Arabian American Announces Third Quarter 2010 Financial Results
Quarterly Revenues Increase by 20.9% to $37.0 Million Year over Year
Third Quarter Earnings up 216.3% to $1.7 Million Year over Year
DALLAS, Nov. 4, 2010 /PRNewswire-FirstCall/ -- Arabian American Development Co. (Nasdaq: ARSD) today announced financial results for the third quarter and nine month period ended September 30, 2010.
-- Sales volume of petrochemical products increased by 2.3% from the third quarter of 2009. -- Revenue for the third quarter increased 20.9% to $37.0 million from $30.6 million in the same period last year. -- Gross profit for the third quarter of 2010 increased 25.6% to $5.4 million from $4.3 million in the comparable period in 2009. -- Adjusted EBITDA (adjusted for certain non-recurring expenses), a non-GAAP financial measure, for the third quarter of 2010 was $3.5 million as compared to $2.7 million for the same period in 2009. Net income attributable to Arabian American Development Company for the third quarter increased 216.3% to $1.7 million, or $0.07 per basic and diluted share, compared to net income of $528,000, or $0.02 per basic and diluted share, for the third quarter last year.
-- Al Masane Al Kobra (AMAK) received an initial tranche of $35 million from a total bridge loan in the amount of $85 million. AMAK completed financing arrangements to fund the bridge loan with a Saudi French bank while pre-closing conditions for the SIDF (Saudi Industrial Development Fund) permanent loan are being met. The second amount, $46 million, can be drawn after AMAK receives clearance for the first payment from the SIDF. -- Construction of the Company's South Hampton Resources facility Isomerization Unit, was completed in the third quarter and will give the Company more flexibility in managing its product line. The isomerization expansion will allow South Hampton to convert up to 600,000 gallons per month of Normal Pentane into Isopentane. South Hampton also is adding an additional Hexane Treater to further expand production of C6 products. The additional train will increase C6 capacity by 100%.
Third Quarter 2010 Financial Results
Consolidated revenue for the quarter ended September 30, 2010 increased 20.9% to $37.0 million compared to revenue of $30.6 million in the third quarter of 2009 and increased 1.4% sequentially compared to revenue of $36.5 million in the second quarter of 2010. Transloading generated $199,000 in revenues in the third quarter of 2010 compared to no revenues in the year-ago period. The increase in transloading revenues was due to spot opportunities during the third quarter of 2010. Excluding transloading revenues of $199,000 generated in the three months ended September 30, 2010 revenues were $36.8 million, a 20.2% increase from $30.6 million in the year-ago period, when there were no transloading revenues. Petrochemical product sales (predominantly C5 and C6 hydrocarbons and related products) represented $35.6 million, or 96.0%, of total revenue for the third quarter of 2010 and $29.7 million, or 97.0%, of total revenue, for the third quarter last year. The Company generated $1.3 million in toll processing fees, up 40.8% during the third quarter of 2010 compared with $907,000 for the prior year's third quarter. Processing revenues increased in the third quarter of 2010 compared to 2009 due to one of the tolling customers running above minimum capacity during the quarter. The Company remains dedicated to maintaining a certain level of toll processing business in the facility and currently has three potential opportunities in various stages of evaluation.
During the third quarter of 2010, the cost of petrochemical sales and processing (including depreciation) increased approximately $5.3 million, or 20.0%, to $31.6 million as compared to $26.4 million the same period in 2009. Total gross profit on revenue for the third quarter of 2010 increased approximately $1.1 million, or 25.6%, to $5.4 million as compared to $4.3 million the same period in 2009. The cost of petrochemical product sales and processing and gross profit for the three months ended September 30, 2010 includes a net gain of $291,000 from derivative transactions. For the same period of 2009, there was zero net gain or loss.
Nick Carter, President and Chief Executive Officer, commented, "Our third quarter of 2010 revenue results show solid gains from the year-ago period as well as effective control of general and administrative expenses. Revenue gains not only came from volume increases but also due to price increases as we moved several of our larger customers to formula pricing, a mechanism which is beneficial to both parties as it allows product prices to move in conjunction with feed prices without the necessity of announced price changes. We also have used derivative contracts to provide some predictability to feedstock prices, and of course we try to have timely price changes on our prime products as necessary."
Mr. Carter continued, "Our new Isomerization unit is now operational and converting Normal Pentane into Isopentane which gives us the flexibility to adjust the product slate to more efficiently meet the market demand for the two products. The new Hexane treater will undergo start up activities in the last half of this month. The Isom unit has made a difference each month beginning in late September when it became operational. Revenue generated since the start up in late September was about $250,000. The economic value varies with the product mix and the alternative market prices in any given month. The maximum benefit of having this flexibility will be in the warm weather months when the IC5 demand is at a peak. In addition, there is approximately $500,000 of work to be accomplished to finish the project's peripherals and we expect those to be completed by the end the first quarter of 2011. We have spent approximately $1.7 million to date so after all work is complete, we will bring the project, including the peripherals, in at approximately $2.2 million compared to the $3.0 million we budgeted. All of this work was accomplished with our own labor and paid out of cash flow."
