PR Newswire | Aug 4, 2020 04:35PM EDT

08/04 15:34 CDT

Trecora Resources Reports Second Quarter and First Half 2020 Results- Total outstanding debt reduced to $78.2 million, excluding Paycheck Protection Program loans; the lowest level since third quarter 2016- Cash balance remains strong at $29.9 million at the end of June- Second quarter net loss from continuing operations of $1.9 million- Second quarter Adjusted EBITDA from continuing operations of $4.2 million- Operating cash flow from continuing operations of $16.5 million, a $12.1 million improvement from first quarter of this year- Company's current growth initiatives in 2020 on track to yield approximately $4 million in incremental value creation- Conference call at 10:00 am ET tomorrow, August 5, 2020 SUGAR LAND, Texas, Aug. 4, 2020

SUGAR LAND, Texas, Aug. 4, 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 second quarter ended June 30, 2020.

"Trecora's second quarter results demonstrate the resiliency of our business and our executional focus, despite the market impacts from COVID-19. Our cash flow from continuing operations of $16.5 million was a $12.1 million improvement from first quarter this year. We ended the second quarter with $78.2 million of debt excluding Paycheck Protection Program loans, $29.9 million of cash and no borrowings on our revolver. Our Company's debt is at its lowest since the third quarter of 2016," said Pat Quarles, Trecora's President and Chief Executive Officer.

"Net loss from continuing operations in the second quarter was $1.9 million while Adjusted EBITDA from continuing operations was $4.2 million. Demand for our Specialty Petrochemicals declined in April and May but rebounded in June while margins for these products expanded significantly as our feedstock costs declined throughout the quarter. Our Specialty Waxes business results were weaker than expected due to both exposure to certain durable good end-uses and the impact from falling custom processing revenues in this segment. While our visibility looking forward remains poor, we see demand in Specialty Petrochemicals continuing to improve into the third quarter, while still below pre-pandemic levels.

"Our growth initiative launched in 2020 remains on track to achieve approximately $4 million of annualized incremental EBITDA value creation. With additional inbound projects continuing to develop, we believe the expanding pipeline of projects offer further opportunities for profit improvements ahead.

"Finally, we recently completed the sale of a 975,000 share portion of Trecora's overall ownership in AMAK. We believe we will complete the sale of our remaining AMAK shares by the end of the third quarter. Coupled with the anticipated receipt of Federal income tax refunds allowed under the CARES Act, we expect our bank debt, net of cash, to be negative. With our strong balance sheet we can better navigate the current market environment as well as prudently consider growth opportunities and drive shareholder value," concluded Mr. Quarles.

Sami Ahmad, Trecora's Chief Financial Officer stated, "We have taken a number of measures in the first half of 2020 to strengthen our balance sheet and provide for sufficient liquidity as we progress through this downturn. We fully repaid our revolver balance of $23 million and paid down another $1 million on our Term Loan during the second quarter of 2020. As a result, our bank debt balance as of June 30 was $78.2 million compared to $102.3 million at March 31. We maintained keen attention to costs with a focus on safe and reliable operation of our plants as well as preserving the continuity of our workforce. Cash on the balance sheet stood at approximately $29.9 million at the end of second quarter. Finally, in addition to proceeds from the AMAK share sale we expect to receive approximately $16.5 million in tax refunds in the second half of the year."

Second Quarter 2020 Financial Results

Net loss from continuing operations in the second quarter of 2020 was $1.9 million, or $0.07 per diluted share[1], compared to a net income from continuing operations of $2.4 million, or $0.10 per diluted share[2], in the second quarter of 2019. Adjusted EBITDA from continuing operations was $4.2 million for the second quarter of 2020, compared with Adjusted EBITDA from continuing operations of $9.3 million in the second quarter of 2019. Adjusted EBITDA from continuing operations declined due to lower sales volumes for prime products and by-products in our Specialty Petrochemicals segment, as well as lower Specialty Waxes sales revenue, both of which were impacted by COVID-19.

Total revenue in the second quarter of 2020 was $40.7 million compared to $69.4 million in the second quarter of 2019. This 41.4% year-over-year decrease was primarily due to lower sales volumes for prime products and by-products which was impacted by COVID-19. Also, gross revenue was reduced by lower selling prices resulting from the sharp decline in feedstock costs relative to the same period a year ago.

Gross profit in the second quarter of 2020 was $6.2 million, or 15.2% of total revenues, compared to $10.6 million, or 15.2% of total revenues, in the second quarter of 2019. Operating loss in the second quarter of 2020 was $0.3 million compared to operating income of $4.3 million for the second quarter of 2019.

