Benjamin P. Cowart - Founder, Chairman, Chief Executive Officer and President Christopher Carlson - Chief Financial Officer, Principal Accounting Officer and Secretary

Philip Shen - Roth Capital Partners, LLC, Research Division Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division Jack Lasday Justyn Putnam Lloyd Quartin - Scanvec Amiable, Ltd. Jeremy Hellman

Greetings, and welcome to Vertex Energy Inc.'s Fourth Quarter and Year-end 2012 Financial Results. [Operator Instructions] A brief question-and-answer session will follow the formal 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. Benjamin P. Cowart: Thank you very much. Good morning. Joining me today on the call is Mr. Chris Carlson, our Chief Financial Officer; Mr. Matt Lieb, our Chief Operating Officer; and Michael Porter, our Investor Relations Consultant at Porter, LeVay & Rose. 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 include words such as believe, anticipate, or expect, and statements in the future tense are forward-looking statements. These statements involve known and unknown risks 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 on the call, our fiscal year 2012 earnings call for Vertex Energy. This call coincides with today's filings of our 10-K for the year ending December 31, 2012. I want to start off by giving you a few highlights from our fiscal year 2012, and then I'll turn the call over to Chris Carlson, our CFO, so that he can walk you through our 2012 financial performance. Following Chris' presentation, I'll provide some thoughts on our plans for the remainder of 2013, and we'll make some closing remarks. We'll then open the line for questions. 2012 was our highest revenue year ever as a public company. I'm very pleased with our performance this past year in a number of areas. Here are a few quick highlights that we will touch on in more detail during this call. We completed the acquisition of Vertex Acquisition Sub, LLC which marks a substantial step for the company in our efforts to become a vertically integrated player in the used oil industry. We now own collection operations, terminaling operation and our TCEP Technology outright. We anticipate this acquisition leading to improved margins as the company moves forward as evidenced by our 98% per barrel margin increase in Q4 2012 versus same quarter of 2011. We were recently uplisted to the NASDAQ, which we consider an important step in raising the profile of the company. We grew revenues by 23% in 2012 compared to 2011. Our consolidated revenue was $134.6 million for the year. We increased gross profit dollars for the year by 21% over last year to $9.79 million. Gross profit is an important matrix for us because it helps us understand how we are performing as a business, while minimizing the impact of commodity prices. Overall volumes of products sold, also a very important matrix for our business, as it illustrates our reach into the market. It increased by 22% for the fiscal year 2012 versus 2011. This increase is sold product volume, is largely a result of continued throughput improvements at TCEP combined with our increased ability to source feedstock to support the process. Before discussing our outlook for 2013, I'd first like to turn the call over to our CFO, Chris Carlson, for more details, review of our financial performance in fiscal year 2012. Chris? Benjamin P. Cowart: Thank you, Ben. For more information, please refer to our press release issued today, our latest Form 10-K for the fiscal year ending December 31, 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. Note that the acquisition Ben referenced was completed in September and we have integrated these new operations into our business. I'd like to now discuss our results. Revenue. For the year ended December 31, 2012, we reported consolidated revenue of $134.6 million compared to $109.7 million in 2011. This represents a 23% revenue increase. The revenue increase was due primarily to increased commodity prices as well as the 22% year-over-year increase in overall product volumes that Ben mentioned in his opening remarks. You can find more detailed information on the various pricing benchmarks that are most applicable to our business in our 10-K that was filed today. We generate revenues from 2 existing operating divisions: our Black Oil Division; and Refining & Marketing division. Historically, our TCEP results have been reported within the Refining & Marketing division. With the recent acquisition of the Vertex Acquisition Sub, as of this filing and moving forward, the company will be reporting TCEP results within the Black Oil Division. Based on the overall activity related to the Black Oil Division, which now includes used oil collections, processing of the used oil and final sale of our end product, we, with counsel from our auditors, felt that it is a more appropriate presentation of our business segments. Our Black Oil Division revenue for fiscal year 2012 was $90.24 million as compared to $72.35 million in 2011, an increase of roughly 25%. This increase in Black Oil revenue is attributable to higher commodity prices and a 53% increase in overall Black Oil sales volume. The increase in Black Oil volume is attributable to the increased amount of product being processed through TCEP, as well as increased volumes sold to third-party rerefiners and lenders. The Refining & Marketing division produced revenue of $44.34 million in 2012 versus $37.39 million in 2011. This represents an increase over the prior year of over 19%. This increase is a result of increased commodity prices and a 16% increase in volume. TCEP, which again is a business unit within our Black Oil division, generated $57.7 million in revenue for fiscal year 2012 versus $52.1 million in 2011. This nearly 11% year-over-year increase was