Arabian American Development Announces Fiscal 2007 First Quarter Financial Results

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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
     *  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

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.


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 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

     Investor Contact:  Cameron Donahue or Brett Maas
                        Hayden Communications
                        (651) 653-1854

                               Tables to follow


                                                   MARCH 31,     DECEMBER 31,
                                                      2007          2006

      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

      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

      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

           STOCKHOLDERS' EQUITY                  $75,804,088    $71,590,166


                                                      THREE MONTHS ENDED
                                                            March 31
                                                      2007            2006
      Petrochemical Product Sales                  $22,354,856    $23,586,369
      Processing Fees                                1,307,834        730,004
                                                    23,662,690     24,316,373

      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

      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.