DELAWARE | 75-1256622 |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) |
1650 Hwy 6 South, Suite 190 | 77478 |
Sugar Land, Texas | (Zip code) |
(Address of principal executive offices) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.10 per share | TREC | New York Stock Exchange |
September 30, 2019 (Unaudited) | December 31, 2018 | |||||||
ASSETS | (thousands of dollars, except par value) | |||||||
Current Assets | ||||||||
Cash | $ | 9,157 | $ | 6,735 | ||||
Trade receivables, net | 25,497 | 27,112 | ||||||
Inventories | 13,285 | 16,539 | ||||||
Investment in AMAK (held-for-sale) | 34,090 | 38,746 | ||||||
Prepaid expenses and other assets | 3,726 | 4,664 | ||||||
Taxes receivable | 182 | 182 | ||||||
Total current assets | 85,937 | 93,978 | ||||||
Plant, pipeline and equipment, net | 190,345 | 194,657 | ||||||
Goodwill | 21,798 | 21,798 | ||||||
Intangible assets, net | 17,551 | 18,947 | ||||||
Lease right-of-use assets, net | 14,364 | — | ||||||
Mineral properties in the United States | 562 | 588 | ||||||
TOTAL ASSETS | $ | 330,557 | $ | 329,968 | ||||
LIABILITIES | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 10,203 | $ | 19,106 | ||||
Accrued liabilities | 7,270 | 5,439 | ||||||
Current portion of long-term debt | 4,194 | 4,194 | ||||||
Current portion of lease liabilities | 3,247 | — | ||||||
Current portion of other liabilities | 1,011 | 752 | ||||||
Total current liabilities | 25,925 | 29,491 | ||||||
Long-term debt, net of current portion | 85,143 | 98,288 | ||||||
Lease liabilities, net of current portion | 11,117 | — | ||||||
Other liabilities, net of current portion | 906 | 1,352 | ||||||
Deferred income taxes | 16,646 | 15,676 | ||||||
Total liabilities | 139,737 | 144,807 | ||||||
EQUITY | ||||||||
Common stock‑authorized 40 million shares of $0.10 par value; issued and outstanding 24.7 million and 24.6 million in 2019 and 2018, respectively | 2,472 | 2,463 | ||||||
Additional paid-in capital | 59,202 | 58,294 | ||||||
Common stock in treasury, at cost | (2 | ) | (8 | ) | ||||
Retained earnings | 128,859 | 124,123 | ||||||
Total Trecora Resources Stockholders' Equity | 190,531 | 184,872 | ||||||
Noncontrolling Interest | 289 | 289 | ||||||
Total equity | 190,820 | 185,161 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 330,557 | $ | 329,968 |
THREE MONTHS ENDED SEPTEMBER 30, | NINE MONTHS ENDED SEPTEMBER 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(thousands of dollars, except per share amounts) | ||||||||||||||||
REVENUES | ||||||||||||||||
Product sales | $ | 59,111 | $ | 68,613 | $ | 185,933 | $ | 198,881 | ||||||||
Processing fees | 3,604 | 4,803 | 11,308 | 14,382 | ||||||||||||
62,715 | 73,416 | 197,241 | 213,263 | |||||||||||||
OPERATING COSTS AND EXPENSES | ||||||||||||||||
Cost of sales and processing | ||||||||||||||||
(including depreciation and amortization of $3,254, $3,813, $11,611 and $9,480, respectively) | 53,148 | 66,574 | 167,036 | 188,139 | ||||||||||||
GROSS PROFIT | 9,567 | 6,842 | 30,205 | 25,124 | ||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||||
General and administrative | 6,401 | 6,327 | 18,532 | 17,216 | ||||||||||||
Depreciation | 208 | 205 | 629 | 592 | ||||||||||||
6,609 | 6,532 | 19,161 | 17,808 | |||||||||||||
OPERATING INCOME | 2,958 | 310 | 11,044 | 7,316 | ||||||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest income | — | 5 | 5 | 26 | ||||||||||||
Interest expense | (1,211 | ) | (924 | ) | (4,111 | ) | (2,617 | ) | ||||||||
Loss on Extinguishment of Debt | — | (315 | ) | — | (315 | ) | ||||||||||
Miscellaneous income (expense), net | 74 | (28 | ) | 330 | (67 | ) | ||||||||||
(1,137 | ) | (1,262 | ) | (3,776 | ) | (2,973 | ) | |||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 1,821 | (952 | ) | 7,268 | 4,343 | |||||||||||
INCOME TAX EXPENSE (BENEFIT) | 238 | (236 | ) | 1,412 | 854 | |||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | 1,583 | (716 | ) | 5,856 | 3,489 | |||||||||||
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX | (1,002 | ) | (893 | ) | (1,120 | ) | (531 | ) | ||||||||
NET INCOME (LOSS) | $ | 581 | $ | (1,609 | ) | $ | 4,736 | $ | 2,958 | |||||||
Basic Earnings per Common Share | ||||||||||||||||
Net income (loss) from continuing operations (dollars) | $ | 0.06 | $ | (0.03 | ) | $ | 0.24 | $ | 0.14 | |||||||
Net loss from discontinued operations, net of tax (dollars) | (0.04 | ) | (0.04 | ) | (0.05 | ) | (0.02 | ) | ||||||||
Net income (loss) (dollars) | $ | 0.02 | $ | (0.07 | ) | $ | 0.19 | $ | 0.12 | |||||||
Basic weighted average number of common shares outstanding | 24,717 | 24,483 | 24,689 | 24,397 | ||||||||||||
Diluted Earnings per Common Share | ||||||||||||||||
Net income (loss) from continuing operations (dollars) | $ | 0.06 | $ | (0.03 | ) | $ | 0.23 | $ | 0.14 | |||||||
Net loss from discontinued operations, net of tax (dollars) | (0.04 | ) | (0.04 | ) | (0.04 | ) | (0.02 | ) | ||||||||
Net income (loss) (dollars) | $ | 0.02 | $ | (0.07 | ) | $ | 0.19 | $ | 0.12 | |||||||
Diluted weighted average number of common shares outstanding | 25,053 | 25,175 | 25,077 | 25,138 |
TRECORA RESOURCES STOCKHOLDERS | |||||||||||||||||||||||||||||||
COMMON STOCK | ADDITIONAL PAID-IN | TREASURY | RETAINED | NON- CONTROLLING | TOTAL | ||||||||||||||||||||||||||
SHARES | AMOUNT | CAPITAL | STOCK | EARNINGS | TOTAL | INTEREST | EQUITY | ||||||||||||||||||||||||
(thousands) | (thousands of dollars) | ||||||||||||||||||||||||||||||
June 30, 2019 | 24,715 | $ | 2,472 | $ | 58,920 | $ | (2 | ) | $ | 128,278 | $ | 189,668 | $ | 289 | $ | 189,957 | |||||||||||||||
Restricted Stock Units | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | 96 | — | — | 96 | — | 96 | |||||||||||||||||||||||
Issued to Employees | — | — | 186 | — | — | 186 | — | 186 | |||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Issued to Employees | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net Income | — | — | — | — | 581 | 581 | — | 581 | |||||||||||||||||||||||
September 30, 2019 | 24,715 | $ | 2,472 | $ | 59,202 | $ | (2 | ) | $ | 128,859 | $ | 190,531 | $ | 289 | $ | 190,820 | |||||||||||||||
June 30, 2018 | 24,311 | $ | 2,451 | $ | 56,365 | $ | (61 | ) | $ | 131,022 | $ | 189,777 | $ | 289 | $ | 190,066 | |||||||||||||||
Stock Options | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Issued to Employees | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Cancellation of Issuance to Former Director | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Restricted Stock Units | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | 75 | — | — | 75 | — | 75 | |||||||||||||||||||||||
Issued to Employees | — | — | 550 | — | — | 550 | — | 550 | |||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | 159 | 41 | — | 200 | — | 200 | |||||||||||||||||||||||
Issued to Employees | — | — | (2 | ) | 1 | — | (1 | ) | — | (1 | ) | ||||||||||||||||||||
Stock Exchange | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Warrants | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net Income | — | — | — | — | (1,609 | ) | (1,609 | ) | — | (1,609 | ) | ||||||||||||||||||||
September 30, 2018 | 24,311 | $ | 2,451 | $ | 57,147 | $ | (19 | ) | $ | 129,413 | $ | 188,992 | $ | 289 | $ | 189,281 |
TRECORA RESOURCES STOCKHOLDERS | |||||||||||||||||||||||||||||||
COMMON STOCK | ADDITIONAL PAID-IN | TREASURY | RETAINED | NON- CONTROLLING | TOTAL | ||||||||||||||||||||||||||
SHARES | AMOUNT | CAPITAL | STOCK | EARNINGS | TOTAL | INTEREST | EQUITY | ||||||||||||||||||||||||
(thousands) | (thousands of dollars) | ||||||||||||||||||||||||||||||
January 1, 2019 | 24,626 | $ | 2,463 | $ | 58,294 | $ | (8 | ) | $ | 124,123 | $ | 184,872 | $ | 289 | $ | 185,161 | |||||||||||||||
Restricted Stock Units | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | 264 | — | — | 264 | — | 264 | |||||||||||||||||||||||
Issued to Employees | — | — | 644 | — | — | 644 | — | 644 | |||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||
Issued to Directors | 10 | 1 | — | 6 | — | 7 | — | 7 | |||||||||||||||||||||||
Issued to Employees | 79 | 8 | — | — | — | 8 | — | 8 | |||||||||||||||||||||||
Net Income | — | — | — | — | 4,736 | 4,736 | — | 4,736 | |||||||||||||||||||||||
September 30, 2019 | 24,715 | $ | 2,472 | $ | 59,202 | $ | (2 | ) | $ | 128,859 | $ | 190,531 | $ | 289 | $ | 190,820 | |||||||||||||||
January 1, 2018 | 24,311 | $ | 2,451 | $ | 56,012 | $ | (196 | ) | $ | 126,455 | $ | 184,722 | $ | 289 | $ | 185,011 | |||||||||||||||
Stock Options | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | (10 | ) | — | — | (10 | ) | — | (10 | ) | ||||||||||||||||||||
Issued to Employees | — | — | 154 | — | — | 154 | — | 154 | |||||||||||||||||||||||
Cancellation of Issuance to Former Director | — | — | (680 | ) | — | — | (680 | ) | — | (680 | ) | ||||||||||||||||||||
Restricted Stock Units | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | 250 | — | — | 250 | — | 250 | |||||||||||||||||||||||
Issued to Employees | — | — | 1,284 | — | — | 1,284 | — | 1,284 | |||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||||||||
Issued to Directors | — | — | 82 | 78 | — | 160 | — | 160 | |||||||||||||||||||||||
Issued to Employees | — | — | 130 | 155 | — | 285 | — | 285 | |||||||||||||||||||||||
Stock Exchange | — | — | (66 | ) | (65 | ) | — | (131 | ) | — | (131 | ) | |||||||||||||||||||
Warrants | — | — | (9 | ) | 9 | — | — | — | — | ||||||||||||||||||||||
Net Income | — | — | — | — | 2,958 | 2,958 | — | 2,958 | |||||||||||||||||||||||
