TREC - Earnings call transcript Q4 2018

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Operator

Good day, and welcome to the Trecora Resources Fourth Quarter and Full Year 2018 Earnings Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Jean Young from the Piacente Group. Please go ahead.

Jean Young

Thank you and good morning everyone. Resources and Trecora earnings year the call. conference to fourth full quarter XXXX Welcome was the distributed the release earnings The over the markets close wire financial yesterday afternoon. of after services Quarles, call will and our Ahmad, Officer. Financial Chief Chief on Presenting Sami be Pat Executive President today Officer; and Chris Groves, be will Controller, available session. Q&A the our Corporate also for

Following remarks, be will there management's a prepared Q&A session.

as would presentation defined Safe Harbor are in this that Before Litigation not of the forward-looking the Reform we statement. XXXX. in review statements get Private Securities like to started, facts are I historical Act Statements

and Forward-looking this statements are expectations based only X, March of upon of management's date beliefs the XXXX. as teleconference,

as involve materially recent in subsequent Form greater others results and risks with quarterly could that detail to in statements Trecora's on from cause SEC, most These differ projected. XX-K company's filings including the actual Form and reports well are Forward-looking those the Annual discussed uncertainties as on Report XX-Q. risks

certain for management will During only. financial comparison non-GAAP also today's purposes call, discuss measures,

presentation www.trecora.com. webcast to like a available by slide company’s For a and non-GAAP CEO, website President is Trecora's is reconciliation turn This after the markets a the afternoon. close the At see of of accompanied measures release the earnings yesterday and financial on results, please to the I'd financial time, over GAAP this financial that to call of non-GAAP Pat definition issued Quarles.

Pat Quarles

have of morning. my strengths to call the allowed Trecora Thanks, ourselves about learned with a have management Jean, challenges tremendous the now I’ve for organization. and our months. lie. and me this clear in define what I three a the company, where has thanks the joining set team here along we about priorities everyone been That seat at to and amount

of quarter in the culture and We respect unacceptable. in results including were a candor that fourth XXXX Trecora's committed to have also

in processing a and Our the of Silsbee be supported. Advanced fourth outage custom significant reflect results couldn’t specific Reformer these arrangement quarter exiting economics negative impacts

downgrades byproducts the the than While were of gallon $X.XX the quarter. we also roughly unit change slightly executed third where and on have the worse they're than running, time incurred per that $X.XX realized gallon we worse catalyst we could budget, under per

If on businesses. our whole, were had The costs. and exclusively wax were Sales problem. grew X% volumes step purity as our increased to you over and price freight of sales our really and the of and successes year poor look back high we petrochemicals over X%. a higher almost down operation our assets due operating markets volumes in both driving not increases We results

processing activities custom and to show were steps We've Our steps performance some results. opportunity. by those our to have important already of not meaningfully improve begun taken constrained

foundation steadily a We are prioritizing be what of in run most the short impactful long-term building performance. while can

throughout foremost, first his As reliable of begins June Chief our free customers. low-cost injury to in last we operations. fundamental both Company October year, products a our the I our in implementing transformation focused Company and am and report to Townsend began a leading have Manufacturing company, our that plants. quality last operations as pleased providing reliable, for and manufacturing key immediately since indicator at the worked Officer safe while Dick of and on plan joined manufacturing year

beginning hydrogenation improvements Texas, appropriate, process approach and utilization to where of since. reliably control and Pasadena, units field, our there of unit. see improved of outside to Advanced first is unit. week Reformer January second monitoring the run planning, the is are and This service to Our has capabilities accomplished been identical skills training reliable We're of and taking the in resources returning near-term manufacturing leveraging in priority an operation in unit distillation After through the already. the the in

to bill safe of annual XXXX without in recognize a financial of the significant running that reliable their Silsbee commitment Reformer want that and improve back and at will be and leadership business. we We the Underlying incident. end constant injury the the important, operations However, given will provide or the XXXX. safely safety reliability. $X.X an undermine and very driving but reduction in savings online I a nature rapid accomplish force Advanced executed to not results Reformer you as to doesn't able when it that our is distracting reliably as were million caution site without the brought I to change is incurring productivity

operations. than broader is focus Our

Joe company with to analytics to We the revenue that's activities. to us fair our up of and Joe from commercial pleased decision next changing the backing making commercial lead our join market, capturing culture the the our welcome value would decision side. are Tanner making, We're week.

chain we're On Long-term we're the subleasing customers decisions of opportunities costs, to relief old by such things cars to both our costs excess getting lower by cost doing logistics supply and investigating side, execution. lower from our taking contracts. short-term driven our costs and our structural on rail improve

Me that board. we also board Karen Twitchell, the announced who third Last refresh quarter in board a effort. replacing chair, Nick Carter, the remains joining had Our on since appointed was month, itself. is to board been member continuing the the XXXX, part of

as taking beyond, XXXX improvement we my that soon As possible. the and about greatest focus actions understand on as is drive think

