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Aegion Corporation Reports 2021 First Quarter Financial Results

·17 min read

Pending Transaction with New Mountain on Track to Close Shortly Following Anticipated Stockholder Approval at May 14 Special Meeting of Stockholders

ST. LOUIS, May 10, 2021 (GLOBE NEWSWIRE) -- Aegion Corporation (NASDAQ: AEGN), a leading provider of infrastructure maintenance, rehabilitation and protection solutions, today announced financial results for the quarter ended March 31, 2021.

First Quarter 2021 Financial Highlights

  • Q1’21 loss per diluted share from continuing operations was $0.04 compared to a loss per diluted share of $0.09 in Q1’20. Q1’21 adjusted (non-GAAP)1 earnings per diluted share from continuing operations were $0.08 compared to $0.01 in Q1’20.

  • Q1’21 revenues from continuing operations were $181 million. Declines from the prior year were primarily due to the impact of exited or restructured businesses, while core Insituform North America revenues remained on par with prior year levels despite weather challenges during the quarter.

  • Q1’21 adjusted1 gross profit margins from continuing operations were 23.6%, increasing 290 basis points from the prior year. Q1’21 adjusted1 operating margins from continuing operations were 3.3%, increasing 180 basis points from the prior year. Results were driven by significant profitability improvements from the Corrosion Protection segment, primarily from the Corrpro North America business.

  • Q1’21 adjusted1 operating income from continuing operations of $6 million doubled prior year results and resulted in positive operating cash flow generation compared to historical first-quarter cash usage trends.

  • Contract backlog from continuing operations as of March 31, 2021, increased $14 million, or 3%, from prior year levels, primarily driven by strong order intake led by the Insituform North America business.

1 Adjusted (non-GAAP) results exclude certain charges related to the Company’s restructuring and divestiture-related activities. Reconciliation of adjusted results is included below.

“Aegion delivered solid first quarter results that reflect the ongoing strength of our core Insituform business as well as significant profitability improvements from our Corrosion Protection businesses,” said Charles R. Gordon, Aegion President and Chief Executive Officer. “We remain focused on continuing to drive strong results as we advance efforts toward the close of our previously announced transaction with New Mountain.”

New Mountain Transaction
On February 16, 2021, the Company announced that it had entered into a definitive merger agreement to be acquired by affiliates of New Mountain Capital, L.L.C., a leading growth-oriented investment firm headquartered in New York, in an all-cash transaction. On March 13, 2021 and April 13, 2021, the Company entered into amendments to such definitive merger agreement which, among other things, increased the consideration payable to the Company’s stockholders upon closing of the transaction from $26.00 per share in cash to $30.00 per share in cash, in each case less any applicable withholding taxes. As a result of the increase in the merger consideration, the transaction is now valued at $1.1 billion. Upon close of the transaction, Aegion will become a private company. The transaction is expected to close on May 17, 2021, and is subject to Aegion stockholder approval and other customary closing conditions. The Aegion Board of Directors unanimously recommends that stockholders vote “FOR” the proposal to adopt the merger agreement at the upcoming Special Meeting of Stockholders on May 14, 2021. Aegion stockholders who have questions about the merger or the Special Meeting, or who wish to obtain copies of the proxy statement, proxy cards or other documents relating to the Special Meeting, may contact Innisfree M&A Incorporated, Aegion’s proxy solicitor, by calling toll-free at (877) 687-1874, if located in the U.S. or Canada, or +1 (412) 232-3651, if located elsewhere.

In light of the proposed transaction, Aegion will not host a conference call to discuss earnings results or provide a financial outlook.

AEGION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

Quarters Ended March 31,

2021

2020

Revenues

$

181,191

$

196,312

Cost of revenues

138,473

156,025

Gross profit

42,718

40,287

Operating expenses

36,986

39,023

Acquisition and divestiture expenses

4,971

852

Restructuring and related charges (reversals)

(25

)

1,192

Operating income (loss)

786

(780

)

Other income (expense):

Interest expense

(2,034

)

(2,519

)

Interest income

306

228

Other

219

425

Total other expense

(1,509

)

(1,866

)

Loss before tax benefit

(723

)

(2,646

)

Tax benefit on loss

(58

)

(110

)

Loss from continuing operations

(665

)

(2,536

)

Income from discontinued operations

2,026

1,233

Net income (loss)

1,361

(1,303

)

Non-controlling interests income

(524

)

(329

)

Net income (loss) attributable to Aegion Corporation

$

837

$

(1,632

)

Earnings (loss) per share attributable to Aegion Corporation:

Basic:

Loss from continuing operations

$

(0.04

)

$

(0.09

)

