Greetings, and welcome to the Vertex Energy Inc. Third Quarter 2012 Financial Results Call. [Operator Instructions] A brief question-and-answer session will follow up on the presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ben Cowart, Chairman and CEO. Thank you, Mr. Cowart, you may begin.

Yes, thank you. Joining me today on the call is Mr. Chris Carlson, our Chief Financial Officer; Mr. Matthew Lieb, our Chief Operating Officer; and Michael Porter, our Investment Relations Consultant with Porter, LeVay & Rose. I just want to welcome everyone to the call. Before we begin the business portion of this call and on behalf of the company, I'd like to inform you that the company expects to make forward-looking statements during today's call. Statements including words such as believe, anticipate, expect, and statements in the future tense and forward-looking statements. These statements involve known and unknown risk and uncertainties and are based on management's current views and assumptions regarding future events and operating performance. A number of factors could cause the company's actual future results to differ materially from its current expectations. Thank you, everyone, for joining us here on our Q3 2012 earnings call for Vertex Energy. This call coincides with our filings of our 10-Q for the quarter which will be out later today. I want to start off by giving you a few highlights from Q3 of this year, and then, we'll turn the call over to Chris Carlson, our CFO, so that he can walk you through our third quarter 2012 financial performance. Following Chris' presentation, I'll comment on the acquisition that was completed during Q3, as well as our strategy given the completion of this acquisition. We'll then open the line for questions. Q3 2012 was a positive quarter for us financially and strategically. We were able to improve revenue, gross profit, net income relative to the same quarter a year ago. From a strategic point of view, we completed an acquisition that provides a platform for future growth going forward. Here are a few quick highlights from the quarter. Our revenue increased 19% in Q3 2012 compared to the third quarter of 2011. Consolidated revenue was $36.2 million for the quarter. Gross profit increased 57% compared to the same quarter last year. Our Q3 gross profit was $3.2 million. Net income also improved relative to last year. Our third quarter 2012 net income increased 105% to $2.1 million. Overall sales volume, in terms of total barrels of finished product that was sold, a very important matrix for the business as it illustrates our reach into the market. Net volume increased about 23% for Q3 2012 versus Q3 2011. Before we discuss the acquisition and our strategy going forward, I'd first like to turn the call over to our CFO, Chris Carlson, for a more detailed review of our financial performance in the third quarter of this year. Chris?