XXXX specific forward-looking step not a giving will in in guidance, results up we I While we am versus confident see XXXX. our be will

wax criteria. most capturing we we their liability is Coast made U.S. on commercial path. The and but continue The We're upgrading according through to that our will performing of unit, Demand We'll seen respect our driven were I custom that confidence continues processing that of industry U.S. challenges opportunities do be the have and I existing market provide improvement progress Our sands This to expecting. demand. the Advanced the us volatile market believe think have petrochemical and are are specialty gives drive risk business. the getting reduce its under we the remains continue specialty Gulf have pressure oil are to assets, of from is our sands with strong. systems. the Reformer and to optimize technical byproducts productivity initiatives. and greater they for benefits value by business that to their design investments growth both our flexible. opportunities on we economy costs oil production and in out

assets, in there We’ll you bank to our apprised process competitiveness implementing reliability our safety to strong global of Lastly, way monetizing its committed products, the the we given challenges as of investors I've note our we with company. changes, to outcomes speaking this to share. our milestones remain Trecora our process. sustainable most with believe the and a high We're committed pass performance. we are plan and meaningful to the higher continue our leading location the the do and of complexity along We're with financial will keep been expertise. key a discussions return to AMAK. so. level the needed in quality mining that prioritizing minority overall Please of of investment that employees, more By and of and key

the a more Ahmad, turn over for our discussion results. Financial Officer, Now our detailed of Sami I'll Chief to call

Sami Ahmad

everyone. to morning good and Pat, Thanks,

and costs adjusted Pat CapEx our fourth forward, our completed a optimistic. rate performance. about outlook a And fourth moment. full for Overall inefficiencies expect largely EBITDA drove in per full our Having XXXX. and to $XX.X quarter multi-year year was run the more for I'll quarter we program, year more fourth spending largely plant million as CapEx approximately the We operational and going Our talk the poor $X million is is operating XXXX believe our remarked, capital $XX quarter be recently million us. higher major year. behind

for that's Additionally, cash going reduction. forward, to free debt we expect use flow generated

received AMAK’s end, partial we year of of approximately at shareholders. repurchase million outstanding from existing shares AMAK, from $X.X Regarding its its cash

it remains cash receive Our at XX.X% from XXXX. ownership AMAK AMAK time in uncertain we is and will at additional if in this

Let quarter in XX.X%. the us key the that XXXX was and fourth million year by our the of looking $XX.X now increase of way fourth of quarter in XXXX, million Slide begin full by compared X the can with the posted metrics you presentation. an on fourth and quarter $XX see Total revenue financial in at

revenues basis and negative quarter is about share Earnings increase For per a share an XX.X% XXXX. the of XXXX per were were which a diluted negative full the the fourth $XXX for XXXX. million, year $X.XX $X.XX on from full for share per year

time the charge of announced related about me for This adjusted to spend million at the in talking charge. fourth EBITDA. full and related EBITDA XXXX $XX.X Let XXXX and broken is this and excludes million. under for truck facility. was for income our figure executive you out a earnings EBITDA costs statement $X.X the excludes some the reduction terminations and Adjusted severance separately $X workforce restructuring Silsbee, charge $XX.X EBITDA year G&A in previously for was release. in restructuring million quarter this was Texas in $X.X the for the million. This million Adjusted was also for Adjusted restructuring

the that negative the a know, the are a third was byproduct approximately Reformer declined a with from along per prime volumes This Advanced at fourth in X.X negative the portion quarter gallon Byproduct the had by the ran volumes this outage specialty for $X.XX impact at $X you on $X fourth little in large in was negative of the EBITDA in a adjusted be by million gallon and of a specifically the driven gallons margin. a had approximately million compares Byproduct our produced, when quarter. per Reformer quarter quarter approximately bit, Focusing facility Silsbee the sold XXXX for margin and to QX as This largely petrochemicals quarter $X.XX XXXX. quarter million positive to of Advanced quarter. of significant products.

unit negative With normally, Reformer now see we to the don't expect impact. Advanced this running

an Additionally, we facility. arrangement the exiting processing in uneconomical Silsbee related to the custom incurred fourth quarter, at costs

full $XX.X $XX.X approximately XX% the we million million fourth approximately and for quarter was G&A was As $XX result, $X.X million for Included $X.X Depreciation million the expenses X% the the in in Operating with the full incurred for the for approximately CapEx respectively. quarter. for XXXX and of for the the year $X one-time and $X.X million for the CapEx for costs was million year end balance was approximately XXXX catalyst percent million quarter of quarter and approximately availability full $X.X including stood Debt the fourth of million revolver was year million $XX.X at compared full quarter the approximately out. additional and quarter for $XX a full year Advanced revolver million. XXXX. Reformer million million year for of the year. at as amortization $XXX.X in and with change a G&A $XX $X.X flow XXXX. was revenue million cash

to rate approximately tax looking forward XX%. effective be for we Finally, XXXX, expect our

some the an fourth with quarter, gallons sands, not first really in continue we fourth quarter third quarter of modest markets higher largely major with X.X% of saw some in Now let for one-time through compared specialty XXXX Total fourth business across gallons by EBITDA was quarter the have was products the and we and gallons $X quarter the that fourth this sales XXXX. XX in XX.X the by quarter for polyurethane. sales and petrochemicals. in $X.X Prime grew the fourth to million We the from quarter XXXX. XXXX the with the the XXXX. gallons XXXX. me walk the volume million quarter growth driven XX.X in product our segments sales you of quarter compares XXXX, million opportunity segment growth million had third XX.X the Polystyrene gallons strong, the XX.X starting XXXX. was demand we of seen metrics in of key but for $XX.X oil in the full and market million In million. EBITDA quarter the largely million in sales year benefited the in quarter into oil XX.X polyethylene million was segment in which gallons year-on-year, fourth Prime the petrochemical of the was the In and third uptick driven volumes million of sands. specialty in first

