10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2012

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from            to           

Commission file number 001-35382

GSE Holding, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	77-0619069
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

19103 Gundle Road, Houston, Texas	77073
(Address of Principal Executive Offices)	(Zip Code)

(281) 443-8564

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   þ     No   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   þ      No   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o Accelerated filer  o Non-accelerated filer  þ Smaller reporting company  o

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   o     No   þ

As of November 1, 2012, 19,710,264 shares of the registrant’s common stock were outstanding.

GSE Holding, Inc.

FORM 10-Q

For the Quarter Ended September 30, 2012

TABLE OF CONTENTS

		Page
PART I	Financial Information
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011
	Condensed Consolidated Statements of Cash Flows for nine months ended September 30, 2012 and 2011
	Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II	Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 4.	Mine Safety Disclosures	30
Item 6.	Exhibits	30
SIGNATURES		31

2

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.

The statements we make regarding the following subjects are forward-looking by their nature. These statements include, but are not limited to, statements about our beliefs concerning our capital expenditure requirements and liquidity needs; our beliefs regarding the impact of future regulations; our ability to secure project bids; our expectations regarding future demand for our products; our expectation that sales and total gross profits derived from outside North America will increase; our ability to manufacture our higher-margin proprietary products globally; and our belief in the sufficiency of our cash flows to meet our liquidity needs. The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors, that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, include, but are not limited to, (i) general economic conditions and cyclicality in the markets we serve; (ii) our ability to secure project bids; (iii) increases in prices or disruptions in supply of the raw materials we use; (iv) our ability to develop new applications and markets for our products; (v) unexpected equipment failures or significant damage to our manufacturing facilities; (vi) competition; (vii) our ability to anticipate and effectively manage risks associated with our international operations; (viii) currency exchange rate fluctuations; (ix) our ability to retain key executives and other personnel; (x) extensive and evolving environmental and health and safety regulations; and (xi) other factors described in more detail under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities Exchange Commission (the “SEC”) on March 30, 2012.

All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements as well as other cautionary statements that are made from time to time in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q in the context of these risks and uncertainties.

We cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

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ITEM 1.FINANCIAL STATEMENTS

4

GSE Holding, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

(Unaudited)

	September 30,  2012			December, 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	11,805		$	9,076
Accounts receivable:
Trade, net of allowance for doubtful accounts of $1,135 and $1,736		101,961			80,705
Other		4,397			3,054
Inventory, net		73,602			58,109
Deferred income taxes		495			935
Prepaid expenses and other		7,896			5,741
Income taxes receivable		428			2,447
Total current assets		200,584			160,067
Property, plant and equipment, net		69,514			57,270
Goodwill		58,895			58,895
Intangible assets, net		1,823			2,727
Deferred income taxes		4,078			2,519
Deferred debt issuance costs, net		7,460			8,387
Other assets		211			2,561
TOTAL ASSETS	$	342,565		$	292,426
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	37,208		$	34,848
Accrued liabilities and other		19,017			22,812
Short-term debt		512			2,864
Current portion of long-term debt		3,153			2,709
Income taxes payable		2,237			964
Deferred income taxes		1,127			1,135
Total current liabilities		63,254			65,332
Other liabilities		1,043			1,124
Deferred income taxes		1,131			1,416
Long-term debt, net of current portion		180,259			192,885
Total liabilities		245,687			260,757
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $.01 par value, 150,000,000 shares authorized, 19,710,264 and 10,809,987 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively		197			108
Additional paid-in capital		130,275			61,407
Accumulated deficit		(33,186	)		(29,456	)
Accumulated other comprehensive loss		(408	)		(390	)
Total stockholders’ equity		96,878			31,669
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	342,565		$	292,426

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

GSE Holding, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net sales	$	121,200		$	146,842		$	355,285		$	353,791
Cost of products		100,820			126,006			297,329			300,925
Gross profit		20,380			20,836			57,956			52,866
Selling, general and administrative expenses		11,945			12,761			34,684			31,499
Public offering related costs		—			—			9,655			—
Amortization of intangibles		295			329			893			1,057
Operating income		8,140			7,746			12,724			20,310
Other expenses (income):
Interest expense, net		3,199			4,657			12,836			14,978
Foreign currency transactions (gain) loss		(571	)		(1,617	)		(513	)		36
Loss on extinguishment of debt		—			—			1,555			2,016
Other income, net		(654	)		(222	)		(1,318	)		(928	)
Income from continuing operations before income taxes		6,166			4,928			164			4,208
Income tax provision		756			1,200			3,483			2,401
Income (loss) from continuing operations		5,410			3,728			(3,319	)		1,807
Income (loss) from discontinued operations, net of tax		(170	)		76			(411	)		83
Net income (loss).		5,240			3,804			(3,730	)		1,890
Other comprehensive income (loss):
Foreign currency translation adjustment		689			(4,704	)		(19	)		(311	)
Comprehensive income (loss)	$	5,929		$	(900	)	$	(3,749	)	$	1,579
Basic net income (loss) per common share:
Continuing operations	$	0.28		$	0.34		$	(0.19	)	$	0.17
Discontinued operations		(0.01	)		0.01			(0.02	)		—
	$	0.27		$	0.35		$	(0.21	)	$	0.17
Diluted net income (loss) per common share:
Continuing operations	$	0.27		$	0.31		$	(0.19	)	$	0.15
Discontinued operations		(0.01	)		0.01			(0.02	)		0.01
	$	0.26		$	0.32		$	(0.21	)	$	0.16
Basic weighted-average common shares outstanding		19,459			10,810			17,978			10,810
Diluted weighted-average common shares outstanding		20,436			11,867			17,978			11,830

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

GSE Holding, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash flows from operating activities:
Net income (loss)	$	(3,730	)	$	1,890
(Income) loss from discontinued operations		411			(83	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization		13,468			11,394
Loss on extinguishment of debt		1,555			2,016
Revaluation of non-dollar denominated debt		217			(158	)
Stock-based compensation		4,453			75
Increase in accounts receivable		(21,266	)		(31,869	)
Increase in inventory		(16,133	)		(2,665	)
Increase in accounts payable		2,502			11,003
Decrease in accrued liabilities		(3,161	)		(1,088	)
All other items, net		(3,225	)		(1,844	)
Net cash used in operating activities – continuing operations		(24,909	)		(11,329	)
Net cash provided by (used in) operating activities – discontinued operations		(19	)		5,087
Net cash used in operating activities		(24,928	)		(6,242	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(21,975	)		(7,713	)
Net cash used in investing activities		(21,975	)		(7,713	)
Cash flows from financing activities:
Proceeds from lines of credit		85,777			77,659
Repayments of lines of credit		(83,770	)		(83,212	)
Proceeds from long-term debt		25,674			173,085
Repayments of long-term debt		(43,471	)		(152,411	)
Net proceeds from initial public offering		65,927			-
Proceeds from the exercise of stock options		888			-
Payments for debt issuance costs		(1,736	)		(7,274	)
Net cash provided by financing activities – continuing operations		49,289			7,847
Net cash used in financing activities – discontinued operations		-			(650	)
Net cash provided by financing activities		49,289			7,197
Effect of exchange rate changes on cash – continuing operations		304			312
Effect of exchange rate changes on cash – discontinued operations		39			(18	)
Net increase (decrease) in cash and cash equivalents		2,729			(6,464	)
Cash and cash equivalents at beginning of period		9,076			15,184
Cash and cash equivalents at end of period	$	11,805		$	8,720

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

GSE Holding, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Nature of Business

Organization and Description of Business —

GSE Holding, Inc. (the “Company”) is a leading global manufacturer and marketer of highly engineered geosynthetic lining products for environmental protection and confinement applications. These lining products are used in a wide range of infrastructure end markets such as mining, environmental containment, liquid containment (including water infrastructure, agriculture and aquaculture and industrial wastewater treatment applications), coal ash containment and shale oil and gas. The Company offers a full range of products, including geomembranes, drainage products, geosynthetic clay liners, nonwoven geotextiles, and other specialty products. The Company generates the majority of its sales outside of the United States, including emerging markets in Asia, Latin America, Africa and the Middle East. Its comprehensive product offering and global infrastructure, along with its extensive relationships with customers and end-users, provide it with access to high-growth markets worldwide, visibility into upcoming projects and the flexibility to serve customers regardless of geographic location. The Company believes that its market share, broad product offering, strong customer relationships, diverse end markets and global presence provide it with key competitive advantages in the environmental geosynthetic products industry. The Company manufactures its products at facilities located in the United States, Germany, Thailand, Chile and Egypt.

Effective February 10, 2012, the Company completed its initial public offering (“IPO”) of 7,000,000 shares of common stock.  The Company also granted the underwriters a 30-day option to purchase up to an additional 1,050,000 shares at the IPO price to cover over-allotments, which was exercised. The IPO price was $9.00 per share and the common stock is currently listed on The New York Stock Exchange under the symbol “GSE”.  The Company received proceeds from the IPO, after deducting underwriter’s fees, of approximately $67.4 million.  The Company incurred direct and incremental costs associated with the IPO of approximately $3.8 million.  At December 31, 2011, $2.3 million of these costs had been deferred in Other assets and were subsequently netted against the proceeds from the IPO and classified in Additional paid-in capital.  The proceeds from the IPO were used to pay down debt ($51.5 million) and for general working capital purposes.  The Company also incurred and expensed compensation costs of $6.6 million related to IPO bonuses that were paid in cash ($2.3 million) and the issuance of fully vested common stock ($4.3 million) to certain key executives and directors, and $3.0 million related to a management agreement termination fee, which became payable upon the closing of the IPO.

2. Basis of Presentation —

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (‘‘GAAP’’) on the same basis as those in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2011. The December 31, 2011 Condensed Consolidated Balance Sheet data was derived from the Company’s year-end audited consolidated financial statements but does not include all disclosures required by GAAP. These condensed consolidated financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of such financial statements for the periods indicated. Certain reclassifications were made to the December 31, 2011 consolidated financial statements to conform to the 2012 financial statement presentation.  These reclassifications did not have an impact on previously reported results.  The Company believes that the disclosures herein are adequate to make the information presented not misleading. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of results to be expected for the full year ending December 31, 2012. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2011, and the notes thereto included in the 2011 Annual Report on Form 10-K.

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts as well as certain disclosures. The Company’s financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.

8

3.  Recent Accounting Pronouncements —

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-08, Intangibles – Goodwill and Other: Testing Goodwill for Impairment, to allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  The Company will adopt this ASU for its 2012 goodwill impairment testing, with an annual test date of October 1, and does not believe it will have a material impact on the Company’s results of operations or financial position.

4. Net Income (Loss) per Share

The Company computes basic net income (loss) per share by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of employee stock options is reflected in diluted net income (loss) per share by applying the treasury stock method.

The basic and diluted net income (loss) per share calculations are presented below (thousands, except for per share amounts):

	For the three months ended September 30,					For the nine months ended September 30,
	2012			2011		2012			2011
Net income (loss):
From continuing operations	$	5,410		$	3,728	$	(3,319	)	$	1,807
From discontinued operations		(170	)		76		(411	)		83
	$	5,240		$	3,804	$	(3,730	)	$	1,890
Common share information:
Weighted-average common shares outstanding – basic		19,459			10,810		17,978			10,810
Dilutive effect of employee stock options		977			1,057		–			1,020
Weighted-average common shares outstanding – dilutive		20,436			11,867		17,978			11,830
Basic net income (loss) per share:
Continuing operations	$	0.28		$	0.34	$	(0.19	)	$	0.17
Discontinued operations		(0.01	)		0.01		(0.02	)		—
	$	0.27		$	0.35	$	(0.21	)	$	0.17
Diluted net income (loss) per share:
Continuing operations	$	0.27		$	0.31	$	(0.19	)	$	0.15
Discontinued operations		(0.01	)		0.01		(0.02	)		0.01
	$	0.26		$	0.32	$	(0.21	)	$	0.16

For the nine months ended September 30, 2012, 1.0 million of in-the-money options have been excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive given the net loss reported by the Company for that period.

9

5. Inventory –

Inventory consisted of the following:

	September 30, 2012			December 31, 2011
	(in thousands)
Raw materials	$	33,205		$	24,479
Finished goods		39,267			31,732
Supplies		4,084			4,996
Obsolescence and slow moving allowance		(2,954	)		(3,098	)
	$	73,602		$	58,109

6. Property, Plant and Equipment –

Property, plant and equipment consisted of the following:

	Estimated useful lives years		September 30, 2012			December 31, 2011
			(in thousands)
Land			$	5,072		$	4,820
Buildings and improvements		7-30		26,853			24,022
Machinery and equipment		3-10		116,197			97,524
Software		3		8,169			8,025
Furniture and fixtures		3-5		797			720
				157,088			135,111
Less – accumulated depreciation and amortization				(87,574	)		(77,841	)
			$	69,514		$	57,270

Depreciation and amortization expense for the three months ended September 30, 2012 and 2011was $3.3 million and $2.8 million, respectively.  Depreciation and amortization expense for the nine months ended September 30, 2012 and 2011 was $9.8 million and $8.3 million, respectively.

7. Intangible Assets –

Intangible assets consisted of the following:

	Estimated useful lives years		September 30, 2012			December 31, 2011
			(in thousands)
Customer lists		5-10	$	25,246		$	25,307
Non-compete agreements		5-10		2,469			2,469
Other		1		363			363
				28,078			28,139
Less accumulated amortization				(26,255	)		(25,412	)
Intangible assets, net			$	1,823		$	2,727

Amortization expense for intangible assets during the three months ended September 30, 2012 and 2011was $0.3 million in each period.  Amortization expense for intangible assets during the nine months ended September 30, 2012 and 2011was $0.9 million and $1.1 million, respectively.

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8. Accrued Liabilities and Other –

Accrued liabilities and other consisted of the following:

	September 30, 2012		December 31, 2011
	(in thousands)
Customer prepayments	$	527	$	167
Accrued operating expenses		4,526		2,591
Self-insurance reserves		2,065		3,167
Compensation and benefits		3,878		6,096
Accrued interest		2,718		4,026
Taxes, other than income		1,859		2,025
Other accrued liabilities		3,444		4,740
	$	19,017	$	22,812

9. Long-Term Debt –

Long-term debt consisted of the following:

	September 30, 2012			December 31, 2011
	(in thousands)
First Lien Credit Facility	$	180,923		$	155,982
Second Lien Term Loan, including payment in kind (“PIK”) interest		—			40,488
Capital Lease – CapitalSource Bank		3,587			—
Term Loan – German bank secured by equipment, 5.15%, maturing March 2014		474			702
Term Loan – Thailand bank secured by equipment, monthly installments of $113,000, 6.75% variable through May 2013		69			1,097
		185,053			198,269
Less – current maturities		(3,153	)		(2,709	)
Unamortized discounts on first lien loans		(1,641	)		(2,675	)
	$	180,259		$	192,885

First Lien Credit Facility –

On May 27, 2011, the Company entered into a five-year, $160.0 million first lien senior secured credit facility with General Electric Capital Corporation, Jefferies Finance LLC and the other financial institutions party thereto (as amended from time to time, the “First Lien Credit Facility”), consisting of $135.0 million of term loan commitments (as amended from time to time, the “First Lien Term Loan”) and $25.0 million of revolving loan commitments (as amended from time to time, the “Revolving Credit Facility””). On October 18, 2011, the Revolving Credit Facility was amended to increase the aggregate revolving loan commitments from $25.0 million to $35.0 million. On December 12, 2011, the First Lien Credit Facility was amended to, among other matters, modify the definition of “Change of Control” to reduce Code Hennessy & Simmons LLP (“CHS”) specified ownership percentage following the consummation of our IPO from 35% to 20%.  On April 18, 2012, the First Lien Credit Facility was amended to increase the aggregate term loan commitments from $135.0 million to $157.0 million. The Company used the additional borrowing capacity under the term loan to repay in full all outstanding indebtedness under, and to terminate, the Second Lien Term Loan (as defined below) and to pay related fees and expenses. On September 19, 2012, the Company entered into a fourth amendment to the First Lien Credit Facility, which increased the Capital Expenditure Limitation covenant as discussed below in “Restrictive Covenants.”

