Arabian American Announces Second Quarter 2010 Financial Results
Quarterly Revenues Increase by 27.8% to $36.5 Million Year over Year
Sequential Increase of 14.2% from First Quarter 2010
DALLAS, Aug. 5 /PRNewswire-FirstCall/ -- Arabian American Development Co. (Nasdaq: ARSD) today announced financial results for the three and six months ended June 30, 2010.
-- Sales volume of petrochemical products for the second quarter of 2010 increased approximately 5.3% compared to the same period in 2009. -- Revenue for the second quarter increased 27.8% to $36.5 million from $28.6 million in the same period last year. -- Gross profit for the second quarter of 2010 and the comparable period in 2009 was $3.7 million and $6.4 million, respectively. -- Adjusted EBITDA (adjusted for non-recurring expenses) for the second quarter of 2010 was $1.7 million as compared to $5.0 million for the same period in 2009. Net income attributable to Arabian American Development Company for the second quarter was approximately $2,000, or $0.00 per basic and diluted share, compared to net income of $2.6 million, or $0.11 per basic and diluted share, for the second quarter last year. -- Sales volume of petrochemical products for the six months ended June 30, 2010 increased approximately 8.7% compared to the same period in 2009. -- Revenue for the six months ended June 30, 2010 increased 22.4% to $68.5 million from $56.0 million in the same period last year. -- Gross profit for the six months ended June 30, 2010 and the comparable period in 2009 was $7.4 million and $15.4 million, respectively. -- Adjusted EBITDA (adjusted for non-recurring expenses) for the first half of 2010 was $3.4 million as compared to $12.4 million for the same period in 2009. Net income attributable to Arabian American Development Company for the six months ended June 30, 2010 was $0.4 million, or $0.02 per basic and diluted share, compared to net income of $6.7 million, or $0.28 per basic and diluted share, for the second quarter last year.
-- Arabian American signed a five-year replacement contract with an affiliate of a Fortune 100 company that allows sales in excess of $15 million per year based on current market values. This solidifies a continuing business relationship with a current purchaser. The contract includes several different hydrocarbons that will be supplied to multiple plant locations for the customer within North America. -- The Al Masane Al Kobra Mining Company (AMAK), our cost-based investment, received a letter of commitment and term sheet for a 330 Million Saudi Riyal ($88.0 million USD) loan facility from the Saudi Industrial Development Fund (SIDF). The loan will be used for completion of site development including underground work, the purchase of machinery, equipment, and vehicles, working capital and contingency funds for the construction of the mine in the Najran Province of southwest Saudi Arabia.
Second Quarter 2010 Financial Results
Consolidated revenue for the quarter ended June 30, 2010 increased 27.8% to $36.5 million compared to revenue of $28.6 million in the second quarter of 2009 and increased 14.2% sequentially compared to revenue of $32.0 million in the first quarter of 2010. Transloading generated no revenues in the second quarter of 2010 compared to revenues of $1.2 million in the year-ago period. The decrease in transloading revenues is due to market conditions that made the Canadian oil sands business less economical for the customer to operate in since the latter part of 2008. Petrochemical product sales (predominantly C5 and C6 hydrocarbons and related products) represented $35.4 million or 96.8%, of total revenue for the second quarter of 2010 and $26.5 million, or 92.6% of total revenue for the second quarter last year. The Company generated $1.2 million in toll processing fees during the second quarter of 2010 compared with $0.9 million for the prior year's second quarter. Processing revenues increased in the second quarter of 2010 compared to 2009 primarily 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 continues to pursue additional opportunities.
During the second quarter of 2010, the cost of petrochemical sales and processing (including depreciation) increased approximately $10.7 million or 48.1% as compared to the same period in 2009. Consequently, total gross profit on revenue for the second quarter of 2010 decreased approximately $2.7 million or 42.1% as compared to the same period in 2009. The cost of petrochemical product sales and processing and gross profit for the three months ended June 30, 2010 includes a net loss from hedging of $0.8 million. For the same period of 2009, the net gain was $0.6 million.
Nick Carter, President and Chief Executive Officer, commented, "The challenge in the petrochemical market remains the volatility of feedstock and the demand for our products. Cost of materials increased in 2010 from the second quarter of 2009 due to higher feedstock prices. Average feedstock price per gallon increased approximately 57.2% in the second quarter of 2010 from 2009. The Petrochemical Company uses natural gasoline as feedstock which is the heavier liquid remaining after butane and propane are removed from liquids produced by natural gas wells. Our use of derivative contracts will provide some predictability to feedstock prices but is not the perfect solution. In the middle of May when petroleum prices dropped almost 20% in a short period of time, our stop loss protection took affect and limited the losses on derivative positions. In addition, the Company has adopted a strategy of moving our larger volume customers to formula-based pricing in order to reduce the effect of feedstock cost volatility. With this pricing mechanism, product prices move in conjunction with feed prices without the necessity of announced price changes. Construction is moving along on our new Isomerization Unit which will give us more control over our product mix. Implementation of this overall strategy should provide increased earnings predictability going forward."
