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GSE Reports Fourth Quarter and Full Year 2012 Results

Announces Record Revenues and Adjusted EBITDA for Full Year 2012

HOUSTON, TX – March 14, 2013 –  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 fourth quarter and full year 2012. 

Selected financial highlights for the full year 2012:

  • Sales of $476.6 million vs. $464.5 million in 2011
  • Gross margin of 16.3%  vs. 15.2% in 2011
  • Adjusted EBITDA of $45.7 million vs. $44.5 million in 2011
  • Adjusted net income of $15.5 million and adjusted diluted earnings per share of $0.80 per share
  • Unadjusted net income of $1.1 million and diluted earnings per share of $0.06 per share

 Selected financial highlights for the fourth quarter of 2012:

  • Sales of $121.4 million vs. $110.7 million in 4Q 2011
  • Gross margin of 16.3%  vs. 15.9% in 4Q 2011
  • Adjusted EBITDA of $10.0 million vs. $8.8 million in 4Q 2011

Mark Arnold, President and Chief Executive Officer stated that “During 2012 we saw gains across most of our end-markets, and began expanding our worldwide manufacturing capabilities.  Most notably, we recently announced the groundbreaking on our new manufacturing facility in China, which will allow us to more readily service the fast-growing Asian Pacific geography. In addition to this facility, we also have planned capacity additions in 2013 for our existing facilities in Thailand and Egypt, and we have completed the addition of a GCL line to our Kingstree, South Carolina plant. We were recently awarded a contract with an Asian engineering company for a mining application in the region. This contract is one of the largest in our Company’s history and is expected to begin shipping in the second quarter of 2013.  We are confident with our growth strategy and remain focused on expanding our manufacturing capabilities and market development globally”  

Fourth Quarter Summary

Total revenue for the fourth quarter was $121.4 million, compared to $110.7 million for the prior year period. Strong sales in Energy, Coal Ash, and Oil and Gas helped offset a decline in our North American Environmental Containment end-market. The decline in revenue from the Environmental Containment end-market reflects the Company’s continued proactive decision to not pursue low margin contracts. Mr. Arnold continued, “The adoption of our innovative products such as our leak location liner system and our high performance geomembrane not only positively impacted our product mix during the quarter, but also reinforced our growth thesis that our customers want a total solution that helps them drive efficiencies to better manage their operations.”

Gross profit increased to $19.7 million in the fourth quarter of 2012 from $17.6 million in the prior year period, resulting in gross margin for the fourth quarter of 2012 improving to 16.3% from 15.9% in the prior year period, highlighting the Company's focus on more profitable end markets and higher value products. 

The fourth quarter included an income tax benefit of approximately $2.0 million or $0.10 per share representing the reversal of the beginning of year valuation allowance reserve for U.S. net operating losses, which we believe are more likely than not to be utilized.

Adjusted EBITDA improved to $10.0 million from $8.8 million in the prior year period.  Adjusted Net Income in the fourth quarter was $5.3 million, or $0.26 per fully diluted share compared to a loss of $0.4 million or ($0.04) per fully diluted share in the prior year period.  Unadjusted net income for the quarter was $4.8 million, or $0.24 per fully diluted share, compared to a net loss of $0.9 million, or ($0.09) per fully diluted share in the prior year period.

Full Year 2012 Summary

Total revenue for 2012 was $476.6 million, compared to $464.5 million for the prior year. Gross profit increased to $77.7 million from $70.5 million in 2011, resulting in gross margin for the full year 2012 of 16.3%, a 110 basis point improvement from 15.2% in 2011. Adjusted Net Income for 2012 was $15.5  million, or $0.80 per fully diluted share up from $4.9 million or $0.41 per fully diluted share in 2011. Adjusted EBITDA in 2012 improved to $45.7 million from $44.5 million in 2011.  Unadjusted net income for the full year was $1.1 million, or $0.06 per fully diluted share, compared to net income of $1.0 million, or $0.08 per fully diluted share in 2011.

Recent Events

On January 7, 2013 the Company announced the appointment of J. Michael Kirksey as Executive Vice President and Chief Financial Officer.  Mr. Kirksey has over 35 years of finance and accounting experience, and spent the last five years as the CFO of a NYSE-Listed company.  Throughout his career, Mr. Kirksey has served in several executive financial and general management positions and has gained extensive domestic and international experience, including leading many acquisition and divestiture transactions, both in the US and internationally.