of logistics include mentioned expenses turnaround the freight facility. expect of announced very managing Both the and initiatives Silsbee we quarter, which I are the As drivers these limited first the the on fourth custom costs We're costs, the reduce processing and these which the to decline Silsbee Silsbee year-over-year. at In increased from byproduct in costs approximately focused, operating the Reformer related in arrangement on $XXX,XXX reduction adjusted focused facility QX and and in to outage the of EBITDA to at previously, to beyond significantly on and facility. workforce, of at QX touched the above the impact exit big the Advanced margins have the Pat quarters. was

custom The our waxes, waxes the specialty negative quarter facility to XXXX of for Texas is segment, $X.X which on fourth million specialty Trecora EBITDA Pasadena, Moving segment of and up million in increased had based Chemical in a million quarter at year-on-year of volume as year. an of X% sales full the was X.X from the – from EBITDA securing this the X.X% to successful additional in while XXXX. business had pricing Growth average higher $X.X wax and volumes Sales allow in business mix. feed reliability The constrained and decline year third to the wax sales end distillation. while grow to wax improved due supply benefited issues seasonal hydrogenation XXXX, continue continued cost will QX processing includes with custom largely were sufficient to operational supply in in QX was at to a By to processing also profitability. be This us facility. factors. wax supply segment have TC at by feed we the

underway costs distillation quarter including $XXX,XXX. hydrogenation the up increased that's units. B related million the due expenses maintenance, turnaround fix to were X% from unit. XXXX. higher XXXX operating to Plant will with As equipment about Operating and to challenges In TC has and mentioned, TC XXXX and $X.X approximately first of $XXX,XXX Pat revenues at from significantly have expenses XXXX, the in labor and efforts TC for

Trecora AMAK. of the million and losses year XXXX full $X.X in quarter million XXXX. of in reported for to AMAK of equity $X.X on approximately the Moving fourth

This Importantly, of million concentrate the second as before expected and in in to is million on improved a tons compared $XX.X operations, update XX,XXX AMAK completing for net XXXX. AMAK in and life this result of mine. million dry of profit is XXXX. had of in process a in and sold compares depreciation XXXX $X.X to $X.X revised amortization the in reserves AMAK metric XXXX the of quarter. XXXX

we're prepared like mentioned, to I'd this at AMAK. to discussions time, major Pat in our bank concludes a help as With remarks. to in operator for ask the sell open Additionally, And Q&A. that with global this us interest call investment up our the

Operator

Securities. from with Our Instructions] line comes question [Operator first the of Tanwanteng Jon CJS

now is open. line Your

Jon Tanwanteng

Thank you taking for questions. morning. Good my

Pat Quarles

Jon. morning, Good

Sami Ahmad

Jon. morning, Good

Jon Tanwanteng

the a you you Sami what they or in you and Pat, see a the oil first mentioned quantify didn't risk basis sands in customers? didn't sands seeing maybe lot did XXXX quarter that QX. that that you from the from you're activity oil year-over-year from Can kind of in

Pat Quarles

Yes, I to read region. the and that’s demand that talked in politically pressure down press we've on I turn trying some about think the in production with what about

and of come We are also costs opportunities to manufacturing the have they're have their as more these effectively that as – operations crude – become prices and a doing lot on down, efficient. just focus

we'll be XXXX, oil of year. I I doubt the for flat verses by the sands, end if in look XXXX So, year-on-year volume

oil in [indiscernible] or to we'll think so be down sands the I X% market.

Jon Tanwanteng

can of you XXXX? revenue remind was as big in portion And me it. it Got how a

Pat Quarles

but don't revenue, I percent disclosed to we've large products our that fair it of think of of it's it's terms in a prime say portion Jon, business.

Jon Tanwanteng

what you it. quickly replace basis? the custom have got regards that you you on that processing exited, can pipeline? Okay, with how With big sales And the a customer arrangement was in to

Pat Quarles

Yes.

we better So, kind understand Jon, have example we're of doing. to in an what of candidly, opportunities it's the company

engage really with think really realize our to total justify as I weren't were getting. perspective there from that the were wasn't the we we we deal the a on ultimately cost forward dug into impact see You as associated customer numbers, to And in we challenge, chain won't going revenue I revenue think that an because value enough whatsoever value that that for adequate that continuing. coming

service effectively a the So unit had exit. relate that on continue the a to the we we fourth one sense and primary on to for And the The see in going conclude. agreed erosion/corrosion was planned of effectively was that why make going. you that discovery It that quarter given was turnaround to we in. the of significant costs to unit, quickly drivers

Jon Tanwanteng

of be it. a at you then different got point? And client turning arrangement Okay, will projects to around some to that

Pat Quarles

an unit. an hydrogenation it’s it's – unit It’s capability. got interesting with Yeah, HDS

uses either So we both. potentially think externally the there and could it or site Silsbee on working for be internally at we're

Jon Tanwanteng

are I Okay. Sami, in trends chart are not you I'm this in expecting you what sure the time. usually noticed for you've But have a XXXX? seeing? been and input presentation that pricing the at What

Sami Ahmad

pricing? On feedstock

Jon Tanwanteng

Yes.

