Arabian American Announces Fourth Quarter and Full-Year 2010 Financial Results

Quarterly Revenues Increase by 8.3% to $33.5 Million Year-over-Year

Fourth Quarter Earnings up 195.6% to $610,000 Year-over-Year

Mar 09, 2011, 16:01 ET from Arabian American Development Co.

DALLAS, March 9, 2011 /PRNewswire/ -- Arabian American Development Co. (Nasdaq: ARSD) today announced financial results for the fourth quarter and full year period ended December 31, 2010.

Financial Highlights

  • Revenue for the fourth quarter increased 8.3% to $33.5 million from $31.0 million in the same period last year.
  • Gross profit for the fourth quarter of 2010 increased 96.5% to $4.4 million from $2.2 million in the comparable period in 2009.
  • EBITDA, a non-GAAP financial measure, for the fourth quarter of 2010 was $2.2 million as compared to $165,000 for the same period in 2009.
  • Net income attributable to Arabian American Development Company for the fourth quarter increased 195.6% to $610,000, or $0.02 per basic and diluted share, compared to a net loss of $(638,000), or $(0.03) per basic and diluted share, for the fourth quarter last year.

Fourth Quarter 2010 Operational Highlights

  • Completed the expansion of South Hampton Resources' Hexane treater unit that adds an additional 800 barrels per day for treating C6 product. This unit completes the plant expansion started in 2008 which doubled capacity.
  • Finished the addition of a new Isomerization unit for increased C5 flexibility. This allows South Hampton to convert up to 600,000 gallons per month of Normal Pentane to Isopentane.  
  • Signed an agreement to merge the assets of Silsbee Trading and Transportation Company (STTC), a company owned by Nicholas Carter, President and Chief Executive Officer of Arabian American Development Co., into its operating unit, South Hampton Resources, Inc.

Subsequent to 2010 Year End

  • Signed two new contracts including a five-year contract with a North America-based company and a three-year contract with an international-based organization for a total value of more than $29 million over the length of the contracts. These continue the diversification and global expansion of the Company's customer base.
  • AMAK, the Saudi Joint Stock company owned 41% by ARSD, applied for four additional mining leases which surround the Al Masane area (Najran province) in southwestern Saudi Arabia.  Conditional approval has been granted. The business and operational plan has been submitted for final approval. These prospects were part of the previous exploration of the region which was undertaken in the late 1980's when approximately $3.0 million was spent by ARSD in research and core drilling.
  • AMAK received the first US$38 million (SR141 million) payment related to a permanent loan from the Saudi Industrial Development Fund (SIDF). This opening draw enabled AMAK to repay the initial bridge loan from a Saudi French Bank and allowed AMAK to arrange a further bridge loan from the Saudi French Bank in the amount of approximately US$44 million (SR165 million) which was needed for the completion of the mine's construction and working capital. This bridge loan will be repaid via the second draw on the SIDF loan later in the year.
  • AMAK has hired a Chief Financial Officer and an Environmental Manager. The AMAK Board is now interviewing laboratory personnel and geologists in order to complete supervisory staffing requirements in preparation for operations.
  • The AMAK Board named one of its members, Mohammed Aballala, as the Managing Director in an effort to expedite the decision making process at the mine. Mr. Aballala has a long history of managing construction projects and is capable of guiding the staff to keep the project on schedule. The mine is well positioned for subsequent operations as the mill is now approximately 95% complete.
  • Recently in conjunction with the 5th Global Competitiveness Forum in Riyadh, ARSD was listed as #54 on the list of top 100 foreign investors in Saudi Arabia. AMAK signed on as a sponsor in the Najran Investment Forum to be held on March 13-15.

Fourth Quarter 2010 Financial Results

Consolidated revenue for the quarter ended December 31, 2010 increased 8.3% to $33.5 million compared to revenue of $31.0 million in the fourth quarter of 2009. Petrochemical product sales (predominantly C5 and C6 hydrocarbons and related products) represented $32.4 million, or 96.6%, of total revenue for the fourth quarter of 2010 and $29.9 million, or 96.6%, of total revenue, for the fourth quarter last year. The Company generated $1.13 million in toll processing fees, up 6.6% during the fourth quarter of 2010 compared with $1.06 million for the prior year's fourth quarter. Processing revenues increased in the fourth quarter of 2010 compared to 2009 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 has several opportunities in various stages of evaluation.

During the fourth quarter of 2010, the cost of petrochemical sales and processing (including depreciation) increased approximately $429,000, or 1.5%, to $29.2 million as compared to $28.7 million in the same period in 2009. Total gross profit on revenue for the fourth quarter of 2010 increased approximately $2.1 million, or 96.5%, to $4.4 million as compared to $2.2 million the same period in 2009. The cost of petrochemical product sales and processing and gross profit for the three months ended December 31, 2010 includes a net gain of $179,000 from derivative transactions. For the same period of 2009, there was an $11,000 net gain.

