TREC - Earnings call transcript Q1 2020

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Operator

Good day, and welcome to Trecora Resources First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference is being recorded. And at this time, I would like to turn the call over to Jason Finkelstein from The Piacente Group, Inc. Please go ahead, Jason.

Jason Finkelstein

good and operator, you, morning, everyone. Thank the call. to Trecora Resources conference earnings XXXX quarter first Welcome release distributed afternoon. earnings of The was the the services financial close after markets yesterday over the wire Pat Presenting call Officer; addition Sami on to and Chief Officer. today be in Financial our Ahmad, Chief Quarles, will Executive President also Corporate the available question-and-answer remarks. session Groves, our be prepared Chris which Controller, will for follows management’s

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

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

statements Trecora’s most recent differ subsequent Form are SEC, as Forward-looking actual others quarterly company’s uncertainties those filings cause including in on the as could results materially detail greater XX-K with well risks discussed to Form and reports the in involve projected. and annual that from These 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 on by slide Web For a and non-GAAP CEO, site, President available Trecora’s is reconciliation turn The after company’s markets a the afternoon. close the At see of of accompanied measures release the earnings yesterday and financial the results, please to the I’d financial time, over GAAP this financial that’s to call of non-GAAP Pat definition issued Quarles.

Pat Quarles

improved quarter on disciplined improvement these and cash from position allowed million, those uncertainty value yielded debt set control, a million Thank shareholder disciplined enter flow on period call. priorities you, from focus results cash $X.X for our a Jason, free launched flow first reduction. participating cost the a steady today’s stability. and the XXXX. continuing this execution and process relative strength onset with $X.X of operations us enhanced meaningful global and all in first to has company’s XXXX, XXXX Delivering the on increased operational reliability, priorities morning At and of we quarter Through to good a of earnings, of of driving

net impact XXXX the benefit prices the quarter from from negative CARES enactment due the to operations, EBITDA a quarter. tax First Consolidated excluding feedstock Act, earnings million. operations from was of to during continuing falling was adjusted from income breakeven the continuing $X.X

quarter, During to all the overall uses end strong. was demand

to was it feedstock during of lower, While sands Canadian unusually first mostly due the oil to gasoline, did have demand export volume dramatic reflection significant We certain to in and in year-over-year negative related impact the our high our demand. a timing was quarter quarter. a of natural earnings primary volumes of XXXX other fall the to

units the well revenue, quarter all across the Sami to $X in as TC, that in multiyear quarter. margin. during improvement reliable in impacts EBITDA will discuss, efforts unit, better this growth costing quarter. over at the for This of gross resulted fell I’m the evidenced to inventory natural As which million related had We including $X.X Chemical quarter, hydrogenation first negative gasoline to have approximately resulted of at operation Also quarter. TC’s volume the pleased million the ran in XX% due Trecora performance and mention by of essentially

demand was custom across byproduct plant quarter wax reliable a unit. portfolio. had our with we and strong both processing wax This the as projects addition, hydrogenation well from further our growth B customers new suppliers by In our enhanced strong as demand at from and existing feed the of

our number and projects new Turning on of to the in growth in delivering portfolio. current launched our towards projects increasing first quarter, we continue initiative both work to the identified

gasoline projects two since natural supply the completion extension of the announced an added additional of project, our last have We and contract. quarter

to $X approximately Using million a On about the realize year’s the we last supply contract million Odyssey this baseline, of agreement extension from Oil another earlier more savings Martin business this of year with expect projects save than year other announced each subsequent $X the add related and and $X expect years. the to million and to in and savings average savings between contract, portfolio. as $X of we this cost to million in logistics

of our the liquidity its let Now sustainability the and COVID-XX in and the health and perspective. The sheet and the remained and in a company. In our turn operate, of where of we the business to dealing me same. balance those our reliability safety have priorities of people COVID-XX on impact and pandemic, our our people, from assets stand we the with communities which our impacts

We measures people. to aggressive have and taken our protect early

To in protocols work-from-home nonoperational distancing social we implemented we to roles March At early all manufacturing been to virus safely continue and of in and any infections execution. impact settings not sites, customers. daily assets visitors able work have relocated with to date, and Specifically, our have no we temperature needs employees our for maintain have screenings into workforce. meet the experienced our and

consistent take authorities. the the continue as cautious situation we develops, CDC with as and local from As well World recommendations steps to Health Organization

global impacts customer manufacturing any operations, chain experienced supply order and fulfillment material thus far. Our not have

is packaging markets our This end sectors geographies, demand for higher However, in we partially melt demand for essential are uses. polyethylene goods with as home for components by and end in in durable reduced hot seeing deliveries. being emerging being foodservice, adhesives expandable and polystyrene and nondurable offset such products in certain particular,

present conditions unpredictable, we likely market near-term remain Although believe to demand long-term and are underlying our intact. uncertainty remains

sheet. maintain our steps important also have We several strong balance proactively taken to

million. claims. refund with in and of $XX an Economic of addition the the million This we caution, end partial Aid Act, first million from CARES borrowings sale expect the share proceeds quarter Relief from Act, cash the in of AMAK our abundance to $XX.X brought million our the Security Furthermore, quarter we out and or Coronavirus approximately third sometime tax of In at cash revolver. $XX from the pulled to consolidated in $XX

