Arabian American Announces First Quarter 2011 Financial Results
Quarterly Revenues Increase by 5.5% to $33.8 Million Year over Year
SUGAR LAND, Texas , May 5, 2011 /PRNewswire/ -- Arabian American Development Co. (Nasdaq: ARSD) today announced financial results for the first quarter ended March 31, 2011.
First Quarter 2011 Highlights
-- Revenue for the first quarter increased 5.5% to $33.8 million from $32.0
million in the same period last year.
-- Gross profit for the first quarter of 2011 was $3.3 million compared to
$3.7 million in the comparable period in 2010.
-- EBITDA, a non-GAAP financial measure, for the first quarter of 2011 was
$1.5 million as compared to $1.7 million for the same period in 2010.
-- Net income attributable to Arabian American Development Company for the
first quarter was $257,000, or $0.01 per basic and diluted share,
compared to net income of $404,000, or $0.02 per basic and diluted
share, for the first quarter last year.
-- John R. Townsend was appointed to the Board of Directors on February 24,
2011. He will serve as Chair of the Audit Committee and as a member of
the Compensation Committee. Mr. Townsend has 33 years of experience in
the Petrochemicals Industry including over 20 years experience as a
Plant Manager in olefins, aromatics, paraxylene, polystyrene, synthetic
lubricants and catalyst plants.
Al Masane Al Kobra (AMAK) Mine Update
-- The Al Masane Al Kobra (AMAK) Board of Directors is investigating
raising additional capital from third-party investors for the AMAK mine
construction activities, as well as, the surrounding lease areas for
which AMAK has conditional lease approval. In conjunction with these
discussions, AMAK shareholders, at a special shareholders' meeting,
unanimously approved to increase the number of shares in the AMAK joint
stock company from 45 million to 50 million. Shareholders also approved
a proposal to increase the number of board seats from eight to nine.
-- The AMAK mine start date is expected to be late 2011 to first quarter
2012 due to delays in equipment delivery and slower than anticipated
underground work.
First Quarter 2011 Financial Results
Consolidated revenue for the quarter ended March 31, 2011, increased 5.5% to $33.8 million compared to revenue of $32.0 million in the first quarter of 2010. Petrochemical product sales (predominantly C5 and C6 hydrocarbons and related products) represented $32.8 million, or 97.1%, of total revenue for the first quarter of 2011 and $30.2 million, or 94.5%, of total revenue, for the first quarter last year. The Company reported $973,000 in toll processing fees, down 12.3% during the first quarter of 2011 compared with $1.1 million for the prior year's first quarter primarily due to one of the tolling customers running approximately 21.1% slower during the first quarter of 2011.
During the first quarter of 2011, the cost of petrochemical product sales and processing (including depreciation) increased approximately $2.2 million, or 7.8%, to $30.5 million as compared to $28.3 million in the same period in 2010 primarily due to the higher cost of feedstock. Total gross profit on revenue for the first quarter of 2011 decreased approximately $434,000, or 11.7%, to $3.3 million as compared to $3.7 million the same period in 2010. The cost of petrochemical product sales and processing and gross profit for the three months ended March 31, 2011 includes a net gain of approximately $244,000 from derivative transactions. For the same period of 2010, there was a $577,000 net gain.
Nick Carter, President and Chief Executive Officer, commented, "Our quarterly revenue results show modest gains from the year-ago period. Gross profit decreased as the cost of feedstock increased. The market continues to be volatile so the use of derivative contracts helps to provide some predictability for feedstock prices. As of the end of the first quarter of 2011, approximately 20% of anticipated feedstock needs for the coming three months were covered by derivative contracts. In addition, in 2010, the Company adopted a strategy of moving its larger volume customers to formula based pricing to reduce the effect of feedstock cost volatility, and this strategy is paying off. Even though the cost of feedstock has risen over 15% since the first of the quarter, and 35% since the first quarter of 2010, we have been able to maintain positive earnings and EBIDTA."
General and Administrative costs for the first quarter of 2011 were down $119,000, or 4.5%, at $2.5 million from $2.6 million in the same period last year primarily due to payroll costs increases due to the addition of personnel and higher salaries offset by a decrease in consulting fees due to the closure of the SEC comment process, as well as, a decrease in directors' fees, post retirement benefits, accounting and legal fees and expenses in Saudi Arabia. Property taxes increased due to the decrease in the amount of an abatement previously obtained.
The Company reported net income attributable to Arabian American Development Company in the first quarter of 2011 of approximately $257,000 or $0.01 per basic and diluted share (based on 24.0 million basic and 24.7 million diluted weighted average shares outstanding, respectively). This compares to net income attributable to Arabian American Development Company of $404,000, or $0.02 per basic and diluted share for the first quarter of 2010 (based on 23.7 million basic and diluted weighted average shares outstanding).
