End market strength and strategic actions underpin expectations for improved financial outlook for 2018
ST. LOUIS, Nov. 01, 2017 (GLOBE NEWSWIRE) --
A PDF accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/223c4b23-eb60-41ef-97d2-c37dedb593bb
- Q3’17 loss per diluted share was $2.23 compared to income of $0.34 per diluted share in Q3’16. Adjusted (non-GAAP)1 Q3’17 earnings per diluted share were $0.32 compared to $0.32 in Q3’16. Unadjusted results per diluted share include after-tax charges for restructuring and divestiture activities of $0.21 and impairment of intangibles of $2.34.
- New orders for the first nine months of 2017 increased 26.2 percent to $1.1 billion compared to $867 million in the prior year period. Contract backlog as of September 30, 2017 was $756 million, an increase of $141 million from contract backlog at September 30, 2016, each excluding backlog for the large deepwater pipe coating and insulation project, which was substantially completed in Q2’17.
- Cash flow from operating activities in Q3'17 provided $34 million versus $27 million provided in Q3'16.
- The Company's Board of Directors has approved a $40 million open market share repurchase program for 2018.
1Adjusted (non-GAAP) results exclude certain charges related to the Company’s restructuring efforts, goodwill impairment, definite-lived intangible asset impairment, acquisition and divestiture activities and release of reserves related to pre-acquisition matters related to Brinderson L.P. Reconciliation of adjusted results begins on page 3.
Q3 2017 HIGHLIGHTS
- Infrastructure Solutions Q3’17 adjusted operating margin rebounded to 9.9 percent compared to 5.8 percent in Q2'17, despite approximately $5 million of losses from portions of the business subject to restructuring actions. Operations in Denmark, Australia, and Fyfe N. America are being restructured within Infrastructure Solutions.
- Corrosion Protection adjusted operating income doubled from Q3'16 on improved performance from international activity.
- Energy Services revenues grew 19.2 percent and operating profits improved by $1.2 million from Q3’16 adjusted results based on growth in maintenance and turnaround services.
- Restructuring and cost savings initiatives are expected to generate cost reductions in excess of $17 million in 2018.
“Continued momentum across key markets for all three Segments resulted in strong order intake and revenues for Q3 and YTD 2017. Backlog remains as strong as we have seen in recent history.
Losses of approximately $0.10 per share in the portions of Infrastructure Solutions being restructured created a significant drag on Q3 profits resulting in flat adjusted EPS versus 2016. The restructuring activities are expected to be substantially completed in 2017 with the affected businesses returning to profitability in early 2018. We expect to close out 2017 with adjusted EPS for the full year to be largely in line with 2016 adjusted results.
Based on the combination of the backlog position, continued strength across our key markets and the results of the restructuring activity, we expect profitability to improve significantly in 2018.”
Charles R. Gordon, President and Chief Executive Officer
STRATEGIC ACTIONS
- In August 2017, the Company announced a series of strategic actions intended to generate more predictable and sustainable long-term earnings growth. Activity during the third quarter included:
• Restructuring activities associated with the decision to exit the Infrastructure Solutions’ North American activity for non-pressure pipe contracting applications of the Tyfo® Fibrwrap® system.
• A detailed assessment of the CIPP contracting operations in Australia and Denmark that resulted in added restructuring actions. Activities will include consolidation of regional offices and realignment of management and support staff to match anticipated regional market activity.
• Restructuring activities associated with Corrosion Protection’s operations in Canada, which also included downsizing activities reflecting current and anticipated market conditions.
• Implementation of other cost savings initiatives across the Company.
- Total restructuring charges of $6.7 million were incurred in the third quarter of 2017 related to the above actions. Total costs associated with the restructuring actions are estimated to be between $12 and $15 million, most of which are expected to be cash charges, and incurred in the second half of 2017 and the first quarter of 2018.
- During the quarter, there were no significant cost reductions generated due to timing of the actions. The Company expects to generate annual cost reductions in excess of $17 million from restructuring actions and other cost reduction initiatives, most of which are expected to be fully realized in 2018.
- As part of the repositioning of the Infrastructure Solutions’ Tyfo® Fibrwrap® system operations in North America, an impairment assessment was performed for the long-lived assets and goodwill associated with the Fyfe reporting unit. As a result, an impairment charge of $86 million was recorded in the third quarter of 2017, of which $45 million related to goodwill and $41 million related to intangible assets. A reduction in annual amortization of intangibles of $2.8 million began on August 1, 2017.
2018 STOCK REPURCHASE PROGRAM
On October 25, 2017, Aegion’s Board of Directors authorized a program to repurchase up to $40.0 million of the Company’s common stock in 2018 in open market transactions. The Company is currently executing a repurchase program that will expire on December 31, 2017 or, if earlier, upon the exhaustion of the Company’s 2017 $40.0 million authorization.