$X uncertain Program May Paycheck continuity also in the Protection the approximately from receipt PPP, million workforce We or will times. which of in support our of anticipate these

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

Sami Ahmad

good and everyone. Pat, morning Thanks, to

me of then cash Let debt with first our and liquidity, quarter flow, will performance. and I start a discussion discuss

the year-end the mentioned, first we cash had compares at Pat end to balance million As this of quarter, and at $XX.X on of $X.X the million sheet XXXX.

from $XX.X previously As of ARMICO. gross March, million we to announced AMAK sale in share proceeds received approximately the

$XX revolver an stacked borrowed a on of caution also cash. out abundance We the of and million

of additional we have addition, our million In further $XX revolving facility for an borrowings. availability on

of service, Total the XXXX ratio million cash from Total at from quarter as and debt to approximately about was At operations Recall flow million. at receivable year-end the additional for against prices. flow We balance received of the the falling QX $X.X receivable related quarter at million. end in at operations, The compared million our quarter to the at Cash first $XX under at borrowings $X.X flow last and revolver of end revolver of CapEx we course, insurance in and including was is end of we to Our which feedstock $XX year, bank to the less $X.X April, the reflects debt Fourth benefit the end recorded $X.X this improvement was was the April quarter of grew event insurance flow from net year. first XXXX. $X.X quarter the increase, a of cash our of at $XX October debt $XX Hampton for cash at first cash of largely million, weather from X.Xx May. approximately our million the an at $XX XX of million, agreement million leverage last cash total of $XX approximately XXXX. the March X.Xx stood was Free million. year-end was the at on $X.X million. approximately payments in South continuing liquidity, the borrowings. sheet million cash $X.X an the end quarter at compares end continuing payment a first million stands our of from operations quarter, $XXX and million plant. approximately Balance revolver, million realized this availability

to out current environment, this cash continue later working the claim. to capital receive manner. manage payment final We In smaller we and effectively insurance expect disciplined close to this quarter flow a the in

our all are credit exposures expenses, discretionary the closely our trade we In of of managing assessing and addition monitoring risks. aging for to customer receivables potential

safety million in in on CapEx projects. compared year. the quarter the CapEx, also X.X and We’re X.X for well and first XXXX asset as environment, fourth while first the was reliability quarter million X.X evaluating of million last to health approximately maintaining quarter as focus

operating to paid. quarter expense in Recall financial loss quarter as in diluted share AMAK result Net $X.XX in from classified net new in loss totaling year income tax of tax of five-year from third per ops Net or the or rules, On to changes taxes credits and will share as the new an million in claim quarter certain and share first of for of $XX the approximately of investment the for per prior refund a the quarter fourth the to payments, compared Act. year This a on million the enactment was thus to disclosed moving the first recover and from quarter. result Now for million our $X.X tax a limitation April carryback XXXX. our approximately continuing approximate income from business income million and operations in laws held-for-sale statements. $X.XX third million of refund first deferral earnings that operations is results. $XX.X CARES net Act we loans to our in the social approximately XX, continuing of interest The per the the that X.X filing claims benefit discontinued in and businesses. or expect and as now receive reflected of income discussion to quarter or – diluted tax income and of $X.XX $X.XX diluted continuing changes grants share for filed ops allows million X.X per includes a CARES we net which the security last quarter XX.X an diluted we certain last losses, to

approved to we loan as the PPP liquidity. mentioned, million, further for $X.X will which approximately add our Act the Additionally, for Pat under were CARES

this later on funding loan receive to this expect week. We

in from excluded are securing banks and forgiveness. will that profit termination until be this our Gross the from of debt such quarter our facility other covenants financial in amendments in or million first XX.X% appropriate quarter the gross compares and debt in last fourth XX% a gross profit $X.X the quarter was profit This XX.X% percent revenues. to as of year. total of first margin margin of We

