Arabian American Development Announces Fiscal 2007 First Quarter Financial Results
Company expects final approval on joint stock company during second quarter
DALLAS, May 10 /PRNewswire-FirstCall/ -- Arabian American Development Co. (OTC Bulletin Board: ARSD) today announced financial results for the first quarter ended March 31, 2007.
First Quarter 2007 Highlights:
* Revenues of $23.7 million compared to $24.3 million in the first
quarter of last year
* Gross profit margin of 64% verses 32.2% due primarily to the change in
fair value of derivatives for feedstock purchases
* Operating Income increased 61.2% or by $2.6 million year-over-year for
the quarter
* First quarter earnings per share of $0.20 verses $0.12 in year-ago
period
* Preparation continues in Saudi Arabia; Management continues to
anticipate government approval for joint stock company during second
quarter, then will apply to transfer the mining lease
* Expansion of petrochemical facilities on-track; Equipment acquisition
underway and management reiterating a first quarter 2008 completion
date
Financial Results
Consolidated revenues for the first quarter of fiscal 2007 were $23.7 million, a decrease of 2.7 percent compared to the $24.3 million for the first quarter last year. Refined product sales (predominantly C5 and C6 Hydrocarbons and related products) represented $22.4 million, or 94.4 percent of total revenues for the first quarter and $23.6 million, or 97.0 percent of total revenues for the first quarter last year. The Company generated $1.3 million in toll processing fees during the first quarter compared with $730,004 for the prior year's first quarter.
Gross profit for the first quarter was $9.3 million, or 39.1 percent gross profit margin, compared with gross profit of $5.9 million, or 24.3 percent gross profit margin, for the first quarter last year. The increase in both whole dollars and as a percent of sales is due to a positive change in the fair value of derivatives for feedstock purchases. The cost of petrochemical product sales and processing and gross profit margin for the three months ended March 31, 2007 includes an estimated unrealized gain of approximately $3.8 million on the derivative agreements. General and administrative expenses increased 55.1% to $2.1 million from $1.4 million last year due to expenses related to a one time accrual of Post Retirement Obligations approved by the Board on March 20, 2007 for the Senior Executives, and also to increased labor costs for the quarter.
The Company reported $6.9 million in operating income compared to $4.3 million in operating income last year. The Company reported net income of $4.6 million, or $0.20 per basic and fully diluted share (based on 23.2 million shares) compared to net income of $2.7 million, or $0.12 per basic and fully diluted share last year (based on 22.9 million shares).
"Demand for our specialty petrochemical products and services remained at solid levels despite price increases, enabling us to maintain revenue levels and maintain our gross profit margin," commented Nick Carter, the Petrochemical Company's President. "This high level of demand validates our decision to expand our specialty petrochemical facilities and this initiative, announced during the first quarter, remains on track to be completed by the end of the first quarter of 2008. Based on current and anticipated demand, this expansion will enable us to double both our revenue and EBITDA opportunity once we reach maximum capacity, which will be a three to five year process."
Mr. Carter continued, "We made significant progress in our mining initiative during the first quarter, and our employees are on the ground in Saudi Arabia doing prep work on the mine. We hope to receive final approval needed for the formation of the joint stock company during the second quarter of 2007. Upon receiving approval to form the new company, we can then apply with the Ministry of Minerals and Petroleum to transfer the mining lease into the new company. We then plan to accelerate construction on the mining facility in the second half of this year. Preliminary negotiations are underway with a Chinese construction company to detail the project work schedule and to identify responsibilities for the parties involved. Mineral spot prices remain favorable and we continue to move closer to revenue generation. Our confidence in this segment of our business remains at an all- time high and we look forward to achieving a more appropriate valuation based on the proven underlying mineral assets."
The Company completed the quarter with $2.0 million in cash compared to $2.9 million as of December 31, 2006. Increased feedstock costs resulted in lower cash, but the Company's inventory levels increased from $3.6 million to $4.4 million and trade receivables increased from $8.9 million to $10.4 million. The changes in the Balance Sheet accounts are part of the normal ebb and flow of the business and are not considered unusual. Collections on Accounts Receivable remain timely and the higher balance reflects a return to normal sales levels from the dip at the end of December. The Company had $4.1 million in working capital as of March 31, 2007 and ended the quarter with a current ratio of 1.2 to 1. Both working capital and current ratio were calculated excluding the $11 million non interest-bearing/non-recourse current note payable to the Saudi Government. The Company expects this note to be transferred to the joint stock company with the mining lease in the second quarter of 2007. Shareholder's Equity increased 10.6 percent during the quarter to $49.5 million compared to $44.7 million as of December 31, 2006.