Thank you, Ben. For more information, please refer to our most recent press release, our latest Form 10-Q to be filed later today for the fiscal quarter ending September 30, 2012, as well as our other filings made with the Securities and Exchange Commission. I also want to mention before we proceed that all financial numbers are prepared, unless noted, in accordance with Generally Accepted Accounting Principles. Our reported Q3 2012 figures include one month, the month of September, of financial impact from the acquisition, and there will be additional pro forma data available in our most recently filed 10-Q. I'd like to now discuss our results. Revenue. For the quarter ended September 30, 2012, revenue increased 19% to $36.2 million compared to $30.3 million in Q3 2011. This revenue increase was due primarily to increased sales volumes that Ben mentioned in his opening remarks. For the first 9 months of 2012, our revenue increased 31% to $102.3 million, compared to last year's first 9 months of revenue of $78.4 million. Our Black Oil Division revenue for Q3 2012 increased roughly 17% to $7.3 million as compared to $6.3 million in the third quarter of 2011. For the 9 months ending September 30, 2012, Black Oil Division sales were $25.8 million, an increase of 71% over the first 9 months of last year. Strong growth in the sales volume drove our revenue increase in this division. The Refining & Marketing division, which includes TCEP, produced a revenue of $28.9 million in the third quarter of this year versus $24 million in the same period last year. This represents an increase over the prior year of 20%. This increase was primarily attributed to a 21% improvement in sales volume. For the first 9 months of 2012, the Refining & Marketing division improved revenue by 21% to $76.5 million. TCEP, which, again, as a business unit within our Refining & Marketing division, generated $15.8 million in revenue for Q3 2012 versus $14.9 million in Q3 2011. This 6% year-over-year increase was driven primarily by increased volume. For the first 9 months of 2012, TCEP generated revenue of $43.7 million, which represents a 21% increase over the $36.1 million in TCEP revenue from the first 9 months of 2011. You can find more detailed information on the various pricing benchmarks that are most applicable to our business in our 10-Q for the quarter ending September 30, 2012. Gross profit. Gross profit increased 57% in the third quarter of 2012 to $3.2 million compared to $2 million during the same period last year. This increase was primarily attributed to increased sales volumes and reduced costs for both raw material for the TCEP process and TCEP-related operating expenses. Overall, our company-wide per barrel margin increased 27% in Q3 of 2012 versus the same quarter in 2011. For the first 9 months of 2012, our gross profit was $6.8 million, a 1% increase relative to the first 3 quarters of 2011. Gross profit for the Black Oil Division was just over $660,000 for the quarter, a 3% increase over last year's third quarter gross profit of approximately $642,000. For the first 9 months of the year, our gross profit in this division increased 38% to $2 million. The Refining & Marketing division as a whole generated gross profit of roughly $2.5 million in Q3 2012, an 81% increase compared to 2011's Q3 gross profit of $1.4 million. During the first 9 months of 2012, we generated gross profit of $4.8 million, which represents a 10% decline versus the first 3 quarters of 2011. TCEP had a gross profit of approximately $430,000 during the third quarter of this year compared to last year's Q3 gross profit of $496,000. For the first 9 months of this year, TCEP produced a gross profit of nearly $1.1 million, which is a 4% decline relative to the first 9 months of 2011. SG&A. Selling, general and administrative expenses increased by 61% from $998,000 in Q3 of 2011 to $1.6 million in the third quarter of 2012. This increase, which is exclusive of acquisition-related expenses, is primarily due to the SG&A costs from the new business lines and additional compensation expenses associated with the employees coming over with the acquisition in September of this year. For the first 9 months of 2012, SG&A totaled $3.72 million, which represents a 23% increase versus the first 9 months of last year. Net income. Net income for the first 9 months of 2012 was $3.5 million or $0.25 per fully diluted share. This represents a 3% decrease compared to the first 9 months of 2011's net income of $3.6 million or $0.25 per fully diluted share. This increase in net income is attributable to our lower-than-anticipated results in the Q2 of 2012. We had a net income of approximately $2.1 million or $0.13 per fully diluted share in Q3 2012. This was a 105% increase compared to 2011's third quarter net income of roughly $1 million, which represented a per fully diluted share figure of $0.06. Inclusive in our 2012 Q3 net income figure is an income tax benefit of $1.7 million related to the net operating losses resulting from our 2009 merger with World Waste Technologies. Partially offsetting the income tax benefit is onetime charge for merger-related expenses of $1.2 million. Our balance sheet continues to be strong at this time, and we are generating free cash flow. I'd like to now turn the call back over to Ben Cowart, our CEO.

Thank you, Chris. As the numbers Chris presented illustrate, the third quarter of this year was a positive one financially, compared to the same quarter last year. Perhaps more important than our most recent financial results is the strategic value of the acquisition completed during Q3, Vertex Energy. Following this acquisition was -- that was discussed on this last earnings call, is now a fully integrated company of meaningful scale in the used oil industry. Our company is now positioned to collect used oil ourself from what we call generators such as oil change facilities, then transport the used oil via our own logistic network back to our TCEP facility in Texas and then process the material internally, and also manage the end sale of the finished products. We now have ownership of every vertical link in the used oil value chain, from collection through the sale of our processed products. There's more for strategic and financial impact to being vertically integrated. Strategically, our ability to control the raw material utilized in our own process through our own used oil collection assets in Texas, augmented by the aggregation of incremental used oil from our Black Oil Division, gives us a more secure source of supply and improved pricing for the raw materials used in TCEP. It is our belief that control of used oil volume will be critical in growing our business. In addition to having great control over the raw material needed for running TCEP, this acquisition also gives us a platform to grow the company through acquisitions and follow-on TCEP facility development. We believe that we are now well-positioned to acquire used oil collectors in strategic locations that can then be supported by additional TCEP operations. We have a management team experienced in used oil collections, operations and a unique understanding of the collectors within the various geographic markets because of our long history aggregating used oil from collectors nationwide. It is our intention to leverage our knowledge of the collection market and associated operations to selectively target used oil collectors in key markets to further increase the volume of used oil under our control. By continuing to expand our footprint of used oil collections, we believe we will be well-positioned to process an increasing amount of used oil at our existing TCEP facility as well as at future TCEP locations. From a financial point of view, this acquisition allows us to acquire the used oil material needed to run TCEP at a significantly lower cost than before because we are sourcing much of the needed material at the point of generation rather than purchasing the oil from other collectors. Additionally, by owning the TCEP operations outright, we can now also process the material at a reduced rate. While this combination of lower raw material costs and reduced TCEP operating cost will not materially impact our revenue going forward, it will materially improve our gross margins relative to the previous quarters before the acquisition was completed. In summary, this acquisition benefits our business in the following ways: We're now acquiring much of the used oil needed in our TCEP process directly from generators. As a result, we expect to source this material at a lower cost. We now control our TCEP operations and therefore, we expect to see reduced operating cost for TCEP going forward. We have increased the scale of our business from an asset perspective. We have expanded our management team to add increased depth and expertise, particularly in area of used oil collection operations. We have a platform from which we can leverage our used oil collection expertise to acquire additional collectors, which will support both existing and future TCEP facilities. Before we move on to the Q&A portion of this call, I want the listeners to know that if you have any follow-up questions or comments, please feel free to contact Porter, LeVay & Rose, our Investor Relations representative Marlon Nurse at area code (212) 564-4700. I also want to mention that a digital replay will be available by telephone approximately 2 hours after the call's completion for the next 2 weeks. Details on how to access the replay can be found in our recent press releases. Operator, we are now ready to take a limited number of questions pertaining to the matters discussed on this call and our 10-Q that will follow later today. We're unable to discuss any information or business plans, which are not publicly available. Thank you.