September 30, 2018 | 24,311 | $ | 2,451 | $ | 57,147 | $ | (19 | ) | $ | 129,413 | $ | 188,992 | $ | 289 | $ | 189,281 |
NINE MONTHS ENDED SEPTEMBER 30, | ||||||||
2019 | 2018 | |||||||
(thousands of dollars) | ||||||||
OPERATING ACTIVITIES | ||||||||
Net Income | $ | 4,736 | $ | 2,958 | ||||
Loss from Discontinued Operations | (1,120 | ) | (531 | ) | ||||
Income from Continuing Operations | $ | 5,856 | $ | 3,489 | ||||
Adjustments to Reconcile Income from Continuing Operations To Net Cash Provided by Operating Activities: | ||||||||
Depreciation and Amortization | 10,863 | 8,614 | ||||||
Amortization of Intangible Assets | 1,396 | 1,396 | ||||||
Stock-based Compensation | 904 | 1,002 | ||||||
Deferred Income Taxes | 1,268 | 1,116 | ||||||
Postretirement Obligation | (28 | ) | (817 | ) | ||||
Bad Debt Expense | (19 | ) | 152 | |||||
Amortization of Loan Fees | 136 | 216 | ||||||
Loss on Extinguishment of Debt | — | 315 | ||||||
Changes in Operating Assets and Liabilities: | ||||||||
Decrease (Increase) in Trade Receivables | 1,634 | (4,160 | ) | |||||
Increase in Insurance Receivables | — | (391 | ) | |||||
Decrease in Taxes Receivable | — | 4,029 | ||||||
Decrease in Inventories | 3,253 | 622 | ||||||
Increase in Prepaid Expenses and Other Assets | 914 | (1,592 | ) | |||||
Decrease in Accounts Payable and Accrued Liabilities | (6,031 | ) | (2,977 | ) | ||||
Decrease in Other Liabilities | 267 | 96 | ||||||
Net Cash Provided by Operating Activities - Continuing Operations | 20,413 | 11,110 | ||||||
Net Cash Used in Operating Activities - Discontinued Operations | (164 | ) | — | |||||
Net Cash Provided by Operating Activities | 20,249 | 11,110 | ||||||
INVESTING ACTIVITIES | ||||||||
Additions to Plant, Pipeline and Equipment | (6,978 | ) | (19,090 | ) | ||||
Proceeds from PEVM | 27 | — | ||||||
Net Cash Used in Investing Activities - Continuing Operations | (6,951 | ) | (19,090 | ) | ||||
Net Cash Provided by (Used in) Investing Activities - Discontinued Operations | 2,697 | (114 | ) | |||||
Net Cash Used in Investing Activities | (4,254 | ) | (19,204 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net Cash (Paid) Received Related to Stock-Based Compensation | (292 | ) | 441 | |||||
Additions to Long-Term Debt | 2,000 | 18,177 | ||||||
Repayments of Long-Term Debt | (15,281 | ) | (12,260 | ) | ||||
Net Cash (Used in) Provided by Financing Activities - Continuing Operations | (13,573 | ) | 6,358 | |||||
NET INCREASE (DECREASE) IN CASH | 2,422 | (1,736 | ) | |||||
CASH AT BEGINNING OF PERIOD | 6,735 | 3,028 | ||||||
CASH AT END OF PERIOD | $ | 9,157 | $ | 1,292 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash payments for interest | $ | 3,749 | $ | 2,663 | ||||
Cash payments for taxes, net of refunds | $ | 53 | $ | 209 | ||||
Supplemental disclosure of non-cash items: | ||||||||
Capital expansion amortized to depreciation expense | $ | 426 | $ | 573 | ||||
Foreign taxes paid by AMAK | $ | 891 | $ | — | ||||
Stock exchange (Note 16) | $ | — | $ | 131 |
(1) | TREC – Trecora Resources |
(2) | TOCCO – Texas Oil & Chemical Co. II, Inc. – Wholly owned subsidiary of TREC and parent of SHR and TC |
(3) | SHR – South Hampton Resources, Inc. – Specialty Petrochemicals segment and parent of GSPL |
(4) | GSPL – Gulf State Pipe Line Co, Inc. – Pipeline support for the Specialty Petrochemicals segment |
(5) | TC – Trecora Chemical, Inc. – Specialty Waxes segment |
(6) | AMAK – Al Masane Al Kobra Mining Company – Held-for-sale mining equity investment – 33% ownership |
(7) | PEVM – Pioche Ely Valley Mines, Inc. – Inactive mine – 55% ownership |
September 30, 2019 | December 31, 2018 | |||||||
(thousands of dollars) | ||||||||
Trade receivables | $ | 25,930 | $ | 27,564 | ||||
Less allowance for doubtful accounts | (433 | ) | (452 | ) | ||||
Trade receivables, net | $ | 25,497 | $ | 27,112 |
September 30, 2019 | December 31, 2018 | |||||||
(thousands of dollars) | ||||||||
Prepaid license | $ | 1,411 | $ | 2,419 | ||||
Spare parts | 1,816 | 1,597 | ||||||
Other prepaid expenses and assets | 499 | 648 | ||||||
Total prepaid expenses and other assets | $ | 3,726 | $ | 4,664 |
September 30, 2019 | December 31, 2018 | |||||||
(thousands of dollars) | ||||||||
Raw material | $ | 3,278 | $ | 4,742 | ||||
Work in process | 157 | 173 | ||||||
Finished products | 9,850 | 11,624 | ||||||
Total inventory | $ | 13,285 | $ | 16,539 |
September 30, 2019 | December 31, 2018 | |||||||
(thousands of dollars) | ||||||||
Platinum catalyst metal | $ | 1,580 | $ | 1,612 | ||||
Catalyst | 4,387 | 3,131 | ||||||
Land | 5,428 | 5,428 | ||||||
Plant, pipeline and equipment | 259,435 | 253,905 | ||||||
Construction in progress | 4,442 | 4,343 | ||||||
Total plant, pipeline and equipment | $ | 275,272 | $ | 268,419 | ||||
Less accumulated depreciation | (84,927 | ) | (73,762 | ) | ||||
Net plant, pipeline and equipment | $ | 190,345 | $ | 194,657 |
September 30, 2019 | ||||||||||||
Gross | Accumulated Amortization | Net | ||||||||||
Intangible assets subject to amortization (Definite-lived) | (thousands of dollars) | |||||||||||
Customer relationships | $ | 16,852 | $ | (5,617 | ) | $ | 11,235 | |||||
Non-compete agreements | 94 | (94 | ) | — | ||||||||
Licenses and permits | 1,471 | (575 | ) | 896 | ||||||||
Developed technology | 6,131 | (3,066 | ) | 3,065 | ||||||||
24,548 | (9,352 | ) | 15,196 | |||||||||
Intangible assets not subject to amortization (Indefinite-lived) | ||||||||||||
Emissions allowance | 197 | — | 197 | |||||||||
Trade name | 2,158 | — | 2,158 | |||||||||
Total | $ | 26,903 | $ | (9,352 | ) | $ | 17,551 |
December 31, 2018 | ||||||||||||
Gross | Accumulated Amortization | Net | ||||||||||
Intangible assets subject to amortization (Definite-lived) | (thousands of dollars) | |||||||||||
Customer relationships | $ | 16,852 | $ | (4,775 | ) | $ | 12,077 | |||||
Non-compete agreements | 94 | (80 | ) | 14 | ||||||||
Licenses and permits | 1,471 | (495 | ) | 976 | ||||||||
Developed technology | 6,131 | (2,606 | ) | 3,525 | ||||||||
24,548 | (7,956 | ) | 16,592 | |||||||||
Intangible assets not subject to amortization (Indefinite-lived) | ||||||||||||
Emissions allowance | 197 | — | 197 | |||||||||
Trade name | 2,158 | — | 2,158 | |||||||||
Total | $ | 26,903 | $ | (7,956 | ) | $ | 18,947 |
Total | Remainder of 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | |||||||||||||||||||||||||
(thousands of dollars) | ||||||||||||||||||||||||||||||||
Customer relationships | $ | 11,235 | $ | 281 | $ | 1,123 | $ | 1,123 | 1,123 | 1,123 | 1,123 | $ | 5,339 | |||||||||||||||||||
Licenses and permits | 896 | 26 | 106 | 101 | 86 | 86 | 86 | 405 | ||||||||||||||||||||||||
Developed technology | 3,065 | 153 | 613 | 613 | 613 | 613 | 460 | — | ||||||||||||||||||||||||
Total future amortization expense | $ | 15,196 | $ | 460 | $ | 1,842 | $ | 1,837 | $ | 1,822 | $ | 1,822 | $ | 1,669 | $ | 5,744 |
($ in thousands) | Classification in the Condensed Consolidated Statements of Income | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||
Operating lease cost (a) | Cost of sales, exclusive of depreciation and amortization | $ | 1,114 | $ | 3,369 | |||
Operating lease cost (a) | Selling, general and administrative | 34 | 103 | |||||
Total operating lease cost | $ | 1,148 | $ | 3,472 | ||||
Finance lease cost: | ||||||||
Amortization of right-of-use assets | Depreciation | $ | — | — | ||||
Interest on lease liabilities | Interest Expense | — | — | |||||
Total finance lease cost | $ | — | $ | — | ||||
Total lease cost | $ | 1,148 | $ | 3,472 | ||||
(a) Short-term lease costs were approximately $64 thousand during the period. |
($ in thousands) | Classification on the Condensed Consolidated Balance Sheets | September 30, 2019 | ||
Assets: | ||||
Operating | Operating lease assets | $ | 14,364 | |
Finance | Property, plant, and equipment | — | ||
Total leased assets | $ | 14,364 | ||
Liabilities: | ||||
Current | ||||
Operating | Current portion of operating lease liabilities | $ | 3,247 | |
Finance | Short-term debt and current portion of long-term debt | — | ||
Noncurrent | ||||
Operating | Operating lease liabilities | 11,117 | ||
Finance | Long-term debt | — | ||
Total lease liabilities | $ | 14,364 |
($ in thousands) | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows used for operating leases | $ | 1,127 | $ | 2,260 | |||
Operating cash flows used for finance leases | — | — | |||||
Financing cash flows used for finance leases | — | — | |||||
Right-of-use assets obtained in exchange for lease obligations: | |||||||
Operating leases | $ | 25 | $ | 138 | |||
Finance leases | — | — |
September 30, 2019 | ||
Weighted-average remaining lease term (in years): | ||
Operating leases | 4.8 | |
Finance leases | 0.0 | |
Weighted-average discount rate: | ||
Operating leases | 4.5 | % |
Finance leases | — | % |
($ in thousands) | Operating Leases | Finance Leases | ||||
2020 | $ | 3,811 | $ | — | ||
2021 | 3,559 | — | ||||
2022 | 3,391 | — | ||||
2023 | 2,571 | — | ||||
2024 | 1,243 | — | ||||
Thereafter | 1,329 | — | ||||
Total lease payments | $ | 15,904 | $ | — | ||
Less: Interest | 1,540 | — | ||||
Total lease obligations | $ | 14,364 | $ | — |
($ in thousands) | Operating Leases | ||
2019 | $ | 3,670 | |
2020 | 3,583 | ||
2021 | 3,418 | ||
2022 | 3,107 | ||
2023 | 2,288 | ||
Beyond 2023 | 2,065 |
September 30, 2019 | December 31, 2018 | |||||||
(thousands of dollars) | ||||||||
Accrued state taxes | 249 | 210 | ||||||
Accrued property taxes | 2,572 | — | ||||||
Accrued payroll | 812 | 936 | ||||||
Accrued interest | 32 | 31 | ||||||
