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

Joseph Fadgen Scott Justin Levine - Imperial Capital, LLC, Research Division Jeremy Hellman - Singular Research Anne Margaret Crow - Edison Investment Research Limited Justyn R. Putnam - Talanta Investment Group, LLC Tom Bishop - BI Research Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division Jack Lasday

Greetings, and welcome to the Vertex Energy Third Quarter 2014 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ben Cowart, Chairman and CEO. Thank you. You may begin. Benjamin P. Cowart: Thank you, operator. Good morning, everyone. Joining me today on the call is Mr. Chris Carlson, our Chief Financial 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 must 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 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. I want to thank everyone for joining us on Vertex Energy's Third Quarter 2014 Earnings Call. This call coincides with today's filing of our 8-K for the quarter ending September 30, 2014. I'll start off with a review of some of the highlights from our third quarter. After that, I'll turn the call over to Chris Carlson, our CFO, who will walk you through our third quarter financial performance. Following Chris's presentation, I'll provide some thoughts on our plans for the remainder of the year, and offer some closing remarks. This was the first full quarter of the first closing of the Omega acquisitions that will be completed -- that was completed in the second quarter 2014. We're encouraged by the performance of the Marrero plant. Revenues for the third quarter 2014 was up 64% from the year ago to $76.9 million. Related to our H&H collection business, we managed our spread by lowering our pay-for-oil by 10% year-over-year, while the organic volume grew 41% year-over-year. Overall volumes of products sold across the company, this is a very important matrix of our business because it illustrates our reach into the market. It increased 56% for the third quarter 2014, and 60% for the first 9 months of 2014 compared to a year ago, respectively. We completed a private placement transaction and raised $17.1 million to pursue our West Coast expansion. Our plans for expansion in that region remain on target. We entered into a consulting agreement with the Heartland Group Holdings LLC, with the intentions to acquire all of their assets. During the quarter, we took steps with our TCEP and Marrero facilities that would have significant long-term benefit for the company. At this junction, I'll turn the call over to our CFO, Chris Carlson, who will go through our third quarter and 9-month financial results for you. Chris?