Income from discontinued operations

0.07

0.04

Net income (loss)

$

0.03

$

(0.05

)

Diluted:

Loss from continuing operations

$

(0.04

)

$

(0.09

)

Income from discontinued operations

0.07

0.04

Net income (loss)

$

0.03

$

(0.05

)


AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share amounts)

March 31,
2021

December 31,
2020

Assets

Current assets

Cash and cash equivalents

$

93,275

$

94,848

Restricted cash

761

765

Receivables, net of allowances of $4,051 and $4,004, respectively

126,967

133,394

Retainage

30,355

32,807

Contract assets

46,924

44,026

Inventories

46,655

44,889

Prepaid expenses and other current assets

18,788

33,675

Assets held for sale

105,609

92,850

Total current assets

469,334

477,254

Property, plant & equipment, less accumulated depreciation

90,800

92,900

Other assets

Goodwill

210,125

210,665

Intangible assets, less accumulated amortization

56,510

58,869

Operating lease assets

52,703

52,421

Deferred income tax assets

451

448

Other non-current assets

9,033

8,890

Total other assets

328,822

331,293

Total Assets

$

888,956

$

901,447

Liabilities and Equity

Current liabilities

Accounts payable

$

48,328

$

51,469

Accrued expenses

54,406

59,664

Operating lease liabilities

14,047

14,147

Contract liabilities

32,344

37,569

Current maturities of long-term debt

28,991

25,811

Liabilities held for sale

41,556

36,148

Total current liabilities

219,672

224,808

Long-term debt, less current maturities

186,585

193,988

Other liabilities

Operating lease liabilities

39,089

38,724

Deferred income tax liabilities

10,143

10,344

Other non-current liabilities

23,752

25,218

Total other liabilities

72,984

74,286

Total liabilities

479,241

493,082

Equity

Preferred stock, undesignated, $0.10 par – shares authorized 2,000,000; none outstanding

Common stock, $0.01 par – shares authorized 125,000,000; shares issued and outstanding
30,741,907 and 30,640,150, respectively

307

306

Additional paid-in capital

101,548

102,001

Retained earnings

327,974

327,137

Accumulated other comprehensive loss

(29,334

)

(29,847

)

Total stockholders’ equity

400,495

399,597

Non-controlling interests

9,220

8,768

Total equity

409,715

408,365

Total Liabilities and Equity

$

888,956

$

901,447


AEGION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

Quarters Ended March 31,

2021

2020

Cash flows from operating activities:

Net income (loss)

$

1,361

$

(1,303

)

Income from discontinued operations

(2,026

)

(1,233

)

(665

)

(2,536

)

Adjustments to reconcile to net cash provided by (used in) operating activities:

Depreciation and amortization

7,120

7,226

Gain on sale of fixed assets

(119

)

(32

)

Equity-based compensation expense

2,038

2,000

Deferred income taxes

(176

)

(866

)

Non-cash restructuring charges

(110

)

463

Gain on sale of businesses

(230

)

(436

)

(Gain) loss on foreign currency transactions

107

(588

)

Other

389

145

Changes in operating assets and liabilities:

Receivables net, retainage and contract assets

5,813

(54

)

Inventories

(1,777

)

4,431

Prepaid expenses and other assets

6,512

(1,649

)

Accounts payable

(3,596

)

(1,710

)

Accrued expenses

(5,909

)

(12,327

)

Operating lease liabilities

(130

)

706

Contract liabilities

(5,287

)

2,357

Other operating

(202

)

(420

)

Net cash provided by (used in) operating activities of continuing operations

3,778

(3,290

)

Net cash used in operating activities of discontinued operations

(2,585

)

(4,829

)

Net cash provided by (used in) operating activities

1,193

(8,119

)

Cash flows from investing activities:

Capital expenditures

(2,748

)

(5,457

)

Proceeds from sale of fixed assets

285

125

Patent expenditures

(50

)

(86

)

Proceeds from sale of businesses, net of cash disposed

8,444

3,358

Net cash provided by (used in) investing activities of continuing operations

5,931

(2,060

)

Net cash used in investing activities of discontinued operations

(1,628

)

(677

)

Net cash provided by (used in) investing activities

4,303

(2,737

)

Cash flows from financing activities:

Repurchase of common stock

(2,490

)

(5,045

)

Proceeds from notes payable

1,257

Proceeds from line of credit, net

34,000

Principal payments on long-term debt

(5,783

)

(8,750

)

Net cash provided by (used in) financing activities

(7,016

)

20,205

Effect of exchange rate changes on cash

(57

)

(1,291

)

Net increase (decrease) in cash, cash equivalents and restricted cash for the period

(1,577

)