Accrued officer compensation | 1,251 | — | ||||||
Accrued restructuring & severance | 37 | 1,221 | ||||||
Accrued foreign taxes | — | 802 | ||||||
Other | 2,317 | 2,239 | ||||||
Total | $ | 7,270 | $ | 5,439 |
September 30, 2019 | December 31, 2018 | ||||
(thousands of dollars) | |||||
Revolving Facility | 8,000 | 18,000 | |||
Term Loan Facility | 82,031 | 85,312 | |||
Loan fees | (694 | ) | (830 | ) | |
Total long-term debt | 89,337 | 102,482 | |||
Less current portion including loan fees | 4,194 | 4,194 | |||
Total long-term debt, less current portion including loan fees | 85,143 | 98,288 |
Stock Options and Warrants | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life | Intrinsic Value (in thousands) | ||||||||
Outstanding at January 1, 2019 | 745,830 | 10.33 | |||||||||
Granted | — | — | |||||||||
Exercised | (85,000 | ) | 7.71 | ||||||||
Forfeited | (173,830 | ) | 10.10 | ||||||||
Outstanding at September 30, 2019 | 487,000 | 10.87 | 3.8 | $ | — | ||||||
Expected to vest | — | $ | — | ||||||||
Exercisable at September 30, 2019 | 487,000 | 10.87 | 3.8 | $ | — |
Shares of Restricted Stock Units | Weighted Average Grant Date Price per Share | |||
Outstanding at January 1, 2019 | 405,675 | 11.27 | ||
Granted | 190,615 | 9.22 | ||
Forfeited | (123,434 | ) | 10.82 | |
Vested | (136,568 | ) | 11.86 | |
Outstanding at September 30, 2019 | 336,288 | 9.83 | ||
Expected to vest | 336,288 |
Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | |||||||||||||||||||||
Income (Loss) | Shares | Per Share Amount | Income (Loss) | Shares | Per Share Amount | |||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
Basic: | ||||||||||||||||||||||
Net income (loss) from continuing operations | $ | 1,583 | 24,717 | $ | 0.06 | $ | (716 | ) | 24,483 | $ | (0.03 | ) | ||||||||||
Unvested restricted stock units | 336 | 398 | ||||||||||||||||||||
Dilutive stock options outstanding | — | 294 | ||||||||||||||||||||
Diluted: | ||||||||||||||||||||||
Net income (loss) from continuing operations | $ | 1,583 | 25,053 | $ | 0.06 | $ | (716 | ) | 25,175 | $ | (0.03 | ) |
Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | |||||||||||||||||||||
Income | Shares | Per Share Amount | Income | Shares | Per Share Amount | |||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
Basic: | ||||||||||||||||||||||
Net income (loss) from continuing operations | $ | 5,856 | 24,689 | $ | 0.24 | $ | 3,489 | 24,397 | $ | 0.14 | ||||||||||||
Unvested restricted stock units | 388 | 383 | ||||||||||||||||||||
Dilutive stock options outstanding | — | 358 | ||||||||||||||||||||
Diluted: | ||||||||||||||||||||||
Net income (loss) from continuing operations | $ | 5,856 | 25,077 | $ | 0.23 | $ | 3,489 | 25,138 | $ | 0.14 |
Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | |||||||||||||||||||||
Income (Loss) | Shares | Per Share Amount | Income (Loss) | Shares | Per Share Amount | |||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
Basic: | ||||||||||||||||||||||
Net income (loss) from discontinued operations, net of tax | $ | (1,002 | ) | 24,717 | $ | (0.04 | ) | $ | (893 | ) | 24,483 | $ | (0.04 | ) | ||||||||
Unvested restricted stock units | 336 | 398 | ||||||||||||||||||||
Dilutive stock options outstanding | — | 294 | ||||||||||||||||||||
Diluted: | ||||||||||||||||||||||
Net income (loss) from discontinued operations, net of tax | $ | (1,002 | ) | 25,053 | $ | (0.04 | ) | $ | (893 | ) | 25,175 | $ | (0.04 | ) |
Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | |||||||||||||||||||||
Income (Loss) | Shares | Per Share Amount | Income (Loss) | Shares | Per Share Amount | |||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
Basic: | ||||||||||||||||||||||
Net income (loss) from discontinued operations, net of tax | $ | (1,120 | ) | 24,689 | $ | (0.05 | ) | $ | (531 | ) | 24,397 | $ | (0.02 | ) | ||||||||
Unvested restricted stock units | 388 | 383 | ||||||||||||||||||||
Dilutive stock options outstanding | — | 358 | ||||||||||||||||||||
Diluted: | ||||||||||||||||||||||
Net income (loss) from discontinued operations, net of tax | $ | (1,120 | ) | 25,077 | $ | (0.04 | ) | $ | (531 | ) | 25,138 | $ | (0.02 | ) |
Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | |||||||||||||||||||||
Income (Loss) | Shares | Per Share Amount | Income (Loss) | Shares | Per Share Amount | |||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
Basic: | ||||||||||||||||||||||
Net income (loss) | $ | 581 | 24,717 | $ | 0.02 | $ | (1,609 | ) | 24,483 | $ | (0.07 | ) | ||||||||||
Unvested restricted stock units | 336 | 398 | ||||||||||||||||||||
Dilutive stock options outstanding | — | 294 | ||||||||||||||||||||
Diluted: | ||||||||||||||||||||||
Net income (loss) | $ | 581 | 25,053 | $ | 0.02 | $ | (1,609 | ) | 25,175 | $ | (0.07 | ) |
Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | |||||||||||||||||||||
Income | Shares | Per Share Amount | Income | Shares | Per Share Amount | |||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||||
Basic: | ||||||||||||||||||||||
Net income (loss) | $ | 4,736 | 24,689 | $ | 0.19 | $ | 2,958 | 24,397 | $ | 0.12 | ||||||||||||
Unvested restricted stock units | 388 | 383 | ||||||||||||||||||||
Dilutive stock options outstanding | — | 358 | ||||||||||||||||||||
Diluted: | ||||||||||||||||||||||
Net income (loss) | $ | 4,736 | 25,077 | $ | 0.19 | $ | 2,958 | 25,138 | $ | 0.12 |
Three Months Ended September 30, 2019 | |||||||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Eliminations | Consolidated | |||||||||||||||
(in thousands) | |||||||||||||||||||
Product sales | $ | 53,277 | $ | 5,834 | $ | — | $ | — | $ | 59,111 | |||||||||
Processing fees | 1,208 | 2,396 | — | — | 3,604 | ||||||||||||||
Total revenues | 54,485 | 8,230 | — | — | 62,715 | ||||||||||||||
Operating profit (loss) before depreciation and amortization | 10,414 | (260 | ) | (2,670 | ) | — | 7,484 | ||||||||||||
Operating profit (loss) | 7,449 | (1,808 | ) | (2,683 | ) | — | 2,958 | ||||||||||||
Profit (loss) from continuing operations before taxes | 6,583 | (2,071 | ) | (2,691 | ) | — | 1,821 | ||||||||||||
Depreciation and amortization | 1,900 | 1,548 | 14 | — | 3,462 | ||||||||||||||
Capital expenditures | 2,163 | 361 | — | — | 2,524 |
Three Months Ended September 30, 2018 | ||||||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Eliminations | Consolidated | ||||||||||||||
(in thousands) | ||||||||||||||||||
Product sales | $ | 61,675 | $ | 6,938 | $ | — | — | $ | 68,613 | |||||||||
Processing fees | 2,056 | 2,799 | — | (52 | ) | 4,803 | ||||||||||||
Total revenues | 63,731 | 9,737 | — | (52 | ) | 73,416 | ||||||||||||
Operating profit (loss) before depreciation and amortization | 6,167 | 415 | (2,252 | ) | — | 4,330 | ||||||||||||
Operating profit (loss) | 3,516 | (936 | ) | (2,270 | ) | — | 310 | |||||||||||
Profit (loss) from continuing operations before taxes | 2,561 | (1,239 | ) | (2,274 | ) | — | (952 | ) | ||||||||||
Depreciation and amortization | 2,651 | 1,351 | 16 | — | 4,018 | |||||||||||||
Capital expenditures | 2,562 | 1,094 | — | — | 3,656 |
Nine Months Ended September 30, 2019 | |||||||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Eliminations | Consolidated | |||||||||||||||
(in thousands) | |||||||||||||||||||
Product sales | $ | 167,351 | $ | 18,582 | $ | — | $ | — | $ | 185,933 | |||||||||
Processing fees | 4,117 | 7,191 | — | — | 11,308 | ||||||||||||||
Total revenues | 171,468 | 25,773 | — | — | 197,241 | ||||||||||||||
Operating profit (loss) before depreciation and amortization | 31,849 | (343 | ) | (7,158 | ) | — | 24,348 | ||||||||||||
Operating profit (loss) | 22,885 | (4,638 | ) | (7,203 | ) | — | 11,044 | ||||||||||||
Profit (loss) from continuing operations before taxes | 20,093 | (5,623 | ) | (7,202 | ) | — | 7,268 | ||||||||||||
Depreciation and amortization | 7,899 | 4,295 | 46 | — | 12,240 | ||||||||||||||
Capital expenditures | 5,002 | 1,296 | — | — | 6,298 |
Nine Months Ended September 30, 2018 | ||||||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Eliminations | Consolidated | ||||||||||||||
(in thousands) | ||||||||||||||||||
Product sales | $ | 178,094 | $ | 20,755 | $ | — | 32 | $ | 198,881 | |||||||||
Processing fees | 5,769 | 8,863 | — | (250 | ) | 14,382 | ||||||||||||
Total revenues | 183,863 | 29,618 | — | (218 | ) | 213,263 | ||||||||||||
Operating profit (loss) before depreciation and amortization | 20,655 | 1,969 | (5,234 | ) | — | 17,390 | ||||||||||||
Operating profit (loss) | 14,635 | (2,051 | ) | (5,268 | ) | — | 7,316 | |||||||||||
Profit (loss) from continuing operations before taxes | 12,474 | (2,926 | ) | (5,205 | ) | — | 4,343 | |||||||||||
Depreciation and amortization | 6,020 | 4,020 | 32 | — | 10,072 | |||||||||||||
Capital expenditures | 16,374 | 2,716 | — | — | 19,090 |
September 30, 2019 | |||||||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Eliminations | Consolidated | |||||||||||||||
(in thousands) | |||||||||||||||||||
Trade receivables, product sales | $ | 19,129 | $ | 4,081 | $ | — | $ | — | $ | 23,210 | |||||||||
Trade receivables, processing fees | 517 | 1,770 | — | — | 2,287 | ||||||||||||||
Goodwill and intangible assets, net | — | 39,349 | — | — | 39,349 | ||||||||||||||
Total assets | 293,098 | 113,007 | 90,174 | (165,722 | ) | 330,557 |
December 31, 2018 | |||||||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Eliminations | Consolidated | |||||||||||||||
(in thousands) | |||||||||||||||||||
Trade receivables, product sales | $ | 21,915 | $ | 3,173 | $ | — | $ | — | $ | 25,088 | |||||||||