Thanks, Ben, and thank you, everyone, for joining us on this call today. As Ben said, I'll be guiding you through our financial results for the quarter. For more information though, please refer to our press release issued today, our latest Form 8-K for the fiscal quarter ending September 30, 2014 as well as our other filings made with the Securities and Exchange Commission. I also want to note that our third quarter 10-Q will be filed tomorrow, November 14. As usual, all of Vertex Energy's financial numbers are prepared, unless noted, in accordance with generally accepted accounting principles. For the quarter ended September 30, 2014, we reported consolidated revenue of $76.9 million compared to $46.8 million in Q3 2013. This represents a 64% revenue increase. For the first 9 months of 2014, revenues increased 70% to $196.3 million compared to $115.2 million a year ago. Our Black Oil Division revenue for Q3 2014 was $52.4 million as compared to $22.7 million in the third quarter of last year, a 131% increase. Revenues for the 9 months in 2014 were $124.9 million, an increase of 91% from $65.4 million a year ago. TCEP, which is a business unit within our Black Oil Division, generated $14.4 million in revenue for Q3 2014 versus $14.1 million in Q3 2013. This was driven by an increase in volume of about 7% and offset in part by a market that was down 6%. TCEP's revenue for the first 9 months of 2014 was $57 million, an increase of 44% from $39.5 million a year ago. The Refining & Marketing Division produced revenue of roughly $19.7 million in the third quarter versus $15.9 million in Q3 2013. For the 9 months ended September 30, 2014, revenue rose 49% to $58 million from $39 million a year ago. Vertex Recovery, which includes the E-Source business, generated $4.8 million in revenue in the third quarter of 2014. In third quarter 2013, the revenue generated by Recovery was almost $8.2 million, a decline of 41%. The strong revenue for 2013 was due to a large one-time project that inflated the figure compared to normal revenue levels. For the 9 months ended September 30, 2014, Recovery generated $13.4 million, up 24% from the $10.8 million generated in the first 9 months of 2013. Gross profit in the third quarter 2014 was $4.1 million compared to $4.9 million during the same period last year. This decrease is primarily attributed to the decline in the market as well as additional costs related to the TCEP turnaround and maintenance. Our per barrel margin during the quarter was down 47%. The market was down, increased expenses at TCEP and margins were strong in 2013, owing to the large project previously mentioned. For the 9 months ended September 30, 2014, gross profit was $18.1 million, up 66% from $10.9 million in the same period prior year. For the 9 months, the per barrel margin was up 4%. Gross profit for the Black Oil Division was $2.5 million during the third quarter of 2014, an improvement from last year's third quarter gross profit of roughly $1.3 million. For the 9 months ended September 30, 2014, gross profit increased roughly $6.6 million, up 133% from $4.9 million in the first 9 months of the previous year. TCEP had a gross profit of $430,000 in Q3 2014 compared to a gross profit of approximately $1.1 million a year ago, representing a decrease of approximately 61%. The turnaround expenses mentioned earlier accounted for a large portion of this decline. For the 9 months ended September 30, 2014, TCEP had gross profit of $6.8 million, up from $4.3 million in the same period. The Refining & Marketing Division generated gross profit of $976,000 for the quarter, a 42% decrease compared to gross profit in Q3 2013 of $1.7 million. This decline was almost entirely due to market price declines. For the first 9 months of 2014, gross profit was $4.4 million, a 21% increase from $3.6 million in the same period prior year. Vertex Recovery produced gross profit of $580,000 during the third quarter of 2014 compared to a gross profit of $2 million in third quarter 2013, which again was inflated by the large project during that quarter. For the 9 months ended September 30, 2014, Recovery posted a gross profit of $2.1 million compared to a gross profit of $2.2 million in the same period prior year. Selling, general and administrative expenses increased in Q3 2014 to $7 million, relative to the third quarter of last year's figure of $2.5 million. For the 9 months, SG&A was $19.2 million compared to $7.1 million in the same period prior year. The majority of the increase is attributable to the first closing of the Omega Holdings acquisition and cost associated with the West Coast expansion. We had a net loss of $1.9 million or a loss of $0.08 per fully diluted share in the third quarter of this year. This compared to a net income of $2.33 million or $0.12 per fully diluted share in the third quarter of 2013. For the first 9 months of 2014, our net income was 1 -- was $5.9 million or $0.24 per fully diluted share, a 12% increase from the $5.3 million or $0.27 per fully diluted share seen in the first 9 months of 2014. I'd like to now turn the call back over to Ben Cowart, our CEO. Benjamin P. Cowart: Thank you, Chris. Before we move on to the question and answer portion of this call, I want to touch on just a couple of more points about the business, the industry and where we're heading for the remainder of the year and beyond. Despite the shutdown of our TCEP facility and Marrero facilities, our volume of products sold increased 56%. As part of our long-term maintenance, we brought our TCEP plant down to perform some key updates. With regards to our Marrero facility and in cooperation with State of Louisiana, we reduced our production rates to run certain stack testing on the facility. This stack testing occurred during the quarter and had an impact on our volumes and production. However, I stress that these decisions were taken with great deliberation, with an eye on the future growth potential of the company. Both facilities are back up and running today. Although the market was down 5%, our H&H collection group reduced its pay-for-oil by 10%, while growing its organic volumes by 41% year-over-year. It's a marked and very strong performance by our team there. The sharp decline in crude oil has impacted our inventory. However, we have been taking steps to manage our spreads by making the necessary discount adjustments with the third-party suppliers. In addition, the shutdown of our plants helped to take some of the demand out of the market and reduce the amount of feedstock we're having to purchase today. The Bango facility in Nevada is now up and operating at nameplate capacity and has met all the requirements to complete the closing of this acquisition. We continue to work with the Heartland Group Holdings and plan to close the acquisition by the end of November. As part of the acquisition, not only are we getting an additional 17 million-gallon refining capacity, we're getting a well-established 6.8 million-gallon collection operation in a 4-state region. Our former COO, Matthew Lieb, has taken on a new role for us, managing the development of our lubricant product line and handling sales and marketing of those products as part of our West Coast expansion. Jim Harvey, a Board Member, has also signed a consulting agreement with the company. Jim will be overseeing the sales and marketing of our refined finished products, as well as the trading into the blender market for export. Before we move on to our question and answer portion of this call, I want to recognize the overall performance of our team, our legacy businesses, our collection business, the work that they've done this quarter and the 9 months, the performance of our TCEP operation and how well they brought the TCEP operation to where it is today, as well as our refining and marketing business. We've had substantial growth and performance across the board. Though we had some decisions made in the third quarter that have impacted our results somewhat, we're very pleased with the our team and, specifically, their efforts over the last 9 months and specifically, this past quarter. So as we look forward, I do see some significant improvements and opportunities for the company, and look forward to presenting those results as we come in to the end of the year and recap 2014. So I want to let the listeners know that if you have any follow-on questions or comments, please feel free to contact Porter, LeVay & Rose, Investor Relations representative Marlon Nurse at (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 and on the Investor Relations section of our website at www.vertexenergy.com. Operator, we're now ready to take a limited number of questions pertaining to the matters discussed on this call and our 8-K. Remember, we're unable to discuss any information or business plans which are not publicly available. Thank you.

[Operator Instructions] Our first question comes from Joe Fadgen with Craig-Hallum.

I'm here for Chad today. First question. The reduction of the contingent liability, can you just give me an idea of what that was related to or what triggered that this quarter?

Yes, great question. There's a 3-year earn-out provision on the Vertex Holdings business that was acquired in 2012. And the period runs from August to September roughly each year. And the second year was this year for that to be triggered, and the company did not meet those targets. So we reduced that liability in the third quarter.