General and Administrative costs for the second quarter of 2010 increased 50.7% to $3.1 million from $2.0 million in the same period last year primarily due to higher administrative payroll costs, consulting fees, insurance premiums, directors' fees, post retirement expense, legal fees and accounting fees. Payroll costs increased due to the addition of personnel and higher salaries due mainly to cost of living adjustments. Insurance premiums increased largely due to additional property coverage and an increase in health insurance premiums plus the addition of a foreign credit insurance policy. Consulting fees increased due to the investigation of potential acquisition targets and to meet and maintain compliance with SEC reporting guidelines.
The Company reported net income attributable to Arabian American Development Company in the second quarter of 2010 of approximately $2,000 or $0.00 per basic and diluted share (based on 23.8 million weighted average number of shares outstanding). This compares to net income attributable to Arabian American Development Company of $2.6 million, or $0.11 per basic and diluted share for second quarter of 2009 (based on 23.7 million basic and 24.0 million diluted weighted average number of shares outstanding, respectively).
The Company reported EBITDA for the second quarter of 2010 of approximately $1.0 million compared to $5.0 million for the same period in 2009. The Company expects improvement going forward due to the move to formula pricing to several of its larger customers, to the feedstock hedging program which has been re-instituted to combat price volatility, to timely price changes on its prime products, and the completion of the Isomerization unit in the latter part of the third quarter.
Year-to-Date 2010 Financial Results
Consolidated revenue for the six months ended June 30, 2010 increased 22.4% to $68.5 million compared to revenue of $56.0 million in the same period in 2009. Excluding transloading revenues of $654,000 generated in the six months ended June 30, 2010, revenues were $67.9 million, a 32.2% increase from $51.4 million in the year-ago period, excluding transloading revenues of $4.6 million. Transloading sales in the first half of 2010 reflected spot opportunities that were fulfilled. Petrochemical product sales represented $65.6 million or 95.3% of total revenue for the first six months of 2010 and $49.5 million or 88.5% of total revenue for the same period last year. The Company generated $2.3 million in toll processing compared with $1.8 million for the prior year's first six months. Again, processing revenues increased due to one of the tolling customers running above minimum capacity during the first half of 2010.
During the six months ended June 30, 2010, the cost of petrochemical sales and processing (including depreciation) increased approximately $20.5 million or 50.5% as compared to the same period in 2009. Consequently, total gross profit on revenue for the first six months of 2010 decreased approximately $7.9 million or 51.6% as compared to the same period in 2009. The cost of petrochemical product sales and processing and gross profit for the six months ended June 30, 2010 includes a net loss from hedging activities of $0.3 million. For the same period of 2009, the net gain was $1.1 million.
General and Administrative costs for the first six months of 2010 increased 38.9%, or approximately $1.6 million, to $5.7 million from $4.1 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 six months of 2010, net income attributable to Arabian American Development was $0.4 million or $0.02 per basic and diluted share (based on 23.7 million and 23.8 million weighted average shares outstanding, respectively) compared to net income of $6.7 million, or $0.28 per basic and diluted share (based on 23.7 million and 23.9 million weighted average shares outstanding, respectively) for the year-ago period.
The Company completed the quarter with $2.8 million in cash and cash equivalents compared to $2.5 million as of December 31, 2009. Trade receivables increased by $4.6 million to $16.9 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 $0.9 million due to an increase in volume in anticipation of increased sales.
The Company had $20.2 million in working capital as of June 30, 2010 and ended the quarter with a current ratio of 2.4 to 1. Shareholders' equity increased to $53.1 million as of June 30, 2010 from $52.2 million as of December 31, 2009.
Mr. Carter continued, "The Al Masane Al Kobra (AMAK) investment continued to show good progress in the above ground construction phase during second quarter of 2010. We continue to see progress toward the goal of monetizing this important asset and in the last 90 days these efforts have accelerated. According to the recently signed contract, mobilization will begin in late September, the underground work will be initiated by the end of the year and the initial ore production will take place by the end of the first quarter of 2011 with full production achieved by the fourth quarter of 2011."
