Aegion Reports 2014 Second Quarter Financial Results

  • Second quarter 2014 non-GAAP diluted earnings per share from continuing operations were $0.34. On an as-reported GAAP basis, diluted earnings per share in the second quarter of 2014 were $0.33.
  • Energy and Mining non-GAAP operating income increased 2.7 percent over the prior year quarter to $8.3 million aided by the Brinderson acquisition on July 1, 2013.
  • Water and Wastewater operating income increased 40.0 percent over the prior year quarter to $12.7 million. Operating margins increased 200 basis points to 9.8 percent.
  • Commercial and Structural generated a slight profit in the quarter, a significant improvement from the first quarter of 2014.
  • Consolidated backlog as of June 30, 2014, compared to a year ago and excluding Brinderson, increased 13.9 percent to $581.1 million primarily due to a 19.6 percent increase for Water and Wastewater and a 11.6 percent increase for Energy and Mining. Brinderson’s backlog as of June 30, 2014 was $248.1 million, a 23.4 percent increase since the acquisition on July 1, 2013. Aegion’s total backlog was $829 million, an all-time record.

1 Reconciliation of all GAAP to non-GAAP financial results in this release are presented on pages 10 through 13. Consolidated second quarter 2014 non-GAAP results exclude a $0.5 million pre-tax charge, or $0.01 per diluted share, from acquisition-related expenses. 2014 year-to-date non-GAAP EPS excludes the acquisition-related expenses just noted plus $0.5 million pre-tax, or $0.01 per diluted share of expense recorded in connection with the March 31, 2014 sale of the Company’s 49% interest in Bayou Coating, L.L.C., recorded in “Other income (expense)” on the Consolidated Statement of Operations.

ST. LOUIS--()--Aegion Corporation (Nasdaq Global Select Market: AEGN) today reported financial results for the second quarter and first six months of 2014. For the second quarter, reported GAAP income from continuing operations totaled $12.8 million, or $0.33 per diluted share, compared to $18.2 million, or $0.47 per diluted share, in the prior year period. Excluding adjustments, income from continuing operations was $13.1 million, or $0.34 per diluted share, for the second quarter of 2014 compared to $13.3 million, or $0.34 per diluted share for the prior year quarter (non-GAAP1). In the second quarter of 2013, the Company recognized $1.3 million, or $0.03 per diluted share, for equity in earnings of affiliated companies from two joint ventures that were divested prior to April 1, 2014, with no resulting contribution in the second quarter of 2014.

For the first six months of 2014, reported GAAP income from continuing operations was $17.3 million, or $0.45 per diluted share, compared to $21.8 million, or $0.56 per diluted share, in the prior year period. Excluding adjustments, income from continuing operations for the first six months of 2014 totaled $17.9 million, or $0.47 per diluted share, compared to $16.9 million, or $0.43 per diluted share.

Chuck Gordon, Aegion’s Interim Chief Executive Officer, commented, “Aegion achieved second quarter results that were largely in line with expectations as Corrpro’s performance rebounded in May and June. Insituform’s North American business completed a strong second quarter and Fyfe North America delivered improved performance consistent with our expectations for a recovery in 2014. We did experience unplanned project delays late in the quarter, particularly related to the CRTS/Wasit project and United Pipeline Systems. While Brinderson’s upstream business increased over 50 percent year-over-year on a pro forma basis, additional opportunities expected in the quarter have not materialized including slower progress in the Permian Basin. Aegion has a strong backlog position, which supports our expectations for a seasonally strong second half of the year that can achieve full-year non-GAAP earnings per share from continuing operations in the range of $1.50 to $1.65, in line with our previously stated guidance.”

