July 31, 2019 - 6:00 PM EDT
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Aegion Corporation Reports 2019 Second Quarter Financial Results

Strong Q2’19 results exceeded expectations; Reaffirming 2019 guidance and targeting further growth in 2020

ST. LOUIS, July 31, 2019 (GLOBE NEWSWIRE) --

A PDF accompanying this announcement is available at http://ml.globenewswire.com/Resource/Download/f57856aa-0707-4af8-82a7-e4cb7fc7e41d 

  • Q2’19 loss per diluted share was $0.27 compared to earnings per diluted share of $0.24 in Q2’18. Q2’19 adjusted (non-GAAP)1 earnings per diluted share were $0.37, increasing 9% compared to $0.34 in Q2’18.

  • Revenues for Q2’19 were $319 million. Excluding exited or to be exited operations, revenues on a same-store basis declined 2%, primarily driven by the expected reduction in large coating project contributions at Corrosion Protection.

  • Adjusted gross margins increased to 21.3%, led by continued productivity improvements in North American CIPP operations and the exit of underperforming international CIPP businesses within Infrastructure Solutions, which overcame the impact of lost contributions from the high-margin coating projects within Corrosion Protection.

  • Adjusted operating margins grew 50 basis points to 5.9%, driven by a $4 million, or 7%, decline in adjusted operating expenses as a result of restructuring and cost containment efforts.

1 Adjusted (non-GAAP) results exclude certain charges related to the Company’s restructuring activities, acquisition and divestiture-related activities, impairment of assets held for sale, credit facility amendment fees and impacts from the Tax Cuts and Jobs Act. Reconciliation of adjusted results is included below.

Q2’19 HIGHLIGHTS

  • Infrastructure Solutions delivered its highest quarterly gross margins in three years at 25.0%, driven by sharp improvements in North America and the exit of underperforming international CIPP operations.

  • Corrosion Protection delivered adjusted gross margins of 22.1%, with strength in industrial lining activities helping to offset the impact of lost contributions from the large coating projects completed in the prior year. The North America cathodic protection business implemented multiple cost reduction initiatives that will yield more than $6 million in annualized savings over the next 12 months.

  • Energy Services increased adjusted operating income 65% on strong top-line growth in core maintenance activities and improved operating leverage.

  • Year-to-date operating cash flows of $14 million grew 38% compared to the prior year.

“Aegion’s second quarter adjusted results exceeded expectations, bolstered by strong performance from Infrastructure Solutions and Energy Services.

We are now substantially complete with the multi-year restructuring activities to simplify, de-risk and improve profitability at Aegion. I am excited to move forward with a clear focus on leveraging our market-leading North America positions, differentiating through technology investments and capturing multiple growth opportunities within all core segments.

We are well positioned with solid backlog and operating momentum going into 2H’19. We are reaffirming our guidance for modest growth in adjusted EPS in 2019 compared to the prior year and see a strong sales funnel going into 2020 which should drive significant earnings expansion next year.”

Charles R. Gordon, President and Chief Executive Officer

 

Selected Consolidated Financial Highlights

 Quarter Ended June 30, 2019Quarter Ended June 30, 2018
(in thousands, except earnings per share)As Reported 
(GAAP)
Adjustments 
(1)
As Adjusted 
(Non-GAAP)
As Reported 
(GAAP)
Adjustments 
(2)
As Adjusted 
(Non-GAAP)
Revenues$318,740 $ $318,740 $335,030 $ $335,030 
Cost of revenues 251,303  (396) 250,907  263,977    263,977 
Gross profit 67,437  396  67,833  71,053    71,053 
Operating expenses 51,254  (2,228) 49,026  54,222  (1,373) 52,849 
Impairment of assets held for sale 11,946  (11,946)        
Acquisition and divestiture expenses 804  (804)   832  (832)  
Restructuring and related charges 2,974  (2,974)   1,540  (1,540)  
Operating income 459  18,348  18,807  14,459  3,745  18,204 
Interest expense (3,566)   (3,566) (3,923) 64  (3,859)
Other income (expense) (1,015) 941  (74) (506)   (506)
Income (loss) before taxes on income (3,861) 19,289  15,428  10,092  3,809  13,901 
Taxes on income (loss) 4,286  (747) 3,539  2,894  658  3,552 
Net Income (loss)
(attributable to Aegion Corporation)
 (8,366) 20,036  11,670  7,921  3,151  11,072 
Diluted earnings (loss) per share$(0.27)$0.64 $0.37 $0.24 $0.10 $0.34 