Okay. All right. And then a couple of questions here on the Heartland business. Assuming that everything closes by the end of November as planned, I mean, I assume, one, that the facilities are up and running full capacity. And then I'm guessing -- I'm wondering, can you give me an idea of how meaningful you think it'll be to Q4? And then also, within their collection route, I think you laid out $6.8 million gallon collections, do you have room to improve the route efficiency there? Or is the $6.8 million kind of full efficiency, full capacity within their collection route rate now? Benjamin P. Cowart: Yes, good questions. First of all, during the third quarter, we took over, under this consulting agreement, joint decision-making related to both the refining operations and the collection business. And we've seen very, very good improvements. So we feel like the plant is running very well. So we took it from a shutdown state, brought it back online, made the necessary improvements for sustainable operations. The plant's been running very consistently for the last 1.5 months. So the plant's doing good. The collection business is also in, we'll just call it, renovation to some degree, especially around our spreads. The business has an interesting branch structure so there's probably 5 branches, Chris, I believe. For the collection business, there's a lot of additional capacity on those fixed assets. And so the $6.8 million is probably on the low side. I think there's several additional nice trucks ready to go on the road. Those branches, certainly, can support additional volumes. So we anticipate some organic growth around that collection asset, just like we've been able to demonstrate with our H&H collection business. The key is once you get this footprint, is having the ability to organically grow that volume and leverage your fixed cost and the assets that you already have in place. So with H&H, we've grown our business year-over-year 41% without adding much branch infrastructure. I think we've added 1 branch in Dallas in the third quarter, I mean, in 2014. So we hope to take the same skills and the platform we have with H&H, apply that to the collection operation in the Midwest with the Heartland Petroleum Group. It's a good, strong team of people there, very knowledgeable, been in the business a long time, so we believe we'll be very successful up there doing that.

Our next question comes from Scott Levine with Imperial Capital. Scott Justin Levine - Imperial Capital, LLC, Research Division: So I mean, really just want to get a sense of how the results came in relative to your internal expectations for the quarter. I was wondering as well, I don't know if you're able to quantify the maintenance expense incurred on both TCEP and Marrero. And thoughts on the market pricing degradation of 5%, how that broke out amongst your various products and maybe compared to your expectations and thoughts on the outlook there as well. Benjamin P. Cowart: Yes, very good, Scott. I'll say that going into the third quarter, we had made the decisions to do the maintenance at the CMP [ph] facility. And we knew we were going to do some work with the Marrero facility at the request of the State to bring our rates down to run all the stack testing. So all of those decisions were made, and we've quantified that operational impact, and it's roughly $2.5 million that the company incurred to do the things that we decided to do. That was our decision to do that. We did apply for -- to up our rates at the Marrero facility after we've done the stack testing, so we're asking the State to consider higher production rates. The plant operated very well at much higher rates than what we normally run, and so we hope to get some favor from the State in doing that. The market impact was something that we really didn't see. Those decisions, the operational decisions were made ahead of the decline in the market. So we've been -- we've really been in a reactive mode or defensive mode to some degree, though when we started seeing the decline, we knew really what to do as far as managing our inventory, making spread adjustments with our supply. And I think we've mitigated -- we did mitigate some real additional losses. The market impact, though, for the company between the Black Oil Division and our Refining & Marketing business was close to $3 million, it was $2.4 million on the Black Oil, primarily around the VGO spread for our Marrero product. There was specific issues in the Gulf related to supply and demand for VGO itself, and that had a $2.4 million impact. The other part of that was our Refining & Marketing business had a market impact of about $540,000 for the quarter. So when you look at that across the board, it represents about $5.1 million of EBITDA that we incurred, an adjustment EBITDA for the market impact and the operational decisions that we make. Scott Justin Levine - Imperial Capital, LLC, Research Division: Got it. And maybe just as a follow-up. Some thoughts on the balance sheet. I know the acquisitions you have closing here potentially before year-end with Bango and Heartland. Just maybe updated thoughts with regards to where you're operating with the current leverage burden. Are you comfortable with it? And how comfortable would you be in taking that up further, where your upper bound would be, in your view?

Yes, so I mean, as you can see, there's about $1 million of cash currently on the business. We've experienced a large increase in receivables with the new business and working through that. So that's 1 challenge the company is dealing with. And we think as we can improve those receivable turns, it will obviously improve the cash flow of the business. From that standpoint, at this time, we're not looking to take on additional debt as we go into the Heartland or even the Bango closings. So the current status of the balance sheet is currently where we're comfortable. Scott Justin Levine - Imperial Capital, LLC, Research Division: And do you have any confidence that the receivable balance will come down next quarter or 2?

We are. We have had very good discussions with those new customers. The base oil industry is a little bit different than the fuel industry. So that's a little bit of a learning curve for us. But we feel like we're on top of that. And those receivables will start to turn quicker.

