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.
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 email@example.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.