Arabian American Announces First Quarter 2011 Financial Results

Download PDF

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.