The First Lien Credit Facility matures in May 2016. Borrowings under the First Lien Credit Facility incur interest expense that is variable in relation to the London Interbank Offer Rates (“LIBOR”) (and/or Prime) rate. In addition to paying interest on outstanding borrowings under the First Lien Credit Facility, the Company pays a 0.75% per annum commitment fee to the lenders in respect of the unutilized commitments, and letter of credit fees equal to the LIBOR margin on the undrawn amount of all outstanding letters of credit.  As of September 30, 2012, there was $180.9 million outstanding under the First Lien Credit Facility consisting of $154.9 million in term loans and $26.0 million in revolving loans, and the interest rate on such loans was 7.16%.  The Company had $6.5 million of capacity under the Revolving Credit Facility after taking into account outstanding loan advances and letters of credit.

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Guarantees; Security.  The obligations under the First Lien Credit Facility are guaranteed on a senior secured basis by the Company and each of its existing and future wholly owned domestic subsidiaries, other than GSE International, Inc. and any other excluded subsidiaries. The obligations are secured by a first priority perfected security interest in substantially all of the guarantors’ assets, subject to certain exceptions, permitted liens and permitted encumbrances under the First Lien Credit Facility.

Restrictive Covenants.  The First Lien Credit Facility contains various restrictive covenants that include, among other things, restrictions or limitations on the Company’s ability to incur additional indebtedness or issue disqualified capital stock unless certain financial tests are satisfied; pay dividends, redeem subordinated debt or make other restricted payments; make certain loans, investments or acquisitions; issue stock of subsidiaries; grant or permit certain liens on assets; enter into certain transactions with affiliates; merge, consolidate or transfer substantially all of its assets; incur dividend or other payment restrictions affecting certain subsidiaries; transfer or sell assets including, but not limited to, capital stock of subsidiaries; and change the business the Company conducts. For the twelve months ended September 30, 2012 and December 31, 2011, the Company was subject to a Total Leverage Ratio not to exceed 6.00:1.00 and 6.15:1.00, respectively, and an Interest Coverage Ratio of not less than 2.00:1.00 and 1.90:1.00, respectively.  For the year ended December 31, 2011, the Company was also subject to a maximum Capital Expenditure Limitation of $17.5 million.  In accordance with the fourth amendment to the First Lien Credit Facility as discussed above, for the year ended December 31, 2012, the Company will be subject to a maximum Capital Expenditure Limitation of $21.7 million, which excludes $8.5 million allowed for acquisition-related expenditures.  These ratios become progressively more restrictive over the term of the loans.  For all periods presented, the Company was in compliance with all financial debt covenants under the existing agreements.

Second Lien Term Loan –

On May 27, 2011, the Company also entered into a 5.5 year, $40.0 million second lien senior secured credit facility consisting of $40.0 million of term loan commitments (the “Second Lien Term Loan”). The Second Lien Term Loan was paid in full on April 18, 2012, and the arrangement was terminated.  In connection with this refinancing, the Company recorded a $1.6 million loss from extinguishment of debt, primarily related to the write-off of unamortized debt issuance cost and discount.

Capital Lease –

On August 17, 2012, the Company entered into an equipment financing arrangement with CapitalSource Bank.  The lease is a three-year lease for equipment cost up to $10.0 million.  As of September 30, 2012, there was $3.6 million outstanding under this lease arrangement, with monthly payments of $0.1 million and an implied interest rate of 7.09%.

10. Fair Value of Financial Instruments –

Under GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, GAAP requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used are as follows:

Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables and debt instruments. The carrying values of cash and cash equivalents, trade receivables and trade payables are considered to be representative of their respective fair values due to the short-term nature of these instruments. The carrying amount of the long-term debt of $185.1 million as of September 30, 2012 approximates fair value because our current borrowing rate does not materially differ from market rates for similar bank borrowings. The long-term debt is classified as a Level 2 item within the fair value hierarchy.

11. Stock-Based Compensation

There was $0.1 million of stock-based compensation expense related to stock options for the three months ended September 30, 2012 and no stock-based compensation expense for the three months ended September 30, 2011.  For the nine months ended September 30, 2012, there was $4.5 million of stock-based compensation recognized.  Of this amount, $4.3 million related to 478,467 shares of fully vested common stock that was issued to certain key executives and directors in connection with the IPO.  Stock-based compensation expense of $0.1 million was recognized during the nine months ended September 30, 2011.

	Number of stock options			Weighted- average exercise price		Weighted- average remaining contractual term (in years)		Aggregate intrinsic value (in millions)
Outstanding at December 31, 2011		1,731,941		$	2.50		3.5	$	5.4
Granted		200,650		$	11.57
Exercised		(314,510	)	$	2.83
Outstanding at September 30, 2012		1,618,081		$	3.56		3.8	$	7.7
Exercisable at September 30, 2012		1,363,116		$	2.28		2.8	$	7.6

The value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for the nine months ended September 30.

	2012			2011
Risk Free Interest Rate		0.54	%		1.0	%
Expected Volatility		45.9	%		22.25	%
Expected Dividend Yield		0	%		0	%
Expected Life	4 years			3 years
Weighted Average Calculated Value per Option	$	3.57		$	0.65

All outstanding stock options are held by employees and former employees of the Company and have an expiration date of 10 years from the date of grant. At September 30, 2012, there was approximately $1.2 million of total unrecognized compensation expense related to non-vested employee stock options and restricted stock grants.

12. Income Taxes –

Income tax expense from continuing operations for the three months ended September 30, 2012 and 2011 was $0.8 million and $1.2 million, respectively.  Our provision for income taxes is recorded at the estimated annual effective tax rates for each tax jurisdiction based on fiscal year to date results. Income tax expense from continuing operations for the nine months ended September 30, 2012 and 2011 was $3.5 million and $2.4 million, respectively.The difference in the effective tax rate compared with the U.S. federal statutory rate is due to the mix of the international jurisdictional rates and the changes in valuation allowance, which primarily relates to the United States.  

The realization of the deferred tax assets depends on recognition of sufficient future taxable income in specific tax jurisdictions during periods in which those temporary differences are deductible. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts the Company believes are more likely than not to be recovered. In evaluating the valuation allowance, the Company considered the reversal of existing temporary differences, the existence of taxable income in prior carryback years, tax planning strategies and future taxable income for each of the taxable jurisdictions, the latter two of which involve the exercise of significant judgment. During the three months ended September 30, 2012, the Company reduced the valuation allowance by $1.0 million in the United States based upon the expected future taxable income in that jurisdiction. Changes to the valuation allowance could materially impact our results of operations.

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13. Commitments and Contingencies –

Warranties

The Company’s products are sold and installed with specified limited warranties as to material quality and workmanship. These limited warranties may last for up to 20 years, but are generally limited to repair or replacement by the Company of the defective liner or the dollar amount of the contract involved, on a prorated basis. The Company may also indemnify the site owner or general contractor for other damages resulting from negligence of the Company’s employees. The Company accrues a warranty reserve based on estimates for warranty claims included in Accrued liabilities and other in the condensed consolidated balance sheet. This estimate is based on historical claims history and current business activities and is accrued as a cost of sales in the period such business activity occurs. The table below reflects a summary of activity of the Company’s operations for warranty obligations for the nine months ended September 30, 2012 and 2011 as recorded in Accrued liabilities and other on the condensed consolidated balance sheet:

	2012			2011
	(in thousands)
Balance at January 1,	$	2,225		$	2,802
Changes in estimates		9			46
Payments		(35	)		(89	)
Balance at March 31,		2,199			2,759
Changes in estimates		(739	)		45
Payments		(42	)		(351	)
Balance at June 30,		1,418			2,453
Changes in estimates		2			228
Payments		(15	)		41
Balance at September 30,	$	1,405		$	2,722

Although the Company is not exposed to the type of potential liability that might arise from being in the business of handling, transporting or storing hazardous waste or materials, the Company could be susceptible to liability for environmental damage or personal injury resulting from defects in the Company’s products or negligence by Company employees in the installation of its lining systems. Such liability could be substantial because of the potential that hazardous or other waste materials might leak out of their containment system into the environment. The Company maintains liability insurance, which includes contractor’s pollution liability coverage in amounts which it believes to be prudent. However, there is no assurance that this coverage will remain available to the Company. While the Company’s claims experience to date may not be a meaningful measure of its potential exposure for product liability, the Company has experienced no material losses from defects in products and installations.

Bonding – Bank Guarantees –

The Company, in some direct sales and raw material acquisition situations, is required to post performance bonds or bank guarantees as part of the contractual guarantee for its performance. The performance bonds or bank guarantees can be in the full amount of the contracts. To date, the Company has not received any claims against any of the posted securities, most of which terminate at the final completion date of the contracts. As of September 30, 2012, the Company had $5.8 million of bonds outstanding and $5.9 million of guarantees issued under its bank lines.

Litigation and Claims –

The Company is a party to various legal actions arising in the ordinary course of our business. These legal actions cover a broad variety of claims spanning the Company’s entire business. We believe it is not probable and reasonably estimable that resolution of these legal actions will, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows.

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14. Related Party Transactions –

Management Agreement with CHS Management IV LP

In connection with the 2004 acquisition of the Company by CHS Management IV LP (“CHS Management”) a limited partnership (1) of which CHS is the general partner and (2) which is the general partner of CHS IV, the Company entered into a management agreement with CHS Management pursuant to which CHS Management provided certain financial and management consulting services to the Company. In consideration of those services, the Company paid fees to CHS Management in an aggregate annual amount of $2.0 million payable in equal monthly installments. Under this agreement, the Company paid and expensed $1.5 million during the nine months ended September 30, 2011, which are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). In connection with the Company’s IPO, the management agreement was terminated and a fee of $3.0 million was paid and expensed during the nine months ended September 30, 2012, which was included in public offering related costs in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). As of September 30, 2012, there were no amounts payable to CHS management under this agreement.

15. Segment Information –

The Company’s operating and external reporting segments are based on geographic regions, which is consistent with the basis of how management internally reports and evaluates financial information used to make operating decisions. The Company’s reportable segments are North America, Europe Africa, Asia Pacific, Latin America and Middle East.

The following tables present information about the results from continuing operations and assets of the Company’s reportable segments for the periods presented.

	Three months ended September 30, 2012
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	48,229		$	41,207		$	24,331		$	6,173		$	1,260		$	121,200
Intersegment sales		8,780			35			5,090			—			1,119			15,024
Total segment net sales		57,009			41,242			29,421			6,173			2,379			136,224
Gross profit (loss)		11,549			3,795			4,426			679			(69	)		20,380
Gross margin		23.9	%		9.2	%		18.2	%		11.0	%		(5.5	)%		16.8	%

	Three months ended September 30, 2011
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	67,296		$	45,391		$	22,073		$	10,189		$	1,893		$	146,842
Intersegment sales		5,202			129			4,187			326			765			10,609
Total segment net sales		72,498			45,520			26,260			10,515			2,658			157,451
Gross profit		13,354			3,293			2,912			1,090			187			20,836
Gross margin		19.8	%		7.3	%		13.2	%		10.7	%		9.9	%		14.2	%

	Nine months ended September 30, 2012
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	144,562		$	108,225		$	66,975		$	29,846		$	5,677		$	355,285
Intersegment sales		27,352			35			10,542			-			3,446			41,375
Total segment net sales		171,914			108,260			77,517			29,846			9,123			396,660
Gross profit		32,805			9,875			11,599			3,277			400			57,956
Gross margin		22.7	%		9.1	%		17.3	%		11.0	%		7.0	%		16.3	%

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	Nine months ended September 30, 2011
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	155,579		$	103,730		$	56,772		$	30,643		$	7,067		$	353,791
Intersegment sales		17,232			129			10,314			326			905			28,906
Total segment net sales		172,811			103,859			67,086			30,969			7,972			382,697
Gross profit		33,300			7,763			7,742			3,441			620			52,866
Gross margin		21.4	%		7.5	%		13.6	%		11.2	%		8.8	%		14.9	%

The following tables reconcile the segment information presented above to the consolidated financial information.

Net sales

	Reconciliation to Consolidated Sales
	Three months ended September 30,						Nine months ended  September 30,
	2012			2011			2012			2011
	(in thousands)
Total segment net sales	$	136,224		$	157,451		$	396,660		$	382,697
Intersegment sales		(15,024	)		(10,609	)		(41,375	)		(28,906	)
Consolidated net sales	$	121,200		$	146,842		$	355,285		$	353,791

16. Discontinued operations –

The Company closed its manufacturing facility located in the United Kingdom and exited the United States Installation business in 2010.  Additionally, the Company completed the exit from the synthetic turf business as of December 31, 2008.  For the three months ended September 30, 2012 and 2011, the Company recorded an after tax loss of $0.2 million and an after tax income of $0.1 million, respectively, related to discontinued operations.   For the nine months ended September 30, 2012 and 2011, the Company recorded an after tax loss of $0.4 million and after tax income of $0.1 million, respectively, related to discontinued operations.  At September 30, 2012 and December 31, 2011, there were approximately $0.6 million and $1.7 million, respectively, in assets and $1.0 million in liabilities at each period end related to discontinued operations.

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ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this discussion and analysis together with our unaudited condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC on March 30, 2012. This discussion and analysis contain forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Forward-Looking Statements.”

Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our,”  “GSE Holding,” “our business” and “our company” refer to GSE Holding, Inc. and its consolidated subsidiaries as a combined entity.

Overview

We believe we are the leading global provider of sales of highly engineered geosynthetic containment solutions for environmental protection and confinement applications. Our products are used in a wide range of infrastructure end markets such as mining, environmental containment, liquid containment (including water infrastructure, agriculture and aquaculture), coal ash containment and shale oil and gas. We are one of the few providers with the full suite of products required to deliver customized solutions for complex projects on a global basis, including geomembranes, drainage products, geosynthetic clay liners, nonwoven geotextiles and specialty products. We have 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 high-growth emerging 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 and the flexibility to serve customers regardless of geographic location.

Segment Data

We have organized our operations into five principal reporting segments: North America, Europe Africa, Asia Pacific, Latin America and Middle East. We generate a greater proportion of our gross profit, as compared to our sales, in our North America segment, which consists of the United States, Canada and Mexico, because our product mix in this segment is focused on higher-margin products. We expect the percentage of total gross profit derived from outside North America to increase in future periods as we continue to focus on selling these higher-value products in our other segments. We also expect the percentage of sales derived from outside North America to increase in future periods as we continue to expand globally.

The following table presents our net sales and gross profit by segment for the period presented, as well as gross profit as a percentage of net sales from each segment:

	North America			Europe Africa			Asia Pacific			Latin America			Middle East
	(in thousands, except percentages)
Three months ended September 30, 2012
Net sales	$	48,229		$	41,207		$	24,331		$	6,173		$	1,260
Gross profit (loss)		11,549			3,795			4,426			679			(69	)
Gross margin		23.9	%		9.2	%		18.2	%		11.0	%		(5.5	)%

	North America			Europe Africa			Asia Pacific			Latin America			Middle East
	(in thousands, except percentages)
Nine months ended September 30, 2012
Net sales	$	144,562		$	108,225		$	66,975		$	29,846		$	5,677
Gross profit		32,805			9,875			11,599			3,277			400
Gross margin		22.7	%		9.1	%		17.3	%		11.0	%		7.0	%

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The following table presents our net sales from each segment, as a percentage of total net sales:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
North America		39.8	%		45.8	%		40.7	%		44.0	%
Europe Africa		34.0			30.9			30.5			29.3
Asia Pacific		20.1			15.0			18.9			16.0
Latin America		5.1			6.9			8.4			8.7
Middle East		1.0			1.4			1.5			2.0
Total		100.0	%		100.0	%		100.0	%		100.0	%

North America

North America net sales decreased $19.1 million, or 28.4%, during the three months ended September 30, 2012 to $48.2 million from $67.3 million during the three months ended September 30, 2011 due to lower volume shipped ($16.5 million) and a decrease in raw material costs ($6.1 million), which were partially offset by changes in product mix ($3.5 million).  North America gross profit decreased $1.8 million, or 13.4%, to $11.6 million during the three months ended September 30, 2012 from $13.4 million in the prior year period. North America gross profit decreased due to the decrease in volume shipped and increased manufacturing costs, which were partially offset by changes in product mix.

North America net sales decreased $11.0 million, or 7.1%, during the nine months ended September 30, 2012 to $144.6 million from $155.6 million in the nine months ended September 30, 2011. Lower volume shipped contributed $8.7 million and decreases in raw material costs and changes in product mix contributed $2.3 million. North America gross profit decreased $0.5 million, or 1.5%, during the nine months ended September 30, 2012 to $32.8 million from $33.3 million in the prior year period primarily due to the lower volume shipped partially offset by changes in product mix.