General and Administrative costs for the third quarter of 2010 were up $51,000, or 2.1%, at $2.53 million from $2.48 million in the same period last year primarily due to higher administrative payroll costs, consulting fees, insurance premiums, directors' fees, post retirement expense and legal fees. These were offset by a decrease in expenses in Saudi Arabia due to the termination of the lease for the Company's branch office.
The Company reported net income attributable to Arabian American Development Company in the third quarter of 2010 of approximately $1.7 million or $0.07 per basic and diluted share (based on 23.8 million weighted average shares outstanding). This compares to net income attributable to Arabian American Development Company of $528,000, or $0.02 per basic and diluted share for the third quarter of 2009 (based on 23.7 million basic and 23.8 million diluted weighted average shares outstanding, respectively).
The Company reported adjusted EBITDA for the third quarter of 2010 of approximately $3.5 million compared to $2.7 million for the same period in 2009.
Year-to-Date 2010 Financial Results
Consolidated revenue for the nine months ended September 30, 2010 increased 21.9% to $105.6 million compared to revenue of $86.6 million in the same period in 2009. Excluding transloading revenues of $854,000 generated in the nine months ended September 30, 2010 revenues were $104.7 million, a 27.7% increase from $82.0 million in the year-ago period, excluding transloading revenues of $4.6 million. Year-to-date 2010 transloading sales reflected spot opportunities that were fulfilled. Petrochemical product sales represented $101.2 million or 95.8%, of total revenue year-to-date in 2010 compared to $79.3 million, or 91.5% of total revenue, for the same period last year. The Company generated $3.5 million in toll processing fees, up 30.2%, during the first nine months of 2010 compared with $2.7 million for the same period last year. Again, processing revenues increased primarily due to one of the tolling customers running above minimum capacity during the first nine months of 2010.
During the nine months ended September 30 of 2010, the cost of petrochemical sales and processing (including depreciation) increased approximately $25.8 million, or 38.5%, as compared to the same period in 2009. Consequently, total gross profit on revenue for the first nine months of 2010 decreased approximately $6.8 million or 34.7%, to $12.9 million, as compared to $19.7 million for the same period in 2009. The cost of petrochemical product sales and processing and gross profit for the nine months ended September 30 of 2010 includes a net gain of $27,000 from derivative transactions. For the same period of 2009, the net gain was $1.1 million.
General and Administrative costs for the first nine months of 2010 increased approximately $1.6 million, or 25.0%, to $8.2 million from $6.6 million in the same period in 2009 primarily due to higher administrative payroll costs for the addition of personnel, insurance premiums, directors' fees, legal fees and consulting fees.
For the first nine months of 2010, net income attributable to Arabian American Development was $2.1 million, or $0.09 per basic and diluted share (based on 23.7 million weighted average shares outstanding), compared to net income of $7.3 million, or $0.31 per basic and diluted share (based on 23.7 million and 23.8 million weighted average shares outstanding, respectively), for the year-ago period.
Adjusted EBITDA (adjusted for non-recurring expenses) for the nine months ended September 30 of 2010 was $6.9 million as compared to $15.1 million for the same period in 2009.
The Company completed the quarter with $4.3 million in cash and cash equivalents compared to $2.5 million as of December 31, 2009. Trade receivables increased by $3.4 million to $15.7 million from $12.3 million due to increased credit terms being extended to foreign customers and the increase in the average selling price. The average collection period remains normal for the business. Inventory increased approximately $380,000 due to a slight increase in volume and price.
The Company had $18.8 million in working capital as of September 30, 2010 and ended the quarter with a current ratio of 3.2 to 1. Shareholders' equity increased to $54.9 million as of September 30, 2010 from $52.2 million as of December 31, 2009.
Mr. Carter concluded, "Our investment in AMAK in Saudi Arabia made significant progress during the quarter, not only with construction but also with the financing, including receipt of an initial tranche of $35 million from a total bridge loan in the amount of $85 million. Subsequent to the quarter end, the Company executed a limited corporate guarantee in favor of the Saudi Industrial Development Fund ("SIDF"). We agreed to guarantee up to 41% of the SIDF loan to AMAK, in the principal amount of 330,000,000 Saudi Riyals (US$88,000,000) as owners of 41% of the currently issued and outstanding stock of AMAK. Other AMAK shareholders are providing personal guarantees. The Loan is required in order for AMAK to fund construction of the underground and above-ground portions of its mining project and to provide working capital for commencement of operations in 2011. Mobilization began in late September, the underground work will be initiated by the end of the year and the initial ore production will take place within the second quarter of 2011 with full production achieved by the fourth quarter of 2011. More background detail on the corporate guarantee will be provided in our third quarter 2010 10-Q and I would encourage interested parties to review it there."
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 in 2011 and will produce economic quantities of zinc, copper, gold, and silver.
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, 2009, and the Company's subsequent Quarterly Reports on Form 10-Q.