Trade receivables, processing fees | 633 | 1,391 | — | — | 2,024 | ||||||||||||||
Goodwill and intangible assets, net | — | 40,745 | — | — | 40,745 | ||||||||||||||
Total assets | 284,367 | 115,366 | 91,474 | (161,239 | ) | 329,968 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(thousands of dollars) | (thousands of dollars) | |||||||||||||||
Sales | $ | 19,643 | $ | 19,877 | $ | 60,873 | $ | 53,458 | ||||||||
Cost of sales | 19,072 | 20,350 | 55,804 | 49,411 | ||||||||||||
Gross profit (loss) | 571 | (473 | ) | 5,069 | 4,047 | |||||||||||
Selling, general, and administrative | 3,557 | 2,736 | 9,102 | 7,151 | ||||||||||||
Operating loss | (2,986 | ) | (3,209 | ) | (4,033 | ) | (3,104 | ) | ||||||||
Other income | 43 | 35 | 396 | 70 | ||||||||||||
Finance and interest expense | (456 | ) | (416 | ) | (1,349 | ) | (1,201 | ) | ||||||||
Loss before Zakat and income taxes | (3,399 | ) | (3,590 | ) | (4,986 | ) | (4,235 | ) | ||||||||
Zakat and income taxes | 444 | 800 | 1,332 | 800 | ||||||||||||
Net Loss | $ | (3,843 | ) | $ | (4,390 | ) | $ | (6,318 | ) | $ | (5,035 | ) |
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
(thousands of dollars) | ||||||||
Current assets | $ | 41,030 | $ | 44,093 | ||||
Noncurrent assets | 191,043 | 212,291 | ||||||
Total assets | $ | 232,073 | $ | 256,384 | ||||
Current liabilities | $ | 22,107 | $ | 17,160 | ||||
Long term liabilities | 74,371 | 77,366 | ||||||
Stockholders' equity | 135,595 | 161,858 | ||||||
$ | 232,073 | $ | 256,384 |
• | In the second quarter of 2019, certain shareholders of AMAK transferred a portion of their shares to the CEO of AMAK as a one-time retention and performance bonus. The Company transferred 100,000 shares and the transaction reduced our ownership percentage from 33.4% to 33.3%. |
• | In first quarter 2018, we completed an exchange of shares with certain stockholders whereby such stockholders traded 65,000 common shares of TREC in exchange for 24,489 shares of our AMAK stock. The 65,000 shares were accounted for as treasury stock. This transaction reduced our ownership percentage from 33.44% to 33.41%. |
• | In connection with the 2018 AMAK share repurchase program, we received net proceeds of approximately $0.4 million during the three months ended March 31, 2019. AMAK completed the share repurchase program in 2019, at which point all shares repurchased from AMAK stockholders were registered as treasury shares. Upon completion of the share repurchase program, the Company's ownership percentage in AMAK did not change from 33.4%. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(thousands of dollars) | (thousands of dollars) | |||||||||||||||
AMAK Net Loss | $ | (3,843 | ) | $ | (4,390 | ) | $ | (6,318 | ) | $ | (5,036 | ) | ||||
Percentage of Ownership | 33.29 | % | 33.41 | % | 33.29 | % | 33.41 | % | ||||||||
Company's share of loss reported by AMAK | $ | (1,279 | ) | $ | (1,467 | ) | $ | (2,103 | ) | $ | (1,682 | ) | ||||
Amortization of difference between Company's investment in AMAK and Company's share of net assets of AMAK | 337 | 337 | 1,010 | 1,010 | ||||||||||||
Equity in (losses) earnings of AMAK | $ | (942 | ) | $ | (1,130 | ) | $ | (1,093 | ) | $ | (672 | ) |
Three Months Ended September 30, 2019 | |||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Net Income (Loss) | $ | 6,278 | $ | (2,071 | ) | $ | (3,626 | ) | $ | 581 | |||||
Loss from discontinued operations, net of tax | — | — | (1,002 | ) | (1,002 | ) | |||||||||
Income (Loss) from continuing operations | $ | 6,278 | $ | (2,071 | ) | $ | (2,624 | ) | $ | 1,583 | |||||
Interest | 895 | 316 | — | 1,211 | |||||||||||
Taxes | 803 | — | (565 | ) | 238 | ||||||||||
Depreciation and amortization | 171 | 24 | 13 | 208 | |||||||||||
Depreciation and amortization in cost of sales | 1,729 | 1,524 | 1 | 3,254 | |||||||||||
EBITDA from continuing operations | $ | 9,876 | $ | (207 | ) | $ | (3,175 | ) | $ | 6,494 | |||||
Stock-based compensation | — | — | 415 | 415 | |||||||||||
Adjusted EBITDA from continuing operations | $ | 9,876 | $ | (207 | ) | $ | (2,760 | ) | $ | 6,909 |
Three Months Ended September 30, 2018 | |||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Net Income (Loss) | $ | 2,504 | $ | (1,239 | ) | $ | (2,874 | ) | $ | (1,609 | ) | ||||
Loss from discontinued operations, net of tax | — | — | (893 | ) | (893 | ) | |||||||||
Income (Loss) from continuing operations | $ | 2,504 | $ | (1,239 | ) | $ | (1,981 | ) | $ | (716 | ) | ||||
Interest | 659 | 265 | — | 924 | |||||||||||
Taxes | 372 | — | (608 | ) | (236 | ) | |||||||||
Depreciation and amortization | 165 | 24 | 16 | 205 | |||||||||||
Depreciation and amortization in cost of sales | 2,486 | 1,327 | — | 3,813 | |||||||||||
EBITDA from continuing operations | $ | 6,186 | $ | 377 | $ | (2,573 | ) | $ | 3,990 | ||||||
Stock-based compensation | — | — | 630 | 630 | |||||||||||
Loss on extinguishment of debt | — | — | 315 | 315 | |||||||||||
Adjusted EBITDA from continuing operations | $ | 6,186 | $ | 377 | $ | (1,628 | ) | $ | 4,935 |
Nine Months Ended September 30, 2019 | |||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Net Income (Loss) | $ | 17,086 | $ | (5,623 | ) | $ | (6,727 | ) | $ | 4,736 | |||||
Loss from discontinued operations, net of tax | — | — | (1,120 | ) | (1,120 | ) | |||||||||
Income (Loss) from continuing operations | $ | 17,086 | $ | (5,623 | ) | $ | (5,607 | ) | $ | 5,856 | |||||
Interest | 3,143 | 967 | 1 | 4,111 | |||||||||||
Taxes | 3,006 | — | (1,594 | ) | 1,412 | ||||||||||
Depreciation and amortization | 512 | 72 | 45 | 629 | |||||||||||
Depreciation and amortization in cost of sales | 7,387 | 4,223 | 1 | 11,611 | |||||||||||
EBITDA from continuing operations | $ | 31,134 | $ | (361 | ) | $ | (7,154 | ) | $ | 23,619 | |||||
Stock-based compensation | — | — | 973 | 973 | |||||||||||
Adjusted EBITDA from continuing operations | $ | 31,134 | $ | (361 | ) | $ | (6,181 | ) | $ | 24,592 |
Nine Months Ended September 30, 2018 | |||||||||||||||
Specialty Petrochemicals | Specialty Waxes | Corporate | Consolidated | ||||||||||||
(in thousands) | |||||||||||||||
Net Income (Loss) | $ | 10,402 | $ | (2,926 | ) | $ | (4,518 | ) | $ | 2,958 | |||||
Loss from discontinued operations, net of tax | — | — | (531 | ) | (531 | ) | |||||||||
Income (Loss) from continuing operations | $ | 10,402 | $ | (2,926 | ) | $ | (3,987 | ) | $ | 3,489 | |||||
Interest | 1,892 | 802 | (77 | ) | 2,617 | ||||||||||
Taxes | 2,387 | — | (1,533 | ) | 854 | ||||||||||
Depreciation and amortization | 492 | 68 | 32 | 592 | |||||||||||
Depreciation and amortization in cost of sales | 5,528 | 3,952 | — | 9,480 | |||||||||||
EBITDA from continuing operations | $ | 20,701 | $ | 1,896 | $ | (5,565 | ) | $ | 17,032 | ||||||
Stock-based compensation | — | — | 1,002 | 1,002 | |||||||||||
Loss on extinguishment of debt | — | — | 315 | 315 | |||||||||||
Adjusted EBITDA from continuing operations | $ | 20,701 | $ | 1,896 | $ | (4,248 | ) | $ | 18,349 |
September 30, 2019 | December 31, 2018 | September 30, 2018 | ||||||
Days sales outstanding in accounts receivable | 35.5 | 34.4 | 38.1 | |||||
Days sales outstanding in inventory | 18.4 | 21.0 | 22.8 | |||||
Days sales outstanding in accounts payable | 14.1 | 24.2 | 17.0 | |||||
Days of working capital | 39.8 | 31.1 | 43.9 |
Nine Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Net cash provided by (used in) | (thousands of dollars) | |||||||
Operating activities | $ | 20,249 | $ | 11,110 | ||||
Investing activities | (4,254 | ) | (19,204 | ) | ||||
Financing activities | (13,573 | ) | 6,358 | |||||
Increase (Decrease) in cash | $ | 2,422 | $ | (1,736 | ) | |||
Cash | $ | 9,157 | $ | 1,292 |
• | Trade receivables decreased approximately $1.6 million. This was due to a decrease in revenues in the third quarter 2019 of $6.7 million, or nearly 9.6%, as compared with the second quarter 2019. Revenues in the third quarter 2018 increased $5.3 million from the second quarter 2018. |
• | Inventories decreased approximately $3.3 million driven by lower inventory in transit primarily due to lower sales to the Canadian oil sands and an overall decrease in value of inventory due to lower feedstock prices. Additionally, our Specialty Wax segment was constrained by disruptions of wax feed supply from a key supplier, resulting in increased sales of existing inventory. |
• | In the first nine months of 2019, we did not have a change in taxes receivable. In the same period of 2018, we collected outstanding taxes receivable of $4.3 million related to prior periods and R&D credits. |
• | Accounts payable and accrued liabilities decreased $6.0 million primarily due to payment for the Advanced Reformer unit catalyst replacement which was completed in December 2018, severance payments and payment for supplemental wax feed. |
Three Months Ended September 30, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
(thousands of dollars) | |||||||||||||||
Specialty Petrochemicals Product Sales | $ | 53,277 | $ | 61,675 | $ | (8,398 | ) | (13.6 | )% | ||||||
Processing | 1,208 | 2,056 | (848 | ) | (41.2 | )% | |||||||||
Gross Revenue | $ | 54,485 | $ | 63,731 | $ | (9,246 | ) | (14.5 | )% | ||||||
Volume of Sales (gallons) | |||||||||||||||
Specialty Petrochemicals Products | 20,523 | 21,564 | (1,041 | ) | (4.8 | )% | |||||||||
Prime Product Sales | 16,431 | 16,986 | (555 | ) | (3.3 | )% | |||||||||
Cost of Sales | $ | 44,206 | $ | 57,156 | (12,950 | ) | (22.7 | )% | |||||||
Gross Margin | 18.9 | % | 10.3 | % | 8.6 | % | |||||||||
