Edgen Group Reports Third Quarter 2012 Results

Edgen Group Reports Third Quarter 2012 Results

  • Sales of $534.6 million; an increase of 17% from prior year's third quarter

  • Net income of $10.4 million and diluted earnings per share of $0.21

  • Adjusted EBITDA of $39.8 million; up 17% from prior year's third quarter

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 markets, today reported its financial results for the three and nine months ended September 30, 2012.

Edgen Group sales for the third quarter 2012 increased 17% to a record $534.6 million from $457.2 million in the third quarter 2011. Edgen Group sales for the first nine months of 2012 increased 28% to $1.5 billion from $1.2 billion for the first nine months of 2011.


Sales from the Company's Energy & Infrastructure ("E&I") segment, operating under the brand name Edgen Murray, increased $50.7 million, or 21%, to $295.6 million for the third quarter 2012 and increased $175.7 million, or 27%, to $828.7 million for the first nine months of 2012 compared to the same periods in 2011. E&I segment backlog was $350 million at September 30, 2012 compared to $405 million at June 30, 2012 and $353 million at December 31, 2011.

Sales at the Company's Oil Country Tubular Goods ("OCTG") segment, operating under the brand name Bourland & Leverich, increased $26.9 million, or 13%, to $239.2 million for the third quarter 2012 and increased by $162.1 million, or 30%, to $708.5 million for the first nine months of 2012 compared to the same periods in 2011.

Gross margins were 12.1% and 11.8% in the third quarter 2012 and the first nine months of 2012, respectively, which is an improvement from 11.8% in the second quarter 2012. Gross margins were 12.8% and 13.0% in the third quarter 2011 and the first nine months of 2011, respectively.

Gross margins for the E&I segment were 14.0% and 13.8% for the third quarter 2012 and first nine months of 2012, respectively, compared to 13.7% in the second quarter 2012. Gross margins for the OCTG segment were 9.5% for both the third quarter and the first nine months of 2012 compared to 9.8% in the second quarter 2012.

Selling, general and administrative ("SG&A") expenses were 4.7% and 5.0% of total sales for the third quarter 2012 and for the first nine months of 2012, respectively, compared to 5.5% and 5.6% of total sales for the same periods in 2011, respectively. 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 2012, SG&A expenses were 4.8% of total sales and reflect effective cost control for the first nine months of 2012 and resulted in improved operating income.

Net income for the third quarter 2012 was $10.4 million compared to net income of $2.4 million in the third quarter 2011. Earnings per basic and diluted share for the third quarter 2012 were $0.22 and $0.21, respectively.

Net income for the first nine months of 2012 was $0.7 million compared to a net loss of $(4.0) million for the first nine months of 2011. Excluding the $15.1 million (net of tax of $1.9 million) loss on prepayment of debt related to the Company's initial public offering and the $3.0 million equity-based compensation charges (net of tax of $0) previously discussed, net income for the nine months ended September 30, 2012 would have been $18.8 million.

Adjusted EBITDA (as defined and calculated in the attached table), a non-GAAP financial measure used by Edgen Group to evaluate the performance of the business, was $39.8 million, or a 17% increase, for the third quarter 2012 compared to $33.9 million for the third quarter 2011. Adjusted EBITDA increased $17.9 million, or 19%, to $110.4 million for the first nine months of 2012 compared to $92.5 million for the first nine months of 2011. At September 30, 2012, the Company's trailing twelve month adjusted EBITDA was $142.6 million.

Dan O'Leary, the Company's Chairman and Chief Executive Officer stated, "We believe our sales growth and operating results in the third quarter 2012 represent our ability to adapt and capture customer spending. In our E&I segment, we saw higher sales volumes in the U.S. midstream energy market and increased offshore upstream sales in the Asia/Pacific region." Mr. O'Leary continued, "At the same time, our OCTG segment sales increased through market share gains and improved sales product mix from rigs operating primarily in U.S. liquid-rich shale formations which require specialized alloy products."

Outlook

Based on current market conditions and expected customer spending patterns and delivery schedules, the Company maintains its revised annual revenue and Adjusted EBITDA guidance, as disclosed in its Form 8-K filed on October 1, 2012. The Company will continue to monitor global economic conditions and market drivers that may impact its operations and financial results including, but not limited to, global energy demand, oil and natural gas prices, international and U.S. land-based rig count and commodity steel prices. Changes in these factors could have an adverse impact on our operating results.

Conference Call

Edgen Group management will host a webcast and conference call to discuss these financial results on Friday, November 9, 2012 at 11:00 a.m. Eastern time (10:00 a.m. Central 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 1-877-317-6789 and international parties may dial 1-412-317-6789. 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 10020004. 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 and all statements under the "Outlook" 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.