driven by production increases as well as higher commodity prices. Gross margins. Gross profit increased in 2012 to $9.79 million compared to $8.07 million last year. This 21% increase is primarily attributed to the improved margins as a Refining & Marketing division, TCEP operations. Gross profit for the Black Oil Division was just over $5 million for the year, a 21% increase over last year's gross profit of approximately $4.15 million. The Refining & Marketing division, as a whole, generated gross profit of $4.75 million in 2012, a 21% increase over 2011's gross profit of $3.92 million. TCEP had a gross profit of nearly $2.43 million in 2012, a nearly 13% increase over fiscal year 2011's TCEP gross margin of approximately $2.16 million. SG&A. Selling, general and administrative expenses increased in 2012 relative to 2011. Our 2012 SG&A expense was $7.39 million versus $4.1 million for 2011. Of the $7.39 million in SG&A, $1.26 million represented a onetime acquisition expense. In addition to the onetime acquisition expenses, we also incurred additional SG&A costs in 2012 related to our ongoing expansion efforts at TCEP that were not capitalized. On a go forward basis, we anticipate SG&A being higher than in previous years because of the additional scale of the company following acquisition. For example, we now have 102 employees as opposed to 12 employees before the acquisition. It is our belief that improved gross margins associated with the benefit of collecting our own used oil for processing will more than offset the increased SG&A associated with these collection efforts as we move forward. Net income. We had net income of roughly $3.66 million or $0.25 per fully diluted share in 2012. This was a 36% decrease compared to 2011's net income of roughly $5.75 million, which represented a per fully diluted share figure of $0.39. Included in our 2012 net income figure is a $1.5 million income tax benefit stemming from our net operating losses related to our merger with World Waste Technologies, leaving us with the remaining NOL balance of approximately $33.9 million for future years. Overall, the decrease in year-over-year net income was a result of increased SG&A and a $1.26 million of onetime SG&A-related acquisition expenses that more than offset our increased revenue and gross profit. Our balance sheet. Our current assets as of December 31, 2012, nearly tripled from the same time the previous year to $49.1 million. This increase in assets is primarily attributed to the acquisition completed during the third quarter. Over the past year, stockholder's equity more than doubled from $9.34 million to $20.4 million as of December 31, 2012. In an effort to minimize dilution relating to our recent acquisition, the company took on $8.5 million of term debt, which as of December 31, 2012, has been reduced to $7.9 million. I would now like to turn the call back over to Ben Cowart, our CEO. Benjamin P. Cowart: Thank you, Chris. As the numbers Chris presented illustrate, we have made tremendous strides in this past year and the company is continuing to grow. As we look forward to 2013, I want to share some of our thoughts on what transpired in 2012 and where the business is heading going forward. During the final 3 quarters or so of 2012, we incurred some expenses related to continued improvements at our TCEP facility. We are currently in the midst of completing a meaningful expansion that we anticipate will increase throughput at the plant, reduce our operating expenses and improve the quality of our finished product. We have approximately $1.2 million in CapEx remaining for this project that will be invested in 2013. During 2012, particularly in Q2 and Q4, we suffered some negative commodity related impacts to our business. Specifically, we saw a significant decline in our end product values resulting from a general decline in oil prices, which we index off of, combined with a slower decline in the price of our feedstock. This disparity in the rate of decline between our raw material prices and our end product prices, contributed to a compression of our margins. These Q2 and Q4 declines had a detrimental impact on the industry as a whole. We have made adjustments in our approach since the latter half of Q4 2012 to address these market changes and believe that we are well-positioned to increase our margins going forward. The acquisition completed in September, as I mentioned earlier in the call, is expected to improve our margins as well. While the acquisition will result in higher SG&A than in previous years, we believe that by now owning our own collection assets, we will be able to supply our TCEP facility with used oil at lower cost than during previous years and that this will result in margin improvements that will improve our bottom line going forward. We're now actively looking for additional TCEP locations at or near port facilities where we can address locations -- unaddress locations in the U.S. We are finalizing our plant engineering and plans to selectively pursue locations that we feel best fit our model. Lastly, we are continuing to evaluate accretive acquisitions like the tuck-in acquisition listed in our 8-K filings, that will allow us to secure incremental feedstock supply at reduced prices. Before we move forward with our Q&A portion on this call, I want to let the listeners know that if you have any follow-up questions or comments, please feel free to contact our Porter, LeVay & Rose Investor Relations representative, Marlon Nurse, at (212) 564-4700. I also wanted 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're now ready to take a limited number of questions pertaining to the matters discussed on this call and our 10-K. Remember we're unable to discuss any information or plans, which are not publicly available.

