INSU Insurance Acquisition Corporation

Aegion Corporation (Nasdaq Global Select Market: AEGN) today reported third quarter net income, excluding impacts of one-time acquisition-related transaction expenses, prior debt redemption costs and restructuring charges of $10.8 million ($0.27 per diluted share) (non-GAAP), compared to income from continuing operations of $18.8 million ($0.48 per diluted share) in the third quarter of 2010. Inclusive of approximately $6.8 million in pre-tax debt redemption costs, $5.4 million in pre-tax acquisition-related expenses, and $2.2 million in pre-tax restructuring charges, net income for the third quarter of 2011 was $1.2 million, or $0.03 per diluted share. For the first nine months of 2011, income from continuing operations, exclusive of acquisition-related expenses, prior debt redemption costs and restructuring charges, was $21.7 million (non-GAAP), or $0.55 per diluted share, compared to $43.0 million, or $1.10 per diluted share, in the first nine months of 2010. Inclusive of the acquisition-related expenses, prior debt redemption costs and restructuring charges, net income for the first nine months of 2011 was $11.8 million, or $0.30 per diluted share.

Joe Burgess, President and Chief Executive Officer, commented, “We achieved our recent guidance for the third quarter and also are beginning to see tangible results from our efforts to stabilize and reposition our North American Sewer and Water Rehabilitation business as September and October to date showed much improved financial results. With this stabilization and continued strong performance expected this year from United Pipeline Systems and Corrpro, we reaffirm guidance to deliver non-GAAP earnings per share in the range of $0.90-$1.00, which translates to $0.35 to $0.45 per diluted share (non-GAAP) in the fourth quarter. And as we begin to focus on 2012, I believe 2011 will become an inflection point, as we continue to establish new growth platforms beyond sewer rehabilitation, creating a new company, Aegion Corporation, that can consistently deliver, on average, 15 percent annual earnings growth.“

“We implemented a $2.2 million restructuring program in the third quarter to restructure our North American Sewer and Water Rehabilitation business and streamline costs in our other segments and corporate support functions. We anticipate that the restructuring will generate approximate pre-tax savings of $1.8 - $2.0 million in the fourth quarter of 2011 and annualized pre-tax savings of $8.0 - $9.0 million in 2012. We’ve taken the necessary steps to reposition our North American Sewer and Water Rehabilitation business to successfully operate in the current challenging market environment where small diameter pipe work is exceeding 85 percent of our project mix, the average transaction amount is considerably smaller and we are executing a record level of these smaller transactions,” said Burgess. “Those actions included a reduction in crews, as well as direct and corporate overhead, implementation of a more disciplined bidding process and investment in project management and logistics to improve efficiency. We achieved increased profitability in the third quarter, primarily as a result of a strong September, compared to previous quarters this year and I expect we will build momentum of profitable growth in the coming quarters.”

With regards to our Energy and Mining segment, Burgess stated, “Our coatings businesses were impacted by not winning a large Canadian insulation lining contract and delay in pipe delivery for a large pipe lining project at our New Iberia facility during the third quarter. This obviously impacted the Energy and Mining segment’s financial results at the gross profit and operating profit lines, overshadowing record results from United Pipeline Systems and continued steady performance from Corrpro. The outlook for our Energy and Mining segment is promising as our backlog of pipe coating projects is improving because of a return of off shore projects in the Gulf of Mexico and due to our efforts to expand our Energy and Mining group’s footprint in the Middle East and North Africa. We already have $20 million in backlog in our pipe coating business and there is a clear line of site for an additional $20 million in the coming months. We closed the quarter with record backlog for the entire segment, and our pace of project acquisitions is increasing. Of course, we also recently announced the largest project in United Pipeline Systems’ history with a $67.3 million joint venture project in Morocco.”

