Based upon an initial public offering price of $9.00 per share, we estimate
that we will receive net proceeds from this offering of approximately $56.6
million, after deducting underwriting discounts and commissions and estimated
offering expenses payable by us.
We currently intend to use the net proceeds to us from this offering:
• to repay $20.0 million of borrowings under our Second Lien Term Loan and all
outstanding borrowings under our Revolving Credit Facility;
• to pay a one-time fee of $3.0 million to CHS IV in consideration for the
termination of the management agreement between us and CHS IV.
• for working capital and general corporate purposes.
A $1.00 increase or decrease in the assumed initial public offering price of
$9.00 per share would increase or decrease the net proceeds we receive from
this offering by approximately $6.5 million, assuming the number of shares
offered by us remains the same and after deducting underwriting discounts and
commissions and estimated offering expenses payable by us.
As of January 27, 2012, we had $159.3 million in outstanding borrowings under
our First Lien Credit Facility, consisting of $134.3 million under our First
Lien Term Loan and $25.0 million under our Revolving Credit Facility, which
matures in May 2016 and accrues interest at either (x) the Base Rate plus four
and one-half percent (4.50%) per annum or (y) the LIBOR Rate plus five and one-
half percent (5.50%) per annum. As of January 27, 2012, we had $40.5 million
outstanding under our Second Lien Term Loan, which matures in November 2016 and
accrues interest at either (x) the Base Rate, as defined in our Second Lien
Term Loan, plus eight and one-half percent (8.50%) per annum or (y) the LIBOR
Rate plus nine and one-half percent (9.50%) per annum. In addition, our Second
Lien Term Loan accrues PIK interest of two percent (2.00%) per annum. We
entered into our Senior Secured Credit Facilities in May 2011 and used a
portion of the net proceeds, together with cash on hand, to repay in full our
old revolving credit facility, to fund the repurchase of our 11% Senior Notes
due 2012, or our Senior Notes, and to pay related fees and expenses.
The geosynthetics industry is relatively fragmented due to the wide variety of
products, functions, markets and geographies. We are one of the few companies
that offer multiple types of geosynthetic products. We estimate that over 150
companies produce geosynthetics and that there are approximately 30 companies
that compete in the production of geomembranes, which is our largest product
type. The majority of competitors in the geomembrane market are small and
medium-sized, privately held companies that offer only one or a few product
types or lack a global market reach. We maintain a significant competitive
advantage as the only industry participant with both (i) the ability to supply
our customers with a complete geosynthetic lining solution, including composite
liners and drainage products and (ii) the geographic reach to effectively serve
a global market and respond to demand internationally. We have also leveraged
our global presence by centralizing purchasing to ensure raw materials are
purchased at the most economical prices, thereby taking advantage of economies
of scale to which smaller competitors do not have access. Other competitive
factors include the performance of our lining systems, quality and pricing. We
lead the global geomembrane market with 24% market share.
Our primary competitor in North America and Europe is Agru Kunststofftechnik
GmbH, or Agru, a family-owned company based in Austria, which focuses primarily
on piping systems. This company's American affiliate, Agru America, produces
geomembranes and other geosynthetics primarily for lining applications to
protect against leaching wastes and fluids from reservoirs. Agru has facilities
in Austria, Germany and the United States.
In less developed regions of the world, the competitive landscape is more
fragmented than in the United States and European markets. Many competitors in
these developing regions are low-cost geosynthetic manufacturers that lack the
product quality and consistency to compete in more mature markets. As
international regulations become increasingly stringent, greater importance
will be placed on manufacturers such as us that have the technical expertise
and industry certifications required to supply geosynthetic products that
comply with these regulations.
infrastructure, agriculture and aquaculture), coal ash containment and shale
oil and gas. We are one of a few providers with the full suite of products
required to deliver customized solutions for complex projects on a worldwide
basis, including geomembranes, drainage products, geosynthetic clay liners, or
GCLs, nonwoven geotextiles, and specialty products. We sell our products in
over 110 countries and a global infrastructure that includes seven
manufacturing facilities located in the United States, Germany, Chile, Egypt
and Thailand, 18 regional sales offices located in 12 countries and engineers
and technical salespeople located on four continents. We generate the majority
of our sales outside of North America, including 38% from sales into high-
growth emerging and frontier markets in Asia, Latin America, Africa and the
Middle East. Our comprehensive product offering and global infrastructure,
along with our extensive relationships with customers and end-users, provide us
with access to high-growth markets worldwide, visibility into upcoming projects
and the flexibility to serve customers regardless of geographic location.