[Operator Instructions] Our first question comes from the line of Philip Shen with Roth Capital Partners. Philip Shen - Roth Capital Partners, LLC, Research Division: My first question is related to the following. I know you guys are in aggregator of black oil and you sell refine products, but what to what degree do you believe you are a derivative play on natural gas? Benjamin P. Cowart: Well, I think the whole premise and investment thesis around Vertex Energy and what we've been pursuing since 2009, is a direct impact from what natural gas has done to the conventional market or our industry historically. So if you think about this being a mom-and-pop business and the small companies in each metropolitan market collecting oil and selling it locally to their industry, their manufacturers, now natural gas has come in and replaced the fuel at these manufacturing facilities because it's so cheap and it's so clean as far as the air emissions, et cetera. So the used oil is having to find a new home, which is creating a new industry and a new opportunity that we're pursuing. And that's what TCEP is about, is taking and aggregating this oil across the country, bringing it into processing locations, like our Baytown facility where we can now monetize that oil and get a higher value for it going into new markets. So it's really a new industry and we're excited about the position we're in as the industry is still in a -- forming and it's being reinvented as of this decoupling of natural gas. Philip Shen - Roth Capital Partners, LLC, Research Division: Great, that's helpful Ben. And can you talk to us about your revenue trajectory for 2013 by division and how do you expect each division's gross margins to change? Benjamin P. Cowart: Yes. The revenue is a little bit more tricky because it's based on commodity prices. So in both divisions, if oil prices go up, our revenue goes up. We do believe we will continue to sustain growth in our overall volume, as our products sold, the total barrels that are going into the market. So we're in the mid-20% growth year-over-year for the last couple of years. And obviously, revenue follows the growth in and the business as well, besides commodity prices. So I'm not going to try to tackle a revenue forecast, but I do believe that there's a lot of growth for the company in the years to come. We see that consistently based on our track record. Now I will say that with the acquisition and now having the collection vertical as part of our business model, it allows us to go and access raw material at a much lower cost than buying directly from third-party collectors. This is going to be a focus of the company, and so we do see our margins expanding considerably as we go forward.

Our next question comes from the line of Chad Bennett with Craig-Hallum. Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division: So, Ben, can you kind of give us more detail on what happened in the fourth quarter on the pricing side and -- for your finished products and maybe the end markets those finished products go into. Because if you look at -- I'm not sure what Six Oil did, but if you look at Brent and diesel and whatnot -- I mean, those prices were pretty kind of stable, if not, maybe slightly better from the September quarter. So can you just give us more detail of what changed in pricing in the last 3 months? Benjamin P. Cowart: Yes, yes, absolutely. It's a very good question. It certainly had an impact in the fourth quarter. It's not as drastic as what we've seen in the second quarter, but nonetheless, we did see a decline across the markets that we sell our product into. And we benchmark off a Platt's index for #6 oil. So it's a residual fuel. We buy the raw material at a discount, a percentage discount, from that index and we sell our finished product at a premium over that index. And we've seen -- the index declined $3 a barrel quarter-over-quarter from the third quarter to the fourth quarter. The second probably more profound impact in the industry is what took place especially around the base oil market which impacts the raw material value and demand for that raw material. When base oil declined, there was a compression in spreads that our industry felt top line and you probably see that across the board in our industry, the fourth quarter was a pretty upsetting quarter for anybody that deals with used oil. And so what happened is, as the air got let out of the base oil business model because of the compression in spreads, the demand on used oil changed in the fourth quarter. Started taking place at the very end of the third quarter. And so the -- when the demand changes on used oil, then the relative discount to that Platt's posting changed. And so -- and as that changed, the relative premium to the posting for our finished product changed slightly, not as much. And so what we've seen is a 2-point adjustment related to the market. You had a decline in index values and then you had a shift in your discount -- your percentage discount, to more reflect now, a market that's not short of used oil, but now a market that is potentially long on used oil. And that's bad for margins in the fourth quarter. It's really good for margins going forward because the industry's having to look at new options now for the used oil that everyone thought they had figured out. And I believe our company is well positioned now to take advantage of those opportunities. Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division: So kind of making sure I understand it correctly, so the demand for used oil dropped off in the fourth quarter, thereby, you're buying it at a larger discount or a less of a discount? Benjamin P. Cowart: Yes. We're -- today in the first quarter, we're buying it at a larger discount. So it shifted in the fourth quarter. It went from being short and the discount being relatively high and expensive for used oil. And now that has transitioned the other way. So the discount's more in our favor as a refiner than it was in the fourth quarter. Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division: Got it. And what was volume growth year-over-year and maybe quarter-to-quarter in the December quarter? Benjamin P. Cowart: Yes. The year-over-year I think is 23%, Chris?