2014 Second Half Outlook

The second half of the year is seasonally the largest for Corrpro, United Pipeline Systems and Brinderson within the Energy and Mining platform. Corrpro’s backlog, as of June 30, 2014, was a record $87 million as new orders increased by 9.4 percent in the second quarter compared to prior year period and the bid table remains robust. United Pipeline Systems has an active bid table, which is indicative of the favorable market conditions in North America and the Middle East, as well as new opportunities in South America. Brinderson enjoyed record billable hours for the downstream maintenance business in the first half of 2014, which we expect to continue in the second half of the year. Brinderson also is pursuing several opportunities in the upstream market with the potential for contribution in the second half of 2014. For the project-based Energy and Mining businesses, pipe welding rates for the offshore portion of the Wasit project have improved in July from the significantly slower pace in the second quarter. The delays experienced in the second quarter shifts the expected completion date to early 2015, consistent with prior forecasts. Bayou has a strong backlog position in Canada and the United States. Bayou’s facility in Louisiana recently received two key project awards increasing backlog to the highest levels since mid-2012. The timing for pipe delivery and coating schedules, which define the start-date for these projects, is yet to be determined. Based on these favorable market conditions and backlog, the Company continues to expect 2014 revenues in the range of $770 million to $800 million and operating margins in the range of 8.0 percent to 9.0 percent.

For the Water and Wastewater platform, backlog as of June 30, 2014 was $317.3 million, a 19.6 percent increase from June 30, 2013. Insituform’s North American business has a strong backlog position, creating a solid base for continued improved performance in the second half of 2014. The international markets generally remain stable. The strong North America position continues to support full year 2014 revenues of $500 million to $525 million and operating margins of 7.0 percent to 8.0 percent.

The Company achieved progress in the first half of 2014 with respect to Commercial and Structural’s North American business. Investments made in 2013 and 2014 to create a more robust sales organization and stronger project management capabilities are taking hold through increased sales visibility reflected in recent new orders that were the highest since 2012. Improving conditions in the North American operation and opportunities in Asia reaffirm the expectations for Commercial and Structural revenues in the range of $70 million to $85 million and operating margins ranging from negative low single digits to positive low single digits.

“We have the backlog in hand and a solid bid table with our core businesses for a strong second half of 2014,” said Mr. Gordon. “While we have a cautious outlook this year with respect to the project-based businesses, we are making progress in the expected recovery of our Commercial and Structural platform. As we look ahead, our top priority is to improve execution across the organization through investments in people and best-in-class operating systems, assessing businesses and markets to best position our go-to-market strategies, and engendering stronger cooperation and collaboration to leverage resources and best practices. These efforts are part of our ongoing commitment to further the Company’s long-term strategic and financial objectives. Aegion enjoys favorable end markets that support both our current expectations for growth in 2014, as well as our strategy to achieve sustainable growth and improve return on invested capital.”

Consolidated Highlights

Second Quarter 2014 versus Second Quarter 2013

Revenues increased $80.8 million, or 33.4 percent. Brinderson contributed $72.7 million in revenues during the quarter with no revenue contribution during the second quarter of 2013. Revenues from the Water and Wastewater segment increased $14.0 million, or 12.1 percent, primarily in the North American business. Partially offsetting these increases were decreased revenues from the industrial linings business as a result of declines in certain international mining markets and the completion of the large Moroccan project in late 2013, and the continued lull in pipe coating project activity for the Gulf of Mexico. Commercial and Structural revenues decreased $0.2 million from lower workable backlog and customer driven project delays in the North American operations, partially offset by increase in material sales and installation revenues in the Asian operations.

Gross profit increased $13.4 million, or 22.8 percent, to $71.9 million, with Brinderson contributing $10.9 million. Water and Wastewater increased gross profit by $3.7 million, or 14.4 percent, due to increased revenues and improved margins from the North American operations. Partially offsetting the increases were the issues noted above impacting revenues and decreased project work from both CRTS and Bayou coating operations. Excluding Brinderson, consolidated gross margins improved by 20 basis points in the quarter primarily due to improved margins for Insituform’s North America business and higher margin work performed in Bayou’s operations in Louisiana. Commercial and Structural gross profit of $6.7 million was even with the prior year quarter.

Operating expenses increased $9.9 million, or 24.3 percent. Brinderson added $7.3 million to operating expenses during the second quarter of 2014. Exclusive of Brinderson, operating expenses as a percent of revenue for Energy and Mining increased 300 basis points, primarily due to continued strategic investments in the Middle East. Water and Wastewater operating expenses as a percent of revenue decreased 150 basis points as expenses remained relatively flat year over year while revenues grew 12.1 percent. Operating expenses as a percent of revenue for Commercial and Structural increased 270 basis points year over year due to an increase in North America related to the investments made to restore growth and improve operational capabilities.