Sami Ahmad

uptick feedstock tracked sharp obviously, in seen as mean, fourth gasoline Crude number It's of pricing the referring an saw where Belvieu specifically you I Yeah. gasoline. of last in decline in Mont Brent in roughly feedstock to basically fourth pricing back the and We've over a quarter more part natural that’s was know. crude, weeks. it early And quarter. I'm the to you natural

most the – are we've piece. going in There the you lead know part, side. formula on on lag non been some formula the about to able For things the

spot been the giveback, little able maintain to we've that. but side, bit of we've had most On of a

Jon Tanwanteng

coming Okay, XXXk on of without on? cause and heading for are you'd I the then, that just down think and the – those these you're some both do great. operational them. costs you going South And there Hampton into mentioned see Trecora to When QX extraordinary side, both finally kind neutral extraordinary of fully

Pat Quarles

normal are maintenance. a I the planned same fairly units, That's – referring of alluded Silsbee. TC at extensive one discovery of to think extraordinary. budget. two We are the of both. a not completed. work, Those the well on I'd at turnarounds particular have it out just amount and the units turnaround course, one did of and went really That's Those in on in variety you're Silsbee. fair of you So to three say of time, the unit case then operations frankly,

back. impact supply, our So bit but more ability all but to It we were or we customers now complete. coming cost a bit late incur that that we're a is didn't did anticipating,

that the we of first remaining so, activity And and costs. the about that for completion maintenance quarter numbers real the reflect our uncertainty not talked for

Jon Tanwanteng

to then the your from volumes this final full starting one reformer quarter? And be plan do me, great. through byproduct you Okay, just running

Pat Quarles

correct. That's

Sami Ahmad

Yeah.

Jon Tanwanteng

Okay, great. Thank you.

Operator

next the Reagor of line Partners. ROTH Our Joseph from Capital comes question with

Your line is open. now

Joseph Reagor

guys the Good and morning taking questions. thanks for

Pat Quarles

Joe. morning, Good

Sami Ahmad

Joe. morning, Good

Joseph Reagor

items. two just So

on you a expect first The guidance us bit but with level on gave going you give guidance the capital little more what can changes. some one forward, guys restructuring expenditures a or be G&A to G&A on you all

Pat Quarles

Yeah.

was – carved so, the why that that So that out related we we and separately. obviously, costs showed that's to

can level what material side of really no in appreciable there's were Within executive change. a certainly expect staffing. you no on change from on think I is G&A, the mean, there G&A I replacements terms headcount.

ought than cost adjustment, rate. that of kind just other to and So, you I that assume living of think run inflationary

Joseph Reagor

Okay, a gaining volumes? quarter? going something And fair seasonal forward give your enough. us revenue more at that went kind is more that one-time down, should little volumes you're you we up. color And bit but pricing a The on then Or that look can wax wax the is went of power?

Pat Quarles

Right.

then bar the third fourth or to line Joe, So the interruption we first of quarter, in the trend relate we wax probably at the in year, bit quarter in chart, it's feed. volume the pulling a the quarters, last you're the the down chart Chemical. couple wax Remember of little in seasonal. were then it. on a half of issues Trecora had supply with And referring And inventory to

a is quarter year much than higher, much but not fourth you XXXX when that XXXX, ago, along look level. at higher – So fourth actually see that you'll quarter

so continue structural secure feed, will nothing there. to grow been able is help that more us to wax there We've So volumes.

sales are talked, upgrading we've we mix. As our

you change and of So price PVC that higher the see year-on-year the into more value the and in HMAX some markets.

business the well. of is So our doing wax component actually

Joseph Reagor

up. I’ll turn thanks. Okay, it

Operator

Sherbetchyan from with B. Our FBR. Riley next of question line Sarkis comes the

now is Your open. line

Sarkis Sherbetchyan

taking thanks Good for and question morning my here.

Pat Quarles

Sarkis. Yes,

Sami Ahmad

Good morning, Sarkis.

Sarkis Sherbetchyan

the back just on unit. of come want So kind to Reformer

said another So you're at of reformers XX margin that? Do you gallons also or what's sold volume I is million operating gallons think processed expecting? of assuming be the XXXX. fully XXXX, XX and I byproducts, And that we you for then uplift in expect have gallon look some the you to if over percentage million

Pat Quarles

Sure.

is the We quick yes. fully of capability all to course So the do of byproducts. have upgrade answer our

what fourth getting through difference is between them the market, which naphtha higher quarter the versus were them the selling to forced value. the do really taking into So and distressed we as in depentanised reformer the

have expectation that for So is XXXX. the we

thus reliably As running we've really quarter we said, throughout first far. been the

If performing how a been you we've a conversion twofold. gallon. it's maximum production and uplift The get are Reformer. essentially the the kind and are toluene been ability bit to is terms the really $X.XX markets of below a at drivers Aromatics of look getting, of benzene One there across price our in

unit the I'd side, On production the is performing according say to design.

there. have we very active. appropriately. new to catalyst – It's learning course, Of It's control we're it performance And hot. in it’s very

we're that year. some improved target continuously I a have rest we say of forward expect piece through big to go which we the seasonally would it. benzene we'll which and improve $X.XX has at today. not was improve as pricing kind element, we opportunities the And of the think to our kind it's of But would gallon, I optimization per as go the of

