Aegion Corporation Reports 2016 Third Quarter Financial Results

ST. LOUIS–(BUSINESS WIRE)–Aegion Corporation (Nasdaq Global Select Market: AEGN):

The Company expects strong Q4’16 performance and significant earnings
growth in 2017.

  • Q3’16 earnings per diluted share were $0.34 compared to $0.40 in
    Q3’15. Adjusted (non-GAAP)1 Q3’16 earnings per diluted
    share were $0.32 compared to $0.44 in Q3’15.
  • Year-to-date operating cash flow was 333 percent of net income
    reflecting strong cash generation consistent with the Company’s
    long-term objective.
  • Contract backlog was $743.9 million at September 30, 2016, which was
    in line with the prior year period.

1 Adjusted (non-GAAP) results exclude certain
charges related to the Company’s restructuring efforts, reversal of a
contingency reserve and acquisition-related expenses. The reconciliation
of adjusted results can be found in the Financial Highlights below.


Q3 2016 HIGHLIGHTS

  • Infrastructure Solutions delivered record revenue and operating income
    due to record results in the North American CIPP market and strong
    performance in the Asia-Pacific region.
  • Corrosion Protection’s results for cathodic protection services
    improved year-over-year, but not enough to offset an approximate $7
    million decline in operating income in other portions of the platform,
    primarily from weakness in the upstream markets.
  • Energy Services returned to profitability after completing the
    downsizing of its upstream operation in 1H’16.
  • Construction of the insulation coating facility was completed and pipe
    insulation commenced for the large deepwater pipe coating and
    insulation project.

“We continue to expect strong performance in the fourth quarter of 2016,
resulting in expected second half adjusted earnings per share largely in
line with our results from the same period in 2015.

“The initial outlook for 2017 indicates favorable conditions in our core
markets for North American municipal pipe rehabilitation, midstream
pipeline cathodic protection services and U.S. West Coast refinery
maintenance, as well as our expectation to successfully complete the
large deepwater pipe coating and insulation project. The projected
strength of these markets combined with expected increased stability in
the upstream oil and gas market provide a solid foundation for achieving
progress towards the financial targets we outlined in our long term
strategy.”

Charles R. Gordon
Aegion President and Chief
Executive Officer

 
 

Selected Q3’16 Consolidated Financial Highlights

 
     

Quarter Ended September 30, 2016

   

Quarter Ended September 30, 2015

(in thousands) As Reported

(GAAP)

    Adjustments

(1)

    As Adjusted

(Non-GAAP)

  As Reported

(GAAP)

    Adjustments

(2)

    As Adjusted

(Non-GAAP)

                       
Revenues $ 308,524 $ $ 308,524 $ 356,595 $ $ 356,595
Gross profit 66,318 130 66,448 77,121 1,661 78,782
Operating expenses 45,277 1,752 47,029 51,554 443 51,997
Operating income 20,505 (1,086 ) 19,419 24,938 1,847 26,785
Income from continuing operations

(attributable to Aegion Corporation)

12,067 (787 ) 11,280 14,750 1,446 16,196
Adjusted diluted EPS       $ 0.34       $ (0.02 )     $ 0.32       $ 0.40       $ 0.04       $ 0.44

Income from continuing operations and diluted earnings per
share includes non-controlling interest.

_________________________________
(1) 2016 Non-GAAP pre-tax
adjustments:

  • Restructuring: Charges for cost of revenues of $130
    related to the write-off of certain other assets; charges for
    operating expenses of $584 related to wind-down and other
    restructuring-related charges; charges of $212 related to employee
    severance, extension of benefits, employment assistance programs and
    early lease termination costs in accordance with ASC 420, Exit or
    Disposal Cost Obligations
    , and recorded as “Restructuring charges”
    in the Consolidated Statements of Operations; and charges for other
    expense of $1 related to the release of cumulative currency
    translation adjustments. The vast majority of restructuring charges
    relate to the 2016 Restructuring.
  • Acquisition-Related Expenses: Expenses of $324 related to
    costs incurred in connection with the Company’s acquisitions of
    Underground Solutions, selected assets of Fyfe Europe, the CIPP
    business of Leif M. Jensen A/S and Concrete Solutions, and other
    potential acquisition activity pursued by the Company during the
    quarter.
  • Reversal of Contingency Reserve: $2,336 reversal of
    contingency reserves established as part of the opening balance sheet
    for the acquisition of Brinderson L.P.

