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With Three Operating Companies Already Under
Their Belt, American International Industries Is Reaching For Success By
Following The Proven Business Model And Acquisition Strategy Of Other Larger
Conglomerates
Services
Business Services
(AMIN-NasdaqCM)
American International Industries, Inc.
601 Cien Street, Suite 235
Kemah, TX 77565-3077
Phone: 281-334-9479
Daniel Dror
Chairman, President and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published - January 25, 2008
BIO:
Daniel Dror
Chairman of the Board / C.E.O. / President
Mr. Dror has served as Chairman of the Board, Chief Executive Officer and
President of American International since September 1997. From April 1994 to
November 1996, Mr. Dror served as Chairman of the Board and C.E.O. of
Microtel International, Inc., a public company, traded on AMEX, in the
telecommunication business. From 1982 until 1993, Mr. Dror served as
Chairman of the Board and C.E.O. of Kleer-Vu Industries, Inc., a public
company traded on AMEX during the time that Mr. Dror served as Chairman.
Company Profile:
American International Industries, Inc. (NasdaqCM: AMIN) is a growing
holding company that takes an active role in its subsidiary companies in
order to foster growth and profitability through its financial resources and
its management expertise. American International has Industrial, Financial,
Real Estate in and around the Houston, Texas area and Oil & Gas holdings.
Each of these portfolio companies is expecting to grow in its particular
market or industry.
By operating as a holding company, American International serves both as a
financial and professional business savvy partner for its subsidiaries. Its
role is to improve each portfolio company's access to capital, help them
benefit from the economies of scale through the consolidation of
administrative functions, and to provide universal access to the financial
and management expertise of the company's corporate personnel.
CEOCFO: Mr. Dror, what is your vision for
American International?
Mr. Dror:
“In 1999, we acquired Pitts and Spitts, a company that was traded under the
symbol OTCBB: TXBQ. It was a manufacturer of barbeque pits based in Houston,
Texas and was a well known brand in Texas. At the time of the acquisition,
the company had approximately $1 million in revenues and was close to
breaking even. I have been a Chairman and CEO of several publicly traded
companies since 1980. It was my vision upon acquiring control of this
company to add other subsidiaries and have a business model of a diversified
holding company. Basically, it is the same concept as Warren Buffet’s
Berkshire Hathaway, Tyco Corporation and General Electric, all of which make
acquisitions of different companies in different segments of the economy and
apply management knowledge and financial abilities to make the subsidiaries
grow.”
CEOCFO:
What do you look for in a potential acquisition?
Mr. Dror:
“Our criteria for acquisitions are two fold. First, is primarily a company
has had a history and a franchise for quite a few years but needs additional
capital to expand further their businesses and achieve their business plans.
Second, is to acquire companies that were owned for a long time by one
family, but had no plan of succession and no continuity through the family
ownership and management. As a result, the family was seeking a means of
estate planning by selling control of the company. Therefore, the ideal in
our particular case is to seek out companies that need an infusion of
additional capital and certain management expertise that we can provide in
consideration for our acquiring 51% or more of the equity for consolidation
purposes. We work with the existing management and together we, in essence,
form a partnership and still have enough incentive for everyone to make the
company grow and prosper.”
CEOCFO:
Typically, how long do you hold a company?
Mr. Dror:
“There is no typical range. It depends on the potential of expansion and
their growth. As long as the possibilities are there for continuity of
growth, then there is no reason to sell and our average holdings of our
subsidiary companies is literally for years. Of course if some third party
comes in and wants to buy one of our subsidiaries, we carefully consider the
terms of their proposal, but basically we do not acquire a subsidiary
contemplating future sale if we believe in the long term potential for
growth and profitability--our idea is to expand and grow as much as we can,
organically and by acquisition.”
CEOCFO:
Would you tell us about the companies you have today?
Mr. Dror:
“Today we have three operating subsidiary companies: one is in the oil and
gas service business, Delta Seaboard Well Service, Inc., and has been in
business for thirty years; We are expecting it to do about $15 million in
revenues in 2008 and probably have an EBITDA of $2 million. Delta’s growth
has been very solid and we are looking at additional acquisitions for our
oil and gas subsidiary. With the oil and gas industry being what it has been
over the past three or four years, and especially based in Houston, Texas
where much of the economy is related to oil and gas, we have done very well.
The second of
our operating companies is Northeastern Plastics, Inc., and it is an
importer and distributor of products from China. The company was originally
based in the northeast in the New York area and was a manufacturer of
automotive products, but it evolved and became more of a sales organization
with products including automotive and home electrical items being
manufactured in China. While the margins are not high, there has been very
steady growth in this subsidiary. Our products are sold in department stores
such as Target, Auto Zones, and Family Dollar. We also have franchises such
as Good Housekeeping and Motor Trend, two well-known and respected brand
names that we license and sell products under. We did approximately $13
million in revenues in 2007 in Northeastern Plastics and it is profitable.
Our third
operating company is Hammonds Industries Inc., which has three operating
subsidiaries and is a manufacturer of different products. Hammonds has
approximately 25 patents that have been granted and additional patents
pending. We have Omni Directional Vehicle (ODV®) products, which we sell to
the US Army, Navy, and Air Force, and we recently received our first
purchase orders from The Boeing Company. Hammonds also has subsidiaries in
the fuel additives business and in the water purification systems business.
