8-9-13 7:00 AM EDT | Email Article

HOUSTON, Aug. 9, 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 second quarter of 2013.

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

Selected financial results for the second quarter of 2013:

  • Net sales of $108.2 million vs. $139.2 million in 2Q 2012
  • Gross margin of 12.2% vs. 17.4% in 2Q 2012
  • Adjusted EBITDA of $3.9 million vs. $16.0 million in 2Q 2012
  • A goodwill impairment charge of $26.4 million was recorded relative to the European business
  • GAAP net loss of $33.9 million or a loss of $1.69 per diluted share, compared to net income of $3.8 million or $0.18 per diluted share in 2Q 2012
  • Adjusted net loss of $6.9 million or a loss of $0.34 per diluted share

Chuck Sorrentino, interim President and Chief Executive Officer stated that, "After recently being named interim President and CEO I have undertaken a more in-depth review of our operations. Our business faced significant challenges in the first half of 2013 in the form of a prolonged European recession and competitive pressures that were further exacerbated by poor weather conditions. Operating results were also pressured in the Americas, where a capacity surplus has outstripped demand, pressuring margins. Despite these near-term headwinds, we believe that we still maintain strong leadership positions in our end-markets. It's our challenge to demonstrate the differentiated nature of our value added products to our customers in each of the end-markets that we serve. We face a difficult road ahead, but we believe that our focus on continued innovation while streamlining operations will result in an improved second half of 2013."

Second Quarter Summary

Total net sales for the second quarter were $108.2 million, compared to $139.2 million for the prior year period. Gross profit was $13.2 million in the second quarter of 2013 compared to $24.2 million in the prior year period, resulting in gross margin for the second quarter of 2013 to decline to 12.2% from 17.4% in the prior year period.

During the second quarter of 2013, the Company performed an interim assessment of goodwill related to its Europe Africa reporting unit due to indications that the fair value of this reporting unit may be less than its carrying amount.  Such indications included prolonged weak economic conditions, under-achievement of previous financial projections and projected continued difficulties in the European market. Based on this assessment, an impairment charge totaling $26.4 million was recorded.

GAAP net loss for the quarter was $33.9 million, or ($1.69) per diluted share, compared to net income of $3.8 million, or $0.18 per diluted share in the prior year period. Adjusted EBITDA was $3.9 million compared to $16.0 million in the prior year period.  Adjusted net loss in the quarter was $6.9 million, or ($0.34) per diluted share compared to adjusted net income of $5.8 million or $0.29 per diluted share in the prior year period.

The lower adjusted EBITDA for the first half of 2013 caused GSE to breach its covenant in respect to its total leverage ratio for June 30, 2013 as contained in its U.S. Credit Facility, which was detailed in the Company's Current Report on Form 8-K filed on August 2nd.  The Company obtained a waiver of default from its lenders and amended the credit facility.

Conference Call

GSE will hold a conference call today, August 9, 2013 at 10:00 a.m. Central Time to discuss the Company's 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 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 27152899. The telephonic replay will be available until 11:59 pm (Eastern Time) on August 15, 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, goodwill impairment, 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, 2012 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
Office: 281-230-6732
Email: mkirksey@gseworld.com

Financial Tables

 

GSE Holding, Inc

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

(Unaudited)




June 30,

2013


December 31, 2012


ASSETS

Current assets:




Cash and cash equivalents               

$    12,940


$  18,068

Accounts receivable:




Trade, net of allowance for doubtful accounts of $1,946 and $869, respectively           

82,952


96,987

Other

3,344


3,626

Inventory, net

73,382


64,398

Deferred income taxes

1,299


1,111

Prepaid expenses and other

5,209


6,681

Income taxes receivable

1,739


1,538

Total current assets

180,865


192,409

Property, plant and equipment, net

74,618


70,172

Goodwill

34,888


58,895

Other assets

16,715


14,622

TOTAL ASSETS 

$307,086


$336,098


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:




Accounts payable

$ 43,046


$36,632

Accrued liabilities and other

16,349


23,045

Short-term debt

12,344


985

Current portion of long-term debt

3,112


3,147

    Total current liabilities             

74,851


63,809

Other liabilities

1,195


1,211

Deferred income taxes


1,078

Long-term debt, net of current portion

165,727


167,282

Total liabilities           

241,773


233,380

Commitments and contingencies




Stockholders' equity:




Common stock, $.01 par value, 150,000,000 shares authorized, 20,379,350 and 19,846,684 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively

204


198

Additional paid-in capital

131,280


130,617

Accumulated deficit

(64,712)


(28,372)

Accumulated other comprehensive income (loss)

(1,459)


275

Total stockholders' equity

65,313


102,718

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            

$307,086


$336,098






 

GSE Holding, Inc

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

(Unaudited)