(2) 2015 Non-GAAP pre-tax adjustments:

  • Restructuring: Charges for cost of revenues of $1,661
    related to the write-off of certain other assets; charges for
    operating expenses of $(443) related to the reversal of reserves for
    potentially uncollectible receivables and other restructuring-related
    charges; charges of $172 related to employee severance, extension of
    benefits, employment assistance programs and early lease termination
    costs in accordance with ASC 420, Exit or Disposal Cost Obligations,
    and recorded as “Restructuring charges” in the Consolidated Statements
    of Operations; and charges for other expense of $108 related to the
    write-off of certain other assets.
  • Acquisition-Related Expenses: Expenses of $457 related to
    costs incurred in connection with potential acquisition activity
    pursued by the Company during the quarter.
 
 

Selected Q3’16 Segment Financial Highlights

 

Infrastructure Solutions

 
     

Quarter Ended September 30, 2016

   

Quarter Ended September 30, 2015

(in thousands) As Reported

(GAAP)

    Adjustments

(1)

    As Adjusted

(Non-GAAP)

  As Reported

(GAAP)

    Adjustments

(2)

    As Adjusted

(Non-GAAP)

                       
Revenues $ 158,562 $ $ 158,562 $ 149,606 $ $ 149,606
Gross profit 40,566 40,566 38,428 1,661 40,089
Operating expenses 21,646 416 22,062 22,001 443 22,444
Operating income       18,573       (69 )     18,504       16,255       1,390       17,645

(1) Includes non-GAAP adjustments related to: (i) pre-tax
restructuring charges associated with the write-off of certain other
assets, severance and benefit related costs, and other restructuring
charges; and (ii) acquisition expenses incurred primarily in connection
with the Company’s acquisitions of Underground Solutions, selected
assets of Fyfe Europe, the CIPP business of Leif M. Jensen A/S and
Concrete Solutions.

(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, early lease termination costs, severance and
benefit related costs, and other restructuring charges.

 
 

Corrosion Protection

 
     

Quarter Ended September 30, 2016

   

Quarter Ended September 30, 2015

(in thousands) As Reported
(GAAP)
    Adjustments
(1)
    As Adjusted
(Non-GAAP)
  As Reported
(GAAP)
    Adjustments
(2)
    As Adjusted
(Non-GAAP)
                       
Revenues $ 95,084 $ $ 95,084 $ 121,392 $ $ 121,392
Gross profit 18,374 130 18,504 27,595 27,595
Operating expenses 17,842 (28 ) 17,814 20,252 20,252
Operating income       513       177       690       6,886       457       7,343

(1) Includes non-GAAP adjustments related to pre-tax restructuring
charges associated with the write-off of certain other assets, severance
and benefit related costs, and other restructuring charges.

(2)
Includes non-GAAP adjustments related to expenses incurred in connection
with potential acquisition activity pursued by the Company during the
quarter.

 
 

Energy Services

 
     

Quarter Ended September 30, 2016

   

Quarter Ended September 30, 2015

(in thousands) As Reported
(GAAP)
    Adjustments
(1)
    As Adjusted
(Non-GAAP)
  As Reported
(GAAP)
    Adjustments     As Adjusted
(Non-GAAP)
                       
Revenues $ 54,878 $ $ 54,878 $ 85,597 $ $ 85,597
Gross profit 7,378 7,378 11,098 11,098
Operating expenses 5,789 1,364 7,153 9,301 9,301
Operating income       1,419       (1,194 )     225       1,797             1,797

(1) Includes non-GAAP adjustments related to: (i) pre-tax
restructuring charges associated with the write-off of certain other
assets, early lease termination costs, severance and benefit related
costs, and other restructuring charges; and (ii) reversal of a pre-tax
contingency reserve established as part of the opening balance sheet for
the acquisition of Brinderson L.P.

 
 

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
transformational 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 and provides innovative
solutions for the strengthening of buildings, bridges and other
structures. 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, 2015, as filed with the Securities and Exchange
Commission on February 29, 2016, 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.

About Non-GAAP Financial Measures

Aegion has presented certain information in this release excluding
certain items that impacted income, expense and earnings per share from
continuing operations. The adjusted earnings per share in the quarters
and nine-month periods ended September 30, 2016 and 2015 exclude certain
charges and benefits related to the Company’s restructuring efforts,
acquisition-related expenses and the release of reserves related to
pre-acquisition matters related to Brinderson L.P.

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® and the associated logo are registered trademarks of Aegion
Corporation and its affiliates. (AEGN-ER)

Contacts

Aegion Corporation
David A. Martin, 636-530-8000
Executive
Vice President and Chief Financial Officer