Delivered significant earnings improvement in FY'18; Positioning Aegion for growth through technological differentiation
ST. LOUIS, Feb. 27, 2019 (GLOBE NEWSWIRE) --
A PDF accompanying this announcement is available at http://resource.globenewswire.com/Resource/Download/3072abed-d5a1-4832-bff9-2a8b65946bee
- 4Q'18 loss per diluted share was $0.08 compared to a loss per diluted share of $0.39 in 4Q'17. 4Q'18 adjusted (non-GAAP)1 earnings per diluted share were $0.27, up 35 percent from 4Q'17 earnings per diluted share of $0.20.
- FY'18 earnings per diluted share were $0.09 compared to a loss per diluted share of $2.09 in FY'17. FY'18 adjusted (non-GAAP)1 earnings per diluted share were $1.19, up 17 percent from FY'17 earnings per diluted share of $1.02.
- Revenues for FY'18 were $1.3 billion, declining $25 million, or 2 percent, from FY'17. Excluding exited or to be exited operations, revenues on a same-store basis increased nearly 7 percent.
- Contract backlog as of December 31, 2018 was $669 million, declining 3 percent from the prior year. Excluding exited or to be exited operations where order intake was impacted during the year, backlog increased 5 percent.
1Adjusted (non-GAAP) results exclude certain charges related to the Company's restructuring activities, goodwill and definite-lived intangible asset impairment, acquisition and divestiture-related expenses, a change in accounting estimates, credit facility amendment fees and impacts from the Tax Cuts and Jobs Act. Reconciliation of adjusted results is included below.
2018 HIGHLIGHTS
- Infrastructure Solutions delivered revenues of $604 million, a decline of just 1 percent from record results achieved in FY'17. Adjusted operating margins were down slightly, as productivity challenges within North America CIPP were largely offset by sharp growth in demand for pressure pipe products and improvements from the restructured Fyfe North America and international CIPP businesses.
- Corrosion Protection increased adjusted gross margins by 80 basis points, driven by strong performance on several large Middle East coating projects and operational improvements within the cathodic protection business.
- Energy Services grew revenues by 16 percent and adjusted operating income by 31 percent, following the successful completion of labor transitions at multiple refineries.
- Restructuring and cost containment efforts drove a $9 million, or 4 percent, decline in operating expenses, resulting in adjusted operating margins of nearly 5 percent, on par with FY'17 despite lower revenues.
"Aegion delivered 17 percent growth in adjusted EPS in FY'18, driven by solid contributions from the Infrastructure Solutions segment, continued growth in Energy Services and strong execution on the large Middle East coating projects within Corrosion Protection.
For 2019, we are targeting a modest improvement in adjusted EPS. We expect top line and profitability improvements in Infrastructure Solutions, Energy Services and the cathodic protection business within Corrosion Protection. We don't currently have visibility into a large project to replace the contribution from the Middle East coating projects in FY'18, which is expected to result in an overall decline in consolidated revenues of 2 to 4 percent. However, when excluding exited or to be exited businesses, 2019 consolidated revenues are expected to grow by 2 to 4 percent over FY'18.
As we wind down our restructuring efforts and simplify Aegion, I am excited about leveraging the scale and market position of our key businesses and delivering more value to stakeholders through our renewed focus on technological differentiation."
Charles R. Gordon, President and Chief Executive Officer
Selected Consolidated Financial Highlights
| Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||||
| (in thousands, except earnings per share) | As Reported (GAAP) | Adjustments (1)(2)(3) | As Adjusted (Non-GAAP) | As Reported (GAAP) | Adjustments (4)(5) | As Adjusted (Non-GAAP) | |||||||||||||||||||
| Revenues | $ | 1,333,568 | $ | — | $ | 1,333,568 | $ | 1,359,019 | $ | — | $ | 1,359,019 | |||||||||||||
| Cost of revenues | 1,066,642 | (4,670 | ) | 1,061,972 | 1,074,207 | (156 | ) | 1,074,051 | |||||||||||||||||
| Gross profit | 266,926 | 4,670 | 271,596 | 284,812 | 156 | 284,968 | |||||||||||||||||||
| Operating expenses | 219,823 | (13,183 | ) | 206,640 | 226,173 | (11,017 | ) | 215,156 | |||||||||||||||||
| Goodwill impairment | 1,389 | (1,389 | ) | — | 45,390 | (45,390 | ) | — | |||||||||||||||||
| Definite-lived intangible asset impairment | 2,169 | (2,169 | ) | — | 41,032 | (41,032 | ) | — | |||||||||||||||||
| Acquisition and divestiture expenses | 7,004 | (7,004 | ) | — | 2,923 | (2,923 | ) | — | |||||||||||||||||
| Restructuring and related charges | 6,894 | (6,894 | ) | — | 12,814 | (12,814 | ) | — | |||||||||||||||||
| Operating income (loss) | 29,647 | 35,309 | 64,956 | (43,520 | ) | 113,332 | 69,812 | ||||||||||||||||||
| Interest expense | (17,327 | ) | 2,179 | (15,148 | ) | (16,001 | ) | — | (16,001 | ) | |||||||||||||||
| Other income (expense) | (9,881 | ) | 11,018 | 1,137 | (2,201 | ) | 161 | (2,040 | ) | ||||||||||||||||
| Net income (loss) (attributable to Aegion Corporation) | 2,928 | 36,242 | 39,170 | (69,401 | ) | 103,839 | 34,438 | ||||||||||||||||||
| Diluted earnings (loss) per share | $ | 0.09 | $ | 1.10 | $ | 1.19 | $ | (2.09 | ) | $ | 3.11 | $ | 1.02 | ||||||||||||
Net income and diluted earnings per share includes non-controlling interest.