“I am pleased with the results we achieved in our European Sewer and Water Rehabilitation business as all regions reported revenue growth in the quarter,” Burgess continued. “This was especially true in the U.K., a promising sign for a market that experienced challenging conditions over the last several years. While market conditions remain challenging in many parts of Europe, we continue to make positive changes to our operating structure to ensure we move forward on profitable improvements and return on capital. We continue to face headwinds in our Asia-Pacific region, primarily in our India market, as we experienced continued delays in closing out existing projects and in the award of two new projects in Delhi valued at approximately $16 million. The same can be said for Singapore where the pace of activity has slowed over the short-term, but I expect new project work to commence there over the next few months and in Malaysia where we have significant upcoming bids. Australia, on the other hand, remains a strong market as we tap into additional opportunities not only in Sydney but in other cities, including Melbourne and Brisbane.”

“As we near the end of 2011, our attention quickly turns to the growth outlook for the new Aegion Corporation. This announcement formalizes for our stockholders and customers the evolution of Insituform into a larger and broader company focused on the preservation of infrastructure assets in key segments and markets around the world. The acquisitions we made this year have grown our Energy and Mining product and service offering and established our Commercial and Structural group. Both provide Aegion with true platforms for growth in attractive high return segments of the infrastructure market. I am very optimistic about the outlook for these segments, especially with what the fiber-reinforced polymer composite system innovation can bring to the reinforcement of commercial structures, opening a new, high growth, market for Aegion.”

“And that growth outlook begins in 2012 as I see the pieces coming together for a very strong year. We have implemented important stabilizing improvements to our North American Sewer and Water Rehabilitation business in recent months, and we are experiencing very robust market conditions throughout our key growth segments of Energy and Mining and Commercial and Structural. I am confident that 2011 will be viewed as a transition year towards a stronger and more consistently profitable Company going forward.”

Segment Reporting

Prior to the third quarter of 2011, we previously considered Water Rehabilitation to be a separate reportable segment. Based on an internal management reorganization, we have combined previously reported water rehabilitation results for all periods presented below, which have not been material, with the geographically separated sewer rehabilitation segments. Additionally, in connection with our recent acquisition of the North American operations of Fyfe Group, LLC, we established a Commercial and Structural reportable segment.

         

Energy and Mining Segment

Increase (Decrease) (in thousands, except %)   2011   2010 $   % Three Months Ended September 30,     Revenues $ 114,014 $ 102,881 $ 11,133 10.8% Gross profit 27,392 29,606 (2,214) (7.5) Gross margin 24.0% 28.8% n/a (4.8) Operating expenses 18,838 17,913 925 5.2 Reversal of earnout (1,700) (1,700) – – Acquisition-related expenses 2,358 – 2,358 n/m Restructuring charges 778 – 778 n/m Operating income 7,118 13,393 (6,275) (46.9) Operating margin 6.2% 13.0% n/a (6.8)   Nine Months Ended September 30, Revenues $ 309,871 $ 276,970 $ 32,901 11.9% Gross profit 75,307 78,467 (3,160) (4.0) Gross margin 24.3% 28.3% n/a (4.0) Operating expenses 53,052 49,690 3,362 6.8 Reversal of earnout (1,700) (1,700) – – Acquisition-related expenses 2,684 – 2,684 n/m Restructuring charges 778 – 778 n/m Operating income 20,493 30,477 (9,984) (32.8) Operating margin 6.6% 11.0% n/a (4.4)     September 30, 2011   June 30, 2011   March 31, 2011   December 31, 2010   September 30, 2010 Backlog (in millions) $225.6   $168.1   $147.6   $146.1   $156.3  