Europe Africa

Europe Africa net sales decreased $4.2 million, or 9.3%, during the three months ended September 30, 2012 to $41.2 million from $45.4 million in the three months ended September 30, 2011. Lower volume shipped contributed $2.1 million to the decrease and changes in foreign currency exchange rates negatively affected net sales by $5.4 million. These decreases were partially offset by increases in raw material costs passed on to customers of $2.7 million, and changes in product mix of $0.6 million. Europe Africa gross profit increased $0.5 million, or 15.2%, to $3.8 million in the three months ended September 30, 2012 compared to $3.3 million in the three months ended September 30, 2011 primarily due to changes in product mix and decreased manufacturing costs,  partially offset by decreased volume shipped and changes in foreign currency exchange rates.

Europe Africa net sales increased $4.5 million, or 4.3%, during the nine months ended September 30, 2012 to $108.2 million from $103.7 million in the prior year period. Net sales increased $7.5 million due to increases in volume shipped and $9.2 million due to increases in raw material costs passed on to customers, and changes in product mix. Europe Africa net sales were negatively affected by approximately $12.2 million from changes in foreign currency exchange rates. Europe Africa gross profit increased $2.1 million, or 26.9%, to $9.9 million in the nine months ended September 30, 2012 compared to $7.8 million in the nine months ended September 30, 2011 primarily due changes in product mix ($1.1 million), reduced manufacturing costs ($1.6 million) and increased volume ($0.6 million), which were partially offset by changes in foreign currency exchange rates ($1.2 million).

Asia Pacific

Asia Pacific net sales increased $2.3 million, or 10.5%, during the three months ended September 30, 2012 to $24.3 million from $22.0 million in the three months ended September 30, 2011. Changes in product mix contributed $3.1 million in additional net sales and increased volume shipped contributed $0.3 million. These increases were partially offset by a decrease in raw material costs of $1.1 million. Asia Pacific gross profit increased $1.5 million, or 51.7%, during the three months ended September 30, 2012 to $4.4 million from $2.9 million in the prior year period. Gross profit increased $3.1 million due to changes in product mix, partially offset by increased manufacturing costs of $1.6 million.

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Asia Pacific net sales increased $10.2 million, or 18.0%, during the nine months ended September 30, 2012 to $67.0 million from $56.8 million in the nine months ended September 30, 2011. Increases in volume shipped contributed $6.7 million and changes in product mix contributed $6.1 million.  These increases were partially offset by a $2.6 million decrease in raw material costs. Asia Pacific gross profit increased $3.9 million, or 50.6%, during the nine months ended September 30, 2012 to $11.6 million from $7.7 million in the prior year period. Gross profit increased $6.1 million due to changes in product mix and $0.9 million due to higher volume shipped, which were partially offset by increased manufacturing costs of $3.1 million.

Latin America

Latin America net sales decreased $4.0 million, or 39.2%, during the three months ended September 30, 2012 to $6.2 million from $10.2 million in the three months ended September 30, 2011. Net sales decreased $4.5 million due to lower volume which was slightly offset by changes in product mix of $0.5 million. Latin America gross profit decreased $0.4 million, or 36.4%, during the three months ended September 30, 2012 to $0.7 million from $1.1 million in the prior year period primarily due to lower volume ($0.5 million) and increased manufacturing costs ($0.5 million), which were partially offset by changes in product mix ($0.6 million).

Latin America net sales decreased $0.8 million, or 2.6%, during the nine months ended September 30, 2012 to $29.8 million from $30.6 million in the nine months ended September 30, 2011. Net sales decreased $3.5 million due to lower volume shipped, which was partially offset by increases in raw material costs passed on to customers, and changes in product mix. Latin America gross profit decreased $0.1 million, or 2.9%, during the nine months ended September 30, 2012 to $3.3 million from $3.4 million in the nine months ended September 30, 2011 due to increased manufacturing costs and lower volume shipped, partially offset by changes in product mix.

Middle East

Middle East net sales decreased $0.6 million, or 31.6% to $1.3 million during the three months ended September 30, 2012 from $1.9 million in the three months ended September 30, 2011 primarily due to decreased volume shipped. Middle East gross profit decreased $0.3 million to a loss of $0.1 million in the three months ended September 30, 2012 from $0.2 million in the three months ended September 30, 2011 primarily due to increases in manufacturing costs, partially offset by changes in product mix.

Middle East net sales decreased $1.4 million, or 19.7% to $5.7 million during the nine months ended September 30, 2012 from $7.1 million in the nine months ended September 30, 2011 primarily due to a decrease in volume shipped ($1.8 million) and raw material costs ($0.2 million), partially offset by changes in product mix ($0.7 million).  Foreign currency also had a negative impact of $0.1 million.  Middle East gross profit decreased $0.2 million, or 33.3%, to $0.4 million in the nine months ended September 30, 2012 from $0.6 million in the prior year period primarily due to increased manufacturing costs ($0.6 million) and lower volume shipped ($0.1 million), which were partially offset by changes in product mix ($0.7 million).  Foreign currency also had a negative impact of $0.2 million.

Key Drivers

The following are the key drivers of our business:

Timing of Projects.  Our financial results are influenced by the timing of projects that are developed and constructed by the end-users of our products in our primary end markets, including mining, environmental containment and liquid containment.

Mining projects and associated capital expenditures are driven by global commodity supply and demand factors. Our products are used primarily in metal mining, including copper, silver, uranium and gold. Metal mining projects are typically characterized by long lead times and large capital investment by the owners of the projects. In addition, these projects are often located in remote geographies with limited infrastructure, such as power and roads, creating complex logistics management requirements and long supplier lead times.

In our environmental containment end market, landfill construction and expansion projects are driven by waste volume generation and the need for additional municipal solid waste disposal resources. In developed markets, landfill construction and expansion projects are influenced by economic factors, particularly retail sales and consumer spending, housing starts and commercial and infrastructure construction. In emerging markets, environmental containment projects are also driven primarily by increased per capita GDP, which is positively correlated with waste generation, as well as by increasing environmental awareness and regulation, as discussed further below.

Finally, projects in our liquid containment end markets, including water management infrastructure, agriculture and aquaculture and industrial wastewater treatment applications, are driven by investment in civil and industrial infrastructure globally. This global spending is influenced by increased urbanization, increased wealth and protein-rich diets in developing economies necessitating higher levels of food production, population growth and other secular and economic factors, in both developed and emerging markets.

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Environmental Regulations.  Our business is influenced by environmental regulations and mandated geosynthetics specifications, which vary across jurisdictions and by end market. For example, China has addressed the need for increased environmentally sound, solid waste disposal resources in its twelfth five-year plan, the most recent in a series of economic development initiatives, which mandates the investment of 180 billion Yuan, or approximately $28 billion, in the urban waste disposal sector between 2011 and 2015. Environmental regulations often require the use of geosynthetic products to contain materials and protect groundwater in various types of projects. In emerging markets, environmental containment and water infrastructure projects are driven by an ongoing increase in environmental awareness and regulation that has developed through the continued urbanization and increased affluence of these economies.

Although environmental regulations may not be as stringent or may not be enforced in emerging markets, we believe these regulations will continue to develop and to be enforced more diligently. In developed markets, existing regulations, which often specify our products, tend to be highly specific and stringently enforced. As a result, regulatory changes in developed markets tend to impact new end markets, such as coal ash containment and shale oil and gas in the United States.

Seasonality.  Due to the significant amount of our projects in the northern hemisphere (North America and Europe), our operating results are impacted by seasonal weather patterns in these markets. Our sales in the first and fourth quarters of the calendar year have historically been lower than sales in the second and third quarters. This is primarily due to lower activity levels in our primary end markets during the winter months in the northern hemisphere. The impact of this seasonality is partially mitigated by our mining and liquid containment end markets, which are located predominantly in the southern hemisphere. As we continue to expand globally, we expect seasonality to be further mitigated.

Resin Cost Volatility.  Resin-based material, derived from crude petroleum and natural gas, accounted for 82.4% and 83.6% of our cost of products for the three and nine months ended September 30, 2012, respectively. Our ability to both manage the cost of our resin purchases as well as pass fluctuations in the cost of resin through to our customers is critical to our profitability. Fluctuations in the price of crude oil impact the cost of resin. In addition, planned and unplanned outages in facilities that produce polyethylene and its feedstock materials have historically impacted the cost of resin. In 2010, we implemented successful performance initiatives that focused on reducing the risk of volatility in resin costs on our profitability. We have developed policies, procedures, tools and organizational training procedures to enable better resin cost management and facilitate the efficient pass through of increases in our resin costs to our customers. These initiatives included diversifying our resin sources, hiring a polyethylene expert to lead procurement, implementing pricing tools that account for projected resin pricing, institutionalizing a bid approval process, creating a plant sourcing decision model, and running a large project tracking process. While the significant majority of our products are sold under orders that include 30-day re-pricing provisions at our option, and while we have taken advantage of this option in the past, the policies, processes, tools and organizational training procedures described above allow us to limit the need to re-price projects already under contract. This, in turn, helps us better manage our relationships with our customers. We consider our comprehensive management of the risks associated with resin cost volatility to be among our critical and core competencies.

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Results of Operations

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011

	Three Months Ended September 30,						Period over
	2012			2011			Period Change
	(in thousands)
Net sales	$	121,200		$	146,842		$	(25,642	)	(17.5	)%
Cost of products		100,820			126,006			(25,186	)	(20.0	)
Gross profit		20,380			20,836			(456	)	(2.2	)
Selling, general and administrative expenses		11,945			12,761			(816	)	(6.4	)
Amortization of intangibles		295			329			(34	)	(10.3	)
Operating income		8,140			7,746			394		5.1
Other expenses (income):
Interest expense, net		3,199			4,657			(1,458	)	(31.3	)
Foreign currency transactions gain		(571	)		(1,617	)		1,046		64.7
Other income, net		(654	)		(222	)		(432	)	(194.6	)
Income from continuing operations before income taxes		6,166			4,928			1,238		25.1
Income tax provision		756			1,200			(444	)	(37.0	)
Income from continuing operations	$	5,410		$	3,728		$	1,682		45.1

Net sales

Consolidated net sales decreased $25.6 million, or 17.5%, to $121.2 million for the three months ended September 30, 2012 from $146.8 million for the three months ended September 30, 2011. Lower volume contributed $23.9 million to the decrease and reduced raw material costs contributed $1.9 million.  Better pricing and changes in product mix increased net sales by $5.7 million. Net sales were negatively affected by approximately $5.5 million from changes in foreign currency exchange rates, principally the Euro.

Cost of Products

Cost of products decreased $25.2 million, or 20.0%, to $100.8 million for the three months ended September 30, 2012 from $126.0 million for the three months ended September 30, 2011. Cost of products decreased $20.5 million due to the decrease in volume shipped and $4.7 million due to changes in foreign currency exchange rates, principally the Euro.

Gross Profit

Consolidated gross profit for the three months ended September 30, 2012 decreased approximately $0.4 million, or 2.2%, to $20.4 million compared to $20.8 million in the prior year period. Gross profit increased $5.3 million due to better pricing and changes in product mix, partially offset by $5.0 million due to the lower volume.  Gross profit was negatively affected by approximately $0.7 million from changes in foreign currency exchange rates, principally the Euro.  Gross profit as a percentage of net sales was 16.8% for the three months ended September 30, 2012 compared with 14.2% for the three months ended September 30, 2011 reflecting better pricing and favorable changes in product mix.

Selling, General and Administrative Expenses

SG&A expense for the three months ended September 30, 2012 was $11.9 million compared to $12.8 million for the three months ended September 30, 2011, a decrease of approximately $0.9 million. SG&A expense decreased during the three months ended September 30, 2012 when compared to the prior year period due to a decrease in professional fees related to our initial public offering (“IPO”) ($1.5 million), other professional fees ($0.4 million) and the termination of our management agreement with Code Hennessy & Simmons LLP (“CHS”) ($0.5 million), which were partially offset by an increase in public company costs ($0.6 million), increased depreciation and other costs related to our global ERP system ($0.5 million), an increase in the allowance for doubtful accounts primarily associated with European customers ($0.2 million) and the expansion of the global sales force ($0.2 million). SG&A as a percentage of net sales for the three months ended September 30, 2012 was 9.9% compared to 8.7% for the three months ended September 30, 2011.

Other Expenses (Income)

Interest expense was $3.2 million for the three months ended September 30, 2012 compared to $4.7 million for the three months ended September 30, 2011. The $1.5 million decrease in interest expense in the three months ended September 30, 2012 was due to lower debt balances outstanding, lower interest rates and $0.7 million of interest capitalized associated with property, plant and equipment under construction. The weighted average debt balance outstanding was $181.4 million and $197.0 million for the three months ended September 30, 2012 and 2011, respectively, and weighted average effective interest rates were 7.4% and 8.1% for the three months ended September 30, 2012 and 2011, respectively.

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Income Tax Expense

Income tax expense from continuing operations for the three months ended September 30, 2012 and 2011 was $0.8 million and $1.2 million, respectively.Our provision for income taxes is recorded at the estimated annual effective tax rates for each tax jurisdiction based on fiscal year to date results. The difference in the effective tax rate compared with the U.S. federal statutory rate is due to the mix of the international jurisdictional rates and the changes in valuation allowance, which primarily relates to the United States.  

The realization of the deferred tax assets depends on recognition of sufficient future taxable income in specific tax jurisdictions during periods in which those temporary differences are deductible. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts we believe are more likely than not to be recovered. In evaluating the valuation allowance, we considered the reversal of existing temporary differences, the existence of taxable income in prior carryback years, tax planning strategies and future taxable income for each of the taxable jurisdictions, the latter two of which involve the exercise of significant judgment. During the three months ended September 30, 2012, we reduced the valuation allowance by $1.0 million in the United States based upon the expected future taxable income in that jurisdiction. Changes to the valuation allowance could materially impact our results of operations.

EBITDA and Adjusted EBITDA

EBITDA represents net income or loss from continuing operations before interest, taxes, depreciation and amortization.  Adjusted EBITDA represents EBITDA before loss (gain) on foreign currency transactions, loss on extinguishment of debt, restructuring expenses, certain professional fees, stock-based compensation expense, IPO related costs and management fees paid to CHS Capital LLC.  EBITDA increased $0.2 million to $13.0 million during the three months ended September 30, 2012 compared to $12.8 million for the three months ended September 30, 2011.  Adjusted EBITDA was $12.6 million during the three months ended September 30, 2012, a decrease of $0.9 million, or 6.7%, from $13.5 million during the three months ended September 30, 2011. The decrease in Adjusted EBITDA was due to the decrease in professional fees of $1.8 million and the management fee of $0.5 million discussed in “Selling, General and Administrative Expenses” above offset by the lower foreign currency transactions gain of $1.0 million.

The following table reconciles net income (loss) from continuing operations, the most comparable GAAP financial measure, to EBITDA and Adjusted EBITDA for the periods presented:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
	(in thousands)
Net income (loss)	$	5,240		$	3,804		$	(3,730	)	$	1,890
(Income) loss from discontinued operations, net of  tax		170			(76	)		411			(83	)
Interest expense, net		3,199			4,662			12,836			14,983
Income tax expense		756			1,200			3,483			2,401
Depreciation and amortization expense		3,618			3,168			10,684			9,340
EBITDA		12,983			12,758			23,684			28,531
Foreign currency transactions (gain) loss		(571	)		(1,617	)		(513	)		36
Loss on extinguishment of debt		—			—			1,555			2,016
Restructuring expense		—			26			93			381
Professional fees		—			1,843			597			3,143
Stock-based compensation expense		112			—			147			75
Public offering related costs		—			—			9,655			—
Management fees		—			516			229			1,520
Other		45			—			189			8
Adjusted EBITDA	$	12,569		$	13,526		$	35,636		$	35,710

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Disclosure in this Quarterly Report on Form 10-Q of EBITDA and Adjusted EBITDA, which are “non-GAAP financial measures,” as defined under the rules of the SEC, is intended as a supplemental measure of our performance that is not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). EBITDA and Adjusted EBITDA should not be considered as alternatives to net income, income from continuing operations or any other performance measure derived in accordance with GAAP. Our presentation of EBITDA and Adjusted EBITDA should not be construed to imply that our future results will be unaffected by unusual or non-recurring items.

