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GSE Reports Third Quarter Results

November 1, 2012

HOUSTON, Nov. 1, 2012 /PRNewswire/ — GSE Holding, Inc. (the “Company” or “GSE”) (NYSE: GSE), a leading global provider of highly engineered geosynthetic containment solutions for environmental protection and confinement applications, today reported its financial results for the Company’s third quarter of 2012.

(Logo: http://photos.prnewswire.com/prnh/20120320/MM73437LOGO)

Selected highlights for the third quarter of 2012:

  • Third quarter sales of $121.2 million vs. $146.8 million in 3Q 2011
  • Gross margin of 16.8% vs. 14.2% in 3Q 2011
  • Net income of $5.2 million vs. $3.8 million in 3Q 2011
  • Adjusted EBITDA of $12.6 million vs. $13.5 million in 3Q 2011
  • Adjusted EBITDA Margin increased to 10.4% vs. 9.2% in 3Q 2011
  • Adjusted EPS of $0.27; fully diluted EPS of $0.26

Mark Arnold, President and Chief Executive Officer stated that, “Despite the challenging operating environment, we expanded our margins and increased net income by 38% primarily due to the Company’s focus on higher margin projects in mining, coal ash and fracking. At the same time we experienced reduced sales volume compared with the prior year quarter due to our decision to decline to bid on certain low margin projects in the U.S. landfill market.”

The Company experienced strong mining orders, highlighting the relative strength of the precious metals mining segment compared to iron ore and coal. We saw increased sales of water containment projects across all of our geographies. Additionally, municipal and industrial waste opportunities in China continue to contribute to sales growth.

Mr. Arnold added, “We expect fourth quarter results to be improved relative to the prior year.”

Third Quarter Summary

Total revenue for the third quarter was $121.2 million, compared to $146.8 million for the prior year period. Lower sales volume in North America, declines in raw material prices and changes in foreign currency exchange rates, principally the Euro, contributed to the decrease in sales. These decreases were partially offset by better pricing and changes in product mix.

Gross margin for the third quarter of 2012 improved to 16.8% from 14.2% in the prior year period, highlighting the Company’s focus on more profitable end markets and higher value products. Gross profit declined slightly, $0.4 million, to $20.4 million in the third quarter of 2012 from $20.8 million in the prior year period.

During the quarter, Selling, General and Administrative (SG&A) expenses declined to $11.9 million compared to $12.8 million in the prior year. The decrease in SG&A was primarily due to higher professional fees incurred in the prior year period related to the initial public offering (IPO).

Net income for the quarter was $5.2 million, or $0.26 per fully diluted share, compared to $3.8 million, or $0.32 per fully diluted share, in the prior year period. Adjusted net income was $5.4 million, or $0.27 per fully diluted share, compared to $4.2 million, or $0.36 per fully diluted share, in the same prior year period.

Adjusted EBITDA declined $0.9 million to $12.6 million from $13.5 million in the prior year period. Adjusted EBITDA margin improved 120 basis points to 10.4% primarily because of improved project mix.

Year to Date Summary

Year to date revenue was $355.3 million compared to $353.8 million for the same period last year. Improved pricing, increases in raw material costs passed on to customers, and changes in product mix contributed to the increase in net sales. This increase was partially offset by lower volume and changes in foreign currency exchange rates, principally the Euro.

Gross profit increased $5.1 million to $58.0 million from $52.9 million compared to last year. Gross margin increased 140 basis points to 16.3%.

SG&A expense for the year to date period was $34.7 million compared to $31.5 million in 2011.

Net loss for the period was $3.7 million or ($0.21) per fully diluted share. This compared to net income of $1.9 million, or $0.16 per fully diluted share, in the prior year period. Year-to-date adjusted net income was $10.1 million, or $0.56 per fully diluted share, compared to $5.3 million, or $0.45 per fully diluted share, in the same prior year period.

Adjusted EBITDA for the year to date period was $35.6 million compared to $35.7 million in the same prior year period.