Nick Carter, President and Chief Executive Officer, commented, "Our quarterly revenue results show modest gains from the year-ago period. Gross profit, however, increased by over 96% as we moved over 50% of our larger customers to formula pricing, a mechanism which is gaining traction and is beneficial to both parties as it allows product prices to move in conjunction with feed prices without the necessity of announced price changes. We also continued to successfully use derivative contracts to offset any fluctuating feedstock prices. These actions, along with careful cost control and the ISOM expansion (which allows Normal Pentane to be converted into Isopentane and provides flexibility in managing products) is also providing greater stability to gross margins."

Mr. Carter continued, "We capitalized on our updated and expanded pentane and hexane units to target new opportunities both domestically and globally which was not possible a year ago. As a result of our expanded capability, we announced several new sales contracts in fourth quarter 2010 and subsequent to the year-end that will help drive revenues going forward."

General and Administrative costs for the fourth quarter of 2010 were up $138,000, or 5.4%, at $2.7 million from $2.6 million in the same period last year primarily due to higher administrative payroll costs, consulting fees, insurance premiums, directors' fees, post retirement expense and legal fees.

The Company reported net income attributable to Arabian American Development Company in the fourth quarter of 2010 of approximately $610,000 or $0.02 per basic and diluted share (based on 23.8 million basic and 23.9 million diluted weighted average shares outstanding, respectively). This compares to a net loss attributable to Arabian American Development Company of $638,000, or $0.03 per basic and diluted share for the fourth quarter of 2009 (based on 23.7 million basic and diluted weighted average shares outstanding).

The Company reported EBITDA for the fourth quarter of 2010 of approximately $2.2 million compared to $165,000 for the same period in 2009.

Full Year 2010 Financial Results

Consolidated revenue for the year ended December 31, 2010 increased 18.3% to $139.1 million compared to revenue of $117.6 million in the same period in 2009. Excluding transloading revenues of $854,000 generated in the year ended December 31, 2010, revenues were $138.3 million, a 22.4% increase from $113.0 million in the year-ago period, excluding transloading revenues of $4.6 million. Year-to-date 2010 transloading sales reflected spot opportunities that were fulfilled. Petrochemical product sales represented $133.6 million or 96.0% of total revenue year-to-date in 2010 compared to $109.2 million or 92.8% of total revenue for the same period last year. The Company generated $4.7 million in toll processing fees up 23.6%, during the full year 2010 compared with $3.8 million for the same period last year. Again, processing revenues increased primarily due to one of the tolling customers running above minimum capacity during the full year 2010. Total sales volume decreased approximately 6.4% due to expiration of the transloading contract; however, petrochemical product sales volume remained steady.

During the year ended December 31, 2010, the cost of petrochemical sales and processing (including depreciation) increased approximately $26.2 million, or 27.4%, as compared to the same period in 2009. Consequently, total gross profit on revenue for the full year of 2010 decreased approximately $4.7 million or 21.4%, to $17.2 million as compared to $21.9 million for the same period in 2009. The cost of petrochemical product sales and processing and gross profit for the year ended December 31, 2010, includes a net gain of $205,000 from derivative transactions.  For the same period of 2009, the net gain was $1.1 million.

General and Administrative costs for the full year of 2010 increased approximately $1.8 million or 19.5%, to $10.9 million from $9.1 million in the same period in 2009 primarily due to increases in accrued liabilities for Pioche environmental issues, administrative payroll costs, insurance premiums, consulting fees, property taxes, directors' fees, post retirement benefits, and legal fees.

For the full year of 2010, net income attributable to Arabian American Development was $2.7 million or $0.11 per basic and diluted share (based on 23.8 million weighted average shares outstanding) compared to net income of $6.6 million or $0.28 per basic and diluted share (based on 23.7 million and 23.8 million weighted average shares outstanding, respectively) for the year-ago period.

EBITDA for the year ended December 31, 2010, was $8.2 million as compared to $15.0 million for the same period in 2009.

The Company completed the quarter with $7.6 million in cash and cash equivalents compared to $2.5 million as of December 31, 2009. Trade receivables decreased by $1.1 million to $11.2 million from $12.3 million due to decreased sales volume in the fourth quarter. The average collection period remains normal for the business. Inventory increased approximately $852,000 due to a slight increase in volume and price.