We believe these measures are meaningful to our investors to enhance their understanding of our financial performance. Although EBITDA and Adjusted EBITDA are not necessarily measures of our ability to fund our cash needs, we understand that they are frequently used by securities analysts, investors and other interested parties as measures of financial performance and to compare our performance with the performance of other companies that report EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should be considered in addition to, not as a substitute for, net income, income from continuing operations and other measures of financial performance reported in accordance with GAAP. Our calculation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

	Nine Months Ended September 30,						Period over
	2012			2011			Period Change
	(in thousands)
Net sales	$	355,285		$	353,791		$	1,494		0.4	%
Cost of products		297,329			300,925			(3,596	)	(1.2	)
Gross profit		57,956			52,866			5,090		9.6
Selling, general and administrative expenses		34,684			31,499			3,185		10.1
Public offering related costs		9,655			—			9,655		*
Amortization of intangibles		893			1,057			(164	)	(15.5	)
Operating income		12,724			20,310			(7,586	)	(37.4	)
Other expenses (income):
Interest expense, net		12,836			14,978			(2,142	)	(14.3	)
Foreign currency transactions (gain) loss		(513	)		36			(549	)	*
Loss on extinguishment of debt		1,555			2,016			(461	)	(22.9	)
Other income, net		(1,318	)		(928	)		(390	)	(42.0	)
Income from continuing operations before income taxes		164			4,208			(4,044	)	*
Income tax provision		3,483			2,401			1,082		45.1	%
Income (loss) from continuing operations	$	(3,319	)	$	1,807		$	(5,126	)	*

* Not meaningful

Net sales

Consolidated net sales increased $1.5 million, or 0.4%, to $355.3 million for the nine months ended September 30, 2012 from $353.8 million for the nine months ended September 30, 2011. Better pricing, increases in raw material costs passed on to the customer, and changes in product mix contributed $14.9 million to the increase in net sales. This increase was partially offset by lower volume, which reduced net sales by $1.0 million, and changes in foreign currency exchange rates, principally the Euro, which reduced net sales by $12.4 million.

Cost of Products

Cost of products decreased $3.6 million, or 1.2%, to $297.3 million for the nine months ended September 30, 2012 from $300.9 million for the nine months ended September 30, 2011. Changes in foreign currency exchange rates ($9.4 million) and decreased volume ($0.7 million) were partially offset by an increase in raw material and manufacturing costs ($6.5 million).

Gross Profit

Consolidated gross profit for the nine months ended September 30, 2012 increased $5.1 million, or 9.6%, to $58.0 million compared to $52.9 million for the nine months ended September 30, 2011. Changes in product mix contributed $8.0 million to the increase in gross profit, which was partially offset by $0.3 million in lower volume and $2.6 million in increased manufacturing costs and changes in foreign currency exchange rates, principally the Euro. Gross profit as a percentage of net sales was 16.3% for the nine months ended September 30, 2012 compared with 14.9% for the nine months ended September 30, 2011.

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Selling, General and Administrative Expenses                                                                           

SG&A expense for the nine months ended September 30, 2012 was $44.3 million, including public offering related costs, compared to $31.5 million for the nine months ended September 30, 2011, an increase of $12.8 million. SG&A expense for the nine months ended September 30, 2012 includes costs related to our IPO of $6.6 million and $3.0 million associated with the termination of our management agreement with CHS.  SG&A expense increased during the nine months ended September 30, 2012 when compared to the prior year period due to the global expansion of our sales force ($1.7 million), public company costs ($1.7 million), increased depreciation and other costs related to our global ERP system ($2.7 million), and increased allowance for doubtful accounts primarily related to a few European customers ($1.2 million), partially offset by lower non-recurring professional fees, management fees and restructuring expense ($4.1 million).    Excluding the expenses related to the IPO, SG&A as a percentage of net sales for the nine months ended September 30, 2012 was 9.8% compared to 8.9% for the nine months ended September 30, 2011.

Other Expenses (Income)

Interest expense was $12.8 million for the nine months ended September 30, 2012 compared to $15.0 million for the nine months ended September 30, 2011. The $2.2 million decrease in interest expense in the nine months ended September 30, 2012 was primarily due to lower interest rates and $0.7 million of interest capitalized in association with property, plant and equipment under construction. The weighted average debt balance outstanding was $186.0 million and $185.5 million for the nine months ended September 30, 2012 and 2011, respectively, and weighted average effective interest rates were 7.9% and 9.2% for the nine months ended September 30, 2012 and 2011, respectively.

Income Tax Expense

Income tax expense from continuing operations for the nine months ended September 30, 2012 and 2011 was $3.5 million and $2.4 million, respectively. Our provision for income taxes is recorded at the estimated annual effective tax rates for each tax jurisdiction based on fiscal year to date results. The difference in the effective tax rate compared with the U.S. federal statutory rate is due to the mix of the international jurisdictional rates and the changes in the valuation allowance, which primarily relates to the United States.

EBITDA and Adjusted EBITDA

EBITDA decreased $4.8 million to $23.7 million during the nine months ended September 30, 2012 compared to $28.5 million for the nine months ended September 30, 2011. The decrease in EBITDA was primarily related to a decrease in our operating income of $7.6 million, partially offset by increased depreciation and amortization expense of $1.4 million, an increase in foreign exchange gains of $0.5 million, an increase in loss on extinguishment of debt of $0.5 million and increased vendor early pay discounts of $0.4 million. Adjusted EBITDA was $35.6 million during the nine months ended September 30, 2012, a decrease of $0.1 million, or 0.3%, from $35.7 million during the nine months ended September 30, 2011.

Liquidity and Capital Resources

General

We rely on borrowings under our First Lien Credit Facility (as defined below) and other financing arrangements as our primary source of liquidity. See “Description of Long-Term Indebtedness” for a description of our long-term debt. Our cash flow from operations serves as an additional source of liquidity to the extent available. Our primary liquidity needs are to finance working capital, capital expenditures and debt service. The most significant components of our working capital are cash and cash equivalents, accounts receivable, inventories, accounts payable and other current liabilities.

We believe that our cash on hand, together with the availability of borrowings under our First Lien Credit Facility and other financing arrangements and cash generated from operations, will be sufficient to meet working capital requirements, anticipated capital expenditures and scheduled interest payments on our indebtedness for at least the next twelve months.  We cannot assure you, however, that our borrowing capacity or cash flow from operations will be sufficient to service our indebtedness or to fund our other liquidity needs.

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Cash and Cash Equivalents

As of September 30, 2012, we had $11.8 million in cash and cash equivalents, an increase of $2.7 million from December 31, 2011 cash and cash equivalents of $9.1 million. We maintain cash and cash equivalents at various financial institutions located in the United States, Germany, Thailand, Egypt and Chile. As of September 30, 2012, $1.7 million, or 14%, was held in domestic accounts with various institutions and approximately $10.1 million, or 86%, was held in accounts outside of the United States with various financial institutions.

Description of Long-Term Indebtedness

First Lien Credit Facility

On May 27, 2011, we entered into a five-year, $160.0 million first lien senior secured credit facility with General Electric Capital Corporation, Jefferies Finance LLC and the other financial institutions party thereto (as amended from time to time, the “First Lien Credit Facility”), consisting of $135.0 million of term loan commitments (as amended from time to time, the “First Lien Term Loan”) and $25.0 million of revolving loan commitments (as amended from time to time, the “Revolving Credit Facility”). On October 18, 2011, the Revolving Credit Facility was amended to increase the aggregate revolving loan commitments from $25.0 million to $35.0 million. On December 12, 2011, the First Lien Credit Facility was amended to, among other matters, modify the definition of “Change of Control” to reduce CHS’ specified ownership percentage following the consummation of our IPO from 35% to 20%.  On April 18, 2012, the First Lien Credit Facility was amended to increase the aggregate term loan commitments from $135.0 million to $157.0 million. We used the additional borrowing capacity under the term loan to repay in full all outstanding indebtedness under, and to terminate, the Second Lien Term Loan (as defined below) and to pay related fees and expenses. On September 19, 2012, we further amended the First Lien Credit Facility to increase the Capital Expenditure Limitation covenant as discussed below in “Restrictive Covenants.”

The First Lien Credit Facility matures in May 2016. Borrowings under the First Lien Credit Facility incur interest expense that is variable in relation to the London Interbank Offer Rates (“LIBOR”) (and/or Prime) rate. In addition to paying interest on outstanding borrowings under the First Lien Credit Facility, we pay a 0.75% per annum commitment fee to the lenders in respect of the unutilized commitments, and letter of credit fees equal to the LIBOR margin on the undrawn amount of all outstanding letters of credit.  As of September 30, 2012, there was $180.9 million outstanding under our First Lien Credit Facility consisting of $154.9 million in term loans and $26.0 million in revolving loans, and the interest rate on such loans was 7.12%.  We had $6.5 million of capacity under the Revolving Credit Facility after taking into account outstanding loan advances and letters of credit.

Guarantees; Security.  The obligations under the First Lien Credit Facility are guaranteed on a senior secured basis by GSE Holding and each of its existing and future wholly owned domestic subsidiaries, other than GSE International, Inc. and any other excluded subsidiaries. The obligations under the First Lien Credit Facility are secured by a first priority perfected security interest in substantially all of the guarantors’ assets, subject to certain exceptions, permitted liens and permitted encumbrances under the First Lien Credit Facility.

Restrictive Covenants.  The First Lien Credit Facility contains various restrictive covenants that include, among other things, restrictions or limitations on our company’s ability to incur additional indebtedness or issue disqualified capital stock unless certain financial tests are satisfied; pay dividends, redeem subordinated debt or make other restricted payments; make certain loans, investments or acquisitions; issue stock of subsidiaries; grant or permit certain liens on assets; enter into certain transactions with affiliates; merge, consolidate or transfer substantially all of our assets; incur dividend or other payment restrictions affecting certain subsidiaries; transfer or sell assets including, but not limited to, capital stock of subsidiaries; and change the business our company conducts.  For the twelve months ended September 30, 2012, our company was subject to a Total Leverage Ratio not to exceed 6.00:1.00 and an Interest Coverage Ratio of not less than 2.00:1.00.  In accordance with our latest amendment, for the fiscal year 2012, our company will be subject to a maximum Capital Expenditure Limitation of $21.7 million, excluding acquisition-related expenditures of $8.5 million.  These ratios become progressively more restrictive over the term of the loan. As of September 30, 2012, we had spent $13.6 million toward our Capital Expenditure Limitation.  As of September 30, 2012, we were in compliance with all covenants under the First Lien Credit Facility.

Second Lien Term Loan

On May 27, 2011, we also entered into a 5.5 year, $40.0 million second lien senior secured credit facility with Jefferies Finance LLC and the other financial institutions party thereto, consisting of $40.0 million of term loan commitments (the “Second Lien Term Loan”). On February 8, 2012, the Second Lien Term Loan was amended to, among other matters; modify the definition of “Change of Control” to reduce CHS’ specified ownership percentage following the consummation of our IPO from 35% to 20%. With the proceeds from our IPO, we paid $20.0 million on our Second Lien Term Loan in February 2012.  On April 18, 2012, in connection with the amendment of the First Lien Credit Facility described above, we repaid in full all outstanding indebtedness under and terminated the Second Lien Term Loan. In connection with this refinancing, we recorded a $1.6 million loss from extinguishment of debt, primarily related to the write-off of unamortized debt issuance cost and discount.  There is no balance outstanding as of September 30, 2012.

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Capital Lease

On August 17, 2012, we entered into an equipment financing arrangement with CapitalSource Bank.  The lease is a three-year lease for equipment cost up to $10.0 million.  As of September 30, 2012, there was $3.6 million outstanding under this lease arrangement, with monthly payments of $0.1 million and an implied interest rate of 7.09%.

Non-Dollar Denominated Term Loans

In April 2011, we entered into a EUR 0.7 million ($0.9 million) term loan with a German bank, bearing interest at 5.15% which is secured by equipment. The loan requires monthly payments of principal and interest totaling EUR 21 thousand ($27 thousand) beginning April 2011 and maturing in March 2014. The term loan had a balance outstanding on September 30, 2012 of EUR 0.4 million ($0.5 million).

We have a BAHT 225.7 million ($7.0 million) term loan with a Thailand bank, bearing interest at the bank’s Minimum Lending Rate (“MLR”) less 1.00% for the first two years and MLR less 0.50%, thereafter, and is secured by equipment, building and lease rights of the property where the equipment and building are located. The bank’s MLR was 7.125% at September 30, 2012. The term loan had a balance outstanding on September 30, 2012 of BAHT 3.1 million ($0.1 million) and matures in May 2013.

Non-Dollar Denominated Credit Facilities

As of September 30, 2012, we had six local international credit facilities. We have credit facilities with two German banks in the amount of EUR 6.0 million ($7.7 million). These revolving credit facilities are secured by a corporate guarantee and bear interest at various market rates. These credit facilities are used primarily to guarantee the performance of European installation contracts and temporary working capital requirements. As of September 30, 2012, we had EUR 4.1 million ($5.2 million) available under these credit facilities with EUR 1.9 million ($2.5 million) of bank guarantees outstanding, and with no amounts outstanding under the line of credit.

In addition, we have three credit facilities with Egyptian banks in the amount of EGP 17.0 million ($2.8 million). These credit facilities bear interest at various market rates and are primarily for cash management purposes. We had EGP 8.1 million ($1.3 million) available under these credit facilities with EGP 5.8 million ($1.0 million) of bank guarantees outstanding, and with EGP 3.1 million ($0.5 million) outstanding under the line of credit as of September 30, 2012.

As of September 30, 2012, we had a BAHT 43.2 million ($1.4 million) revolving credit facility with Export-Import Bank of Thailand (“EXIM”), which has a termination date at the discretion of EXIM or our company. This revolving credit facility bears interest at EXIM prime rate less 0.75% for BAHT borrowings and at LIBOR plus 3.5% for U.S. dollar borrowings. Repayments of principal are required within 90 days from the date of each draw down borrowing and interest is payable once a month on the last day of the month. The credit facility is secured by a BAHT 43.2 million ($1.4 million) mortgage on land, building and equipment. We had BAHT 43.2 million ($1.4 million) available under these credit facilities with no letters of credit or amounts outstanding under the line of credit as of September 30, 2012.

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Cash Flow Analysis

A summary of operating, investing and financing activities is shown in the following table:

	Nine Months Ended September 30,
	2012			2011
	(in thousands)
Net cash used in operating activities – continuing operations	$	(24,909	)	$	(11,329	)
Net cash provided by (used in) operating activities – discontinued operations		(19	)		5,087
Net cash used in investing activities – continuing operations		(21,975	)		(7,713	)
Net cash provided by financing activities – continuing operations		49,289			7,847
Net cash used in financing activities – discontinued operations		—			(650	)
Effect of exchange rate changes on cash – continuing operations		304			312
Effect of exchange rate changes on cash – discontinued operations		39			(18	)
Increase (decrease) in cash and cash equivalents		2,729			(6,464	)
Cash and cash equivalents at beginning of period		9,076			15,184
Cash and cash equivalents at end of period	$	11,805		$	8,720

Net Cash Provided by (Used in) Operating Activities

Net cash used in operating activities consists primarily of net loss adjusted for non-cash items, including depreciation and amortization, loss on extinguishment of debt, stock compensation and the effect of changes in working capital.

Net cash used in operating activities was $24.9 million for the nine months ended September 30, 2012 compared to $11.3 million in the nine months ended September 30, 2011. The $13.6 million increase was primarily related to the decreased inventory and increased accounts payable, partially offset by the increase in accounts receivable.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by (used in) investing activities consists primarily of:

·   capital expenditures for growth, including real estate and buildings, in order to expand and upgrade manufacturing facilities or add incremental capacity;

·   capital expenditures for facility maintenance, including machinery and equipment improvements to significantly extend the useful life of the assets; and

·   capital expenditures for information technology software and equipment costs.

Net cash used in investing activities during the nine months ended September 30, 2012 was $22.0 million compared to $7.7 million during the nine months ended September 30, 2011. Capital expenditures during the nine months ended September 30, 2012 consisted of $18.9 million of growth expenditures (which includes $8.3 million in acquisition related spending) and $3.1 million of maintenance expenditures.  Capital expenditures during the nine months ended September 30, 2011 consisted of $1.4 million of growth expenditures, $2.6 million of maintenance expenditures and $3.7 million related to improving the functionality and global rollout of our Enterprise Resource Planning System.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by (used in) financing activities consists primarily of borrowings, repayments and fees and expenses related to our credit facilities.

Net cash provided by financing activities was $49.3 million during the nine months ended September 30, 2012 compared to $7.2 million during the nine months ended September 30, 2011. The net cash provided in 2012 was attributable to the net proceeds from our IPO during February 2012 ($65.9 million) and proceeds from the exercise of stock options ($0.9 million), partially offset by the net repayment of our debt ($17.5 million).

