Trecora Resources
Q3 2015 Earnings Call Transcript

Published: 4 Nov 2015

[Operator:]

Good day and welcome to the Trecora Resources Third Quarter 2015 Earnings Conference. Today's conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Matt Steinberg, Piacente Group Incorporated. Please go ahead, Sir.

[Matt Steinberg:]

Thank you, operator. And good afternoon everyone. Welcome to the Trecora Resources third quarter 2015 earnings conference call. The earnings release was distributed over the wire services after the close of the financial markets earlier today. Our call today will include Simon Upfill-Brown, President and Chief Executive Officer and Connie Cook, Chief Financial Officer. Following management's prepared remarks, there will be a question-and-answer session. Before we get started, I would like to review the Safe Harbor statements, which is found on slide two. Statements in this presentation that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management's beliefs and expectations only as of the date of this teleconference November 3rd, 2015. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks, as well as others, are discussed in greater detail in Trecora's filings with the SEC, including the company's Annual Report on Form 10-K for the year ended December 31, 2014 and subsequent quarterly reports on Form 10-Q. This webcast is accompanied by a slide presentation that is available on the company's website www.trecora.com. At this time I would like to turn the call over to Trecora's President and CEO, Simon Upfill-Brown.

[Simon Upfill-Brown:]

Thanks, Matt. And thanks to everyone joining the call this afternoon. I'll begin today with a brief discussion of the quarter's highlights. I'll then pass the call over to Connie for a more detailed discussion of the financial results. Following that, our review progress at South Hampton Resources and Trecora Chemical and conclude with an update on results and developments at AMAK before taking your questions. Turning now to slide four. Our third quarter results reflect many of the same themes that occur during the first half of the year. We achieved a record quarterly growth profit in Q3 at 16.6 million, up over 27% year-over-year with operating income of 11.1 million, up over 25% year-over-year. We generated a total adjusted EBITDA of 13.9 million, a 33.5% increase from a year ago and the highest level ever in company history. Revenue decrease 13% year-over-year to 67 million, reflecting the continued low feedstock prices. Because roughly half of our contracts are tied to the index cost of natural gasoline, this lowers our average selling price and consequently our revenue. Our fully diluted earnings per share were $0.21, compared with $0.23 in Q3 of 2014. Low metal prices and operation issues at AMAK had a significant impact on our EPS and Connie will discuss in detail. Slide 5 is a chart of our revenue and volume over time. This clearly illustrates the year-over-year decline in revenue, but it also shows an uptick sequentially from the first quarter of this year in both revenue and volume. As you can see on slide 6, our processed feedstock cost per gallon remains well below a year ago. During the third quarter of 2015, we paid nearly 49% less per gallon than in the third quarter of 2014. The natural gasoline price index is trading about 12% above this year's low point which was on January the 6th. Now, I'll turn the call over to our CFO, Connie Cook, for a review of the financial results.

[Connie Cook:]

