Edgen Group Reports Fourth Quarter and Full Year 2012 Results and Provides 2013 Guidance

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Edgen Group Reports Fourth Quarter and Full Year 2012 Results and Provides 2013 Guidance

  • Record annual net sales of $2.1 billion for 2012, an increase of 23% from the prior year
  • Annual adjusted EBITDA of $144.9 million for 2012, an increase of 15% from the prior year
  • Q4 2012 net sales increased 10% and adjusted EBITDA increased 5% compared to Q4 2011
  • Q4 2012 adjusted net income of $11.0 million compared to $0.6 million in Q4 2011

BATON ROUGE, La.--(BUSINESS WIRE)-- Edgen Group Inc. (the "Company" or "Edgen Group") (NYS: EDG) a leading global distributor of specialized products including steel pipe, valves, plate, and related components to the energy and industrial infrastructure markets, today reported its financial results for the three and twelve months ended December 31, 2012.


"With record net sales in 2012, we are very pleased with our year over year growth given the uncertain global economic conditions throughout 2012," stated Dan O'Leary, the Company's Chairman and Chief Executive Officer. "Despite the challenging environment, the Company was able to achieve record revenue levels while we focused on completing an IPO, refinancing our debt at more favorable terms and completing two acquisitions to expand our product offering, all of which continue to position the Company for future success."

Years Ended December 31, 2012 and 2011

  • Net sales increased 23% to a record $2.1 billion from $1.7 billion in 2011.
    • Net sales from our Energy & Infrastructure ("E&I") segment increased 24% to $1.1 billion compared to $911.6 million in 2011. Gross margins in 2012 and 2011 were 13.4% and 14.8%, respectively.
    • Net sales from our Oil Country Tubular Goods ("OCTG") segment increased 22% to $929.6 million compared to $763.7 million in 2011. Gross margins in 2012 and 2011 were 9.6% and 10.0%, respectively.
  • SG&A expenses in 2012 and 2011 were 5.0% and 5.4%, respectively, of net sales.
    • Exclusive of a $3.0 million non-cash charge related to equity based compensation expense associated with the acceleration of certain equity based awards in the second quarter of 2012, SG&A expenses were 4.9% of net sales and reflect effective cost control for 2012.
  • Net loss of $(43.4) million in 2012, as compared to a net loss of $(4.2) million in 2011, includes a loss on prepayment of debt of $71.7 million pre-tax ($69.2 million after tax) as well as other charges as reconciled in the tables below. Excluding charges, adjusted net income (loss) was $29.3 million in 2012, compared to $(3.4) million in 2011.
  • Adjusted EBITDA increased 15%, to $144.9 million in 2012 compared to $125.5 million in 2011.
  • Sales backlog from our E&I segment decreased to $248.0 million at December 31, 2012 from $353.0 million at December 31, 2011. The decline in sales backlog reflects a slowdown in new bookings late in the year as many of our customers chose to delay capital spending initiatives due to uncertainty in commodity prices, global consumer demand for energy, particularly in Europe and emerging markets and fiscal cliff negotiations in the U.S.

Three Months Ended December 31, 2012 and 2011

  • Net sales increased 10% to $522.1 million from $475.9 million in 2011.
    • Net sales from our E&I segment increased 16% to $301.0 million compared to $258.7 million in 2011. Gross margins in 2012 and 2011 were 12.5% and 13.4%, respectively.
    • Net sales from our OCTG segment increased 2% to $221.1 million compared to $217.2 million in 2011. Gross margins in 2012 and 2011 were 9.9% and 9.5%, respectively.
  • Selling, general and administrative ("SG&A") expenses in 2012 and 2011 were 5.1% and 5.0%, respectively, of net sales.
  • Net loss of $(44.1) million in 2012, as compared to a net loss of $(0.2) million in 2011, includes a loss on prepayment of debt of $54.7 million pre-tax ($54.4 million after tax) as well as other charges as reconciled in the tables below. Excluding charges, adjusted net income was $11.0 million in 2012 compared to $0.6 million in 2011.
  • Adjusted EBITDA increased 5% to $34.6 million compared to $33.0 million in 2011.

