Aegion Reports Full Year Non-Gaap Results Of $1.40 Per Share, A 50 Percent Increase Over Full Year 2011

Aegion Corporation (Nasdaq Global Select Market: AEGN) today reported fourth quarter 2012 net income of $15.2 million, or $0.39 per diluted share (non-GAAP), excluding $0.5 million in pre-tax acquisition-related expenses, compared to net income of $15.2 million, or $0.38 per diluted share (non-GAAP), in the fourth quarter of 2011, excluding $0.6 million in pre-tax acquisition-related expenses. For 2012, net income was $55.4 million, or $1.40 per diluted share (non-GAAP), excluding $3.1 million in pre-tax acquisition-related expenses. Inclusive of these acquisition-related expenses, reported net income was $52.7 million, or $1.33 per diluted share.

J. Joseph Burgess, Aegion’s President and Chief Executive Officer, commented, “2012 was a transformative year for Aegion. We completed a full year of operations across all three operating platforms and, for the first time, our consolidated revenues surpassed $1 billion. We also drove record operating cash flow performance in the business in 2012. As we chart our course for 2013, the momentum we gained in 2012 in our Energy and Mining, Commercial and Structural and North American Water and Wastewater operations creates the foundation for significant earnings growth in 2013.”

“The breadth and importance of the technologies and services we offer is best reflected in a record backlog of $536.1 million at December 31, 2012, and a solid bid table across our three operating platforms. In 2013, we expect our Energy and Mining platform to increase operating margins to 11 percent to 12 percent from a combination of revenue growth and a focus on expanding margins in our Corrpro pipeline integrity business and Bayou operations and the start of CRTS’s offshore project for Wasit in Saudi Arabia. We anticipate our Commercial and Structural platform will continue to expand in 2013 through our continued investments in key end markets in North America, Asia and Latin America. We expect revenues to increase by approximately 30 percent, year-over-year, with operating margins in the mid-to-high teens. North America Water and Wastewater turned the corner in 2012, transforming to compete effectively in a challenging, but modestly improving, municipal wastewater market. For 2013, we plan to improve our project management execution to incrementally expand gross margins currently in the low 20 percent range, and deliver operating margins in the range of high-single digits. We have a much improved backlog in North America entering 2013, giving us confidence of modest revenue growth. Finally, we made the necessary operational changes in 2012 so our international cured-in-place operations in Europe and Asia-Pacific can achieve significantly improved profitability in 2013.”

“Our base businesses provide a strong foundation from which we expect to achieve 2013 diluted earnings per share in the range of $1.60-$1.80, return on invested capital in the range of 9 percent to 10 percent, and cash from operating activities of more than $100 million.”

Consolidated Highlights

For the fourth quarter of 2012, revenues increased $17.9 million, or 7.0 percent, compared to the prior year quarter, primarily due to 13.0 percent growth in our Energy and Mining segment, partially offset by 3.3 percent lower revenues in our global Water and Wastewater platforms. Additionally, the fourth quarter of 2012 included $4.4 million of revenues from our 2012 acquisitions of Fyfe Asia and Fyfe Latin America.

For the quarter, gross profit increased 2.7 percent, or $1.7 million, to $65.2 million compared to the prior year quarter, led by our Commercial and Structural segment, which increased gross profit by $3.9 million, or 58.3 percent. Our North American Water and Wastewater platform increased gross profit by 8.5 percent, or $1.3 million, because of improved project execution and from our enhanced project management focus. Consolidated gross margins were 23.7 percent for the quarter, a 100 basis point decrease compared to the fourth quarter of 2011. This decline in gross margins was a result of continued disappointing results from our Asia-Pacific Water and Wastewater segment, particularly Singapore, and lower gross profit and margins in our Energy and Mining platform from the mix of work associated with United Pipeline Systems’ Morocco project in 2012, lack of high margin coating projects completed last year and the shift of the originally anticipated CRTS/Wasit project into 2013.

Operating expenses increased $2.9 million, or 7.1 percent, for the fourth quarter of 2012 compared to the fourth quarter of 2011, due principally to the $2.9 million increase in operating expenses (including purchase price depreciation and amortization) associated with our Commercial and Structural platform. We are making investments to more fully develop several key end markets through the addition of engineering and business development personnel and by expanding into new regions within the U.S. and parts of Asia and Latin America. Expenses increased slightly in our Energy and Mining segment to support our pursuit of international growth opportunities. Offsetting the increases was a slight decrease in our North American and Asia-Pacific Water and Wastewater segments, primarily from the restructuring and cost reduction efforts taken in 2011 and our continued focus on achieving cost efficiencies throughout the Company.