Three Months Ended

June 30,


Six Months Ended

June 30,


2013


2012


2013


2012









Net sales

$108,201


$139,168


$203,335


$234,085

Cost of Products

94,992


114,958


176,869


195,485

Gross profit

13,209


24,210


26,466


38,600

Selling, general and administrative expenses

13,422


11,814


27,461


22,739

Non-recurring initial public offering related costs




9,655

Amortization of intangibles

395


297


754


598

Impairment of goodwill

26,423



26,423


Operating income (loss)

(27,301)


12,099


(28,172)


5,608

Other expenses (income):








Interest expense, net of interest income

3,686


3,890


7,449


9,637

Loss on extinguishment of debt


1,555



1,555

Other expense

643


860


982


418

Income (loss) from continuing operations before income taxes

(31,360)


5,794


(36,603)


(6,002)

Income tax provision (benefit)

2,533


2,078


(263)


2,727

Income (loss) from continuing operations

(33,893)


3,716


(36,340)


(8,729)

Income (loss) from discontinued operations, net of tax


80



(241)

Net income (loss)

(33,893)


3,796


(36,340)


(8,970)

Other comprehensive income (loss):








Foreign currency translation adjustment

(232)


(1,844)


(1,734)


(708)

Comprehensive income (loss)

$(34,125)


$1,952


$(38,074)


$(9,678)









Basic net income (loss) per common share:








Continuing operations

$(1.69)


$0.19


$(1.82)


$(0.51)

Discontinued operations


0.01



(0.01)


$(1.69)


$0.20


$(1.82)


$(0.52)

Diluted net income (loss) per common share:








Continuing operations

$(1.69)


$0.18


$(1.82)


$(0.51)

Discontinued operations


0.01



(0.01)


$(1.69)


$0.19


$(1.82)


$(0.52)

Basic weighted-average common shares outstanding

20,067


19,338


19,985


17,230

Diluted weighted-average common shares outstanding

20,067


20,399


19,985


17,230

 

GSE Holding, Inc

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



Six Months Ended

June 30,


2013


2012





Cash flows from operating activities:




Net loss

$        (36,340)


$        (8,970)

Loss from discontinued operations


241

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




    Impairment of goodwill

26,423


    Depreciation and amortization

8,746


9,315

    Loss on extinguishment of debt


1,555

    Stock-based compensation

433


4,341

    Changes in operating assets and liabilities, net of effect of acquisitions:




       Decrease (increase) in accounts receivable

15,591


(21,191)

       Increase in inventory

(9,081)


(14,282)

       Increase in accounts payable

4,022


3,606

    All other items, net

(4,838)


(9,418)

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

4,956


(34,803)

        Net cash used in operating activities – discontinued operations


(143)

        Net cash provided by (used in) operating activities

4,956


(34,946)

Cash flows from investing activities:




Purchase of property, plant and equipment

(10,851)


(13,206)

Acquisition of business, net of cash acquired

(9,657)


  Net cash used in investing activities

(20,508)


(13,206)

Cash flows from financing activities:




    Proceeds from lines of credit

61,986


53,673

    Repayments of lines of credit

(51,129)


(51,013)

    Proceeds from long-term debt


22,000

    Repayments of long-term debt

(1,164)


(42,073)

    Net proceeds from the exercise of stock options

235


    Payments for debt issuance costs

(264)


(1,260)

    Net proceeds from initial public offering


65,927

      Net cash provided by financing activities – continuing operations

9,664


47,254

Effect of exchange rate changes on cash – continuing operations

760


560

Effect of exchange rate changes on cash – discontinued operations


26

Net decrease in cash and cash equivalents

(5,128)


(312)

Cash and cash equivalents at beginning of period

18,068


9,076

Cash and cash equivalents at end of period

$           12,940


$           8,764

 

GSE Holding, Inc

Reconciliation of Net (Loss) Income to Adjusted EBITDA

(in thousands)

(unaudited)



Three Months Ended

June 30,


Six Months Ended

June 30,


2013


2012


2013


2012


(in thousands)

Net (loss) income

$ (33,893)


$ 3,796


$(36,340)


$(8,970)

(Income) loss from discontinued operations, net of tax


(80)



241

Interest expense, net

3,686


3,890


7,449


9,637

Income tax expense (benefit)

2,533


2,078


(263)


2,727

Depreciation and amortization expense

3,847


3,522


7,573


7,066

Foreign exchange loss

388


631


759


58

Impairment of goodwill

26,423



26,423


Loss on extinguishment of debt


1,555



1,555

Restructuring expense

189


33


189


93

Professional fees

357


559


953


597

Stock-based compensation expense

279


35


433


35

Public offering related costs




9,655

Management fees


14



229

Other

101


10


109


144

Adjusted EBITDA

$3,910


$16,043


$7,285


$23,067

 

GSE Holding, Inc

Reconciliation of Net (Loss) Income to Adjusted Net Loss

(in thousands, except for per share amounts)

(unaudited)



Three Months Ended June 30,


Six Months Ended

June 30,


2013


2012


2013


2012









Net Income (loss)

$ (33,893)


$ 3,796


$(36,340)


$ (8,970)

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


(80)



241

Impairment of goodwill

26,423



26,423


Restructuring expense

189



189


Professional fees

300


559


896


559

Loss on extinguishment of debt


1,555



1,555

Public offering related costs




9,655

IPO interest expense




1,470

Management fees


14



229

Other

112



112


37

Adjusted net (loss) income

$(6,869)


$5,844


$(8,720)


$ 4,776

Diluted weighted average common shares outstanding

20,067


20,399


19,985


17,230

Adjusted (loss) net income per diluted share

$(0.34)


$0.29


$(0.44)


$0.28

SOURCE GSE Holding, Inc.