Our next question comes from Jeremy Hellman with Singular Research. Jeremy Hellman - Singular Research: Just to expand on the cost impacts that you mentioned and the revenue impacts, 1 last item on that. What would the volumes -- the volume growth would look like quarter -- or year-over-year rather if you'd have been running TCEP and Marrero through the quarter? Benjamin P. Cowart: Yes, good question. I've got that right here. Our volume in July for TCEP was 87,000 barrels of products sold, and for August, it was 11,000 barrels so the plant was down the majority of August. And in September, it was 50,000 barrels. So you can see August and September had very low production. Our target's around 80,000 barrels, so the 87,000 is probably on the high side. So we definitely incurred a much lower volume there. The Marrero facility, we were at 84,000 barrels in July, 54,000 barrels in August, and 125,000 barrels in September. Our target's 100,000 barrels per month there. So we were short in production at both of those facility. Jeremy Hellman - Singular Research: And that was it 84,000, 54,000 and 125,000 you said? Benjamin P. Cowart: That's correct. Jeremy Hellman - Singular Research: Okay, great. And then one other just more macro question with what's going on with commodity prices. And just given your experience in contacts around the industry, what -- are people kind of looking at current prices in the low-$80s as a new normal that's going to persist for a while? That seems to be what I'm reading. But what you see out in the market, does that confirm that? Benjamin P. Cowart: Yes, I think $80 could be a little ambitious. So I know we're below that. And I guess, there is very smart people out there that can provide better guidance on where crude's going to end up. But our opinion is that somewhere in the $75 to $80 range is kind of what our thoughts are.

Our next question comes from Lloyd Quartin [ph] with Unique Investments [ph].

A quick follow-up on that. Based upon a potential $75 to $80 price, what do we have to look forward to as far as profits, margins, et cetera, going forward? In addition to that, the prices dropped fairly quickly and dramatically. And how did that affect your inventory that you currently had in this supply line that you had paid more for, I assume? Benjamin P. Cowart: Yes, okay. So the decline in oil prices is not a real concern for us. In fact, it seems to be helping our spreads. And when I say that, with higher oil prices, there tends to be more demand on alternative commodity products like what we produce that generates more activity in our space, that drives feedstock costs up, and when prices come off, then, really, it drives more of those raw materials into our refining capacity instead of alternative markets. So that's a positive. When the market is oversupplied with raw material that our refineries can take, then we have an opportunity to adjust our relative discount to those indexes that we buy our product from. And we've been able to accomplish that starting in the third quarter. We'll appreciate that more as we go in the fourth quarter. So that's a positive. Obviously, if we get down really low, it starts to eat into your fixed cost, specifically around your collection business, to pick oil up at the generator collection. Fortunately, we don't have as big a presence in the collection side of the industry as others do. So that's been a good thing for us, because we've been able to quickly manage our spread from a quickly declining oil price, make our spread adjustments with the purchases from the third-party suppliers and the pressure is more on that vertical. And then we've got a small collection business that we had been adjusting pricing with all the generators. So we feel very fortunate that we didn't have a big collection presence as these prices had fallen to this -- it's one thing to adjust pricing with 40 or 50 suppliers versus 10,000 or 20,000 generators. So I like where we are in the macro picture. The other part of this is the inventory, and I spoke to that earlier. Our inventory adjustment based on, I guess, market-to-market, was about $3 million for the quarter. So that's the inventory that we were holding at a higher price versus what we sold at a lower price than expected. So that does have an impact. The good thing is we're buying our raw materials, not just at the lower index price, but in additional, adjustment to the relative discount to that index. So we've taken some opportunity with the declining prices to capture additional spread margin. So once the market bottoms, we're going to have a bigger spread as we rebound and recover.

Going for -- one more question. Going forward, will all the Omega acquisitions be online? Benjamin P. Cowart: Yes. We're working real close to having the Bango close, and we've already got the other 3 assets integrated into the business. Our Bakersfield blending plant should come online late December and produce and finish lubricants early in the first quarter next year.

Are there any forward-looking projections for the first quarter with all your facilities online based upon today's prices? Benjamin P. Cowart: No, we haven't put any kind of forecast out. I think there's some good analyst coverage that has done the best job of just trying to figure out what that looks like. So -- and we will continue to work with the different analysts that are covering the company to provide them as much insight as we can.

Do we expect to be profitable? Benjamin P. Cowart: Yes, we do.