Operating income in the fourth quarter of 2012 increased 8.6 percent to $24.2 million from $22.3 million in the fourth quarter of 2011, excluding acquisition-related expenses and restructuring charges in the prior year (non-GAAP). North American Water and Wastewater operating income grew 36.0 percent to $5.7 million. Energy and Mining and Commercial and Structural operating income increased $1.2 million to $15.7 million and $1.9 million to $4.2 million, respectively. These increases were partially offset by a $1.5 million decrease in operating income in our European Water and Wastewater segment because of weak market conditions and project delays in several contracting markets in Europe. Costs associated with completing older projects in Singapore, along with delays in project releases in Australia, resulted in a $2.3 million operating loss for our Asia-Pacific Water and Wastewater segment, excluding acquisition-related expenses (non-GAAP). Consolidated operating margins, excluding acquisition-related expenses, remained essentially the same in the fourth quarter of 2012 compared to the fourth quarter of 2011 as challenges in Europe and Asia-Pacific were offset by stronger performance in our United Pipeline Systems and Fyfe North America operations, improved margins in our North American Water and Wastewater segment and leverage on our operating cost structure from revenue growth.

Revenues increased $89.4 million, or 9.5 percent, to $1.03 billion in 2012 compared to 2011. Strong performance from our Energy and Mining segment and a significant contribution from our Commercial and Structural segment accounted for record revenues. Gross profit, year-over-year, increased 19.7 percent to $243.1 million with a 200 basis point gross margin expansion to 23.6 percent. Operating expenses increased by 12.6 percent as a result of our 2011 and 2012 acquisitions and our continued investment for future growth initiatives, primarily in our Energy and Mining and Commercial and Structural segments, partially offset by lower operating expenses in our Water and Wastewater platform. For the year ended December 31, 2012 compared to the prior year, operating income, excluding acquisition-related expenses and restructuring charges, increased 55 percent to $82.2 million and operating margins expanded by 230 basis points to 8.0 percent (non-GAAP).

Cash Flow For 2012

Net cash flow from operations for 2012 was a record $110.7 million, or 194.8 percent of net income, as compared to only $22.9 million in 2011. The increase in operating cash flow was primarily related to higher earnings and significantly improved working capital management. The largest contributor to the increase in cash from operations was the impact of strong collections of receivables, primarily in our North American Water and Wastewater segment and certain portions of our Energy and Mining business.

Net cash flow from investing activities in 2012 was an $83.4 million use of cash as a result of our acquisitions of Fyfe Asia (for a net purchase price of $38.8 million) and Fyfe Latin America (for a net purchase price of $3.0 million), along with $45.9 million in capital expenditures in 2012 compared to $21.6 million in 2011. The 2012 increase in capital expenditures was directly related to our funding for an insulation coating plant in partnership with Wasco Energy at our facility in New Iberia, Louisiana and expansion of our Canadian coating operation, which projects were substantially completed in the fourth quarter of 2012. We spent a total of $23.6 million on these two projects in 2012, which was partially funded by our joint venture partners.

Cash flows from financing activities used $0.2 million of cash during 2012, as a result of our repurchase of $12.3 million of our common stock in open market repurchases and in connection with our equity programs. During 2012, we also made payments of $25.0 million on our term loan in accordance with the terms of our credit facility. Partially offsetting these uses of cash, we borrowed $26.0 million on our line of credit for a portion of the funding for the Fyfe Asia acquisition in April 2012 and for certain working capital needs. Further offsetting the uses of cash was our receipt of $7.2 million in proceeds on notes payable, primarily in connection with funding for capital expenditures for the insulation coating plant in partnership with Wasco Energy and our Canadian coating plant in partnership with Perma Pipe.

Net cash flow for 2012 was an inflow of $27.5 million.

Consolidated Backlog
 

AEGION CORPORATION AND SUBSIDIARIESCONTRACT BACKLOG(Unaudited in millions)
 

 
  December 31,

2012
  September 30,

2012
  December 31,

2011
Energy and Mining $ 243.8   $ 250.7   $ 256.4
North American Water and Wastewater 185.0 167.3 130.0
European Water and Wastewater 23.9 25.7 20.7
Asia-Pacific Water and Wastewater 32.7 29.9 37.5
Commercial and Structural(1)   50.8     46.7     19.6
Total $ 536.2   $ 520.3   $ 464.2

____________

(1) December 31, 2012 and September 30, 2012 include backlog from our January 2012 and April 2012 acquisitions of Fyfe Latin America and Fyfe Asia, respectively.
 