The Hammonds’ companies are growing rapidly, from $6.5 million revenues in
2006 to about $11 million in 2007 and we are projecting approximately $30
million in 2008.
We have an oil
and gas subsidiary that is a holder of oil and gas royalties and we look for
additional acquisitions in that particular field. We also have a significant
real estate holding of 287 acres on Galveston Bay outside of Houston that we
have on our books at the historic cost of $225 thousand, which is extremely
undervalued based upon recent fair market appraisals of approximately $16
million, which property is under contract for the appraised $16 million
price. We also have 174 acres on northwest side of Houston. Each one of our
companies has its own real estate, which is extremely undervalued on our
books. As an example, Delta Seaboard owns four acres on the west side of
Houston for which we have a bona fide offer from a third party of $7
million. Our participation in the proceeds will be $3.5 million and the
value on our books is $400 thousand. As a result, based upon the growth of
our operating subsidiaries and the undervaluation of our real estate
holding, we believe that American International Industries is undervalued.”
CEOCFO:
Are you finding more opportunity in the current economic environment?
Mr. Dror:
“What has happened in the past few years is the hedge funds have been
extremely competitive. They have so much money to invest and they do not
make money unless they are making investments and acquisitions. As a result,
it has been more difficult to find bargains with acquisition prices, because
we were competing for acquisitions and there was so much money chasing fewer
deals. We believe that with the recent hedge fund trend of slowing the pace
of acquisitions, in part because of the downturn in the credit industry and
losses in investment banking community, that this may create more
opportunities for investments in acquisitions. In AMIN’s particular case, as
a niche player in the acquisition market, and because a lot of the larger
players looking for bigger deals, we have found acquisition opportunities in
the range of between $5 million to $20 million in annual revenues, which
many companies have not pursued because people did not want to bother with
these candidates as it was too small for them. That is why we have been and
expect to continue to be successful in finding opportunities in those
particular areas and levels.”
CEOCFO:
Do you mainly look for acquisitions in the Houston area?
Mr. Dror:
“The Houston area has so much to offer that it all depends on how big you
want to grow and of course as you grow bigger more people call you with many
opportunities. We look at many different deals and potential deals. We are
very selective about what fits, what we need, and we just do not want to
make any mistakes and not to get into a situation where it takes years to
turn an entity around. We are being very careful in our acquisitions and
investments while we continue looking at some other opportunities both
within and outside of Houston.”
CEOCFO:
What is the financial picture today?
Mr. Dror:
“Our financial position is extremely solid; we have approximately $14
million in cash or cash equivalent, certificates of deposit and liquid
investments. We have a current assets to liability ratio of approximately
5:1, with over $32.8 million in current assets, and $6.5 million in current
liabilities. We have a net worth of approximately $25 million without
counting the value that is over and above the book value. If we are
successful in completing the transactions of the sale of real estate this
year, our net worth is going to increase approximately $20 million to around
$48 million. Our cash position will grow to about $34 million. We basically
are very well positioned to weather any potential downturn and be ready with
the sufficient liquidity to acquire opportunities that may come our way.”
CEOCFO:
Why should potential investors be interested and what might they miss when
they first look at the company?
Mr. Dror:
“What they might miss is the intrinsic value of the company. With our $14
million in cash right now and based on approximately six million shares
outstanding, we are talking about $2.50 per share in cash, with our stock
trading at $4.50. That translates into valuing all the other assets and
operations on the books at two dollars a share, which we believe is
ridiculous. In addition if we complete the pending real estate transactions
which we have already announced, we will have $34 million in cash then we
have about $5.00 to $6.00 a share in cash, which exceeds our present stock
price of $4.50.”
CEOCFO:
How do you get people to understand the company?
Mr. Dror:
“We have engaged during the past few years several different investor
relation service firms but have been disappointed in the firms we have
tried. They always promise you the moon and give you Channel #5 so to speak.
While we were on the Bulletin Board for a long time, we believed that was
the reason that we lacked both institutional support and shareholder
recognition. However, even with us being listed on the NasdaqCM, it seems
like it has not changed our exposure. We need to expose the stock more to
the market and we probably may not have enough liquidity for the
institutions to come in and I think that is probably where the problem is.
We firmly believe that with the additional investment opportunities that
come our way, and our issuance of additional shares for our acquisitions,
that the market will better evaluate our company. At the present level, we
know that the stock is extremely undervalued. As the stock appreciates and
is at higher prices that properly value our company, we will do some
financing and then we will have more shares out there that may interest the
institutions.”
CEOCFO:
What should people remember most about American International?
Mr. Dror:
“What people should remember most is Warren Buffet’s concept and what we are
doing in a very small way is exactly what Berkshire Hathaway is doing, which
has diversified to the point of owning a Dairy Queen, pipeline companies,
furniture stores, and other unrelated businesses. I’m not trying to compare
us to the size deals Mr. Buffet is doing, but the business model is the
same. We hope to get it a lot bigger.”
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