Operating income increased 30.3 percent to $20.6 million in the second quarter of 2014 compared to the second quarter of 2013. Excluding acquisition-related expenses, operating income increased $3.4 million, or 19.3 percent, to $21.2 million (non-GAAP). The Energy and Mining and Water and Wastewater segments increased operating income by $1.6 million and $3.6 million, respectively.

The second quarter 2014 financial results also include a $0.5 million, or $0.01 per diluted share, non-cash unrealized loss from foreign currency fluctuations on dollar denominated foreign subsidiary loans and payables.

Cash Flow

Net cash flow provided by continuing operations for the first six months of 2014 was $19.0 million compared to $16.9 million provided in the first six months of 2013. The increase in operating cash flow compared to 2013 was primarily due to improved net income, partially offset by the timing of working capital requirements.

Net cash flow used by investing activities in the first six months of 2014 was $5.6 million compared to $6.5 million of cash provided by investing activities in the first six months of 2013. Capital expenditures in the first six months of 2014 were $13.8 million compared to $13.1 million in the first six months of 2013, a slight increase due to the addition of Brinderson and more maintenance capital to support Insituform’s growing North American business. On March 31, 2014, we sold our 49% ownership interest in Bayou Coating, L.L.C. for $9.1 million. On June 30, 2013, we received $18.3 million in connection with the sale of our 50 percent interest in our German joint venture.

Net cash flows from financing activities used $25.2 million during the first six months of 2014 compared to $28.1 million used in the first six months of 2013. During 2014, the Company used $20.7 million to repurchase 882,840 shares of common stock through open market purchases and in connection with the Company’s equity compensation programs, as compared to $15.8 million to repurchase 696,310 shares in the first six months of 2013. During the first six months of 2014 and 2013, the Company made scheduled principal payments on its long-term debt of $8.9 million and $12.5 million, respectively.

Net cash flow for the first six months of 2014 was an outflow of $11.9 million compared to an outflow of $15.4 million in the first six months of 2013.

 

Consolidated Backlog

 

AEGION CORPORATION AND SUBSIDIARIES

CONTRACT BACKLOG

(Unaudited, in millions)

 
         

June 30,
2014

   

March 31,
2014

       

December 31,
2013

   

June 30,
2013

Energy and Mining (1) $ 463.5     $ 416.8         $ 429.1     $ 193.0
Water and Wastewater 317.3 285.5 280.1 265.2
Commercial and Structural 48.4 46.4         49.8 52.2
Total backlog $ 829.2 $ 748.7         $ 759.0 $ 510.4

_______________

   

(1)

  June 30, 2014, March 31, 2014 and December 31, 2013 included backlog from Brinderson of $248.1 million, $255.8 million and $268.3 million, respectively. Brinderson backlog represents expected revenues to be realized under long-term Master Service Agreements (“MSAs”) and other signed contracts. If the remaining term of these arrangements exceeds 12 months, the unrecognized revenues attributable to such arrangements included in backlog are limited to only the next 12 months of expected revenues.
 

Energy and Mining segment contract backlog at June 30, 2014 was $463.5 million, which included backlog of $248.1 million related to Brinderson. Exclusive of Brinderson, backlog at June 30, 2014 was $215.4 million, which was an increase of $54.4 million, or 33.8 percent, compared to March 31, 2014, and a $22.4 million, or 11.6 percent, increase compared to June 30, 2013. Backlog for the Energy and Mining segment (exclusive of Brinderson) improved on a year over year basis primarily due to improvements in Corrpro protection operations, primarily in the United States, and Bayou’s operations in Louisiana, which recently secured large contracts with two major customers. Offsetting these improvements were year over year declines due to the completion of the large Moroccan project in late 2013, a reduction in capital and maintenance expenditures impacting the industrial linings operations, primarily in South America and Mexico, and progress on the Wasit gas field project in Saudi Arabia. At the date of its acquisition, July 1, 2013, backlog for Brinderson was $201.0 million and has increased 23.4 percent to $248.1 million at June 30, 2014. This increase was principally due to securing significant new downstream long-term maintenance contracts with customers in the fourth quarter of 2013.

Contract backlog in our Water and Wastewater segment was $317.3 million at June 30, 2014, a $31.8 million, or 11.1 percent, increase from backlog at March 31, 2014 and a $52.1 million, or 19.6 percent, increase from backlog at June 30, 2013.