(1) 2018 Non-GAAP pre-tax adjustments:
- Restructuring: Charges for cost of revenues of $1,881 primarily related to inventory write offs; charges for operating expenses of $13,183 primarily related to wind-down expenses, reserves for potentially uncollectible receivables, fixed asset disposals and other restructuring-related charges; charges for goodwill and definite-lived intangible asset impairments of $1,389 and $2,169, respectively, related to the restructured operations in Denmark and Corrpro Middle East; charges of $6,894 related to employee severance, extension of benefits, employment assistance programs and early lease and contract termination costs; and (iv) charges for other expense of $3,970 related to losses on disposal of certain restructured operations and the release of cumulative currency translation adjustments.
- Acquisition and Divestiture Expenses: Expenses of $7,004 incurred in connection with the Company's divestiture of Bayou, small acquisitions in both Corrosion Protection and Energy Services, the divestiture of the CIPP business in Denmark and the planned divestiture of the CIPP operation in Australia.
- Change in Accounting Estimate: Charges of $2,789 for estimates of inventory obsolescence in the Company's cathodic protection operations.
- Credit Facility Fees: Expenses of $2,179 related to certain out-of-pocket expenses and acceleration of certain unamortized fees associated with amending the Company's credit facility.
(2) 2018 Non-GAAP adjustments include $7,048 loss on the divestiture of Bayou.
(3) 2018 Non-GAAP adjustments include $1,917 of income tax reversals resulting from the Tax Cuts and Jobs Act.
(4) 2017 Non-GAAP pre-tax adjustments:
- Restructuring: Charges for cost of revenues of $156 primarily related to the write-off of certain other assets; charges for operating expenses of $11,017 primarily related to wind-down and other restructuring-related charges; charges of $12,814 related to employee severance, extension of benefits, employment assistance programs and early lease and contract termination costs.
- 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 $3,084 incurred in connection with the Company's acquisition of Environmental Techniques and the Company's divestiture of Bayou.
(5) 2017 Non-GAAP adjustments include $2,426 of income tax charges resulting from the Tax Cuts and Jobs Act.
Selected Segment Financial Highlights
Infrastructure Solutions
| Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||||
| (in thousands) | As Reported (GAAP) | Adjustments (1) | As Adjusted (Non-GAAP) | As Reported (GAAP) | Adjustments (2) | As Adjusted (Non-GAAP) | |||||||||||||||||||
| Revenues | $ | 604,121 | $ | — | $ | 604,121 | $ | 612,154 | $ | — | $ | 612,154 | |||||||||||||
| Cost of revenues | 471,710 | (1,281 | ) | 470,429 | 471,331 | (141 | ) | 471,190 | |||||||||||||||||
| Gross profit | 132,411 | 1,281 | 133,692 | 140,823 | 141 | 140,964 | |||||||||||||||||||
| Gross profit margin | 21.9 | % | 22.1 | % | 23.0 | % | 23.0 | % | |||||||||||||||||
| Operating expenses | 100,349 | (8,014 | ) | 92,335 | 106,834 | (8,769 | ) | 98,065 | |||||||||||||||||
| Goodwill impairment | 1,389 | (1,389 | ) | — | 45,390 | (45,390 | ) | — | |||||||||||||||||
| Definite-lived intangible asset impairment | 870 | (870 | ) | — | 41,032 | (41,032 | ) | — | |||||||||||||||||
| Acquisition and divestiture expenses | 814 | (814 | ) | — | 651 | (651 | ) | — | |||||||||||||||||
| Restructuring and related charges | 5,306 | (5,306 | ) | — | 9,160 | (9,160 | ) | — | |||||||||||||||||
| Operating income (loss) | $ | 23,683 | $ | 17,674 | $ | 41,357 | $ | (62,244 | ) | $ | 105,143 | $ | 42,899 | ||||||||||||
| Operating margin | 3.9 | % | 6.8 | % | (10.2 | )% | 7.0 | % | |||||||||||||||||
(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, goodwill and definite-lived intangible asset impairments and other restructuring charges; and (ii) expenses incurred in connection with the divestiture of the CIPP business in Denmark and the planned divestiture of the CIPP business in Australia.