Our next question comes from Anne Margaret Crow with Edison. Anne Margaret Crow - Edison Investment Research Limited: Most of the questions I was going to ask have already been covered by the preceding callers. But I wanted to explore 2 things. One was looking -- if you could give a metric for like-for-like volumes for the first 9 months of this year compared with the previous year, so Q3 of this year compared to the previous year. And secondly, if you could provide a little bit more detail about the work that was being carried out at the TCEP plant. It doesn't seem that long ago that there's quite a bit of work done on it. Benjamin P. Cowart: Yes, I'll take the TCEP question while Chris looks at our data and try to give you some insight on the volume over, I guess, year-over-year volume and quarter-over-quarter volume. So at the TCEP facility, we made some improvements, primarily in our tank farms. So on a -- it's a scheduled maintenance basis, typically 5-year tank inspections where you bring all your tanks down, you clean all your tanks, so if there's any bottoms, you have all the cost to get rid of all the bottoms out of the tanks. You do all your inspections on the integrity of the tank floors, the side walls, et cetera. We went through all our primary tanks in our tank farm and made any necessary adjustments for payers improvements. We've got some insulation that we've done, and then we did some work on our piping systems as well. So that's something that you do pretty much on a 5-year schedule. We felt like this was the right time to do that just because of all that's going on in the market and what we're doing at Marrero as well. We just feel like going into 2015 is really our target. We wanted to kind of clean everything up and get everything done that we needed to do in this year, in this cycle, because we think 2015 is where our company should really step out and show the income potential of these assets. So we've made a decision to bring the plant down and get all of that taken care of.

So looking at volume improvement like businesses year-over-year, I'll start with our TCEP business, one of the legacy line businesses. So Q3 '13 versus Q3 '14, we're up right at 7%. And then for the 9-month period, we were up 49%. And again, I want to reiterate, a lot of that improvement is due to third, fourth quarter of last year. There was a lot of debottlenecking and a lot of investment made in throughput capacity and the ability to run more volume. So that's the big change there. The Refining & Marketing Division, there's no real change as far as year-over-year, as far as acquisitions. So 17% improvement Q3-to-Q3, and then year-over-year for the 9 months, it's a 52% improvement in the volume in that business line. Benjamin P. Cowart: One other thing to add to the TCEP question is the fact that we are finishing construction on another large tank in our tank farm. That was another part of the project. So I failed to mentioned that earlier.

Our next question comes from Justyn Putnam with Talanta Investment Group. Justyn R. Putnam - Talanta Investment Group, LLC: Ben, I just want to follow up on an earlier comment you made to a question about not being worried about oil prices declining until they got to a level where they started eating your fixed cost, particularly from the collection department. First of all, do I understand that correctly? And second of all, kind of where is that level? Is it significantly lower than where we are now? Or where is that? Benjamin P. Cowart: We're doing some sensitivity analysis internally. And I think it affects more our collection business than our overall business. But -- so I don't have a definitive number. If I had to just put a number out that I think it is, it's somewhere in the $60-type of range, where it becomes an issue where you are going to need to charge your generator for the collection of their waste. And today, there's still a lot of room in the industry spread for declining commodity prices due to oil prices coming down and the pay-for-oil at the generator level. So the real test is where do you stop paying the generator for the privilege to haul the regulated waste off. And that's the -- at the end of the day, that's our challenge as a company and the challenge that our industry has. So as base oil prices and VGO prices and fuel prices come down on this side, we've got to be able to adjust back to the generator, the pay-for-oil. So there's no -- for the way we look at it, it's -- we can't make an excuse about our spreads. We've got to manage our spreads and we've got to take it back at a street level. We don't have as much collections today at a street-level, so our price adjustments have to take place with third-party suppliers. And then they will, in turn, have to go adjust their prices at the generator level. And so there's still plenty of room, that's why lower oil prices today, probably, are the healthy thing for us and for the industry because we really needed this pendulum to start moving in the right direction. The industry has kind of been hung up because of high oil prices and high pay-for-oil prices at The Street. Justyn R. Putnam - Talanta Investment Group, LLC: Okay. And Ben, now, it's my understanding that one of the big significant factors in you being able to lower your input cost was your expansion in your collection efforts. So you were going out at street level and expanding into that market, and that was helping to drive your lower input cost. Now is that -- is there less opportunity with that, going forward, you're saying because of lower prices, or is that still the driver? Benjamin P. Cowart: Yes, no, that's a very good point, because it is our key focus as we go into 2015 and 2016. We think there's going to be significant opportunities for us to build on our collection footprint. So H&H has done a fantastic job, so far this year, to organically grow their collection business volumes and improve their spread at the same time. So that's really positive. Now with the Heartland acquisition, we get another 4 state collection region, so we'll continue to develop our collection expertise in the Midwest. And then we will be looking at opportunities to integrate additional collection routes from other markets and other companies that could be struggling and integrate those into our platform because we have a large appetite for that collection route business because of the refining capacity that we have. So we just -- we see this collection vertical coming under a lot of pressure over the next 12 to 24 months, and we want to be poised and positioned to benefit from a consolidation opportunity at that level. And then when the consolidation takes place, we'll have more leverage at the street level, the disciplined pricing back down to where it should be and we hope to be able to benefit from that shift as the pendulum swings all the way back into the generators pay-for-oil, we hope to have a bigger presence in that collection vertical at that time to reach some of those benefits. Justyn R. Putnam - Talanta Investment Group, LLC: Okay, okay. So Ben, this quarter, you said that your finished product cost declined by 5% year-over-year, yes, and your input costs declined by 10% year-over-year. And I know those are different numbers that you're multiplying that by, but that seems like a pretty good job of managing the spread during this quarter. And the decline in your gross margin, is that -- the most significant factor was just your markdown in your inventory, mark-to-market decline in the inventory values? Benjamin P. Cowart: Yes, that's exactly right. That's -- I definitely wanted to highlight just what a good job our collection operation's done this quarter and for the first 9 months. Because when you grow organically at 41%, you're taking market share from other stakeholders in the market. Your pricing -- or the value of that oil you're collecting is coming down at a rate of 5%, but yet, you lowered your overall pay-for-oil cost by 10%. So that speaks very well to our team's ability to manage that business. And we're going to take the same skills and apply that to additional volume in new markets, like the Heartland collection business, that we're taking on there in the Midwest. Justyn R. Putnam - Talanta Investment Group, LLC: Okay. And then just one quick question, a follow up on that. We kind of danced around it a little bit, but where are we quarter-to-date on your finished product pricing, and then also your input on used motor oil pricing now? Benjamin P. Cowart: Well, we don't speak specifically to our sale prices because they vary from different products. We sell everything, from finished base oil, all the way back to used oil, into the export market. So all the prices are different. I will say that we really look at the product lines and the cost of raw material from a spread standpoint, so we... Justyn R. Putnam - Talanta Investment Group, LLC: But Ben, you -- but you reported on -- in the third quarter, the 5% decline, and I know that was, in average, a high level number. I mean, you reported a 10% decline, and I was just looking for something similar to that for the fourth quarter. I'm not looking for a specific product goal.

