Aegion Corporation Reports 2018 Second Quarter Financial Results

ST. LOUIS, Aug. 01, 2018 (GLOBE NEWSWIRE) --

A PDF accompanying this announcement is available at http://resource.globenewswire.com/Resource/Download/a48a9184-fbda-4fb1-82f3-63f056d2dfa7

Management continues to target adjusted EPS growth of at least 30% in 2018; Exiting underperforming operations

  • Q2’18 earnings per diluted share were $0.24 compared to earnings per diluted share of $0.33 in Q2’17. Q2’18 adjusted (non-GAAP)1 earnings per diluted share were $0.34, improving from prior year earnings per diluted share of $0.33.
  • Contract backlog as of June 30, 2018 remains strong at $738 million, driven by new orders in the quarter of $352 million and a record ending backlog position in North America CIPP.
  • Aegion's continued focus on simplifying the business to generate more predictable results led to decisions to exit CIPP contracting operations in Denmark and Australia, with actions expected to be completed by the end of FY'18. As part of the 2017 Restructuring program, management will further evaluate its international footprint to assess the long-term viability of each business unit.

1Adjusted (non-GAAP) results exclude certain charges related to the Company’s restructuring activities, acquisition and divestiture-related expenses and credit facility amendment fees.  Reconciliation of adjusted results is included below.

Q2 2018 HIGHLIGHTS

  • Infrastructure Solutions' adjusted operating income of $12 million improved 43 percent from the prior-year period, despite $1 million in adjusted operating losses in the quarter and $2.5 million in adjusted losses year to date from Australia and Denmark CIPP contracting businesses.
  • Corrosion Protection results include strong performance on the international field joint coatings projects and a 600 basis point adjusted gross margin improvement in the cathodic protection business that helped offset lost contribution from the large deepwater project substantially completed in FY'17.
  • Energy Services delivered year-over-year improvement in operating income while continuing to invest for further growth in specialty services offerings.

“Aegion delivered Q2’18 adjusted EPS above Q2’17, despite significant prior year contribution from the large deepwater project. Results benefited from top-line strength in North America CIPP, improved cathodic protection margins and strong execution on the large international coating projects.  

Looking forward, we are exiting our Denmark and Australia CIPP contracting operations as part of a further comprehensive review of our international footprint. We see 2H'18 tailwinds from our strong backlog position, which includes record North America CIPP levels, recently awarded North America Tite Liner® projects and nearly 40 percent in remaining work on the large international coating projects. With this market strength and ongoing productivity improvements, we are poised to deliver significantly higher 2H’18 results and continue to expect adjusted EPS growth of at least 30 percent in FY'18."

Charles R. Gordon, President and Chief Executive Officer


Selected Consolidated Financial Highlights

 

 

Quarter Ended June 30, 2018

 

 

Quarter Ended June 30, 2017


(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

 

$

335,030

 

 

$

 

 

$

335,030

 

 

 

$

354,473

 

 

$

 

 

$

354,473

 


Cost of revenues

 

263,977

 

 

 

 

263,977

 

 

 

274,705

 

 

12

 

 

274,717

 


Gross profit

 

71,053

 

 

 

 

71,053

 

 

 

79,768

 

 

(12

)

 

79,756

 


Operating expenses

 

54,222

 

 

(1,373

)

 

52,849

 

 

 

58,109

 

 

(285

)

 

57,824

 


Acquisition and divestiture expenses

 

832

 

 

(832

)

 

 

 

 

 

 

 

 

 


Restructuring and related charges

 

1,540

 

 

(1,540

)

 

 

 

 

 

 

 

 

 


Operating income

 

14,459

 

 

3,745

 

 

18,204

 

 

 

21,659

 

 

273

 

 

21,932

 


Net income

(attributable to Aegion Corporation)

 

7,921

 

 

3,151

 

 

11,072

 

 

 

11,100

 

 

185

 

 

11,285

 


Diluted earnings per share

 

$

0.24

 

 

$

0.10

 

 

$

0.34

 

 

 

$

0.33

 

 

$

 

 

$

0.33

 


 

Net income and diluted earnings per share includes non-controlling interest.

  1. Q2 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, fixed asset disposals and other restructuring-related charges; and restructuring and related charges of $1,540 related to employee severance, extension of benefits, employment assistance programs and early lease and contract termination costs.
  • Acquisition and Divestiture Expenses: Expenses of $832 incurred in connection with the Company’s acquisition of Hebna and planned divestitures of Bayou and the CIPP operations in Australia.
  • Credit Facility Fees: Charges related to certain out-of-pocket expenses associated with amending the Company’s credit facility.

(2)    Q2 2017 Non-GAAP pre-tax adjustments:

  • Restructuring: Charges for cost of revenues of $(12) related to the write-off of certain other assets; and charges for operating expenses of $285 primarily related to wind-down and other restructuring-related charges, net of the reversal of reserves for potentially uncollectible receivables.