Net income (loss) and diluted earnings (loss) per share includes non-controlling interest

(1) 2019 Non-GAAP pre-tax adjustments:

  • Restructuring: Charges for cost of revenues of $396 primarily related to inventory write offs; charges for operating expenses of $2,205 primarily related to wind-down expenses, reserves for potentially uncollectible receivables, fixed asset disposals and other restructuring-related charges; charges of $2,974 related to employee severance, extension of benefits, employment assistance programs and contract termination costs; charges for other expense of $941 related to net losses on disposal of certain restructured operations and the release of cumulative currency translation adjustments; and charges for foreign withholding taxes of $2,073 on the repatriation of foreign earnings.

  • Acquisition and Divestiture Expenses: Charges of $11,946 related to the impairment of held for sale operations (CIPP operations in Australia and the Netherlands, Corrpower and United Mexico); and expenses of $804 incurred primarily in connection with the Company’s planned divestiture of its held for sale operations.

  • Tax Cuts and Jobs Act: Expenses of $23 related to professional fees resulting from the Tax Cuts and Jobs Act.

(2) 2018 Non-GAAP pre-tax adjustments:

  • Restructuring: Charges for operating expenses of $1,373 primarily related to wind-down expenses, reserves for potentially uncollectible receivables and other restructuring-related charges; and charges of $1,540 related to employee severance, extension of benefits, employment assistance programs and contract termination costs.

  • Acquisition and Divestiture Expenses: Expenses of $832 incurred in connection with the Company’s divestiture of Bayou.

  • Credit Facility Fees: Expenses of $64 related to certain out-of-pocket expenses associated with amending the Company’s credit facility.

 

Selected Segment Financial Highlights
(in thousands)

 Quarter Ended June 30, 2019 Quarter Ended June 30, 2018
 As Reported
(GAAP)
 Adjustments 
(1)
 As Adjusted
(Non-GAAP)
 As Reported
(GAAP)
 Adjustments 
(2)
 As Adjusted
(Non-GAAP)
Revenues:           
Infrastructure Solutions$155,439  $  $155,439  $160,732  $ $160,732 
Corrosion Protection 77,597      77,597   96,389     96,389 
Energy Services 85,704      85,704   77,909     77,909 
Total Revenues$318,740  $  $318,740  $335,030  $ $335,030 
            
Gross Profit:           
Infrastructure Solutions$38,871  $(67) $38,804  $35,949  $ $35,949 
Gross Profit Margin 25.0%    25.0%  22.4%    22.4%
Corrosion Protection 16,692   463   17,155   24,537     24,537 
Gross Profit Margin 21.5%    22.1%  25.5%    25.5%
Energy Services 11,874      11,874   10,567     10,567 
Gross Profit Margin 13.9%    13.9%  13.6%    13.6%
Total Gross Profit$67,437  $396  $67,833  $71,053  $ $71,053 
Gross Profit Margin 21.2%    21.3%  21.2%    21.2%
            
Operating Income (Loss):           
Infrastructure Solutions$9,120  $10,791  $19,911  $12,916  $2,747 $15,663 
Operating Margin 5.9%    12.8%  8.0%    9.7%
Corrosion Protection (3,863)  6,272   2,409   6,953   469  7,422 
Operating Margin (5.0)%    3.1%  7.2%    7.7%
Energy Services 4,107   6   4,113   2,498     2,498 
Operating Margin 4.8%    4.8%  3.2%    3.2%
Corporate (8,905)  1,279   (7,626)  (7,908)  529  (7,379)
Operating Margin (2.8)%    (2.4)%  (2.4)%    (2.2)%
Total Operating Income$459  $18,348  $18,807  $14,459  $3,745 $18,204 
Operating Margin 0.1%    5.9%  4.3%    5.4%

_________________________________

(1) Includes non-GAAP adjustments related to:

  • Infrastructure Solutions - (i) pre-tax restructuring charges associated with severance and benefit related costs, early contract termination costs and other restructuring charges; (ii) acquisition and divestiture expenses; and (iii) impairment of assets held for sale.

