GSE Reports Fourth Quarter and Full Year 2012 Results

            GSE Reports Fourth Quarter and Full Year 2012 Results

Announces Record Revenues and Adjusted EBITDA for Full Year 2012

PR Newswire

HOUSTON, March 14, 2013

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

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

Selected financial highlights for the full year 2012:

  oSales of $476.6 million vs. $464.5 million in 2011
  oGross margin of 16.3% vs. 15.2% in 2011
  oAdjusted EBITDA of $45.7 million vs. $44.5 million in 2011
  oAdjusted net income of $15.5 million and adjusted diluted earnings per
    share of $0.80 per share
  oUnadjusted 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:

  oSales of $121.4 million vs. $110.7 million in 4Q 2011
  oGross margin of 16.3% vs. 15.9% in 4Q 2011
  oAdjusted 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 Kirksey, 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    96,987   80,705
$1,736
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   198      108
December 31, 2012 and 2011, respectively
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 Year Ended

                                          December 31,       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       14,642    12,975   49,326   44,474
expenses
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  1,738     99       1,902    4,307
income taxes
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           (51)      53       (462)    136
operations, net of tax
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      19,683    10,810   18,407   10,810
outstanding
Diluted weighted-average common shares    20,440    11,810   19,336   11,841
outstanding

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 –          (1,530)   (4,123)   (26,541)
continuing operations
Net cash provided by (used in) operating         (142)     5,010     (3,219)
activities – discontinued operations
Net cash provided by (used in) operating         (1,672)   887       (29,760)
activities
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 –          (26,104)  (11,662)  (3,337)
continuing operations
Net cash provided by investing activities –      –         –         2,284
discontinued operations
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 –      36,698    4,702     25,691
continuing operations
Net cash used in financing activities –          —         (650)     —
discontinued operations
Net cash provided by financing activities        36,698    4,052     25,691
Effect of exchange rate changes on cash –        27        611       (228)
continuing operations
Effect of exchange rate changes on cash –        43        4         (280)
discontinued operations
Net increase (decrease) in cash and cash         8,992     (6,108)   (5,630)
equivalents
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 Year Ended

                                           December 31,       December 31,
                                           2012      2011     2012    2011
Net Income (loss)                          $4,814    $ (937)  $1,084  $953
(Income) loss from discontinued            51        (53)     462     (136)
operations, net of income tax
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 Year Ended

                                            December 31,       December 31,
                                            2012     2011      2012    2011
Net Income (loss)                           $4,814   $(937)    $1,084  $ 953
(Income) loss from discontinued operations, 51       (53)      462     (136)
net of income tax
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      20,440   10,810    19,336  11,841
outstanding
Adjusted earnings (loss) per share          $0.26    $(0.04)   $0.80   $0.41

SOURCE GSE Holding, Inc.

Website: http://www.gseworld.com
 
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