Contract backlog for the Commercial and Structural segment was $48.4 million at June 30, 2014. This represented an increase of $2.0 million, or 4.3 percent, compared to March 31, 2014 and a decrease of $3.8 million, or 7.3 percent, compared to June 30, 2013. The increase compared to the prior quarter is attributable to North American backlog improvements due to improved volume of new orders and better visibility into project opportunities.

Segment Reporting

Energy and Mining

      Quarters Ended June 30,         Increase (Decrease)
  2014     2013     $     %  
Revenues $ 175,608     $ 108,592 $ 67,016     61.7 %
Gross profit 35,967 26,294 9,673 36.8
Gross profit margin 20.5 % 24.2 % n/a

(370

)bp

Operating expenses 27,685 18,230 9,455 51.9
Acquisition-related expenses 539 1,908 (1,369 ) (71.8 )
Operating income 7,743 6,156 1,587 25.8
Operating margin 4.4 % 5.7 % n/a

(130

)bp

Non-GAAP operating income 8,282 8,064 218 2.7
 
 
Six Months Ended June 30, Increase (Decrease)
  2014     2013     $     %  
Revenues $ 359,518 $ 217,283 $ 142,235 65.5 %
Gross profit 71,476 50,560 20,916 41.4
Gross profit margin 19.9 % 23.3 % n/a

(340

)bp

Operating expenses 55,519 37,045 18,474 49.9
Acquisition-related expenses 539 1,908 (1,369 ) (71.8 )
Operating income 15,418 11,607 3,811 32.8
Operating margin 4.3 % 5.3 % n/a

(100

)bp

Non-GAAP operating income 15,957 13,515 2,442 18.1
 

Second Quarter 2014 versus Second Quarter 2013

Excluding acquisition-related expenses (non-GAAP), Energy and Mining operating income increased $0.2 million, or 2.7 percent, to $8.3 million due principally to a $3.6 million contribution from Brinderson in the second quarter of 2014. In addition, gross profits from Bayou’s operations in Canada and Louisiana were strong when compared to the prior year second quarter. Offsetting these increases were declines in United Pipeline Systems caused by soft market conditions in several international markets and the completion of the large Morocco project in 2013 with no comparable contribution during the second quarter of 2014.

Water and Wastewater

      Quarters Ended June 30,         Increase (Decrease)
  2014     2013     $     %  
Revenues $ 129,710     $ 115,736 $ 13,974     12.1 %
Gross profit 29,257 25,576 3,681 14.4
Gross profit margin 22.6 % 22.1 % n/a 50 bp
Operating expenses 16,603 16,536 67 0.4
Operating income 12,654 9,040 3,614 40.0
Operating margin 9.8 % 7.8 % n/a 200 bp
 
 
Six Months Ended June 30, Increase (Decrease)
  2014     2013     $     %  
Revenues $ 235,843 $ 219,531 $ 16,312 7.4 %
Gross profit 49,359 44,737 4,622 10.3
Gross profit margin 20.9 % 20.4 % n/a 50 bp
Operating expenses 33,685 33,135 550 1.7
Operating income 15,674 11,602 4,072 35.1
Operating margin 6.6 % 5.3 % n/a 130 bp
 

Second Quarter 2014 versus Second Quarter 2013

Water and Wastewater achieved a $3.6 million, or 40.0 percent, increase in operating income compared to the prior year quarter. The increase came from higher revenues in Insituform’s North American operations as a result of increased workable backlog. Operating expenses increased by only a modest 0.4 percent, another contributing factor to a 200 basis point improvement in operating margins. The successes achieved from the efforts to improve project cost estimating, maintain bidding discipline and focus on strong project management execution contributed to the quarter’s results.