Thank you, Simon. Slide 7 presents our income statement for the third quarter and the first nine months of 2015. I will begin with the discussion of the quarter. Quarterly revenues decreased 13% year-over-year to $66.9 million compared with $76.9 million in the third quarter of 2014. The decrease in revenue was due to the continued sharp decline in per gallon feedstock cost that translated into lower average selling prices. Volume of petrochemical sales increased 14% year-over-year to 24.6 million gallons from 21.6 million gallons in the third quarter of 2014. Foreign sales volumes for Q3 '15 was 5.1 million gallons versus 5.7 million gallons in Q3 of 2014. This reflects reduction in Canadian oil sands volume. Petrochemical product sales were $59.1 million, representing 88.3% of total revenue for the third quarter of 2015. Specialty wax sales were $4.1 million. We generated $3.7 million in processing fees during the quarter, compared with $1.6 million in Q3 at 2014. The increase in processing fees was primarily the result of the incorporation of TC's processing fees. Cost of sales, including depreciation, totaled $50.3 million, a decrease of 21.2% compared with $63.9 million in the third quarter of 2014. The decrease was driven by the sharp reduction in feedstock prices. Gross margin for the quarter was 24.8% versus 17% in the third quarter of 2014, also driven by the lower feedstock cost. However, it was down slightly from the second quarter of 2015's gross margin at 25.6%. G&A costs were $5.4 million versus $4.1 million in the third quarter of 2014. A majority of the increase is due to the addition of TC. However, we did see an increase of 8.3% in G&A excluding TC, due to additional officer compensation which included the accrual for year-end bonuses and a restricted stock grant and contributions to the 401(k) plan due changes in the plan. Operating income was an $11.1 million for Q3 '15 versus $8.8 million in the third quarter of 2014, an increase of 25.3%. Due to the decline in commodity prices, there was an inventory write down of $3 million for AMAK with our share being 1.1 million. This significantly impacted our equity and losses in AMAK for the quarter. Net income attributable to Trecora Resources was $5.3 million or $0.21 per diluted share compared to net income of $5.8 million or $0.23 per diluted share in the second quarter of 2014. We estimate that EPS was negatively impacted by the equity and losses from AMAK by approximately $0.05. Now moving to year-to-date results. Revenues decreased 15.8% year-over-year to $181.4 million compared with $215.6 million in the first nine months of 2014. As mentioned previously, the decrease in revenue was due to the sharp decline in per gallon feedstock costs, which translated into lower average selling prices. Volume of petrochemical sales increased 1.9% year-over-year to 62.3 million gallons from 61.1 million gallons in the first nine months of 2014. Foreign sales volumes were 14 million gallons versus 17 million gallons in the first nine months of 2014. This again reflects the reduction in Canadian oil sands volume. Petrochemical product sales were $158.7 million representing 87.4% of total revenue for the first nine months of 2016. Specialty wax sales were an $11.7 million. We generated an 11 million in processing fees, compared with 5.1 million in the first nine months of 2014. The increase in processing fees was again, primarily the result of the incorporation of TC processing fees. Cost of sales including depreciation, totaled $133.9 million, a decrease of 26.5% compared with $182.1 million in the first nine months of 2014. The decrease was again driven by the sharp reduction in feedstock prices. Year-to-date, gross margin was 26.2% versus 15.5% in the first nine months of 2014, also driven by the lower feedstock cost. G&A cost were $16.7 million versus $12.4 million in the first nine months of 2014. The majority of the increase is again due to the addition of TC. Operating income was $30.3 million versus $20.6 million in the first nine months of 2014, an increase of 46.9%. Net income attributable to Trecora Resources was $17.5 million or $0.69 per diluted share compared to net income of $13.4 million or $0.54 per diluted share in the first nine months of 2014. Moving to slide 8. It shows that EBITDA and adjusted EBITDA calculations for the quarter and for year-to-date. EBITDA for the quarter was an 11.3 million compared with 9.5 million in the third quarter of 2014. Adjusted EBITDA, which excludes the equity and AMAK losses and share based compensation, was $13.9 million compared with $10.4 million in the third quarter of 2014. Adjusted EBITDA margin was 20.7% compared with 13.5% a year ago. EBITDA for the first nine months at 2015 was $34.6 million compared with $22.9 million in the first nine months of 2014. Adjusted EBITDA was $38.7 million compared with $25.2 million in the first nine months of 2014. Adjusted EBITDA margin was 21.4% compared with a 11.7% a year ago. Slide 9 presents our balance sheet. Cash was $14.9 million at the end of the quarter, compared with $8.5 million at December 31. Long-term debt, including the current portion, was $75.2 million compared with $80.5 million at the yearend 2014, reflecting the funding used to acquire TC, construct D-Train and provide working capital, plus the quarterly payments that remain. Capital expenditures for the quarter were $6.7 million and comprised expenditures related to our D-Train expansion and the expansion of custom processing capabilities at TC. We have $31.5 million in working capital as of September 30th, 2015 and ended the quarter with a current ratio of 2.3 to 1. Shareholders' equity increased to $140.4 million from $121.1 million as of December 31st, 2014. This concludes the financial review and with that, I'll turn the call back over to Simon.

[Simon Upfill-Brown:]