The Company had $19.0 million in working capital as of December 31, 2010 and ended the quarter with a current ratio of 3.5 to 1. Shareholders' equity increased to $56.6 million as of December 31, 2010 from $52.2 million as of December 31, 2009.

Mr. Carter concluded, "Our balance sheet remains strong with cash and cash equivalents that increased over 210% from the year-ago period. In addition, we generated cash from operations of $11.3 million which is up 62% sequentially from $7.0 million at the end of our third quarter 2010 and up 73.9% from $6.5 million in the fourth quarter of 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 which is currently under construction in the Najran Province area of southwest Saudi Arabia. The mine is scheduled to be in production in 2011 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,  2009, 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


December 31,


2010

2009

ASSETS



CURRENT ASSETS



 Cash and cash equivalents

$   7,609,943

$   2,451,614

 Financial contracts

177,446

-

  Trade Receivables, net of allowance for doubtful accounts

    of $155,000 and $126,500, respectively

11,212,290

12,302,955

  Current portion of notes receivable, net of discount of $684 and $16,109,

    respectively

34,427

372,387

  Prepaid expenses and other assets

669,367

739,989

  Contractual based intangible assets

250,422

-

  Inventories

5,917,283

5,065,169

  Deferred income taxes

487,513

640,057

  Taxes receivable

216,461

4,726,708




         Total current assets

26,575,152

26,298,879




 PLANT, PIPELINE, AND EQUIPMENT – AT COST

54,703,710

50,082,441

   LESS ACCUMULATED DEPRECIATION

(20,839,442)

(17,674,938)




 PLANT, PIPELINE, AND EQUIPMENT, NET

33,864,268

32,407,503




 INVESTMENT IN AMAK

30,883,657

31,146,157

 MINERAL PROPERTIES IN THE UNITED STATES

588,311

588,311


NOTES RECEIVABLE, net of discount of $0 and $684, respectively, net

 of current portion

-

35,001

CONTRACTUAL BASED INTANGIBLE ASSETS, net of current

 portion

605,185

-

 OTHER ASSETS

10,938

10,938




TOTAL ASSETS

$ 92,527,511

$ 90,486,789




ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)


December 31,


2010

2009

LIABILITIES



 CURRENT LIABILITIES



   Accounts payable

$  2,778,161

$  3,617,043

   Accrued interest

120,533

148,538

   Current portion of derivative instruments

396,527

436,203

   Accrued liabilities

1,777,642

1,336,219

   Accrued liabilities in Saudi Arabia

184,593

471,280

   Notes payable

12,000

12,000

   Current portion of post retirement benefit

246,605

31,500

   Current portion of long-term debt

1,864,770

1,400,000

   Current portion of other liabilities

199,939

579,500




         Total current liabilities

7,580,770

8,032,283




 LONG-TERM DEBT, net of current portion

20,836,098

23,439,488

 POST RETIREMENT BENEFIT, net of current portion

680,196

815,378

 DERIVATIVE INSTRUMENTS, net of current portion

719,693

838,489

 OTHER LIABILITIES, net of current portion

390,232

562,011

 DEFERRED INCOME TAXES

5,480,683

4,332,911




         Total liabilities

35,687,672

38,020,560




COMMITMENTS AND CONTINGENCIES






EQUITY



 Common Stock authorized 40,000,000 shares of $.10 par value;

     issued and outstanding, 23,682,915 and 23,433,995 shares

     in 2010 and 2009, respectively

2,368,291

2,343,399

 Additional Paid-in Capital

43,162,641

41,604,168

 Accumulated Other Comprehensive Loss

(736,706)

(841,297)

 Retained Earnings

11,756,390

9,070,736

Total Arabian American Development Company Stockholders'

   Equity

56,550,616

52,177,006

Noncontrolling interest

289,223

289,223

      Total equity

56,839,839

52,466,229




    TOTAL LIABILITIES AND EQUITY

$ 92,527,511

$ 90,486,789




ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME


THREE MONTHS ENDED

12 MONTHS ENDED


31-Dec

31-Dec


2010

2009

2010

2009






REVENUES





 Petrochemical Product Sales

$       32,394,750

$       29,897,604

$        133,579,088

$        109,178,541

 Transloading Sales

-

-

853,636

4,624,681

 Processing Fees

1,128,440

1,058,656

4,677,470

3,783,457


33,523,190

30,956,260

139,110,194

117,586,679






OPERATING COSTS AND EXPENSES





 Cost of Petrochemical Product





   Sales and Processing  

29,169,093

28,740,179

121,894,912

95,688,819






  GROSS PROFIT

4,354,097

2,216,081

17,215,282

21,897,860






GENERAL AND ADMINISTRATIVE EXPENSES





 General and Administrative

2,701,525

2,563,067

10,930,141

9,144,710

 Depreciation

104,974

114,799

433,372

443,538


2,806,499

2,677,866

11,363,513

9,588,248






OPERATING INCOME (LOSS)

