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
�- News) 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.