Thanks, Connie. Moving to slide 10. Petrochemical sales volume was $24.6 million gallons, which was up 14% year-over-year compared with the third quarter of 2014. The increase was attributable to the increase of prime product sales partially offset by the variability in orders from our Canadian oil sands customers, along with an increase in excess and byproduct sales. Excluding oil sand shipments, prime product sales were up 14% year-over-year. Unfortunately, excess product sales increased by 700,000 gallons per month or 2.1 million gallons with the quarter over third quarter 2014. This was driven primarily by a drop in pentane in the feed from roughly 56% to 54% in the feed this quarter. We have no control over the contents of the feed and with this change we need almost 4% more feed to make the same volume of pentanes, that we would with a higher pentane feedstock. Equipment outages also lead to additional byproduct volumes in third quarter '15. Deferred sales were approximately 1.1 million gallons lower than the year ago period. Petrochemical capacity utilization was 91.8% compared with 87.2% in the third quarter of 2014 and 74% in the second quarter of 2015. Capacity utilization was based on 7,000 barrels of fresh feed in 2015 and 6,700 barrels per day in 2014. International petrochemical volume was 20.7% of total volume, reflecting the reduction in oil sands shipments. As indicated last quarter, we are pleased to report an order for nearly 400,000 gallons of pentane from a new polyethylene facility in the Middle East. The customer stated very firmly that the decision was based on our product quality. This business was developed by agent in Asia and shipments will begin in December. Our polyethylene market continues to develop well. In addition to the order just mentioned, we recently signed a new three year agreement to supply 100% of a customer's pentane for our new project in the South East U.S. Volume is estimated at 580,000 gallons per year with the projects start-up in mid-2017. Another major polyethylene customer with the project due to start up in 2020, recently announced the technology that we'll use to produce polyethylene. I am glad to say that that technology is very much in our sweet spot. On slide 11, I am pleased to announce that our D-Train expansion is ahead of schedule and below our original capital budget. We had announced earlier that our HD unit -- HDS unit was put in service, this September. The distillation unit was mechanically complete by the 11 of October and feed introduced on the 19. We were producing unspecification finished product contents on the 29th. We will conduct a full D-Train capacity test in December, but we have already been running well above 10,000 barrels per day of feed through whole three lines. I'm recovering from a cold. Slide 12 gives a quick photographic update on D-Train progress. The photos are fairly similar, but one on the right includes the HD unit in the full ground. HDS unit, sorry, I keep telling the HD unit, HDS unit, in the foreground. If you look carefully, you can see all the piping attached to the columns, something you would not have seen last time. SHR had a great quarter and it is very exciting to have D-Train on stream. With the continued increase in prime product sales, we expect the demand from polyethylene projects and oil sands the unit will serve us well. It already is. There were 12 rail cars of pentane we could not ship in October due to capacity constraints. These will all go out in early November. We couldn't be more pleased with this business. Moving to slide 13. At Trecora Chemical, we benefited from new orders from adhesive customers, an additional custom processing project. We continue improving wax quality and consistency as well as our throughput with September generating the highest ever wax production volume by a significant margin. We are having considerable success in the adhesive markets. One major customer purchased 2.2 million pounds in the first nine months of 2015. This is the customer who had thrown us out in 2014 before we owned the business, for poor quality. A second major adhesive customer purchased a 100,000 pounds in the third quarter and two others made follow-up orders in the quarter after successful trials. After making solid inroads into resource market, we are starting to go up in the PVC lubricants and coatings, primarily road marking paints, those two markets. Our European distributor placed an initial order of 170,000 pounds in October and a new sales rate focused on Latin America also kicked into gear in October. After our new wax distillation column started up in July, the custom processing unit generated almost 2.4 million in revenue for the quarter. Some of this revenue came from the Laguna project where the customer funded all of the necessary capital. We plan on executing a follow-up campaign for this project in the fourth quarter and we remain excited about this new technology. While the expansion of the custom processing distillation and hydrogenation project continues to progress, the expected completion date has been delayed to the third quarter of 2016 as we optimize the design for specific projects. We look forward to leveraging existing relations with our petrochemical customers and driving new custom processing business. Turning now to an update on AMAK on slide 14. Lower commodity prices significantly impacted results at AMAK in the third quarter. Average spot prices were down 13% from the second quarter and zinc prices down 16% over the same period. The drop in commodity prices caused an inventory write down of 3 million for AMAK in the quarter. Third quarter results were also negatively impacted by operating issues resulting in unplanned downtime and lower recoveries than expected. Recoveries were primarily impacted by the lack of supply of floatation agent. Copper recoveries returned to normal in September as the zinc recoveries in early October. As opposed to what we had predicted last quarter, the precious metals circuit was down for all of July and most of August, due to lack of cyanide supply. The unit was up 70% of the time in September and 90% of the time in October, so a great improvement towards the end of the quarter and subsequent to the quarter. AMAK has now paid for the two expiration licenses and one new mining license, indicating that formula approval is indeed very close. We will announce it as soon as we get the relevant documents. We have no control over this of course but remain optimistic that zinc prices will strengthen in the intermediate term, following both the closure of the world's largest zinc mine in the next few months and Glencore's recent announcement to cut 500,000 metric tons of contained zinc metal output from its mines. Slide 15 shows the year-to-date update on production and delivery at AMAK. We fell a little further behind on zinc shipments and fell below plan on copper due to the issues mentioned above. The average cash cost of production remains below $60 per metric ton of ore. While we wait for the recovery in zinc prices. Recent pricing is well below what we call forecast for the second half of 2015, during our last call. With new licenses to be issued shortly, new low cost gold extraction technology and improved zinc prices we remain convinced that AMAK will deliver significant value in the longer term. In the meantime, AMAK continues to comprehensively review ways to help at whether the storm of low commodity prices and sub promo performance. Let's go to slide 16, for the summary. The underlying operations of our business continue to perform well during the third quarter. We achieved direct or quarterly gross profit, attracted several new customers and large orders and maintained efficiently run operations. South Hampton recourse had a record quarter. And Trecora chemical continued to demonstrate good progress. Both are well positioned to achieve the long term growth as our capacity expansions are well underway. Volume environment and operational issues for AMAK have been difficult. Zinc prices are expected to improve. And the formal approval on the three new leases which we paid for a few weeks ago is endless. Going forward, we're excited for the future prospects of the company and as we have done consistently in the past, we will continue to maximize value to our shareholders. This concludes my prepared remarks. Before I open the call for questions I would like to announce that I will be presenting at the Jefferies energy conference on Wednesday November 11. I hope to see many of you there. At this time I would like to ask the operator to open the call for Q&A.