Commercial and Structural

      Quarters Ended June 30,         Increase (Decrease)
  2014     2013     $     %  
Revenues $ 17,550     $ 17,772 $ (222 )     (1.2 )%
Gross profit 6,694 6,698 (4 ) (0.1 )
Gross profit margin 38.1 % 37.7 % n/a

40

bp

Operating expenses 6,472 6,071 401 6.6
Operating income 222 627 (405 ) (64.6 )
Operating margin 1.3 % 3.5 % n/a

(220

)bp

 
 
Six Months Ended June 30, Increase (Decrease)
  2014     2013     $     %  
Revenues $ 33,741 $ 31,262 $ 2,479 7.9 %
Gross profit 12,146 11,408 738 6.5
Gross profit margin 36.0 % 36.5 % n/a

(50

)bp

Operating expenses 13,485 11,976 1,509 12.6
Operating loss (1,339 ) (568 ) (771 ) (135.7 )
Operating margin (4.0 )% (1.8 )% n/a

(220

)bp

 

Second Quarter 2014 versus Second Quarter 2013

Commercial and Structural operating income decreased $0.4 million primarily driven by increased operating expenses resulting from the investments made in 2013 and 2014 in business development professionals, operation and project management, and systems to restore the sales growth and improve the business’ operational capabilities. Second quarter 2014 operating results improved $1.8 million from the first quarter of 2014, marking the third consecutive quarter of improved operating income.

About Aegion

Aegion Corporation is a global leader in infrastructure protection and maintenance, providing proprietary technologies and services: (i) to protect against the corrosion of industrial pipelines; (ii) to rehabilitate and strengthen water, wastewater, energy and mining piping systems and buildings, bridges, tunnels and waterfront structures; and (iii) to utilize integrated professional services in engineering, procurement, construction, maintenance and turnaround services for a broad range of energy related industries. Our business activities include manufacturing, distribution, maintenance, construction, installation, coating and insulation, cathodic protection, research and development and licensing. More information about Aegion can be found on our internet site at www.aegion.com.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. We make forward-looking statements in this news release that represent our beliefs or expectations about future events or financial performance. These forward-looking statements are based on information currently available to us 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 our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on February 28, 2014, and in subsequently filed documents. In light of these risks, uncertainties and assumptions, the forward-looking events may not occur. In addition, our actual results may vary materially from those anticipated, estimated, suggested or projected. Except as required by law, we do 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 us from time to time in our 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 us in this news release are qualified by these cautionary statements.

Regulation G Statement

We have presented certain information in this release excluding certain items that impacted income, expense and earnings per share from continuing operations. The non-GAAP earnings per share in 2014 exclude the earnings impact of acquisition-related expenses and the loss on sale of our 49 percent interest in Bayou Coating, L.L.C. The non-GAAP earnings per share in 2013 exclude the earnings impact of acquisition-related expenses, the gain related to the sale of our German joint venture, charges associated with our decision to liquidate Bayou Welding Works and a goodwill write-off associated with the sale of our interest in Bayou Coating, L.L.C. Aegion management uses such non-GAAP information internally to evaluate financial performance for our operations, as we believe it allows us to more accurately compare our ongoing performance across periods.

Aegion®, the Aegion® logo, Insituform®, the Insituform® logo, United Pipeline Systems®, Bayou Companies®, Corrpro®, CRTS™, Fyfe® and Brinderson® are the registered and unregistered trademarks of Aegion Corporation and its affiliates.

 

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per share information)

 
   

For the Quarters Ended
June 30,

   

For the Six Months Ended
June 30,

2014     2013 2014     2013
Revenues $ 322,868     $ 242,100 $ 629,102     $ 468,076
Cost of revenues 250,950       183,532   496,121       361,371  
Gross profit 71,918 58,568 132,981 106,705
Operating expenses 50,760 40,837 102,689 82,156
Acquisition-related expenses 539       1,908   539       1,908  
Operating income 20,619       15,823   29,753       22,641  
Other income (expense):
Interest expense (3,320 ) (2,243 ) (6,435 ) (4,579 )
Interest income 125 46 377 118
Other (687 )     7,169   (1,463 )     7,083  
Total other income (expense) (3,882 )     4,972   (7,521 )     2,622  
Income before taxes on income 16,737 20,795 22,232 25,263
Taxes on income 3,961       3,709   5,573       4,821  
Income before equity in earnings of affiliated companies 12,776 17,086 16,659 20,442
Equity in earnings of affiliated companies       1,310   677       2,212  
Income from continuing operations 12,776 18,396 17,336 22,654
Loss from discontinued operations (364 )     (4,977 ) (496 )     (5,898 )
Net income 12,412 13,419 16,840 16,756
Non-controlling interests (26 )     (206 ) (57 )     (832 )
Net income attributable to Aegion Corporation $ 12,386       $ 13,213   $ 16,783       $ 15,924  
 