Yes, 23%. Benjamin P. Cowart: Yes, we had a 23% growth in volume. And that's a real key indicator for our company as we grow the business. That truly speaks to our ability to reach the market, to gather more material, monetize that. So the -- I don't know that I have the quarter-over-quarter, do you have that with you?

Yes. Quarter-over-quarter, Chad, was 15% increase in volume. Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division: Okay, got it. And Ben, with the new expansion of your TCEP facility, what will that bring in terms of -- can you quantify, actually, what it will bring in terms of new capacity there and also kind of new efficiencies or quantified margin impact of that capacity expansion? Benjamin P. Cowart: Yes. I don't think I'm prepared to do that on the call today. In general, we started down this path probably 9 months ago. So we had long leadtime equipment that had to be ordered. We justified the investment based on a $60,000 a month cost savings. So that's a given. We believe that we're going to see upward to 8,000, 10,000 barrels a month of additional throughput capacity in the operation. The system is designed for more than that. So we really want to start the unit and this will take place the first part of the second quarter. So we'll be ringing everything out in the second quarter and dialing it up. But we're pretty excited that we've quietly made a lot of investments, especially in the fourth quarter. We've done a lot of the work our self. We invested all the labor and welding and all the mechanical and IT there on-site to make everything ready for this new expansion and we're fixing to start this thing up. So that's hopefully a very pleasant surprise to our investors. Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division: And what was -- I know part of the appeal of the transaction in the September quarter was, you'd have more of your own captive or internal used oil collections running through the TCEP plant. And I think we were thinking at scale or once you get a full quarter, 2 quarters into it, roughly 1/3 of your plant would be your own internal kind of supply of used oil. Are we at -- was there any change in mix of your own collected used oil versus buying off at the market on the third-party side in the quarter that changed or was different than your expectations? Benjamin P. Cowart: No. The ratio, as you just mentioned are there. We're seeing 1/3 of our own collections come in. I think what's interesting in the fourth quarter results is some of these merger-related impacts that were not, I guess, easy to identify. One, being, all of the collected oil -- our collected oil coming into the system where we would recognize our inventory prior to the merger or recognize the revenue, I'm sorry, prior to the merger. At the point it would come in the front door the public company. Well, today, all of that inventory has to come in the tank, go through process and then load on to barges before it's monetized. So we've seen a proportional decrease in our inventory cost, holding a lot more of our margin in tank than what we've carried before. You'll see that on our balance sheet. You'll see that we actually had 1,000 barrels more product in inventory at the close of the fourth quarter than we had at the third quarter. But yet, we're close to $600,000 less in inventory costs. And what that is, is some of, I would call that, stranded margin now in tank. It's not money that we lost, it just hasn't been recognized on the schedule that we're used to seeing it recognized. So that certainly has had somewhat of an impact to our earnings for the fourth quarter, but it's easily explained. Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division: And one -- or couple of last ones for me. Where is this 6 Oil Index today relative to -- in the first 2.5 months to 3 months of the year relative to the fourth quarter? Benjamin P. Cowart: Yes, it's come up. It's probably running in the $97 per barrel range where I think we closed on a $93 average in December. So the markets are more in our favor today. Chad M. Bennett - Craig-Hallum Capital Group LLC, Research Division: So, Ben, how should we think about gross margins for the business throughout this year? I know we talked about once we made this acquisition and realize the synergies and got the volume coming through, the captive volume. We're talking about kind of a mid-teens type gross margin target. Is that realistic this year? Benjamin P. Cowart: Yes, I believe it is. That's what we're looking at and we're very comfortable with what we're seeing. Our management team put together a very conservative forecast and it's in that range as well. So I'm very comfortable with that range.