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Off-Balance Sheet Arrangements

As of September 30, 2012, we had no off-balance sheet arrangements.

Contingencies

We are involved in various legal and administrative proceedings and disputes that arise from time to time in the ordinary course of doing business. Some of these proceedings may result in fines, penalties or judgments being assessed against us, which, from time to time, may adversely affect our financial results. We have considered these proceedings and disputes in determining the necessity of any reserves for losses that are probable and reasonably estimable. Our recorded reserves are based on estimates developed with consideration given to the potential merits of claims or quantification of any performance obligations. In doing so, we take into account our history of claims, the limitations of any insurance coverage, advice from outside counsel, the possible range of outcomes to such claims and obligations and their associated financial impact (if known and reasonably estimable), and management’s strategy with regard to the settlement or defense of such claims and obligations. While the ultimate outcome of those claims, lawsuits or performance obligations cannot be predicted with certainty, we believe, based on our understanding of the facts of these claims and performance obligations, that adequate provisions have been recorded in the accounts where required. In addition, we believe it is not reasonably possible that resolution of these legal actions will, individually or in the aggregate, have a material adverse effect on our financial condition or results of operations. It is possible, however, that charges related to these matters could be significant to our results or cash flows in any single accounting period.

In addition, we provide our customers limited material product warranties. Our limited product warranties are typically five years but occasionally extend up to 20 years. These warranties are generally limited to repair or replacement of defective products or workmanship, often on a prorated basis, up to the amount of the original order. In some foreign orders, we may be required to provide the customer with specified contractual limited warranties as to material quality. Our product warranty liability in many foreign countries is dictated by local laws in addition to the warranty specified in the orders. Failure of our products to operate properly or to meet specifications may increase our costs by requiring additional engineering resources, product replacement or monetary reimbursement to a customer. We have received warranty claims in the past, and we expect to continue to receive them in the future. Warranty claims are not covered by insurance, and substantial warranty claims in any period could have a material adverse effect on our financial condition, results of operations or cash flows as well as on our reputation.

Furthermore, in certain direct sales and raw material acquisition situations, we are required to post performance bonds or bank guarantees as part of the contractual guarantee for performance. The performance bonds or bank guarantees can be in the full amount of the orders. To date we have not received any claims against any of the posted securities, most of which terminate at the final completion date of the orders. As of September 30, 2012, we had $5.8 million of bonds outstanding and $5.9 million of guarantees issued under bank lines.

Critical Accounting Policies

There have been no material changes to our critical accounting policies as disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC on March 30, 2012.

Recently Issued Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-08, Intangibles – Goodwill and Other: Testing Goodwill for Impairment, to allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  We will adopt this ASU for our 2012 goodwill impairment testing and do not believe it will have a material impact on our results of operations or financial position.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about market risks as of September 30, 2012 does not differ materially from the information disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC on March 30, 2012, except for our April 2012 amendment to the First Lien Credit Facility and repayment of the Second Lien Term Loan.  We estimate an annual interest expense savings of approximately $1.1 million associated with the refinancing.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief accounting officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2012. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 30, 2012, our chief executive officer and chief accounting officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

29

PART II

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of our business, we have been involved in various disputes and litigation. Although the outcome of any such disputes and litigation cannot be predicted with certainty, we do not believe that there are any pending or threatened actions, suits or proceedings against or affecting us which, if determined adversely to us, would, individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS

There have been no material changes in the status of our risk factors from those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.

ITEM 4.  MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 4. EXHIBITS

The information called for by this Item is incorporated herein by reference from the Exhibit Index following the signature pages of this Quarterly Report on Form 10-Q.

30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

Date:  November 1, 2012.

GSE HOLDING, INC.
By:	/s/ L. GREGG TAYLOR
	Name:    L. Gregg Taylor Title:    Vice President and Chief Accounting Officer (Principal Financial Officer)

31

EXHIBIT INDEX

Exhibit Number	Description
10.1	Fourth Amendment to First Lien Credit Agreement, dated as of September 19, 2012, by and among Gundle/SLT Environmental, Inc., the other credit parties named therein, General Electric Capital Corporation, as agent and lender, and the other lenders party thereto*
10.2	Consulting and Transition Agreement, dated as of September 27, 2012, by and between William F. Lacey and GSE Holding, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on October 1, 2012)
31.1	Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Chief Accounting Officer Certification pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2	Chief Accounting Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.1	Interactive Data Files pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011, (iii) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 and (iv) Notes to Unaudited Condensed Consolidated Financial Statements**

* Filed herewith.

** Pursuant to Rule 406T of Regulation S-T, the eXtensible Business Reporting Language information contained in Exhibit 101.1 hereto is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

EX-10.1

Exhibit 10.1

FOURTH AMENDMENT TO FIRST LIEN CREDIT AGREEMENT

THIS FOURTH AMENDMENT TO FIRST LIEN CREDIT AGREEMENT (this “Amendment”) is entered into as of September 19, 2012 by and among GSE ENVIRONMENTAL, INC., a Delaware corporation f/k/a Gundle/SLT Environmental, Inc. (the “Borrower”), the other Persons party hereto that are designated as a “Credit Party” on the signature pages hereof, GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, “GE”), as Agent and as a Lender, and the other LENDERS signatory hereto.

W I T N E S S E T H:

WHEREAS, Borrower, the other Credit Parties, GE, as Agent and as a Lender, and the other Lenders from time to time party thereto are parties to that certain First Lien Credit Agreement dated as of May 27, 2011 (as the same has been and may hereafter be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”);

WHEREAS, Borrower has requested that Agent and Lenders amend certain provisions of the Credit Agreement; and

WHEREAS, subject to the satisfaction (or waiver by the Lenders) of the conditions set forth herein, Agent and the Lenders signatory hereto are willing to amend the Credit Agreement in certain respects, in each case, on the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows:

1.Defined Terms.  Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Credit Agreement.

2.Amendments to Credit Agreement.  Upon satisfaction (or waiver by the Lenders) of the conditions set forth in Section 3 hereof, the Credit Agreement is hereby amended as follows:

a.Section 6.1 of the Credit Agreement is hereby amended by deleting subsection (a) thereof in its entirety and substituting the following therefor:

“(a)           The Credit Parties and their Subsidiaries shall not make or commit to make Capital Expenditures (excluding, in any event, to the extent constituting Capital Expenditures, the purchase price for the Poly America Assets) for any Fiscal Year set forth below in excess of the amount set forth in the table below with respect to such Fiscal Year:

Fiscal Year Ending	Capital Expenditure Limitation
December 31, 2012	$21,700,000
December 31, 2013	$17,000,000
December 31, 2014	$11,250,000
December 31, 2015	$5,000,000
December 31, 2016	$3,000,000"

b.Section 6.1 of the Credit Agreement is hereby further amended by deleting subsection (b) thereof in its entirety and substituting the following therefor:

"(b)           In addition to the foregoing, in the event that the amount of Capital Expenditures permitted to be made by the Borrower and its Subsidiaries pursuant to clause (a) above in any Fiscal Year (before giving effect to any increase in such permitted Capital Expenditure amount pursuant to this clause (b) and without giving effect to clauses (c) through (e) below) is greater than the amount of Capital Expenditures actually made by the Borrower and its Subsidiaries during such Fiscal Year, seventy-five (75%) (or, solely in respect of the Fiscal Year ending December 31, 2012, one hundred percent (100%)) of such excess may be carried forward and utilized to make Capital Expenditures in the immediately succeeding Fiscal Year, provided that no amounts once carried forward pursuant to this subsection 6.1(b) may be carried forward to any Fiscal Year thereafter and such amounts may only be utilized after the Borrower and its Subsidiaries have utilized in full the permitted Capital Expenditure amount for such Fiscal Year as set forth in clause (a) above (without giving effect to any increase in such amount pursuant to this clause (b))."

c.Section 11.1 of the Credit Agreement is hereby further amended by deleting the definition of Poly America Assets set forth therein and substituting the following therefor:

"Poly America Assets" means the equipment and other assets purchased by GSE Lining Technology, LLC pursuant to and in accordance with the Poly America Purchase Agreement, including dye removal and line removal related thereto, together with any improvements and/or refurbishments to such equipment and other assets.

3.Conditions.  The effectiveness of this Amendment is subject to the satisfaction (or waiver by the Lenders) of the following conditions precedent or concurrent:

a.the execution and delivery to Agent of this Amendment by each Credit Party, Agent and Required Lenders;

b.payment by Borrower to Agent of a fully-earned, non-refundable amendment fee for the ratable benefit of each applicable Lender that has delivered and released to Agent its executed signature page to this Amendment by no later than 1:00 p.m. EST on September 19, 2012 (each such Lender, a “Consenting Lender”), equal to 0.125% of the sum of (y) the aggregate Revolving Loan Commitments of all Consenting Lenders and (z) the outstanding principal amount of the Initial Term Loan held by Consenting Lenders, in each case, as of the date hereof;

2

c.the truth and accuracy in all material respects of the representations and warranties contained in Section 4 hereof; and

d.no Default or Event of Default shall have occurred and be continuing or arise as a direct result of the effectiveness of this Amendment.

4.Representations and Warranties.   Each Credit Party hereby represents and warrants to Agent and each Lender as follows:

a.the representations and warranties made by such Credit Party contained in the Loan Documents are true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of the date hereof, except to the extent such representation or warranty expressly relates to an earlier date (in which event such representations and warranties were true and correct in all material respects (without duplication of any materiality qualifier contained therein) as of such earlier date;

b.such Credit Party is a corporation or limited liability company, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable;

c.such Credit Party has the power and authority to execute, deliver and perform its obligations under this Amendment and the Credit Agreement, as amended hereby;

d.the execution, delivery and performance by such Credit Party of this Amendment and the Credit Agreement, as amended hereby, have been duly authorized by all necessary action;

e.this Amendment and the Credit Agreement, as amended hereby, constitutes the legal, valid and binding obligation of such Credit Party, enforceable against such Person in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditor’s rights generally or by equitable principles relating to enforceability;

f.the execution, delivery and performance by each of the Credit Parties of this Amendment have been duly authorized by all necessary action, and do not and will not: (a) contravene the terms of any of that Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or result in the creation of any Lien under, any document evidencing any material Contractual Obligation to which such Person is a party or any material order, injunction, writ or decree of any Governmental Authority to which such Person or its Property is subject; or (c) violate any material Requirement of Law in any material respect; and

g.no Default or Event of Default exists or shall arise as a direct result of the effectiveness of this Amendment.

3

5.No Modification.  Except as expressly set forth herein, nothing contained herein shall be deemed to constitute a waiver of compliance with any term or condition contained in the Credit Agreement or any of the other Loan Documents or constitute a course of conduct or dealing among the parties.  Except as expressly stated herein, the Agent and Lenders reserve all rights, privileges and remedies under the Loan Documents.  Except as amended or consented to hereby, the Credit Agreement and other Loan Documents remain unmodified and in full force and effect.  All references in the Loan Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as amended and waived hereby.

6.Counterparts.  This Amendment may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Signature pages may be detached from multiple separate counterparts and attached to a single counterpart.  Delivery of an executed signature page of this Amendment by facsimile transmission or Electronic Transmission shall be as effective as delivery of a manually executed counterpart hereof.

7.Successors and Assigns.  The provisions of this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that none of the Credit Parties may assign or transfer any of its rights or obligations under this Amendment without the prior written consent of the Agent.

8.Further Assurance.  Borrower hereby agrees from time to time, as and when requested by the Agent or Lender, to execute and deliver or cause to be executed and delivered, all such documents, instruments and agreements and to take or cause to be taken such further or other action as the Agent or Lender may reasonably deem necessary or desirable in order to carry out the intent and purposes of this Amendment, the Credit Agreement and the Loan Documents.

9.Governing Law and Jurisdiction.

(a)           Governing Law.  The laws of the State of New Yorkshall govern all matters arising out of, in connection with or relating to this Amendment, including, without limitation, its validity, interpretation, construction, performance and enforcement (including, without limitation, any claims sounding in contract or tort law arising out of the subject matter hereof and any determinations with respect to post-judgment interest) (without regard to conflicts of law principles (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law)).

(b)           Submission to Jurisdiction.  Any legal action or proceeding with respect to this Amendment shall be brought exclusively in the courts of the State of New York located in the City of New York, Borough of Manhattan, or of the United States of America sitting in the Southern District of New York and, by execution and delivery of this Amendment, each Credit Party hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts.  The parties hereto hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such jurisdictions.

4

(c)           Service of Process.  Each Credit Party hereby irrevocably waives personal service of any and all legal process, summons, notices and other documents and other service of process of any kind and consents to such service in any suit, action or proceeding brought in the United States of America with respect to or otherwise arising out of or in connection with this Agreement by any means permitted by applicable Requirements of Law, including by the mailing thereof (by registered or certified mail, postage prepaid) to the address of such Person specified in the Credit Agreement (and shall be effective when such mailing shall be effective, as provided therein).  Each Credit Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(d)           Non-Exclusive Jurisdiction.  Nothing contained in this Section 10 shall affect the right of Agent to serve process in any other manner permitted by applicable Requirements of Law or commence legal proceedings or otherwise proceed against any Credit Party in any other jurisdiction.

(e)           Waiver of Jury Trial.  THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS

AMENDMENT, THE OTHER LOAN DOCUMENTS AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.

10.Severability.  The illegality or unenforceability of any provision of this Amendment or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Amendment or any instrument or agreement required hereunder.

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

5

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark C. Arnold, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of GSE Holding, Inc. for the quarterly period ended September 30, 2012;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Reserved.

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:           November 1, 2012

/s/ Mark C. Arnold
Name:	Mark C. Arnold
Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, L. Gregg Taylor, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of GSE Holding, Inc. for the quarterly period ended September 30, 2012;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Reserved.

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:           November 1, 2012

/s/ L. Gregg Taylor
Name:	L. Gregg Taylor
Title:	Vice President and Chief Accounting Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark C. Arnold, President and Chief Executive Officer of GSE Holding, Inc. (the “Company”), hereby certify, on the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1.   The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:           November 1, 2012

/s/ Mark C. Arnold
Name:	Mark C. Arnold
Title:	President and Chief Executive Officer

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, L. Gregg Taylor, Executive Vice President and Chief Financial Officer of GSE Holding, Inc. (the “Company”), hereby certify, on the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1.   The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:           November 1, 2012

/s/ L. Gregg Taylor
Name:	L. Gregg Taylor
Title:	Vice President and Chief Accounting Officer
	(Principal Financial Officer)

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

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Note 8 - Accrued Liabilities and Other (Detail) - Accrued liabilities and other (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Customer prepayments	$ 527	$ 167
Accrued operating expenses	4,526	2,591
Self-insurance reserves	2,065	3,167
Compensation and benefits	3,878	6,096
Accrued interest	2,718	4,026
Taxes, other than income	1,859	2,025
Other accrued liabilities	3,444	4,740
	$ 19,017	$ 22,812

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Note 13 - Commitments and Contingencies (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Limited Warranty Term	20 years
Performance Bonds Outstanding	$ 5.8
Guarantor Obligations, Maximum Exposure, Undiscounted	$ 5.9

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Note 11 - Stock-Based Compensation (Detail) - Fair Value Assumptions of Option Pricing Model (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Risk Free Interest Rate	0.54%	1.00%
Expected Volatility	45.90%	22.25%
Expected Dividend Yield	0.00%	0.00%
Expected Life	4 years	3 years
Weighted Average Calculated Value per Option (in Dollars per share)	$ 3.57	$ 0.65

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Note 4 - Net Income (Loss) per Share (Detail) - Basic and Diluted Net Income (Loss) Per Share (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net income (loss):
From continuing operations (in Dollars)	$ 5,410	$ 3,728	$ (3,319)	$ 1,807
From discontinued operations (in Dollars)	(170)	76	(411)	83
(in Dollars)	$ 5,240	$ 3,804	$ (3,730)	$ 1,890
Common share information:
Weighted-average common shares outstanding – basic (in Shares)	19,459	10,810	17,978	10,810
Dilutive effect of employee stock options (in Shares)	977	1,057		1,020
Weighted-average common shares outstanding – dilutive (in Shares)	20,436	11,867	17,978	11,830
Basic net income (loss) per share:
Continuing operations	$ 0.28	$ 0.34	$ (0.19)	$ 0.17
Discontinued operations	$ (0.01)	$ 0.01	$ (0.02)
	$ 0.27	$ 0.35	$ (0.21)	$ 0.17
Diluted net income (loss) per share:
Continuing operations	$ 0.27	$ 0.31	$ (0.19)	$ 0.15
Discontinued operations	$ (0.01)	$ 0.01	$ (0.02)	$ 0.01
	$ 0.26	$ 0.32	$ (0.21)	$ 0.16

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Note 7 - Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	Estimated useful lives years		September 30, 2012			December 31, 2011
			(in thousands)
Customer lists		5-10	$	25,246		$	25,307
Non-compete agreements		5-10		2,469			2,469
Other		1		363			363
				28,078			28,139
Less accumulated amortization				(26,255	)		(25,412	)
Intangible assets, net			$	1,823		$	2,727

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Note 14 - Related Party Transactions (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended		12 Months Ended
	Mar. 31, 2012	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Related Party Transaction, Amounts of Transaction				$ 2.0
Related Party Transaction, Expenses from Transactions with Related Party			1.5
IPO Management Agreement Termination Fee	$ 3.0	$ 3.0

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Note 9 - Long-Term Debt (Detail) - Long-term debt (Parentheticals) (USD $) In Thousands, unless otherwise specified	9 Months Ended	2 Months Ended
	Sep. 30, 2012	Sep. 30, 2012 Capital Lease - CapitalSource Bank [Member]
Tеrm Loan - Gеrman bank sеcurеd by еquipmеnt, intеrеst ratе	5.15%
Tеrm Loan - Thailand bank sеcurеd by еquipmеnt, monthly installmеnts (in Dollars)	$ 113,000	$ 100
Tеrm Loan - Thailand bank sеcurеd by еquipmеnt, intеrеst ratе	6.75%

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Note 7 - Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Amortization of Intangible Assets	$ 295	$ 329	$ 893	$ 1,057

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Note 15 - Segment Information (Detail) - Net Sales (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Total segment net sales	$ 136,224	$ 157,451	$ 396,660	$ 382,697
Intersegment sales	(15,024)	(10,609)	(41,375)	(28,906)
Consolidated net sales	$ 121,200	$ 146,842	$ 355,285	$ 353,791

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Note 12 - Income Taxes (Detail) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Income Tax Expense (Benefit)	$ 756,000	$ 1,200,000	$ 3,483,000	$ 2,401,000
Valuation Allowance, Deferred Tax Asset, Change in Amount	$ (1,000,000)

XML

Note 4 - Net Income (Loss) per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Text Block]

4. Net Income (Loss) per Share

The Company computes basic net income (loss) per share by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of employee stock options is reflected in diluted net income (loss) per share by applying the treasury stock method.