Our Energy and Mining segment contract backlog at December 31, 2012 was $243.8 million, which represented a $12.6 million, or 4.9 percent, decrease compared to December 31, 2011. This slight decline at December 31, 2012 was a result of our completion of approximately $46 million of United Pipeline Systems’ project in Morocco, the largest project in such company’s history. Partially offsetting the decrease was backlog growth in United Pipeline Systems because of expansion in the Middle East and increased backlog levels in our Corrpro operations on a global basis. We continue to believe healthy commodity prices coupled with ever increasing demand for maintenance spending in the sector, more significant opportunities in offshore pipeline development, particularly in the Gulf of Mexico, and continued growth in our businesses situated in the key infrastructure spend areas of North America, the Middle East and South America, will provide us significant growth opportunities.

Contract backlog in our North American Water and Wastewater segment at December 31, 2012 represented a $55.0 million, or 42.3 percent, increase from backlog at December 31, 2011. The increase in backlog comes from domestic growth, specifically the Eastern region of the United States, which experienced improved market conditions from increased bidding activity in 2012. We anticipate modest revenue growth in the North American Water and Wastewater market in 2013 from more stabilized municipal spending for pipeline rehabilitation projects.

Contract backlog in our European Water and Wastewater segment was $23.9 million at December 31, 2012, a $3.2 million, or 15.5 percent, increase compared to December 31, 2011, because of increased bidding opportunities in 2012 the United Kingdom.

Contract backlog in our Asia-Pacific Water and Wastewater segment was $32.7 million at December 31, 2012, a decrease of $4.8 million, or 12.8 percent, compared to December 31, 2011, primarily due to the lack of large project awards in Sydney and successful project completions in Hong Kong in 2012. Partially offsetting these decreases were project awards totaling $9.3 million in Malaysia, which projects commenced in the fourth quarter of 2012. The December 2012 contract backlog is also inclusive of the recent project awards in Brisbane, Australia totaling $8.9 million. We expect increase in Asian backlog in the coming quarters from the continued growth of the Australian market from bids outside of Sydney and select opportunities in other parts of Asia.

Backlog at December 31, 2012 for our Commercial and Structural segment was $50.8 million compared to $19.6 million at December 31, 2011. The increase in backlog was primarily the result of our acquisitions of Fyfe Latin American and Fyfe Asia in 2012 and Fyfe Asia’s large project awards in Hong Kong in the second half of 2012. Project quoting activity continues to be strong globally and, as our investments in business development and focused engineering resources continue, we believe our prospects are significant in a number of key markets in the sector, most notably pipelines and building infrastructure.

Segment Reporting
 

Energy and Mining
 
  Quarters Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 139,452   $ 123,359 $ 16,093   13.0 %
Gross profit 33,331 34,446 (1,115 ) (3.2 )
Gross profit margin 23.9 % 27.9 % n/a (400) bp
Operating expenses 20,379 19,928 451 2.3
Reversal of earnout (2,762 ) (2,762 ) n/m
Operating income 15,714 14,518 1,196 8.2
Operating margin 11.3 % 11.8 % n/a (50) bp
   
Years Ended December 31, Increase (Decrease)
2012   2011 $   %
Revenues $ 525,107   $ 433,230 $ 91,877   21.2 %
Gross profit 126,960 109,753 17,207 15.7
Gross profit margin 24.2 % 25.3 % n/a (110) bp
Operating expenses 79,301 72,982 6,319 8.7
Reversal of earnout (9,654 ) (1,700 ) (7,954 ) (467.9 )
Acquisition-related expenses 2,682 (2,682 ) n/m
Restructuring charges 778 (778 ) n/m
Operating income 57,313 35,011 22,302 63.7
Operating margin 10.9 % 8.1 % n/a 280 bp
 

In the fourth quarter of 2012, our Energy and Mining operating income increased to $15.7 million compared to $14.5 million for the fourth quarter of 2011. Revenue increased throughout the platform while gross margins were down from the prior year quarter, because of lower margins associated with the United Pipeline Systems’ project in Morocco. We experienced exceptional performance in the fourth quarter of 2011, primarily driven by completion of several high margin projects in our Bayou coating and CRTS operations, which did not reoccur in the fourth quarter of 2012. Our cathodic protection business experienced both improved revenue and gross margin from continued migration into higher profit engineering and other high value services. While our industrial linings business performed very well in the quarter, gross margins were down slightly as a higher percentage of revenues came from lower margin international projects that include more general contracting tasks. During the fourth quarter of 2012, our Canadian coating operation’s second line became operational, which led to a record revenue month in December.

Operating expenses decreased as a percentage of revenue from 16.2 percent in 2011 to 14.6 percent in 2012 due to operating leverage achieved across the platform, particularly in our cathodic protection business. During the fourth quarter of 2012, we reversed $2.3 million and $0.5 million of the contractual earnouts related to CRTS and Hockway, respectively, based on our normal, quarterly review of contingent liabilities. The decrease in the CRTS earnout came from the completion of the planning process where we assessed each company’s current project timing and the short term prospects, particularly the timing of the Wasit project. The Hockway earnout was reduced as a result of our slower than anticipated penetration into the corrosion protection market in Iraq during 2012.