Specialty Petrochemicals

Specialty Petrochemicals net income from continuing operations was $1.4 million in the second quarter of 2020, compared to net income of $4.7 million in the second quarter of 2019. Specialty Petrochemicals volume in the second quarter of 2020 was 15.3 million gallons, compared to 19.7 million gallons in the first quarter of 2020 and 21.4 million gallons in the second quarter of 2019. Sales volume of our Specialty Petrochemicals products decreased 28.5% year-over-year, due to lower demand from polyethylene end-use markets as well as lower sales to Canadian oil sands customers.

Prime product volume in the second quarter of 2020 was 13.1 million gallons, compared to 16.2 million gallons in the first quarter of 2020 and 17.7 million gallons in the second quarter of 2019. By-product sales volume was 2.3 million gallons in the second quarter of 2020. Adjusted EBITDA from continuing operations for Specialty Petrochemicals in the second quarter of 2020 was $5.0 million compared to $10.4 million in the second quarter of 2019.

Dollar amounts in thousands/rounding may apply THREE MONTHS ENDED

JUNE 30,

2020 2019 % Change

Product sales $31,236 $58,584 (47%)

Processing fees 1,159 1,527 (24%)

Gross revenues $32,395 $60,111 (46%)

Operating profit before depreciation and 4,974 10,028 (50%) amortization

Operating profit 2,354 7,104 (67%)

Net profit before taxes 1,648 6,375 (74%)

Depreciation and amortization 2,621 2,925 (10%)

Adjusted EBITDA from continuing operations 4,998 10,353 (52%)

Capital expenditures 5,382 1,461 268%

Specialty Waxes

Specialty Waxes net loss from continuing operations was $0.3 million in the second quarter of 2020, compared to a net loss from continuing operations of $1.0 million in the second quarter of 2019. Specialty Waxes generated revenues of approximately $8.3 million in the second quarter of 2020, a $2.1 million decrease from $10.4 million in the first quarter of 2020, and a $1.0 million decrease from the second quarter of 2019. Revenue included $5.5 million of wax product sales in the second quarter of 2020. Wax sales volumes decreased approximately 16.0% or nearly 1.6 million pounds from the second quarter of 2019. Lower sales volumes, in the second quarter of 2020, reflect the impact on our customers from COVID-19. Many of our customers, especially in the automotive, furniture and construction end-markets, had significant decline in sales demand due to the pandemic. There were no material disruptions to feed supply during the second quarter of 2020.

Processing revenues, which were $2.8 million in the second quarter of 2020, increased 11.7%, or approximately $0.3 million, from the second quarter of 2019. Adjusted EBITDA from continuing operations for Specialty Waxes in the second quarter of 2020 was $0.9 million compared to $0.7 million in the second quarter of 2019.

Dollar amounts in thousands/rounding may apply THREE MONTHS ENDED

JUNE 30,

2020 2019 % Change

Product sales $5,471 $6,745 (19%)

Processing fees 2,808 2,516 12%

Gross revenues $8,279 $9,261 (11%)

Operating profit before depreciation and 854 766 11% amortization

Operating loss (485) (633) 23%

Net loss before taxes (445) (1,013) 56%

Depreciation and amortization 1,338 1,399 (4%)

Adjusted EBITDA from continuing operations 892 734 22%

Capital expenditures 285 426 (33%)



First Half 2020 Financial Results

Net income from continuing operations in the first half of 2020 was $4.0 million, or $0.16 per diluted share[3], compared to net income of $4.3 million, or $0.17 per diluted share[4], for the same period in 2019. Adjusted EBITDA from continuing operations in the first half of 2020 was $9.7 million, compared to Adjusted EBITDA from continuing operations of $17.7 million for the same period in 2019.

Total revenue in the first half of 2020 was $102.7 million, compared to $134.5 million for the same period in 2019, a decrease of 23.6%. This decrease was primarily due to lower sales volumes for prime products and byproducts 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 half of 2020 was $14.2 million, or 13.9% of total revenues, compared to $20.6 million, or 15.3% of total revenues, for the same period in 2019. Operating income in the first half of 2020 was $0.9 million, compared to operating income of $8.1 million for the same period in 2019.

Specialty Petrochemicals

Specialty Petrochemicals net income was $6.0 million in the first half of 2020, compared to net income of $10.8 million for the same period in 2019. Specialty Petrochemicals volume in the first half of 2020 was 35.1 million gallons, compared to 43.9 million gallons for the same period in 2019. Prime product volume in the first half of 2020 was 29.3 million gallons, compared to 35.4 million gallons in the same period 2019. Adjusted EBITDA from continuing operations for Specialty Petrochemicals in the first half of 2020 decreased 47% to $11.5 million, compared to $21.8 million for the same period in 2019.