 

Selected Segment Financial Highlights

Infrastructure Solutions

 

 

Quarter Ended June 30, 2018

 

 

Quarter Ended June 30, 2017


(in thousands)

 

As Reported

(GAAP)

 

Adjustments

(1)

 

As Adjusted

(Non-GAAP)

 

 

As Reported

(GAAP)

 

Adjustments

(2)

 

As Adjusted

(Non-GAAP)


 

 

 

 


Revenues

 

$

160,732

 

 

$

 

 

$

160,732

 

 

 

$

148,311

 

 

$

 

 

$

148,311

 


Cost of revenues

 

124,783

 

 

 

 

124,783

 

 

 

113,947

 

 

12

 

 

113,959

 


Gross profit

 

35,949

 

 

 

 

35,949

 

 

 

34,364

 

 

(12

)

 

34,352

 


Gross profit margin

 

22.4

%

 

 

 

22.4

%

 

 

23.2

%

 

 

 

23.2

%


Operating expenses

 

24,805

 

 

(1,210

)

 

23,595

 

 

 

25,973

 

 

(285

)

 

25,688

 


Acquisition and divestiture expenses

 

286

 

 

(286

)

 

 

 

 

 

 

 

 

 


Restructuring and related charges

 

1,344

 

 

(1,344

)

 

 

 

 

 

 

 

 

 


Operating income

 

$

9,514

 

 

$

2,840

 

 

$

12,354

 

 

 

$

8,391

 

 

$

273

 

 

$

8,664

 


Operating margin

 

5.9

%

 

 

 

7.7

%

 

 

5.7

%

 

 

 

5.8

%


 

  1. Includes non-GAAP adjustments related to: (i) pre-tax restructuring charges associated with severance and benefit related costs, early lease and contract termination costs, fixed asset disposals and other restructuring charges; and (ii) expenses incurred in connection with the planned divestiture of the CIPP business in Australia.
  2. Includes non-GAAP adjustments related to pre-tax restructuring charges associated with the write-off of certain other assets, reversal of reserves for potentially uncollectible receivables, wind-down and other restructuring charges.

Corrosion Protection

 

 

Quarter Ended June 30, 2018

 

 

Quarter Ended June 30, 2017


(in thousands)

 

As Reported
(GAAP)

 

Adjustments

(1)

 

As Adjusted
(Non-GAAP)

 

 

As Reported
(GAAP)

 

Adjustments

 

As Adjusted
(Non-GAAP)


 

 

 

 


Revenues

 

$

96,389

 

 

$

 

 

$

96,389

 

 

 

$

127,715

 

 

$

 

 

$

127,715

 


Cost of revenues

 

71,852

 

 

 

 

71,852

 

 

 

92,079

 

 

 

 

92,079

 


Gross profit

 

24,537

 

 

 

 

24,537

 

 

 

35,636

 

 

 

 

35,636

 


Gross profit margin

 

25.5

%

 

 

 

25.5

%

 

 

27.9

%

 

 

 

27.9

%


Operating expenses

 

20,896

 

 

(163

)

 

20,733

 

 

 

24,397

 

 

 

 

24,397

 


Acquisition and divestiture expenses

 

546

 

 

(546

)

 

 

 

 

 

 

 

 

 


Restructuring and related charges

 

196

 

 

(196

)

 

 

 

 

 

 

 

 

 


Operating income

 

$

2,899

 

 

$

905

 

 

$

3,804

 

 

 

$

11,239

 

 

$

 

 

$

11,239

 


Operating margin

 

3.0

%

 

 

 

3.9

%

 

 

8.8

%

 

 

 

8.8

%


 

  1. Includes non-GAAP adjustments related to: (i) pre-tax restructuring charges associated with severance and benefit related costs, early lease and contract termination costs and other restructuring charges; and (ii) expenses incurred in connection with the acquisition of Hebna and planned divestiture of the Bayou business.

Energy Services

 

 

Quarter Ended June 30, 2018

 

 

Quarter Ended June 30, 2017


(in thousands)

 

As Reported
(GAAP)

 

Adjustments

 

As Adjusted
(Non-GAAP)

 

 

As Reported
(GAAP)

 

Adjustments

 

As Adjusted
(Non-GAAP)


 

 

 

 


Revenues

 

$

77,909

 

 

$

 

 

$

77,909

 

 

 

$

78,447

 

 

$

 

 

$

78,447

 


Cost of revenues

 

67,342

 

 

 

 

67,342

 

 

 

68,679

 

 

 

 

68,679

 


Gross profit

 

10,567

 

 

 

 

10,567

 

 

 

9,768

 

 

 

 

9,768

 


Gross profit margin

 

13.6

%

 

 

 

13.6

%

 

 

12.5

%

 

 

 

12.5

%


Operating expenses

 

8,521

 

 

 

 

8,521

 

 

 

7,739

 

 

 

 

7,739

 


Operating income

 

$

2,046

 

 

$

 

 

$

2,046

 

 

 

$

2,029

 

 

$

 

 

$

2,029

 


Operating margin

 

2.6

%

 

 

 

2.6

%

 

 

2.6

%

 

 

 

2.6

%


 

 

 


About Aegion (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, 2017, filed with the Securities and Exchange Commission on March 1, 2018, 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 preliminary estimates which are forward-looking statements and are subject to change, possibly materially. Information regarding the impacts of the Tax Cuts and Jobs Act is based on our current calculations, as well as our current interpretations, assumptions and expectations, which are subject to further change. 

 

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-month periods ended June 30, 2018 and 2017 exclude charges related to the Company’s restructuring efforts, acquisition and divestiture-related activities and credit facility amendment fees.

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®, Fyfe®, Tite Liner® and Fusible PVC® and the associated logos are the registered trademarks of Aegion Corporation and its affiliates.

CONTACT:

Aegion Corporation

 

David F. Morris, Executive Vice President and Chief Financial Officer

 

(636) 530-8000

 

Aegion Corporation

17988 Edison Avenue

St. Louis, MO 63005