[Operator:]

Thank you. [Operator Instructions] We'll take our first question from Joseph Reagor with Roth Capital Partners.

[Joseph Reagor:]

Good morning. Good afternoon, guys, and thanks for taking the questions.

[Simon Upfill-Brown:]

Hey, Joe.

[Joseph Reagor:]

Couple of I guess things where looking for little additional color on the issues I guess at AMAK first where the only issue is just a lack of supply of re-agents for flotation and for cyanide or are there any other unexpected shut down reasons?

[Simon Upfill-Brown:]

We had a couple of maintenance break downs, Joe. A couple of days here and a couple of days there I think one was the max for a week.

[Joseph Reagor:]

Okay. So nothing out of that ordinary otherwise from a mining perspective, that just comes with the third part?

[Simon Upfill-Brown:]

No. I mean, a lot of things happened and we're working hard on upgrading maintenance with our sub-contractor and I think some of them who'd potentially have been avoided but it comes a little with the territory in mining.

[Joseph Reagor:]

Yes. Okay, that's helpful. Second area of interest here, on the volumes from South Hampton, they were a pretty big jump from last quarter, up almost 5 million gallons. Can you give some color as to where those increases came from, was it oil sands, was it other products, etcetera?

[Simon Upfill-Brown:]

Well, oil sands was still a little bit below quarter-over-quarter. I mentioned the big jump because we included all products, right? There was 2.1 of the five was the byproduct increase based on the one operational issue we had and the lower pentanes in feed. And then the rest was sort of across the board in a variety of different business, the customers and markets.

[Joseph Reagor:]

So, is it fair to assume that, I know, it's a little bit of a light seasonality in Q4, but volume should be relatively similar to Q3, based on historic reporting, right?

[Simon Upfill-Brown:]

Yes. We don't give guidance, Joe, but yes I mean it should be pretty close.

[Joseph Reagor:]

Okay. That's helpful.

[Simon Upfill-Brown:]

We don't have what we don’t have control over of course is the feed. And October showed a little bit of a further decline in pentanes, but November looks a little bit better again. So, we'll see how that all goes but we don't have any control over that.

[Joseph Reagor:]

Okay, fair enough. And then, looking at your Trecora Chemical, there is the delay with the installation of the hydrogenation unit. Can you give us some more color as to why you are delaying it, it sounds like you're doing some additional work, takes some extra time. But and also what kind of growth potential maybe you can just slap a range on it, that doesn't really come across this guidance. Can we expect before the hydrogenation unit is installed in Q3 next year, because I know that is a big portion of the growth story for that business.

[Simon Upfill-Brown:]

Yes. There are couple of things. Engineers, who are working on a couple of minor safely projects in the quarter which took them off this project for a bit. In the last two quarters they've been focusing on that. But the primary reason for the delay is we are designing more now with this for specific project that we are aware of us being able to get. So, that's causing and that's much better to have specific project in mind because you can get them up and running sooner rather than later. So, it's a wise thing to do, Joe, to delay the project. I think we've said a number of times that it's unlikely we'll see much more volume above say the 10 million a year in custom processing. There will some slight improvement but we had a good quarter in custom processing in the third quarter roughly 2.4 million, and the [indiscernible] roughly 9.6 million, 10 million. We likely will get much more than that. We will get some before the new unit comes on stream.