Add a Comment

News   More...

Securities related to this article
GSE Systems View gvp Stock Quote
GSE Systems View gvp Stock Quote
GSE Co., Ltd. View 053050 Stock Quote
Goldsearch Limited View gse Stock Quote
 
Start Premium Trial Register For Free

P F Fund Financial Data (13,000+ funds)
P F Stock Financial Data (7,000+ stocks)
P F Stock and Fund Screeners (basic)
P F Investing Articles and Market Commentary
P F Articles Archive (>30 days)
P F Discuss (dozens of stock, fund, bond, and general bulletin boards)
P F Portfolio Manager (basic)
P F Morningstar Investment Classroom
P F Access Your Portfolio Anytime, Anywhere via Your Mobile Device
P   Morningstar Fund Analyst Reports (full research on 1,700 funds, ETFs, and CEFs)
P   Morningstar Stock Analyst Reports (full research on more than 1,100 stocks)
P   Portfolio Manager (advanced with 10 X-Ray analyses, including recommendations)
P   Portfolio Monitor (monthly and on-demand personalized portfolio statements)
P   Morningstar Proprietary Stock Information (stock star ratings, buy/sell prices, economic moat ratings, and more)
P   Morningstar 5-Star Stock and Fund Favorites & Red Flags eNewsletters
P   Premium Stock and Fund Screeners (advanced with nearly infinite ways to find the best securities for you)
P   Discounts on Morningstar newsletters, books, seminars, and more

Sign-up to Morningstar


Basic Access

Articles and Videos
Morningstar video reports, articles, data, and tools. Dig into our lineup of e-newsletters and investing classroom courses outlining sensible strategies for maximizing your investments.
Morningstar Discuss
Follow the buzz on individual stocks or fund families. Plus, read the latest posts from Morningstar members and analysts.
Portfolio Manager
Track your investments and watch lists with our Portfolio Manager. Customize your view with our comprehensive stock, fund, and ETF data.

Access these features and more when you sign up for Free Membership.
Join Morningstar today. It's Free.

Unlimited Access

Analyst Research
Gather in-depth, actionable insight on over 3,700 stock and mutual funds covered by Morningstar analysts. View our mutual fund Analyst Reports favored by professionals, savvy experienced investors, and new investors researching options for retirement savings, college plans, or other investment needs.
Portfolio X-Ray®
Ensure your portfolio is positioned exactly how you want with Morningstar's X-Ray Interpreter and Stock Intersection tools. A Barron's "Best of the Web" award winner for five years running, X-Ray Interpreter goes under the hood of your portfolio to provide a useful allocation, sector, and geographic analysis. And you can discover how much of a stock you really own, individually and through mutual funds, with Stock Intersection.
Investment Picks
Find new 5-star stocks (greatly undervalued companies) to consider daily. Our 5-star stock rating is a proven winner, consistently beating benchmarks like the S&P 500. Plus, browse our Fund Analyst Picks and Stewardship Grades to find shareholder-friendly mutual funds that are poised for outperformance.
Portfolio Monitor
Get a clear view of your investments with personalized reports about your portfolio. Receive monthly statements and generate reports on-demand to help you stay on track to meet your investment goals.

Access these features and more when you sign up for Premium Membership.
Start your free 14-day trial today online
Your subscription may be tax deductible. Please contact your tax advisor.

Content Partners
Morningstar - - GSE Reports Second Quarter 2013 Results
Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol |  Title Star Rating |  Category |  Total Assets |  Top Holdings |  Top Sectors |  Symbol |  Name Topic |  Sector |  Key Indicators |  User Interest |  Market Cap |  Industry Name |  Ticker |  Star Rating |  Market Cap |  Stock Type |  Sector |  Industry Star Rating |  Investment Style |  Total Assets |  Category |  Top Holdings |  Top Sectors |  Symbol / Ticker |  Title Star Rating |  Category |  Total Assets |  Symbol / Ticker |  Name Title |  Date |  Author |  Collection |  Popularity |  Interest Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Company |  Symbol |  Interest |  Popularity Title |  Date |  Author |  Collection |  Interest |  Popularity

Previous: GSE Receives Notice from NYSE regarding Listing Standards  |  Next: GSE Reports Third Quarter 2013 Results