Sami Ahmad

The is feed take one run and you contraction there it the that I volume is thing that reformer. would when go, add through to the Sarkis

you we through it the So when selling naphtha, run quarter, And there's reformer, in would the the fourth a feed. depentanised form as volume be you then Aromatics. normally were the contraction which is

take quarter just volume and annualized the fourth it. can't you So

Sarkis Sherbetchyan

be? you could contraction might the And what discuss

Pat Quarles

not yield, Reformer feed. I the that in yield, it's around common from scrape Advanced you somewhere XX% mean It’s aromatics. get yield, you're XX%, because yield converting volumetric mass chains Yeah, these volumetric into

Sarkis Sherbetchyan

then some moving potential by I installed company has updates $XX Can for Are The us? projects, was range incremental from in the still annual newly million provide valid? Got the maybe on, outlined those it. kind $XX targets XXXX. to just And right. presentations, you think EBITDA of million prior

Pat Quarles

We've can make thing given my has we kind first focus driving better, I months, to been am now think, I on really been of everything the that of lot a XX where XX, three to yet talked here in that portfolio really this not I'm and drive Sarkis, getting commercial assets. number. gets our about of talk reliability cleaned about our up. down to ready

in really yet capabilities what too execute we think to I be on to have demonstrated much our in. there's

So our to is and I'd just say right now focus and drive every pull we to available continuing on lever have us. XXXX

Sarkis Sherbetchyan

helpful. then reduction regards Thanks to And That's COGS for December that to the versus of cost the portion can reorg, with relates from $X.X that. think you maybe was what breakdown I G&A? million

Sami Ahmad

no G&A on operating construction, so was done, It's really work Yeah, the balance Reformer had of We Advanced and completed related we costs that. to plant there's really and kinds it was – to capital labor, project in four had be sheet demobilized. and costs. it's the then associated, the when

So localized that's related all that's what to. at And it's Silsbee.

So both it's plants. not

we're is annual about So the an as seeing And we benefit disclosed Hampton in that reduction as expected mentioned, on And just cost obviously, million here the first quarter. South $X.X the the benefit basis. facility. already Pat it's of

Sarkis Sherbetchyan

rest the you. I'll Thank Great, line. take off

Sami Ahmad

thanks. Okay,

Operator

the next question comes from with Morbelli Our G-Research. of line Rosemarie

is line Your morning. open now

Joe Catania

This for question. my taking is on Thanks Rosemarie. Catania for Joe

building out the another and recall what's seem hired I sometime up well noticed, Tanner dynamic at team? to I this Or just there? mid-last for a you or is Looking being there Joe this Is discussed that the the commercial for year. as this release, heading you hire replacement commercial.

Pat Quarles

replacement. a it's Yeah,

Joe Catania

Okay.

Pat Quarles

Humby. Yeah, during the He quarter. fourth Mike left you're recalling

Joe Catania

but sands give it little you the talked bit can And previously you. I've you more you've detail give color a grow here, about pull from a bit to that? I thank know demand? everything bit Okay, it on a little to oil guys more going on bit. like and looks Can little you little expect it's is back this heard now a demand

Pat Quarles

appreciate Sure. we markets and Listen, volatile all I dynamic. think extraordinarily are oil as

it's by you and sands in what's I of crude, on and kind pipeline economically. today shale production that oil production of America pressure of take out of the about put think and They're has the particularly development, of constrained off pressure they're think also the other feeling going you If as on channels impacted oil Alberta. that know North

in net and WTI not posted net backs Texas. or the they're improved I materially on lower So Oklahoma we back. see their a that numbers mean,

that's driving they alternatives parts driving manufacturing. efficiencies And economically to they're other more efficient mining them in of consumption. on again, their focus any ways it's since for effectively in become good just at and looking one secondly, to the like production consider of that their processes solvent continent. So part And manufacturer, and is

So expectations of mean, as into long-term reasons, want I I – about for those I some caution to this, as gotten I just raise just growth.

Joe Catania

Great, thanks.

Operator

line comes with question of Our next from Dezellem the Bill Tieton Capital.

is line Your now open.

Bill Dezellem

in gallon Thank you. and of in per in net from your you that was repeat what was that perspective you QX? Sami, said the please the gallon loss would the numbers a byproduct terms QX the what's per profit

Sami Ahmad

Bill. Certainly,

script and repeat to go of I that. happy just that will page be my me to Let

was that $X.XX basically the quarter what the was fourth a the quarter is for prices third The margin talked and portion sell the So about full aromatics of quarter, when per the ran per unit what it In margin decent. but byproduct the quarter, the of were I negative mentioned below $X.XX at we to feed, for the large because gallon. ran, not having in gallon.