Also in January, the Company held a groundbreaking ceremony for its new manufacturing facility in China. Construction of the facility is expected to be completed in late 2013 and add 44 million pounds of new manufacturing capacity. Once completed, the facility will have the ability to manufacture the Company's entire line of geomembrane products and service the growing demand for landfill expansions, industrial waste containment, coal ash containment and oil and gas fracking in the region.

In February, the Company announced the acquisition of SynTec, a manufacturer of geosynthetic drainage and soil reinforcement products. This acquisition provides GSE entry into the civil market and access to new technology for environmental and civil applications.

Conference Call

GSE will hold a conference call today, March 14, 2013 at 9:30 a.m. Central Time to discuss the Company’s strategy and operating results. The conference call can be accessed by dialing 877-616-4476 (domestic) or 402-875-4763 (international). A telephonic replay will be available approximately two hour 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 16362470. The telephonic replay will be available until 11:59 pm (Eastern Time) on March 27, 2013.

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

Use of Non-GAAP Financial Measures (Adjusted EBITDA and Adjusted Net Income)

Adjusted EBITDA represents net income (loss) before interest expense, income tax expense, depreciation, amortization of intangibles, loss (gain) on foreign currency transactions, restructuring expenses, certain professional fees, stock‑based compensation expense, public offering related costs, loss on extinguishment of debt and management fees. Adjusted Net Income represents Net Income attributable to GSE Holding, Inc. before public offering related costs and public offering related interest expense, loss on extinguishment of debt, certain professional fees and management fees.   Adjusted EBITDA and Adjusted Net Income are “non-GAAP financial measures,” and are intended as supplemental measures of the Company’s performance that are not required by, or presented in accordance with, GAAP. Adjusted EBITDA and Adjusted Net Income 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 Adjusted EBITDA and Adjusted Net Income 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 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 Adjusted EBITDA”. A reconciliation of Adjusted Net Income to net Income (loss) appears in the section of this press release titled “Reconciliation of Net Income (Loss) to Adjusted Net Income”.

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.

Contact: Mike Kirskey, Executive Vice President and Chief Financial Officer, +1-281-443-8564, mkirksey@gseworld.com

 

GSE Holding, Inc.

Consolidated Balance Sheets

(In thousands, except share amounts)

 

December 31,

 

2012

2011

 

 

 

ASSETS

Current assets:

 

 

Cash and cash equivalents............................................................................

$18,068

$9,076

Accounts receivable:

 

 

Trade, net of allowance for doubtful accounts of $869 and $1,736.....................

96,987

80,705

Other....................................................................................................

3,626

3,054

Inventory, net............................................................................................

64,398

58,109

Deferred income taxes..................................................................................

1,111

935

Prepaid expenses and other...........................................................................

6,681

5,741

Income taxes receivable................................................................................

1,538

2,447

Total current assets..............................................................................

192,409

160,067

Property, plant and equipment, net....................................................................

70,172

57,270

Goodwill......................................................................................................

58,895

58,895

Intangible assets, net......................................................................................

1,549

2,727

Deferred income taxes.....................................................................................

5,858

2,519

Deferred debt issuance costs, net ......................................................................

7,003

8,387

Other assets..................................................................................................

212

2,561

TOTAL ASSETS.........................................................................................

$336,098

$292,426

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

 

 

Accounts payable........................................................................................

$36,632

$34,848

Accrued liabilities and other.........................................................................

20,198

22,812

Short-term debt..........................................................................................

985

2,864

Current portion of long-term debt..................................................................

3,147

2,709

Income taxes payable...................................................................................

1,691

964

Deferred income taxes..................................................................................

1,156

1,135

Total current liabilities.........................................................................

63,809

65,332

Other liabilities.............................................................................................

1,211

1,124

Deferred income taxes.....................................................................................

1,078

1,416

Long-term debt, net of current portion................................................................

167,282

192,885

Total liabilities...................................................................................

233,380

260,757

Commitments and Contingencies (Note 15)

 

 

Stockholders’ equity:

 

 

Common stock, $.01 par value, 150,000,000 shares authorized, 19,846,684 and 10,809,987 shares issued and outstanding at December 31, 2012 and 2011, respectively............................................................................................