quarter interest higher expenses. insurance costs EBITDA $X.X primarily in QX reduction million million million negatively in X first $X quarter by with the of sharp cost an were was million. petrochemical from approximately continuing specialty in second is This materials were rates. million debt EBITDA ops X.X X.X inventory with to impacted our relative XXXX, for fourth higher to decrease year. for lower and for mainly first X.X million for due and resulted quarter earnings XXXX in continuing compared and first expenses The the the volume increase Consolidated million combined with decline, This $X.X compensation to for quarter expense fourth rapid interest the of adjusted with expense decline the XXXX compares the taxes, year. was half First last approximately quarter to was prices Interest year. the first compared million quarter feedstock million X.X last The property impact. first X.X business. quarter along in in reduction operations due quarter G&A XXXX first of last quarter from adjusted

also QX petrochemicals. million through The X.X XXXX. ops XXXX mostly had in million in let walk the continuing the year. gallons our million compared compared X quarter of demand first of in me specialty specialty and pandemic. reduction were Specialty from in million quarter some with petrochemicals We first quarter we demand to export the fourth of sales. million first of attributable when quarter gallons to segments, XX.X quarter Now the XX.X reduction gallons export million the XX.X the first in XXXX, quarter million to the saw in timing in volumes March million first in quarter in was in gallons gallons which XX.X high in the certain volume from for Adjusted gallons $X.XX are in fourth of last prices, of product oil into of gallons unusually the the minor starting first in and volume demand gasoline compared attribute Prime natural fourth quarter in and million is XXXX quarter Byproduct timing volume EBITDA you to to to last prices, XX.X business $X.XX XX.X X.X quarter and which declined year. gallon gallon was quarter quarter. per feedstock. was first sands XX.X margins about we of petrochemicals than Byproduct fell and benzene to sales the toluene million fourth the tied XXXX. faster Byproduct per first

about Let’s on first impact falling gasoline of the natural feedstock prices quarter talk results.

by you mainly $X.XX average price earnings presentation dramatic X natural of at natural and higher natural prices gasoline feedstock site. during know, decline with gasoline results price over approximately natural per which, inventory the Web course, the in the the of that of gasoline the and was course solvents on gasoline of fall quarter. specialty to may natural of price with due March, the for is the highly the gasoline of had per our had of South impact December, throughout As correlated shown of Hampton. continued end use on in gallon. a feedstock it end as we at of $X.XX steady in posted quarter. oil, At gasoline is collapsed is The consumption our The negative cost course declined market April gallon, to The market of price producing trend price the per fallen current This the quarter. page the first on prices gallon. crude for $X.XX Natural QX XX%

working feedstock prime flow. positive the In during the a addition, Both which and byproduct margins, impact. also approximately on quarter, we had Obviously, product cost negative cost these cash inventory total down the had had factors in inventory and drew unfavorable impact $X.X of capital million. a the this of fall an to cost was pricing effect

year. or Moving first quarter at and XXXX from in a approximately or of improved from generated in of XX% the hydrogenation Custom we our first the $XX.X year. to last supply first feedstock million on quarter and had customers. X.X to and the from own Revenues based X.X Trecora the of fourth million $X.X The a processing $X.X TC was XX% specialty quarter which first first Pasadena, custom quarter million to the absence quarter million adjusted EBITDA is compared X.X in waxes wax the the as from Texas, million of in revenues, revenues a last year. had negative approximately in increased Chemical specialty fourth volumes nearly waxes. the of operations in which waxes first segment, volumes quarter million sales continuing maintenance pounds facility compared were the X.X million other from X.X in wax increase the our increased interruptions product sales included quarter. reflect to unit in as operation quarter due strong throughout increase in and processing The year. million $X.X Specialty significantly revenues prior Wax XXXX quarter. of last well million increased million the increase quarter, distillation QX The supply first quarter fourth or million year that $X.X and in outage quarter first quarter from $X.X of approximately last XX% reliable sales and

overall of units, did number the TC and hydrogenation reliability reliability equipment to site. as significantly improved we the the recent of months result has a As in of that and enhancements its operating made distillation the

believe near-term downturn, maturities balance debt liquidity, sheet we of focus great we keen and uncertainty management. a ample on cost have no As and period enter with business a we strong economic a into

like line your we’d open for the Now questions. up to

Operator

[Operator Instructions].

first We question have line our from from Tanwanteng Securities. CJS the of Jon

line now is open. Your

Jon Tanwanteng

questions morning, and Good quarter. my gentlemen. Thanks taking for nice

Pat Quarles

Thanks, Jon. morning. Good

Jon Tanwanteng

Maybe down between on expect and oil and construction, a start takes? And sands break and you into up and custom you by all April that you’re be strength net seeing if then overall packaging, volumes May? March where then Could the or down the sequential in maybe to during down and given puts processing? exit it breaking basis, weakness you

Pat Quarles

touch right? continue as portfolio. demand shouldn’t it tied in So our such clear-cut applications, to is and U.S. you nondurable product our perhaps think be And we surprising, our to And Essentially along uses. polystyrene some Yes. durable right? demand both, or of all, if our I’d fairly end uses, So Sure. two how as polyethylene say relatively of it’s about assets end stable run would is expect. except one course,

the poly-iso, this expect volumes uses. again, has we an negative, steady. If about net lot to to And construction. decline a strong would see we ramping up to packaging EPS, for been polystyrene, end that commercial still second where talk clear. in So be Similarly, in normally that offset be tied remains construction-related to be We the season would again, their food quarter.