Our $243.8 million Energy and Mining backlog entering 2013 and robust bidding opportunities support the outlook for growing revenues and expanding gross and operating margins despite the expected completion of the remaining portion of United Pipeline Systems’ project in Morocco. The end markets we currently serve with our technologies and services remain robust. Continued capital expenditures for new pipelines and the need to protect existing pipelines in North America provide growth opportunities for Corrpro’s corrosion engineering services (primarily in North America and the Middle East), our TiteLiner® technology (worldwide) and Bayou’s coating services (primarily in the Canadian Oil Sands, offshore projects in the Gulf of Mexico and onshore projects in the North American natural gas shales). Fuller opportunities exist for expanding the use of our proprietary technologies, including our CRTS robotics technology for offshore pipelines, in new markets, specifically, the Middle East, North Africa, South America and Asia. In 2013, CRTS plans to complete the majority of the $28 million Wasit project in Saudi Arabia.

North American Water and Wastewater
 
  Quarters Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 85,691   $ 90,901 $ (5,210 )   (5.7 )%
Gross profit 16,444 15,151 1,293 8.5
Gross profit margin 19.2 % 16.7 % n/a 250 bp
Operating expenses 10,749 10,965 (216 ) (2.0 )
Operating income 5,695 4,186 1,509 36.0
Operating margin 6.6 % 4.6 % n/a 200 bp
 
  Years Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 317,338   $ 357,507 $ (40,169 )   (11.2 )%
Gross profit 65,294 55,443 9,851 17.8
Gross profit margin 20.6 % 15.5 % n/a 510 bp
Operating expenses 43,237 48,191 (4,954 ) (10.3 )
Restructuring charges 503 (503 ) n/m
Operating income 22,057 6,749 15,308 226.8
Operating margin 7.0 % 1.9 % n/a 510 bp
 

In the fourth quarter of 2012, North American Water and Wastewater operating income increased by $1.5 million, or 36.0 percent, compared to the prior year quarter. Our North American Water and Wastewater segment continued its successful re-formation with improved gross and operating margins because of improved performance domestically. These margin improvements were achieved despite a 5.7 percent revenue decline. Our primary focus remains to expand gross and operating margins through maximizing crew utilization, maintaining strict bidding discipline and increasing higher margin third party tube sales. As a result of actions taken in 2011 and 2012, gross margins improved 250 basis points for the quarter and 510 basis points for the year.

We remain committed to delivering strong execution in the context of a challenging, but stabilized, water and wastewater market in the United States. With improved contract backlog entering 2013, we anticipate modest top line growth and continued operating margin expansion in this business.

European Water and Wastewater
 
  Quarters Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 20,191   $ 20,472 $ (281 )   (1.4 )%
Gross profit 4,907 6,304 (1,397 ) (22.2 )
Gross profit margin 24.3 % 30.8 % n/a (650) bp
Operating expenses 4,030 3,888 142 3.7
Operating income 877 2,416 (1,539 ) (63.7 )
Operating margin 4.3 % 11.8 % n/a (750) bp
 
  Years Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 72,534   $ 87,017 $ (14,483 )   (16.6 )%
Gross profit 17,065 22,837 (5,772 ) (25.3 )
Gross profit margin 23.5 % 26.2 % n/a (270) bp
Operating expenses 14,948 16,140 (1,192 ) (7.4 )
Restructuring charges 697 (697 ) n/m
Operating income 2,117 6,000 (3,883 ) (64.7 )
Operating margin 2.9 % 6.9 % n/a (400) bp
 

In the fourth quarter of 2012, our European Water and Wastewater business operating income declined approximately $1.5 million, or 63.7 percent, compared to the fourth quarter of 2011. The decline in this segment was primarily related to continued depressed economic conditions throughout most of Europe.

We experienced weak market conditions throughout Europe during 2012 and we expect these market conditions to persist into 2013. However, we anticipate improved performance from our European operations in 2013 due to an expanded backlog position along with increased third party tube sales from our efforts to expand our product sales with new licensees and other customers throughout Europe.