In the third quarter of 2011, our Energy and Mining segment operating income decreased by $6.3 million, or 46.9 percent, compared to the third quarter of 2010, inclusive of $3.1 million of pre-tax acquisition-related expenses and restructuring charges. The decrease was primarily due to a lack of large diameter pipe coating projects partially offset by another strong quarter from our industrial linings and cathodic protection businesses. Energy and Mining gross margin declined to 24.0 percent compared to 28.8 percent in the third quarter of 2010 as much of the revenue growth came from geographic regions with lower gross profit margins coupled with lower margins resulting from a lack of large coating projects. The increase in operating expenses was attributable to higher corporate allocations due to the increased size of this segment, acquisition-related depreciation and amortization related to the CRTS and Hockway acquisitions and increased resources to support the growth of the segment, primarily for increased support of international projects and the addition of recent acquisitions. We expect strong global energy markets will lead to growth within existing geographies as well as new geographies, specifically in Asia, the Middle East and North Africa as evidenced by the recent acquisitions within our corrosion engineering and pipe coating businesses, which expand our presence in the Middle East and other key markets. During the third quarter of 2011, CRTS and Hockway both experienced a slight loss due to acquisition-related depreciation and amortization; however, we expect these acquisitions to contribute positive operating income in the coming quarters.

Similar to 2010, the third quarter of 2011 includes a $1.7 million pre-tax reversal of an earnout liability that was not earned by the former owners of Bayou.

Contract backlog in our Energy and Mining segment at September 30, 2011 was $225.6 million, an increase of $57.5 million, or 34.2 percent, compared to June 30, 2011 and an increase of $69.3 million, or 44.3 percent, compared to September 30, 2010. The increase over the previous quarter was primarily driven by an increase at CRTS, which added a $48.4 million contract during the quarter for work to be performed in Saudi Arabia over the next three years. Additionally, our pipe coating operations backlog increased due to a recovery of offshore pipeline development activity. Since December 31, 2010, our pipe coating and cathodic protection operations have increased backlog levels. We continue to believe that high commodity prices as a result of healthy global energy demand will result in significant continued opportunities for our Energy and Mining segment for future periods, particularly as it relates to new spending in the sector. We expect backlog for this segment to grow through the final quarter of 2011 and into 2012, particularly with the addition of the $67.3 million project in Morocco awarded to our United Pipeline System joint venture in October 2011.

       

North American Sewer and Water Rehabilitation Segment

Increase (Decrease) (in thousands, except %) 2011   2010 $   % Three Months Ended September 30, Revenues $ 95,200 $ 111,560 $ (16,360 ) (14.7 )% Gross profit 15,882 24,336 (8,454 ) (34.7 ) Gross margin 16.7 % 21.8 % n/a (5.1 ) Operating expenses 10,966 12,392 (1,426 ) (11.5 ) Restructuring charges 503 – 503 n/m Operating income 4,413 11,944 (7,531 ) (63.1 ) Operating margin 4.6 % 10.7 % n/a (6.1 )   Nine Months Ended September 30, Revenues $ 266,606 $ 306,856 $ (40,250 ) (13.1 )% Gross profit 40,292 68,957 (28,665 ) (41.6 ) Gross margin 15.1 % 22.5 % n/a (7.4 ) Operating expenses 37,226 40,093 (2,867 ) (7.2 ) Restructuring charges 503 – 503 n/m Operating income 2,563 28,864 (26,301 ) (91.1 ) Operating margin 0.1 % 9.4 % n/a (9.3 )   September 30, 2011   June 30, 2011   March 31, 2011   December 31, 2010   September 30, 2010 Backlog (in millions) $157.5   $169.5   $152.6   $159.5   $191.0

In the third quarter of 2011, our North American Sewer and Water Rehabilitation segment operating income decreased by $7.5 million, or 63.1 percent, compared to the third quarter of 2010. The principal contributors to the 2011 third quarter results were the 14.7 percent decline in revenues and compressed gross margins resulting from project execution challenges, magnified by project release delays impacting crew utilization. In addition, there was a significant shift to lower margin small diameter project, pressuring project management and crew operations, which further negatively impacted performance. Contracting margins for the eastern and western regions improved from the second quarter of 2011 as we began to see the effects of our efforts to improve our project management organizational structure.