Okay, got you. I mean, speaking to the H&H collections and their lowering of pay-for-oil on The Street, our target for the fourth quarter is to drop it another 25%. So Ben mentioned what we were able to do in the third quarter. I mean, we're still working, as markets are coming down, to adjust that pricing every day. Justyn R. Putnam - Talanta Investment Group, LLC: Okay. And finished products, what are they at? Something similar what crude oil has done this quarter, or a little better than that?

No, it's similar to crude oil. It's coming down to the well.

Our next question comes from Tom Bishop with BI Research. Tom Bishop - BI Research: I was wondering about a couple of things. One of which is in October, say, and into November here, how is the TCEP plant running? I mean, when is that back up to full steam? And are there more of these sort of one-timers coming here in Q4? Benjamin P. Cowart: No, a couple of things. Good question. TCEP, in October, probably we will not be at full capacity. I think at as we close out November, the plant should be running very close to the operational capacity that we're looking for. So December should be certainly on target. So there has been some ramp-up during the month of October and a little bit in November, actually. So we definitely believe we'll be at full throttle as we exit the fourth quarter. But I don't see a major production impact like we did in the third quarter. So we're not talking about big numbers. We may be off, say, 40,000 barrels maybe for the quarter, Chris.

Roughly. Benjamin P. Cowart: Something like that. So -- but October has certainly had some additional price declines related to the commodity markets themselves. So that's the impact that we'll feel on the inventory, at least for October. We feel like the market's settling out in November and, hopefully, in December. But if crude continues to fall, we'll continue to have to make adjustments related to our inventory. But we'll be buying product every day at the lower price. And so as soon as it settles and, hopefully, we've improved our spread to the index, that allows us to rally back additional margin. So we're doing several things to mitigate additional downturn on oil prices, and that's moving our inventories down lower to where we've got less exposure to the commodity markets, if we think it's in a decline position. And we're also looking at the way we're contracting and purchasing our product and actually buying cheaper, knowing that the market could come down some more. So all of those tools are in place. Tom Bishop - BI Research: Okay. And are there any additional kind of maintenance expenses or, I mean, did they end at the end of September? Or are they dribbling through Q4 as well? Benjamin P. Cowart: There's going to be some in Q4. Like I said, we're finishing up the construction of a brand-new tank in our tank farms, so that's... Tom Bishop - BI Research: That's capitalized, no? Benjamin P. Cowart: That's right. That's capital. But anything else, Chris?

