second quarter of 2020, and a $0.3 million increase from the third quarter of 2019. Revenue included approximately $6.0 million of wax product sales in the third quarter of 2020. Wax sales volumes increased approximately 2.0%, or nearly 0.2 million pounds, from the third quarter of 2019. Higher sales volumes in the third quarter of 2020 reflect no material disruptions to feed supply during the third quarter of 2020, as there were in third quarter of 2019.

Processing revenues, which were $2.5 million in the third quarter of 2020, increased 5.7%, or approximately $0.1 million, from the third quarter of 2019. Adjusted EBITDA for Specialty Waxes in the third quarter of 2020 was $0.1 million compared to $(0.2) million in the third quarter of 2019.

Dollar amounts in thousands/rounding may apply THREE MONTHS ENDED

SEPTEMBER 30,

2020 2019 % Change

Product sales $5,990 $5,834 2.7%

Processing fees 2,533 2,396 5.7%

Gross revenues $8,523 $8,230 3.6%

Operating profit (loss) before depreciation and 89 (260) 134.3% amortization

Operating loss (1,337)(1,808)26.0%

Net loss before taxes (1,293)(2,071)37.5%

Depreciation and amortization 1,427 1,548 (7.8%)

Adjusted EBITDA 134 (207) 164.7%

Capital expenditures 641 361 77.5%

Year-to-Date 2020 Financial Results

Net income in the first nine months of 2020 was $31.3 million, or $1.24 per diluted share4, which includes the net gain from the sale of AMAK of $26.2 million, compared to net income of $4.7 million, or $0.19 per diluted share5, in the first nine months of 2019. Net income from continuing operations in the first nine months of 2020 was $5.1 million, or $0.20 per diluted share4, compared to net income of $5.9 million, or $0.23 per diluted share5, for the same period in 2019. Adjusted EBITDA from continuing operations in the first nine months of 2020 was $16.8 million, compared to Adjusted EBITDA from continuing operations of $24.6 million for the same period in 2019.

Total revenue in the first nine months of 2020 was $150.5 million, compared to $197.2 million for the same period in 2019, a decrease of 23.7%. This decrease was primarily due to lower sales volumes for prime products and by-products as a result of COVID-19 and its general impact on the economy. A decrease in average selling prices resulting from a sharp decrease in feedstock costs also contributed to the revenue decline.

Gross profit in the first nine months of 2020 was $22.7 million, or 15.1% of total revenues, compared to $30.2 million, or 15.3% of total revenues, for the same period in 2019. Operating income in the first nine months of 2020 was $3.3 million, compared to operating income of $11.0 million for the same period in 2019.

Specialty Petrochemicals

Specialty Petrochemicals net income was $10.2 million in the first nine months of 2020, compared to net income of $17.1 million for the same period in 2019. Specialty Petrochemicals volume in the first nine months of 2020 was 53.0 million gallons, compared to 64.4 million gallons for the same period in 2019. Prime product volume in the first nine months of 2020 was 44.0 million gallons, compared to 51.8 million gallons in the same period 2019. Adjusted EBITDA for Specialty Petrochemicals in the first nine months of 2020 decreased 35.9% to $20.0 million, compared to $31.1 million for the same period in 2019.

Dollar amounts in thousands/rounding may apply NINE MONTHS ENDED

SEPTEMBER 30,

2020 2019 % Change

Product sales $119,202$167,351(28.8%)

Processing fees 4,047 4,117 (1.7%)

Gross revenues $123,249$171,468(28.1%)

Operating profit before depreciation and amortization 20,002 31,849 (37.2%)

Operating profit 12,097 22,885 (47.1%)

Net profit before taxes 9,901 20,093 (50.7%)

Depreciation and amortization 7,905 7,899 0.1%

Adjusted EBITDA 19,956 31,134 (35.9%)

Capital expenditures 9,067 5,002 81.3%

Specialty Waxes

Specialty Waxes net loss of $0.4 million in the first nine months of 2020 compared to a net loss of $5.6 million for the same period in 2019. Specialty Waxes had revenues of $27.2 million in the first nine months of 2020, a 5.7% increase from the same period of 2019. Revenues included $18.3 million of wax product sales and $9.0 million of processing revenues. Wax sales volumes in the first nine months of 2020 increased approximately 3.3% from the same period 2019. In the first nine months of 2019, planned maintenance turnaround at our Pasadena facility, along with outages at multiple wax feed suppliers, constrained specialty wax production and thereby sales volumes. There were no material disruptions to feed supply during the first nine months of 2020. Adjusted EBITDA for Specialty Waxes in the first nine months of 2020 was $2.1 million, compared to $(0.4) million for the same period in 2019.