198

108

Additional paid-in capital.............................................................................

130,617

61,407

Accumulated deficit.....................................................................................

(28,372)

(29,456)

Accumulated other comprehensive income (loss) .............................................

275

(390)

Total stockholders’ equity...............................................................................

102,718

31,669

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY.................................

$336,098

$292,426

 


GSE Holding, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share amounts)

 

Three Months Ended December 31,

Year Ended December 31,

 

 

2012

2011

2012

2011

 

 

 

 

 

Net sales...........................................................................................

$121,360

$110,660

$476,644

$464,451

Cost of products..................................................................................

101,626

93,019

398,955

393,944

Gross profit........................................................................................

19,734

17,641

77,689

70,507

Selling, general and administrative expenses.............................................

14,642

12,975

49,326

44,474

Public offering related costs ...................................................................

9,655

Amortization of intangibles....................................................................

290

322

1,182

1,379

Operating income ...............................................................................

4,802

4,344

17,526

24,654

Other expenses (income):

 

 

 

 

Interest expense, net .......................................................................

3,961

5,103

16,797

20,081

Foreign currency transaction (gain) loss.................................................

54

(604)

(459)

(568)

Loss on extinguishment of debt ...........................................................

1,555

2,016

Other income, net............................................................................

(951)

(254)

(2,269)

(1,182)

Income from continuing operations before income taxes..............................

1,738

99

1,902

4,307

Income tax (benefit) provision................................................................

(3,127)

1,089

356

3,490

Income (loss) from continuing operations..................................................

4,865

(990)

1,546

817

Income (loss) from discontinued operations, net of tax ................................

(51)

53

(462)

136

Net income (loss).................................................................................

             4,814

        (937)

      1,084

        953

Other comprehensive income (loss):

 

 

 

 

Foreign currency translation adjustment ...............................................

                684

      (1,814)

          665

        (2,125)

Comprehensive income (loss) ................................................................

           $5,498

       $(2,751)

   $1,749

      $(1,172)

 

 

 

 

 

Basic net income (loss) per common share:

 

 

 

 

Continuing operations.......................................................................

$0.24

$(0.09)

$0.08

$0.08

Discontinued operations....................................................................

(0.00)

0.00

(0.02)

0.01

 

$0.24

$(0.09)

$0.06

$0.09

Diluted net income (loss) per common share:

 

 

 

 

Continuing operations.......................................................................

$0.24

$(0.09)

$0.08

$0.07

Discontinued operations....................................................................

(0.00)

0.00

(0.02)

0.01

 

$0.24

$(0.09)

$0.06

$0.08

Basic weighted-average common shares outstanding..................................

19,683

10,810

18,407

10,810

Diluted weighted-average common shares outstanding...............................

20,440

11,810

19,336

11,841

 

GSE Holding, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

Year Ended December 31,

 

2012

2011

2010

 

 

 

 

Cash flows from operating activities:

 

 

 

Net income (loss) ...................................................................................................

$1,084

$953

$(16,772)

(Income) loss from discontinued operations...........................................................

462

(136)

4,428

Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization ..............................................................................

13,114

11,419

10,416

Amortization of debt issuance costs.......................................................................

2,418

2,025

1,844

Amortization of intangible assets............................................................................

1,182

1,379

2,284

Amortization of premium/discount on senior notes.................................................

935

744

(40)

Loss on extinguishment of debt .............................................................................

1,555

2,016

Deferred income tax (benefit) provision..................................................................

(3,862)

683

(1,854)

Stock-based compensation....................................................................................

4,666

75

67

Revaluation of non-dollar denominated debt..........................................................

340

(815)

345

Other .....................................................................................................................

176

75

116

Change in cash from operating assets and liabilities:

 

 

 

Accounts receivable................................................................................................

(16,757)

(16,498)

(24,539)

Inventory.................................................................................................................

(6,288)

(7,463)

(19,561)

Prepaid expenses and other...................................................................................

(1,781)

550

(6,837)

Accounts payable...................................................................................................

1,878

395

12,827

Accrued liabilities....................................................................................................

(1,398)

741

8,164

Income taxes (receivable) payable.........................................................................

1,235

(1,243)

2,615

Other assets and liabilities......................................................................................

(489)

977

(44)

Net cash used in operating activities – continuing operations................................