No. Benjamin P. Cowart: Yes, we're pretty much covered third quarter. Tom Bishop - BI Research: Okay. And when you mentioned the comment about the profitability, were you talking about Q4, or are we looking more into 2015? Benjamin P. Cowart: Well, we've set some targets out, different scenarios that we believe will play into 2015, 2016. So we've taken on the acquisitions with Omega. We've got the Heartland deal. We're trying to get everything integrated during this year. We really want a clean, running start in the 2015. So that's really what we're focused on, as well as just maintaining profitability. As I said, with our legacy businesses, our collection business, our Refining & Marketing and our TCEP, year-over-year, everything's performing extremely well, both in volume and margin and gross profit. So I believe we're doing a really good job of executing on our day-to-day business. Tom Bishop - BI Research: But when -- as the questioner asked if you would be profitable, and you said, yes, I didn't get what the timeframe was. Was it Q4 he was asking about, or 2015? 2015, I'm certainly very hopeful about. But how about Q4? Benjamin P. Cowart: Yes. Sure, yes. As we go into 2015, I mean, we're optimistic that the fourth quarter in 2014 is going to be profitable as well. But we're really focused on hitting some serious targets going into next year. Tom Bishop - BI Research: Okay. So in summary, I think you said there was $5 million worth of kind of unusual expenses in the quarter for maintenance and stack testing and all that? Is that correct? Or did that include the business impact as well [indiscernible shut down for a while? Is that all inclusive, or is that just the actual cost of the maintenance that was $5 million? Benjamin P. Cowart: It's all inclusive, including the hit on our inventory. So it's $5.1 million ... Tom Bishop - BI Research: So that includes the inventory hit of $3 million? Benjamin P. Cowart: That's correct.

Our next question comes from Michael Hoffman with Stifel. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Ben, Chris, a couple of housekeeping items first, and then get into the grit here. On the share count, there's share-related issues around Omega and Heartland. What are we using as the share count for 4Q and then going into 2015 at this point?

Yes. Right now, I would use a fully diluted number of about $29 million. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: For 4Q and 2015?

Yes. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And what's the upside to that $29 million based on earnouts?

It could go up to about $33 million, roughly. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And that could happen all at once in '15, or has it got multi-year triggers like the Vertex Holdings yielded?

It's multi-year triggers. So yes, it wouldn't happen all at once. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: All right. And then on -- the question about the contingent liability, is it the same dollar amount? If I look at the August '14 to September '15 period, that's what I could be looking at as a reversal of this, if similar circumstances occur?

Yes, that's correct. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. All right. And then with regards very specifically on TCEP, you spoke to that difference in the fourth quarter. What about Marrero? Are we at 300,000 run rate for Marrero, which is 100,000 a month? Benjamin P. Cowart: Yes, that's our VGO sales volume. That's not our feed rate. So yes, we're definitely on target with our production. Their plant's running good and no issues. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. So TCEP might do 200,000 versus the 240,000 kind of targeted number, but Marrero should do the 300,000? Benjamin P. Cowart: Yes.

Yes. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then I hate to come back to this because now, I'm confused. There's $2.5 million related to maintenance and sort of what, call it, one-timers. I should be able to walk that right back into 4Q almost dollar for dollar. So take 3Q, add that back and start at that point, Marrero is up at full operation, that helps. TCEP's going to produce more volume, that helps. But then I got the offset of another -- probably another inventory hit at some level, at least for the month of October, but you're seeking to offset that by an aggressive reduction in cost of goods sold, feedstock cost on the front-end. Have I captured that correctly? Benjamin P. Cowart: Yes, that's exactly right. We're reducing inventory from an exposure standpoint, and then we're improving our spreads, which is mitigating further downturn in some of the lulls in October in the [indiscernible]. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: All right. So the $2.9 million that was the hit for the compression, the spread compression in the third quarter, how much of that can you walk back? And all things being equal, I'd have the same hit in fourth quarter. So how much of that do you walk back because of your actions? Benjamin P. Cowart: Yes, I would say, for sure, there's $2.4 million specifically on our VGO product, and that was a supply and demand issue. It really wasn't a market index where the market fail adjustment. It was really the -- and I don't want to get into weeds, but the refineries in the Gulf shut down multiple -- several of them at the same time, reducing the demand for VGO, which caused the price to go down in the third quarter sharply and our sales were affected there. I will say that we don't anticipate that for the fourth quarter because we've realigned our product into some new markets where we don't have that same exposure. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. So again, if I read this right, I take $2.5 million for the maintenance, $2.4 million for VGO, add it to the third quarter, that's a starting place, improve the volume, had to take my hit for the incremental crude impact in 4Q -- or in October, but I'm reducing my price for oil to the aggregators a lot, hence, I should be profitable in 4Q, and it's creating an excellent momentum into '15. Benjamin P. Cowart: Yes.

Yes. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: I got -- I characterized that right? Don't need to be over my skis on this. So I just -- okay. All right.