Contract backlog in our North American Sewer and Water Rehabilitation segment at September 30, 2011 was $157.5 million, a decrease of $12.0 million, or 7.1 percent, compared to June 30, 2011 and a decrease of $33.5 million, or 17.5 percent, compared to September 30, 2010. The decrease from June 30, 2011 was due to timing of project awards in the eastern and central regions of the United States. There was an increase in the amount of projects won but not signed from the second quarter to third quarter of 2011. Contract backlog in the western region of the United States increased from June 30, 2011 as a result of a number of large projects being signed during the third quarter. Market conditions remain challenging although our recent project awards and market share have been holding up against historical performance and margins in backlog are improving.

       

European Sewer and Water Rehabilitation Segment

Increase (Decrease) (in thousands, except %) 2011   2010 $   % Three Months Ended September 30, Revenues $ 22,176 $ 15,929 $ 6,247 39.2 % Gross profit 5,899 4,831 1,068 22.1 Gross margin 26.6 % 30.3 % n/a (3.7 ) Operating expenses 3,941 3,508 433 12.3 Restructuring charges 697 – 697 n/m Operating income 1,261 1,323 (62 ) (4.7 ) Operating margin 5.7 % 8.3 % n/a (2.6 )   Nine Months Ended September 30, Revenues $ 66,545 $ 51,743 $ 14,802 28.6 % Gross profit 16,533 14,147 2,386 16.9 Gross margin 24.8 % 27.3 % n/a (2.5 ) Operating expenses 12,252 11,623 629 5.4 Restructuring charges 697 – 697 n/m Operating income 3,584 2,524 1,060 42.0 Operating margin 5.4 % 4.9 % n/a 0.5   September 30, 2011   June 30, 2011   March 31, 2011   December 31, 2010   September 30, 2010 Backlog (in millions) $19.2   $22.2   $24.0   $23.3   $26.0

In the third quarter of 2011, our European Sewer and Water Rehabilitation segment operating income increased by $0.6 million compared to the third quarter of 2010, exclusive of $0.7 million of pre-tax restructuring charges. The increase was primarily due to improved project performance in France and improved market conditions in the United Kingdom partially offset by lower margin projects in the Netherlands and competitive pricing pressures in Switzerland.

Contract backlog in our European Sewer and Water Rehabilitation segment at September 30, 2011 decreased $3.0 million, or 13.5 percent, compared to June 30, 2011 and decreased $6.8 million, or 26.2 percent, compared to September 30, 2010. Backlog has improved in France, while market conditions and increased competition have negatively impacted backlog in the Netherlands.

       

Asia-Pacific Sewer and Water Rehabilitation Segment

Increase (Decrease) (in thousands, except %) 2011     2010 $   % Three Months Ended September 30, Revenues $ 11,163 $ 9,215 $ 1,948 21.1 % Gross profit 1,915 2,646 (731 ) (27.6 ) Gross margin

17.2

%

28.7 % n/a (11.5 ) Operating expenses 2,088 2,351 (263 ) (11.2 ) Restructuring charges 173 – 173 n/m Operating income (loss)

(346

)

295 (641 ) (217.3 ) Operating margin

(3.1

)%

3.2 % n/a (6.3 )   Nine Months Ended September 30, Revenues $ 35,103 $ 33,390 $ 1,713 5.1 % Gross profit 5,970 7,727 (1,757 ) (22.7 ) Gross margin

17.0

%

23.1 % n/a (6.1 ) Operating expenses 6,662 7,384 (722 ) (9.8 ) Restructuring charges 173 – 173 n/m Operating income (loss)

(865

)

343 (1,208 ) (352.2 ) Operating margin

(2.5

)%

1.0 % n/a (3.5 )     September 30, 2011   June 30, 2011   March 31, 2011   December 31, 2010   September 30, 2010 Backlog (in millions) $37.4   $50.3   $68.7   $79.8   $81.3

In the third quarter of 2011, our Asia-Pacific Sewer and Water Rehabilitation segment operating income decreased by $0.6 million, compared to the third quarter of 2010. The decrease was primarily due to the lack of profitable projects in India, partially offset by continued growth in our Australian operation. Operating expenses decreased by $0.3 million for the quarter compared to the prior year; however, operating income was also negatively impacted by $0.2 million as part of the Company’s restructuring efforts.