We’re seeing that. not

are some but up at just a through minute, – let level this the uses. in go I’ll all We me end declines. aggregate seeing And wrap I’ll the

use as turn important And near the applications, rubber, oil well domestic as us fairly sands. automotive, both sands oil to while And like And rubber been then export is dire, in tied again, term. producer to their that circumstance we’re Another down manufacturing guys large significantly in – to synthetic has as quickly. you large these market. is units know, don’t the tied

talking really don’t pandemic. so is expectation. demand projects, them quarter attribute that consistent second a – we’re down that happening the a say in and we as I it’s So been customer is sands I risk. demand efficiency anything is our wouldn’t the to implementing What oil to in about about we’ve in year that certainly is unusual But our seeing yet, although prior for with

level, know in all in We rolling saw the U.S. we very this Europe impacts. through if you minor that started aggregate the take So Asia and March, it at started and

Asia impacts saw So demand down as some supply they were our on chains had initial consumers in Southeast turned up. polyethylene that back

but So that economic was really it related driven, to pandemic. was the

in actually So frankly, that that’s returned. And was late March.

driver. course, seeing May, started is, of of down April. really the think year demand, So a business, In that’s not And of our demand. in the really little we’re terms which domestic I in in bulk bit our another that

melt to some solvents look delivery hot across business. unlikely home the in have we’ll that like an from adhesives. are waxes, it on box But So that a it’s TC we perspective lot not has second end-use applications, in as quarter a we reduction to today, home furniture At exposure U.S. but again, notionally of – see XX% applications which course, of the in strong, type the split exposure we the between, to have also corrugated demand

Southeast.

So that’s downward to the second going probably – in I some pressure would expect feel quarter. we’re

working small the mitigate is We’re have that. wax that the to we’re business. we’re – in The we business the context frankly, benefit in of overall

that perspective, also. on So not we’re And net from see find then down it’s processing. or we custom an But hard alternative whether underlying to working lastly, can product. demand markets for

uses We end like have else, fairly diversified. there, of everything portfolio a

this custom would of what overall construction ties. ties polyurethane And into the I their application some less, – of in XX% seen that as solvents have it and Some some again not of bedding point, would it’s something end level automotive processing. not type But uses, reduction see the at to I which say home is we and expect. we have

Jon Tanwanteng

Can you expanded they last now, comment and the about bit inputs byproduct reported. if in from QX know QX in little color. talk point? Got were also? at you seeing you, QX you’re a what I Maybe spreads time That’s benefit on Patrick. on where you’re you it. the have spreads from commented expecting that this Thank lower great

Pat Quarles

Yes.

second challenge to So be us quarter. the for actually, that’s going in a

me that. So talk through let little of bit a

selling So our cash selling right? in in payables, as our goods us. essentially that that if were as a you about, to a our said prices, So payables we hurts of kind cost and market talked it falling long cycle lag, at look have we of we’ve relates coming

see prompt with you a imagine So two market there the maybe deck for on see if of decline gasoline say a today actually our that or profile that continuation the can for was instance, days our natural in lag, in ago, the graph in I feedstock portfolio. we falling you overlaying, should you

continue quarter second prices. there negative is means in the to feedstock that to what with So be impacts respect falling

speak have So should as of And of we hydrocarbon little going about in bit that on today. the kind market. still I what’s headwind general a

pricing related byproduct month. as appreciate, last six been the the And highly we’ve market. all and So toluene seen, on saw We you last market weeks, fuels complete in the value four the frankly, for those our fuels of as posting what’s disarray weeks. to is WTI tied five, end going in to are of at the has benzene, the negative

So to byproduct materially are being April. now point right values negative in of the compressed highly

markets that’s us. they going a to rebalance always do. as be for What expect I So challenge these is

In fact, in all we’re we’ve seen a watching remarkable hydrocarbons. change days five past these as

from XXX% gasoline yesterday. up days. WTI price in $X.XX seen days $X.XX daily really is the five We’ve go to So over ago last trading two natural