Asia-Pacific Water and Wastewater
 
  Quarters Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 10,132   $ 8,614 $ 1,518   17.6 %
Gross profit (loss) (185 ) 802 (987 ) (123.1 )
Gross profit margin (1.8 )% 9.3 % n/a (1110) bp
Operating expenses 2,091 2,449 (358 ) (14.6 )
Acquisition-related expenses 442 442 n/m
Operating loss (2,718 ) (1,647 ) (1,071 ) (65.0 )
Operating margin (26.8 )% (19.1 )% n/a (770) bp
 
  Years Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 38,501   $ 43,717 $ (5,216 )   (11.9 )%
Gross profit (loss) (2,740 ) 6,772 (9,512 ) (140.5 )
Gross profit margin (7.1 )% 15.5 % n/a (2260) bp
Operating expenses 7,874 9,111 (1,237 ) (13.6 )
Acquisition-related expenses 887 887 n/m
Restructuring charges 173 (173 ) n/m
Operating income (loss) (11,501 ) (2,512 ) (8,989 ) (357.8 )
Operating margin (29.9 )% (5.7 )% n/a (2420) bp
 

In the fourth quarter of 2012, our Asia-Pacific Water and Wastewater business reported an operating loss, excluding acquisition-related expenses, of $2.3 million (non-GAAP), primarily from higher costs associated with closing out three loss producing projects in Singapore. We are in the final inspection phase for two of the projects and nearing completion for the third. In the fourth quarter, we incurred significantly more costs associated with dig and replace work and costs to rehabilitate remaining lines with non-CIPP technologies associated with the final project. In Australia, the lack of project activity in Sydney coupled with increased costs to setup operations in new markets led to an operating loss for the quarter. However, we have recently secured $8.9 million in project awards in Brisbane and have positioned crew resources locally, which should favorably impact the operation’s results in 2013. Operating expenses declined during the quarter as a result of cost containment efforts throughout the region in response to decreased activity in 2012.

With the significant project issues in Singapore coming to a close, a more stable operating situation in Australia at the beginning of 2013 and profitable projects being performed in Malaysia, we anticipate this segment will see a significant rebound in 2013.

Commercial and Structural
 
  Quarters Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 19,217   $ 13,449 $ 5,768   42.9 %
Gross profit 10,727 6,778 3,949 58.3
Gross profit margin 55.8 % 50.4 % n/a 540 bp
Operating expenses 6,854 3,933 2,921 74.3
Reversal of earnout (365 ) (365 ) n/m
Acquisition-related expenses 88 608 (520 ) (85.5 )
Operating income 4,150 2,237 1,913 85.5
Operating margin 21.6 % 16.6 % n/a 500 bp
 
  Years Ended December 31,   Increase (Decrease)
2012   2011 $   %
Revenues $ 74,483   $ 17,114 $ 57,369   335.2 %
Gross profit 36,530 8,319 28,211 339.1
Gross profit margin 49.0 % 48.6 % n/a 40 bp
Operating expenses 25,522 5,340 20,182 377.9
Reversal of earnout (365 ) (365 ) n/m
Acquisition-related expenses 2,237 3,690 (1,453 ) (39.4 )
Operating income (loss) 9,136 (711 ) 9,847 1,385.0
Operating margin 12.3 % (4.2 )% n/a 1650 bp
 

We established our Commercial and Structural reporting segment in connection with our August 2011 acquisition of Fyfe North America and expanded this segment with our January 2012 acquisition of Fyfe Latin America and April 2012 acquisition of Fyfe Asia.

In the fourth quarter of 2012, the Fyfe businesses performed in-line with our expectations, with strong gross margins of 55.8 percent and operating income of $4.2 million. Fyfe North America’s performance improved $1.5 million, or 52.0 percent, from the fourth quarter of 2011, due to strong activity in pipeline, transportation and buildings markets. Fyfe Latin America contributed $0.3 million in revenues and broke even at the operating income level, while Fyfe Asia contributed $4.1 million in revenues and $0.5 million in operating profit during the quarter, excluding acquisition-related expenses (non-GAAP), which was lower than expected because of a delay in the startup of certain projects. However, project bidding activity was strong during the quarter and we secured $21.4 million in additional projects in Hong Kong during the second half of 2012, which we anticipate will lead to more significant profit contributions in 2013.

Operating expenses for the quarter and year ended December 31, 2012 increased $2.9 million and $20.2 million, respectively, compared to the prior year periods, largely from the full inclusion of Fyfe’s North America, Asia and Latin America operations for the 2012 periods. In addition, operating expenses were higher because of our strategic initiatives to develop key end markets supporting the growth plan for the Commercial and Structural platform.

We believe the Fyfe businesses will significantly accelerate the pace of growth they experienced over the last few years as we integrate all three businesses with our global distribution network, increase our investment in business development, and invest in product innovation to exploit further growth opportunities across several key vertical end markets. We anticipate that the Commercial and Structural segment will provide strong contributions to earnings in 2013.