So that's the you Delta referred that saw to. Pat

Bill Dezellem

Understood.

of times you. to gallons take thank And we're that that to it $X.XX multiply correctly, you'd sold gallon the you this make X.X math Okay, million sure per byproduct and just doing between the and what not you had byproducts loss. into ends providing $X.X account profit? as million otherwise And of alone, a loss differential the on the up have taking breakeven should that

Sami Ahmad

Yes…

Bill Dezellem

of loss and byproduct $X.X multiply upgrade wouldn't a million because it gallons times And did of I do you the we do have to and also take run the through say you Advanced when Reformer. correctly volume hear the that roughly $XX XX%

Sami Ahmad

a Yeah, the that's reforming yeah. contraction there's volume of process, result

Bill Dezellem

fourth sure that you I'm quarter quarters the had have product than volume. you more in to also clear had make that more And Okay. then past volume byproduct you that prime in because

more essence actually against product at that byproducts you prime sense a a worked sold So good had in thing, having you normally higher loss? volume then a what's in you because

Sami Ahmad

that's Yeah, a good point. actually

we and So a going things that products One were prime on. there more byproducts. had was of couple more generated were so

the unit Secondly, out contraction reformer rather with than the feed running, reformer selling margin negative. coming was unit the and product the the you volume obviously not severely were and of that's the

Bill Dezellem

money Whereas growing you as in losing prime Advanced opposed to have product – the you'd the did QX? make byproduct in volume running, Reformer the actually when quarters money as then as success future opposed as also to you on

Sami Ahmad

Prime fine. And to were prime clarify, Reformer, thing kind zero. historically, it reformer, of you I margin around to mean – the All look Yeah, right. it's when One it's products. at products just didn't the bounced Advanced margin the negative yeah, of prior byproduct.

was the it positive, mark zero. in what was around on Sometimes on it'd be bounced other going negative fields it depending and times

Bill Dezellem

And Tanner thank to Joe are this what Great, then, you've you. see you out to that wanting point? not up Pat, of had

Pat Quarles

seat. Well, okay, be clear, we've stepped when I nobody to this had in in,

there's it's opportunity of lots So – here.

and negotiations planning how service with I kind dramatically understand on the I've of where procurement. experience one our to to well And chain improve think what foundational as to drive as as know the pieces we an to then is organization, why. found we're those with commercial one customers outcomes kind into of providers that going supply is course of need of

about similar So way. with in We very the Joe think I've worked a past. in business

have. our we we will, experience successful business drive case respect will and and business with the with a apply we that analytics are to acumen, will understand to you negotiations the and different outcomes go if to We where and start

So that him I will forward looking I'm Joe know to week. starting and next bring

Bill Dezellem

the that past what see described? either the What's from in opportunity just lost the the or forward you of magnitude you opportunity

Pat Quarles

that have got of example the course number accomplished mind. would the of significant which a it's is car we for modestly of reduce for instance, reduce an And of rail ratability renegotiation customer There's our in – you, volume one a do logistics a fee. don't things. size fleet. our the should to and commitment I be the going able were us Yeah, before but of also better We us Joe but gone our this variety to arrived, my to the allowed of We we've upgraded through bearing. to be cost this represented allow allowed that contract, metric we've

but three value that's the opportunity So don't that, the improvements see contract we improve everything if a that us really engage through through takes detail to that analysis set as we're forward. of for it's put I bunch time we where want time we of of as changes path. and capture. our will contracts, to right as least next of the and of month sit This or partners the And to supply contract make, the our through we expectation need business at here about three going to it roll we to at changes. as we key you a month level elements goes our a contract go on that had all chain make by go think the

we'll see value think I really good it. through creation

Bill Dezellem

of time the course not potential potential of over profit per – there that millions there of the Pat like also of incremental year, quarter? profit are over millions immediately but sounds dollars are

Pat Quarles

Yeah.

next to on positive gain where a dollars, Millions don't that or improvement beyond out frankly. already make the the significant set a continue said I I there now short have in number right just thing the path. don't disagree making for ahead. We're earlier, very expectation to and the We're opportunity not to I contributions I've that weeks momentum night I'm months this As quarters in set starts to want should and better. of quarter. that and we an horizon that had going that go

Bill Dezellem

both. thank Great, you

Pat Quarles

Thank you.

Operator

question Sacks with line Mitchell Asset the Slam of Management. from Grand next comes Our

now line Your is open.

Mitchell Sacks

back And business? Is forward at hoping – we my of and so about Is that I businesses. unprofitable quarter? and of achievable? still quarter that been fourth business. around look kind kind the of teens mid parts this could Hey, was kind do kind kind you It a operated and – area last in in the having last gross looking the part. on of add margin like you bit of for byproduct One of has question lower margin that how you've give hands And tolling be to that get gross margin is gross historically. going that at? backs of than I you to for historically I kind should both of trying year just in upper guys. looked into sort at an I'm think if the in – the two Is a

Sami Ahmad

Sure.

for So, much we're not in a escalation year, Mitch, relates but things right. been today. certainly these year, And it the requirements. customer that fleet over maintaining reflects the element I around been real headwind only think straight the on that was true of company remain if relates the you have It reflect calls think the of about costs, a logistics we kind that us escalated the fleet size in our today, back that's to talked costs meet past with freight topic of made costs to really on the last last comments haven't I have and just to they we and the for

to of improve need back get margin. opportunities gross I type up to high us to present think to teen improve all those that and

Pat Quarles

And in add the million substantial describing is We so bridge in Mitch, of – to piece impact costs you annually. to that, those that costs reduction. terms on, the cost one-time so there. and the the portion said of XXXX, the Prior of of $X.X were weren't those just terms were to other

structure had that unit. item facility. we've or really And that the operating cost grown affected difficulties is has because TC costs the on of the The third at Pasadena really HD has

costs down at up the across both looking we're and so, line And sites.