So how very we’ll this facing. valid and have unfortunately, I tell just and in will appropriate our if give correlation actions for be to you gasoline going co-product can’t how to you, we volatility you I benzene strong have quarter. on inputs and a we’re influence correlation We’ll play to going have of uncertain we’re trading to it’s volatility values just control around, through. I the which the Brent. that gasoline is have can on taking hydrocarbon just WTI impact urge remainder manage watching, our But time to volatility an will look is through [ph] that that natural you’re a watch on to forward But really the

Jon Tanwanteng

that loan point? much door Thank to or getting returned forgivable And much for how of PPP or needs some is the keep Sami. you’re the of in finally, cash at and kind the How it. then just grant you. be you Got that CARES a can

Sami Ahmad

designed Act workforce of Well, our our terms all benefits, headcount that. as of to first is all, loan is continuation support CARES and wages, in of the

going that where money go. So that’s is to

that. criteria things. in rents terms of are to and those the piece, be in for In going are used of examine payroll. terms we’re kinds like things of to terms has much forgivability other Jon, and There utilities allowed how uses There of

along have our a determine we’ll amount. to through later and So auditors analysis with what’s forgivable quarter go the that in

Jon Tanwanteng

Okay. Should a it we consider at point? loan XXX% this

Sami Ahmad

I we think We the consider a amount don’t believe that’s for conservative of to amount that now. scenario, but is qualify is that know will XXX%. what right forgiveness, significant I

Jon Tanwanteng

Okay, on just in Thank it. and got you. buyers? any AMAK the of there’s And any then, final Pat, had sale if if you been of the rest comments the change

Pat Quarles

month, weeks Those that beginning piece, real due and were couple course, Sure. course, in shutdown countries able in at And appreciate. a No We to all shutdowns didn’t update, into to the this March, We we’re Both as remain shutdown. April. of actually ARMICO end of come situations of of you the have rest the going early on and buyers the the close largely updated haven’t the were region. other the in Ramadan. ago, Saudi changed. Dubai and GCC now of

from really the June, I and up economies. they anything begin we Middle And get are don’t East. So in Ramadan open to return will change to into quiet early things expect hopefully until just really their back

Jon Tanwanteng

appreciate Got the guys. it. I answers. Thank much, very you

Pat Quarles

Thanks, Jon.

Operator

question next from line from our We have Partners. ROTH of Cap Joseph Reagor the

Your open. now is line

Joseph Reagor

guys. morning, to Congrats year. Good good on a start the

Pat Quarles

Joe. Thanks,

Sami Ahmad

Joe. Thanks,

Joseph Reagor

the I of had. questions most So prior asked caller

two things. Just maybe other

but luckily. higher any volumes XX% waxes was voice color Was pricing XX%, spiked my your about that priced lower struggling with Wax down quarter-over-quarter, well. as that you about it could Sorry back of I’m there? volume give other or drove allergies up.

Pat Quarles

Yes.

call it’s input a listen, because think mix But are day, and our environment. watching all for relief looking this costs what we’re suffering they customers effect. of in mostly all I every

is we. So everyone appropriately as pushing and pricing, on aggressively do

point, think I pressure erosion about mix. more we’ve we seen But that particular at a So this pricing significant face. was effect but it’s in don’t

Joseph Reagor

stabilizing of during And Okay. will pricing up April of catch just think expect following pricing it with out With now prior and of somewhat WTI’s you guys stuff the possibly impact wash be that feedstock quarter? have do this the compressed – or there you’re some of on that kind where falling of a from rebound, bit then during occurred will going you the some caller. to kind margin price do to negative opportunity to the May or an

Pat Quarles

So And that if first days would second we about in you the ago, but quarter. at from we we pricing feedstock two they’re less. impacts some million quarter, have talked tell in still X.X were I the the negative

So negative. sequentially, it will be less

convoluted to these hydrocarbons So anybody’s out improvement. the it’s sequential that all are how But it’s means you’d an have in guess candidly, in price going term. math, near for – the

So to tomorrow. as was a $X.XX $X.XX gallon that yesterday, well, said, it’s day XX% to the jumped be – I from – up yesterday. going we can’t over effectively and yesterday And I where tell you

us. – element a it’s structural for will it So

day if good higher through it’s that returned return new crude is it’s the kind in world. then prices. to crude Ultimately, that will of bad, pricing, a or prior with flow P&L will norms believe it the day you every But consistent Joe, back through. to whether of So – we just honestly, flow

Sami Ahmad

see mostly April benefit the a Joe, of cash, cash in growth prices. you fact the that side, I and on reduced driven But did terms the that as mentioned AP result of by was lower that really the

Joseph Reagor

thing. one fair And Okay, enough. then final

right materially to and now valuation? that to up level. have inventory byproduct negative at some any You build Do less an least values that mentioned at for they opportunity ability point a or somewhat sell wait are a reached negative at byproduct you of guys had