Total Operating Expense* | 17,248 | 18,673 | (1,425 | ) | (7.6 | )% | |||||||||
Natural Gas Expense* | 1,000 | 1,265 | (265 | ) | (20.9 | )% | |||||||||
Operating Labor Costs* | 3,619 | 4,837 | (1,218 | ) | (25.2 | )% | |||||||||
Transportation Costs* | 6,997 | 7,126 | (129 | ) | (1.8 | )% | |||||||||
General & Administrative Expense | 2,659 | 2,893 | (234 | ) | (8.1 | )% | |||||||||
Depreciation and Amortization** | 1,900 | 2,651 | (751 | ) | (28.3 | )% | |||||||||
Capital Expenditures | 2,163 | 2,562 | (399 | ) | (15.6 | )% |
Three Months Ended September 30, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
(thousands of dollars) | |||||||||||||||
Product Sales | $ | 5,834 | $ | 6,938 | $ | (1,104 | ) | (15.9 | )% | ||||||
Processing | 2,396 | 2,799 | (403 | ) | (14.4 | )% | |||||||||
Gross Revenue | $ | 8,230 | $ | 9,737 | $ | (1,507 | ) | (15.5 | )% | ||||||
Volume of specialty wax sales (thousand pounds) | 8,649 | 9,055 | (406 | ) | (4.5 | )% | |||||||||
Cost of Sales | $ | 8,879 | $ | 9,470 | $ | (591 | ) | (6.2 | )% | ||||||
Gross Margin (Loss) | (7.9 | )% | 2.7 | % | (10.6 | )% | |||||||||
General & Administrative Expense | 1,071 | 1,180 | (109 | ) | (9.2 | )% | |||||||||
Depreciation and Amortization* | 1,548 | 1,351 | 197 | 14.6 | % | ||||||||||
Capital Expenditures | $ | 361 | $ | 1,094 | $ | (733 | ) | (67.0 | )% |
Three Months Ended September 30, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
(thousands of dollars) | |||||||||||||||
General & Administrative Expense | $ | 2,670 | $ | 2,252 | $ | 418 | 18.6 | % |
Three Months Ended September 30, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
(thousands of dollars) | |||||||||||||||
Equity in (losses) earnings of AMAK | $ | (1,268 | ) | $ | (1,130 | ) | $ | (138 | ) | 12.2 | % |
Three Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
(thousands of dollars) | ||||||||
Sales | $ | 19,643 | $ | 19,877 | ||||
Cost of sales | 19,072 | 20,350 | ||||||
Gross profit | 571 | (473 | ) | |||||
Selling, general, and administrative | 3,557 | 2,736 | ||||||
Operating (loss) income | (2,986 | ) | (3,209 | ) | ||||
Other (expense) income | 43 | 35 | ||||||
Finance and interest expense | (456 | ) | (416 | ) | ||||
Loss before Zakat and income taxes | (3,399 | ) | (3,590 | ) | ||||
Zakat and income taxes | 444 | 800 | ||||||
Net Loss | $ | (3,843 | ) | $ | (4,390 | ) | ||
Finance and interest expense | 456 | 416 | ||||||
Depreciation and amortization | 8,534 | 8,899 | ||||||
Zakat and income taxes | 444 | 800 | ||||||
EBITDA | $ | 5,591 | $ | 5,725 |
Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
(thousands of dollars) | |||||||||||||||
Specialty Petrochemicals Product Sales | 167,351 | 178,094 | $ | (10,743 | ) | (6.0 | )% | ||||||||
Processing | 4,117 | 5,769 | (1,652 | ) | (28.6 | )% | |||||||||
Gross Revenue | $ | 171,468 | $ | 183,863 | $ | (12,395 | ) | (6.7 | )% | ||||||
Volume of Sales (gallons) | |||||||||||||||
Specialty Petrochemicals Products | 64,438 | 64,586 | (148 | ) | (0.2 | )% | |||||||||
Prime Product Sales | 51,801 | 50,729 | 1,072 | 2.1 | % | ||||||||||
Cost of Sales | 140,121 | 160,543 | (20,422 | ) | (12.7 | )% | |||||||||
Gross Margin | 18.3 | % | 12.7 | % | 5.6 | % | |||||||||
Total Operating Expense* | 53,983 | 51,597 | 2,386 | 4.6 | % | ||||||||||
Natural Gas Expense* | 3,636 | 3,841 | (205 | ) | (5.3 | )% | |||||||||
Operating Labor Costs* | 10,918 | 13,351 | (2,433 | ) | (18.2 | )% | |||||||||
Transportation Costs* | 21,405 | 21,528 | (123 | ) | (0.6 | )% | |||||||||
General & Administrative Expense | 7,950 | 8,193 | (243 | ) | (3.0 | )% | |||||||||
Depreciation and Amortization** | 7,899 | 6,020 | 1,879 | 31.2 | % | ||||||||||
Capital Expenditures | 5,002 | 16,374 | (11,372 | ) | (69.5 | )% |
Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
(thousands of dollars) | |||||||||||||||
Product Sales | $ | 18,582 | $ | 20,755 | $ | (2,173 | ) | (10.5 | )% | ||||||
Processing | 7,191 | 8,863 | (1,672 | ) | (18.9 | )% | |||||||||
Gross Revenue | $ | 25,773 | $ | 29,618 | $ | (3,845 | ) | (13.0 | )% | ||||||
Volume of specialty wax sales (thousand pounds) | 26,486 | 29,140 | (2,654 | ) | (9.1 | )% | |||||||||
Cost of Sales | $ | 26,852 | $ | 27,814 | $ | (962 | ) | (3.5 | )% | ||||||
Gross Margin (Loss) | (4.2 | )% | 6.1 | % | (10.3 | )% | |||||||||
General & Administrative Expense | 3,423 | 3,787 | (364 | ) | (9.6 | )% | |||||||||
Depreciation and Amortization* | 4,295 | 4,020 | 275 | 6.8 | % | ||||||||||
Capital Expenditures | $ | 1,296 | $ | 2,716 | $ | (1,420 | ) | (52.3 | )% |
Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | Change | % Change | ||||||||||||
(thousands of dollars) | |||||||||||||||
General & Administrative Expense | $ | 7,159 | $ | 5,234 | $ | 1,925 | 36.8 | % |
Nine Months Ended September 30, | ||||||||||||
2019 | 2018 | Change | % Change | |||||||||
(thousands of dollars) | ||||||||||||
Equity in (losses) earnings of AMAK | (1,418 | ) | (672 | ) | (746 | ) | 111.0 | % |
Nine Months Ended September 30, 2019 | ||||||||
2019 | 2018 | |||||||
(thousands of dollars) | ||||||||
Sales | $ | 60,873 | $ | 53,458 | ||||
Cost of sales | 55,804 | 49,411 | ||||||
Gross profit | 5,069 | 4,047 | ||||||
Selling, general, and administrative | 9,102 | 7,151 | ||||||
Operating income (loss) | (4,033 | ) | (3,104 | ) | ||||
Other income | 396 | 70 | ||||||
Finance and interest expense | (1,349 | ) | (1,201 | ) | ||||
Loss before Zakat and income taxes | (4,986 | ) | (4,235 | ) | ||||
Zakat and income taxes | 1,332 | 800 | ||||||
Net Loss | $ | (6,318 | ) | $ | (5,035 | ) | ||
Finance and interest expense | 1,349 | 1,201 | ||||||
Depreciation and amortization | 23,604 | 24,881 | ||||||
Zakat and income taxes | 1,332 | 800 | ||||||
EBITDA | $ | 19,967 | $ | 21,847 |
(a) | Evaluation of disclosure controls and procedures. Our Chief Executive Officer and Chief Financial Officer, with the participation of management, have evaluated the effectiveness of our "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934) and determined that our disclosure controls and procedures were effective as of the end of the period covered by this report. |
(b) | Changes in internal control. There were no significant changes in our internal control over financial reporting that occurred during the three months ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. |
Exhibit Number | Description |
2.1* | |
31.1* | |
31.2* | |
32.1** | |
32.2** | |
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Schema Document |
101.CAL* | XBRL Taxonomy Calculation Linkbase Document |
101.LAB* | XBRL Taxonomy Label Linkbase Document |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
TRECORA RESOURCES | ||
Dated: November 8, 2019 | By: | /s/ Sami Ahmad |
Sami Ahmad | ||
Principal Financial Officer and Duly Authorized Officer |
1. | Definitions and Interpretation 1 |
2. | Authority of Signatories 3 |
3. | Sale and Purchase 4 |
4. | Payment of Purchase Price and Deposit 5 |
5. | Effective Date 5 |
6. | Conditions 5 |
7. | Filings; Other Actions 7 |
8. | Closing 8 |
9. | Warranties 9 |
10. | Indemnifications; Remedies 10 |
11. | Tax Matters 11 |
12. | Further Assurances 12 |
13. | No Partnership or Agency 12 |
14. | Costs 12 |
15. | Termination 12 |
16. | Assignment 13 |
17. | Entire Agreement 13 |
18. | Notices 13 |
19. | Variation, Waiver and Consent 15 |
20. | Severability 15 |
21. | General 15 |
22. | Continuing Effect 16 |
23. | Governing Law and Submission to Arbitration 16 |
(1) | Trecora Resources, a Delaware (USA) corporation, a company organized and existing under the Laws of the United States of America and having its registered office at 1650 Hwy 6 S., Suite 190, Sugar Land, TX 77478, USA (“Seller”); |
(2) | Al Masane Al Kobra Mining Co., a Saudi joint stock company organized under the Laws of the Kingdom of Saudi Arabia with commercial registration number 4030175345 dated 7/1/1429 issued at Jeddah and commercial registration number 5950017523 dated 03/11/1431H issued at Najran, and SAGIA license number 993/2 dated 16/7/1428 issued at Riyadh (the “Company”); |
(3) | The individuals and entities identified on the signature page hereto (collectively, “Individual Purchasers” and together with the Company, “Purchasers”); and |
(4) | Mohammad Aballala, an individual, as the representative of the Purchasers for all purposes under this Agreement (the “Purchasers’ Representative”). |
(A) | Seller is the owner of, in the aggregate, 26,467,422 Shares (as defined below) in the capital of the Company. |
(B) | Each Individual Purchaser is a current shareholder in the Company. |
(C) | Seller wishes to sell, and Purchasers wish to purchase, the Sale Shares (as defined below) on the terms and subject to the conditions set out in this Agreement. |
1. | DEFINITIONS AND INTERPRETATION |
1.1 | Definitions |
1.2 | Statutory Provisions |
1.3 | Agreed Form |
1.4 | Recitals and Schedules |
1.5 | Meaning of References |
(a) | words importing one gender shall be treated as importing any gender, words importing individuals shall be treated as importing persons and vice versa, words importing the singular shall be treated as importing the plural and vice versa, and words importing the whole shall be treated as including a reference to any part thereof; |
(b) | references to a “person” shall include any individual, firm, body corporate, unincorporated association, government, state or agency of state, association, joint venture or partnership, in each case whether or not having a separate legal personality; |