That's correct. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Can you talk about the marine fuel market opportunity that's about to hit us and what that means to this opportunity with Marrero? Benjamin P. Cowart: Well, I can say that we're working real hard on that opportunity. It won't come to play until January, so being next year, first quarter. And the sulfur content of the ship fuel that's required within a 200 nautical mile radius of North America and Europe is going from a 1% sulfur content to a 0.1% sulfur content. And because of the quality of our VGO product produced in Marrero, we meet these new ISO RMG 0.1% sulfur fuel requirements. Our product does meet the specs. So we are -- we're in the process of educating the market about our product. We're working on pilot testing on board ships to use our product and we've yet to sell product to the ship engine because of the timing, and we hope to be able to do that. So it's still a little bit early, Michael, to comment further on that because there's still a lot of work to do, and I don't want to paint the wrong picture. But it does hold some significant opportunities for the company, and there's nothing that we see today that discourages us from reaching those opportunities. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: And the other benefit, if I'm correct about this, is that used motor oil, blended with the residuals, has been going to that market, it can't do that anymore because there's too much sulfur in it. So that displaces more UMO without a home and it -- which just makes the story of can you go back to the aggregators and beat them up for a lower price -- that much better. Is that... Benjamin P. Cowart: Yes, I think that's part of it, but there's also just a change, a dynamic change in the export trade that has, historically, taken a lot of used lubes, blended those with residual fuel and went offshore to utility markets. Not just the bunker market and what's going on with this 0.1%. It's not going to really impact that much the supply and demand for used oil blending, because they've stopped blending used oil and bunker fuels a long time ago. But what has changed is the export volume of residual fuel from the refineries that, typically, would carry a percentage of used oil out with those residual fuel barrels when they're blended and loaded on cargoes. And so the export volume for resid is down considerably year-over-year, which has become a limiting factor for the market for used oil. So as -- so that's 1 issue. Natural gas has continued to erode the domestic burner market that consumes raw used oil fuel, and we only have 520 million gallons of refining capacity for used oil in the United States. So collectively, there could be an oversupply to the total demand for the product. I do see that changing in the next year or so, so this is probably a benefit for us for the next year, maybe 2 years, and there's some other dynamics that would change that again based on macro things that are going on. But we could be looking at an oversupply and the refining capacity across the U.S. could be very strategic in making the market for the product. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. So to that end, that you had to be in the enviable position of take luck over strategy at this point that you don't have a lot of internalized collection. But if this trend holds for another 1 quarter, 2 quarters, it seems like it begs the opportunity to then consolidate the collection off the bottom. Is that a... Benjamin P. Cowart: That is correct. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Is that a reasonable sort of way to think about that? Benjamin P. Cowart: Yes. That is correct. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: SG&A running kind of 8.5% to 9% of revenues, is that the way I should think about it, or is there some cost in there that you can, one, there's some operating leverage and what have you? Or more specifically, what's the target SG&A as a percent of revenues?

Yes. I mean, we're running, and we'll continue to run around 8% to 9%. The normalized SG&A looks to be right around $7 million, just a little bit under. And that's per quarter. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay. And then are you in any risk of any covenants with regards to the Goldman Sachs loan?

Yes. Just to clarify, at the end of the quarter, the company did not maintain a less than 4:1 ratio on its consolidated debt, that's on a pro forma adjusted basis. So we are in default at the moment. We are working with the lender very closely on resetting targets and assumptions going forward. And then we will make amendments to the agreements as we move forward. There's been a very fluid dialogue with the lender. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: All right. And lastly, working capital, how fast can you reverse that working capital use to become a working capital source?

I think in a 90 to 120-day period, we can do that. Michael Edward Hoffman - Stifel, Nicolaus & Company, Incorporated, Research Division: So -- and we should see it iteratively, or it's going to take you 90 to 120 to be out of, say, 50 days, went back to 40 days kind of thing?

I think it will take 90 to 120 to be able to say we went from 50 down to 40.

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

I have a couple of questions. Most of my questions have been answered by the previous callers. But with regard to the Goldman Sachs default, the -- any adjustments that are going to be made, do those come at a cost to the company? And my second question is the -- everybody -- we've kind of walked into the TCEP and the Marrero, the run rates and the targets, but what you didn't get into was the acquisitions that will be closing and the fact that you stated those will be accretive. Can you give us some ideas on a going forward basis what we should expect to do there for modeling purposes?

Yes, let me address the Goldman Sachs situation first. As of right now, I'm assuming that there will be certain penalties. But I do not know what those will be or what they will look like. Again, we're in very fluid dialogue with them. They have been a very friendly lender. So I think it's going to be a good situation that gets worked out between the 2 of us.

All right. And with regards to the acquisitions, can you give us some ideas on what we should expect going forward?

Yes. As far as whether they're going to be accretive or not, absolutely. We -- again, everything that you can look at the past and the way we've managed various acquisitions, that they will definitely be accretive. We see the space. As Michael noted earlier, it's a good opportunity to get some of these assets at a very good value. And then going forward, into 2015 and '16, as the market stabilizes and we've adjusted all of our spreads, it's going -- things are going to look very strong going forward. So they will be accretive.

There are no further questions at this time. I would like to turn the floor back over to Ben for closing comments. Benjamin P. Cowart: Okay. Well, thank you, everybody, for joining us on the call. And I really appreciate everyone's time and interest in the business. We hope that if you do have any questions, feel free to reach back out to Marlon Nurse with Porter, LeVay & Rose. That, again, (212) 564-4700. And thank you, again, for joining the call.

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