Aegion Corporation is a global leader in infrastructure protection, providing proprietary technologies and services to protect against the corrosion of industrial pipelines and for the rehabilitation and strengthening of water, wastewater, energy and mining piping systems and buildings, bridges, tunnels and waterfront structures. 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, 2011, as filed with the Securities and Exchange Commission on February 28, 2012. 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 periodic 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. The (non-GAAP) earnings per share exclude the earnings impact of acquisition-related expenses, restructuring charges and debt redemption costs. 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®, Tite Liner®, Bayou Companies®, Corrpro®, CRTS™, Fibrwrap® and Fyfe™ are the registered and unregistered trademarks of Aegion Corporation and its affiliates.
 
 
 
 
 

AEGION CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except share and per share information)
 
  For the Quarters Ended   For the Years Ended
December 31, December 31,
2012   2011 2012   2011
 
Revenues $ 274,683 $ 256,795 $ 1,027,963 $ 938,585
Cost of revenues   209,459     193,314   $ 784,854     735,461  
Gross profit 65,224 63,481 243,109 203,124
Operating expenses 44,103 41,163 170,882 151,764
Earnout reversal (3,127 ) (10,019 ) (1,700 )
Acquisition-related expenses 530 608 3,124 6,372
Restructuring charges               2,151  
Operating income   23,718     21,710     79,122     44,537  
Other income (expense):
Interest expense (2,507 ) (2,248 ) (10,208 ) (15,075 )
Interest income 275 148 506 347
Other   (199 )   942     (1,457 )   1,955  
Total other expense   (2,431 )   (1,158 )   (11,159 )   (12,773 )
Income before taxes on income 21,287 20,552 67,963 31,764
Tax expense on income   6,231     5,538     17,473     7,565  

Income before equity in earnings of affiliated companies
15,056 15,014 50,490 24,199
Equity in earnings of affiliated companies   1,971     940     6,359     3,471  
Net income 17,027 15,954 56,849 27,670
Non-controlling interests   (2,132 )   (1,202 )   (4,188 )   (1,123 )
Net income attributable to Aegion Corporation $ 14,895   $ 14,752  

 
$ 52,661   $ 26,547  
 
Earnings per share attributable to Aegion Corporation:
Basic: $ 0.38   $ 0.37   $ 1.34   $ 0.67  
Diluted:   0.38     0.37     1.33     0.67  
 
 
 
Weighted average shares outstanding - Basic 39,131,493 39,406,355 39,222,737 39,362,138
Weighted average shares outstanding - Diluted 39,467,061 39,649,466 39,536,391 39,698,455
 
 
 
 
 
 

AEGION CORPORATION AND SUBSIDIARIESSTATEMENT OF OPERATIONS RECONCILIATIONFor the Quarter Ended December 31, 2012(Non-GAAP)(in thousands, except share and per share information)
 

 
           

Consolidated

Results

Acquisition-related

Expenses

Results Excluding

Acquisition-related Expenses
 
Revenues $ 274,683 $ $ 274,683
Cost of revenues   209,459         209,459  
Gross profit 65,224 65,224
Operating expenses 44,633 (530 ) 44,103
Earnout reversal   (3,127 )       (3,127 )
Operating income   23,718     530     24,248  
Other income (expense):
Interest expense (2,507 ) (2,507 )
Interest income 275 275
Other   (199 )       (199 )
Total other expense   (2,431 )       (2,431 )
Income before taxes on income 21,287 530 21,817

Tax expense on income
  6,231     187     6,418  

Income before equity in earnings of affiliated companies
15,056 343 15,399
Equity in earnings of affiliated companies   1,971         1,971  
Net income 17,027 343 17,370
Non-controlling interests   (2,132 )       (2,132 )
Net income attributable to Aegion Corporation $ 14,895   $ 343   $ 15,238  
 
Diluted earnings per share:    
Net income $ 0.38   $ 0.39  
 
Weighted average shares outstanding - Diluted 39,467,061 39,467,061
 
 
 
 
 
 

AEGION CORPORATION AND SUBSIDIARIESSTATEMENT OF OPERATIONS RECONCILIATIONFor the Quarter Ended December 31, 2011(Non-GAAP)(in thousands, except share and per share information)
 
           

Consolidated

Results

Acquisition-related

Expenses

Results Excluding

Acquisition-related Expenses
 
Revenues $ 256,795 $ $ 256,795
Cost of revenues   193,314         193,314  
Gross profit 63,481 63,481
Operating expenses 41,771 (608 ) 41,163
Earnout reversal           -  
Operating income   21,710     608     22,318  
Other income (expense):
Interest expense (2,248 ) (2,248 )
Interest income 148 148
Other   942         942  
Total other expense   (1,158 )       (1,158 )
Income before taxes on income 20,552 608 21,160
Tax expense on income   5,538     148     5,686  