Pat Quarles

timing. it we don’t two second have the particular answer we play We market have think on So don’t storage wisdom components that answers; calling inventories physical prices. nor hydrocarbon for inventory the is answer do capability physically no. frankly, we the short to is any And

inventories been have moving for $XX at by $XX. didn’t we build be would So maybe then crude, inclination and would those it seem to trading around. us effectively prudent My goes to it inventory,

a don’t to I just feel for take. smart us position like So that’s

our through run efficiently just low run So then volatility and lean the portfolio. we and and try cost, manage

Joseph Reagor

fair Thanks, enough. Okay, turn I’ll guys. over. it

Operator

Bill is from line Tieton Dezellem of question Capital. from Next the

open. line now Your is

Bill Dezellem

Thank you.

that all, come to want higher-priced be contract with there customers, How think but due pricing. we was would that how of impact. that $X.X of into I was or to would do the feedstock million million we due much then into lag, inventory X.X to First that which and reduction to understand a just prices of inventory? that experiencing is of the your back lag chewing your understand feedstock do much the work natural you And

those please? So two you out if that’s can break correct,

Pat Quarles

million X.X we million impact. X pulled was about X, volume to of price/cost Roughly down and it, that, balance was Yes. X.X call the as volume

Bill Dezellem

would you me contract Sami, impact? that be comfortable lag a as with And characterizing

Sami Ahmad

Yes. on it is. overhang not really cost on The That’s the – the this layers Pat overhang, AR side. difference. cost/price but not driver – AP Effectively, versus mentioned are

Bill Dezellem

Okay.

take here, I’m off where maybe to when this and would be welcome me offline but So me I have cut off so correct my it that understanding, you’re and to feedstock’s lag. feedstock feedstock and that goes favor in is pricing up, correct? that goes when when supposed down, is work your Well, goes against lag actually work to down there a you here,

Pat Quarles

this it of Think No. way.

sales about portion lags – contract right, before, have the are significant a formula. on of we talked we’ve on So our so sales

And prior as in gasoline price. natural both also inventory price. physical have a reference reference our month month system. of we feedstock the reference that’s then those the many a a as formulas to well And combination prior of on they actual So the a side,

we’re So the lag, you goods think that means those those things cost price. reflects aggregate, talk your sold about. that’s When an basically adjustment older about the what we than about of in talking price in product your – when

price than market, your market that’s newer So your pricing. reflective is a in pricing of a falling feedstock product

that’s we why lag. So

long impact that a in falling get we of and We’re the market. payables negative

Bill Dezellem

Understood.

did I’m you sorry, And – cut so I just off?

Pat Quarles

No, in system, bit is a go it little noise the ahead.

Bill Dezellem

So price. if prices the simply feedstock would you if catch up the away in this volatility because which prices lag then of level, from would highly market effect the newness but see this were the seems with unlikely were go flat then the flat, market, feedstock feedstock given

Pat Quarles

April. in effect recognize effect That’s because in right. we a still it was that But we falling had April, negative – had

talking current negative recognize quarter, we’re within the in April about starting some effects. we’re with so just Just already

Bill Dezellem

Right.

for closure any in for the in go before your on that there to you you potential gold and if squirrely the your the When And of Guyan sale? kind at the the favor direction. does gold I’m clarity. sale, Guyan adjustments given are mine? going a work the that jump production And to the Thank may second delays of begin mine of production begins a the rest Okay. then close off

Pat Quarles

Sure.

capital project they’ve been project, get year gold continuing. approved frankly, can’t technical They resources anticipating they for launched So summer. complete by work. had this it’s to that the last to the certain on Board some external Guyan course, by that’s a project, was and And their because completion were the in early and of impacts ability Saudi

in delayed looks contemplated, of just project but some time, our that’s a good it and be That course, delays. the So period some for progressing negotiation. of not all have to But was they extensively, project. it’s

– a that formula. It’s say not we and wouldn’t have negotiated So I price.

the So price. is the price

the thing of the the third pay expect by buyers this closed – the price we them expect We end quarter. and to to we expect get to

Bill Dezellem

Great. your Thank you lastly, talk the would product about you. volumes? build prime initiatives And volumes, especially to then sales

Pat Quarles

of kind think which this I’ll that talk really last for way funnel our we’re value is launched driving the Sure. quarter, about shareholders generally. we growth about we in as

work on really So and we requires, over thoughtful any value, feedstocks. execution frankly, that to that focus deliver it time approach encompasses

a Martin that actually ago, year That’s say, in effectively. a saw started, You the contract. that negotiation

our You that got underway of got really last announcement negotiation in underway saw that which – again summer. Odyssey contract, the

some Other pieces processing and customers do So assets to new engaging against bring at where projects, we’re in things custom portfolio are the TC are at time business this lead in Hampton. them. with that to these have South