Company Contact: Nick Carter, President and Chief Executive Officer (409) 385-8300 firstname.lastname@example.org Investor Contact: Cameron Donahue Hayden IR (651) 653-1854 Cameron@haydenir.com
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ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, DECEMBER 31, 2010 2009 (unaudited) ASSETS Current Assets Cash and cash equivalents $ 4,286,818 $ 2,451,614 Financial contracts 187,604 -- Trade receivables, net 15,665,822 12,302,955 Inventories 5,445,562 5,065,169 Current portion of notes receivable 54,876 372,387 Prepaid expenses and other assets 914,847 739,989 Deferred income taxes 572,883 640,057 Taxes receivable 400,676 4,726,708 Total current assets 27,529,088 26,298,879 Property, pipeline and equipment, net 32,000,154 32,407,503 Investment in AMAK 30,883,657 31,146,157 Mineral properties in the United States 588,311 588,311 Notes receivable -- 35,001 Other assets 10,938 10,938 TOTAL ASSETS $ 91,012,148 $ 90,486,789 LIABILITIES Current Liabilities Accounts payable $ 3,355,056 $ 3,617,043 Accrued interest 112,820 148,538 Current portion of derivative instruments 413,018 436,203 Accrued liabilities 2,521,758 1,336,219 Accrued liabilities in Saudi Arabia 628,242 471,280 Notes payable 12,000 12,000 Current portion of post retirement benefit 31,500 31,500 Current portion of long-term debt 1,400,000 1,400,000 Current portion of other liabilities 222,038 579,500 Total current liabilities 8,696,432 8,032,283 Long-term debt, net of current portion 20,389,488 23,439,488 Post retirement benefit,net of current portion 740,431 815,378 Derivative instruments,net of current portion 875,032 838,489 Other liabilities,net of current portion 433,177 562,011 Deferred income taxes 4,715,272 4,332,911 Total liabilities 35,849,832 38,020,560 EQUITY Common stock-authorized 40,000,000 shares of $.10 par value; issued and outstanding, 23,450,745 and 23,433,995 shares in 2010 and 2009, respectively 2,345,074 2,343,399 Additional paid-in capital 42,231,542 41,604,168 Accumulated other comprehensive loss (850,113) (841,297) Retained earnings 11,146,590 9,070,736 Total Arabian American Development Company Stockholders' Equity 54,873,093 52,177,006 Noncontrolling Interest 289,223 289,223 Total equity 55,162,316 52,466,229 TOTAL LIABILITIES AND EQUITY $ 91,012,148 $ 90,486,789
ARABIAN AMERICAN DEVELOPMENT COMPANY ANDSUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 2010 2009 2010 2009 REVENUES Petrochemical Product Sales $ 35,572,993 $ 29,741,240 $ 101,184,338 $ 79,280,937 Transloading Sales 199,432 -- 853,636 4,624,681 Processing Fees 1,277,460 906,848 3,549,030 2,724,801 37,049,885 30,648,088 105,587,004 86,630,419 OPERATING COSTS AND EXPENSES Cost of Petrochemical Product Sales and Processing (including depreciation of $566,054, $556,281, $1,703,326, and $1,671,957, respectively) 31,632,185 26,354,402 92,725,819 66,948,640 GROSS PROFIT 5,417,700 4,293,686 12,861,185 19,681,779 GENERAL AND ADMINISTRATIVE EXPENSES General and Administrative 2,530,766 2,480,340 8,228,616 6,581,643 Depreciation 108,545 107,397 328,398 328,739 2,639,311 2,587,737 8,557,014 6,910,382 OPERATING INCOME 2,778,389 1,705,949 4,304,171 12,771,397 OTHER INCOME (EXPENSE) Interest Income 2,699 12,141 15,222 53,976 Interest Expense (275,065) (324,449) (857,391) (970,857) Equity in loss – AMAK -- -- (262,500) -- Miscellaneous (5,951) 65,176 (25,641) (17,293) (278,317) ( 247,132) (1,130,310) (934,174) INCOME BEFORE INCOME TAXES 2,500,072 1,458,817 3,173,861 11,837,223 INCOME TAXES 829,881 934,246 1,098,007 4,586,543 NET INCOME 1,670,191 524,571 2,075,854 7,250,680 NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST -- 3,557 -- 14,293 NET INCOME ATTRIBUTABLE TO ARABIAN AMERICAN DEVELOPMENT COMPANY $ 1,670,191 $ 528,128 $ 2,075,854 $ 7,264,973 Basic Earnings per Common Share Net Income attributable to Arabian American Development Company $ 0.07 $ 0.02 $ 0.09 $ 0.31 Basic Weighted Average Number of Common Shares Outstanding 23,750,745 23,733,995 23,749,070 23,725,995 Diluted Earnings per Common Share Net Income attributable to Arabian American Development Company $ 0.07 $ 0.02 $ 0.09 $ 0.31 Diluted Weighted Average Number of Common Shares Outstanding 23,750,745 23,753,535 23,749,070 23,822,601
SOURCE Arabian American Development Co.