Income before equity in earnings of affiliated companies
15,014 460 15,474
Equity in earnings of affiliated companies   940         940  
Net income 15,954 460 16,414
Non-controlling interests   (1,202 )       (1,202 )
Net income attributable to Aegion Corporation $ 14,752   $ 460   $ 15,212  
 
Diluted earnings per share:    
Net income $ 0.37   $ 0.38  
 
Weighted average shares outstanding - Diluted 39,649,466 39,649,466
 
 
 
 
 
 

AEGION CORPORATION AND SUBSIDIARIESSTATEMENT OF OPERATIONS RECONCILIATIONFor the Year Ended December 31, 2012(Non-GAAP)(in thousands, except share and per share information)
 
           
Consolidated Acquisition-related Results Excluding
Results Expenses Acquisition-related Expenses
 
Revenues $ 1,027,963

$ 1,027,963
Cost of revenues   784,854    

    784,854  
Gross profit 243,109 243,109
Operating expenses 174,006 (3,124 ) 170,882
Earnout reversal   (10,019 )       (10,019 )
Operating income   79,122     3,124     82,246  
Other income (expense):
Interest expense (10,208 ) (10,208 )
Interest income 506 506
Other   (1,457 )       (1,457 )
Total other expense   (11,159 )       (11,159 )
Income before taxes on income 67,963 3,124 71,087
Tax expense on income   17,473     434     17,907  

Income before equity in earnings of affiliated companies
50,490 2,690 53,180
Equity in earnings of affiliated companies   6,359         6,359  
Net income 56,849 2,690 59,539
Non-controlling interests   (4,188 )       (4,188 )
Net income attributable to Aegion Corporation $ 52,661   $ 2,690   $ 55,351  
 
Diluted earnings per share:    
Net income $ 1.33   $ 1.40  
 
Weighted average shares outstanding - Diluted 39,536,391 39,536,391
 
 
 
 
 
 

AEGION CORPORATION AND SUBSIDIARIESSTATEMENT OF OPERATIONS RECONCILIATIONFor the Year Ended December 31, 2011(Non-GAAP)(in thousands, except share and per share information)
 
                   

Consolidated

Results

Restructuring

Charges

Acquisition-

related

Expenses

Prior Debt

Redemption

Costs

Results

Excluding One-

time Items
 
 
Revenues $ 938,585 $ $ $ $ 938,585
Cost of revenues   735,461               735,461  
Gross profit 203,124 203,124
Operating expenses   158,587     (2,151 )   (6,372 )     150,064  
Operating income   44,537     2,151     6,372       53,060  
Other income (expense):
Interest expense (15,075 ) 6,811 (8,264 )
Interest income 347 347
Other   1,955               1,955  
Total other expense   (12,773 )           6,811   (5,962 )
Income before taxes on income 31,764 2,151 6,372 6,811 47,098
Tax expense on income   7,565     655     1,669     2,684   12,573  

Income before equity in earnings of affiliated companies
24,199 1,496 4,703 4,127 34,525
Equity in earnings of affiliated companies   3,471               3,471  
Net income 27,670 1,496 4,703 4,127 37,996
Non-controlling interests   (1,123 )             (1,123 )
Net income attributable to Aegion Corporation $ 26,547   $ 1,496   $ 4,703   $ 4,127 $ 36,873  
 
Diluted earnings per share:    
Net income $ 0.67   $ 0.93  
 
Weighted average shares outstanding - Diluted 39,698,455 39,698,455
 
 
 
 
 
 

AEGION CORPORATION AND SUBSIDIARIES SEGMENT DATA(In thousands)
 
  Quarters Ended   Years Ended
December 31, December 31,
2012   2011 2012   2011
Revenues:    
Energy and Mining $ 139,452 $ 123,359 $ 525,107 $ 433,230
North American Water and Wastewater 85,691 90,901 317,338 357,507
European Water and Wastewater 20,191 20,472 72,534 87,017
Asia-Pacific Water and Wastewater 10,132 8,614 38,501 43,717
Commercial and Structural   19,217       13,449     74,483       17,114  
Total Revenues $ 274,683     $ 256,795   $ 1,027,963     $ 938,585  
 
Gross Profit (Loss):
Energy and Mining $ 33,331 $ 34,446 $ 126,960 $ 109,753
North American Water and Wastewater 16,444 15,151 65,294 55,443
European Water and Wastewater 4,907 6,304 17,065 22,837
Asia-Pacific Water and Wastewater (185 ) 802 (2,740 ) 6,772
Commercial and Structural   10,727       6,778     36,530       8,319  
Total Gross Profit: $ 65,224     $ 63,481   $ 243,109     $ 203,124  
 