(c) | References to a “company” shall be construed so as to include any company, corporation or other body corporate wherever and however incorporated or established; |
(d) | references to the word “include” or “including” (or any similar term) are not to be construed as implying any limitation and general words introduced by the word “other” (or any similar term) shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of matters; |
(e) | references to “writing” or “written” includes any method of reproducing words or text in a legible and non-transitory form; |
(f) | references to “indemnify” and to “indemnifying” any person against any Losses by reference to any matter includes indemnifying and keeping that person indemnified against all Losses from time to time made, suffered or incurred as a direct consequence of or which would not have arisen but for that matter; |
(g) | where this Agreement states that a Party “shall”, “will” or “must” perform in some manner or otherwise act or omit to act, it means that the Party is legally obligated to do so in accordance with this Agreement; |
(h) | references to any document (including this Agreement) are references to that document as amended, consolidated, supplemented, novated or replaced from time to time; |
(i) | references to paragraphs in each schedule are references to paragraphs in that particular schedule unless the context requires otherwise; |
(j) | a reference to any matter is a reference to any fact, matter or circumstance; |
(k) | references to Saudi Arabian Riyals (“SAR”) are to the lawful currency of the Kingdom of Saudi Arabia (“KSA”) as at the date of this Agreement; and |
(l) | references to times of the day are to the local time in KSA and references to a day are to a period of 24 hours running from midnight to midnight. Any reference to dates or periods of time are to the Gregorian calendar. |
1.6 | Headings |
1.7 | Awareness |
(a) | anything of which any such Warrantor has knowledge; and |
(b) | anything of which such Warrantor would have had knowledge had it made due and careful enquiry immediately before giving the statement. |
1.8 | Joint and Several Obligations |
1.9 | Negotiation of the Agreement |
2. | AUTHORITY OF SIGNATORIES |
2.1 | If requested by any other Party, a Party shall promptly deliver to each of the other Parties evidence reasonably satisfactory to the other Parties that any person executing any Transaction Document on its behalf is duly authorised signatory and is authorised to do so. |
2.2 | Further all Parties shall, as soon as reasonably practicable after the date of this Agreement, duly execute a power of attorney (and where appropriate such power of attorney shall be notarised and legalised) for use in KSA enabling each Party to undertake all acts and actions required to complete the Transaction in accordance with this Agreement. |
2.3 | It is acknowledged and agreed that the Company's entry into this Agreement and the performance of its obligations hereunder in connection with the buyback by the Company of certain of the Sale Shares (as listed in Schedule 1) (the “Buyback”) is subject to the Company receiving the approval of its Shareholders at an extraordinary general meeting to be held on 29 September 2019 (the “Shareholder Approval”). Following receipt of the Shareholder Approval, the Company shall be obliged to comply with its obligations hereunder including but not limited to payment of the Deposit in accordance with Clause 4.2 which shall, for the avoidance of doubt, be paid by the Company and received by the Sellers within 11 days of the date of this Agreement. |
3. | SALE AND PURCHASE |
3.1 | Sale Shares |
3.2 | The Sale Shares shall be sold on and with effect on and from the Closing Date, free from all Encumbrances and together with all rights and liabilities attaching to them including the right to receive any dividends in respect of the Sale Shares declared and/or paid after Closing. |
3.3 | Seller is not obliged to complete the sale of any of the Sale Shares unless the sale and purchase of all of the Sale Shares is completed simultaneously. |
3.4 | Purchasers acknowledge that Seller enters into this Agreement in reliance on Purchasers’ Warranties and undertakings on the part of each Purchaser set out in this Agreement. |
3.5 | The purchase price for the Sale Shares is SAR 10 per Sale Share, equating to a total of SAR 264,674,220 (the “Purchase Price”). The Purchase Price will be paid in United States Dollars calculated at the prevailing exchange rate on the date of the relevant transfer. |
3.6 | The Purchase Price shall be paid by Purchasers in proportion to the number of Sale Shares purchased by each Purchaser hereunder as set forth in Schedule 1. |
3.7 | Contemporaneously with the sale of the Sale Shares, Seller will be released from any and all commitments and guarantees Seller may have to the Company or any third parties on behalf of the Company, including the guarantee (the “Guarantee”) issued by Seller in favour of the lenders under the Loan Agreement No. 2234 by and between the SIDF and the Company, dated September 1, 2010 (the “Loan”), as amended. To accomplish this release, each Individual Purchaser will assume a share of the aggregate amount of the Guarantee (and any other liabilities arising out of or relating to the Sale Shares) that is proportionate to such Individual Purchaser’s percentage acquisition of Sale Shares relative to the other Individual Purchasers, calculated for purposes of this Clause 3.7 on the basis that the Individual Purchasers are acquiring 100% of the Sale Shares and AMAK is not purchasing any of the Sale Shares. |
4. | PAYMENT OF PURCHASE PRICE AND DEPOSIT |
4.1 | Payment of the Purchase Price |
4.2 | Deposit |
5. | EFFECTIVE DATE |
6. | CONDITIONS |
6.1 | Conditions |
(a) | General Conditions |
(i) | As soon as reasonably practicable after the date of this Agreement and if required, the Parties shall procure that their respective authorised signatories execute the Short Form SPA and shall take all steps as may be necessary to have the Short Form SPA attested by the Chamber of Commerce; |
(ii) | SIDF shall have unconditionally approved the Transaction in writing together with confirmation that Seller is released from any and all obligations and guarantees in connection with the Loan, including the Guarantee, in accordance with Clauses 3.7 and 6.1(c)(iv); and |
(iii) | DMMR shall approve the Transaction. |
(b) | Conditions to Obligations of Purchasers: |
(i) | No Governmental Entity shall have enacted, issued, promulgated or enforced or entered any Law or Order to the effect that the Transaction may not be Closed as provided herein; |
(ii) | Seller’s Warranties shall be true and correct as at the Closing as though made at and as of such time or, in the case of Seller’s Warranties made as of a specific date, as of such date; |
(iii) | Seller shall have performed, in all material respects, all of its obligations and undertakings hereunder required to be performed or complied by it at or prior to the Closing; and |
(iv) | Seller shall have procured that Patrick D. Quarles, Nicholas N. Carter and John D. Elmes (the “Resigning Directors”) each sign their respective letter of resignation as a director on the Board of the Company with effect from the Closing Date. |
(c) | Conditions to Obligations of Seller: |
(i) | No Governmental Entity shall have enacted, issued, promulgated or enforced or entered any Law or Order to the effect that the Transaction may not be consummated as provided herein; |
(ii) | Each Purchaser’s Warranties shall be true and correct as of the Closing as though made at and as of such time or, in the case of Purchasers’ Warranties made as of a specific date, as of such date; |
(iii) | Each Purchaser shall have performed, in all material respects, all of its obligations and undertakings hereunder required to be performed or complied by it at or prior to the Closing; and |
(iv) | Seller has been released from any and all commitments and guarantees Seller may have to the Company or any third parties on behalf of the Company, including the Guarantee. The Parties shall cooperate and use commercially reasonable efforts to take all such steps and to cause any documents supporting the discussions or effecting the foregoing to be provided, executed and delivered as soon as reasonably practicable following receipt of the request from SIDF and in any event on or before the Closing Date. |
6.2 | All Reasonable Endeavours |
6.3 | Failure to satisfy the Conditions |
7. | FILINGS; OTHER ACTIONS |
7.1 | Seller and Purchasers (acting through the Purchasers’ Representative) shall cooperate with each other and take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable on its part under this Agreement and applicable Law to consummate and make effective the Transaction contemplated by this Agreement as soon as reasonably practicable, including respectively using all their reasonable endeavours to accomplish the following: |
(a) | the satisfaction of the Conditions in accordance with Clause 0; and |
(b) | the obtaining or making of all necessary consents, approvals, authorizations, filings or notices including but not limited to from SIDF, DMMR and SAGIA. |
7.2 | It is agreed that Purchasers, represented by the Purchasers’ Representative, and the Company shall lead all discussions with the Governmental Entities. Seller shall have the right to nominate a representative to attend any meeting with a Governmental Entity (including DMMR, SIDF, SAGIA and MOCI) and Purchasers and the Company shall ensure that Seller has reasonable notice ahead of any such meeting. |
