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Arabian American Development (ARSD)

Q4 2012 Earnings Call

March 07, 2013 4:30 pm ET

Executives

Kim Rogers-Carrete

Nicholas N. Carter - Chairman, Chief Executive Officer, President, Chief Operating Officer and President of Texas Oil & Chemical Co II Inc

Connie J. Cook - Chief Financial Officer, Principal Accounting Officer, Treasurer and Secretary

Simon Upfill-Brown - Executive Vice President

Analysts

Thomas Harenburg

Gunnar Hansen - Sidoti & Company, LLC

John H. Curti - Singular Research

Mitchell Lester Sacks - Grand Slam Asset Management, LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Arabian American Development Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions]

Today's conference is being recorded, March 7, 2013. I would now like to turn the conference over to Kim Rogers, of Genesis Select IR firm for Arabian American Development.

Kim Rogers-Carrete

Thank you, operator, and good afternoon, everyone. Welcome to the Arabian American Development Company's Fourth Quarter and Full Year 2012 Financial Results Earnings Call. The earnings release was distributed over the wire service approximately 30 minutes ago and should be available on most financial websites.

On our call with us today will be Mr. Nick Carter, President and Chief Executive Officer; Connie Cook, Chief Financial Officer, and Simon Upfill-Brown, Executive Vice President.

Following management's prepared comments, there will be a formal Q&A session open to all participants on the call today. Before we get started, I'm going to review the Safe Harbor statement, which is Slide #2 in the presentation.

Statements in this conference call that are not descriptions of historical facts are forward-looking statements relating to future events. And as such, all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. Such statements, including, but not limited to, expectations about future operating results, involve a number of risks and uncertainties, competitive factors, market demand and the company's ability to fund and exploit its mining resources. Various future events or factors may cause the actual results to differ materially from those expressed in any forward-looking statements made on this conference call.

As a result, actual results may differ materially from any financial outlook stated herein. Further information on potential factors that could affect the company's financial results may be found on the company's reports on Form 10-K and 10-Q filed with the Securities and Exchange Commission, which can be reviewed at www.sec.gov.

As a reminder, this webcast is accompanied by a slide presentation that's accessible on the Arabian American website at arabianamericandev.com.

For those who want to participate in the Q&A, you must do so through the dial-in provided in the release today and the one provided on February 19 as well.

And now, I'd like to turn the call over to President and CEO, Nick Carter, for comments. Nick?

Nicholas N. Carter

Well, thank you, Kim. I'd like to thank all of you who have joined us for the conference call today to discuss our fourth quarter and full year 2012 financial results. As Kim mentioned, slides are available on the website and Slide 3 identifies our agenda for today's call.

I'll start with an overview of our financial and operational highlights. Connie Cook will follow with a discussion of the financial details and Simon Upfill-Brown will discuss his role in the company. I will then conclude with an operational update and information on the AMAK mining activities.

Now, let's turn to Slide 4. We are pleased to announce that for 2012, we had record full year revenues of $223 million, which was a 12% increase from the $200 million we recorded in 2011. This revenue increase was primarily due to a record volume of 63.6 million gallons for the year, up from 54.3 million we recorded in the 2011 calendar year. We also set a new record for operating income of $17.5 million. We've seen a steady increase in our international shipments with volume up 28% and revenue up 25%.

Now turning to Slide 5. All of these records were achieved despite the fourth quarter of 2012 which was below our expectations. The drop off in fourth quarter was largely beyond our control as we had several issues come up affecting the volume of sales quarter-over-quarter. Our competitor had experienced operational difficulties in the fourth quarter of 2011 which put us in the position of supplying the entire market and this issue was resolved by them in the first quarter of 2012.

Secondly, a large customer suffered a fire and extended shutdown in 2012 and we therefore lost considerable volume to that incident in the fourth quarter. That customer is still currently not in operation but is expected to be back in the next few months. And lastly, as we've discussed previously, a large oil sands customer has been late in starting their brand-new process in the second half of 2012 and they were accepting product for inventory in the fourth quarter of 2011 and so that skewed our volume of sales of 2011 versus 2012. This customer, by the way, has now placed orders for March and April delivery and so we wish them good luck in operating their process going forward. We know it's been a long and difficult startup phase for them and we can sympathize with that.

We also had maintenance shutdown in the fourth quarter of 2012 but final analysis indicates due to preparation and planning, we were able to make it through that event without significantly affecting the volumes sold.

Moving on to Slide 6. Petrochemical product sales revenue and volume for the last 10 quarters are presented. You can see that petrochemical sales revenue ranged from $32.4 million in the fourth quarter of 2010 to $60.7 million for the second quarter of 2012 and dropped down to $48.8 million in the fourth quarter of 2012.

While we didn't have any normal customer issues, the second quarter and third quarter historically tend to be our highest demand quarters as those are the warmer months and since our isopentane is used extensively as a coolant in the polyethylene industry, we see the results in volume demand during those quarters. The interesting point about this slide, is that I'm pleased to -- I'm pleased about, is that our 2012 revenues and results are much more consistent than we've seen in past years. In many past years we have made most earnings of the year in just 2 quarters and the other 2 have been modest at best. I believe that a number of factors have contributed in increased consistency. A larger market share domestically, international sales volume increases and formula pricing have all been factors.

Read the rest of this transcript for free on seekingalpha.com