Teleconference
Management will conduct a conference call and live web cast at 4:30 p.m. Eastern Time, on Thursday, May 10, 2007. Anyone interested in participating should call 800-936-9754 if calling within the United States or 973-935-2048 if calling internationally. There will be a playback available until May 17, 2007. To listen to the playback, please call 877-519-4471 if calling within the United States or 973-341-3080 if calling internationally. Please use pin number 8769152 for the replay. This call is being web cast by ViaVid Broadcasting and can be accessed at ViaVid's website at http://www.viavid.net. The web cast can be accessed until June 10, 2007.
About Arabian American Development Co.
Arabian American owns and operates a petrochemical facility employing about 110 people located in southeast Texas just north of Beaumont, Texas, specializing in high purity petrochemical solvents and other solvent type manufacturing. Arabian American also has a mining project in Saudi Arabia which is under development and is expected to produce economic quantities of zinc, copper, gold, and silver when it is put into production. There are about 20 employees at the mine site.
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, 2005 and the Company's subsequent Quarterly Report Form 10-Q.
Company Contact: Nick Carter, President, Secretary and Treasurer
(409) 385-1400
ncarter@southhamptonrefining.com
Investor Contact: Cameron Donahue or Brett Maas
Hayden Communications
(651) 653-1854
Cameron@haydenir.com
Tables to follow
ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, DECEMBER 31,
2007 2006
ASSETS
Current Assets
Cash and cash equivalents $1,961,325 $2,939,022
Trade Receivables, Net of allowance
for doubtful accounts of $35,000
and $35,000, respectively 10,421,594 8,893,182
Current portion of notes receivable, net
of discount and deferred gross profit
of $198,530 and $200,492, respectively 607,917 605,955
Financial contracts 3,726,690 --
Financial contract deposits 300,000 1,500,000
Prepaid expenses and other assets 488,757 404,228
Inventories 4,388,743 3,576,317
Income tax receivable 619,598 619,598
Total Current Assets 22,514,624 18,538,302
Plant, Pipeline and Equipment 22,385,119 21,643,903
Less: Accumulated Depreciation (11,355,662) (11,017,503)
Net Plant, Pipeline and Equipment 11,029,457 10,626,400
Al Masane Project 37,310,052 37,137,022
Other Interests in Saudi Arabia 2,431,248 2,431,248
Mineral Properties in the United States 1,058,138 1,084,711
Notes Receivable, net of discount
of $130,773 and $172,041, respectively,
net of current portion 1,409,132 1,545,714
Other Assets 51,437 226,769
TOTAL ASSETS $75,804,088 $71,590,166
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $2,673,437 $2,989,203
Accrued interest 61,273 59,857
Financial contracts --- 765,672
Accrued liabilities 2,530,287 1,210,054
Accrued liabilities in Saudi Arabia 1,515,148 1,645,257
Notes payable 11,012,500 11,012,500
Current portion of long-term debt 28,172 488,828
Current portion of other liabilities 584,349 584,349
Total Current Liabilities 18,405,166 18,755,720
Long-Term Debt, net of current portion 3,101,482 5,108,309
Other Liabilities 2,073,724 1,621,105
Deferred Income Taxes 1,946,946 540,000
Minority Interest in Consolidated Subsidiaries 788,834 817,558
STOCKHOLDERS' EQUITY
Common Stock-authorized 40,000,000
shares of $.10 par value; issued and
outstanding, 22,601,994 and 22,571,994
shares in 2007 and 2006, respectively 2,260,199 2,257,199
Additional Paid-in Capital 37,183,206 37,087,206
Retained Earnings 10,044,531 5,403,069
Total Stockholders' Equity 49,487,936 44,747,474
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $75,804,088 $71,590,166
ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED
March 31
2007 2006
REVENUES
Petrochemical Product Sales $22,354,856 $23,586,369
Processing Fees 1,307,834 730,004
23,662,690 24,316,373
OPERATING COSTS AND EXPENSES
Cost of Petrochemical Product
Sales and Processing 14,399,556 18,399,203
General and Administrative 2,127,385 1,371,855
Depreciation 249,683 197,114
16,776,624 19,968,172
OPERATING INCOME 6,886,066 4,348,201
OTHER INCOME (EXPENSE)
Interest Income 62,595 49,688
Interest Expense (90,872) (145,852)
Minority Interest 2,073 1,789
Miscellaneous Income (Expense) (10,553) 25,524
(36,757) (68,851)
INCOME BEFORE INCOME TAXES 6,849,309 4,279,350
INCOME TAXES 2,207,847 1,578,069
NET INCOME $4,641,462 $2,701,281
Basic Earnings per Common Share
Net Income $0.203 $0.119
Basic Weighted Average Number
of Common Shares Outstanding 22,875,594 22,765,327
Diluted Earnings per Common Share
Net Income $0.200 $0.118
Diluted Weighted Average Number
of Common Shares Outstanding 23,192,286 22,916,106
SOURCE Arabian American Development Co.