Conference Call

GSE will hold a conference call today, November 1, 2012 at 9:30 a.m. Central Time to discuss third quarter operating results. The conference call can be accessed by dialing 877-616-4476 (domestic) or 402-875-4763 (international). Participants will need to provide the passcode 47980802. A telephonic replay will be available approximately two hours after the call and can be accessed by dialing 1-855-859-2056, or for international callers, 1-404-537-3406. The passcode for the live call and the replay is 47980802. The telephonic replay will be available until 11:59 pm (Eastern Time) on November 15, 2012.

Interested parties may also listen to a simultaneous webcast of the conference call via the Investor Relations section of GSE’s website at http://www.gseworld.com.

Use of Non-GAAP Financial Measures

EBITDA represents net income (loss) before interest expense, income tax expense, depreciation and amortization of intangibles. Adjusted EBITDA represents EBITDA before loss (gain) on foreign currency transactions, restructuring expenses, non-recurring professional fees, stock?based compensation expense, IPO costs, loss on extinguishment of debt and management fees. Adjusted Earnings per Share represents Earnings per Share before IPO costs and IPO related interest expense, loss on extinguishment of debt and management fees. EBITDA, Adjusted EBITDA and Adjusted Earnings per Share are “non-GAAP financial measures,” as defined under the rules of the Securities and Exchange Commission (the “SEC”), and are intended as supplemental measures of the Company’s performance that are not required by, or presented in accordance with, GAAP. EBITDA, Adjusted EBITDA and Adjusted Earnings per Share should not be considered as alternatives to net income, income from continuing operations, earnings per share or any other performance measure derived in accordance with GAAP. The presentation of EBITDA, Adjusted EBITDA and Adjusted Earnings per Share should not be construed to imply that future results will be unaffected by unusual or non-recurring items. Management believes these measures are meaningful to investors to enhance their understanding of the Company’s financial performance. Management’s calculation of these measures may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most comparable GAAP measure, appears in the section of this press release titled “Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA”. A reconciliation of Adjusted Earnings per Share to Earnings per Share appears in the section of this press release titled “Earnings per Share Reconciliation”.

About GSE Holding, Inc.

GSE is a global manufacturer and marketer of geosynthetic lining solutions, products and services used in the containment and management of solids, liquids, and gases for organizations engaged in waste management, mining, water, wastewater, and aquaculture.

GSE has a long history of manufacturing quality geosynthetic lining systems and developing innovative products. The Company’s principal products are polyethylene-based geomembranes, geonets, geocomposites, geosynthetic clay liners, concrete protection liners and vertical barriers. GSE manufactures products primarily to line or cap hazardous and non-hazardous waste landfills; contain materials generated in certain mining processes; and contain water, liquid waste and industrial products in ponds, tanks, reservoirs, sewers, and canals. Headquartered in Houston, Texas, USA, GSE maintains sales offices throughout the world and manufacturing facilities in the United States, Chile, Germany, Thailand and Egypt.

Forward-Looking Statements

This press release contains forward?looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this press release are forward?looking statements. Forward?looking statements give management’s current expectations and projections relating to the Company’s financial condition, results of operations, plans, objectives, future performance and business. You can identify forward?looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. The forward?looking statements are based on the Company’s beliefs, assumptions and expectations of future performance, taking into account the information currently available to management. Important factors that could cause actual results to differ materially from statements included in this press release can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and other documents filed with the SEC. These documents are available in the Investor Relations section of the Company’s website at http://www.gseworld.com.

The Company cannot assure you that it will realize the results or developments it expects or anticipates or, even if substantially realized, that they will result in the consequences or affect the Company or its operations in the way it expects. The forward?looking statements included in this press release are made only as of the date hereof. Management undertakes no obligation to update or revise any forward?looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

                                                            GSE Holding, Inc.
                                                       Consolidated Balance Sheets
                                                   (In thousands, except share amounts)
                                                               (Unaudited)
                                                                 September 30, 2012         December 31, 2011
                                                                 ------------------         -----------------