1,547,598

(461,785)

5,851,769

12,309,612






OTHER INCOME (EXPENSE)





 Interest Income

962

9,693

16,184

63,669

 Interest Expense

(275,577)

(356,673)

(1,132,968)

(1,327,530)

 Equity in Loss from AMAK

-

-

(262,500)

-

 Miscellaneous Income (expense)

(58,374)

(71,332)

(84,015)

(74,332)


(332,989)

(418,312)

(1,463,299)

(1,338,193)






INCOME (LOSS) BEFORE INCOME TAXES

1,214,609

(880,097)

4,388,470

10,971,419






INCOME TAXES

604,809

(242,575)

1,702,816

4,343,968






 NET INCOME (LOSS)

609,800

(637,522)

2,685,654

6,627,451






NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

  -

  -

  -

  -






NET INCOME (LOSS) ATTRIBUTABLE TO ARABIAN AMERICAN DEVELOPMENT CO.

$        609,800

$       (637,522)

$       2,685,654

$        6,627,451






Basic Earnings (Loss)





 per Common Share

 Net Income (Loss)          

$0.02

($0.03)

$0.11

$0.28

Basic Weighted Average Number





 of Common Shares Outstanding

23,828,976

23,736,745

23,769,047

23,733,955






Diluted Earnings (Loss)





 per Common Share

 Net Income          

$0.02

($0.03)

$0.11

$0.28

Diluted Weighted Average Number





 of Common Shares Outstanding

23,874,000

23,736,745

23,780,303

23,800,499




ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS


For the years ended December 31,


2010

2009

Operating activities



 Net income (loss) attributable to Arabian

   American Development Co.

$ 2,685,654

$ 6,627,451

 Adjustments to reconcile net income (loss)



   to Arabian American Development Co. to Net  cash provided by

   operating activities:



   Depreciation

2,613,164

2,689,847

   Accretion of notes receivable discounts

(16,109)

(53,628)

   Unrealized (gain) loss on derivative instruments

(177,448)

(6,976,232)

   Share-based compensation

807,917

280,161

   Provision for doubtful accounts

28,500

111,154

   Deferred income taxes

684,582

8,977,317

   Postretirement obligation

-

23,378

   Impairment loss

-

-

   Loss attributable to noncontrolling interest

-

-

   Equity in loss from AMAK

262,500

-

 Changes in operating assets and liabilities:



   (Increase) decrease in trade receivables

1,062,165

(510,083)

   Decrease in notes receivable

389,070

582,177

   (Increase) decrease in income tax receivable

4,510,247

(4,297,082)

   Increase in inventories

(852,114)

(2,618,969)

   Decrease in prepaid expenses and other assets

70,622

59,353

   Decrease in derivative instruments deposits

-

3,950,000

   Increase in other liabilities

-

773,000

   Decrease in accounts payable and accrued liabilities

(504,088)

(2,146,279)

   Increase (decrease) in accrued interest

(28,005)

1,077

   Decrease in accrued liabilities in Saudi Arabia

(206,764)

(957,876)

   Net cash provided by operating activities

11,329,893

6,514,766




Investing activities



 Additions to property, pipeline and equipment

(2,898,752)

(3,184,140)

 Purchase of transportation company

(250,000)

  -

   Net cash used in investing activities

(3,148,752)

(3,184,140)




Financing Activities



 Additions to long-term debt

1,396,751

2,530,761

 Repayment of long-term debt

(4,419,563)

(6,169,009)

   Net cash provided (used) in financing activities

(3,022,812)

(3,638,248)




Net increase (decrease) in cash

5,158,329

(307,622)

Cash and cash equivalents at beginning of year

2,451,614

2,759,236




Cash and cash equivalents at end of year

$ 7,609,943

$ 2,451,614




ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES(1)


THREE MONTHS ENDED

12 MONTHS ENDED


31-Dec

31-Dec


2010

2009

2010

2009


(in thousands)






NET INCOME (LOSS)

$                 610

$                (638)

$                 2,686

$                 6,627






Add back:





 Interest

276

357

1,133

1,328

 Taxes

605

(243)

1,703

4,344

 Depreciation

105

115

432

444

 Depreciation in Cost of sales

568

574

2,271

2,246






EBITDA

$              2,164

$                 165

$                 8,225

$               14,989






12/31/2010


(in thousands except ratio)



Current assets

$               26,575



Current liabilities

$                 7,581



Working capital

$               18,994

(current assets less current liabilities)


Current ratio

3.5

(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.