UNAUDITED CONDENSED CONSOLIDATED/COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

Three months ended
September 30,

Nine months ended
September 30,

2012

2011

2012

2011

SALES

$

534,624

$

457,166

$

1,536,953

$

1,199,282

OPERATING EXPENSES:

Cost of sales (exclusive of depreciation and amortization shown below)

469,932

398,867

1,355,186

1,043,516

Selling, general and administrative expense

25,171

25,105

76,606

66,961

Depreciation and amortization expense

7,905

8,933

24,031

26,781

Total operating expenses

503,008

432,905

1,455,823

1,137,258

INCOME FROM OPERATIONS

31,616

24,261

81,130

62,024

OTHER INCOME (EXPENSE):

Other income (expense)- net

(366

)

71

109

1,857

Loss on prepayment of debt

(17,005

)

Interest expense - net

(18,331

)

(20,733

)

(59,899

)

(64,517

)

INCOME (LOSS) BEFORE INCOME TAX EXPENSE

12,919

3,599

4,335

(636

)

INCOME TAX EXPENSE

2,535

1,193

3,674

3,315

NET INCOME (LOSS)

$

10,384

$

2,406

$

661

$

(3,951

)

NET INCOME (LOSS) ATTRIBUTABLE TO:

Predecessor

$

$

2,240

$

4,858

$

(4,177

)

Non-controlling interest

6,498

166

(2,008

)

226

Edgen Group Inc.

3,886

(2,189

)

*

EDGEN GROUP INC. EARNINGS (LOSS) PER SHARE:

Basic

$

0.22

$

(0.12

)

*

Diluted

0.21

(0.12

)

*

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

17,771,939

17,547,082

*

Diluted

18,182,524

17,547,082

*

*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 loss attributable to Edgen Group Inc., loss per share and weighted average common shares outstanding shown are for the period from May 2, 2012 to September 30, 2012 (the period since the IPO and the Reorganization).

EDGEN GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED/COMBINED CONSOLIDATED BALANCE SHEETS

(In thousands)

September 30,
2012

December 31,
2011

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

19,157

$

26,269

Accounts receivable - net of allowance for doubtful accounts of $2,548 and $2,056, respectively

301,565

261,155

Inventory

383,792

339,371

Prepaid expenses and other current assets

11,603

10,443

Total current assets

716,117

637,238

PROPERTY, PLANT AND EQUIPMENT - NET

46,357

46,647

GOODWILL

23,894

22,965

OTHER INTANGIBLE ASSETS - NET

152,351

172,036

OTHER ASSETS

14,333

21,854

TOTAL ASSETS

$

953,052

$

900,740

LIABILITIES AND EQUITY (DEFICIT)

CURRENT LIABILITIES:

Managed cash overdrafts

$

7,798

$

6,488

Accounts payable

198,571

223,428

Accrued interest payable

12,860

26,982

Current portion of long term debt and capital lease

401

19,244

Accrued expenses and other current liabilities

47,209

31,787

Total current liabilities

266,839

307,929

DEFERRED TAX LIABILITY - NET

2,957

4,544

OTHER LONG TERM LIABILITIES

1,328

783

REVOLVING CREDIT FACILITIES

88,200

37,523

LONG TERM DEBT AND CAPITAL LEASE

523,564

627,078

Total liabilities

882,888

977,857

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Class A common stock; 18,048,062 shares issued and outstanding at September 30, 2012

2

Class B common stock; 24,343,138 shares issued and outstanding at September 30, 2012

2

Additional paid in capital

162,862

Retained deficit

(30,511

)

Accumulated other comprehensive loss

(9,423

)

Total stockholders' equity

122,932

PREDECESSOR NET DEFICIT:

Net deficit

(51,799

)

Accumulated other comprehensive loss

(25,648

)

Total predecessor net deficit

(77,447

)

NON-CONTROLLING INTEREST

(52,768

)

330

Total equity (deficit)

70,164

(77,117

)

TOTAL LIABILITIES AND EQUITY (DEFICIT)

$

953,052

$

900,740

EDGEN GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED/COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine months ended September 30,

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

661

$

(3,951

)

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

Depreciation and amortization

24,031

26,781

Amortization of deferred financing costs

3,775

3,665

Amortization of discount on long term debt

954

891

Non-cash accrual of interest on Seller Note

2,207

2,759

Loss on prepayment of debt

17,005

Equity-based compensation expense

4,907

1,948

Unrealized (gain) loss on derivative instruments

(487

)

639

Allowance for doubtful accounts

469

27

Provision for inventory allowances and writedowns

1,125

876

Deferred income tax benefit

(1,889

)

(1,086

)

Loss on foreign currency transactions

785

657

Gain on sale of property, plant and equipment

(48

)

(983

)

Changes in operating assets and liabilities:

Accounts receivable

(40,869

)

(50,453

)

Inventory

(43,859

)

(79,169

)

Prepaid expenses and other current assets

(2,415

)

(1,017

)

Accounts payable

(24,452

)

50,347

Accrued expenses and other current liabilities

(2,254

)

(12,997

)

Income tax payable

2,154

2,713

Income tax receivable

(298

)

18,235

Other

(816

)

(130

)

Net cash used in operating activities

(59,314

)

(40,248

)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

(3,130

)

(2,549

)

Proceeds from the sale of property, plant and equipment

113

6,276

Net cash provided by (used in) investing activities

(3,017

)

3,727

CASH FLOWS FROM FINANCING ACTIVITIES:

Gross proceeds from issuance of Class A common stock in initial public offering

153,862

Initial public offering costs

(4,574

)

Repayment of BL term loan, including prepayment penalty of $8,876

(125,322

)