Contract backlog in our Asia-Pacific Sewer and Water Rehabilitation segment at September 30, 2011 was $37.4 million, a decrease of $12.9 million, or 25.6 percent, compared to June 30, 2011 and a decrease of $43.9 million, or 54.0 percent, compared to September 30, 2010. The decrease was primarily due to efforts to work through backlog in Australia, Hong Kong and Singapore as well as the lack of any large new project awards during the quarter. In the second quarter of 2011, our Singapore projects were adjusted downward due to project revisions. Prospects continue to be strong throughout Asia-Pacific for expansion of the business, particularly in Australia and Malaysia, while our recent large bids in India continue to be delayed by the customer.

       

Commercial and Structural Segment

Increase (Decrease) (in thousands, except %) 2011   2010 $   % Three Months Ended September 30, Revenues $ 3,665 $ – $ 3,665 – Gross profit 1,541 – 1,541 – Gross margin 42.0 % – 42.0 % – Operating expenses 1,409 – 1,409 – Acquisition-related expenses 3,080 – 3,080 – Operating income (2,948 ) – (2,948 ) – Operating margin (80.4 )% – (80.4 )% –   Nine Months Ended September 30, Revenues $ 3,665 $ – $ 3,665 – Gross profit 1,541 – 1,541 – Gross margin 42.0 % – 42.0 % – Operating expenses 1,409 – 1,409 – Acquisition-related expenses 3,080 – 3,080 – Operating income (2,948 ) – (2,948 ) – Operating margin (80.4 )% – (80.4 )% –   September 30, 2011 Backlog (in millions) $17.5

The third quarter of 2011 represents financial results for the 30-day period ended September 30, 2011 following our acquisition of the North American operation of Fyfe Group LLC on August 31, 2011. During the third quarter of 2011, we incurred $3.1 million of pre-tax acquisition-related costs for this segment. We hold exclusive negotiating rights to acquire Fyfe Group’s international operations in Latin America, Asia and Europe, which we anticipate would close over the next several quarters. Backlog at September 30, 2011 for the Commercial and Structural segment was $17.5 million. Excluding acquisition-related expenses, the Commercial and Structural segment generated a slight operating profit in the third quarter and we anticipate stronger performance in the fourth quarter and beyond with solid backlog levels and improving prospects in a variety of end markets.

Cash Flow

Unrestricted cash at September 30, 2011 was $96.7 million compared to $108.0 million at June 30, 2011 and $114.8 million at December 31, 2010. Operating cash flow for the first nine months was impacted primarily by transaction costs related to recent acquisitions, along with the restructuring charges, prior debt redemption costs and lower earnings from North American Sewer and Water Rehabilitation. We expect to see increased cash flow during the remainder of 2011 as earnings grow and we are able to optimize our cash management practices.

Aegion 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 sewer, water, energy and mining piping systems and buildings, bridges, tunnels and waterfront structures. More information about Aegion can be found on its 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, 2010, as filed with the Securities and Exchange Commission on February 28, 2011 under the name of Insituform Technologies, Inc. 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

Aegion has presented certain information in this release excluding certain items that impacted income and diluted earnings per share. The (non-GAAP) earnings per share exclude the earnings impact of acquisition-related expenses, prior debt redemption costs and restructuring charges. 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™ and Corrpro® 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 Three MonthsEnded September 30,