Geosynthetic lining solutions are mission-critical, and often mandated by
regulatory authorities, for the safe containment of materials and groundwater
protection across a wide range of applications. Our technologically advanced
products are manufactured primarily from polyethylene resins and proprietary
additives, and are engineered to high performance specifications such as
relative impermeability, structural integrity and resistance to weathering,
ultraviolet degradation and extended chemical exposure. Our products are low in
cost relative to the total development expenditure of a typical project, as
well as to the remediation cost and adverse environmental impact that would
result from not using a geosynthetic lining solution. We believe that we derive
a pricing premium and margin advantage from our technologically advanced
products and our brand name that is well-recognized in the industry for
quality, reliability and innovation, each of which are critical factors when
purchasing a product that is often required to last in perpetuity.
We are one of a few providers that possess the manufacturing capabilities and
product breadth to develop solutions that meet the specific performance and
regulatory standards required to supply large, complex projects on a global
basis. Our manufacturing facilities have one of the broadest geographic
presences in the industry and are strategically located to allow us to serve
the fastest growing end markets and geographies, to effectively manage our cost
structure and to maintain proximity to our customers and suppliers. In
addition, we have a global network of engineers and salespeople that work with
customers to provide customized solutions. Our engineers also collaborate with
international standards organizations to develop regional specifications and
standards for existing and new applications; consequently, we help public and
private industry engineers to establish the framework of specifications for our
industry's products. We believe that our global infrastructure provides us with
a competitive advantage, particularly in emerging and frontier markets, as we
are well positioned to capture new opportunities from the implementation and
enforcement of more stringent environmental regulations driven by increasing
environmental awareness globally.
We serve leading mining, waste management and power companies; independent
installers and dealers; general contractors and government agencies. Our
solutions have been integral components of projects by large, well-established
and well-known companies such as Arizona Public Service Company, Inc., Barrick
Gold Corp., BHP Billiton plc, the Charoen Pokphand Group Co. Ltd., Newmont
Mining Corp., Rio Tinto Limited, Veolia Environnement S.A. and Waste
Management, Inc. Our customer base is geographically diversified with 58% of
our sales in 2010 generated outside North America including in emerging and
frontier markets in Asia (14%), Latin America (11%), Africa (10%) and the
Middle East (3%). We define emerging markets as nations with rapid growth in
business activity and industrialization, such as China and India, and frontier
markets as countries that are earlier in their development cycles but could
exhibit similar characteristics in the future, such as Vietnam and many African
countries. We serve over 1,300 customers annually, and our largest customer
accounted for less than 5% of our sales in 2010. We maintain strong,
longstanding relationships with our customer base, with an average tenure of 13
years with our top 10 customers.
Our sales grew by 40% to $443.5 million in the twelve months ended September
30, 2011 from $316.2 million in the twelve months ended September 30, 2010. In
the twelve months ended September 30, 2011, we had net income of $4.0 million
compared to a net loss of $29.8 million in the same prior year period, a 113%
increase. Our Adjusted EBITDA grew by 162% to $44.6 million from $17.0 million
in the same prior year period. Growth in the twelve months ended September 30,
2011 has been driven, in part, by our focus on product innovation and strategic
growth initiatives in new markets and applications, as exemplified by the
ongoing diversification of our sales. Despite challenging economic conditions
in early 2010, we were able to meaningfully streamline our operations and
implement successful performance improvements that have enhanced our
profitability and provided us with significant operating leverage. As a result
of these initiatives, we increased our gross margins by 3% to 15% in the nine
months ended September 30, 2011 from 12% in the same period in the prior year
and we believe there is an ongoing opportunity for improvement. Our adjusted
gross margins increased by 2% to 17% in the nine months ended September 30,
2011 from 15% in the same period in the prior year. Our recent historical sales
have been variable, however, and we recorded a net loss in each of the last
three fiscal years. In addition, our sales typically fluctuate from quarter to
quarter due to seasonal weather patterns and our long sales cycle. As of
September 30, 2011, our total outstanding debt was $197.2 million.
-----
We are incorporated in Delaware and our corporate offices are located at 19103
Gundle Road, Houston, Texas 77073. Our telephone number is (281) 443-8564. Our
website address is www.gseworld.com.
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