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Arabian American Development Company Reports Operating Results (10-Q)

November 06, 2009 | About:
10qk

10qk

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Arabian American Development Company (ARSD) filed Quarterly Report for the period ended 2009-09-30.

ARABIAN AMER's principal business activities include refining petrochemical products and developing mineral properties in Saudi Arabia and the United States. All of its mineral properties are presently undeveloped and require capital expenditures before beginning any commercial operations. Their undeveloped mineral interests are primarily located in Saudi Arabia. Arabian American Development Company has a market cap of $70.2 million; its shares were traded at around $3 with and P/S ratio of 0.4.

Highlight of Business Operations:

The Company s net income during the first nine months of 2009 increased by approximately $9,608,000 or 410.1% in 2009 as compared to the corresponding period of 2008. Major non-cash items affecting income included an increase in depreciation of approximately $1,019,000, an decrease in the unrealized loss on derivative instruments of approximately $17,362,000, a decrease in share-based compensation of about $95,000, an increase in deferred income taxes of roughly $12,153,000, and an increase in the provision for doubtful accounts of approximately $111,000, a write off of accounts receivable of approximately $485,000 and a decrease in post retirement obligations of about $133,000.

Cash used in financing activities during the first nine months of 2009 was approximately $2,788,000 versus cash provided by financing activities of approximately $16,877,000 during the corresponding period of 2008. The Company made principal payments on long-term debt during the first nine months of 2009 of $4,000,000 on the Company s line of credit and $1,300,000 on the term loan. In 2008 additions to long term debt of $16.9 million were from a $9.9 million draw on the line of credit and a $7.0 million draw on the term loan.

SPECIALTY PETROCHEMICALS SEGMENT. In the quarter ended September 30, 2009, total petrochemical product sales decreased by about $9,043,000, transloading sales decreased by $7,891,000, and toll processing fees decreased by $160,000 for a net decrease in revenue of $17,094,000 or 35.8% over the same quarter of 2008. Sales volume of petrochemical products for the third quarter of 2009 versus 2008 increased approximately 24.3%; however, sales volume from the transloading venture decreased by 100.0% due to the expiration of the contract earlier in 2009. During the third quarter of 2009, the cost of petrochemical sales and processing (including depreciation) decreased approximately $30.5 million or 53.6% as compared to the same period in 2008. Consequently, total gross profit margin on revenue for the third quarter of 2009 increased approximately $13.4 million or 147.1% as compared to the same period in 2008. The increase in gross profit margin for the period was due to decreased price of feedstock during the quarter.

For the nine month period ending September 30, 2009, total petrochemical product sales, transloading sales and processing fees decreased approximately $35.0 million or 28.7%, and the cost of petrochemical sales and processing, including depreciation, decreased approximately $52.0 million or 43.7% for the same period in 2008. Consequently, the total gross profit margin on petrochemical product sales, transloading sales and processing during the first nine months of 2009 increased approximately $17.1 million as compared to the same period in 2008. The cost of petrochemical product sales and processing and gross profit margin for the nine month period ended September 30, 2009, includes an estimated unrealized gain of approximately $17,447,000 a realized loss of $16,338,000 for a net gain effect of approximately $1,109,000. The cost of petrochemical product sales and processing and gross profit margin for the nine month period ended September 30, 2008, includes an estimated unrealized loss of approximately $10,121,000 a realized gain of $5,465,000 for a net loss effect of approximately $4,656,000.

General and Administrative costs for the third quarter of 2009 increased approximately $825,000 as compared to the same period in 2008 due primarily to the expensing of expenditures in Saudi Arabia versus their capitalization in the prior year. General and Administrative costs for the first nine months of 2009 increased approximately $303,000 as compared to the same period in 2008. This increase is primarily attributable to approximately $135,000 additional expense related to the consulting fees for marketing studies, an increase in property taxes of about $112,000, and an increase of $55,000 related to travel expenses.

Interest expense for the third quarter of 2009 of approximately $324,000 represents an increase of approximately $215,000 over the same period in 2008. Interest expense increased in 2009 due to the increase in notes payable balances related to the expansion of the facilities in Silsbee, Texas. Interest expense for the first nine months of 2009 of approximately $971,000 represents an increase of approximately $771,000 for the same period in 2008. Interest expense increased in 2009 due to the increase in notes payable balances related to the expansion of the facilities.

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