Dan O'Leary stated, "We believe the softness in E&I sales bookings experienced late in the fourth quarter of 2012 and early 2013 will result in a slower first half of 2013 compared to a year ago, but the second half of the year should support another year of sales growth. We expect a competitive environment across all end-markets along with continued pricing pressure for the products we distribute, particularly within the OCTG segment."

2013 Guidance

  • Net sales for our segments are anticipated to be as follows:
    • E&I segment - range of $1.2 billion to $1.3 billion
    • OCTG segment - range of $0.8 billion to $0.9 billion
  • Adjusted EBITDA is anticipated to be in the range of $142 million to $152 million.

Conference Call

Edgen Group management will host a webcast and conference call to discuss these financial results on Friday, March 15, 2013 at 11:00 a.m. Eastern Daylight Time (10:00 a.m. Central Daylight Time). To access the conference call live over the internet, please log onto Edgen Group's website, http://www.edgengroup.com, and go to the "Investor Relations" webpage at least fifteen minutes prior to the start time to register, download and install any necessary software. To participate in the conference call, interested parties in the United States may dial 1-877-317-6016 and international parties may dial 1-412-317-6016. To access the conference call, please call at least ten minutes prior to the start time.

For those who are unable to listen to the live call, a replay will be available by dialing 1-877-344-7529 (United States) and 1-412-317-0088 (International) and using the conference number 10024937. A replay of the conference call will also be available at Edgen Group's website for 90 days following the date the webcast is posted.

About Edgen Group

Edgen Group is a leading global distributor of specialized products and services to the energy sector and industrial infrastructure markets, including steel pipe, valves, quenched and tempered and high yield heavy plate and related components. Edgen Group is headquartered in Baton Rouge, Louisiana. Additional information is available at www.edgengroup.com.

Forward-Looking Statements Disclaimer

This press release contains, and during the conference call referenced in this press release we may make, forward-looking statements within the meaning of federal securities laws. All statements other than statements of historical fact are considered forward-looking statements including, without limitation, statements about our business strategy, expected future success, expected future growth and all statements under the "2013 Guidance" heading above. These forward-looking statements involve a number of risks, uncertainties, assumptions and other factors that could affect future results and cause actual results and events to differ materially from historical and expected results and those expressed or implied in the forward-looking statements. Our historical financial information, and the risks and other important factors that could affect the outcome of the events set forth in these statements and that could affect our operating results and financial condition, are contained in our filings with the Securities and Exchange Commission ("SEC"), including our prospectus filed with the SEC on April 27, 2012 and in our subsequent filings with the SEC made prior to or after the date hereof. We undertake no obligation to review or update any forward-looking statements to reflect events or circumstances occurring after the date of this press release. Investors, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements.

 
 
 
 
 

EDGEN GROUP INC.
COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except shares outstanding and per share data)

 
 

Three months ended

December 31,

 

Years ended

December 31,

2012 20112012 2011
NET SALES$522,084$475,927$2,059,037

$

1,675,209

OPERATING EXPENSES:
Cost of sales (exclusive of depreciation and amortization shown below)462,587420,7521,817,7731,464,268
Selling, general and administrative expense26,43024,005103,03690,966
Depreciation and amortization expense7,992 8,830 32,023  35,611 
Total operating expenses497,009 453,587 1,952,832  1,590,845 
INCOME (LOSS) FROM OPERATIONS25,07522,340106,20584,364
OTHER INCOME (EXPENSE):
Other income (expense)- net681211771,978
Loss on prepayment of debt(54,724)(71,729)
Interest expense - net(15,711)(21,963)(75,610) (86,480)
INCOME (LOSS) BEFORE INCOME TAX EXPENSE(45,292)498(40,957)(138)
INCOME TAX EXPENSE (BENEFIT)(1,188)773 2,486  4,088 
NET INCOME (LOSS)$(44,104)$(275)$(43,443)

$

(4,226

)
 
NET INCOME (LOSS) ATTRIBUTABLE TO:
Predecessor$$(337)$4,858

$

(4,514

)
Non-controlling interest(24,930)62(26,938)288
Edgen Group Inc.(19,174)(21,363)

