Arabian American Announces Record Third Quarter 2011 Financial Results

SUGAR LAND, Texas, Nov. 3, 2011 /PRNewswire/ -- Arabian American Development Co. (Nasdaq: ARSD) today announced financial results for the three and nine months ended September 30, 2011.

Third Quarter 2011 Highlights

• Revenue for the third quarter increased 66.1% to $61.5 million from $37.0 million in the same period last year and increased sequentially by 44% from $42.7 million in the second quarter of 2011.
• Gross profit for the third quarter of 2011 was $9.2 million compared to $5.4 million in the comparable period in 2010 and compared sequentially to $3.2 million in the second quarter of 2011.
• EBITDA, a non-GAAP financial measure, for the third quarter of 2011 increased 98% to $6.8 million as compared to $3.5 million for the same period in 2010 and compared sequentially to $1.4 million in the second quarter of 2011.
• Net income attributable to Arabian American Development Company for the third quarter was approximately $3.9 million, or $0.16 per basic and diluted share, compared to net income of approximately $1.7 million, or $0.07 per basic and diluted share, for the third quarter last year and compared sequentially to $159,000, or $0.01 per basic and diluted share in the second quarter of 2011.

Subsequent to Third Quarter End

• ARSD's South Hampton Resources subsidiary signed a five-year contract with a one-year extension option to deliver a C5 pentane product to a new customer which is expected to generate annual volumes of approximately 800,000 U.S. gallons and generate approximately $2.6 million in revenue per year. The product will be used in an emerging technology solution.

Al Masane Al Kobra (AMAK) Mine Update

• Received formal approval of four additional leases surrounding the Al Masane area (Najran province) in southwestern Saudi Arabia believed to have prime zinc, copper, nickel, gold and silver deposits. The Ministry of Petroleum and Minerals approved the applications after AMAK submitted a detailed exploration plan.
• Successfully completed the construction phase of the AMAK mine and issued notice to the surface facility operator that it will turn the facility over to them to begin operations on November 28, 2011.

Third Quarter 2011 Financial Results

Revenue for the third quarter increased 66.1% to $61.5 million from $37.0 million in the same period last year and increased sequentially by 44% from $42.7 million in second quarter of 2011. Revenue increased during the third quarter of 2011 from 2010 due to an increase in average selling price of 31.0% and volume of 28.2%. There were no transloading sales in third quarter 2011 compared to $199,000 in the same period last year. The Company reported $1.5 million in toll processing fees during the third quarter of 2011 up 14.9% compared to $1.3 million for the prior year's third quarter due to an increase in run volumes by one of the tolling customers.  

During the third quarter of 2011, the cost of petrochemical sales and processing (including depreciation) increased approximately $20.7 million, or 65.4%, to $52.3 million as compared to $31.6 million in the same period in 2010 due to higher feedstock prices and volume processed. Average feedstock price per gallon increased 40.2% from 2010 to 2011 while volume processed increased 32.5%. Total gross profit on revenue for the third quarter of 2011 increased approximately $3.8 million, or 70.1%, to $9.2 million as compared to $5.4 million in the same period in 2010 and compared sequentially to $3.2 million in the second quarter of 2011. The cost of petrochemical product sales and processing and gross profit for the three months ended September 30, 2011, includes a net loss of approximately $393,000 from derivative transactions. For the same period of 2010, there was a net gain of approximately $291,000.

Nick Carter, President and Chief Executive Officer, commented, "We are very pleased to report record revenue in the quarter and attribute it to the continuation of strong volume demand driven by new business both domestically and internationally, as well as, strong customer retention. The volume increase reflects our success in securing new business which allowed us to utilize the increased capacity we gained with our facility expansion in 2008. This has allowed us to do exactly what we intended to do – increase revenues and expand margins with a more robust, flexible product mix. The increased volume also promotes decreased per unit operating costs which leverages our operating infrastructure more efficiently."

Mr. Carter continued, "This week our South Hampton Resources, Inc. subsidiary signed a five-year contract with a one-year extension option to deliver a C5 pentane product to a new customer. This multi-year contract, valued at more than $2.6 million per year in revenue, utilizes our facility expansion and also demonstrates that emerging technologies are utilizing our products. This continues to broaden and diversify the total market opportunity for our Company."

General and Administrative costs for the third quarter of 2011 increased $508,000, or 20.1%, to $3.0 million from $2.5 million in the same period last year primarily due to increases in officer, management and administrative compensation, travel expense, group health insurance premium increases, and property taxes, offset by decreases in directors' fees, post retirement expense, legal fees and Saudi administrative expenses.