                                                  ASSETS
    Current assets:
    Cash and cash equivalents                                                      $11,805                   $9,076
    Accounts receivable:
    Trade, net of allowance for doubtful
     accounts of $1,135 and $1,736                                                 101,961                   80,705
    Other                                                                            4,397                    3,054
    Inventory, net                                                                  73,602                   58,109
    Deferred income taxes                                                              495                      935
    Prepaid expenses and other                                                       7,896                    5,741
    Income taxes receivable                                                            428                    2,447
                                                                                       ---                    -----
    Total current assets                                                           200,584                  160,067
    Property, plant and equipment, net                                              69,514                   57,270
    Goodwill                                                                        58,895                   58,895
    Intangible assets, net                                                           1,823                    2,727
    Deferred income taxes                                                            4,078                    2,519
    Deferred debt issuance costs, net                                                7,460                    8,387
    Other assets                                                                       211                    2,561
                                                                                       ---                    -----
    TOTAL ASSETS                                                                  $342,565                 $292,426
                                                                                  ========                 ========
                                 LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable                                                               $37,208                  $34,848
    Accrued liabilities and other                                                   19,017                   22,812
    Short-term debt                                                                    512                    2,864
    Current portion of long-term debt                                                3,153                    2,709
    Income taxes payable                                                             2,237                      964
    Deferred income taxes                                                            1,127                    1,135
                                                                                     -----                    -----
    Total current liabilities                                                       63,254                   65,332
    Other liabilities                                                                1,043                    1,124
    Deferred income taxes                                                            1,131                    1,416
    Long-term debt, net of current
     portion                                                                       180,259                  192,885
                                                                                   -------                  -------
    Total liabilities                                                              245,687                  260,757
                                                                                   -------                  -------
    Commitments and contingencies
    Stockholders' equity:
    Common stock, $.01 par value,
     150,000,000 shares authorized,
     19,710,264 and 10,809,987 shares
     issued and outstanding at September
     30, 2012 and December 31, 2011,
     respectively                                                                      197                      108
    Additional paid-in capital                                                     130,275                   61,407
    Accumulated deficit                                                            (33,186)                 (29,456)
    Accumulated other comprehensive loss                                              (408)                    (390)
                                                                                      ----                     ----
    Total stockholders' equity                                                      96,878                   31,669
                                                                                    ------                   ------
    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                                                                       $342,565                 $292,426
                                                                                  ========                 ========

                                    GSE Holding, Inc
                          Consolidated Statements of Operations
                        (In thousands, except per share amounts)
                                       (Unaudited)

                                                     Three Months Ended      Nine Months Ended
                                                       September 30,           September 30,
                                                    -------------------     ------------------
                                                       2012        2011      2012        2011
                                                       ----        ----      ----        ----

    Net sales                                      $121,200    $146,842  $355,285    $353,791
    Cost of products                                100,820     126,006   297,329     300,925
                                                    -------     -------   -------     -------
    Gross profit                                     20,380      20,836    57,956      52,866
    Selling, general and
     administrative
     expenses                                        11,945      12,761    34,684      31,499
    Public offering
     related costs                                        -           -     9,655           -
    Amortization of
     intangibles                                        295         329       893       1,057
                                                        ---         ---       ---       -----
    Operating income                                  8,140       7,746    12,724      20,310
    Other expenses (income):
    Interest expense, net                             3,199       4,657    12,836      14,978
    Foreign currency
     transactions (gain)
     loss                                              (571)     (1,617)     (513)         36
    Loss on
     extinguishment of
     debt                                                 -           -     1,555       2,016
    Other income, net                                  (654)       (222)   (1,318)       (928)
                                                       ----        ----    ------        ----
    Income from
     continuing
     operations before
     income taxes                                     6,166       4,928       164       4,208
    Income tax provision                                756       1,200     3,483       2,401
                                                        ---       -----     -----       -----
    Income (loss) from
     continuing
     operations                                       5,410       3,728    (3,319)      1,807
    Income (loss) from
     discontinued
     operations, net of
     tax                                               (170)         76      (411)         83
                                                       ----         ---      ----         ---
    Net income (loss)                                 5,240       3,804    (3,730)      1,890
    Other comprehensive income (loss):
    Foreign currency
     translation
     adjustment                                         689      (4,704)      (19)       (311)
                                                        ---      ------       ---        ----
    Comprehensive income
     (loss)                                          $5,929       $(900)  $(3,749)     $1,579
                                                     ======       =====   =======      ======