Mitchell Sacks

sort get to about this higher that that similar we wax. fee you're to going able And cost then business having to the wax of does in, to come higher grade South ever Hampton How be business, business? margins think but in Okay. business? margins of gross are And do respect sell your you're that the to with gross

Pat Quarles

Mitch, think between the businesses. those have you on I my in ultimately difference for I margin so math the don't two in gross head, Yeah,

also having source the can driving of – – these position us those feeds also increment, a success supply we on more products costs sourcing higher higher our just value higher right. feeds, the cost think in we're reliable diversifies I that put base. because It supply are justifying the

we're to inventories lot think I upgrade, also saw heading not ability value. that necessarily drove and think but our volumes, a our I directionally last on year So of high high you focus

out mix So that come well. of as our will we move forward as

Sami Ahmad

drive be in really to really Mitch, TC, wax that's or processing business, going the And – however way at that's other margin, is EBITDA thing growth. been And gross it want revenue to our going you custom to the look at margin adjusted lacking.

had haven't costs we've the So revenue had commensurate the XXXX, certainly to it in related we custom but on processing. growth

custom the wax prongs the on and both processing side it's So side.

Mitchell Sacks

unit you we then profits with with can respect custom transaction? a HD the are market can it having you of where point close to high processing, expect to how individual that to the each And you make confidence degree to on that make that

Pat Quarles

and be What the it's We we past now be it's operability of higher Yeah, of we and to incrementing unit production the just continued to call load value production, have say need binary of back working the I it. it's I just selective And on we from do going straightforward the now a about no would use we're processing not beginning now actually the returned of service unit or it's the to of in at working the that our working relatively turnaround, go that that it's really point I'd perspective, had But over and improve higher at up matter think an to already turnaround type it complexity longer utilization today. way ramping with but successful as what is base custom – first be thinking prior to do up forward. type we products from we've because this it just the to is hydrogenation products. quarter. But as across unit quarter. the we're either it's

Mitchell Sacks

So you starting be terms let where get very differently or demand me, ask are a through? to I of question the still in are real to or in say low capacity? state selling Are would flow then you you guess, maybe at either

Pat Quarles

to continue ability We’re of in lots the rate got to that. We've low drive today.

Mitchell Sacks

demand there is for And that?

Pat Quarles

There kind of the that really word, unit as demand is. right. conversation different often think We a as different different the well not custom could monolithic they wrong need project, about we maybe characteristics. with each product across be have reflects, have and there as a Each customer again with that in talk service. demand, But it's demand and we – processing internal is needs

given again, as our we selective we be a good then get us for improve, what's today And capabilities complicated. So to more fit on capabilities. our have can

Mitchell Sacks

Okay, thank you.

Pat Quarles

Thank you.

Operator

Our Wolf of with next line EVR. question comes from Joffe the

is now line Your open.

Wolf Joffe

Hi.

Pat Quarles

Good morning.

Sami Ahmad

Good morning.

Wolf Joffe

volume oil volumes sands in in XXXX? result X% to in are for XXXX, year-over-year the should total If that down what Southampton's impact growth

Pat Quarles

chunk uses. a seeing our the sales bit is would end we're other expect reasonable can big I growth total down of a volume be on And this portfolio.

in briefly unit. that with along polyolefin in in the U.S. have the last of Gulf associated a Coast industry As continues. a major We my investment I business unit mentioned chemical startup had weeks. comments, And we

out they their increases. demand production, to line As that continue

slightly down, think, be speaking. will year-over-year, So flat I to it generally

Wolf Joffe

higher profit you achieve prime versus volumes quarter gross on fourth QX? per Did gallon the Okay. in

Pat Quarles

did stock touched yes. Yes, that we declines, I on mean, margins our so improve

Wolf Joffe

are obviously in Southampton Southampton volumes assume generate Again flat like reformer QX volumes sounds now the how and it versus we is flat reformer if can much working, And Okay. QX QX? the assuming in with network. EBITDA

Pat Quarles

it's the started quarter, reformer it design. first to early in The said, in and we working January according up

Wolf Joffe

put Well, numbers I would around help your is expect if given obviously and guys that it improved actually could shareholders financial where some this. think, your leverage you say you you performance,

QX, volumes your again, reformer can versus in so Southampton flat just QX EBITDA the how And we generate with if that networking? much are assume

Pat Quarles

about of quarter, think the you if we about talked the So our so $X components fourth adjusted EBITDA with in kind about earlier, start million.

arrangement that's to going the the over us. reductions so of running, improvement. been behind benefit to We're $X we've roughly significant have that’s – That was Silsbee hurt $X.X custom quarter. began upgrade exit byproducts of million so we that get the that million about this we're January, us versus in With we at reformer quarter-to-quarter the million. to And the us the have going right, processing talking in which about, fourth $X cost executed downgrade,

take north in rate and rate run those million $X drivers, first from just quarter. So three run million $X gets if to you the you that of $X almost million

that, talked we $X both and that's sites that offsetting Now turnaround about work have million. roughly the at we

you if those just quarter-to-quarter. numbers, million $X.X that's So take headline about

Wolf Joffe

Thank you.