So are will there utilization both are sites. projects the of higher have. for where we assets we some type in application projects drive There

tend visibility and that team, and properly both resourced. leadership of proper to in very the to to we hit the and some That’s comprehensively bring But company we it of repurposing We’re funded so in looking cases, that’s executive they the Those really the assets. priority nothing the cycle are across times. the the projects want think at, kind get near going long term. to get

value to outlined that we’ve can deliver So we there. continue in the

Bill Dezellem

then that meaningful you’re sale PPP tax refund are anticipating, of you anticipation down. forgiveness and some expense have the pay you’re That’s your fair. the closing with Thank the of Sami, the interest And of then going you. loan, What the the line to remainder debt anticipating that will reduction be?

Sami Ahmad

Right.

down, – On the mentioned, items none believe I in probably that’s premature. terms you of that just pay in a this little of we fronts, hand cash of number these think don’t have yet. debt we now a So right

business I decent meaningful think we you’re happen upon business, If terms in expectations depending debt. pay to at these liquidity. things look cash on they’re much we decide choose a and flow And we’ll conditions, depending right. amount as And from have absolutely down. when to to, the business supposed should of could But pay down how we’ll all upon of circumstances it.

Bill Dezellem

this interest question are could you I the large actually projects your one thinking that spirit about. pose equivalent of in expense. of the And the of the be

Sami Ahmad

One way is didn’t the about question, the we until quarter, to think Bill, expense look revolver at first March. you if interest the do borrowing

rates. million So in quarter or first balance call the expense that’s of roughly, $XX is also we that’s that debt it, of reflective so. the had a current interest And reflective

So of terms that’s place to good probably in start projecting. a

Pat Quarles

caller. We to should on probably move next

Sami Ahmad

Thank Yes. you, Bill.

Bill Dezellem

Great. Thank you, guys.

Operator

the Next Grand Volfing from line of is Erik question from Slam.

now open. is line Your

Mitch Sacks

of a was questions sense prices I wax price discussion asked. And do Hi, – that of you discussed bit. have average your you the petrochemical been to you much is any have also price question higher falling Did the of mix guys. Most of discuss had on – Mitch. how impact? if just has from This And each? with One sales. can

Pat Quarles

we to higher we augment costs. So products been path our have before are a about on on-purpose supply talked – other with feed that our

of are part because have products higher those also higher-priced as costs. that So they migration,

And brought the in you’ve had driver quarter that the other of sales a So basically seen. we that just that of is mix some effect the average down. price

cost that polyethylene that buying make wax are quite our move most if have purpose. for volatility of the these because doesn’t on you’re Our you instance, to feedstock toluene, byproducts that see feedstock much doesn’t

lower That’s remains in our price their That cost sustain fairly had to their that that a competes feedstock pricing. our market making come on-purpose product But significant a see guys we’re a pressure with lower has the to at under down continue So Those been certainly we lot. carve – reductions yet of niche. we day because can price – are we’re polyethylene, haven’t us. point niche niche out have. reductions costs customers for every point but and because why price mentioned a kind our we under pressure I have this for

Mitch Sacks

Okay.

quarter it in of least sustainable at wax seem first that level at in short be to level looking for sales, was the So terms a term? the would the

Pat Quarles

are In uses. the near to term, end tied certain we

channels quarter, the in other qualified on those those get established you other I that And applications counter in outlets demand. all turndown the loss done what can the we’ll if pricing trying maybe demand. our that’s down, turn can’t But or other step at turn mentioned end than of mitigating of mitigate that get [indiscernible] customers. You to for lower reduction furniture, But find it to we applications. this because our exposure is, like uses, to dime. when had don’t we’re I know this but the volume of mitigate so

Mitch Sacks

second with custom the do then And to processing. has question Okay.

of into that the you move processing and in of units forward distillation have moving? nice visibility near custom to how you’ve terms a continue that’s do had expect future or hydrogenation terms the Do you So running. got in you as

Pat Quarles

Yes.

really benefit So we’ve we seeing in finally talking combination good the right. turn had – of of some operations been the a about,

the So frankly, site, supply interruptions end great. It that end hydrogenation wax from circumstance use, use, that others. was which in some was including particular consistent had across with the also corresponded

an had of we So volume. to a lot capture opportunity

Some related continuing, frankly issues, not but of those supply chain the is its are us. having own disruptions to

think opportunity So customer interested. the business we think in the level The across see first did remains the we that quarter quarter, had that second I there. that with, same We unit. project of don’t in you’ll the the remains

it. the to expect I don’t So you’ll in that see able business level optimistic same against that continue we’re revenue But drive we’ll quarter asset. be second to the against of