The Company reported EBITDA for the first quarter of 2011 of approximately $1.5 million compared to $1.7 million for the same period in 2010.
The Company completed the quarter with $5.9 million in cash and cash equivalents compared to $7.6 million as of December 31, 2010. Trade receivables increased by $4.3 million to $15.5 million from $11.2 million due to additional foreign sales with longer payment terms and an increase in the average selling price per gallon in the first quarter. The average collection period remains normal for the business. Inventory was flat at $5.9 million.
Cash used by operating activities totaled $371,000 for the first quarter of 2011. The Company had $18.9 million in working capital as of March 31, 2011 and ended the quarter with a current ratio of 2.9 to 1. Shareholders' equity increased to $57.2 million as of March 31, 2011 from $56.6 million as of December 31, 2010.
Mr. Carter concluded, "Subsequent to the end of the quarter, AMAK's Board of Directors approved several items designed to enhance the mine's capital structure and to ensure that adequate funding is available. These actions include seeking third party investors to expedite operations for both the current mining operations and the additional lease area activities, increasing the number of shares by 11% and increasing the number of board seats from eight to nine. The Board is very sensitive to the impact of these actions but we believe the long-term benefit will prove to be positive to shareholders. AMAK has been thinly capitalized from the start, especially since Arabian American's contribution was in the form of mining assets, an infusion of additional capital will be prudent to cover working capital and start up expenses. We are pleased to be working with our Saudi partners and potential third-party investors to produce a well funded, stable operation for the current mine and any operations that result from the additional leases we have pending with the Ministry."
About Arabian American Development Company (ARSD)
ARSD owns and operates a petrochemical facility located in southeast Texas just north of Beaumont which specializes in high purity petrochemical solvents and other solvent type manufacturing. The Company is also the original developer and now a 41% investor in a Saudi Arabian joint stock company involving a mining project which is currently under construction in the Najran Province area of southwest Saudi Arabia. The mine is scheduled to be in production late in 2011 or early in 2012 and will produce economic quantities of zinc, copper, gold, and silver.
Safe Harbor
Statements in this release that are not historical facts are forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements are based upon management's belief as well as assumptions made by and information currently available to management. Because such statements are based upon expectations as to future economic performance and are not statements of fact, actual results may differ from those projected. These risks, as well as others, are discussed in greater detail in Arabian American's filings with the Securities and Exchange Commission, including Arabian American's Annual Report on Form 10-K for the year ended December 31, 2010, and the Company's subsequent Quarterly Reports on Form 10-Q.
Company Contact: Nick Carter, President and Chief Executive Officer
(409) 385-8300
ncarter@southhamptonr.com
Investor Contact: Cameron Donahue
Hayden IR
(651) 653-1854
Cameron@haydenir.com
- Tables follow –
ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2011 2010
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 5,866,721 $ 7,609,943
Financial contracts 377,647 177,446
Trade receivables, net 15,472,604 11,212,290
Inventories 5,931,678 5,917,283
Current portion of notes receivable, net of discount
of $134 and $684, respectively 13,566 34,427
Prepaid expenses and other assets 626,457 669,367
Contractual based intangible assets 250,422 250,422
Deferred income taxes 244,031 487,513
Income taxes receivable 216,461 216,461
Total current assets 28,999,587 26,575,152
Plant, pipeline and equipment, net 33,974,504 33,864,268
Investment in AMAK 30,883,657 30,883,657
Mineral properties in the United States 588,311 588,311
Contractual based intangible assets 542,580 605,185
Other assets 10,938 10,938
TOTAL ASSETS $ 94,999,577 $ 92,527,511
LIABILITIES
Current Liabilities
Accounts payable $ 5,130,145 $ 2,778,161
Accrued interest 117,080 120,533
Current portion of derivative instruments 384,968 396,527
Accrued liabilities 2,041,768 1,777,642
Accrued liabilities in Saudi Arabia 196,593 196,593
Current portion of post retirement benefit 249,559 246,605
Current portion of long-term debt 1,837,572 1,864,770
Current portion of other liabilities 179,078 199,939