SIX MONTHS Dollar amounts in thousands/rounding may apply ENDED

JUNE 30,

2020 2019 % Change

Product sales $81,622$114,074(28%)

Processing fees 2,403 2,910 (17%)

Gross revenues $84,025$116,984(28%)

Operating profit before depreciation and 11,464 21,435 (47%) amortization

Operating profit 6,226 15,437 (60%)

Net profit before taxes 4,590 13,510 (66%)

Depreciation and amortization 5,238 5,999 (13%)

Adjusted EBITDA from continuing operations 11,471 21,758 (47%)

Capital expenditures 6,983 2,839 146%

Specialty Waxes

Specialty Waxes net income of $0.9 million in the first half of 2020 compared to a net loss of $3.6 million for the same period in 2019. Specialty Waxes had revenues of $18.7 million in the first half of 2020, a 6.7% increase from the same period of 2019. Revenues included $12.3 million of wax product sales and $6.4 million of processing revenues. Wax sales volumes in the first half of 2020 increased approximately 3.9% from the same period 2019. In the first half 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 half of 2020. Adjusted EBITDA from continuing operations for Specialty Waxes in the first half of 2020 was $2.0 million, compared to $(0.2) million for the same period in 2019.

Dollar amounts in thousands/rounding may apply SIX MONTHS ENDED

JUNE 30,

2020 2019 % Change

Product sales $12,268$12,748(4)%

Processing fees 6,448 4,794 34%

Gross revenues $18,716$17,5427%

Operating profit (loss) before depreciation and 1,920 (83) 2,413% amortization

Operating loss (747) (2,830)74%

Net loss before taxes (687) (3,552)81%

Depreciation and amortization 2,666 2,747 (3%)

Adjusted EBITDA from continuing operations 1,996 (154) 1,396%

Capital expenditures 601 935 (36%)

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/mmc/p/zucq82i6. 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 6689633. 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 6689633 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 (benefit), income taxes, 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 or minus equity in AMAK's earnings and losses, plus impairment losses and plus or minus gains or losses on disposal of assets.

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.

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: not completing, or not completely realizing the anticipated benefits from, the sale of our stake in AMAK; 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 COVID-19) 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 in our 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.

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. In addition, the Company is the original developer and a 27.0% owner of Al Masane Al Kobra Mining Co., a Saudi Arabian joint stock company.

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



1 Based on 24.8 million shares outstanding.

2 Based on 25.1 million shares outstanding.

3 Based on 25.4 million shares outstanding.

4 Based on 25.1 million shares outstanding.

TRECORA RESOURCES AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2020 December 31, (Unaudited) 2019

ASSETS (thousands of dollars, except par value)

Current Assets

Cash $ 29,877 $ 6,145

Trade receivables, net 20,240 26,320

Inventories 7,595 13,624

Investment in AMAK (held-for-sale) 29,175 32,872

Prepaid expenses and other assets 3,233 4,947

Taxes receivable 16,229 182

Total current assets 106,349 84,090

Plant, pipeline and equipment, net 189,237 188,919

Intangible assets, net 13,814 14,736

Operating lease assets, net 11,915 13,512

Mineral properties in the United 562 562States

TOTAL ASSETS 321,877 301,819

LIABILITIES

Current Liabilities

Accounts payable 11,027 14,603

Accrued liabilities 7,801 5,740

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

Current portion of lease liabilities 3,142 3,174

Current portion of other liabilities 955 924

Total current liabilities 27,119 28,635

CARES Act, PPP Loans 6,123 -

Long-term debt, net of current portion 73,998 79,095

Post-retirement benefit, net of 327 338current portion

Lease liabilities, net of current 8,773 10,338portion

Other liabilities, net of current 512 595portion

Deferred income taxes 23,860 11,375

Total liabilities 140,712 130,376

EQUITY

Common stock-authorized 40 millionshares of $0.10 par value; issued and 2,482 2,475outstanding 24.8 million and 24.8million in 2020 and 2019, respectively

Additional paid-in capital 60,386 59,530

Retained earnings 118,008 109,149

Total Trecora Resources Stockholders' 180,876 171,154Equity

Noncontrolling Interest 289 289

Total equity 181,165 171,443

TOTAL LIABILITIES AND EQUITY 321,877 301,819

TRECORA RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30,

(unaudited) (unaudited)

2020 2019 2020 2019

(thousands of dollars, except per share amounts)

Revenues

Product sales $ 36,707 $ 65,329 $ 93,890 $ 126,822

Processing 3,967 4,042 8,851 7,704fees

40,674 69,371 102,741 134,526

Operating costs andexpenses

Cost of salesand processing(includingdepreciation and 34,507 58,806 88,496 113,888amortizationof $3,750, $4,128,$7,486 and $8,357,respectively)