The basic and diluted net income (loss) per share calculations are presented below (thousands, except for per share amounts):

	For the three months ended September 30,					For the nine months ended September 30,
	2012			2011		2012			2011
Net income (loss):
From continuing operations	$	5,410		$	3,728	$	(3,319	)	$	1,807
From discontinued operations		(170	)		76		(411	)		83
	$	5,240		$	3,804	$	(3,730	)	$	1,890
Common share information:
Weighted-average common shares outstanding – basic		19,459			10,810		17,978			10,810
Dilutive effect of employee stock options		977			1,057		–			1,020
Weighted-average common shares outstanding – dilutive		20,436			11,867		17,978			11,830
Basic net income (loss) per share:
Continuing operations	$	0.28		$	0.34	$	(0.19	)	$	0.17
Discontinued operations		(0.01	)		0.01		(0.02	)		—
	$	0.27		$	0.35	$	(0.21	)	$	0.17
Diluted net income (loss) per share:
Continuing operations	$	0.27		$	0.31	$	(0.19	)	$	0.15
Discontinued operations		(0.01	)		0.01		(0.02	)		0.01
	$	0.26		$	0.32	$	(0.21	)	$	0.16

For the nine months ended September 30, 2012, 1.0 million of in-the-money options have been excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive given the net loss reported by the Company for that period.

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Note 10 - Fair Value of Financial Instruments (Detail) (USD $) In Millions, unless otherwise specified	Sep. 30, 2012
Long-term Debt, Fair Value	$ 185.1

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Note 13 - Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Product Warranty Liability [Table Text Block]

		2011
	(in thousands)
Balance at January 1,		$	2,802
Changes in estimates			46
Payments			(89	)
Balance at March 31,			2,759
Changes in estimates			45
Payments			(351	)
Balance at June 30,			2,453
Changes in estimates			228
Payments			41
Balance at September 30,		$	2,722

		2012
	(in thousands)
Balance at January 1,		$	2,225
Changes in estimates			9
Payments			(35	)
Balance at March 31,			2,199
Changes in estimates			(739	)
Payments			(42	)
Balance at June 30,			1,418
Changes in estimates			2
Payments			(15	)
Balance at September 30,		$	1,405

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Note 11 - Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of stock options			Weighted- average exercise price		Weighted- average remaining contractual term (in years)		Aggregate intrinsic value (in millions)
Outstanding at December 31, 2011		1,731,941		$	2.50		3.5	$	5.4
Granted		200,650		$	11.57
Exercised		(314,510	)	$	2.83
Outstanding at September 30, 2012		1,618,081		$	3.56		3.8	$	7.7
Exercisable at September 30, 2012		1,363,116		$	2.28		2.8	$	7.6

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2012			2011
Risk Free Interest Rate		0.54	%		1.0	%
Expected Volatility		45.9	%		22.25	%
Expected Dividend Yield		0	%		0	%
Expected Life	4 years			3 years
Weighted Average Calculated Value per Option	$	3.57		$	0.65

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Note 11 - Stock-Based Compensation (Detail) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Sep. 30, 2011
Share-based Compensation	$ 100,000	$ 4,453,000	$ 75,000
Stock Options Term		10 years
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	1,200,000	1,200,000
Paid In Fully Vested Common Stock [Member]
Share-based Compensation		$ 4,300,000
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period (in Shares)		478,467

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Note 15 - Segment Information (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three months ended September 30, 2012
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	48,229		$	41,207		$	24,331		$	6,173		$	1,260		$	121,200
Intersegment sales		8,780			35			5,090			—			1,119			15,024
Total segment net sales		57,009			41,242			29,421			6,173			2,379			136,224
Gross profit (loss)		11,549			3,795			4,426			679			(69	)		20,380
Gross margin		23.9	%		9.2	%		18.2	%		11.0	%		(5.5	)%		16.8	%

	Three months ended September 30, 2011
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	67,296		$	45,391		$	22,073		$	10,189		$	1,893		$	146,842
Intersegment sales		5,202			129			4,187			326			765			10,609
Total segment net sales		72,498			45,520			26,260			10,515			2,658			157,451
Gross profit		13,354			3,293			2,912			1,090			187			20,836
Gross margin		19.8	%		7.3	%		13.2	%		10.7	%		9.9	%		14.2	%

	Nine months ended September 30, 2012
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	144,562		$	108,225		$	66,975		$	29,846		$	5,677		$	355,285
Intersegment sales		27,352			35			10,542			-			3,446			41,375
Total segment net sales		171,914			108,260			77,517			29,846			9,123			396,660
Gross profit		32,805			9,875			11,599			3,277			400			57,956
Gross margin		22.7	%		9.1	%		17.3	%		11.0	%		7.0	%		16.3	%

	Nine months ended September 30, 2011
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	155,579		$	103,730		$	56,772		$	30,643		$	7,067		$	353,791
Intersegment sales		17,232			129			10,314			326			905			28,906
Total segment net sales		172,811			103,859			67,086			30,969			7,972			382,697
Gross profit		33,300			7,763			7,742			3,441			620			52,866
Gross margin		21.4	%		7.5	%		13.6	%		11.2	%		8.8	%		14.9	%

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	Reconciliation to Consolidated Sales
	Three months ended September 30,						Nine months ended  September 30,
	2012			2011			2012			2011
	(in thousands)
Total segment net sales	$	136,224		$	157,451		$	396,660		$	382,697
Intersegment sales		(15,024	)		(10,609	)		(41,375	)		(28,906	)
Consolidated net sales	$	121,200		$	146,842		$	355,285		$	353,791

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Note 1 - Nature of Business (Detail) (USD $)	3 Months Ended	9 Months Ended
	Mar. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Stock Issued During Period, Shares, New Issues (in Shares)	7,000,000
IPO Additional Shares, Period	30 days
IPO Additional Shares Available (in Shares)	1,050,000
IPO Price Per Share (in Dollars per share)	$ 9.00
Proceeds from Issuance Initial Public Offering	$ 67,400,000	$ 65,927,000
Payments of Stock Issuance Costs	3,800,000
Deferred IPO Costs			2,300,000
Extinguishment of Debt, Amount	51,500,000
Salaries, Wages and Officers' Compensation	6,600,000
IPO Management Agreement Termination Fee	3,000,000	3,000,000
Paid In Cash [Member]
Salaries, Wages and Officers' Compensation	2,300,000
Paid In Fully Vested Common Stock [Member]
Salaries, Wages and Officers' Compensation	$ 4,300,000

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Note 3 - Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2012

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

3.  Recent Accounting Pronouncements —

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-08, Intangibles – Goodwill and Other: Testing Goodwill for Impairment, to allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  The Company will adopt this ASU for its 2012 goodwill impairment testing, with an annual test date of October 1, and does not believe it will have a material impact on the Company’s results of operations or financial position.

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Note 4 - Net Income (Loss) per Share (Detail) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1.0

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Note 9 - Long-Term Debt (Detail) (USD $)	1 Months Ended	9 Months Ended								1 Months Ended	9 Months Ended			1 Months Ended		1 Months Ended	2 Months Ended
	Dec. 31, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 First Lien Credit Facility [Member] Term Loan Commitments [Member]	Apr. 18, 2012 First Lien Credit Facility [Member] Term Loan Commitments [Member]	May 27, 2011 First Lien Credit Facility [Member] Term Loan Commitments [Member]	Sep. 30, 2012 First Lien Credit Facility [Member] Revolving Loan Commitments [Member]	Oct. 18, 2011 First Lien Credit Facility [Member] Revolving Loan Commitments [Member]	May 27, 2011 First Lien Credit Facility [Member] Revolving Loan Commitments [Member]	May 31, 2011 First Lien Credit Facility [Member]	Sep. 30, 2012 First Lien Credit Facility [Member]	May 27, 2011 First Lien Credit Facility [Member]	May 27, 2011 Second Lien Term Loan [Member] Term Loan Commitments [Member]	May 31, 2011 Second Lien Term Loan [Member]	May 27, 2011 Second Lien Term Loan [Member]	Aug. 31, 2012 Capital Lease - CapitalSource Bank [Member]	Sep. 30, 2012 Capital Lease - CapitalSource Bank [Member]
Line Of Credit Facility Term Length										5 years				5 years 6 months		3 years
Line of Credit Facility, Maximum Borrowing Capacity					$ 157,000,000	$ 135,000,000		$ 35,000,000	$ 25,000,000			$ 160,000,000	$ 40,000,000		$ 40,000,000	$ 10,000,000
Line of Credit Facility, Covenant Terms	On December12, 2011, the First Lien Credit Facility was amended to, among other matters, modify the definition of "Change of Control" to reduce Code Hennessy & Simmons LLP ("CHS") specified ownership percentage following the consummation of our IPO from 35% to 20%.										For the twelve months ended September 30, 2012 and December 31, 2011, the Company was subject to a Total Leverage Ratio not to exceed 6.00:1.00 and 6.15:1.00, respectively, and an Interest Coverage Ratio of not less than 2.00:1.00 and 1.90:1.00, respectively.For the year ended December 31, 2011, the Company was also subject to a maximum Capital Expenditure Limitation of $17.5 million.In accordance with the fourth amendment to the First Lien Credit Facility as discussed above, for the year ended December 31, 2012, the Company will be subject to a maximum Capital Expenditure Limitation of $21.7 million, which excludes $8.5 million allowed for acquisition-related expenditures.These ratios become progressively more restrictive over the term of the loans.
Line of Credit Facility, Commitment Fee Percentage		0.75%
Line of Credit Facility, Amount Outstanding				154,900,000			26,000,000				180,900,000						3,600,000
Line of Credit Facility, Interest Rate at Period End											7.16%						7.09%
Line of Credit Facility, Remaining Borrowing Capacity		6,500,000
Line of Credit Facility, Covenant Compliance											For all periods presented, the Company was in compliance with all financial debt covenants under the existing agreements.
Gains (Losses) on Extinguishment of Debt		(1,555,000)	(2,016,000)
Debt Instrument, Periodic Payment		$ 113,000,000															$ 100,000

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Note 16 - Discontinued Operations (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Discontinued Operation, Income (Loss) from Discontinued Operation During Phase-out Period, Net of Tax	$ (0.2)	$ 0.1	$ (0.4)	$ 0.1
Assets of Disposal Group, Including Discontinued Operation	0.6		0.6		1.7
Liabilities of Disposal Group, Including Discontinued Operation	$ 1.0		$ 1.0		$ 1.0

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 11,805	$ 9,076
Accounts receivable:
Trade, net of allowance for doubtful accounts of $1,135 and $1,736	101,961	80,705
Other	4,397	3,054
Inventory, net	73,602	58,109
Deferred income taxes	495	935
Prepaid expenses and other	7,896	5,741
Income taxes receivable	428	2,447
Total current assets	200,584	160,067
Property, plant and equipment, net	69,514	57,270
Goodwill	58,895	58,895
Intangible assets, net	1,823	2,727
Deferred income taxes	4,078	2,519
Deferred debt issuance costs, net	7,460	8,387
Other assets	211	2,561
TOTAL ASSETS	342,565	292,426
Current liabilities:
Accounts payable	37,208	34,848
Accrued liabilities and other	19,017	22,812
Short-term debt	512	2,864
Current portion of long-term debt	3,153	2,709
Income taxes payable	2,237	964
Deferred income taxes	1,127	1,135
Total current liabilities	63,254	65,332
Other liabilities	1,043	1,124
Deferred income taxes	1,131	1,416
Long-term debt, net of current portion	180,259	192,885
Total liabilities	245,687	260,757
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $.01 par value, 150,000,000 shares authorized, 19,710,264 and 10,809,987 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively	197	108
Additional paid-in capital	130,275	61,407
Accumulated deficit	(33,186)	(29,456)
Accumulated other comprehensive loss	(408)	(390)
Total stockholders’ equity	96,878	31,669
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 342,565	$ 292,426

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Note 11 - Stock-Based Compensation (Detail) - Stock options activity (USD $) In Millions, except Share data, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Outstanding at December 31, 2011	1,618,081	1,731,941
Outstanding at December 31, 2011 (in Dollars per share)	$ 3.56	$ 2.50
Outstanding at December 31, 2011	3 years 292 days	3 years 6 months
Outstanding at December 31, 2011 (in Dollars)	$ 7.7	$ 5.4
Granted	200,650
Granted (in Dollars per share)	$ 11.57
Exercised	(314,510)
Exercised (in Dollars per share)	$ 2.83
Outstanding at September 30, 2012	1,618,081	1,731,941
Outstanding at September 30, 2012 (in Dollars per share)	$ 3.56	$ 2.50
Outstanding at September 30, 2012	3 years 292 days	3 years 6 months
Outstanding at September 30, 2012 (in Dollars)	7.7	5.4
Exercisable at September 30, 2012	1,363,116
Exercisable at September 30, 2012 (in Dollars per share)	$ 2.28
Exercisable at September 30, 2012	2 years 292 days
Exercisable at September 30, 2012 (in Dollars)	$ 7.6

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Note 1 - Nature of Business

9 Months Ended

Sep. 30, 2012

Nature of Operations [Text Block]

1. Nature of Business

Organization and Description of Business —

GSE Holding, Inc. (the “Company”) is a leading global manufacturer and marketer of highly engineered geosynthetic lining products for environmental protection and confinement applications. These lining products are used in a wide range of infrastructure end markets such as mining, environmental containment, liquid containment (including water infrastructure, agriculture and aquaculture and industrial wastewater treatment applications), coal ash containment and shale oil and gas. The Company offers a full range of products, including geomembranes, drainage products, geosynthetic clay liners, nonwoven geotextiles, and other specialty products. The Company generates the majority of its sales outside of the United States, including emerging markets in Asia, Latin America, Africa and the Middle East. Its comprehensive product offering and global infrastructure, along with its extensive relationships with customers and end-users, provide it with access to high-growth markets worldwide, visibility into upcoming projects and the flexibility to serve customers regardless of geographic location. The Company believes that its market share, broad product offering, strong customer relationships, diverse end markets and global presence provide it with key competitive advantages in the environmental geosynthetic products industry. The Company manufactures its products at facilities located in the United States, Germany, Thailand, Chile and Egypt.

