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TheStreet Open House

Edgen Group Reports Second Quarter 2012 Results

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. 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 June 30, Six months ended June 30,
2012   2011   2012   2011
SALES $ 496,499 $ 415,106 $ 1,002,329 $ 742,116
OPERATING EXPENSES:
Cost of sales (exclusive of depreciation and amortization shown below) 437,835 359,917 885,253 644,648
Selling, general and administrative expense 28,406 22,128 51,434 41,856
Depreciation and amortization expense   7,887     8,930     16,125     17,848  
Total operating expenses   474,128     390,975     952,812     704,352  
INCOME FROM OPERATIONS 22,371 24,131 49,517 37,764
OTHER INCOME (EXPENSE):
Other income - net 167 504 472 1,786
Loss on prepayment of debt (17,005 ) - (17,005 ) -
Interest expense - net   (19,521 )   (22,060 )   (41,567 )   (43,785 )
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) (13,988 ) 2,575 (8,583 ) (4,235 )
INCOME TAX EXPENSE (BENEFIT)   (165 )   1,566     1,139     2,122  
NET INCOME (LOSS) $ (13,823 ) $ 1,009   $ (9,722 ) $ (6,357 )
 
NET INCOME (LOSS) ATTRIBUTABLE TO:
Predecessor $ 768 $ 955 $ 4,858 $ (6,417 )
Non-controlling interest (8,517 ) 54 (8,506 ) 60
Edgen Group Inc. (from date of initial public offering to June 30, 2012) (6,074 ) - (6,074 ) -
 
EDGEN GROUP INC. LOSS PER SHARE*:
Basic and diluted $ (0.35 ) $ (0.35 )
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING*:
Basic and diluted 17,213,423 17,213,423

* 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 earnings per share and weighted average common shares outstanding shown above are for the period from May 2, 2012 to June 30, 2012 (the period since the IPO and the Reorganization).

     

EDGEN GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED/COMBINED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

June 30,

2012

December 31,

2011

ASSETS

 CURRENT ASSETS:

Cash and cash equivalents $ 25,399 $ 26,269
Accounts receivable - net of allowance for doubtful accounts of $2,385 and $2,056, respectively 273,899 261,155
Inventory 411,834 339,371
Prepaid expenses and other current assets   9,488     10,443  
Total current assets 720,620 637,238

PROPERTY, PLANT AND EQUIPMENT - NET

45,816 46,647

GOODWILL

23,208 22,965

OTHER INTANGIBLE ASSETS - NET

158,691 172,036

OTHER ASSETS

  14,439     21,854  
TOTAL ASSETS $ 962,774   $ 900,740  
 
LIABILITIES AND EQUITY (DEFICIT)

CURRENT LIABILITIES:

Managed cash overdrafts $ 7,501 $ 6,488
Accounts payable 217,799 223,428
Accrued interest payable 26,862 26,982
Current portion of long term debt and capital lease 380 19,244
Accrued expenses and other current liabilities   31,981     31,787  

Total current liabilities

284,523 307,929

DEFERRED TAX LIABILITY - NET

3,701 4,544

OTHER LONG TERM LIABILITIES

1,322 783

REVOLVING CREDIT FACILITIES

92,500 37,523

LONG TERM DEBT AND CAPITAL LEASE

  521,930     627,078  
Total liabilities 903,976 977,857
 

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Class A common stock; 18,049,227 shares issued and outstanding at June 30, 2012 2 -
Class B common stock; 24,343,138 shares issued and outstanding at June 30, 2012 2 -
Additional paid in capital 164,530 -
Retained deficit (34,396 ) -
Accumulated other comprehensive loss   (10,552 )   -  
Total stockholders' equity 119,586 -

PREDECESSOR NET DEFICIT:

Net deficit - (51,799 )
Accumulated other comprehensive loss   -     (25,648 )
Total predecessor net deficit - (77,447 )

NON-CONTROLLING INTEREST

  (60,788 )   330  
Total equity (deficit)   58,798     (77,117 )
TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 962,774   $ 900,740  
       

EDGEN GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED/COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

 (In thousands

 
Six months ended June 30,
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,722 ) $ (6,357 )