  • Corrosion Protection - (i) pre-tax restructuring charges associated with severance and benefit related costs, early contract termination costs and other restructuring charges, (ii) acquisition and divestiture expenses; and (iii) impairment of assets held for sale.

  • Energy Services - pre-tax restructuring charges associated with severance and benefit related costs and other restructuring charges.

  • Corporate - (i) pre-tax restructuring charges primarily associated with severance and benefit related costs and legal expenses; and (ii) acquisition and divestiture expenses.

(2) Includes non-GAAP adjustments related to:

  • Infrastructure Solutions - (i) pre-tax restructuring charges associated with severance and benefit related costs, early contract termination costs and other restructuring charges; and (ii) acquisition and divestiture expenses.

  • Corrosion Protection - (i) pre-tax restructuring charges associated with severance and benefit related costs, early contract termination costs and other restructuring charges; and (ii) expenses incurred in connection with the acquisition of Hebna and divestiture of the Bayou business.

  • Corporate - (i) pre-tax restructuring charges primarily associated with severance and benefit related costs and legal expenses; and (ii) acquisition and divestiture expenses.

 

About Aegion Corporation (NASDAQ:  AEGN)

Aegion combines innovative technologies with market-leading expertise to maintain, rehabilitate and strengthen infrastructure around the world. Since 1971, the Company has played a pioneering role in finding innovative solutions to rehabilitate aging infrastructure, primarily pipelines in the wastewater, water, energy, mining and refining industries. Aegion also maintains the efficient operation of refineries and other industrial facilities. Aegion is committed to Stronger. Safer. Infrastructure.®  More information about Aegion can be found at www.aegion.com.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Aegion’s forward-looking statements in this news release represent its beliefs or expectations about future events or financial performance. These forward-looking statements are based on information currently available to Aegion and on management’s beliefs, assumptions, estimates or projections and are not guarantees of future events or results. When used in this document, the words “anticipate,” “estimate,” “believe,” “plan,” “intend, “may,” “will” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Such statements are subject to known and unknown risks, uncertainties and assumptions, including those referred to in the “Risk Factors” section of Aegion’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on March 1, 2019, and in subsequently filed documents. In light of these risks, uncertainties and assumptions, the forward-looking events may not occur. In addition, Aegion’s actual results may vary materially from those anticipated, estimated, suggested or projected. Except as required by law, Aegion does not assume a duty to update forward-looking statements, whether as a result of new information, future events or otherwise. Investors should, however, review additional disclosures made by Aegion from time to time in Aegion’s filings with the Securities and Exchange Commission. Please use caution and do not place reliance on forward-looking statements. All forward-looking statements made by Aegion in this news release are qualified by these cautionary statements.

Information regarding the impact of the Tax Cuts and Jobs Act consists of estimates which are forward looking and subject to change. We anticipate additional guidance, both at the federal and state level, to be forthcoming in 2019.  As such, the impacts of the legislation may differ from our current estimates, interpretations and assumptions, possibly materially, and the amount of the impact on the Company may accordingly be adjusted over the course of 2019.

About Non-GAAP Financial Measures

Aegion has presented certain information in this release excluding certain items that impacted income, expense and earnings per share. The adjusted earnings per share in the quarters and six months ended June 30, 2019 and 2018, respectively, exclude charges related to the Company’s restructuring activities, acquisition and divestiture-related activities, impairment of assets held for sale, project warranty accruals, credit facility amendment fees and impacts related to the Tax Cuts and Jobs Act.

Aegion management uses such non-GAAP information internally to evaluate financial performance for Aegion’s operations because Aegion’s management believes such non-GAAP information allows management to more accurately compare Aegion’s ongoing performance across periods. As such, Aegion’s management believes that providing non-GAAP financial information to Aegion’s investors is useful because it allows investors to evaluate Aegion’s performance using the same methodology and information used by Aegion management.

Aegion®, Tite Liner®, Tyfo® and Stronger. Safer. Infrastructure.® and the associated logos are the registered trademarks of Aegion Corporation and its affiliates. (AEGN-ER)

CONTACT:         Aegion Corporation
                          David F. Morris, Executive Vice President and Chief Financial Officer
                          (636) 530-8000

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Source: GlobeNewswire (July 31, 2019 - 6:00 PM EDT)

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