(2) 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; (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.
Corrosion Protection
| Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||||
| (in thousands) | As Reported (GAAP) | Adjustments (1) | As Adjusted (Non-GAAP) | As Reported (GAAP) | Adjustments (2) | As Adjusted (Non-GAAP) | |||||||||||||||||||
| Revenues | $ | 393,740 | $ | — | $ | 393,740 | $ | 456,139 | $ | — | $ | 456,139 | |||||||||||||
| Cost of revenues | 300,772 | (3,389 | ) | 297,383 | 347,899 | (15 | ) | 347,884 | |||||||||||||||||
| Gross profit | 92,968 | 3,389 | 96,357 | 108,240 | 15 | 108,255 | |||||||||||||||||||
| Gross profit margin | 23.6 | % | 24.5 | % | 23.7 | % | 23.7 | % | |||||||||||||||||
| Operating expenses | 86,017 | (5,013 | ) | 81,004 | 89,868 | (2,248 | ) | 87,620 | |||||||||||||||||
| Definite-lived intangible asset impairment | 1,299 | (1,299 | ) | — | — | — | — | ||||||||||||||||||
| Acquisition and divestiture expenses | 6,165 | (6,165 | ) | — | 2,272 | (2,272 | ) | — | |||||||||||||||||
| Restructuring and related charges | 1,354 | (1,354 | ) | — | 3,654 | (3,654 | ) | — | |||||||||||||||||
| Operating income (loss) | $ | (1,867 | ) | $ | 17,220 | $ | 15,353 | $ | 12,446 | $ | 8,189 | $ | 20,635 | ||||||||||||
| Operating margin | (0.5 | )% | 3.9 | % | 2.7 | % | 4.5 | % | |||||||||||||||||
(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, inventory write-offs, definite-lived intangible asset impairments and other restructuring charges; (ii) non-cash charges related to estimates for inventory obsolescence; and (iii) expenses incurred in connection with the acquisition of Hebna and divestiture of the Bayou business.
(2) 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 divestiture of the Bayou business.
Energy Services
| Year Ended December 31, 2018 | Year Ended December 31, 2017 | ||||||||||||||||||||||||
| (in thousands) | As Reported (GAAP) | Adjustments (1) | As Adjusted (Non-GAAP) | As Reported (GAAP) | Adjustments | As Adjusted (Non-GAAP) | |||||||||||||||||||
| Revenues | $ | 335,707 | $ | — | $ | 335,707 | $ | 290,726 | $ | — | $ | 290,726 | |||||||||||||
| Cost of revenues | 294,160 | — | 294,160 | 254,977 | — | 254,977 | |||||||||||||||||||
| Gross profit | 41,547 | — | 41,547 | 35,749 | — | 35,749 | |||||||||||||||||||
| Gross profit margin | 12.4 | % | 12.4 | % | 12.3 | % | 12.3 | % | |||||||||||||||||
| Operating expenses | 33,457 | (156 | ) | 33,301 | 29,471 | — | 29,471 | ||||||||||||||||||
| Acquisition-related expenses | 25 | (25 | ) | — | — | — | — | ||||||||||||||||||
| Restructuring and related charges | 234 | (234 | ) | — | — | — | — | ||||||||||||||||||
| Operating income | $ | 7,831 | $ | 415 | $ | 8,246 | $ | 6,278 | $ | — | $ | 6,278 | |||||||||||||
| Operating margin | 2.3 | % | 2.5 | % | 2.2 | % | 2.2 | % | |||||||||||||||||
(1) Includes non-GAAP adjustments related to: (i) pre-tax restructuring charges associated with severance and benefit related costs and other restructuring charges; and (ii) expenses incurred in connection with the acquisition of Plant Performance Services, LLC.
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 estimates which are forward looking and subject to change. We anticipate additional guidance, both at the federal and state level, to be forthcoming in 2019. As such, the impacts of the legislation may differ from our current estimates, interpretations and assumptions, possibly materially, and the amount of the impact on the Company may accordingly be adjusted over the course of 2019.
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 fourth quarters and years ended December 31, 2018 and 2017 exclude charges related to the Company's restructuring activities, goodwill and definite-lived intangible asset impairment, acquisition and divestiture-related activities, a change in accounting estimates, 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®, Fyfe®, Fusible PVC®, Tite Liner®, Tyfo® and Stronger. Safer. Infrastructure.® and the associated logos are the registered trademarks of Aegion Corporation and its affiliates. (AEGN-ER)
| CONTACT: | Aegion Corporation |
| David F. Morris, Executive Vice President and Chief Financial Officer | |
| (636) 530-8000 | |
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