Date: August 10, 2006
Source: Gundle/SLT Environmental, Inc.
Gundle/SLT Environmental, Inc. Announces Second Quarter Results and Reports on New Orders And Backlog
Gundle/SLT Environmental, Inc. (GSE), reported a net loss of $759,000 for the quarter ended June 30, 2006, compared with net income of $1,035,000 for the comparable period in 2005. Net loss for the first six months of 2006 was $8,835,000, compared to a net loss of $3,825,000 for the first six months of 2005.
"Excluding the impact of the settlement reached on July 19, 2006 with respect to a personal injury claim that has been in litigation since 1997 and the impact of rising interest rates on interest expense and the interest rate swap, the results of the second quarter of 2006 were quite good and in line with our expectations," said Samir Badawi, President and CEO.
Revenues for the second quarter of 2006 were $103.2 million, up from $87.0 million for the same quarter of 2005. The increase in revenues was primarily due to 16.6% increase in shipments. U.S. shipments increased 14.9% and foreign shipments increased 18.0% in the second quarter of 2006 compared to the same period in 2005. The increase in foreign shipments was attributed to the Company's newly acquired Chilean operations. For the first six months of 2006, revenues were $147.0 million, flat with the first six months of 2005. In the prior year period, U.S. shipments were accelerated into the first quarter to our largest customer that normally would be shipped in the second and third quarters. Also in 2006, certain of our customers delayed purchases of product during the first four months in anticipation of reductions in raw material costs. In Europe, shipments were delayed primarily due to severe winter weather conditions in the first quarter of 2006. Offsetting the decline in shipments in the U.S. and Europe were revenues of $9.7 million from the newly acquired Chilean operations.
Mr. Badawi further said "Our operations in Chile are generating the benefits expected in the South American market. We are satisfied with the level of profitability for this new acquisition during the last six months and believe the second half of 2006 will be even better."
Backlog as of June 30, 2006 was $134.3 million compared with $99.6 million at the same time last year. Backlog was $21.1 million higher in the U.S. and $13.6 million higher in foreign markets, including the backlog from the newly acquired Chilean operations.
Gross profit for the second quarter of 2006 was $16.4 million, compared with $14.4 million in the second quarter of 2005. Gross profit as a percentage of sales and operating revenues was 15.9% for the second quarter of 2006, compared to 16.5% for the second quarter of 2005. The decline was the result of higher raw material costs in the second quarter of 2006 compared to the second quarter of 2005. Gross profit on a dollar per unit basis in the second quarter of 2006 is flat with the same period in 2005. Gross profit for the first six months of 2006 was $19.0 million compared to $21.2 million in the first six months of 2005. The decline in profit was due to lower shipments in the first six months of 2006 compared to the same period in 2005.
Selling, general and administrative expenses were $10.0 million for the second quarter of 2006, compared to $8.5 million in the second quarter of 2005. The increase was primarily from $648,000 related to the newly acquired Chilean operations and a $900,000 increase in our legal reserve for the settlement of the personal injury claim. For the first six months of 2006, selling, general and administrative expenses were $19.5 million compared to $17.0 million for the same period in 2005. The increase was primarily due to the newly acquired Chilean operations, the increase in legal reserves, and stock option compensation recorded in the first quarter of 2006.
Interest expense for the second quarter of 2006 of $5.5 million was up $771,000, compared to the prior year second quarter primarily from higher interest rates, increased levels of debt and accretion of the fair market value adjustment recorded due to hedge accounting being discontinued at the beginning of 2006. As the result of a recently issued SFAS 133 Interpretation, the Company recorded in other expenses $917,000 for the change in the market value of the interest rate swap during the second quarter of 2006. Prior to this interpretation, we classified the swap as a hedge.
Income tax expense recognized in the second quarter of 2006 was $1.1 million, with an effective rate of 326%, compared to $380,000, with an effective rate of 27%, for the second quarter of 2005. Included in the second quarter 2006 provision was $659,000 of income tax expense on foreign dividends that reduced U.S. net operating loss assets. In addition, the Company also recorded a $510,000 adjustment to state net operating losses based upon a detailed state-by-state analysis taking into consideration apportionment factors and individual state requirements. Income tax benefit recognized in the first six months of 2006 was $3.9 million, with an effective rate of 31%, compared to $926,000, with an effective rate of 20%, for the same period in 2005.
Earnings before interest, taxes, depreciation and amortization, or EBITDA, as adjusted in accordance with the terms of the Company's credit agreement for its senior credit facility, was $12.4 million for the second quarter of 2006, compared to $10.5 million for the comparable period in 2005. For the first six months of 2006, adjusted EBITDA was $11.1 million compared to $13.4 million for the same period in 2005.
Second Quarter Conference Call
The Company will host a conference call on Friday, August 11, 2006, at 10:00am (ET). This call will discuss results of operations for the second quarter of 2006 and answer questions from participants.
Note holders may join in the conference call by dialing 800.967.7134 or, if calling from outside the United States, 719.457.2625, and enter conference ID# 2142044. The conference call will also be broadcast live over the internet. To access the webcast, go to www.gseworld.com, the investor relations page, at least 15 minutes prior to the start of the call to register and to download and install any necessary audio software.
If you are unable to participate in the live call, the webcast of the conference call will be available at the Web site listed above following the event and will be available until the close of business April 30, 2007.
About Gundle/SLT Environmental, Inc.
Gundle/SLT Environmental, Inc., headquartered in Houston, 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 and wastewater treatment, and aquaculture.
For more information contact: Kelvin R. Collard (281) 230-2512 or visit: www.gseworld.com.