Quarterly report pursuant to Section 13 or 15(d)

INVESTMENT IN AMAK

v3.19.2
INVESTMENT IN AMAK
 6 Months Ended
Jun. 30, 2019
Equity Method Investments and Joint Ventures [Abstract]  
INVESTMENT IN AMAK
INVESTMENT IN AMAK

As of June 30, 2019 and December 31, 2018, the Company had a non-controlling equity interest of 33.3% and 33.4% in AMAK of approximately $37.3 million and $38.7 million, respectively. This investment is accounted for under the equity method. There were no events or changes in circumstances that may have an adverse effect on the fair value of our investment in AMAK at June 30, 2019.

In the second quarter of 2019, certain shareholders of AMAK transferred a portion of their shares to the CEO of AMAK as a one-time retention and performance bonus. The Company transferred 100,000 shares and the transaction reduced our ownership percentage from 33.4% to 33.3%.

In first quarter 2018, we completed an exchange of shares with certain stockholders whereby such stockholders traded 65,000 common shares of TREC in exchange for 24,489 shares of our AMAK stock. The 65,000 shares were accounted for as treasury stock. This transaction reduced our ownership percentage from 33.44% to 33.41%.

AMAK's financial statements were prepared in the functional currency of AMAK which is the Saudi Riyal ("SR"). In June 1986 the SR was officially pegged to the U. S. Dollar ("USD") at a fixed exchange rate of 1 USD to 3.75 SR.

The summarized results of operation and financial position for AMAK are as follows:

Results of Operations
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019

 
2018

 
2019

 
2018

 
 
(thousands of dollars)
 
(thousands of dollars)
Sales
 
$
20,566

 
$
19,494

 
$
41,230

 
$
33,581

Cost of sales
 
18,162

 
16,555

 
36,732

 
29,061

Gross profit
 
2,404

 
2,939

 
4,498

 
4,520

Selling, general, and administrative
 
2,807

 
2,892

 
5,545

 
4,415

Operating (loss) income
 
(403
)
 
47

 
(1,047
)
 
105

Other (expense) income
 
(75
)
 
15

 
353

 
34

Finance and interest expense
 
(448
)
 
(388
)
 
(893
)
 
(785
)
Loss before Zakat and income taxes
 
(926
)
 
(326
)
 
(1,587
)
 
(646
)
Zakat and income taxes
 
366

 
—

 
888

 
—

Net Loss
 
$
(1,292
)
 
$
(326
)
 
$
(2,475
)
 
$
(646
)


Financial Position
 
 
June 30,

 
December 31,

 
 
2019

 
2018

 
 
(thousands of dollars)
Current assets
 
$
35,658

 
$
44,093

Noncurrent assets
 
197,093

 
212,291

Total assets
 
$
232,751

 
$
256,384

 
 
 
 
 
Current liabilities
 
$
19,201

 
$
17,160

Long term liabilities
 
74,111

 
77,366

Stockholders' equity
 
139,439

 
161,858

 
 
$
232,751

 
$
256,384


The equity in the (losses) earnings of AMAK reflected on the consolidated statements of income for the three and six months ended June 30, 2019, and 2018, is comprised of the following:
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019

 
2018

 
2019

 
2018

 
 
(thousands of dollars)
 
(thousands of dollars)
AMAK Net Loss
 
$
(1,292
)
 
$
(326
)
 
$
(2,475
)
 
$
(646
)
Percentage of Ownership
 
33.29
%
 
33.41
%
 
33.29
%
 
33.41
%
 
 
 
 
 
 
 
 
 
Company's share of loss reported by AMAK
 
$
(429
)
 
$
(109
)
 
$
(824
)
 
$
(216
)
Amortization of difference between Company's investment in AMAK and Company's share of net assets of AMAK
 
337

 
337

 
674

 
674

Equity in (losses) earnings of AMAK
 
$
(91
)
 
$
228

 
$
(150
)
 
$
458



In connection with the 2018 AMAK share repurchase program, we received net proceeds of approximately $0.4 million during the three months ended March 31, 2019. AMAK completed the share repurchase program in 2019, at which point all shares repurchased from AMAK stockholders were registered as treasury shares. Upon completion of the share repurchase program, the Company's ownership percentage in AMAK did not change from 33.4%.

For additional information, see Note 10, “Investment in Al Masane Al Kobra Mining Company ("AMAK")” to the consolidated financial statements set forth in our Annual Report on Form 10–K for the year ended December 31, 2018.

At June 30, 2019, and December 31, 2018, we had a receivable from AMAK of approximately $0.1 million and $0.1 million, respectively, relating to unreimbursed travel and Board expenses which are included in prepaid and other assets. We have not advanced any cash to AMAK during 2019.