(1,530)

(4,123)

(26,541)

Net cash provided by (used in) operating activities – discontinued operations.......

(142)

5,010

(3,219)

Net cash provided by (used in) operating activities................................................

(1,672)

887

(29,760)

Cash flows from investing activities:

 

 

 

Purchase of property, plant and equipment............................................................

(26,137)

(11,694)

(3,337)

Proceeds from the sale of assets...........................................................................

33

32

Net cash used in investing activities – continuing operations.................................

(26,104)

(11,662)

(3,337)

Net cash provided by investing activities – discontinued operations.......................

2,284

Net cash used in investing activities.......................................................................

(26,104)

(11,662)

(1,053)

Cash flows from financing activities:

 

 

 

Proceeds from lines of credit..................................................................................

100,635

86,948

137,865

Repayments of lines of credit.................................................................................

(110,490)

(90,667)

(109,918)

Proceeds from long-term debt................................................................................

25,674

173,083

Repayments of long-term debt...............................................................................

(44,318)

(153,172)

(2,256)

Net proceeds from initial public offering .................................................................

65,927

Payments for debt issuance costs..........................................................................

(1,748)

(9,179)

Payments for public offering costs..........................................................................

(2,311)

Proceeds from the exercise of stock options....................................................................................................................

1,018

Net cash provided by financing activities – continuing operations..........................

36,698

4,702

25,691

Net cash used in financing activities – discontinued operations.............................

(650)

Net cash provided by financing activities................................................................

36,698

4,052

25,691

Effect of exchange rate changes on cash – continuing operations.........................

27

611

(228)

Effect of exchange rate changes on cash – discontinued operations.....................

43

4

(280)

Net increase (decrease) in cash and cash equivalents..........................................

8,992

(6,108)

(5,630)

Cash and cash equivalents at beginning of year....................................................

9,076

15,184

20,814

Cash and cash equivalents at end of year..............................................................

$18,068

$9,076

$15,184

Supplemental cash flow disclosure:

 

 

 

Cash paid for interest.............................................................................................

$15,840

$15,626

$16,341

Cash paid for income taxes....................................................................................

$1,375

$2,643

$22


GSE Holding, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(in thousands)

(unaudited) 

 

Three Months Ended

December 31,

Year Ended

 December 31,

 

2012

2011

2012

2011

 

 

 

 

 

Net Income (loss)

$4,814

$ (937)

$1,084

$953

(Income) loss from discontinued operations, net of income tax

51

 (53)

 462

 (136)

Interest expense

3,961

 5,105

 16,797

 20,088

Income tax (benefit) expense

 (3,127)

 1,089

 356

3,490

Depreciation and amortization expense

3,611

3,458

14,296

12,798

Foreign exchange (gain) loss

53

(604)

(459)

(568)

Loss on extinguishment of debt

1,555

2,016

Restructuring expense

569

93

950

Professional fees

460

(431)

1,056

2,712

Stock-based compensation expense

213

360

75

Public offering costs

9,655

Management fees

554

229

2,074

Other

76

188

84

Adjusted EBITDA

$10,036

$8,826

$45,672

$44,536

  

GSE Holding, Inc.

Reconciliation of Net Income (Loss) to Adjusted Net Income

(in thousands)

(unaudited)

 

 

Three Months Ended

December 31,

Year Ended

 December 31,

 

2012

2011

2012

2011

 

 

 

 

 

Net Income (loss)

$4,814

$(937)

$1,084

$ 953

(Income) loss from discontinued operations, net of income tax

51

 (53)

 462

 (136)

Professional fees

460

1,056

Management fees

554

229

2,074

Loss on extinguishment of debt

1,555

2,016

Public offering costs

9,655

Public offering interest related expense

 1,470

Adjusted net income (loss)

$5,325

$(436)

$15,511

$ 4,907

Diluted weighted-average common shares outstanding

20,440

10,810

19,336

11,841

Adjusted earnings (loss) per share

$0.26

$(0.04)

$0.80

$0.41

 

  

About GSE

GSE is a leading manufacturer and marketer of geosynthetic lining products and services. We've built a reputation of reliability through our dedication to providing consistency of product, price and protection to our global customers.

Our commitment to innovation, our focus on quality and our industry expertise allow us the flexibility to collaborate with our clients to develop a custom, purpose-fit solution.