The Company reported net income attributable to Arabian American Development Company in the third quarter of 2011 of approximately $3.9 million or $0.16 per basic and diluted share (based on 24.0 million basic and 24.5 million diluted weighted average shares outstanding, respectively). This compares to net income attributable to Arabian American Development Company of approximately $1.7 million, or $0.07 per basic and diluted share for the third quarter of 2010 (based on 23.8 million basic and diluted weighted average shares outstanding). This compares sequentially to $159,000, or $0.01 per basic and diluted share in the second quarter of 2011.

The Company reported EBITDA for the third quarter of 2011 up 98% to approximately $6.8 million compared to $3.5 million for the same period in 2010 and up sequentially from $1.4 million in the second quarter of 2011.

YTD 2011 Financial Results

Consolidated revenue for the nine months ended September 30, 2011, increased 30.7% to $138.0 million compared to revenue of $105.6 million in the same period in 2010 primarily due to an increase in the average selling price of 28.7% and total sales volume of 2.4%. There were no transloading sales for the nine months ended September 30, 2011 compared to $854,000 in the same period last year. The Company generated $3.6 million in toll processing fees, up 1.5%, during the nine months ended September 30, 2011 compared with $3.5 million for the same period last year.

During the nine months ended September 30, 2011, the cost of petrochemical sales and processing (including depreciation) increased approximately $29.6 million, or 31.9%, as compared to the same period in 2010 due to higher feedstock prices, a 4.3% increase in gallons processed, and an increase in the LIFO adjustment of approximately $624,000.  Average feedstock price per gallon increased 34.0% from the first nine months of 2010 to 2011.  

Total gross profit on revenue for the nine months ended September 30, 2011, increased approximately $2.9 million, or 22.5%, to $15.8 million, as compared to $12.9 million for the same period in 2010. The cost of petrochemical product sales and processing and gross profit for the nine months ended September 30, 2011, includes a net loss of approximately $109,000 from derivative transactions.  For the same period of 2010, the net gain was approximately $27,000.

Year-to-date General and Administrative costs decreased approximately $94,000, or 1.1%, to $8.1 million from $8.2 million in the same period in 2010.

For the nine months ended September 30, 2011, net income attributable to Arabian American Development was approximately $4.4 million, or $0.18 per basic and diluted share (based on 24.0 million basic and 24.6 million diluted weighted average shares outstanding, respectively), compared to net income of approximately $2.1 million, or $0.09 per basic and diluted share (based on 23.7 million basic and diluted weighted average shares outstanding) for the year-ago period.

EBITDA for the nine months ended September 30, 2011, was $9.7 million as compared to $6.1 million for the same period in 2010.

The Company completed the quarter with $4.8 million in cash and cash equivalents compared to $7.6 million as of December 31, 2010. Trade receivables increased by $11.4 million or 101%, to $22.6 million compared to $11.2 million at December 31, 2010 due to foreign sales with longer payment terms, an increase in the average selling price per gallon, and an increase in the volume sold during the third quarter. The average collection period remains normal for the business. Inventory increased approximately $2.1 million due to a 10.9% increase in volume and a 22.8% increase in cost per gallon.

The Company had $25.4 million in working capital and ended the quarter with a current ratio of 3.2 to 1. Shareholders' equity increased to $61.6 million as of September 30, 2011, from $56.6 million as of December 31, 2010.

Mr. Carter concluded, "AMAK successfully completed the construction phase of the mine and has issued notice to the surface facility operator that it will turn the facility over to them to begin operations on November 28, 2011. This milestone signals that they are officially moving into the operating stage. AMAK's staff and Board of Directors continue to strive toward the goal of generating operating cash flows beginning in the first or second quarter of 2012. The approval of four additional leases surrounding the Al Masane area (Najran province) in southwestern Saudi Arabia allows them to take the next step of exploration and mapping. It is expected to cost approximately $3.5 million and take about 18 months to accomplish, absent any delays. This is a positive milestone we have taken to monetize our additional assets in the region."

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 37% owner of Al-Masane Al-Kobra Mining Company (AMAK), a Saudi Arabian joint stock company which is in the final stages of development in Najran Province of southwestern Saudi Arabia. The mine is scheduled to be in production in early 2012 and will produce economic quantities of copper, zinc, 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.

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(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.