[Joseph Reagor:]

Okay. Thank you.

[Simon Upfill-Brown:]

Thanks, Joe.

[Operator:]

[Operator Instructions] Our next question comes from Sarkis Sherbetchyan with B. Riley and Company.

[Sarkis Sherbetchyan:]

Good afternoon and thanks for taking my question. So, I guess first and foremost, with respect to the pentanes within your feedstock, was there something causing the lower output, I suppose, is that a supplier thing or if you can give some color on that. So, how would we think about that?

[Simon Upfill-Brown:]

Yes. Hi, Sarkis. Yes. The issue with the feedstock is that the specification for natural gasoline is very broad. So, it's very wide on pentanes content and hexanes content. We look back historically, our 2015 pentane content is sort of right in the middle of where it's been over the last five years. And there is a little bit of a move around seasonally but not much and I think a lot depends on this stuff which well it's coming from. How well the fractionate is, or running down in Mont Belvieu and other places regards to a fractionating the natural gas liquids. So, there is a whole slew of things that impact us but our expectation is that it will trend back higher again and then at some months some quarters later on it will come back lower. We just with this there's absolutely nothing we can do about that expect find more and more optimized value for the byproduct streams and as you know we work hard at that.

[Sarkis Sherbetchyan:]

Understood. So, it's essentially within bounds and it's within the range of expectations that's kind of the message that we're getting. It's not something that's kind of a surprise.

[Simon Upfill-Brown:]

That's well within balance. I think we've been a bit spoiled in the first half of the year with it being so high, the pentane content, but as I said what we've been, what regard is the third quarter was very much in line sort of we had years where it was lower. And you had, we've had this recent time where it's been higher but it's right down in the middle.

[Sarkis Sherbetchyan:]

Okay. That's fair enough. And then with respect to the 400,000 gallon order you mentioned from the new facility in the Middle East is I think you mentioned it's to be shipped, that hasn't shipped yet?

[Simon Upfill-Brown:]

No. It's to be shipped, starting shipping in December.

[Sarkis Sherbetchyan:]

Okay and is that 400,000 gallons on an annual number that you expect to ship or is that something that these folks would presumably order every quarter or so?

[Simon Upfill-Brown:]

Well, this is the first fill and it all depends on how efficient their recycle unit is and everything else but it's likely to be roughly that per year --.

[Sarkis Sherbetchyan:]

Okay, understood.

[Simon Upfill-Brown:]

Maybe a little bit less.

[Sarkis Sherbetchyan:]

Understood. And with regards to some of the new Asian customer winds you had mentioned in the prior call, have you noticed some reorder rates come through or any kind of color as to what their expectations are fulfilled?

[Simon Upfill-Brown:]

Yes. There has been a number of reorder. Some have not reordered while the dollar has been so strong. But we are continued to work on a number of other projects over there, the Sarkis and I think I mentioned in the call that this product, the engineering design company for this project actually came out of Asia and that's why our agent was actually landed the project for us.

[Sarkis Sherbetchyan:]

Good, understood. And I guess moving on Trecora Chemical you mentioned that September you generated the highest wax production volume. I guess, can you give us a sense of what that number entails and also are you able to place that volume into your customers' hands at this point?

[Simon Upfill-Brown:]

Unfortunately, quite a bit of it went into inventory Sarkis. The volume was well in excess of 3 million pounds. So, it was a really good volume and this is very exciting for us as we develop these new markets and continue to grow the adhesives market and so on and so on. We will have a lot of good product to sell. So, it's very exciting to see that. I would prefer it if less of it was going into inventory, but that will be taken care of as all these customers add follow-up orders. One customer who has a little bit of excess product in inventory, when they run that up, we will start to see bigger volume from then on and so on and so on. So, I think the fact that we can make that much volume is a very exciting point.

[Sarkis Sherbetchyan:]

That's fair. And then with respect to some earlier comments where you've forecast as the management team to double the wax and custom processing revenues by 2017. Is that essentially still on track even given the delay that you just kind of mentioned with the unit for Trecora Chemical?

[Simon Upfill-Brown:]

Yes, I think so. Yes, we should be able to do that.

[Sarkis Sherbetchyan:]

Good. And finally, with respect to the mine AMAK, understood that it's kind of a tough environment out there for commodities especially metals. Any progress on the IPO process, any updates with respect to that?