Total current liabilities 10,136,763 7,580,770
Long-term debt, net of current portion 20,432,640 20,836,098
Post retirement benefit,net of current portion 680,196 680,196
Derivative instruments,net of current portion 457,717 719,693
Other liabilities,net of current portion 347,287 390,232
Deferred income taxes 5,459,548 5,480,683
Total liabilities 37,514,151 35,687,672
EQUITY
Common stockauthorized 40,000,000 shares of $.10 par
value; issued and
outstanding, 23,690,415 and 23,682,915 shares in 2011
and 2010, respectively 2,369,041 2,368,291
Additional paid-in capital 43,369,646 43,162,641
Accumulated other comprehensive loss (556,173) (736,706)
Retained earnings 12,013,689 11,756,390
Total Arabian American Development Company
Stockholders' Equity 57,196,203 56,550,616
Noncontrolling Interest 289,223 289,223
Total equity 57,485,426 56,839,839
TOTAL LIABILITIES AND EQUITY $ 94,999,577 $ 92,527,511
ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
MARCH 31
2011 2010
REVENUES
Petrochemical Product Sales $ 32,782,710 $ 30,230,944
Transloading Sales - 654,204
Processing Fees 972,858 1,109,627
33,755,568 31,994,775
OPERATING COSTS AND EXPENSES
Cost of Petrochemical Product Sales and Processing
(including depreciation of $672,429 and $569,180,
respectively) 30,463,720 28,268,692
GROSS PROFIT 3,291,848 3,726,083
GENERAL AND ADMINISTRATIVE EXPENSES
General and Administrative 2,507,759 2,627,367
Depreciation 111,804 110,363
2,619,563 2,737,730
OPERATING INCOME 672,285 988,353
OTHER INCOME (EXPENSE)
Interest Income 550 7,420
Interest Expense (271,638) (323,996)
Miscellaneous 25,491 (12,031)
(245,597) ( 328,607)
INCOME BEFORE INCOME TAXES 426,688 659,746
INCOME TAXES 169,389 255,760
NET INCOME 257,299 403,986
NET LOSS ATTRIBUTABLE TO
NONCONTROLLING INTEREST -- --
NET INCOME ATTRIBUTABLE TO ARABIAN AMERICAN
DEVELOPMENT COMPANY $ 257,299 $ 403,986
Basic Earnings per Common Share
Net Income attributable to Arabian American
Development
Company $ 0.01 $ 0.02
Basic Weighted Average Number of Common Shares
Outstanding 23,988,082 23,745,721
Diluted Earnings per Common Share
Net Income attributable to Arabian American
Development
Company $ 0.01 $ 0.02
Diluted Weighted Average Number of Common Shares
Outstanding 24,715,974 23,745,721
ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREEMONTHS ENDED
MARCH 31,
2011 2010
OPERATING ACTIVITIES
Net Income $ 257,299 $ 403,986
Adjustments to Reconcile Net Income Attributable to
Arabian American Development
Company To Net Cash Provided by (Used in) Operating
Activities:
Depreciation 784,233 679,543
Amortization of Contractual Based Intangible Asset 62,605 --
Accretion of Notes Receivable Discounts (550) (7,383)
Unrealized Gain on Derivative Instruments (200,201) (630,995)
Stock-based Compensation 191,180 246,205
Deferred Income Taxes 129,345 (143,886)
Postretirement Obligation 2,954 (74,947)
Changes in Operating Assets and Liabilities:
Increase in Trade Receivables (4,260,314) (1,075,004)
Decrease in Notes Receivable 21,411 122,553
Decrease in Income Tax Receivable -- 369,335
(Increase) Decrease in Inventories (14,395) 95,611
(Increase) Decrease in Prepaid Expenses 42,910 (42,184)
Increase in Accounts Payable and Accrued Liabilities 2,616,110 193,396
Increase (Decrease) in Accrued Interest (3,453) 448
Increase in Accrued Liabilities in Saudi Arabia -- 156,962
Cash Provided by (Used in) Operating Activities (370,866) 293,640
INVESTING ACTIVITIES
Additions to Property, Pipeline and Equipment (958,275) (639,770)
FINANCING ACTIVITIES
Issuance of Common Stock 16,575 --
Additions to Long-Term Debt -- 1,000,000
Repayment of Long-Term Debt (430,656) (350,000)
Cash Provided by (Used in) Financing Activities (414,081) 650,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,743,222) 303,870
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,609,943 2,451,614
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,866,721 $2,755,484
ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES RECONCILIATION OF
SELECTED GAAP MEASURES TO NON-GAAP MEASURES(1)
THREE MONTHS ENDED
March 31,
2011 2010
(in thousands)
NET INCOME $ 257 $ 404
Add back:
Interest 272 324
Taxes 169 256
Depreciation 112 110
Depreciation in Cost of sales 672 569
EBITDA $ 1,482 $ 1,663
03/31/11
(in thousands except ratio)
Current assets $ 29,000
Current liabilities 10,137
Working capital $ 18,863
(current assets less current liabilities)
Current ratio 2.9
(current assets divided by current liabilities)
(1)This press release includes non-GAAP measures. Our non-GAAP measures are
not meant to be considered in isolation or as a substitute for comparable GAAP
measures and should be read only in conjunction with our consolidated
financial statements prepared in accordance with GAAP.
SOURCE Arabian American Development Co.