Earnings per share attributable to Aegion Corporation:
Basic:
Income from continuing operations $ 0.34 $ 0.47 $ 0.46 $ 0.56
Loss from discontinued operations (0.01 )     (0.13 ) (0.01 )     (0.15 )
Net income $ 0.33 $ 0.34 $ 0.45 $ 0.41
Diluted:
Income from continuing operations $ 0.33 $ 0.47 $ 0.45 $ 0.56
Loss from discontinued operations (0.01 )     (0.13 ) (0.01 )     (0.15 )
Net income $ 0.32 $ 0.34 $ 0.44 $ 0.41
 
 
Weighted average shares outstanding - Basic 37,893,170 38,960,439 37,928,548 38,919,551
Weighted average shares outstanding - Diluted 38,250,198 39,318,829 38,306,647 39,311,389
 
 

AEGION CORPORATION AND SUBSIDIARIES

STATEMENT OF OPERATIONS RECONCILIATION

(Unaudited) (Non-GAAP)

(in thousands, except share and per share information)

 

 

For the Quarter Ended June 30, 2014

 
   

As Reported
(GAAP)

   

Acquisition-
Related
Expenses (1)

   

As Adjusted
(Non-GAAP)

Affected Line Items:    
Operating expenses $ 51,299 $ (539 ) $ 50,760
Operating income 20,619 539 21,158
Income before taxes on income 16,737 539 17,276
Taxes on income 3,961 208 4,169
 
Income from continuing operations attributable to Aegion Corporation (2) 12,750 331 13,081
 
Diluted earnings per share:
Income from continuing operations attributable to Aegion Corporation (2) $ 0.33 $ 0.01 $ 0.34

_______________

(1)   Includes expenses incurred in connection with the 2012 acquisition of Fyfe Group LLC’s Asian operations (Fyfe Asia), the 2013 acquisition of Brinderson, L.P. and other potential acquisition activity pursued by the Company during the period (non-GAAP).
 
(2) Includes non-controlling interests.
 
 

AEGION CORPORATION AND SUBSIDIARIES

STATEMENT OF OPERATIONS RECONCILIATION

(Unaudited) (Non-GAAP)

(in thousands, except share and per share information)

 

For the Quarter Ended June 30, 2013

 
   

As Reported
(GAAP)

   

Acquisition-
Related
Expenses (1)

   

Joint
Venture/Divestiture
Activity (2)(3)

   

As Adjusted
(Non-GAAP)

Affected Line Items:    
Operating expenses $ 42,745 $ (1,908 ) $ $ 40,837
Operating income 15,823 1,908 17,731
Other income (expense):
Other 7,169 (8,688 ) (1,519 )
Income before taxes on income 20,795 1,908 (8,688 ) 14,015
Taxes on income 3,709 760 (2,635 ) 1,834
 
Income from continuing operations attributable to Aegion Corporation (4) 18,190 1,148 (6,053 ) 13,285
 
Diluted earnings per share:
Income from continuing operations attributable to Aegion Corporation (4) $ 0.47 $ 0.02 $ (0.15 ) $ 0.34

_______________

(1)   Includes expenses incurred in conjunction with the acquisition of Brinderson, L.P. in July 2013 and other acquisition activity pursued by the Company during the period (non-GAAP).
 
(2) Includes a gain on the sale of the Company’s 50 percent interest in Insituform Rohrsanierungstechniken GmbH. The sale price was €14.0 million, approximately $18.3 million. The sale resulted in a gain on the sale of approximately $11.3 million (net of $0.5 million of transaction expenses) (non-GAAP).
 
(3) Includes a non-cash write down of the Company’s investment in Bayou Coating, LLC. The Company recognized a non-cash charge of $2.7 million ($1.8 million post-tax) related to the goodwill allocated to the joint venture as part of the purchase price accounting associated with the 2009 acquisition of The Bayou Companies, LLC. The non-cash charge represented the Company’s then current estimate of the difference between the carrying value of the investment on the balance sheet and the amount the Company would receive in connection with the exercise (non-GAAP).
 
(4) Includes non-controlling interests and equity in earnings of affiliated companies.
 