8,058

Cash, cash equivalents and restricted cash, beginning of year

95,613

66,222

Cash, cash equivalents and restricted cash, end of period

$

94,036

$

74,280

Statement of Operations Reconciliation
(Unaudited) (Non-GAAP)

For the Quarter Ended March 31, 2021

(in thousands, except earnings per share)

Gross
Profit

Operating
Expenses

Operating
Income

Income
(Loss) Before
Taxes
(Benefit)

Taxes
(Benefit)
on Income
(Loss)

Income (Loss)
from
Continuing
Operations

Diluted
Earnings (Loss)
per Share from
Continuing
Operations

As Reported (GAAP)

$

42,718

$

36,986

$

786

$

(723

)

$

(58

)

$

(665

)

$

(0.04

)

Items Affecting Comparability:

Restructuring Charges(1)

8

(219

)

202

99

16

83

Divestiture Related Expenses(2)

4,971

4,742

1,120

3,622

0.12

As Adjusted (Non-GAAP)

$

42,726

$

36,767

$

5,959

$

4,118

$

1,078

$

3,040

$

0.08

(1)

Includes the following non-GAAP adjustments: (i) pre-tax restructuring charges for cost of revenues of $8 primarily related to inventory write offs; (ii) pre-tax restructuring charges for operating expenses of $219 primarily related to wind-down expenses, patent disposals and other restructuring-related charges; (iii) pre-tax restructuring and related recoveries of $25 related to employee severance and the reversal of employment assistance program costs; and (iv) pre-tax restructuring credits for other expense of $103 related to the release of cumulative currency translation adjustments and net gains on disposal of certain restructured operations.

(2)

Includes the following non-GAAP adjustments: (i) pre-tax expenses of $4,971 incurred primarily in connection with the sale of Aegion and the Company’s planned divestiture of Energy Services; and (ii) a pre-tax gain of $229 primarily related to the divestiture of Bayou.

For the Quarter Ended March 31, 2020

(in thousands, except earnings per share)

Gross
Profit

Operating
Expenses

Operating
Income
(Loss)

Income
(Loss) Before
Taxes
(Benefit)

Taxes
(Benefit)
on Income
(Loss)

Income (Loss)
from
Continuing
Operations

Diluted
Earnings (Loss)
per Share from
Continuing
Operations

As Reported (GAAP)

$

40,287

$

39,023

$

(780

)

$

(2,646

)

$

(110

)

$

(2,536

)

$

(0.09

)

Items Affecting Comparability:

Restructuring Charges(1)

323

(1,381

)

2,896

3,527

564

2,963

0.09

Divestiture Related Expenses(2)

852

416

48

368

0.01

As Adjusted (Non-GAAP)

$

40,610

$

37,642

$

2,968

$

1,297

$

502

$

795

$

0.01

(1)

Includes the following non-GAAP adjustments: (i) pre-tax restructuring charges for cost of revenues of $323 primarily related to inventory write offs; (ii) pre-tax restructuring charges for operating expenses of $1,381 primarily related to wind-down expenses, fixed asset disposals and other restructuring-related charges; (iii) pre-tax restructuring and related charges of $1,192 related to employee severance, extension of benefits, employment assistance programs and early contract termination costs; and (iv) pre-tax restructuring charges for other expense of $631 related to net losses on disposal of certain restructured operations and the release of cumulative currency translation adjustments.

(2)

Includes the following non-GAAP adjustments: (i) pre-tax expenses of $852 incurred primarily in connection with the Company’s divestiture of Australia and Spain and its planned divestiture of its held for sale operations; and (ii) net gains of $436 on the divestitures of Australia and Spain.


Selected Segment Financial Highlights

(Unaudited) (Non-GAAP)

Quarter Ended March 31, 2021

Quarter Ended March 31, 2020

(in thousands)

As Reported
(GAAP)

Adjustments
(1)

As Adjusted
(Non-GAAP)

As Reported
(GAAP)

Adjustments
(2)

As Adjusted
(Non-GAAP)

Revenues:

Infrastructure Solutions

$

126,562

$

$

126,562

$

130,244

$

$

130,244

Corrosion Protection

54,629

54,629

66,068

66,068

Total Revenues

$

181,191

$

$

181,191

$

196,312

$

$

196,312

Gross Profit:

Infrastructure Solutions

$

29,483

$

$

29,483

$

31,370

$

17

$

31,387

Gross Profit Margin

23.3

%

23.3

%

24.1

%

24.1

%

Corrosion Protection

13,235

8

13,243

8,917

306

9,223

Gross Profit Margin

24.2

%

24.2

%

13.5

%

14.0

%

Total Gross Profit

$

42,718

$

8

$

42,726

$

40,287

$

323

$

40,610

Gross Profit Margin

23.6

%

23.6

%

20.5

%

20.7

%

Operating Income (Loss):