Our next question comes from the line of Jack Lasday with Morgan Stanley.

I've got 2 questions. The first one is related to the SG&A. I'm a little perplexed by the SG&A. I get the fact that there was a onetime acquisition expense of about $1.25 million and I get the rise in the number of people. Those things I certainly get and I would expect, but you had also mentioned that there's R&D that was not capitalized and if it's anything other than repair and maintenance, I would have thought that it would've been capitalized and then you made a statement that going forward for this year, you expect maybe another $1.2 million of a similar kind of a scenario. The gross margin numbers look very pleasing. The SG&A is perplexing to me. Can you talk to us a little bit about that? Benjamin P. Cowart: Yes. And I'll let Chris add to my comments. But the $1.2 million of capital remaining for the TCEP project will be capitalized. That's all the hard equipment coming in. We did take on the R&D and all of the labor and expenses associated with the expansion internally. We didn't bring in contractors and we just expensed it out through our labor costs. And so that is all behind us. And 2012 was a lot -- I look at it a lot like 2010, where we had those type of development costs, really researching the technology path. We spent lots of money in the lab, labor and work, to firm up our decisions on the investment that we made. So I don't see that going forward. I do see a new SG&A ratio to revenue because of the merger and because of all the expenses related to running a collection business and running the plant itself. So we have to understand that. But the trade off is, we should have proportionate gross margin and return around those investments. Does that answer the question?

Yes. I would certainly think that you should have it and so on a going forward run rate, then, what kind of -- where would you think we should be on a percentage basis with SG&A? Benjamin P. Cowart: Chris, you...

Percentage to revenue or gross profit or -- how are you looking at that, Jack?

Either one.

Yes, I haven't run those particular percentages on a go forward basis with the new integration of the Vertex acquisitions, specifically.

Okay. All right, and my second question is with regard to the margin compression due to the market changes, it seems that the second quarter we thought was kind of an aberration. And the concern that I have is going forward, it seems that we are subject to these volatilities. Is there not some way to hedge some of this volatility out? For example, when you know you're bringing in feedstock at a certain price and you know that it's going to be sold in x number of days, can you not use some kind of forward type of hedging to mitigate the potential fluctuations while thereby, of course, also limiting what could potentially be a positive margin expansion due to those same things, but to try and keep things in a little tighter range? Is that something that you all have thought about and looked at, and is that possible?

Yes. We've looked at different hedging structures and possibilities and they are out there. They do exist. As we reviewed and looked back on 2012, had we have implemented some of those strategies, we would have missed out on some upside in the market. We're continuing to look at that as we go forward. But as you stated, it would minimize upside, but it would put some more stability into that gross profit. Benjamin P. Cowart: And one of the challenges, Jack, is there's not a fungible market made for the commodity of used oil. So you would have to pick another index commodity, and there's always hangover on both sides of that, that you can't control. So you might can get it within a 70% range or 80% range and the problem in talking to the banks and the professional guys, they believe that it's better to just run with back-to-back indexed purchases and sales of product, and go through the markets up and down. Because if you spend the money to hedge and you don't have a pure hedge against the risk, you could be -- you really could still get hurt and miss your upside as well. So that's -- because we buy everyday and we're selling everyday and I say selling, our sales are a little bit more lumpy by barge versus the truck receipts of raw material. But we're in the market daily. We don't speculate, we're not holding product or trying to throttle in and out of market conditions. We're just steady. Buy and sell, buy and sell. We believe that if we see the low side, we'll see the upside on the vice versa. And I think we've seen that as we come out of second quarter into the third quarter. We're just -- the markets have been a little bit turbid because of a lot of things going on in the used oil space that are still kind of resettling the industry and where we're going as an industry. And we kind of talked about that in our last call. We really seen the transition take place in the fourth quarter. It just -- our sale price gets impacted immediately. As soon as the market changes, the sale price changes. Trying to adjust your feedstock cost is a more time-consuming process because you got to work it on multiple levels all the way back to -- eventually, back to a generator at a loot shop. So it takes time to do that.