 

AEGION CORPORATION AND SUBSIDIARIES

STATEMENT OF OPERATIONS RECONCILIATION

(Unaudited) (Non-GAAP)

(in thousands, except share and per share information)

 

For the Six-Month Period Ended June 30, 2014

 
   

As Reported
(GAAP)

   

Acquisition-
Related
Expenses (1)

   

Loss on Sale of
Bayou Coating (2)

   

As Adjusted
(Non-GAAP)

Affected Line Items:    
Operating expenses $ 103,228 $ (539 ) $ $ 102,689
Operating income 29,753 539 30,292
Other income (expense):
Other (1,463 ) 472 (991 )
Income before taxes on income 22,232 539 472 23,243
Taxes on income 5,573 208 194 5,975
 
Income from continuing operations attributable to Aegion Corporation (3) 17,279 331 278 17,888
 
Diluted earnings per share:
Income from continuing operations attributable to Aegion Corporation (3) $ 0.45 $ 0.01 $ 0.01 $ 0.47

_______________

(1)   Includes expenses incurred in connection with the 2012 acquisition of Fyfe Group LLC’s Asian operations (Fyfe Asia), the 2013 acquisition of Brinderson, L.P. and other acquisition activity pursued by the Company during the period (non-GAAP).
 
(2) Represents a loss on the sale of the Company’s 49 percent interest in Bayou Coating, L.L.C. The difference between the Company’s recorded gross equity in earnings of affiliated companies of approximately $1.2 million and the final equity distribution settlement of $0.7 million resulted in a loss of approximately $0.5 million that is recorded in “Other income (expense)” on the consolidated statement of operations (non-GAAP).
 
(3) Includes non-controlling interests and equity in earnings of affiliated companies.
 
 

AEGION CORPORATION AND SUBSIDIARIES

STATEMENT OF OPERATIONS RECONCILIATION

(Unaudited) (Non-GAAP)

(in thousands, except share and per share information)

 

For the Six-Month Period Ended June 30, 2013

 
   

As Reported
(GAAP)

   

Acquisition-
Related
Expenses (1)

   

Joint
Venture/Divestiture
Activity (2)(3)

   

As Adjusted
(Non-GAAP)

Affected Line Items:    
Operating expenses $ 84,064 $ (1,908 ) $ $ 82,156
Operating income 22,641 1,908 24,549
Other income (expense):
Other 7,083 (8,688 ) (1,605 )
Income before taxes on income 25,263 1,908 (8,688 ) 18,483
Taxes on income 4,821 760 (2,635 ) 2,946
 
Income from continuing operations attributable to Aegion Corporation (4) 21,822 1,148 (6,053 ) 16,917
 
Diluted earnings per share:
Income from continuing operations attributable to Aegion Corporation (4) $ 0.56 $ 0.02 $ (0.15 ) $ 0.43

_______________

(1)   Includes expenses incurred in conjunction with the acquisition of Brinderson, L.P. in July 2013 and other acquisition activity pursued by the Company during the period (non-GAAP).
 
(2) Includes a gain on the sale of the Company’s 50 percent interest in Insituform Rohrsanierungstechniken GmbH. The sale price was €14.0 million, approximately $18.3 million. The sale resulted in a gain on the sale of approximately $11.3 million (net of $0.5 million of transaction expenses) (non-GAAP).
 
(3) Includes a non-cash write down of the Company’s investment in Bayou Coating, LLC. The Company recognized a non-cash charge of $2.7 million ($1.8 million post-tax) related to the goodwill allocated to the joint venture as part of the purchase price accounting associated with the 2009 acquisition of The Bayou Companies, LLC. The non-cash charge represented the Company’s then current estimate of the difference between the carrying value of the investment on the balance sheet and the amount the Company would receive in connection with the exercise (non-GAAP).
 
(4) Includes non-controlling interests and equity in earnings of affiliated companies.
 