Infrastructure Solutions

$

11,926

$

10

$

11,936

$

13,555

$

629

$

14,184

Operating Margin

9.4

%

9.4

%

10.4

%

10.9

%

Corrosion Protection

(115

)

(10

)

(125

)

(6,447

)

1,774

(4,673

)

Operating Margin

(0.2

)%

(0.2

)%

(9.8

)%

(7.1

)%

Corporate

(11,025

)

5,173

(5,852

)

(7,888

)

1,345

(6,543

)

Operating Margin

(6.1

)%

(3.2

)%

(4.0

)%

(3.3

)%

Total Operating Income (Loss)

$

786

$

5,173

$

5,959

$

(780

)

$

3,748

$

2,968

Operating Margin

0.4

%

3.3

%

(0.4

)%

1.5

%

_________________________________

(1) Includes non-GAAP adjustments related to:

  • Infrastructure Solutions - pre-tax restructuring charges associated with wind-down costs and other restructuring charges.

  • Corrosion Protection - pre-tax restructuring charges associated with severance and benefit related costs, inventory write offs and other restructuring charges.

  • Corporate - (i) pre-tax restructuring charges primarily associated with legal expenses and other restructuring charges; (ii) divestiture expenses related to the sale of Aegion and the Company’s planned divestiture of Energy Services.

(2) Includes non-GAAP adjustments related to:

  • Infrastructure Solutions - (i) pre-tax restructuring charges associated with wind-down costs, fixed asset disposals and other restructuring charges; (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, early contract termination costs, inventory write offs and other restructuring charges.

  • Corporate - (i) pre-tax restructuring charges primarily associated with severance and benefit related costs and legal expenses; (ii) 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 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
This communication contains “forward-looking statements” within the meaning of the U.S. federal securities laws. Such statements include statements concerning anticipated future events and expectations that are not historical facts. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions or the negative thereof. Actual results may vary materially from those expressed or implied by forward-looking statements based on a number of factors, including, without limitation: (1) risks related to the consummation of the merger, including the risks that (a) the merger may not be consummated within the anticipated time period, or at all, (b) the parties may fail to obtain stockholder approval of the merger agreement, (c) the parties may fail to secure the termination or expiration of any waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (d) other conditions to the consummation of the merger under the merger agreement may not be satisfied, and (e) the significant limitations on remedies contained in the merger agreement may limit or entirely prevent the Company from specifically enforcing the obligations of Carter Intermediate, Inc. (Parent) and its wholly owned subsidiary, Carter Acquisition, Inc. (Merger Sub), under the merger agreement or recovering damages for any breach by Parent or Merger Sub; (2) the effects that any termination of the merger agreement may have on the Company or its business, including the risks that (a) the Company’s stock price may decline significantly if the merger is not completed, (b) the merger agreement may be terminated in circumstances requiring the Company to pay Parent a termination fee, or (c) the circumstances of the termination, including the possible imposition of a 12-month tail period during which the termination fee could be payable upon certain subsequent transactions, may have a chilling effect on alternatives to the merger; (3) the effects that the announcement or pendency of the merger may have on the Company’s and its business, including the risks that as a result (a) the Company’s business, operating results or stock price may suffer, (b) the Company’s current plans and operations may be disrupted, (c) the Company’s ability to retain or recruit key employees may be adversely affected, (d) the Company’s business relationships (including, customers, franchisees and suppliers) may be adversely affected, or (e) the Company’s management’s or employees’ attention may be diverted from other important matters; (4) the effect of limitations that the merger agreement places on the Company’s ability to operate its business, return capital to stockholders or engage in alternative transactions; (5) the nature, cost and outcome of pending and future litigation and other legal proceedings, including any such proceedings related to the merger and instituted against the Company and others; (6) the risk that the merger and related transactions may involve unexpected costs, liabilities or delays; (7) other economic, business, competitive, legal, regulatory, and/or tax factors; and (8) other factors described under the heading “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as updated or supplemented by subsequent reports that the Company has filed or files with the SEC. Potential investors, stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Neither Parent nor the Company assumes any obligation to publicly update any forward-looking statement after it is made, whether as a result of new information, future events or otherwise, except as required by law.

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 from continuing operations in the quarters ended March 31, 2021 and 2020 exclude charges related to the Company’s restructuring and divestiture-related activities.

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.

For more information, contact:

Aegion Corporation
Katie Cason
Senior Vice President, Strategy and Communications
636-530-8000
kcason@aegion.com