Mr. Carter concluded, "During the quarter, we learned that AMAK had recorded Zakat tax expense in 2008 of SR 1,965,000 (approximately $525,000 USD). This tax is not an income tax but rather a tax on equity. This expense related to the time period when AMAK was accounted for by ARSD under the equity method. The Company recorded a charge for our 50% share of this expense (approximately $262,500 USD) in the second quarter of 2010 on the basis that our receipt of this information in that period (which information was not available when the 2008 financial statements were issued) caused us to revise our original estimate of our share of AMAK's 2008 net income or loss. There was no Zakat tax for 2009."
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 in the southwest region of Saudi Arabia which is currently under construction. 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
- Tables follow -
ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 2010 DECEMBER 31, (unaudited) 2009 ASSETS Current Assets Cash and cash equivalents $ 2,772,314 $ 2,451,614 Restricted cash 3,000,000 -- Trade receivables, net 16,944,463 12,302,955 Current portion of notes receivable 174,730 372,387 Prepaid expenses and other assets 598,385 739,989 Inventories 6,004,152 5,065,169 Deferred income taxes 786,034 640,057 Taxes receivable 3,877,770 4,726,708 Total current assets 34,157,848 26,298,879 Property, Pipeline and Equipment, net 32,059,643 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 $ 97,700,397 $ 90,486,789 LIABILITIES Current Liabilities Accounts payable $ 5,834,202 $ 3,617,043 Advance payment from shareholder 3,000,000 -- Accrued interest 113,676 148,538 Current portion of derivative instruments 940,325 436,203 Accrued liabilities 1,699,234 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 343,542 579,500 Total current liabilities 14,002,721 8,032,283 Long-Term Debt, net of current portion 23,739,488 23,439,488 Post Retirement Benefit,net of current portion 740,431 815,378 Derivative instruments,net of current portion 776,810 838,489 Other Liabilities,net of current portion 476,121 562,011 Deferred Income Taxes 4,611,824 4,332,911 Total liabilities 44,347,395 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 42,029,604 41,604,168 Accumulated Other Comprehensive Loss (787,298) (841,297) Retained Earnings 9,476,399 9,070,736 Total Arabian American Development Company Stockholders' Equity 53,063,779 52,177,006 Non-controlling Interest 289,223 289,223 Total equity 53,353,002 52,466,229 TOTAL LIABILITIES AND EQUITY $ 97,700,397 $ 90,486,789
ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 2010 2009 2010 2009 REVENUES Petrochemical Product Sales $ 35,380,401 $ 26,465,860 $ 65,611,345 $ 49,539,697 Transloading Sales -- 1,205,625 654,204 4,624,681 Processing Fees 1,161,943 913,798 2,271,570 1,817,953 36,542,344 28,585,283 68,537,119 55,982,331 OPERATING COSTS AND EXPENSES Cost of Petrochemical Product Sales and Processing (including depreciation of $568,090, $563,113, $1,137,272, and $1,115,676, respectively) 32,824,942 22,159,416 61,093,634 40,594,238 GROSS PROFIT 3,717,402 6,425,867 7,443,485 15,388,093 GENERAL AND ADMINISTRATIVE EXPENSES General and Administrative 3,070,483 2,036,968 5,697,850 4,101,303 Depreciation 109,490 106,752 219,853 221,342 3,179,973 2,143,720 5,917,703 4,322,645 OPERATING INCOME 537,429 4,282,147 1,525,782 11,065,448 OTHER INCOME (EXPENSE) Interest income 5,103 16,118 12,523 41,835 Interest expense (258,330) (337,732) (582,326) (646,408) Equity in loss – AMAK (262,500) -- (262,500) -- Miscellaneous expense (7,659) (15,927) (19,690) (82,469) (523,386) ( 337,541) (851,993) (687,042) INCOME BEFORE INCOME TAXES 14,043 3,944,606 673,789 10,378,406 INCOME TAXES 12,366 1,389,437 268,126 3,652,297 NET INCOME 1,677 2,555,169 405,663 6,726,109 NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST -- 8,861 -- 10,736 NET INCOME ATTRIBUTABLE TO ARABIAN AMERICAN DEVELOPMENT COMPANY $ 1,677 $ 2,564,030 $ 405,663 $ 6,736,845 Basic Earnings per Common Share Net Income attributable to Arabian American Development Company $ 0.00 $ 0.11 $ 0.02 $ 0.28 Basic Weighted Average Number of Common Shares Outstanding 23,750,745 23,721,995 23,748,233 23,721,995 Diluted Earnings per Common Share Net Income attributable to Arabian American Development Company $ 0.00 $ 0.11 $ 0.02 $ 0.28 Diluted Weighted Average Number of Common Shares Outstanding 23,750,745 23,992,272 23,748,233 23,857,134
SOURCE Arabian American Development Co.