Aegion will effect the 2018 $40.0 million repurchase program through one or more trading plans established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. Rule 10b5-1 permits Aegion’s designated broker to continue to purchase shares on Aegion’s behalf even during periods when Aegion is in possession of undisclosed earnings or other material, non-public information about the Company pursuant to pre-arranged parameters instituted during an open window period. Share repurchases can be made on the open market or otherwise. The new repurchase program will expire on December 31, 2018 or, if earlier, upon the repurchase of $40.0 million of the Company’s stock under the new repurchase program.
The new stock repurchase program will be effected in accordance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, which includes certain restrictions including one with respect to the number of shares that may be purchased in a single day (subject to certain exceptions for block purchases) based on the average daily trading volume of the Company’s shares on the Nasdaq Global Select Market during the four calendar weeks preceding the week in which a purchase is to be effected.
As required under the federal securities laws, Aegion will report in each of its quarterly reports and in its annual report repurchases of shares by month for the most recently completed quarter, including the average prices paid and the approximate dollar value of the shares yet to be purchased under the program.
Selected Q3’17 Consolidated Financial Highlights
| Quarter Ended September 30, 2017 | Quarter Ended September 30, 2016 | |||||||||||||||||||||||||||
| (in thousands) | As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | ||||||||||||||||||||||
| (GAAP) | (1) | (Non-GAAP) | (GAAP) | (2) | (Non-GAAP) | |||||||||||||||||||||||
| Cost of revenues | $ | 268,430 | $ | — | $ | 268,430 | $ | 242,206 | $ | (130 | ) | $ | 242,076 | |||||||||||||||
| Gross profit | 73,442 | — | 73,442 | 66,318 | 130 | 66,448 | ||||||||||||||||||||||
| Operating expenses | 54,610 | (1,258 | ) | 53,352 | 45,277 | 1,752 | 47,029 | |||||||||||||||||||||
| Goodwill impairment | 45,390 | (45,390 | ) | — | — | — | — | |||||||||||||||||||||
| Definite-lived intangible asset impairment | 41,032 | (41,032 | ) | — | — | — | — | |||||||||||||||||||||
| Acquisition and divestiture expenses | 1,980 | (1,980 | ) | — | 324 | (324 | ) | — | ||||||||||||||||||||
| Restructuring and related charges | 5,439 | (5,439 | ) | — | 212 | (212 | ) | — | ||||||||||||||||||||
| Operating income (loss) | (75,009 | ) | 95,099 | 20,090 | 20,505 | (1,086 | ) | 19,419 | ||||||||||||||||||||
| Net income (loss) | (73,236 | ) | 84,126 | 10,890 | 12,067 | (787 | ) | 11,280 | ||||||||||||||||||||
| (attributable to Aegion Corporation) | ||||||||||||||||||||||||||||
| Diluted earnings (loss) per share | $ | (2.23 | ) | $ | 2.55 | $ | 0.32 | $ | 0.34 | $ | (0.02 | ) | $ | 0.32 | ||||||||||||||
Net income and diluted earnings per share includes non-controlling interest.
_________________________________
(1) 2017 Non-GAAP pre-tax adjustments:
- Restructuring: Charges for operating expenses of $1,258 primarily related to wind-down and other restructuring-related charges; and charges of $5,439 related to employee severance, extension of benefits, employment assistance programs and early lease termination costs. The vast majority of restructuring charges relate to the 2017 Restructuring.
- Impairment: Charges for goodwill impairment of $45,390 for the Fyfe reporting unit; and charges for definite-lived intangible asset impairment of $41,032 for Fyfe North America.
- Acquisition and Divestiture Expenses: Expenses of $1,980 incurred in connection with the Company’s acquisition of Environmental Techniques and the Company’s planned divestiture of Bayou.
(2) 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; 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 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.
Selected Q3’17 Segment Financial Highlights
Infrastructure Solutions
| Quarter Ended September 30, 2017 | Quarter Ended September 30, 2016 | |||||||||||||||||||||||||||
| (in thousands) | As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | ||||||||||||||||||||||
| (GAAP) | (1) | (Non-GAAP) | (GAAP) | (2) | (Non-GAAP) | |||||||||||||||||||||||
| Revenues | $ | 174,161 | $ | — | $ | 174,161 | $ | 158,562 | $ | — | $ | 158,562 | ||||||||||||||||
| Cost of revenues | 132,972 | 15 | 132,987 | 117,996 | — | 117,996 | ||||||||||||||||||||||
| Gross profit | 41,189 | (15 | ) | 41,174 | 40,566 | — | 40,566 | |||||||||||||||||||||
| Gross profit margin | 23.6 | % | 23.6 | % | 25.6 | % | 25.6 | % | ||||||||||||||||||||
| Operating expenses | 25,045 | (1,158 | ) | 23,887 | 21,646 | 416 | 22,062 | |||||||||||||||||||||
| Goodwill impairment | 45,390 | (45,390 | ) | — | — | — | — | |||||||||||||||||||||
| Definite-lived intangible asset impairment | 41,032 | (41,032 | ) | — | — | — | — | |||||||||||||||||||||
| Acquisition and divestiture expenses | 118 | (118 | ) | — | 324 | (324 | ) | — | ||||||||||||||||||||
| Restructuring and related charges | 3,390 | (3,390 | ) | — | 23 | (23 | ) | — | ||||||||||||||||||||
| Operating income (loss) | $ | (73,786 | ) | $ | 91,073 | $ | 17,287 | $ | 18,573 | $ | (69 | ) | $ | 18,504 | ||||||||||||||
| Operating margin | (42.4 | )% | 9.9 | % | 11.7 | % | 11.7 | % | ||||||||||||||||||||
(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; (ii) impairment charges to goodwill and definite-lived intangible assets related to the Fyfe reporting unit; and (iii) acquisition expenses incurred primarily in connection with the Company’s acquisition of Environmental Techniques.