[Operator Instructions] Our first question is coming from Chad Bennett from Craig Hallum.

Just a couple of questions. First of all, probably for Ben. Ben, can you talk about December quarter-to-date, where pricing and spreads are? And I know, obviously, a lot changes with the full quarter of the acquired assets, but kind of how pricing and spreads have been thus far this quarter since last?

Yes. Chad, I don't have the numbers in front of me for the fourth quarter. Obviously, we're just kind of diving into to the fourth quarter here. They -- obviously, they're going to improve materially with the acquisition and all of the collected oil that's coming in a much lower cost basis. And so we do see the per barrel margin continuing to improve. We had a very positive improvement year-over-year, I think around 27%, in our per barrel margin prior to the acquisition. So I'm real pleased of the company's performance even before the new acquisition coming in. But the new acquisition will significantly impact our per barrel spread and margins.

So how should we think about, from a gross margin perspective, a full quarter of the combined business from a gross profit's perspective?

I'll let Chris comment to that.

Yes, I mean we definitely expect to see improvement in our margins for the fourth quarter as we move forward with the acquisition and growth in the lower tiers, is what we call that division, as we grow the volumes on the street.

Okay. And Ben, how should we think about the growth looking into next year between your 2 divisions, Black Oil and Refining & Marketing? Obviously, they grew fairly nicely and fairly equally this quarter year-over-year, how should we think about the growth aspects of those 2 segments looking out a year?

Yes, I think our Black Oil Division is what we call the feeder of the opportunity for the company. So we, we're very focused on building our network and building our reach for raw material supply. So we see that business continuing its growth trajectory. I think a lot of growth for next year is going to come through expanding TCEP, TCEP capacity, looking at additional markets and product opportunities, some diversification. We anticipate a very strong growth perspective for next year is our goal and what we see.

Okay. And just in terms of the quarter from a finished product mix standpoint between your Marine Cutter Stock and Pygas and Gasoline Blend was there anything kind of unique about this quarter or was one of the finished product pricing better this quarter than you thought, and you shifted production? Or anything unique about the mix this quarter?

No, I don't think so. It was some -- some of the finished product sales comes in lumps. So we moved outside the majority, our finished products by barge. A lot of our -- the majority of our raw material comes by truck and rail. So we did have strong sales volume for the quarter. And -- but we ended the quarter with a lot of raw material inventory, too. So we're very pretty positive about our fourth quarter as it relates to the product sales and a continued volume growth going forward.

How much of a benefit did you get this quarter from kind of cycling through, kind of lower cost inventory from the June quarter? Did that boost margins at all?

Well, obviously, we took a hit in the second quarter because pricing adjusted down on us rapidly in a 7-week period. And we've had some recovery in the commodity markets. I think we're trading around $86 in crude today. Our high point in the second quarter was I think around $107 and the market fell to $77. So we've had some recovery, so I can certainly say that we've all enjoyed some of that benefit. But I wouldn't think we've had a full recovery of the margins that we lost in the second quarter. So I anticipate as oil prices either stay flat or move up, we'll continue to see some benefit.

Got it. Last one for me, probably for Chris. Chris, just on the balance sheet, receivables went up probably largely due or somewhat due to the transaction. I guess, can you give us an up-to-date picture on where you are in terms of into the facility and where the cash balance is? And maybe what we should expect kind of out of receivables exiting this year. Obviously, it's somewhat of a moving target.