Dollar amounts in thousands/rounding may apply NINE MONTHS ENDED

SEPTEMBER 30,

2020 2019 % Change

Product sales $18,258$18,582 (1.7%)

Processing fees 8,981 7,191 24.9%

Gross revenues $27,239$25,773 5.7%

Operating profit (loss) before depreciation and amortization 2,009 (343)) 686.3%

Operating loss (2,084)(4,638) 55.1%

Net loss before taxes (1,980)(5,623) 64.8%

Depreciation and amortization 4,093 4,295 (4.7%)

Adjusted EBITDA 2,130 (361) 690.7%

Capital expenditures 1,242 1,296 (4.2%)

Outlook

"In the fourth quarter, we continue to see positive demand growth in most of our key markets. We anticipate our Specialty Petrochemicals prime product sales volumes to match pre-COVID levels in the fourth quarter. We are also seeing improved demand for waxes in our domestic market. However, the value for our by-products and the demand of custom processing services continue to be impacted by the dislocations associated with the COVID pandemic. The outlook into business conditions in 2021 is uncertain," stated Mr. Quarles.

Earnings Call

Tomorrow's conference, on November 4, 2020 at 10:00am Eastern Time, call 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/mmc/p/yu6jkxfk. A replay of the call will also be available through the same link.

To participate via telephone, callers should dial in at least ten to fifteen 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 2877564. 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 2877564 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 from continuing operations and Adjusted EBITDA from continuing operations, 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.

We define EBITDA from continuing operations as net income (loss) from continuing operations plus interest expense, income tax expense (benefit), depreciation and amortization. We define Adjusted EBITDA from continuing operations as EBITDA from continuing operations plus share-based compensation, plus restructuring and severance expenses, plus impairment losses and plus or minus gains or losses on disposal of fixed assets.

These non-GAAP measures have been reconciled to the nearest GAAP measure for historical periods in the tables below entitled "Reconciliation of Selected GAAP Measures to Non-GAAP Measures. However, the Company is unable to reconcile its expectations regarding Adjusted EBITDA growth in 2021 to the most directly comparable GAAP measures without unreasonable efforts because the Company is currently unable to predict with a reasonable degree of certainty the type and extent of certain items that would be expected to impact GAAP measures for these periods but would not impact the non-GAAP measures.

Forward-Looking Statements

Some of the statements and information contained in this earnings 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.

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 general economic and financial conditions domestically and internationally; insufficient cash flows from operating activities; our ability to attract and retain key employees; feedstock, product and mineral 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 extraordinary transactions, including acquisitions and dispositions, 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 (including having to return the amounts borrowed under the Paycheck Protection Program or failing to qualify for forgiveness of such loans, in whole or in part); 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 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 under similar headings in our subsequent Quarterly Reports on Form 10-Q and 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. Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us.

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.

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.

Investor Relations Contact:Jason FinkelsteinThe Piacente Group, Inc.212-481-2050trecora@tpg-ir.com

^1 Al Masane Al Kobra Mining Co., a Saudi Arabian joint stock company

^2 Based on 25.4 million shares outstanding

^3 Based on 25.1 million shares outstanding

^4 Based on 25.2 million shares outstanding

^5 Based on 25.1 million shares outstanding

TRECORA RESOURCES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2020 December 31, (Unaudited) 2019

ASSETS (thousands of dollars, except par value)

Current Assets

Cash $ 51,862 $ 6,145

Trade receivables, net 22,656 26,320

Inventories 11,110 13,624

Investment in AMAK (held-for-sale) - 32,872

Prepaid expenses and other assets 7,016 4,947

Taxes receivable 16,858 182

Total current assets 109,502 84,090

Plant, pipeline and equipment,net 187,898 188,919

Intangible assets, net 13,354 14,736

Operating lease assets, net 11,154 13,512

Mineral properties in the United 412 562States

TOTAL ASSETS 322,320 301,819

LIABILITIES

Current Liabilities

Accounts payable 12,815 14,603

Accrued liabilities 13,192 5,740

Current portion of long-term debt 4,194 4,194

Current portion of lease 3,148 3,174liabilities

Current portion of other 447 924liabilities

Total current liabilities 33,796 28,635

CARES Act, PPP Loans 6,123 -

Long-term debt, net of current 42,949 79,095portion

Post-retirement benefit, net of 321 338current portion

Lease liablities, net of current 8,006 10,338portion

Other liabilities, net of current 907 595portion

Deferred income taxes 26,132 11,375

Total liabilities 118,234 130,376

EQUITY

Common stock?authorized 40 millionshares of $0.10 par value; issuedand outstanding 24.8 million and 2,482 2,47524.8 million in 2020 and 2019,respectively

Additional paid-in capital 60,875 59,530

Retained earnings 140,440 109,149

Total Trecora Resources 203,797 171,154Stockholders' Equity

Noncontrolling Interest 289 289

Total equity 204,086 171,443

TOTAL LIABILITIES AND EQUITY 322,320 301,819

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30,

(unaudited) (unaudited)

2020 2019 2020 2019

(thousands of dollars, except per share amounts)

Revenues

Product sales $ 43,570 $ 59,111 $ 137,460 $ 185,933

Processing fees 4,177 3,604 13,028 11,308

47,747 62,715 150,488 197,241

Operating costs andexpenses

Cost of salesand processing(includingdepreciation and 39,290 53,148 127,786 167,036amortization of$3,887, $3,254,$11,373 and $11,611,respectively)