And 10 days left in this quarter, how does it look margin-wise based upon what happened Q2 and Q4. Is it similar or are we in a different course? Benjamin P. Cowart: No. I think the first quarter, we're on a -- we made our adjustments coming out of the fourth quarter and we're on target and on plan.

Our next question comes from the line of Justyn Putnam with Talanta Investment Group.

I just want to follow up on the previous caller -- the caller's question about some increased SG&A that went along with this TCEP facility project. Can you put a dollar amount on that, approximately? Benjamin P. Cowart: It's just difficult to do. We try -- we looked at that and it's just the day-to-day expenses and mainly the labor cost around our R&D work, as well as the pipe fitters, their own payroll. Our management team, we've had a lot of overtime around the expansion. So our labor cost was higher at our facility. And so there's just -- it normally would have just kind of worked through the system had we not had these market impacts on our spreads. And we really -- that's the way we've always tried to handle a lot of our development work. And you can see that going all the way back to 2009 and '10. We still maintained profitability as we developed our TCEP technology from a pilot stage all the way through to a commercial operation. And 2012, we took -- we've been taking strides just on that same, I guess, way of doing business. And so it's not a number that I can give that says we can attribute that. I can tell you that we were, off our labor budget and we knew why. But I wouldn't want to box it all in around just that one piece.

Okay. Let me approach it from a capital spending standpoint. In the fourth quarter, CapEx was up quite a bit, probably an extra million dollars or so and I assume that most of that was due to the TCEP facility project, is that correct?

Yes, that's right.

Okay. And then you have another $1.2 million that you're expecting to spend, what in the first quarter, first half of the year? Benjamin P. Cowart: Yes. It will roll over to the second quarter, but that's correct.

Okay. And then going forward, kind of what's the CapEx profile once you get past this project? Benjamin P. Cowart: The typical annualized CapEx is right around $500,000 a year and that's just strictly routine. If there's other projects then that would be above and beyond that number.

Do you have any other projects scheduled for this year? Benjamin P. Cowart: I mean, we're always looking at other opportunities, but nothing I that can really comment on at the moment.

Great. And then one quick question about your acquisitions. You mentioned that you're looking at some of those, and I assume, are they primarily third-party collectors, is that what you're looking at? Benjamin P. Cowart: Yes, that's correct.

And then what kind of valuation metrics do you use when you're looking at those type of acquisitions? Benjamin P. Cowart: They all vary. A lot depends on the volume that they're bringing in. It's going to depend on the facilities and the infrastructure that are around the operations. Historically, we've seen anywhere from 4x to 5x earnings and sometimes higher than that again based on the overall facility, infrastructure and operation.

So it is more of an earnings picture as opposed to just volume? Benjamin P. Cowart: Yes, it's an EBITDA, that's right. But we definitely look at volume because that's what we're focused on, is growing our volume.

Our next question comes from the line of Ian Clark with [indiscernible] Capital.

One question on the sustainability of the business in the next 5, 10 years. If you guys do hit your gross margin in the midteens, that's going to attract a lot of attention. So could you guys comment on the mode that your business had and how you expect to keep those margins over the long haul and what's going to allow you to keep going forward and increase those? Benjamin P. Cowart: Yes, that's good question. We definitely have a different approach than a lot of folks in our industry. We believe this is a regional model and that's what we've tried to roll out in the Texas Gulf region. We're the only refiner of used oil in this region. And we believe in a dense concentration of supply at a street level around that refining asset. So inside that collection footprint, we believe in vertically integrating the other residual materials and monetizing those completely. So here in Texas, with our acquisitions, not only are we collecting, we have a $30 million refining capacity, we have a $10 million collection capacity at the day and we're going to grow that substantially over the next few years. We also have our own oil filter recycling plant in Corpus Christi where we can actually monetize the oil filter collection business, taking the residual oil from the filters and moving the steel into a finished steel market. And then we take the waste antifreeze that's collected from these same generators and we have a vacuum distillation plant in Houston where we distill the waste antifreeze and recover the clean ethylene glycol chemical component. We then repackage and have our own add to the package that goes back into a finished coolant product. So we make a finished antifreeze product. And we sell that back to that customer base. And so we have a pretty sticky market here, a sticky business, in this 350-mile radius. And so our idea long-term as we perfect this regional model, is we want to replant it in multiple locations where you're running as efficient of a gathering and recycling business as you can be. The difference with other companies is they focus on a thin market share across a broad base of markets and then they have huge transportation costs to move it across country to one location. And our model allows us to be a very strong regional player because we have 1/3 of the capital cost required to build our facilities. And so we can plan on strategically in key markets around the raw material, and we can focus our investments on these other areas to capture all the margin inside that footprint. So that's our concept and that's what we're believing is going to win market share and the long-term position in the U.S. And we see a pretty solid moat around that model and it's demonstrating that very well here in our first market that we're working.