7.3 | Subject to applicable Law and the instructions of any Governmental Entity (including DMMR, SIDF, SAGIA and MOCI), Seller, Purchasers (acting through the Purchasers’ Representative) and the Company (acting other than in its capacity as a Purchaser) each shall keep the others apprised of the status of matters relating to Closing of the Transaction contemplated hereby, including promptly furnishing the other with copies of notices or other communications received by Seller, the Company or Purchasers from any Governmental Entity with respect to such transaction. |
7.4 | In connection with the resignation and removal of the Resigning Directors with effect from the Closing Date, the Company shall take all such steps as may be necessary with DMMR and MOCI and shall submit all such documents as may be required or necessary in order to complete the removal of the Resigning Directors as directors on the Board and their removal from the Company’s Commercial Licence in accordance with Clause 8.6. |
8. | CLOSING |
8.1 | Time and Place of Closing |
8.2 | Seller Deliverables |
(a) | A copy of the share certificate representing Seller’s Shares in the Company (being the Sale Shares); |
(b) | The signed Tadawul share transfer forms to transfer the Sale Shares to the Purchasers; and |
(c) | Resigning Directors’ letters of resignation. |
8.3 | Purchaser Deliverables |
(a) | The Purchase Price Balance in accordance with Clause 3.5 and Clause 4.1; |
(b) | Evidence that all regulatory approvals have been obtained; |
(c) | A release in favour of Seller from the Company and the general assembly of the Company of any and all claims and liability related to the ownership of the Sale Shares; |
(d) | The signed Tadawul share transfer forms to purchase the Sale Shares from the Seller; and |
(e) | Evidence that Seller’s Guarantee has been released. |
8.4 | At Closing the Company shall: |
(a) | update the register of Shareholders of the Company with Tadawul to reflect the transfer of the Sale Shares to the relevant Purchaser; and |
(b) | procure that the Board acknowledge the transfer of the Sale Shares to Purchasers and the resignation of the Resigning Directors and that the Board direct that the Chairman execute all such documents, and do all such acts as may be required to duly record such transfer in the share registry and before all relevant authorities. |
8.5 | No Party shall be obliged to complete the sale and purchase of the Sale Shares unless all of the obligations of the respective Parties which are to be performed on the Closing Date are performed on the same date (to the extent possible) and in accordance with the terms of this Agreement. |
8.6 | Within no more than five Business Days after Closing and in accordance with Clause 7.4, the Company shall liaise with MOCI in connection with the resignation and removal of the Resigning Directors as directors on the Board of the Company. Within no more than two Business Days after the date of issuance by MOCI of the updated Commercial Licence showing that the Resigning Directors have been removed as directors on the Board (the “Updated Licence”), the Company shall provide a copy of Updated Licence to Seller and Purchasers. |
8.7 | As soon as reasonably practicable after the Closing Date, and in any event within no more than five Business Days after the Closing Date, the Company and the Purchasers shall notify SAGIA that the Sale Shares have been transferred from the Seller to the Purchasers and shall request that the SAGIA Licence be updated accordingly. Within no more than two Business Days after the date of issuance by SAGIA of the updated SAGIA Licence showing that the Seller is no longer a shareholder in the Company (the “Updated SAGIA Licence”), the Company shall provide a copy of Updated SAGIA Licence to Seller. |
9. | WARRANTIES |
9.1 | Seller’s Warranties |
9.2 | Purchasers’ Warranties |
9.3 | Prompt Disclosure of Breach |
9.4 | Reliance |
9.5 | Scope of Warranties |
(a) | qualified only by reference to those matters disclosed in this Agreement; and |
(b) | separate and independent and, unless expressly provided to the contrary, is not limited by any other provision of the Warranties or ancillary documents. |
10. | INDEMNIFICATIONS; REMEDIES |
10.1 | Survival of Warranties and Undertakings |
10.2 | No Other Warranties |
10.3 | Indemnification Obligations |
(a) | Each Purchaser shall, jointly and severally, indemnify and hold harmless Seller and its affiliates, officers, directors, shareholders, employees and other representatives from, against and in respect of any and all Damages whenever arising or incurred (including amounts paid in settlement, costs of investigation and reasonable attorneys’ fees and expenses) arising out of or relating to any breach of any: (i) Warranty made by Purchasers in this Agreement; and (ii) agreement or undertaking expressly made by Purchasers in this Agreement. |
(b) | Seller shall indemnify and hold harmless each Purchaser from, against and in respect of any and all Damages whenever arising or incurred (including amounts paid in settlement, costs of investigation and reasonable attorneys’ fees and expenses) arising out of or relating to any breach of any: (i) Warranty made by Seller in this Agreement; and (ii) agreement or undertaking expressly made by Seller in this Agreement. |
10.4 | Limitation on Liability |
(a) | neither Purchasers, on the one hand, nor Seller, on the other hand, shall be liable in respect of any warranty claim unless the amount of the damages to which the claiming Party would, but for this Clause 10.4(a), be entitled as a result of that claim exceeds an amount equal to SAR 2,000,000 (the “Claim Threshold”), and such items will not be aggregated for purposes of calculating the Deductible; |
(b) | neither Purchasers, on the one hand, nor Seller, on the other hand, shall be liable in respect of any warranty claim except to the extent that the amount of damages resulting from any and all claims (other than claims disregarded as contemplated by Clause 10.4(a) above) exceeds in aggregate an amount equal to SAR 10,000,000 (the “Deductible”), and then only to the extent of such excess over the Deductible; and |
(c) | the maximum aggregate liability of Purchasers, on the one hand, or Seller, on the other hand, in respect of any and all warranty claims shall not in any case exceed the Purchase Price. |
10.5 | NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, IN NO EVENT WILL ANY PARTY OR ANY OF ITS AFFILIATES OR REPRESENTATIVES BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS, LOSS OF REVENUE OR LOST SALES) IN CONNECTION WITH ANY CLAIMS, LOSSES, DAMAGES OR INJURIES ARISING OUT OF THE CONDUCT OF SUCH PARTY PURSUANT TO THIS AGREEMENT REGARDLESS OF WHETHER THE NONPERFORMING PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR NOT. |
10.6 | Liability in Case of Fraud |
10.7 | Claims Procedures |
11. | TAX MATTERS |
12. | FURTHER ASSURANCES |
13. | NO PARTNERSHIP OR AGENCY |
14. | COSTS |
15. | TERMINATION |
15.1 | Date of Termination |
(a) | at any time prior to the Closing Date by unanimous written agreement of Purchasers and Seller; |
(b) | by Seller if: |
(i) | at any time prior to the Closing Date there is (x) a breach of any of Purchasers’ Warranties herein occurs or (y) an objection from a Governmental Entity in relation to the Transaction; |
(ii) | Purchasers fail to pay the Deposit in accordance with Clause 4.2; |
(iii) | the Closing does not occur by the Long Stop Date; or |
(iv) | there is any change to the rate at which the SAR is pegged to the USD. |
15.2 | Effect of Termination |
(a) | Seller shall retain the Deposit, which shall serve as liquidated damages for lost opportunities (and not as a penalty) in lieu of all other Damages. The Parties hereby acknowledge that the extent of Damages occasioned by termination for any other reason would be impossible or extremely impractical to ascertain and that the amount of the Deposit is a fair and reasonable estimate of the Damages suffered by Seller under the circumstances. |
(b) | Each Party: |
(i) | is released from the obligation to continue to perform this Agreement except those obligations contained in the Surviving Provisions and each provision of this Agreement necessary for a Party to enforce those Clauses; and |
(ii) | retains the rights it has against any other Party for any past breach of the Agreement. |
16. | ASSIGNMENT |
17. | ENTIRE AGREEMENT |
17.1 | Entire Agreement |
17.2 | No Reliance |
17.3 | Exclusion |
18. | NOTICES |
18.1 | Form |
(a) | to Seller at: |
(b) | to Purchasers care of the Purchasers’ Representative: |
18.2 | The Purchasers acknowledge and agree that the Purchasers' Representative shall represent all of the Purchasers in relation to the Transaction and that any and all notices, approvals, consents or communications made by or received by the Purchasers' Representative shall be made for and on behalf of and shall be binding on the Purchasers. |
18.3 | Deemed Delivery |
(a) | if delivered, on the date of delivery; or |
(b) | if sent by email, on the date of delivery, if delivered before 3.00 pm (local time at the country of destination) on any Business Day, and in any other case on the Business Day following the date of actual delivery. |
18.4 | Proof of Service |
18.5 | Exceptions |
18.6 | Change of Details |