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

Depreciation and amortization 16,125 17,848
Amortization of deferred financing costs 2,681 3,148
Non-cash accrual of interest on Seller Note 1,311 1,716
Amortization of discount on long term debt 638 584
Equity-based compensation expense 4,405 1,262
Allowance for doubtful accounts 243 (70 )
Provision for inventory allowances and writedowns 750 500
Loss on prepayment of debt 17,005 -
Deferred income tax benefit (1,100 ) (1,314 )
Loss (gain) on foreign currency transactions 544 (202 )
Unrealized loss (gain) on derivative instruments 444 (158 )
Loss (gain) on sale of property, plant and equipment 28 (992 )
Changes in operating assets and liabilities:
Accounts receivable (13,900 ) (55,773 )
Inventory (72,719 ) (37,576 )
Income tax receivable (1,255 ) 17,685
Prepaid expenses and other current assets 459 (935 )
Accounts payable (4,623 ) 56,743
Accrued expenses and other current liabilities (753 ) 1,499
Income tax payable 426 2,992
Other   (351 )   (213 )
Net cash provided by (used in) operating activities   (59,364 )   387  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (2,031 ) (2,614 )
Proceeds from the sale of property, plant and equipment   37     6,270  
Net cash provided by (used in) investing activities   (1,994 )   3,656  
CASH FLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from issuance of Class A common stock in initial public offering 153,862 -
Deferred initial public offering costs (4,574 ) -
Repayment of BL term loan, including prepayment penalty of $8,876 (125,322 ) -
Repayment of portion of Seller Note (10,745 ) -
Deferred financing costs (356 ) -
Other principal payments on long term debt and capital lease (174 ) (3,343 )
Distributions to owners of Predecessor (8,605 ) (4,952 )
Proceeds from revolving credit facilities 404,771 89,548
Payments to revolving credit facilities (349,840 ) (98,548 )
Managed cash overdraft   1,017     8,586  
Net cash provided by (used in) financing activities   60,034     (8,709 )
Effect of exchange rate changes on cash and cash equivalents   454     499  
NET CHANGE IN CASH AND CASH EQUIVALENTS (870 ) (4,167 )
CASH AND CASH EQUIVALENTS - beginning of period   26,269     62,864  
CASH AND CASH EQUIVALENTS - end of period $ 25,399   $ 58,697  
       

EDGEN GROUP INC.

UNAUDITED CONDENSED CONSOLIDATED/COMBINED CONSOLIDATED SEGMENT INFORMATION

 (In thousands)

 
Three months ended June 30, Six months ended June 30,
2012   2011 2012     2011
Sales:
E&I $ 255,365 $ 222,549 $ 533,040 $ 408,111
OCTG 241,136 192,619 469,291 334,067
Intersegment sales   (2 )   (62 )   (2 )   (62 )
Total sales $ 496,499   $ 415,106   $ 1,002,329   $ 742,116  
 
Intersegment sales:
E&I $ - $ - $ - $ -
OCTG   2     62     2     62  
Total intersegment sales $ 2   $ 62   $ 2   $ 62  
 
Selling, general and administrative expense:
E&I $ 17,663 $ 16,232 $ 33,224 $ 31,145
OCTG 7,088 3,335 10,843 6,214
Corporate   3,655     2,561     7,367     4,497  
Total selling, general and administrative expense $ 28,406   $ 22,128   $ 51,434   $ 41,856  
 
Depreciation and amortization:
E&I $ 4,283 $ 5,303 $ 8,859 $ 10,593
OCTG 3,604 3,627 7,266 7,255
Corporate   -     -     -     -  
Total depreciation and amortization $ 7,887   $ 8,930   $ 16,125   $ 17,848  
 
Income (loss) from operations:
E&I $ 13,142 $ 14,235 $ 30,454 $ 21,223
OCTG 12,884 12,457 26,430 21,038
Corporate   (3,655 )   (2,561 )   (7,367 )   (4,497 )
Total income (loss) from operations $ 22,371   $ 24,131   $ 49,517   $ 37,764  
 
Assets: June 30,

2012

December 31,

2011

E&I $ 574,166 $ 537,872
OCTG 386,583 362,868
Corporate   2,025     -  
Total assets $ 962,774   $ 900,740  

Basis of Presentation

On May 2, 2012, we completed an initial public offering (“IPO”) of common stock and were party to a series of transactions (the “Reorganization”). As a result of the IPO and the Reorganization, we are the parent holding company of Edgen Murray Corporation (“EMC”) and Bourland & Leverich Supply Co. (“B&L”) and have consolidated the results of these businesses with our own. EMC and B&L comprise the historical businesses of Edgen Murray II, L.P. (“EM II LP”) and Bourland & Leverich Holdings LLC (“B&L Holdings”), respectively, which comprise 100% of our E&I and OCTG segments, respectively. The Reorganization has been accounted for as a transaction between entities under common control, as we, EM II LP, EMC, B&L and B&L Holdings have been since July 2010, and continue to be, under the collective common control of affiliates of Jefferies Capital Partners (“JCP”).

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