Okay. And then you have any offtake agreements for the motor oil and antifreeze? Are there any long-term contracts and visibility to how much you guys can get or is it more of a spot market, we have some, let's buy some sort of style? Benjamin P. Cowart: No. We sell our finished products on offtake agreements. We're working on a 2 year agreement with the sale of our product. We have supply agreements that range anywhere from spot to 12 months, typically. And a lot of our generator businesses is very relational, so we've been servicing those generator customers for years and so that's typical in the industry. They usually sign up with a one-year type of service agreement.

[Operator Instructions] Our next question comes from the line of Lloyd Quartin with Unique Investments. Lloyd Quartin - Scanvec Amiable, Ltd.: I have a couple of questions. Could you just fill us in your cash position currently? And also, could you elaborate on -- I think on the release there was a mention that you were aggressively looking to open up another plant and kind of timeline and can we talk about that a little bit? Benjamin P. Cowart: Yes. The current cash position is right at $800,000 in cash, and you can see that on the balance sheet of the company. Benjamin P. Cowart: And obviously we work our inventory and receivables from a revolver, which we have not capped that revolver. We got plenty of capacity there inside that revolver. So there's no need to keep a lot of cash in the account as long as we have inventory and receivables out. So as it relates to the second plant, we've got several, let's just say, 3 locations that we're looking at. These are unaddressed markets that we believe TCEP would serve very well. We are commissioned with our engineering firm to have an engineering package within the next 60 days that allows us to go out for bid. And at this point, we've not chosen a location and we've not signed a letter of intent related to one of those locations. We're still in evaluation stage, but we've been moving along all this past year down this path. We've really been focused on this expansion at Baytown to really take it further down the road because it was an incremental investment and we wanted to take advantage of that opportunity first. And so we're preparing for the second location based on the timing and the available feedstock. The markets are now moving in our favor. And so that pace has ticked up quite a bit in the fourth quarter as far as trying to get something positioned and ready to go. Lloyd Quartin - Scanvec Amiable, Ltd.: Will you be, Baytown itself, is that -- will you be doing more expansion eventually down there or is there a limit to how much you can expand? And also, the new facility, do you have any idea of the type of capacity compared to Baytown that you would build going forward? Benjamin P. Cowart: Yes, at each opportunity has a regional supply capacity. So the design of that plant would be based on what we felt like would be the optimum feedstock volume that would come out of that market. So it would be different. In general, we're looking at a comparable capacity to what we're currently doing in Baytown, which is around 28 million to 30 million gallons on annualized basis. Lloyd Quartin - Scanvec Amiable, Ltd.: Okay. And the timeline, do you have any idea when, just guestimate a new facility would be open and running? Benjamin P. Cowart: Yes. I don't think you would see a new facility in 2013. Lloyd Quartin - Scanvec Amiable, Ltd.: Well, potentially 2014? Benjamin P. Cowart: Potentially. Lloyd Quartin - Scanvec Amiable, Ltd.: Yes, I think I once asked you about the potential costs of a new facility like this, and I don't know if it was between $5 million to $8 million. Benjamin P. Cowart: Yes. We have basically been talking around $5.5 million to $6 million for the last year or so. And we'll really know here within the next couple of months as we go out for bid on the design that is underway. The infrastructure is additional to that. So if you set it in existing infrastructure that you can partner on, you can lease tankage and drop your plant into that location, or if you go greenfield, obviously, and build tanks and piping and barge docks, et cetera, it gets pretty expensive. So we -- most of the locations we're looking at, there's existing infrastructure that we can access and then we just have our plant cost -- unit cost. Lloyd Quartin - Scanvec Amiable, Ltd.: All right. Currently, you guys, in your acquisition, you now have your trucks and your own collection. How would that work in the new facility for you guys? Benjamin P. Cowart: The model is basically the same. We want to build the plant. We want to work with the third-party suppliers and build those relationships long-term, just like we're doing here in Texas. As these companies make decision to exit and some of these guys will retire, we've got a built-in acquisition pipeline. So we keep a good pulse on who the sellers are and so we will seek to acquire them over time. So we like the model of going in, build the plant, work with the market, develop our intelligence around that footprint and then with a long-term strategy to collect and supply our own refinery. Lloyd Quartin - Scanvec Amiable, Ltd.: One more question. Do you guys also do the cooking oil out there or is it strictly motor oil? Benjamin P. Cowart: No. The primary business is motor oil and in our Austin location, we actually have piloted a cooking oil collection operation and we are gathering data and moving that oil into the biodiesel manufacturing space. So they're using it as feedstock to produce biodiesel. And so that's something that interests us, but not on scale or any kind of -- we're not ready to make any kind of announcement that we're heading in that direction. Again, a common theme is we're constantly looking at opportunities that make sense for business, and we will spend a lot of time and money pursuing those opportunities and getting them baked and -- to where -- before we start talking about them, we've got a lot of that figured out. So I would say that, that business in Austin, the collection of the cooking oil, is a profitable business. We're actually making money doing that today. So we like what we see, it's just a long-term game and probably will require a lot more commitment than what we've made so far.

