Aegion Corporation Reports 2020 Third Quarter Financial Results

Management evaluating strategic alternatives for Energy Services; Focused on growing water and wastewater market presence

ST. LOUIS, Oct. 28, 2020 (GLOBE NEWSWIRE) --

A PDF accompanying this release is available at: http://ml.globenewswire.com/Resource/Download/f38a396c-11e4-4cb8-9b96- ...

• Q3’20 loss per diluted share was $0.93 compared to earnings per diluted share of $0.19 in Q3’19, reflecting a $39 million pre-tax non-cash goodwill impairment charge for Energy Services. Q3’20 adjusted (non-GAAP)¹ earnings per diluted share were $0.32 compared to $0.40 in the prior year. Q3’20 adjusted results were at the high end of guidance expectations, driven by continued strength from the Insituform North America business.
• Revenues in the quarter were $276 million. The Insituform North America business grew revenues by 10% year over year, helping to offset COVID-related impacts from Energy Services and the coatings business within Corrosion Protection.
• Strong ending cash and net debt levels at September 30, 2020, position Aegion well for organic and inorganic growth.
• Management focused on capitalizing on strong balance sheet and industry leading position to grow the North America water and wastewater business. BofA Securities engaged to review strategic alternatives for the Energy Services segment.
• Q4’20 adjusted earnings are expected to be slightly below Q3’20 results, primarily reflecting typical seasonal revenue reductions in Infrastructure Solutions.
  

^{(1)Adjusted (non-GAAP) results exclude certain charges related to the Company’s restructuring activities, acquisition and divestiture-related expenses, goodwill and indefinite-lived intangible asset impairment, impairment of assets held for sale, project warranty accruals, credit facility amendment fees and impacts from the Tax Cuts and Jobs Act. Reconciliation of adjusted results is included below.}

Q3’20 HIGHLIGHTS

• Top-line reductions drove a 6% decline in adjusted operating income. However, strong Insituform performance and a sharp improvement in the Corrpro North America business drove increases in both adjusted gross margins and adjusted operating margins.
• Ending cash of $77 million increased 40% over the prior year, and year-to-date operating cash flows of $79 million exceeded the full-year performance in each of the last five years. The Company paid off its revolver borrowings in Q3’20, resulting in ending net debt levels of $150 million.
• Contract backlog as of September 30, 2020, was $678 million. Excluding exited or to-be-exited businesses, backlog increased 2% compared to prior year levels.
  

“Our performance in the quarter and outlook as we close out the year reflect our continued success navigating unprecedented near-term challenges.

Looking forward, we are advancing a strategy to better leverage our differentiated pipeline rehabilitation and protection technologies for the benefit of public health and the environment. A core element of the strategy is to focus on meaningful growth opportunities in the water and wastewater space to capitalize on the strength of our largest and most profitable business.

The evaluation of strategic alternatives for the Energy Services business reflects a deliberate multi-year shift to simplify and drive a narrower focus on our core markets. Our performance today and plans moving forward position us well to create significant long-term value for our shareholders.”

Charles R. Gordon, President and Chief Executive Officer, Aegion

Selected Consolidated Financial Highlights

	Quarter Ended September 30, 2020										Quarter Ended September 30, 2019
(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	$	275,884		$	—		$	275,884			$	308,789		$	—		$	308,789
Cost of revenues		215,624			(1,830	)		213,794				241,997			33			242,030
Gross profit		60,260			1,830			62,090				66,792			(33	)		66,759
Operating expenses		45,055			(1,546	)		43,509				48,866			(1,860	)		47,006
Goodwill impairment		39,430			(39,430	)		—				—			—			—
Acquisition and divestiture expenses		680			(680	)		—				1,842			(1,842	)		—
Restructuring and related charges		2,335			(2,335	)		—				1,435			(1,435	)		—
Operating income (loss)		(27,240	)		45,821			18,581				14,649			5,104			19,753
Other income (expense)		(3,785	)		(897	)		(4,682	)			(8,414	)		5,345			(3,069	)
Income (loss) before taxes (benefit)		(31,025	)		44,924			13,899				6,235			10,449			16,684
Taxes (benefit) on income (loss)		(3,131	)		6,118			2,987				(114	)		3,905			3,791
Net Income (loss) (attributable to Aegion Corporation)		(28,474	)		38,551			10,077				6,036			6,468			12,504
Diluted earnings (loss) per share	$	(0.93	)	$	1.25		$	0.32			$	0.19		$	0.21		$	0.40

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

⁽¹⁾  Q3’20 non-GAAP pre-tax adjustments:

• Restructuring: Charges to cost of revenues of $1,830 primarily related to inventory write offs; charges for operating expenses of $1,546 primarily related to wind-down costs, fixed asset disposals and other restructuring-related charges; charges of $2,335 related to employee severance, extension of benefits, employment assistance programs and contract termination costs; income for other income/expense of $1,468 related to net gains on disposal of certain restructured operations and the release of cumulative currency translation adjustments; and adjustments to non-controlling interests income of $255.
• Goodwill Impairment: Charges of $39,430 related to goodwill impairments in Energy Services.
• Acquisition and Divestiture Expenses: Expenses of $680 incurred primarily in connection with the Company’s divestitures of Australia and Spain and its planned divestiture of its held for sale operations; and losses of $571 related to the divestiture of Australia.