Operating Income (Loss):
Energy and Mining $ 15,714 $ 14,518 $ 57,313 $ 35,011
North American Water and Wastewater 5,695 4,186 22,057 6,749
European Water and Wastewater 877 2,416 2,117 6,000
Asia-Pacific Water and Wastewater (2,718 ) (1,647 ) (11,501 ) (2,512 )
Commercial and Structural   4,150       2,237     9,136       (711 )
Total Operating Income: $ 23,718     $ 21,710   $ 79,122     $ 44,537  
 
 
 
 
 
 

AEGION CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share amounts)
 
  December 31,
2012   2011

Assets
 
Current assets
Cash and cash equivalents $ 133,676 $ 106,129
Restricted cash 1,574 82
Receivables, net 237,234 228,313
Retainage 30,172 33,933
Costs and estimated earnings in excess of billings 70,515 67,683
Inventories 59,509 54,540
Prepaid expenses and other current assets   27,981     27,305
Total current assets   560,661     517,985
Property, plant & equipment, less accumulated depreciation   185,966     168,945
Other assets
Goodwill 273,661 249,888
Identified intangible assets, less accumulated amortization 162,278 157,021
Investments 19,181 19,314
Deferred income tax assets 7,989 5,418
Other assets   8,158     6,393
Total other assets 471,267 438,034
 
Total Assets $ 1,217,894   $ 1,124,964
 

Liabilities and Equity
Current liabilities
Accounts payable $ 77,949 $ 72,326
Accrued expenses 81,240 69,417
Billings in excess of costs and estimated earnings 31,552 24,435
Current maturities of long-term debt and line of credit   33,775     26,541
Total current liabilities 224,516 192,719
Long-term debt, less current maturities 221,848 222,868
Deferred income tax liabilities 39,790 38,167
Other non-current liabilities   15,620     22,221
Total liabilities   501,774     475,975

 
 

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 38,952,561 and 39,352,375, respectively
390 394
Additional paid-in capital 257,209 260,680
Retained earnings 426,457 373,796
Accumulated other comprehensive income   15,260     5,862
Total stockholders’ equity 699,316 640,732
Non-controlling interests   16,804     8,257
Total equity   716,120     648,989
 
Total Liabilities and Equity $ 1,217,894   $ 1,124,964
 
 
 
 
 
 

AEGION CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended December 31, 2012 and 2011(in thousands)
 
  2012   2011
 

Cash flows from operating activities:
Net income $ 56,849 $ 27,670
 
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 38,117 36,039
Gain on sale of fixed assets (785 ) (373 )
Equity-based compensation expense 6,767 6,491
Deferred income taxes (2,933 ) (2,320 )
Equity in earnings of affiliated companies (6,359 ) (3,471 )
Reversal of earnout (10,020 ) (1,700 )
(Gain) loss on foreign currency transactions 1,049 (1,155 )
Other (2,271 ) 573
Changes in operating assets and liabilities (net of acquisitions):
Restricted cash (1,492 ) 663
Return on equity of affiliated companies 11,034 7,018
Receivables net, retainage and costs and estimated earnings in excess of billings 5,397 (38,310 )
Inventories (3,661 ) (5,992 )
Prepaid expenses and other assets 3,338 2,045
Accounts payable and accrued expenses 14,826 (2,248 )
Other operating   865       (2,046 )
Net cash provided by operating activities   110,721       22,884  
 

Cash flows from investing activities:
Capital expenditures (45,894 ) (21,554 )
Proceeds from sale of fixed assets 4,401 755
Patent expenditures (552 ) (1,130 )
Purchase of Fyfe Latin America, net of cash acquired (3,048 )
Purchase of Fyfe Asia, net of cash acquired (38,841 )
Purchases of CRTS, Hockway and Fyfe North America, net of cash acquired   516       (144,134 )
Net cash used in investing activities   (83,418 )     (166,063 )

Cash flows from financing activities:
Issuance of common stock upon stock option exercises, including tax benefit 1,178 3,610
Issuance of common stock in connection with acquisition of Fyfe North America 4,000
Repurchase of common stock (12,308 ) (5,000 )
Investments from noncontrolling interests 4,939 546
Purchase of or distributions to noncontrolling interests (5 ) (1,661 )
Proceeds on notes payable 7,160 354
Principal payments on notes payable (2,768 ) (1,499 )
Proceeds from line of credit 26,000
Proceeds from long-term debt 983 250,000
Principal payments on long-term debt (25,000 ) (103,750 )
Credit facility and other financing fees         (4,320 )
Net cash provided by financing activities   179       142,280  
Effect of exchange rate changes on cash   65       (7,801 )
Net increase (decrease) in cash and cash equivalents for the period 27,547 (8,700 )
Cash and cash equivalents, beginning of period   106,129       114,829  
Cash and cash equivalents, end of period $ 133,676     $ 106,129  
 
 

Copyright Business Wire 2010

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