Our next question comes from the line of Jeremy Hellman with Avenue T Fund.

Chris, can I -- do you have the breakdown on the Q4 revenues between Black Oil and then Refining & Marketing for the quarter throughout the year?

Yes I do. Give me one second.

While you are looking for that, I can come in with my follow-up question, which is on another thread, if that's okay, Ben. Benjamin P. Cowart: Yes, no problem.

I was just going to -- more of a suggestion than a question actually. Just kind of given the detail that you've provided around how the pricing works and the used oil market and everything. One thing that might be helpful on a go forward basis in your reporting is some sort of volume statistics or some other metric that we can track that part of the business, and then -- that'll help a lot of us understand the trajectory of things, knowing that the ultimate numbers will dance around that due to the pricing.

Okay. Do you understand what he's asking? Benjamin P. Cowart: We'll, definitely look into that.

As far as the breakout between Black Oil and Refining & Marketing and for the fourth quarter specifically, that's not something we report on. I can just kind of give some highlights of the fourth quarter in general. That revenue did increase 3% to $32.2 million versus $31.3 million the prior fourth quarter in 2011, and gross profit increased to 127% to $2.9 million compared with $1.3 million in the prior year. In addition to that, our nonfinancial metric volumes increase has been noted earlier, 15% in the fourth quarter, 2012 compared to 2011.

Okay. Maybe what I was trying to get that number for, is just the way I had modeled out your business, I was -- I'd originally been thinking the TCEP related business would be in the Refining & Marketing line and it's going to end up in the Black Oil line as you say in the K. And so it's a little bit different from how I had been looking at things. So on a go forward basis, if I can't bench off some Q4 actual numbers, can I get some perspective on what percentage of revenues would be in each bucket, give or take, and some ranges going forward? Any kind of help I can get there would be appreciated. Benjamin P. Cowart: Yes. Ironically now that we've done this shift or moved TCEP under Black Oil, the percentage of revenues is about 50-50.

Okay, that's kind. That kind of... Benjamin P. Cowart: And also think the first quarter numbers will come rather quickly and that'll start to break everything out for you, too, Jeremy. You'll see that. And maybe we can take off-line call from Jeremy and try to address some of that.

Gentlemen, there are no further questions at this time. Mr. Cowart, I'd like to turn the floor back over to you for closing comments. Benjamin P. Cowart: Okay. Well, thank you for the questions and your interest in the company. We appreciate the support we get from this call and we look forward to updating you on developments with the company as we unfold and we appreciate you joining in on today's conference call. Thank you.

This concludes today's teleconference. Thank you for your participation you may disconnect your lines at this time.