Effective February 10, 2012, the Company completed its initial public offering (“IPO”) of 7,000,000 shares of common stock.  The Company also granted the underwriters a 30-day option to purchase up to an additional 1,050,000 shares at the IPO price to cover over-allotments, which was exercised. The IPO price was $9.00 per share and the common stock is currently listed on The New York Stock Exchange under the symbol “GSE”.  The Company received proceeds from the IPO, after deducting underwriter’s fees, of approximately $67.4 million.  The Company incurred direct and incremental costs associated with the IPO of approximately $3.8 million.  At December 31, 2011, $2.3 million of these costs had been deferred in Other assets and were subsequently netted against the proceeds from the IPO and classified in Additional paid-in capital.  The proceeds from the IPO were used to pay down debt ($51.5 million) and for general working capital purposes.  The Company also incurred and expensed compensation costs of $6.6 million related to IPO bonuses that were paid in cash ($2.3 million) and the issuance of fully vested common stock ($4.3 million) to certain key executives and directors, and $3.0 million related to a management agreement termination fee, which became payable upon the closing of the IPO.

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Note 6 - Property, Plant and Equipment (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Depreciation, Depletion and Amortization			$ 13,468	$ 11,394
Property, Plant and Equipment [Member]
Depreciation, Depletion and Amortization	$ 3,300	$ 2,800	$ 9,800	$ 8,300

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Note 4 - Net Income (Loss) per Share (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the three months ended September 30,					For the nine months ended September 30,
	2012			2011		2012			2011
Net income (loss):
From continuing operations	$	5,410		$	3,728	$	(3,319	)	$	1,807
From discontinued operations		(170	)		76		(411	)		83
	$	5,240		$	3,804	$	(3,730	)	$	1,890
Common share information:
Weighted-average common shares outstanding – basic		19,459			10,810		17,978			10,810
Dilutive effect of employee stock options		977			1,057		–			1,020
Weighted-average common shares outstanding – dilutive		20,436			11,867		17,978			11,830
Basic net income (loss) per share:
Continuing operations	$	0.28		$	0.34	$	(0.19	)	$	0.17
Discontinued operations		(0.01	)		0.01		(0.02	)		—
	$	0.27		$	0.35	$	(0.21	)	$	0.17
Diluted net income (loss) per share:
Continuing operations	$	0.27		$	0.31	$	(0.19	)	$	0.15
Discontinued operations		(0.01	)		0.01		(0.02	)		0.01
	$	0.26		$	0.32	$	(0.21	)	$	0.16

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Note 6 - Property, Plant and Equipment (Detail) - Property, plant and equipment (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Balance, gross	$ 157,088	$ 135,111
Less – accumulated depreciation and amortization	(87,574)	(77,841)
	69,514	57,270
Land [Member]
Balance, gross	5,072	4,820
Building and Building Improvements [Member]
Estimated useful lives years	7-30
Balance, gross	26,853	24,022
Machinery and Equipment [Member]
Estimated useful lives years	3-10
Balance, gross	116,197	97,524
Software [Member]
Estimated useful lives years	3
Balance, gross	8,169	8,025
Furniture and Fixtures [Member]
Estimated useful lives years	3-5
Balance, gross	$ 797	$ 720

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Note 6 - Property, Plant and Equipment (Tables)

9 Months Ended

Sep. 30, 2012

Property, Plant and Equipment [Table Text Block]

	Estimated useful lives years		September 30, 2012			December 31, 2011
			(in thousands)
Land			$	5,072		$	4,820
Buildings and improvements		7-30		26,853			24,022
Machinery and equipment		3-10		116,197			97,524
Software		3		8,169			8,025
Furniture and fixtures		3-5		797			720
				157,088			135,111
Less – accumulated depreciation and amortization				(87,574	)		(77,841	)
			$	69,514		$	57,270

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Note 2 - Basis of Presentation

9 Months Ended

Sep. 30, 2012

Basis of Accounting [Text Block]

2. Basis of Presentation —

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (‘‘GAAP’’) on the same basis as those in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2011. The December 31, 2011 Condensed Consolidated Balance Sheet data was derived from the Company’s year-end audited consolidated financial statements but does not include all disclosures required by GAAP. These condensed consolidated financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of such financial statements for the periods indicated. Certain reclassifications were made to the December 31, 2011 consolidated financial statements to conform to the 2012 financial statement presentation.  These reclassifications did not have an impact on previously reported results.  The Company believes that the disclosures herein are adequate to make the information presented not misleading. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of results to be expected for the full year ending December 31, 2012. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2011, and the notes thereto included in the 2011 Annual Report on Form 10-K.

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts as well as certain disclosures. The Company’s financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.

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Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Trade, allowance for doubtful accounts (in Dollars)	$ 1,135	$ 1,736
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in Shares)	150,000,000	150,000,000
Common stock, shares issued (in Shares)	19,710,264	10,809,987
Common stock, shares outstanding (in Shares)	19,710,264	10,809,987

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Note 12 - Income Taxes

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Text Block]

12. Income Taxes –

Income tax expense from continuing operations for the three months ended September 30, 2012 and 2011 was $0.8 million and $1.2 million, respectively.  Our provision for income taxes is recorded at the estimated annual effective tax rates for each tax jurisdiction based on fiscal year to date results. Income tax expense from continuing operations for the nine months ended September 30, 2012 and 2011 was $3.5 million and $2.4 million, respectively.The difference in the effective tax rate compared with the U.S. federal statutory rate is due to the mix of the international jurisdictional rates and the changes in valuation allowance, which primarily relates to the United States.  

The realization of the deferred tax assets depends on recognition of sufficient future taxable income in specific tax jurisdictions during periods in which those temporary differences are deductible. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts the Company believes are more likely than not to be recovered. In evaluating the valuation allowance, the Company considered the reversal of existing temporary differences, the existence of taxable income in prior carryback years, tax planning strategies and future taxable income for each of the taxable jurisdictions, the latter two of which involve the exercise of significant judgment. During the three months ended September 30, 2012, the Company reduced the valuation allowance by $1.0 million in the United States based upon the expected future taxable income in that jurisdiction. Changes to the valuation allowance could materially impact our results of operations.

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Document And Entity Information	9 Months Ended
	Sep. 30, 2012	Nov. 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	GSE Holding, Inc.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		19,710,264
Amendment Flag	false
Entity Central Index Key	0001275712
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Non-accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3

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Note 13 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Text Block]

13. Commitments and Contingencies –

Warranties

The Company’s products are sold and installed with specified limited warranties as to material quality and workmanship. These limited warranties may last for up to 20 years, but are generally limited to repair or replacement by the Company of the defective liner or the dollar amount of the contract involved, on a prorated basis. The Company may also indemnify the site owner or general contractor for other damages resulting from negligence of the Company’s employees. The Company accrues a warranty reserve based on estimates for warranty claims included in Accrued liabilities and other in the condensed consolidated balance sheet. This estimate is based on historical claims history and current business activities and is accrued as a cost of sales in the period such business activity occurs. The table below reflects a summary of activity of the Company’s operations for warranty obligations for the nine months ended September 30, 2012 and 2011 as recorded in Accrued liabilities and other on the condensed consolidated balance sheet:

		2011
	(in thousands)
Balance at January 1,		$	2,802
Changes in estimates			46
Payments			(89	)
Balance at March 31,			2,759
Changes in estimates			45
Payments			(351	)
Balance at June 30,			2,453
Changes in estimates			228
Payments			41
Balance at September 30,		$	2,722

		2012
	(in thousands)
Balance at January 1,		$	2,225
Changes in estimates			9
Payments			(35	)
Balance at March 31,			2,199
Changes in estimates			(739	)
Payments			(42	)
Balance at June 30,			1,418
Changes in estimates			2
Payments			(15	)
Balance at September 30,		$	1,405

Although the Company is not exposed to the type of potential liability that might arise from being in the business of handling, transporting or storing hazardous waste or materials, the Company could be susceptible to liability for environmental damage or personal injury resulting from defects in the Company’s products or negligence by Company employees in the installation of its lining systems. Such liability could be substantial because of the potential that hazardous or other waste materials might leak out of their containment system into the environment. The Company maintains liability insurance, which includes contractor’s pollution liability coverage in amounts which it believes to be prudent. However, there is no assurance that this coverage will remain available to the Company. While the Company’s claims experience to date may not be a meaningful measure of its potential exposure for product liability, the Company has experienced no material losses from defects in products and installations.

Bonding – Bank Guarantees –

The Company, in some direct sales and raw material acquisition situations, is required to post performance bonds or bank guarantees as part of the contractual guarantee for its performance. The performance bonds or bank guarantees can be in the full amount of the contracts. To date, the Company has not received any claims against any of the posted securities, most of which terminate at the final completion date of the contracts. As of September 30, 2012, the Company had $5.8 million of bonds outstanding and $5.9 million of guarantees issued under its bank lines.

Litigation and Claims –

The Company is a party to various legal actions arising in the ordinary course of our business. These legal actions cover a broad variety of claims spanning the Company’s entire business. We believe it is not probable and reasonably estimable that resolution of these legal actions will, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations or cash flows.

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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net sales	$ 121,200	$ 146,842	$ 355,285	$ 353,791
Cost of products	100,820	126,006	297,329	300,925
Gross profit	20,380	20,836	57,956	52,866
Selling, general and administrative expenses	11,945	12,761	34,684	31,499
Public offering related costs			9,655
Amortization of intangibles	295	329	893	1,057
Operating income	8,140	7,746	12,724	20,310
Other expenses (income):
Interest expense, net	3,199	4,657	12,836	14,978
Foreign currency transactions (gain) loss	(571)	(1,617)	(513)	36
Loss on extinguishment of debt			1,555	2,016
Other income, net	(654)	(222)	(1,318)	(928)
Income from continuing operations before income taxes	6,166	4,928	164	4,208
Income tax provision	756	1,200	3,483	2,401
Income (loss) from continuing operations	5,410	3,728	(3,319)	1,807
Income (loss) from discontinued operations, net of tax	(170)	76	(411)	83
Net income (loss).	5,240	3,804	(3,730)	1,890
Other comprehensive income (loss):
Foreign currency translation adjustment	689	(4,704)	(19)	(311)
Comprehensive income (loss)	$ 5,929	$ (900)	$ (3,749)	$ 1,579
Basic net income (loss) per common share:
Continuing operations (in Dollars per share)	$ 0.28	$ 0.34	$ (0.19)	$ 0.17
Discontinued operations (in Dollars per share)	$ (0.01)	$ 0.01	$ (0.02)
(in Dollars per share)	$ 0.27	$ 0.35	$ (0.21)	$ 0.17
Diluted net income (loss) per common share:
Continuing operations (in Dollars per share)	$ 0.27	$ 0.31	$ (0.19)	$ 0.15
Discontinued operations (in Dollars per share)	$ (0.01)	$ 0.01	$ (0.02)	$ 0.01
(in Dollars per share)	$ 0.26	$ 0.32	$ (0.21)	$ 0.16
Basic weighted-average common shares outstanding (in Shares)	19,459	10,810	17,978	10,810
Diluted weighted-average common shares outstanding (in Shares)	20,436	11,867	17,978	11,830

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Note 7 - Intangible Assets

9 Months Ended

Sep. 30, 2012

Intangible Assets Disclosure [Text Block]

7. Intangible Assets –

Intangible assets consisted of the following:

	Estimated useful lives years		September 30, 2012			December 31, 2011
			(in thousands)
Customer lists		5-10	$	25,246		$	25,307
Non-compete agreements		5-10		2,469			2,469
Other		1		363			363
				28,078			28,139
Less accumulated amortization				(26,255	)		(25,412	)
Intangible assets, net			$	1,823		$	2,727

Amortization expense for intangible assets during the three months ended September 30, 2012 and 2011was $0.3 million in each period.  Amortization expense for intangible assets during the nine months ended September 30, 2012 and 2011was $0.9 million and $1.1 million, respectively.

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Note 6 - Property, Plant and Equipment

9 Months Ended

Sep. 30, 2012

Property, Plant and Equipment Disclosure [Text Block]

6. Property, Plant and Equipment –

Property, plant and equipment consisted of the following:

	Estimated useful lives years		September 30, 2012			December 31, 2011
			(in thousands)
Land			$	5,072		$	4,820
Buildings and improvements		7-30		26,853			24,022
Machinery and equipment		3-10		116,197			97,524
Software		3		8,169			8,025
Furniture and fixtures		3-5		797			720
				157,088			135,111
Less – accumulated depreciation and amortization				(87,574	)		(77,841	)
			$	69,514		$	57,270

Depreciation and amortization expense for the three months ended September 30, 2012 and 2011was $3.3 million and $2.8 million, respectively.  Depreciation and amortization expense for the nine months ended September 30, 2012 and 2011 was $9.8 million and $8.3 million, respectively.

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Note 5 - Inventory (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Inventory, Current [Table Text Block]

	September 30, 2012			December 31, 2011
	(in thousands)
Raw materials	$	33,205		$	24,479
Finished goods		39,267			31,732
Supplies		4,084			4,996
Obsolescence and slow moving allowance		(2,954	)		(3,098	)
	$	73,602		$	58,109

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Note 14 - Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions Disclosure [Text Block]

14. Related Party Transactions –

Management Agreement with CHS Management IV LP

In connection with the 2004 acquisition of the Company by CHS Management IV LP (“CHS Management”) a limited partnership (1) of which CHS is the general partner and (2) which is the general partner of CHS IV, the Company entered into a management agreement with CHS Management pursuant to which CHS Management provided certain financial and management consulting services to the Company. In consideration of those services, the Company paid fees to CHS Management in an aggregate annual amount of $2.0 million payable in equal monthly installments. Under this agreement, the Company paid and expensed $1.5 million during the nine months ended September 30, 2011, which are included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). In connection with the Company’s IPO, the management agreement was terminated and a fee of $3.0 million was paid and expensed during the nine months ended September 30, 2012, which was included in public offering related costs in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). As of September 30, 2012, there were no amounts payable to CHS management under this agreement.

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Note 10 - Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Text Block]

10. Fair Value of Financial Instruments –

Under GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, GAAP requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used are as follows:

Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables and debt instruments. The carrying values of cash and cash equivalents, trade receivables and trade payables are considered to be representative of their respective fair values due to the short-term nature of these instruments. The carrying amount of the long-term debt of $185.1 million as of September 30, 2012 approximates fair value because our current borrowing rate does not materially differ from market rates for similar bank borrowings. The long-term debt is classified as a Level 2 item within the fair value hierarchy.

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Note 8 - Accrued Liabilities and Other

9 Months Ended

Sep. 30, 2012

Other Liabilities Disclosure [Text Block]

8. Accrued Liabilities and Other –

Accrued liabilities and other consisted of the following:

	September 30, 2012		December 31, 2011
	(in thousands)
Customer prepayments	$	527	$	167
Accrued operating expenses		4,526		2,591
Self-insurance reserves		2,065		3,167
Compensation and benefits		3,878		6,096
Accrued interest		2,718		4,026
Taxes, other than income		1,859		2,025
Other accrued liabilities		3,444		4,740
	$	19,017	$	22,812

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Note 9 - Long-Term Debt

9 Months Ended

Sep. 30, 2012

Long-term Debt [Text Block]

9. Long-Term Debt –

Long-term debt consisted of the following:

	September 30, 2012			December 31, 2011
	(in thousands)
First Lien Credit Facility	$	180,923		$	155,982
Second Lien Term Loan, including payment in kind (“PIK”) interest		—			40,488
Capital Lease – CapitalSource Bank		3,587			—
Term Loan – German bank secured by equipment, 5.15%, maturing March 2014		474			702
Term Loan – Thailand bank secured by equipment, monthly installments of $113,000, 6.75% variable through May 2013		69			1,097
		185,053			198,269
Less – current maturities		(3,153	)		(2,709	)
Unamortized discounts on first lien loans		(1,641	)		(2,675	)
	$	180,259		$	192,885

First Lien Credit Facility –

On May 27, 2011, the Company entered into a five-year, $160.0 million first lien senior secured credit facility with General Electric Capital Corporation, Jefferies Finance LLC and the other financial institutions party thereto (as amended from time to time, the “First Lien Credit Facility”), consisting of $135.0 million of term loan commitments (as amended from time to time, the “First Lien Term Loan”) and $25.0 million of revolving loan commitments (as amended from time to time, the “Revolving Credit Facility””). On October 18, 2011, the Revolving Credit Facility was amended to increase the aggregate revolving loan commitments from $25.0 million to $35.0 million. On December 12, 2011, the First Lien Credit Facility was amended to, among other matters, modify the definition of “Change of Control” to reduce Code Hennessy & Simmons LLP (“CHS”) specified ownership percentage following the consummation of our IPO from 35% to 20%.  On April 18, 2012, the First Lien Credit Facility was amended to increase the aggregate term loan commitments from $135.0 million to $157.0 million. The Company used the additional borrowing capacity under the term loan to repay in full all outstanding indebtedness under, and to terminate, the Second Lien Term Loan (as defined below) and to pay related fees and expenses. On September 19, 2012, the Company entered into a fourth amendment to the First Lien Credit Facility, which increased the Capital Expenditure Limitation covenant as discussed below in “Restrictive Covenants.”