Gross Profit 6,167 10,565 14,245 20,638

General andAdministrativeExpenses

General and 6,289 6,042 12,963 12,076administrative

Depreciation 212 208 428 421

6,501 6,250 13,391 12,497

Operating income (334) 4,315 854 8,141(loss)

Other income(expense)

Interest - - - 5income

Interest (735) (1,401) (1,651) (2,900)expense

Miscellaneousincome (expense), 68 284 6 256net

(667) (1,117) (1,645) (2,639)

Income (loss) fromcontinuing (1,001) 3,198 (791) 5,502operations beforeincome taxes

Income tax expense 858 691 (4,795) 1,185(benefit)

Income (loss) fromcontinuing (1,859) 2,507 4,004 4,317operations

Income (loss) fromdiscontinued (2) (103) 4,855 (162)operations, net oftax

Net income (loss) (1,861) 2,404 8,859 4,155

Basic earnings (losses) per commonshare

Net income(loss) fromcontinuing $ (0.07) $ 0.10 $ 0.16 $ 0.17operations(dollars)

Net incomefrom discontinued $ - $ - $ 0.20 $ (0.01)operations, net oftax (dollars)

Net income $ (0.07) $ 0.10 $ 0.36 $ 0.16(loss) (dollars)

Basic weightedaverage number of 24,802 24,696 24,784 24,675common sharesoutstanding

Diluted earnings(losses) per commonshare

Net income(loss) fromcontinuing $ (0.07) $ 0.10 $ 0.16 $ 0.17operations(dollars)

Net incomefrom discontinued $ - $ - $ 0.19 $ (0.01)operations, net oftax (dollars)

Net income $ (0.07) $ 0.10 $ 0.35 $ 0.16(loss) (dollars)

Dilutedweighted average 24,802 25,091 25,360 25,089number of commonshares outstanding

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

6/30/2020 6/30/2019

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

NET INCOME $ 1,393 $ (332) $ (2,922) $ (1,861) $ 4,666 $ (1,013) $ (1,249) $ 2,404(LOSS)

Loss fromdiscontinued - - (2) (2) - - (103) (103)operations,net of tax

Income(Loss) from $ 1,393 $ (332) $ (2,920) $ (1,859) $ 4,666 $ (1,013) $ (1,146) $ 2,507continuingoperations

Interest 736 - (1) 735 1,053 347 1 1,401

Tax expense 255 (113) 716 858 1,709 - (1,018) 691(benefit)

Depreciationand 185 23 4 212 172 24 12 208amortization

Depreciationandamortization 2,436 1,314 - 3,750 2,753 1,375 - 4,128in cost ofsales

EBITDA fromcontinuing 5,005 892 (2,201) 3,696 10,353 733 (2,151) 8,935operations

Share based - - 543 543 - - 345 345compensation

Loss ondisposal of (7) - - (7) - - - -assets

AdjustedEBITDA from $ 4,998 $ 892 $ (1,658) $ 4,232 $ 10,353 $ 733 $ (1,806) $ 9,280continuingoperations

Revenue 32,395 8,279 - 40,674 60,110 9,260 - 69,371

SIX MONTHS ENDED SIX MONTHS ENDED

6/30/2020 6/30/2019

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

NET INCOME $ 5,989 $ 882 $ 1,988 $ 8,859 $ 10,808 $ (3,552) $ (3,101) $ 4,155(LOSS)

Loss fromdiscontinued - - 4,855 4,855 - - (162) (162)operations,net of tax

Income(Loss) from $ 5,989 $ 882 $ (2,867) $ 4,004 $ 10,808 $ (3,552) $ (2,939) $ 4,317continuingoperations

Interest 1,651 - - 1,651 2,248 651 1 2,900

Tax expense (1,399) (1,569) (1,827) (4,795) 2,703 - (1,518) 1,185(benefit)

Depreciationand 371 47 10 428 341 48 32 421amortization

Depreciationandamortization 4,867 2,619 - 7,486 5,658 2,699 - 8,357in cost ofsales

EBITDA fromcontinuing 11,479 1,979 (4,684) 8,774 21,758 (154) (4,424) 17,180operations

Share based - - 933 933 - - 558 558compensation

(Gain) Losson disposal (8) 17 - 9 - - - -of assets

AdjustedEBITDA from $ 11,471 $ 1,996 $ (3,751) $ 9,716 $ 21,758 $ (154) $ (3,866) $ 17,738continuingoperations

Revenue 84,025 18,716 - 102,741 116,984 17,542 - 134,526

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SOURCE Trecora Resources