⁽²⁾  Q3’19 non-GAAP pre-tax adjustments:

• Restructuring: Gains for cost of revenues of $33 primarily related to recoveries of inventory write offs; charges for operating expenses of $1,860 primarily related to wind-down expenses, reserves for potentially uncollectible receivables, fixed asset disposals and other restructuring-related charges; charges of $1,435 related to employee severance, extension of benefits, employment assistance programs and contract termination costs; charges for other expense of $5,345 related to net losses on disposal of certain restructured operations and the release of cumulative currency translation adjustments; and an income tax return-to-provision true-up of $1,683 related to foreign tax credits.
• Acquisition and Divestiture Expenses: Charges of $1,842 incurred primarily in connection with the divestiture of the Company’s business in Australia and other held for sale operations.
  

Selected Segment Financial Highlights

	Quarter Ended September 30, 2020										Quarter Ended September 30, 2019
(in thousands)	As Reported (GAAP)			Adjustments (1)			As Adjusted (Non-GAAP)				As Reported (GAAP)			Adjustments (2)			As Adjusted (Non-GAAP)
Revenues:
Infrastructure Solutions	$	152,102		$	—		$	152,102			$	156,087		$	—		$	156,087
Corrosion Protection		60,986			—			60,986				75,901			—			75,901
Energy Services		62,796			—			62,796				76,801			—			76,801
Total Revenues	$	275,884		$	—		$	275,884			$	308,789		$	—		$	308,789
Gross Profit:
Infrastructure Solutions	$	41,358		$	—		$	41,368			$	39,569		$	(30	)	$	39,539
Gross Profit Margin		27.2	%					27.2	%			25.4	%					25.3	%
Corrosion Protection		13,432			1,830			15,262				17,232			(3	)		17,229
Gross Profit Margin		22.0	%					25.0	%			22.7	%					22.7	%
Energy Services		5,470			—			5,470				9,991			—			9,991
Gross Profit Margin		8.7	%					8.7	%			13.0	%					13.0	%
Total Gross Profit	$	60,260		$	1,830		$	62,090			$	66,792		$	(33	)	$	66,759
Gross Profit Margin		21.8	%					22.5	%			21.6	%					21.6	%
Operating Income (Loss):
Infrastructure Solutions	$	23,497		$	(175	)	$	23,322			$	18,376		$	1,710		$	20,086
Operating Margin		15.4	%					15.3	%			11.8	%					12.9	%
Corrosion Protection		(1,357	)		4,520			3,163				2,362			834			3,196
Operating Margin		(2.2	)%					5.2	%			3.1	%					4.2	%
Energy Services		(41,701	)		40,299			(1,402	)			2,257			139			2,396
Operating Margin		(66.4	)%					(2.2	)%			2.9	%					3.1	%
Corporate		(7,679	)		1,177			(6,502	)			(8,346	)		2,421			(5,925	)
Operating Margin		(2.8	)%					(2.4	)%			(2.7	)%					(1.9	)%
Total Operating Income (Loss)	$	(27,240	)	$	45,821		$	18,581			$	14,649		$	5,104		$	19,753
Operating Margin		(9.9	)%					6.7	%			4.7	%					6.4	%

⁽¹⁾  Includes non-GAAP adjustments related to:

• Infrastructure Solutions - (i) pre-tax restructuring charges associated with severance and benefit related costs, wind-down costs and other restructuring charges; and (ii) expenses incurred in connection with the divestitures of Australia and Spain.
• Corrosion Protection - pre-tax restructuring charges associated with severance and benefit related costs, contract termination costs, wind-down costs, fixed asset disposals and other restructuring charges.
• Energy Services - (i) pre-tax restructuring charges associated with severance and benefit related costs, contract termination costs, fixed asset disposals and other restructuring charges; and (ii) goodwill impairment charges.
• Corporate - (i) pre-tax restructuring charges primarily associated with severance and benefit related costs and legal expenses; and (ii) divestiture expenses related to Australia and Spain and other acquisition and divestiture activities.

⁽²⁾  Includes non-GAAP adjustments related to:

• Infrastructure Solutions - (i) pre-tax restructuring charges associated with severance and benefit related costs, contract termination costs and other restructuring charges; and (ii) expenses incurred in connection with the divestiture of the CIPP business in Australia.
• Corrosion Protection - (i) pre-tax restructuring charges associated with severance and benefit related costs, contract termination costs and other restructuring charges, and (ii) acquisition and divestiture expenses.
• 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 related to held for sale entities.
  

About Aegion Corporation (NASDAQ: AEGN)

Aegion combines innovative technologies with market-leading expertise to maintain, rehabilitate and strengthen infrastructure around the world. For nearly 50 years, 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, 2019, filed with the Securities and Exchange Commission on March 2, 2020, and in subsequently filed documents, and, in particular, the impact of the current COVID virus outbreak and the evolving response thereto both on the Company generally and on other risks described therein. 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. The Company anticipates additional guidance, both at the federal and state level, to be forthcoming in 2020.  As such, the impacts of the legislation may differ from current estimates, interpretations and assumptions, possibly materially, and the amount of the impact on the Company may accordingly be adjusted over the course of 2020.

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 nine months ended September 30, 2020 and 2019 exclude charges related to the Company’s restructuring activities, acquisition and divestiture-related expenses, goodwill and indefinite-lived intangible asset impairment, 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 and Stronger. Safer. Infrastructure. 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
[phone]