 

*

 
EARNINGS (LOSS) PER SHARE OF CLASS A COMMON STOCK ATTRIBUTABLE TO EDGEN GROUP INC.:
Basic$(1.07)N/A$(1.21)

 

*

N/A
Diluted(1.07)N/A(1.21)

 

*

N/A
 
WEIGHTED AVERAGE SHARES OF CLASS A COMMON STOCK OUTSTANDING:
Basic17,840,074N/A17,656,656

 

*

N/A
Diluted17,840,074N/A17,656,656

 

*

N/A
 

*Edgen Group Inc. did not have any assets or operations, nor did it have any common stock outstanding prior to the IPO and the Reorganization. Accordingly, the net income (loss) attributable to Edgen Group Inc., earnings (loss) per share of Class A common stock attributable to Edgen Group Inc. and weighted average shares of Class A common stock outstanding shown are for the period from May 2, 2012 to December 31, 2012 (the period since the IPO and the Reorganization).

 
 
 
 
 
 

EDGEN GROUP INC.
COMBINED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)

 
 December 31,
2012
 December 31,
2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$29,729$26,269
Accounts receivable - net266,365261,155
Inventory - net388,204339,371
Income tax receivable1,0671,209
Deferred tax asset8209
Prepaid expenses and other current assets7,574 9,025 
Total current assets692,947637,238
PROPERTY, PLANT AND EQUIPMENT - NET46,83446,647
GOODWILL36,59022,965
DEFERRED TAX ASSET4,8121,044
OTHER INTANGIBLE ASSETS - NET158,880172,036
OTHER ASSETS21,069 20,810 
TOTAL ASSETS$961,132 $900,740 
 
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Managed cash overdrafts$4,593$6,488
Accounts payable202,607223,428
Income tax payable7,7074,307
Deferred revenue8,0165,139
Accrued interest payable9,86626,982
Current portion of long term debt and capital lease2,82219,244
Deferred tax liability1,953991
Accrued expenses and other current liabilities29,298 21,350 
Total current liabilities266,862307,929
DEFERRED TAX LIABILITY5,3144,544
OTHER LONG TERM LIABILITIES3,109783
REVOLVING CREDIT FACILITIES56,89437,523
LONG TERM DEBT AND CAPITAL LEASE602,551 627,078 
Total liabilities934,730977,857
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.0001 par value, 40,000,000 shares authorized, none issued or outstanding
Class A common stock, $0.0001 par value, 435,656,862 shares authorized; 18,196,062 shares issued and outstanding at December 31, 20122
Class B common stock, $0.0001 par value, 24,343,138 shares authorized, issued and outstanding at December 31, 20122
Additional paid in capital162,901
Retained deficit(49,685)
Accumulated other comprehensive loss(9,294) 
Total stockholders' equity103,926
PREDECESSOR NET DEFICIT:
Net deficit(51,799)
Accumulated other comprehensive loss (25,648)
Total predecessor net deficit(77,447)
NON-CONTROLLING INTEREST(77,524)330 
Total equity (deficit)26,402 (77,117)
TOTAL LIABILITIES AND EQUITY (DEFICIT)$961,132 $900,740 
 
 
 
 
 
 

EDGEN GROUP INC.
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

 
 Years ended December 31,
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)$(43,443)$(4,226)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization32,02335,611
Amortization of deferred financing costs4,5645,048
Amortization of discount on long term debt1,1631,205
Non-cash accrual of interest on Seller Note3,1413,843
Loss on prepayment of debt71,729
Equity-based compensation expense5,4392,632
Unrealized (gain) loss on derivative instruments729497
Allowance for doubtful accounts1,028380
Provision for inventory allowances and write downs4,2491,251
Deferred income tax benefit(4,694)(1,251)
Loss (gain) on foreign currency transactions(293)456
Gain on sale of property, plant and equipment(54)(996)
Changes in operating assets and liabilities:
Accounts receivable(1,556)(108,362)
Inventory(46,843)(104,005)
Prepaid expenses and other current assets613(2,160)<
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