Mitch Sacks

you. Okay. Thank

Operator

We have from next Caramanidis question Carl of M. line our Kurt Hennig, Inc. the from

now is line open. Your

Kurt Caramanidis

minimum a your or minimum what to a work this Hi, wrestling guys. type actually XXXX oil they’re keep due still think the that is make. meaning dropping you trying when of of here in have that you’re to – kind price, you killed on Back markup, it. XXXX, you’re margins point to of you crashed, the have with to but in on factor up some that prices went just I can’t getting Is

keep to feedstock? just can’t You unlimited for dropping

Pat Quarles

Yes.

not So in candidly, what happened XXXX. I’m familiar with

Sami Ahmad

Neither am I.

Pat Quarles

Yes.

that So we I specifics can’t situation was What of in describing ourselves really comment you’re that. isn’t on today. about what the find a

Sami Ahmad

to thing to prior accounting. on LIFO switched is that One XXXX, And they was company FIFO. this inventory

thinking be could in terms. you So those

Kurt Caramanidis

fact quarter-by-quarter but that correspondence. fact just the about the margins they other at wasn’t levels, One timing, to lower – just It due fair more about way in was so enough. that that’s price the up the the That didn’t much question. the went all gross drop the

to revolver? going keep the the to borrowed? keep that XX So You’re you’re going from million

Pat Quarles

defensive are brutal. the where very I I’ve in resets quarters. as can and would We know Personally, So unfold going coming, market posture. through we before they to today, characterize been how be in market frankly, a don’t is the these really the and listen, guys, months

deal Today, difficult So we’re posturing I’ve ourselves the learned but to very always we’re frankly. over circumstances, tough it circumstances. worse, get with can at years

our ultimately, rewarding we time, expectation strategy So be the other place same sheet through is our is balance a to or company Xx is as listen, think sustain remains we time. we lever as than and around through remains to is the And to through the the tough shareholders Xx then right and be same, a think mechanisms available. should with that our which respect appropriate we’re taking less our a that every that get we action cash

all think become remain those options. down. defensively going I So today until postured settle to things But things we’re

Sami Ahmad

but on seen what up, a it days impact unfavorable that And good from I as in the with working earnings has cash hydrocarbons add that’s turning an is we’ve would last standpoint. capital to few that

I’m in that a event not position do way, other we’ve a is number So the we but over to that in saying defensive working the seen last it have good the weeks. could have prices go spike. collapse capital of

Kurt Caramanidis

And on QX. Have comp Board firms run in hands try to went I are where to on that noticed at all of looked comp, the that? other in Okay. said you at you I deck, you it’s are up comp looking short at if number noticed or executive a –

Pat Quarles

appropriately And So, test the are how we in we the market, surveyed we’ve always we as market. context we the reward positioned. everyone think of

our and and loan that’s One us of participating saw things virtue maintenance important of pay in is the organization the their of and PPP us by and to you the our people benefits.

workforce. our support And looking So significant remains might consistent the today cost really on that’s to PPP while reduction to want opportunities, in program, for our because be the of continuity we’re the normal which circumstance the is priority. we path be a intentions we with not of that really

Kurt Caramanidis

luck Okay. the Thanks. quarter. Good for

Pat Quarles

Okay. Thank you.

Operator

At this time, final I like back the remarks. turn would closing Mr. for Quarles to it Pat to

Pat Quarles

and people. I to on on want Trecora call acknowledge today. tragedies our want and thank pandemic individuals caused this world. you the the also your Listen, to interest May. families participating has I around all for you, the hardship the acknowledge Thank to in

drivers have road the every to our customers day. We on delivering

Despite and helpfully. customers of our – impressed been our changes and really many needs coming of ability remains company. it’s work, these the present current It’s challenges, of with our – a them These the and I their I’m their of work-from-home with company for thank the in candidly needs focus unique to staying safe, their the have safe, keeping balancing in maintenance operators hard and the sites them all morale very very, around same. to of our needs family. We deal our meeting these those our situation, diligence with of organization been dedication, sustaining challenges

come We our site who continue our operate. the to those prioritize the which of people, communities in safety to we and

the our operations growth advance We’re our productivity improving reliability to of focused and programs. and on

create shareholder sustain saw last excelling these and believe challenges us through will dimensions in current we value the we significant year, As time. over

you And thank Thanks, for May. so participation. your again,

done. We’re

Sami Ahmad

Thank you.

Operator

you Thank Thank you, today’s and presenters. participating. gentlemen, for concludes conference Ladies all this call.

disconnect. now may You

Trecora Resources (TREC) 6 May 202020 Q1 Earnings call transcript