(2) 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 acquisition of Underground Solutions, selected assets of Fyfe Europe, the CIPP business of Leif M. Jensen A/S and Concrete Solutions.
Corrosion Protection
| Quarter Ended September 30, 2017 | Quarter Ended September 30, 2016 | |||||||||||||||||||||||||||
| (in thousands) | As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | ||||||||||||||||||||||
| (GAAP) | (1) | (Non-GAAP) | (GAAP) | (2) | (Non-GAAP) | |||||||||||||||||||||||
| Revenues | $ | 102,276 | $ | — | $ | 102,276 | $ | 95,084 | $ | — | $ | 95,084 | ||||||||||||||||
| Cost of revenues | 79,213 | (15 | ) | 79,198 | 76,710 | (130 | ) | 76,580 | ||||||||||||||||||||
| Gross profit | 23,063 | 15 | 23,078 | 18,374 | 130 | 18,504 | ||||||||||||||||||||||
| Gross profit margin | 22.5 | % | 22.6 | % | 19.3 | % | 19.5 | % | ||||||||||||||||||||
| Operating expenses | 21,811 | (100 | ) | 21,711 | 17,842 | (28 | ) | 17,814 | ||||||||||||||||||||
| Acquisition and divestiture expenses | 1,862 | (1,862 | ) | — | — | — | — | |||||||||||||||||||||
| Restructuring and related charges | 2,049 | (2,049 | ) | — | 19 | (19 | ) | — | ||||||||||||||||||||
| Operating income (loss) | $ | (2,659 | ) | $ | 4,026 | $ | 1,367 | $ | 513 | $ | 177 | $ | 690 | |||||||||||||||
| Operating margin | (2.6 | )% | 1.3 | % | 0.5 | % | 0.7 | % | ||||||||||||||||||||
(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) expenses incurred in connection with the planned disposal of the Bayou business.
(2) 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.
Energy Services
| Quarter Ended September 30, 2017 | Quarter Ended September 30, 2016 | |||||||||||||||||||||||||
| (in thousands) | As Reported | Adjustments | As Adjusted | As Reported | Adjustments | As Adjusted | ||||||||||||||||||||
| (GAAP) | (Non-GAAP) | (GAAP) | (1) | (Non-GAAP) | ||||||||||||||||||||||
| Revenues | $ | 65,435 | $ | — | $ | 65,435 | $ | 54,878 | $ | — | $ | 54,878 | ||||||||||||||
| Cost of revenues | 56,245 | — | 56,245 | 47,500 | — | 47,500 | ||||||||||||||||||||
| Gross profit | 9,190 | — | 9,190 | 7,378 | — | 7,378 | ||||||||||||||||||||
| Gross profit margin | 14.0 | % | 14.0 | % | 13.4 | % | 13.4 | % | ||||||||||||||||||
| Operating expenses | 7,754 | — | 7,754 | 5,789 | 1,364 | 7,153 | ||||||||||||||||||||
| Restructuring and related charges | — | — | — | 170 | (170 | ) | — | |||||||||||||||||||
| Operating income | $ | 1,436 | $ | — | $ | 1,436 | $ | 1,419 | $ | (1,194 | ) | $ | 225 | |||||||||||||
| Operating margin | 2.2 | % | 2.2 | % | 2.6 | % | 0.4 | % | ||||||||||||||||||
(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 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 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, 2016, filed with the Securities and Exchange Commission on March 1, 2017, 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, 2017 and 2016 exclude charges related to the Company’s restructuring efforts, goodwill impairment, definite-lived intangible asset impairment, acquisition and divestiture activities 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®, Fibrwrap®, Tyfo® and the associated logos are the registered trademarks of Aegion Corporation and its affiliates. (AEGN-ER)
| CONTACT: | Aegion Corporation |
| David A. Martin, Executive Vice President and Chief Financial Officer | |
| (636) 530-8000 |