The First Lien Credit Facility matures in May 2016. Borrowings under the First Lien Credit Facility incur interest expense that is variable in relation to the London Interbank Offer Rates (“LIBOR”) (and/or Prime) rate. In addition to paying interest on outstanding borrowings under the First Lien Credit Facility, the Company pays a 0.75% per annum commitment fee to the lenders in respect of the unutilized commitments, and letter of credit fees equal to the LIBOR margin on the undrawn amount of all outstanding letters of credit.  As of September 30, 2012, there was $180.9 million outstanding under the First Lien Credit Facility consisting of $154.9 million in term loans and $26.0 million in revolving loans, and the interest rate on such loans was 7.16%.  The Company had $6.5 million of capacity under the Revolving Credit Facility after taking into account outstanding loan advances and letters of credit.

Guarantees; Security.  The obligations under the First Lien Credit Facility are guaranteed on a senior secured basis by the Company and each of its existing and future wholly owned domestic subsidiaries, other than GSE International, Inc. and any other excluded subsidiaries. The obligations are secured by a first priority perfected security interest in substantially all of the guarantors’ assets, subject to certain exceptions, permitted liens and permitted encumbrances under the First Lien Credit Facility.

Restrictive Covenants.  The First Lien Credit Facility contains various restrictive covenants that include, among other things, restrictions or limitations on the Company’s ability to incur additional indebtedness or issue disqualified capital stock unless certain financial tests are satisfied; pay dividends, redeem subordinated debt or make other restricted payments; make certain loans, investments or acquisitions; issue stock of subsidiaries; grant or permit certain liens on assets; enter into certain transactions with affiliates; merge, consolidate or transfer substantially all of its assets; incur dividend or other payment restrictions affecting certain subsidiaries; transfer or sell assets including, but not limited to, capital stock of subsidiaries; and change the business the Company conducts. For the twelve months ended September 30, 2012 and December 31, 2011, the Company was subject to a Total Leverage Ratio not to exceed 6.00:1.00 and 6.15:1.00, respectively, and an Interest Coverage Ratio of not less than 2.00:1.00 and 1.90:1.00, respectively.  For the year ended December 31, 2011, the Company was also subject to a maximum Capital Expenditure Limitation of $17.5 million.  In accordance with the fourth amendment to the First Lien Credit Facility as discussed above, for the year ended December 31, 2012, the Company will be subject to a maximum Capital Expenditure Limitation of $21.7 million, which excludes $8.5 million allowed for acquisition-related expenditures.  These ratios become progressively more restrictive over the term of the loans.  For all periods presented, the Company was in compliance with all financial debt covenants under the existing agreements.

Second Lien Term Loan –

On May 27, 2011, the Company also entered into a 5.5 year, $40.0 million second lien senior secured credit facility consisting of $40.0 million of term loan commitments (the “Second Lien Term Loan”). The Second Lien Term Loan was paid in full on April 18, 2012, and the arrangement was terminated.  In connection with this refinancing, the Company recorded a $1.6 million loss from extinguishment of debt, primarily related to the write-off of unamortized debt issuance cost and discount.

Capital Lease –

On August 17, 2012, the Company entered into an equipment financing arrangement with CapitalSource Bank.  The lease is a three-year lease for equipment cost up to $10.0 million.  As of September 30, 2012, there was $3.6 million outstanding under this lease arrangement, with monthly payments of $0.1 million and an implied interest rate of 7.09%.

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Note 11 - Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

11. Stock-Based Compensation

There was $0.1 million of stock-based compensation expense related to stock options for the three months ended September 30, 2012 and no stock-based compensation expense for the three months ended September 30, 2011.  For the nine months ended September 30, 2012, there was $4.5 million of stock-based compensation recognized.  Of this amount, $4.3 million related to 478,467 shares of fully vested common stock that was issued to certain key executives and directors in connection with the IPO.  Stock-based compensation expense of $0.1 million was recognized during the nine months ended September 30, 2011.

	Number of stock options			Weighted- average exercise price		Weighted- average remaining contractual term (in years)		Aggregate intrinsic value (in millions)
Outstanding at December 31, 2011		1,731,941		$	2.50		3.5	$	5.4
Granted		200,650		$	11.57
Exercised		(314,510	)	$	2.83
Outstanding at September 30, 2012		1,618,081		$	3.56		3.8	$	7.7
Exercisable at September 30, 2012		1,363,116		$	2.28		2.8	$	7.6

The value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for the nine months ended September 30.

	2012			2011
Risk Free Interest Rate		0.54	%		1.0	%
Expected Volatility		45.9	%		22.25	%
Expected Dividend Yield		0	%		0	%
Expected Life	4 years			3 years
Weighted Average Calculated Value per Option	$	3.57		$	0.65

All outstanding stock options are held by employees and former employees of the Company and have an expiration date of 10 years from the date of grant. At September 30, 2012, there was approximately $1.2 million of total unrecognized compensation expense related to non-vested employee stock options and restricted stock grants.

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Note 5 - Inventory (Detail) - Inventory (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Raw materials	$ 33,205	$ 24,479
Finished goods	39,267	31,732
Supplies	4,084	4,996
Obsolescence and slow moving allowance	(2,954)	(3,098)
	$ 73,602	$ 58,109

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Note 15 - Segment Information (Detail) - Operations and assets of reportable segments (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net sales to external customers	$ 121,200	$ 146,842	$ 355,285	$ 353,791
Intersegment sales	15,024	10,609	41,375	28,906
Total segment net sales	136,224	157,451	396,660	382,697
Gross profit (loss)	20,380	20,836	57,956	52,866
Gross margin	16.80%	14.20%	16.30%	14.90%
N America [Member]
Net sales to external customers	48,229	67,296	144,562	155,579
Intersegment sales	8,780	5,202	27,352	17,232
Total segment net sales	57,009	72,498	171,914	172,811
Gross profit (loss)	11,549	13,354	32,805	33,300
Gross margin	23.90%	19.80%	22.70%	21.40%
Europe Africa [Member]
Net sales to external customers	41,207	45,391	108,225	103,730
Intersegment sales	35	129	35	129
Total segment net sales	41,242	45,520	108,260	103,859
Gross profit (loss)	3,795	3,293	9,875	7,763
Gross margin	9.20%	7.30%	9.10%	7.50%
Asia Pacific [Member]
Net sales to external customers	24,331	22,073	66,975	56,772
Intersegment sales	5,090	4,187	10,542	10,314
Total segment net sales	29,421	26,260	77,517	67,086
Gross profit (loss)	4,426	2,912	11,599	7,742
Gross margin	18.20%	13.20%	17.30%	13.60%
Latin America [Member]
Net sales to external customers	6,173	10,189	29,846	30,643
Intersegment sales		326		326
Total segment net sales	6,173	10,515	29,846	30,969
Gross profit (loss)	679	1,090	3,277	3,441
Gross margin	11.00%	10.70%	11.00%	11.20%
Middle East [Member]
Net sales to external customers	1,260	1,893	5,677	7,067
Intersegment sales	1,119	765	3,446	905
Total segment net sales	2,379	2,658	9,123	7,972
Gross profit (loss)	$ (69)	$ 187	$ 400	$ 620
Gross margin	(5.50%)	9.90%	7.00%	8.80%

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Note 16 - Discontinued Operations

9 Months Ended

Sep. 30, 2012

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

16. Discontinued operations –

The Company closed its manufacturing facility located in the United Kingdom and exited the United States Installation business in 2010.  Additionally, the Company completed the exit from the synthetic turf business as of December 31, 2008.  For the three months ended September 30, 2012 and 2011, the Company recorded an after tax loss of $0.2 million and an after tax income of $0.1 million, respectively, related to discontinued operations.   For the nine months ended September 30, 2012 and 2011, the Company recorded an after tax loss of $0.4 million and after tax income of $0.1 million, respectively, related to discontinued operations.  At September 30, 2012 and December 31, 2011, there were approximately $0.6 million and $1.7 million, respectively, in assets and $1.0 million in liabilities at each period end related to discontinued operations.

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Note 8 - Accrued Liabilities and Other (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Accrued Liabilities [Table Text Block]

	September 30, 2012		December 31, 2011
	(in thousands)
Customer prepayments	$	527	$	167
Accrued operating expenses		4,526		2,591
Self-insurance reserves		2,065		3,167
Compensation and benefits		3,878		6,096
Accrued interest		2,718		4,026
Taxes, other than income		1,859		2,025
Other accrued liabilities		3,444		4,740
	$	19,017	$	22,812

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Note 13 - Commitments and Contingencies (Detail) - Warranty Obligations (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011
Balance	$ 1,418	$ 2,199	$ 2,225	$ 2,453	$ 2,759	$ 2,802
Changes in estimates	2	(739)	9	228	45	46
Payments	(15)	(42)	(35)	41	(351)	(89)
Balance	$ 1,405	$ 1,418	$ 2,199	$ 2,722	$ 2,453	$ 2,759

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Note 9 - Long-Term Debt (Detail) - Long-term debt (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Long-term debt instrument	$ 185,053	$ 198,269
Less – current maturities	(3,153)	(2,709)
Unamortized discounts on first lien loans	(1,641)	(2,675)
	180,259	192,885
First Lien Credit Facility [Member]
Long-term debt instrument	180,923	155,982
Second Lien Term Loan [Member]
Long-term debt instrument		40,488
Capital Lease - CapitalSource Bank [Member]
Long-term debt instrument	3,587
Term Loan - German Bank [Member]
Long-term debt instrument	474	702
Term Loan - Thailand Bank [Member]
Long-term debt instrument	$ 69	$ 1,097

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities:
Net income (loss)	$ (3,730)	$ 1,890
(Income) loss from discontinued operations	411	(83)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization	13,468	11,394
Loss on extinguishment of debt	1,555	2,016
Revaluation of non-dollar denominated debt	217	(158)
Stock-based compensation	4,453	75
Increase in accounts receivable	(21,266)	(31,869)
Increase in inventory	(16,133)	(2,665)
Increase in accounts payable	2,502	11,003
Decrease in accrued liabilities	(3,161)	(1,088)
All other items, net	(3,225)	(1,844)
Net cash used in operating activities – continuing operations	(24,909)	(11,329)
Net cash provided by (used in) operating activities – discontinued operations	(19)	5,087
Net cash used in operating activities	(24,928)	(6,242)
Cash flows from investing activities:
Purchase of property, plant and equipment	(21,975)	(7,713)
Net cash used in investing activities	(21,975)	(7,713)
Cash flows from financing activities:
Proceeds from lines of credit	85,777	77,659
Repayments of lines of credit	(83,770)	(83,212)
Proceeds from long-term debt	25,674	173,085
Repayments of long-term debt	(43,471)	(152,411)
Net proceeds from initial public offering	65,927
Proceeds from the exercise of stock options	888
Payments for debt issuance costs	(1,736)	(7,274)
Net cash provided by financing activities – continuing operations	49,289	7,847
Net cash used in financing activities – discontinued operations		(650)
Net cash provided by financing activities	49,289	7,197
Effect of exchange rate changes on cash – continuing operations	304	312
Effect of exchange rate changes on cash – discontinued operations	39	(18)
Net increase (decrease) in cash and cash equivalents	2,729	(6,464)
Cash and cash equivalents at beginning of period	9,076	15,184
Cash and cash equivalents at end of period	$ 11,805	$ 8,720

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Note 5 - Inventory

9 Months Ended

Sep. 30, 2012

Inventory Disclosure [Text Block]

5. Inventory –

Inventory consisted of the following:

	September 30, 2012			December 31, 2011
	(in thousands)
Raw materials	$	33,205		$	24,479
Finished goods		39,267			31,732
Supplies		4,084			4,996
Obsolescence and slow moving allowance		(2,954	)		(3,098	)
	$	73,602		$	58,109

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Note 9 - Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2012

Schedule of Long-term Debt Instruments [Table Text Block]

	September 30, 2012			December 31, 2011
	(in thousands)
First Lien Credit Facility	$	180,923		$	155,982
Second Lien Term Loan, including payment in kind (“PIK”) interest		—			40,488
Capital Lease – CapitalSource Bank		3,587			—
Term Loan – German bank secured by equipment, 5.15%, maturing March 2014		474			702
Term Loan – Thailand bank secured by equipment, monthly installments of $113,000, 6.75% variable through May 2013		69			1,097
		185,053			198,269
Less – current maturities		(3,153	)		(2,709	)
Unamortized discounts on first lien loans		(1,641	)		(2,675	)
	$	180,259		$	192,885

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Note 7 - Intangible Assets (Detail) - Intangible assets (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Balance, gross	$ 28,078	$ 28,139
Less accumulated amortization	(26,255)	(25,412)
Intangible assets, net	1,823	2,727
Customer Lists [Member]
Estimated useful lives years	5-10
Balance, gross	25,246	25,307
Noncompete Agreements [Member]
Estimated useful lives years	5-10
Balance, gross	2,469	2,469
Other Intangibles [Member]
Estimated useful lives years	1
Balance, gross	$ 363	$ 363

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Note 15 - Segment Information

9 Months Ended

Sep. 30, 2012

Segment Reporting Disclosure [Text Block]

15. Segment Information –

The Company’s operating and external reporting segments are based on geographic regions, which is consistent with the basis of how management internally reports and evaluates financial information used to make operating decisions. The Company’s reportable segments are North America, Europe Africa, Asia Pacific, Latin America and Middle East.

The following tables present information about the results from continuing operations and assets of the Company’s reportable segments for the periods presented.

	Three months ended September 30, 2012
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	48,229		$	41,207		$	24,331		$	6,173		$	1,260		$	121,200
Intersegment sales		8,780			35			5,090			—			1,119			15,024
Total segment net sales		57,009			41,242			29,421			6,173			2,379			136,224
Gross profit (loss)		11,549			3,795			4,426			679			(69	)		20,380
Gross margin		23.9	%		9.2	%		18.2	%		11.0	%		(5.5	)%		16.8	%

	Three months ended September 30, 2011
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	67,296		$	45,391		$	22,073		$	10,189		$	1,893		$	146,842
Intersegment sales		5,202			129			4,187			326			765			10,609
Total segment net sales		72,498			45,520			26,260			10,515			2,658			157,451
Gross profit		13,354			3,293			2,912			1,090			187			20,836
Gross margin		19.8	%		7.3	%		13.2	%		10.7	%		9.9	%		14.2	%

	Nine months ended September 30, 2012
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	144,562		$	108,225		$	66,975		$	29,846		$	5,677		$	355,285
Intersegment sales		27,352			35			10,542			-			3,446			41,375
Total segment net sales		171,914			108,260			77,517			29,846			9,123			396,660
Gross profit		32,805			9,875			11,599			3,277			400			57,956
Gross margin		22.7	%		9.1	%		17.3	%		11.0	%		7.0	%		16.3	%

	Nine months ended September 30, 2011
	N. America			Europe Africa			Asia Pacific			Latin America			Middle East			Total
	(in thousands, except percentages)
Net sales to external customers	$	155,579		$	103,730		$	56,772		$	30,643		$	7,067		$	353,791
Intersegment sales		17,232			129			10,314			326			905			28,906
Total segment net sales		172,811			103,859			67,086			30,969			7,972			382,697
Gross profit		33,300			7,763			7,742			3,441			620			52,866
Gross margin		21.4	%		7.5	%		13.6	%		11.2	%		8.8	%		14.9	%

The following tables reconcile the segment information presented above to the consolidated financial information.

Net sales

	Reconciliation to Consolidated Sales
	Three months ended September 30,						Nine months ended  September 30,
	2012			2011			2012			2011
	(in thousands)
Total segment net sales	$	136,224		$	157,451		$	396,660		$	382,697
Intersegment sales		(15,024	)		(10,609	)		(41,375	)		(28,906	)
Consolidated net sales	$	121,200		$	146,842		$	355,285		$	353,791