Yes, it's definitely a moving target. Currently, as you see on the balance sheet, there is just over $1 million in cash. I expect that to be consistent as we move forward particularly as we go in and out of our line of credit. Receivables did jump to just over $8 million. We did have 2 or 3 large sales right at the end of the quarter, which attributed to that increase. But overall, we'll probably run in that range of $8 million to $9 million on receivables as we go forward.

Okay. And did -- how much did receivables go up because of the transaction? Is there a way to look at that or not so much?

Not really. The transaction didn't have a big impact on receivables really going forward.

I think our volume growth is what's driving our receivables, the volume that we're selling. And the year-over-year growth will continue to build receivable position if we can grow our sales.

Got it. And Chris, are you into the line for -- I think you're in $6 million at the end of September. Are you still into -- is it still the same amount?

Yes, we're actually in it -- and it's in the Q, $5.5 million today.

[Operator Instructions] Our next question comes from Jack Lasday from Morgan Stanley.

It's Jack Lasday. A couple of questions for you. First of all, the TCEP capacity from the existing plant seem to have been maxed out, and then you made some adjustments and got some additional capacity. And again, we're moving toward being maxed out, you made some more adjustments. And so, my question to you is can we -- can you give us kind of an idea of what to expect regarding TCEP capacity for the company as a whole going forward?

Yes, so Baytown has additional infrastructure capacity, and we're looking in pricing some incremental improvements to our Baytown operation. And I would say it's incremental CapEx that we would spend to do that. Now we're somewhat cautious until we have a better handle on additional raw material without increasing the market price for that raw material. So we're -- there's a balancing act in order to continue our ramp-up in Baytown. So the opportunity is there. We believe that the raw material is going to be available, and we're looking in that direction, Jack. In addition to that, we're looking at other unaddressed markets where we can implement our technology and start building our model in these markets. So there's several opportunities. There's a lot of wind in our sail today around the raw material and our ability to compete for that raw material because of what's happening along the base oil side of the business. Our base competition for the raw material is other re-refining operations that convert used oil to more of a base stock for lubrication use where we're really converting more to a -- high-value BTU product. The base oil market is going long and the pricing for the finished product is falling where the raw material costs continues to move with the BTUs or with crude oil or diesel fuel-type value. So we're working very well in that space with a good natural hedge on what we buy and what we are able to sell it for minus processing cost and capturing our margin. So we're seeing more raw material available, and we're very positive about the quarters ahead of us. But we're not sure how long this base oil glut will last, but we're getting some view on that, that really is encouraging to our business model.

Then you alluded to the possibility of additional markets. How quickly could you get up and running in a market if you decided that you wanted to move make a move there?

Yes. It's tricky, Jack, because it's very dependent on the infrastructure that we can acquire. The processing plant, let's just say it's a 9 to 12-month engineer and buildout part. But if we had to develop the infrastructure, that could add another 12 months to a greenfield type of site. We're not really looking for greenfield locations, we're focused more on facilities that have a lot of working infrastructure we can drop our processing plant right into. So I'm going to say we're looking at a 12, 18-month type of term in order to get a second plant off the ground. If we get lucky with the right deal, that could be accelerated within a 6-month type of window. And so we've got a couple of potentials that may work out in that way.

All right. Ben, I think the quarter was very impressive from a perspective of looking at the accretive nature of the acquisitions that you talked about and told us it would be accretive, and I want to congratulate you on that. Should we look at this quarter as kind of a base of normalized earnings that should build from here?

Yes. I think so. We only had one month of the new business in these numbers. So I hope that sheds some light just on the operating performance of the public company prior to the acquisition. So we're really looking forward to the new business coming in like we said, lowering our cost and driving deeper margins and adding a lot more to the bottom line. So I'm very comfortable that we're more at a base and we've got some real upside going forward.

Now, that probably puts you in a very unique category of a value stock with great growth perspective and potential. And it's time that maybe it's not such a big secret anymore. So I applaud you for everything you've done and keep up the good work.

Thank you, Jack. Appreciate it.

[Operator Instructions] Our next question is coming from Michael Potter from Monarch Capital Group.

To continue, I guess, on the same thing with regards to TCEP. Where are we relative to our capacity right now? And how does that compare to, I guess, the beginning of the year?

Yes, we're obviously up. I think our output volume is roughly 22% higher than last year, is that right Chris?

Yes.