 

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited) (in thousands, except share amounts)

 
   

June 30,
2014

   

December 31,
2013

Assets
Current assets
Cash and cash equivalents $ 146,146 $ 158,045
Restricted cash 575 483
Receivables, net 229,158 231,775
Retainage 35,481 30,831
Costs and estimated earnings in excess of billings 105,131 79,999
Inventories 60,591 58,768
Prepaid expenses and other current assets 40,054 38,522
Current assets of discontinued operations 4,899 5,435
Total current assets 622,035 603,858
Property, plant & equipment, less accumulated depreciation 180,379 182,303
Other assets
Goodwill 349,912 348,680
Identified intangible assets, less accumulated amortization 203,758 209,283
Investments 9,101
Deferred income tax assets 6,981 6,957
Other assets 13,216 14,315
Total other assets 573,867 588,336
Non-current assets of discontinued operations 2,551 2,921
 
Total Assets $ 1,378,832 $ 1,377,418
 
Liabilities and Equity
Current liabilities
Accounts payable $ 83,550 $ 80,417
Accrued expenses 104,863 105,466
Billings in excess of costs and estimated earnings 27,789 24,978
Current maturities of long-term debt and line of credit 26,399 22,024
Current liabilities of discontinued operations 1,782 2,070
Total current liabilities 244,383 234,955
Long-term debt, less current maturities 353,300 366,616
Deferred income tax liabilities 38,539 38,217
Other non-current liabilities 12,324 10,512
Non-current liabilities of discontinued operations 238 197
Total liabilities 648,784 650,497
 
Equity
Preferred stock, undesignated, $.10 par – shares authorized 2,000,000; none outstanding
Common stock, $.01 par – shares authorized 125,000,000; shares issued and outstanding 37,631,630 and 37,983,114, respectively 376 380
Additional paid-in capital 222,714 236,128
Retained earnings 487,591 470,808
Accumulated other comprehensive income 1,499 2,052
Total stockholders’ equity 712,180 709,368
Non-controlling interests 17,868 17,553
Total equity 730,048 726,921
 
Total Liabilities and Equity $ 1,378,832 $ 1,377,418
 
 

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 
   

For the Six Months Ended
June 30,

2014     2013

Cash flows from operating activities:

Net income $ 16,840 $ 16,756
Loss from discontinued operations 496   5,898  
17,336 22,654
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 21,894 18,169
Gain on sale of fixed assets (8 ) (793 )
Equity-based compensation expense 3,120 3,973
Deferred income taxes (434 ) (2,836 )
Equity in earnings of affiliated companies (677 ) (2,212 )
Gain on sale of interests in German joint venture (11,771 )
Loss on sale of interests in Bayou Coating, LLC 472
Loss on foreign currency transactions 134 1,571
Other 2,243 1,926
Changes in operating assets and liabilities:
Restricted cash (92 ) (16 )
Return on equity of affiliated companies 684 2,269
Receivables net, retainage and costs and estimated earnings in excess of billings (26,771 ) (2,263 )
Inventories (1,605 ) (6,135 )
Prepaid expenses and other assets (345 ) (3,407 )
Accounts payable and accrued expenses 2,090 (4,357 )
Other operating 984   148  
Net cash provided by operating activities of continuing operations 19,025 16,920
Net cash used in operating activities of discontinued operations (90 ) (8,859 )
Net cash provided by operating activities 18,935 8,061
 

Cash flows from investing activities:

Capital expenditures (13,784 ) (13,121 )
Proceeds from sale of fixed assets 829 1,637
Patent expenditures (1,730 ) (359 )
Sale of interests in German join venture 18,300
Sale of interest in Bayou Coating, L.L.C. 9,065    
Net cash provided by (used in) investing activities of continuing operations (5,620 ) 6,457
Net cash provided by investing activities of discontinued operations 90   774  
Net cash provided by (used in) investing activities (5,530 ) 7,231
 

Cash flows from financing activities:

Proceeds from issuance of common stock upon stock option exercises, including tax effects 5,013 901
Repurchase of common stock (20,661 ) (15,822 )
Purchase of noncontrolling interest (617 )
Payment of earnout related to acquisition of CRTS, Inc. (2,112 )
Proceeds on notes payable 1,409
Principal payments on long-term debt (8,915 ) (12,500 )
Net cash used in financing activities (25,180 ) (28,124 )
Effect of exchange rate changes on cash (124 ) (2,612 )
Net decrease in cash and cash equivalents for the period (11,899 ) (15,444 )
Cash and cash equivalents, beginning of period 158,045   133,676  
Cash and cash equivalents, end of period $ 146,146   $ 118,232  
 

Contacts

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

Release Summary

Aegion Corporation reports 2014 second quarter financial results.

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Contacts

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