[Simon Upfill-Brown:]

Well, you noticed I didn't mention it. I think the view is that until commodity prices improve a little bit, Sarkis, it's not really worth pursuing that because we were get the value that we think we can get out of this asset. So, we keep expecting thing prices to go up and say what we were saying last quarter there, they're way of that. So, it's just a very tough time in commodities. So, I think the view is to really start pursuing the IPO when there is some real indications that zinc prices in particular are improving.

[Sarkis Sherbetchyan:]

Okay, that's helpful. And then I guess along that line of thinking with respect to cash generation, is the mine is supporting itself, would it require infusions from the current partners? Any line of thought around that?

[Simon Upfill-Brown:]

Yes. Well, we didn't put any cash in the last quarter. We have no plans to put cash in this quarter. All looks pretty good from a cash flow perspective and I think one of the shareholders are expecting on to be able to manage without additional cash.

[Sarkis Sherbetchyan:]

Good. I'll hop back into the queue. Thank you.

[Simon Upfill-Brown:]

Thanks, Sarkis.

[Operator:]

[Operator Instructions] We'll take our follow-up question from Joseph Reagor with Roth Capital Partners.

[Joseph Reagor:]

Hey, guys. Two follow-up questions. One, just while we are on the subject of AMAK and the IPO. If you chose to go forward in IPO at some point, [indiscernible] and copper prices improved a bit. How long from a decision to go forward with it be tell you actually IPO to like what would be that timeframe, given that Saudi Arabia's regulations and timeframe, it might be little different than the U.S.?

[Simon Upfill-Brown:]

We've initiated conversations with banks and things like that. So, AMAK knows who they're going to be working with from that perspective. So, it's not like we have to go searching around. So, my guess is and Joe and it's a guess, it's about nine months.

[Joseph Reagor:]

Okay. Okay, that's helpful. And then, just had one follow-up question on South Hampton. You talked about volumes already but given the volumes went up but I think you said there is some byproduct in there and they are probably impacted margin on a per gallon basis a little bit. And I know you guys had reported but it's calculated a little bit on back of the envelop. It looks like a decline maybe $0.10 during the quarter. Was that all byproduct related or was there any pricing pressure in the quarter?

[Simon Upfill-Brown:]

There was a little bit of pricing pressure in the quarter because our competitive prices of unleaded gasoline and our prices are pretty much check for the formula customers, right. But for the spot customers were we'd work very hard to hold prices up. Those guys came under a bit of pressure from our competitor because unleaded gasoline prices are way down. And they sort of been out of full letter saying here's our new price. So, our sales guys get pounded up on and then work very hard to minimize the reduction but it does have some impact on our spot pricing.

[Joseph Reagor:]

Okay. But you haven't had any of the formula based customers kind of come try to push you to go up some of the margin, have you?

[Simon Upfill-Brown:]

No.

[Joseph Reagor:]

No. Okay, that's good.

[Simon Upfill-Brown:]

If anything where we've extended formula price contracts, I think nearly in every case we got a price increase.

[Joseph Reagor:]

Okay, good to hear. Thank you.

[Simon Upfill-Brown:]

Thanks, Joe.

[Operator:]

Our next question comes from Colin Lee with Luzich Partners.

[Colin Lee:]

Hi, good afternoon. For the Middle East and the new Asian customers, are they on a formula pricing or they are on spot pricing?

[Simon Upfill-Brown:]

They are on formula pricing.

[Colin Lee:]

Throughout formula pricing, got you. And can you just --.

[Simon Upfill-Brown:]

Let me check that, hold on. Colin, let me check that.

[Colin Lee:]

Okay.

[Simon Upfill-Brown:]

Let me check that, I need to check that. I just had a flash that I might be wrong. I will report back to you on that.

[Colin Lee:]

Can you also repeat the revenue amount from your international customers?

[Connie Cook:]

For the quarter?

[Colin Lee:]

Yes, for the quarter.

[Connie Cook:]

14.1 million

[Colin Lee:]

14.1 million. Okay, great, thank you.

[Connie Cook:]

Welcome.

[Simon Upfill-Brown:]

Thanks, Colin.

[Operator:]

That does conclude the question-answer portion of today's call. At this time I would like to turn the call back over to management for any additional or closing remarks.

[Simon Upfill-Brown:]

Thank you all for being with us today. Please feel free to contact us with any additional questions you might have and I wish you all a very good evening.

[Operator:]

That does conclude today's conference. Thank you for your participation.