Gross Profit 8,457 9,567 22,702 30,205

General andAdministrativeExpenses

General and 5,766 6,401 18,729 18,532administrative

Depreciation 209 208 637 629

5,975 6,609 19,366 19,161

Operating income 2,482 2,958 3,336 11,044

Other income(expense)

Interest income - - - 5

Interest expense (508) (1,211) (2,159) (4,111)

Miscellaneous income (13) 74 (7) 330(expense), net

(521) (1,137) (2,166) (3,776)

Income fromcontinuing operations 1,961 1,821 1,170 7,268before income taxes

Income tax expense 853 238 (3,942) 1,412(benefit)

Income from 1,108 1,583 5,112 5,856continuing operations

Income (loss) fromdiscontinued 21,324 (1,002) 26,179 (1,120)operations, net oftax

Net income 22,432 581 31,291 4,736

Basic earnings percommon share

Net income fromcontinuing operations $ 0.04 $ 0.06 $ 0.21 $ 0.24(dollars)

Net income (loss)from discontinued $ 0.86 $ (0.04) $ 1.06 $ (0.05)operations, net oftax (dollars)

Net income (dollars) $ 0.90 $ 0.02 $ 1.27 $ 0.19

Basic weightedaverage number of 24,817 24,717 24,795 24,689common sharesoutstanding

Diluted earnings percommon share

Net income fromcontinuing operations $ 0.04 $ 0.06 $ 0.20 $ 0.23(dollars)

Net income (loss)from discontinued $ 0.84 $ (0.04) $ 1.04 $ (0.04)operations, net oftax (dollars)

Net income (dollars) $ 0.88 $ 0.02 $ 1.24 $ 0.19

Diluted weightedaverage number of 25,394 25,053 25,179 25,077common sharesoutstanding

TRECORA RESOURCES AND SUBSIDIARIES

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES

EBITDA from continuing operations and Adjusted EBITDA from continuingoperations

(thousands of dollars; rounding may apply)

THREE MONTHS ENDED THREE MONTHS ENDED

9/30/2020 9/30/2019

SPEC. PETRO SPEC. WAX CORP TREC SPEC. PETRO SPEC. WAX CORP TREC

NET INCOME (LOSS) $ 4,161 $ (1,267) $ 19,538 $ 22,432 $ 6,278 $ (2,071) $ (3,626) $ 581

Income (Loss) from discontinued operations, net of tax - - 21,324 21,324 - - (958) (958)

Income (Loss) from continuing operations * $ 4,161 $ (1,267) $ (1,786) $ 1,108 $ 6,278 $ (2,071) $ (2,668) $ 1,539

Interest 507 - 1 508 895 316 - 1,211

Income tax expense (benefit) 1,150 (26) (271) 853 303 - (76) 227

Depreciation and amortization 183 24 3 210 171 24 13 208

Depreciation and amortization in cost of sales 2,484 1,403 - 3,887 1,729 1,524 1 3,254

EBITDA from continuing operations * 8,485 134 (2,053) 6,566 9,376 (207) (2,730) 6,439

Share based compensation - - 489 489 - - 415 415

Adjusted EBITDA from continuing operations * $ 8,485 $ 134 $ (1,564) $ 7,055 $ 9,376 $ (207) $ (2,315) $ 6,854

Revenue 39,223 8,523 - 47,746 54,485 8,230 - 62,715

NINE MONTHS ENDED NINE MONTHS ENDED

9/30/2020 9/30/2019

SPEC. PETRO SPEC. WAX CORP TREC SPEC. PETRO SPEC. WAX CORP TREC

NET INCOME (LOSS) $ 10,150 $ (385) $ 21,526 $ 31,291 $ 17,086 $ (5,623) $ (6,727) $ 4,736

Gain (Loss) from discontinued operations, net of tax - - 26,179 26,179 - - (1,120) (1,120)

Income (Loss) from continuing operations * $ 10,150 $ (385) $ (4,653) $ 5,112 $ 17,086 $ (5,623) $ (5,607) $ 5,856

Interest 2,158 - 1 2,159 3,143 967 1 4,111

Income tax expense (benefit) (249) (1,595) (2,098) (3,942) 3,006 - (1,594) 1,412

Depreciation and amortization 554 71 13 638 512 72 45 629

Depreciation and amortization in cost of sales 7,351 4,022 - 11,373 7,387 4,223 1 11,611

EBITDA from continuing operations * 19,964 2,113 (6,737) 15,340 31,134 (361) (7,154) 23,619

Share based compensation - - 1,422 1,422 - - 973 973

(Gain) Loss on disposal of assets (8) 17 - 9 - - - -

Adjusted EBITDA from continuing operations * $ 19,956 $ 2,130 $ (5,315) $ 16,771 $ 31,134 $ (361) $ (6,181) $ 24,592

Revenue 123,248 27,239 - 150,487 171,468 25,773 - 197,241

* Discontinued Operations only applicable within the Corporate segment

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SOURCE Trecora Resources