    Basic net income (loss) per common share:
    Continuing operations                             $0.28       $0.34    $(0.19)      $0.17
    Discontinued
     operations                                       (0.01)       0.01     (0.02)          -
                                                      -----        ----     -----         ---
                                                      $0.27       $0.35    $(0.21)      $0.17
                                                      =====       =====    ======       =====
    Diluted net income (loss) per common share:
    Continuing operations                             $0.27       $0.31    $(0.19)      $0.15
    Discontinued
     operations                                       (0.01)       0.01     (0.02)       0.01
                                                      -----        ----     -----        ----
                                                      $0.26       $0.32    $(0.21)      $0.16
                                                      =====       =====    ======       =====
    Basic weighted-
     average common
     shares outstanding                              19,459      10,810    17,978      10,810
                                                     ======      ======    ======      ======
    Diluted weighted-
     average common
     shares outstanding                              20,436      11,867    17,978      11,830
                                                     ======      ======    ======      ======

                               GSE Holding, Inc.
                       Earnings per Share Reconciliation
                                  (Unaudited)

                                                  Three Months       Nine Months
                                                     Ended              Ended
                                                 September 30,     September 30,
                                                 -------------     -------------
                                                 2012     2011    2012     2011
                                                 ----     ----    ----     ----
    Diluted net income (loss) per
     common share                               $0.26    $0.32  $(0.21)   $0.16
    Discontinued operations                      0.01    (0.01)   0.02    (0.01)
    Loss on extinguishment of debt                  -        -    0.09     0.17
    Due diligence fees                              -        -    0.03        -
    Public offering related costs                   -        -    0.54        -
    Public offering related interest
     expense                                        -        -    0.08        -
    Management fees                                 -     0.05    0.01     0.13
                                                  ---     ----    ----     ----
    Adjusted Earnings per Share                  0.27    $0.36   $0.56    $0.45
                                                 ====    =====   =====    =====

                                                                               GSE Holding, Inc.
                                                       Reconciliation of Net Income (loss) to EBITDA and Adjusted EBITDA
                                                                                 (In thousands)
                                                                                  (Unaudited)

                                                                                                                         Three Months Ended      Nine Months Ended
                                                                                                                            September 30,           September 30,
                                                                                                                            -------------          -------------
                                                                                                                            2012        2011     2012        2011
                                                                                                                            ----        ----     ----        ----

    Net Income (loss)                                                                                                     $5,240      $3,804  $(3,730)     $1,890
    (Income) loss from discontinued operations, net of income tax                                                            170         (76)     411         (83)
    Interest expense                                                                                                       3,199       4,662   12,836      14,983
    Income tax expense                                                                                                       756       1,200    3,483       2,401
    Depreciation and amortization expense                                                                                  3,618       3,168   10,684       9,340
                                                                                                                           -----       -----   ------       -----
    EBITDA                                                                                                                12,983      12,758   23,684      28,531
                                                                                                                          ------      ------   ------      ------
    Foreign currency transactions (gain) loss                                                                               (571)     (1,617)    (513)         36
    Loss on extinguishment of debt                                                                                             -           -    1,555       2,016
    Restructuring expense                                                                                                      -          26       93         381
    Professional fees                                                                                                          -       1,843      597       3,143
    Stock-based compensation expense                                                                                         112           -      147          75
    Public offering related costs                                                                                              -           -    9,655           -
    Management fees                                                                                                            -         516      229       1,520
    Other                                                                                                                     45           -      189           8
    Adjusted EBITDA                                                                                                      $12,569     $13,526  $35,636     $35,710
                                                                                                                         =======     =======  =======     =======

CONTACT: Cade Kohoutek, Phone: 281-230-6733, Email: ckohoutek@gseworld.com

SOURCE GSE Holding, Inc.


Source: PR Newswire