American International Industries Inc Reports Operating Results (10-Q)

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Nov 14, 2009
American International Industries Inc (AMIN, Financial) filed Quarterly Report for the period ended 2009-09-30.

AMERICAN INTERNATIONAL INDUSTRIES, INC. is a diversified holding company, with a business model similar to General Electric, Tyco International, and Berkshire Hathaway. The Company has holdings in Industry, Finance, and Real Estate in Houston Texas and surrounding areas, and Oil & Gas. The vision of the Company is to develop holdings in various industries through acquisition of existing companies, applying the financial resources and management expertise to foster the growth and profitability of the acquired businesses. The holding company serves as a financial and professional partner to the management of the subsidiaries. The role of the holding company is to improve each subsidiary's access to capital, achieve economies of scale by consolidating administrative functions, and utilize the financial and management expertise of corporate personnel across all units. The Company is continuing to work with management of the subsidiary companies to improve revenues, operations and p American International Industries Inc has a market cap of $12.5 million; its shares were traded at around $1.41 with a P/E ratio of 5.4 and P/S ratio of 0.4.

Highlight of Business Operations:

Total other income/expenses. Other income was $67,488 for the three months ended September 30, 2009, compared to other expense of $1,530,517 for the three months ended September 30, 2008. Other income was $75,774 for the nine months ended September 30, 2009, compared to other expense of $2,611,382 for the nine months ended September 30, 2008. Net realized/unrealized gains on trading securities were $200,382 for the three months ended September 30, 2009, compared to net losses of $1,570,137 for the three months ended September 30, 2008. Net realized/unrealized gains on trading securities were $250,025 for the nine months ended September 30, 2009, compared to net losses of $4,152,668 for the nine months ended September 30, 2008. The net unrealized losses on trading securities of $4,232,221 for the nine months ended September 30, 2008, were due primarily to the decline in the market value of our investment in Rubicon Financial Incorporated of $3,349,510 (see note 2). Other expense for the nine months ended September 30, 2008 included $2,945,133 for recognition of the property dividend distribution gain associated with the declaration of the Hammonds stock dividend (see note 18) and the recognition of $1,450,000 for the Delta lawsuit settlement (see note 16). After noncontrolling interest, the net impact of this settlement on our net income was $739,500. For the nine months ended September 30, 2009, American recognized other income in the amount of $205,534, of which $175,000 was for providing right-of-way access on the 287 acres in Galveston County. Interest expense was $705,264 for the nine months ended September 30, 2009, compared to $586,632 for the nine months ended September 30, 2008. The increase in interest expense was due primarily to the $5 million in debt used to fund the acquisition of the assets of Shumate Machine Works.

Net loss. We had a net loss from continuing operations of $926,302 for the three months ended September 30, 2009, compared to a net loss of $313,418 for the same period in 2008. We had a net loss from discontinued operations of $995,348, or $0.12 per share for the three months ended September 30, 2008. Our net loss was $911,642, or $0.10 per share, for the three months ended September 30, 2009, compared to a net loss of $2,037,301, or $0.12 per share, for the three months ended September 30, 2008. We had a net loss from continuing operations of $1,914,343 for the nine months ended September 30, 2009, compared to a net loss of $2,379,982 for the same period in 2008. We had a net loss from discontinued operations of $350,000, or $0.04 per share, for the nine months ended September 30, 2009, compared to a net loss of $2,471,957, or $0.33 per share, for the same period in 2008. Our net loss was $1,957,029, or $0.23 per share, for the nine months ended September 30, 2009, compared to a net loss of $5,041,848, or $0.67 per share, for the nine months ended September 30, 2008.

Total assets/working capital. Total assets at September 30, 2009 were $34,088,981, compared to $35,977,944 at December 31, 2008, representing a decrease of $1,888,963. The primary reason for the decrease in total assets resulted from the use of cash and the redemption of certificates of deposit to reduce our debt by $1,344,392 and to pay for operating expenses. At September 30, 2009, our working capital surplus was $15,119,009, compared to a working capital surplus of $18,196,027 at December 31, 2008, representing a decrease in working capital of $3,077,018. Delta's and NPI's lines of credit with their banks of $1,369,907 and $1,965,000, respectively, were reclassified from long-term to current during the period. These lines of credit have historically been renewed prior to the due date for a period of 18 to 24 months.

Cash flow from operations. For the nine months ended September 30, 2009, cash flow used in operations was $799,105, compared to cash flow used in operations of $1,721,861 during the same period in 2008. Our net loss of $1,914,343 for the nine months ended September 30, 2009 included non-cash expenses of $1,322,372, including depreciation and amortization of $885,942 and share-based compensation of $436,430. Our net loss of $2,379,982 for the nine months ended September 30, 2008 included non-cash income of $2,945,133 for recognition of the property dividend distribution gain associated with the declaration of the Hammonds stock dividend (see note 18) and non-cash expenses of $6,676,243, including unrealized losses on trading securities of $4,232,221, recognition of $1,450,000 for the Delta lawsuit settlement (see note 16), depreciation and amortization of $360,958, share-based compensation of $633,064. Our inventories decreased by $56,977 for the nine months ended September 30, 2009, compared to a decrease of $467,281 during the nine months ended September 30, 2008. We decreased our investments in trading securities by $300,840 during the nine months ended September 30, 2009, compared to a decrease of $14,042 during the same period in 2008. Accounts receivable increased by $1,464,111 during the nine months ended September 30, 2009, compared to an increase of $4,411,164 during the same period in 2008. Prepaid expenses increased by $89,662, other assets decreased by $27,519, and accounts payable increased by $1,211,328 for the nine months ended September 30, 2009. For the nine months ended September 30, 2008, prepaid expenses increased by $158,956, deposits for pipe inventory purchases increased by $1,748,601, other assets increase by $7,295, and accounts payable increased by $2,908,846.

Cash flow from investing activities. Our investing activities provided cash of $1,371,632 during the nine month period ended September 30, 2009, as a result of a net decrease in investments in certificates of deposit of $1,550,000, offset by the issuance of a note receivable of $300,000. This is compared to cash provided by investing activities during the same period in the prior year in the amount of $945,237, as a result of a net decrease in investments in certificates of deposit of $1,220,000 and proceeds from the sale of drilling rig equipment of $200,000, offset by the issuance of notes for $432,424 and the purchase of property and equipment of $171,547.

Cash flow from financing activities. During the nine months ended September 30, 2009, our financing activities used cash of $1,338,678 compared to cash provided of $2,009,933 during the same period in 2008. During the nine month period ended September 30, 2009, we received net proceeds from the issuance of debt of $283,851 and from line-of-credit agreements of $568,479. We made payments of $1,912,871 on debt, and purchased 237,046 shares of treasury stock at a cost of $225,332. During the 2008 period, we received net proceeds from the issuance of debt of $3,567,663 and from line-of-credit agreements of $1,045,000. We made payments of $2,797,213 on debt and margin loans during the nine month period ended September 30, 2008.

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