And we're operating outside the original engineering design, which was 45,000 barrels per month. I think we've averaged probably 56,000 per month for the quarter. And we have run the plant up to 62,000 barrels in one month. So we did that to kind of see where our weaknesses were and what we could change to move to a higher number. So I guess on a daily basis, we're at capacity, but we've been spending time and money on -- internally to figure out how to dial this up a little bit further with very little capital. And then we've got the step that we can take with additional capital to meet the additional infrastructure capacity that we already have in place. And that could take us another 10 to 15 million gallons a year. So we've got some options, we're looking at them. And I can't make any promises at the moment other than our team feels very positive about what we think we can accomplish there at our existing facility.

So we started the year at 45,000 barrels a day capacity. You were able to increase that to 62,000 barrels a day?

Well, we were designed at 45,000 barrels per month. We're operating at 56,000 barrels per month on average for the third quarter, and we've peaked out at 62,000 barrels on a month a couple of quarters ago. So there are some opportunities to continue growing our existing capacity like we've been able to demonstrate thus far.

Okay. Okay. We had some additional acquisition expenses in Q3 as anticipated. Do you anticipate any additional expenses to hit in Q4?

Our audit expenses may go up a little bit, but I don't think it's going to be a big number.

We try to get everything in, Michael, right into this third quarter to go ahead and put it behind us.

Okay. And with regards to the tax rate, what's the tax rate that we're anticipating on a go forward basis?

Be right around 38%.

Okay. And by chance, do you have the pro forma adjusted EBITDA number for Q3?

We have some pro formas posted in the Q that was filed this morning.

Okay. But you don't have a breakdown of the pro forma adjusted EBITDA?

No. That will come out in the 8-K that we submit in the next couple of weeks.

Okay. Just one other question then guys. With regards to an uplisting, you meet, I guess, the requirements certainly for an uplisting, I guess, on the AMEX, where does that currently stand?

Yes, we're, obviously, very focused on this uplisting. And it's one of our goals and targets for the company. I think we are doing everything we can in order to meet the last requirement, which is a share price requirement. We need to just get our story out to the market and hopefully, the market will value the company differently than what is being valued today based on a share price standpoint. That's our only limitation to meet those requirements going forward.

But is it a target for the AMEX or are we targeting a listing on the NASDAQ?

We're looking at both, but we're leaning more towards the NASDAQ.

Okay. So you would have a -- we would need a significant increase in our stock price or some sort of reverse in order to get there in the near term?

That's correct.

Our next question is coming from Kevin Martin from Source Capital.

I just want to talk about the end product from TCEP. A lot of these companies that are lumped into your industry as refineries don't compete in that same market. Is there anybody else out there that puts and end product into the same market that you do with your TCEP?

No one that is on a significant scale. I mean, we are processing roughly 28 million to 30 million gallons of finished product. There are some -- there's a lot of different types of companies out there trying to pursue the opportunity of monetizing used oil, and there's different technologies that can make products somewhat similar to that. One being a vacuum-gas oil. So this VGO is also used as a high-value cutter stock back into the same markets. So I would say that, specifically to what we're doing, it's pretty, pretty proprietary and niche as far as what we're producing and the way that we produce it, the process and the methods that we use to make the product.

And what about the demand for the product? I mean you are only producing so much and you'd have to open up another facility. Is that demand still there and growing?

Yes, we see the market supporting our finished product very well. We're selling into a very large pool of commodity product compared to our competitors in the space, they have to face a finite market with a lot of headwind from major oil companies. We've been very fortunate that we've never had a disruption in our output, and offtake of finished product since we've been producing, and we don't see that being the issue going forward.

And one of the callers mentioned something about a secret, it's finally out there. But there was some recent consolidation in, I guess, the industry where you had the Heckmann buying Thermo Fluids and Clean Harbors buying Safety-Kleen. Those are some pretty big numbers. And when you look at your market cap and you owning a refinery now being vertically integrated with a $26 million, $27 million market cap, it seems that maybe there is a secret there. Have you been approached or looked at by some of these other bigger players?

Not those 2 specifically. There are other companies that are very interested in what we're doing. We feel like there is a tremendous opportunity for us to grow the business. With our public company model and the support from the markets, we believe we can really build our company and scale. So we're pretty happy with the way things are going. It would have to be something that is very interesting to our shareholders before we get us off our course of our own.

Well, the numbers on those other companies that they were bought, that were pretty substantial, so it just seems that they are willing to pay a great amount of money to be in that business.

[Operator Instructions] If there are no further questions at the time, I'll turn the floor back over to management for any further closing comments.

Okay. Well, thank you very much for calling in and your interest in the company. We look forward to a continued dialogue. If you have any additional questions or would like to discuss further the results of our operations for the third quarter, please feel free again to contact Marlon Nurse with Porter, LeVay & Rose at area code (212) 564-4700 and thank you very much for calling in.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.