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GSE Reports Third Quarter Results

Significant Margin Expansion In Spite of Reduced Volume

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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 September 30,

Nine Months Ended 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 Ended
September 30,

Nine Months Ended
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

September 30,

Nine Months Ended

 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.



RELATED LINKS
http://www.gseworld.com

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