Trecora Resources engages in the manufacture and sale of petrochemical products and synthetic waxes; and provision of custom processing services. It operates through the Petrochemical and Specialty Wax segments. The Petrochemical segment is conducted through South Hampton Resources, Inc. (SHR), which produces high purity hydrocarbons and other petroleum based products; and Gulf State Pipe Line Co, Inc., which owns and operates pipelines that connect the SHR facility to a natural gas line, to SHR's truck and rail loading terminal, and to a major petroleum products pipeline owned by a third party. The Specialty Wax segment is conducted through Trecora Chemical, Inc., which produces specialty polyethylene and poly alpha olefin waxes. The company was founded on May 4, 1967 and is headquartered in Sugar Land, TX.
We rely on a limited number of customers, including one customer that represented more than 10% of our consolidated revenue in 2018. A significant change in customer relationships or in customer demand for our products could materially adversely affect our results of operations, financial position and cash flows.
Our industry is highly competitive, and we may lose market share to other producers of specialty petrochemicals, specialty waxes or other products that can be substituted for our products, which may adversely affect our results of operations, financial position and cash flows.
Loss of key employees, our inability to attract and retain new qualified employees or our inability to keep our employees focused on our strategies and goals could have an adverse impact on our operations.
We do not control the activities of AMAK and are dependent on AMAK's management and board of directors.
Maintenance, expansion and refurbishment of our facilities and the development and implementation of new manufacturing processes involve significant risks which may adversely affect our business, results of operations, financial condition and cash flows.
The covenants in the instruments that govern our outstanding indebtedness may limit our operating and financial flexibility.
Our substantial indebtedness could limit cash flow available for our operations and could adversely affect our ability to service debt or obtain additional financing if necessary.
Conditions in the global economy may adversely affect our results of operations, financial condition and cash flows.
To service our current, and any future, indebtedness, we will require a significant amount of cash, which may adversely affect our future results.
There are certain hazards and risks inherent in our operations that could adversely affect those operations and results of operations and financial condition.
Increases in the costs of our raw materials could have an adverse effect on our financial condition and results of operations if those costs cannot be passed onto our customers.
If the availability of our raw materials is limited, we may be unable to produce some of our products in quantities sufficient to meet customer demand or on favorable economic terms, which could have an adverse effect on our results of operations, financial condition and cash flows.
Certain activist stockholders actions could cause us to incur expense and hinder execution of our strategy.
We expect to continue to incur capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations.
If we are unable to access third-party transportation for our raw materials and finished products, we may not be able to fulfill our obligations to our customers in a timely manner, which could have a material adverse effect on our results of operations, financial condition and cash flows.
If we are not able to continue the technological innovation and successful commercial introduction of new products, our customers may turn to other producers to meet their requirements, which may adversely affect our results of operations, financial position and cash flows.
We are subject to numerous regulations that could require us to modify our current business practices and incur increased costs.
Failure to successfully consummate extraordinary transactions, including the integration of other businesses, assets, products or technologies, or realize the financial and strategic goals that were contemplated at the time of any such transaction may adversely affect our future business, results of operations and financial condition.
Adverse results of legal proceedings could materially adversely affect us.
Cost pressures could negatively impact AMAK's operating margins and expansion plans.
An impairment of goodwill could negatively impact our results of operations.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
We are exposed to local business risks in different countries, which could have a material adverse effect on our financial condition and results of operations.
We may have additional tax liabilities, which may adversely affect our financial position.
We from time to time are subject to contingent liabilities. If any contingent liabilities become actual liabilities, our financial condition may be adversely affected.
We may be unable to recover our investment in AMAK, which could adversely affect our results of operations and financial condition.
AMAK may have fewer mineral reserves than its estimates indicate.
Domestic or international terrorist attacks may disrupt our operations or otherwise have an adverse impact on our business.
Increased information systems security threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, products and services.
Implementation of changes to our enterprise resource planning ("ERP") system may adversely affect our business and results of operations or the effectiveness of internal controls over financial reporting.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Some of the statements and information contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements regarding the Company's financial position, business strategy and plans and objectives of the Company's management for future operations and other statements that are not historical facts, are forward-looking statements. Forward-looking statements are often characterized by the use of words such as "outlook," "may," "will," "should," "could," "expects," "plans," "anticipates," "contemplates," "proposes," "believes," "estimates," "predicts," "projects," "potential," "continue," "intend," or the negative of such terms and other comparable terminology, or by discussions of strategy, plans or intentions.
Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such statements. Such risks, uncertainties and factors include, but are not limited to: general economic conditions domestically and internationally; insufficient cash flows from operating activities; difficulties in obtaining financing; outstanding debt and other financial and legal obligations; lawsuits; competition; industry cycles; feedstock, product and mineral prices; feedstock availability; technological developments; regulatory changes; environmental matters; foreign government instability; foreign legal and political concepts; foreign currency fluctuations; not completing, or not completely realizing the anticipated benefits from, the sale of our equity interest in AMAK; receipt and timing of necessary governmental approvals for the sale of our equity interest in AMAK; and other risks detailed in this report, in our latest Annual Report on Form 10–K, including but not limited to Part I, Item 1A. Risk Factors and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations therein, and in our other filings with the SEC.