Sami Ahmad

to Yes. weakness see that is that we as oil also strong and were going in quarter to adding in particularly fourth And sands. related then we're to product prime mentioned the volumes

So adjust that. for you would

Wolf Joffe

there. My occur? the operate supportive for by you last Understood. the question said not that units earnings in call, published third fourth the quarter old reformer, Thank the that did presentation would quarter to assistance your is accompany XXx the

Pat Quarles

around Yes, really that what has that site. did really occur, did, doesn't contribute. but meet reformer old that very hydrogen helps our economically balances that Effectively the it But little contribution. us it

Sami Ahmad

much, it's And capacity reformer. new smaller much the wise, than

Pat Quarles

let's be to say, I right. Yes, candid want with everybody,

miss, think, didn't what versus happen a byproducts So it think, fourth I it downgrade out, reflect was get miss upgraded. expectations part that the that quarter converted, because going to on as in were get back think didn't the those reflect our that call I didn't was if fully you set we on I was turned a

Wolf Joffe

I the working, it reformer old was somewhat, have been upgraded guess would right? if

Pat Quarles

It has is. to And to where the low very conversion conversion creation is Aromatics. Aromatics value

value. much drive really doesn't it So

that's driver So get the off hydrogen said, for an balance it, as not results. but I to we the some side, of economic

Sami Ahmad

– had gallon look feed. floated margins or above sufficient historically, the was plus reformer when we at minus. around not per old you There byproducts there was If uplift the for $X.XX

Pat Quarles

talk its a there's past the of about is fourth Aromax just available old was not confuse ourselves commission. Unit It was useful right. us maybe be clear, in the there, then Aromax out sometimes We then That to old and Unit The there's even. to And reformer, life. reformer quarter. we

Wolf Joffe

Understood. your help. Thanks for

Pat Quarles

Yes.

Sami Ahmad

Yes.

Operator

CJS from Securities. of Our next question comes the Tanwanteng John with line

open. now is line Your

John Tanwanteng

from quarter? you do bank debt how Sam, me. Hi a more couple in the with guys your covenants and stand just

Sami Ahmad

Yes, so a availability And as the quarter, of said we bank approximately group. ended in had debt we on of in past, incremental the have terms very the we supportive million. revolver in $XX compliance I've

And with work discussion some and contact more regular we in with them. are need we our relief, in partnership in We banks. the future if

John Tanwanteng

the to leverage, or do the giving end earn to by expect of flow? where terms Okay, you you cash a net for ballpark of year what just and generating debt great. in expect And then be

Sami Ahmad

X.X guidance, Four going you to of you get times is broadly give debt-to-EBITDA. in John mentioned de will to the we've we'd times leverage. Well, a target. Where to that. company we I'm But say to around has where need is speaking is what to not like terms not X before to know I We want times be. as

another get down denominator grow those of to debt really terms to also going we're come of to that's So And to going going ways. we're and mean in achieve. debt levels. EBITDA the turn that's in both EBITDA have of I we reduction terms hopefully Pat to to pay that as said,

John Tanwanteng

what’s your Okay, year? just great. maybe in to help this tax me bill cash be is you Can expected

Sami Ahmad

cash – we NOLs tax basically made depreciation. from capital because should minimal the be and we investments that Yes, have the tax have I mean,

So it be shouldn't material.

of million positive and cash I can flow the it thing The as will free run number. on $XX rate things those on calculation the a do kinds you is and mentioned, EBITDA you CapEx a interest basis and is I to be effective flow cash get Our XX%. rate, to I mean, thing standpoint, as add that mentioned, free only a from positive. like be I'd should – other

John Tanwanteng

Okay, great.

to that that received I – expect this repurchased relative market, Finally, the shares your guess, had AMAC when year? color in any especially earlier was thoughts value you on that evaluation might the you you get to the expect or the,

Pat Quarles

saw to is is the that's that mine global we why due the going of work process And the its its where mine investment management how performing, And we’re that's define ago, basis of had really calculations headed weigh be through continue encouraged the Yes, go our their on market's going this bank around to I path improvement the expertise profitability. going business. we diligence defining recognized expectation year we change to and throughout and and value of frankly value. they is really that a expect therefore right. process turned how production That the We're by seeing life value. for operationally, the positively And and think, it's on of they on view that's and We with think about AMAC has is wanted itself about last its mining. years their consistent in two to to year.

John Tanwanteng

amortization, profit cash depreciation a and good flow you number for mine? that was before from net proxy It the Okay. gave

Sami Ahmad

for flow, It's cash for – good cash yes. flow good proxy a

John Tanwanteng

Thank you much. great. so Okay,

Sami Ahmad

That's why gave I number. that

lot. a Okay, thanks

Operator

that concludes closing call turn to for question-and-answer session. I'd to back Pat And the today's remarks like Quarles

Pat Quarles

months. I thank the to find for their themselves – to want I everybody October. that and everyone over grateful still today work our since these last done joining and really for I'm employees attention to keeping thank several for want for questions. I around them also it detail your and they've safe

earlier I how I to As want said I'm And it with manufacturing to that's foundational companies them. should run. and thank pleased

coming XX concludes this at XX. in on and And to And for be New Annual our Dana our Annual Orange Chemicals one-on-ones the March forward the March in Operator kind after California with in meetings. Conference Specialty engaging of Gabelli’s addition, ROTH G.research XX. I'll available further remarks. shareholders, Conference progress at for XXth on County, And look we you for be As be I'll York XXst week updating on I'll available months. Point, in presenting our next

Operator

concludes program. gentlemen, your today's for participation conference. you and Ladies the thank in This

You now may disconnect.

Trecora Resources (TREC) 7 Mar 192018 Q4 Earnings call transcript