(a) | the date specified in the notice as the date on which the change is to take place (provided that date is not prior to the date on which the notice is deemed to be delivered); or |
(b) | if no date is specified or the date specified is less than five Business Days after the date on which notice is deemed to be delivered, the fifth Business Day after notice of any change has been given. |
19. | VARIATION, WAIVER AND CONSENT |
19.1 | No Waiver |
19.2 | Form |
19.3 | Effectiveness |
20. | SEVERABILITY |
20.1 | Severance |
20.2 | Replacement |
21. | GENERAL |
21.1 | Third Party Rights |
21.2 | Counterparts |
21.3 | Rights and Remedies |
21.4 | Amendments |
21.5 | Language |
22. | CONTINUING EFFECT |
23. | GOVERNING LAW AND SUBMISSION TO ARBITRATION |
23.1 | Governing Law |
23.2 | Arbitration |
(a) | Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the rules of the DIFC-LCIA, which rules are deemed to be incorporated by reference into this Clause 23.2. |
(b) | The number of arbitrators shall be three. The claimant and the respondent shall each nominate one member of the tribunal. Where there are multiple parties, whether as claimant or as respondent, the multiple claimants (jointly) shall nominate one member of the tribunal and the respondents (jointly) shall nominate one member of the tribunal. The party-nominated arbitrators shall, within 30 days of the response being served on the LCIA, jointly nominate an arbitrator to act as chairman of the tribunal. If they cannot agree on a person within that period, the LCIA Court shall appoint a chairman. |
(c) | The seat, or legal place, of arbitration shall be the DIFC-LCIA Arbitration Centre in the Dubai International Financial Centre in the Emirate of Dubai, in the United Arab Emirates. |
(d) | The arbitrators shall not be authorized to decide any dispute, controversy or claim ex aequo et bono or as amiable compositeurs but shall strictly apply the Law governing this Agreement. |
(e) | The language to be used in the arbitral proceedings and all pleadings and written evidence shall be English. |
(f) | The decision of the arbitrators shall be final, binding and enforceable upon the parties and judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction thereof. In the event that the failure of a party to comply with the decision of the arbitrators requires the other parties to apply to any court for enforcement of such award, the non-complying party shall be liable to the other for all costs of such litigation including attorneys’ fees. The Parties may apply to any court of competent jurisdiction for temporary or permanent injunctive relief, without breach of this paragraph or abridgement of the powers of the arbitrators. No Party shall be entitled to commence or maintain any action in any court of law upon any matter in dispute until such matter shall have been submitted to, and finally determined under, the dispute resolution and arbitration procedures in this paragraph, and then only for the enforcement of any arbitral award. The Parties irrevocably waive any objection which they may now or hereafter have to the laying of venue of any action, suit or proceeding arising out of or relating to this Agreement, or any claim that any such action, suit or proceeding brought before the arbitrators appointed under this Clause 23.2 has been brought in an inconvenient forum. |
(g) | Requests for arbitration should be served in accordance with the notice provisions set out in Clause 18. |
1. | OWNERSHIP OF SALE SHARES |
(a) | Seller is and will be on the Closing Date the record and beneficial owner and holder of the Sale Shares, free and clear of all Encumbrances. No legend or other reference to any purported Encumbrance appears upon any certificate representing the Sale Shares. |
(b) | The transfer of ownership by Seller to Purchasers of the Sale Shares pursuant to this Agreement and the Company updating the share registry of the Company with Tadawul in respect of the Sale Shares will transfer to Purchasers good and valid title to such Sale Shares, free and clear of all Encumbrances. |
2. | QUALIFICATION |
3. | AUTHORIZATION; NON-CONTRAVENTION |
1. | CAPACITY AND CONSEQUENCES OF SALE |
2. | AUTHORIZATION; NON-CONTRAVENTION |
3. | VALID AND ENFORCEABLE OBLIGATIONS |
4. | ADEQUACY OF FUNDS |
1. | I have reviewed this quarterly report on Form 10-Q of Trecora Resources; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's independent registered public accounting firm and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 8, 2019 | /s/ Patrick Quarles |
Patrick Quarles | |
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Trecora Resources; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's independent registered public accounting firm and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 8, 2019 | /s/ Sami Ahmad |
Sami Ahmad | |
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
(1) | The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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LIABILITIES AND LONG-TERM DEBT |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LIABILITIES AND LONG-TERM DEBT | LIABILITIES AND LONG-TERM DEBT Senior Secured Credit Facilities As of September 30, 2019, we had $8.0 million in borrowings outstanding under the revolving credit facility (the "Revolving Facility") of our amended and restated credit agreement (as amended to the date hereof, the "ARC Agreement") and approximately $82.0 million in borrowings outstanding under the term loan facility of the ARC Agreement (the "Term Loan Facility" and, together with the Revolving Facility, the "Credit Facilities"). In addition, we had approximately $46 million of availability under our Revolving Facility at September 30, 2019. TOCCO’s ability to make additional borrowings under the Revolving Facility at September 30, 2019 was limited by, and in the future may be limited by our obligation to maintain compliance with the covenants contained in the ARC Agreement (including maintenance of a maximum Consolidated Leverage Ratio and minimum Consolidated Fixed Charge Coverage Ratio (each as defined in the ARC Agreement)). On March 29, 2019, TOCCO, as borrower, and SHR, GSPL and TC, as guarantors, entered into a Sixth Amendment (“Sixth Amendment”) to the ARC Agreement. Pursuant to the Sixth Amendment, certain amendments were made to the terms of the ARC Agreement, including increasing the maximum Consolidated Leverage Ratio that must be maintained by TOCCO to 4.75 to 1.00 for the four fiscal quarters ended March 31, 2019, 4.50 to 1.00 for the four fiscal quarters ended June 30, 2019 and 4.00 to 1.00 for the four fiscal quarters ended September 30, 2019. For the four fiscal quarters ended December 31, 2019 and each fiscal quarter thereafter, TOCCO must maintain a Consolidated Leverage Ratio of 3.50 to 1.00 (subject to temporary increase following certain acquisitions). The maturity date for the ARC Agreement is July 31, 2023. As of September 30, 2019, the effective interest rate for the Credit Facilities was 4.59%. The ARC Agreement contains a number of customary affirmative and negative covenants and we were in compliance with those covenants as of September 30, 2019. For a summary of additional terms of the Credit Facilities, see Note 12, “Long-Term Debt and Long-Term Obligations” to the consolidated financial statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2018. Debt Issuance Costs Debt issuance costs of approximately $0.9 million were incurred in connection with the fourth amendment to the ARC Agreement. Unamortized debt issuance costs of approximately $0.7 million and $0.8 million for the periods ended September 30, 2019 and December 31, 2018, have been netted against outstanding loan balances. Long-term debt and long-term obligations are summarized as follows:
Subsequent to September 30, 2019, we made an optional principal payment of $5.0 million against the Revolving Facility, reducing the outstanding amount from $8.0 million to $3.0 million. |
PLANT, PIPELINE AND EQUIPMENT |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PLANT, PIPELINE AND EQUIPMENT | PLANT, PIPELINE AND EQUIPMENT Plant, pipeline and equipment consisted of the following:
Plant, pipeline, and equipment serve as collateral for our amended and restated credit agreement. See Note 10. Labor capitalized for construction was approximately nil and $0.1 million for the three months and $0.1 million and $2.2 million for the nine months ended September 30, 2019 and 2018, respectively. Construction in progress during the first nine months of 2019 included Advanced Reformer unit improvements and pipeline maintenance at SHR and equipment modifications at TC. Construction in progress during the first nine months of 2018 included equipment purchased for various equipment updates at the TC facility, the Advanced Reformer unit, tankage upgrades, and an addition to the rail spur at SHR. Amortization relating to the catalyst, which is included in cost of sales, was approximately $0.2 million and nil for the three months and $0.7 million and nil for the nine months ended September 30, 2019 and 2018, respectively. |
INVENTORIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Inventories included the following:
|
ACCRUED LIABILITIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Liabilities | Accrued liabilities consisted of the following:
|
SEGMENT INFORMATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Summary of Segment Information |
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