For the Nine Months EndedSeptember 30,

2011 2010 2011 2010   Revenues $ 246,218 $ 239,585 $ 681,790 $ 668,959 Cost of revenues   193,589     178,166     542,147     499,661   Gross profit 52,629 61,419 139,643 169,298 Operating expenses 37,242 36,164 110,601 108,790 Earnout reversal (1,700 ) (1,700 ) (1,700 ) (1,700 ) Acquisition-related expenses 5,438 – 5,764 – Restructuring charges   2,151     –     2,151     –   Operating income 9,498 26,955 22,827 62,208 Other income (expense): Interest income 63 73 199 240 Interest expense (9,168 ) (1,940 ) (12,827 ) (6,204 ) Other   (768 )   71     1,013     44   Total other expense   (9,873 )   (1,796 )   (11,615 )   (5,920 ) Income (loss) before taxes on income (375 ) 25,159 11,212 56,288 Taxes on income (tax benefit)   (775 )   7,934     2,027     17,618   Income before equity in earnings of affiliated companies 400 17,225 9,185 38,670 Equity in earnings of affiliated companies, net of tax   916     2,792     2,531     5,470   Income before discontinued operations 1,316 20,017 11,716 44,140 Loss from discontinued operations, net of tax   –     (16 )   –     (93 ) Net income 1,316 20,001 11,716 44,047 Less: net (income) loss attributable to noncontrolling interests   (156 )   (1,191 )   79     (999 ) Net income attributable to common stockholders $ 1,160   $ 18,810   $ 11,795   $ 43,048     Earnings per share attributable to common stockholders: Basic: Income from continuing operations $ 0.03 $ 0.48 $ 0.30 $ 1.11 Loss from discontinued operations   –     (0.00 )   –     (0.01 ) Net income $ 0.03 $ 0.48 $ 0.30 $ 1.10 Diluted: Income from continuing operations $ 0.03 $ 0.48 $ 0.30 $ 1.10 Loss from discontinued operations   –     (0.00 )   –     (0.01 ) Net income $ 0.03 $ 0.48 $ 0.30 $ 1.09

Basic

39,424,336 39,060,076 39,427,237 39,032,698 Diluted 39,711,383 39,419,038 39,706,751 39,387,915            

AEGION CORPORATION AND SUBSIDIARIES

STATEMENT OF OPERATIONS RECONCILIATION

For the Three Months Ended September 30, 2011

(Unaudited) (Non-GAAP)

(in thousands, except share and per share information)

 

ConsolidatedResults

 

RestructuringCharges

 

Acquisition-relatedexpenses

 

Prior DebtRedemption

 

ResultsExcludingone-off items

  Revenues $ 246,218 $ – $ – $ – $ 246,218 Cost of revenues   193,589       –       –       –     193,589   Gross profit 52,629 – – – 52,629 Operating expenses   43,131       (2,151 )     (5,438 )     –     35,542   Operating income 9,498 2,151 5,438 – 17,087 Other income (expense): Interest income 63 – – – 63 Interest expense (9,168 ) – – 6,811 (2,357 ) Other   (768 )     –       –       –     (768 ) Total other income   (9,873 )     –       –       6,811     (3,062 ) Income before taxes on income (375 ) 2,151 5,438 6,811 14,025 Taxes on income (tax benefit)   (775 )     649       1,679       2,457     4,010   Income before equity in earnings of affiliated companies 400

1,502

3,759

4,354

10,015 Equity in earnings of affiliated companies   916       –       –       –     916   Net income 1,316 1,502 3,759 4,354 10,931 Less: net income attributable to noncontrolling interests   (156 )    

–

     

–

     

–

    (156 ) Net income attributable to common stockholders $ 1,160    

$

1,502

   

$

3,759

   

$

4,354

  $ 10,775     Earnings per share attributable to common stockholders: Basic: Income from continuing operations $ 0.03 $ 0.27 Loss from discontinued operations   –     –   Net income $ 0.03 $ 0.27 Diluted: Income from continuing operations $ 0.03 $ 0.27 Loss from discontinued operations   –     –   Net income $ 0.03 $ 0.27   Weighted average number of shares: Basic 39,424,336 39,424,336 Diluted 39,711,383 39,711,383            

AEGION CORPORATION AND SUBSIDIARIES

STATEMENT OF OPERATIONS RECONCILIATION

For the Nine Months Ended September 30, 2011

(Unaudited) (Non-GAAP)

(in thousands, except share and per share information)

 

ConsolidatedResults

 

RestructuringCharges

 

Acquisition-relatedexpenses

 

Prior DebtRedemption

 

ResultsExcludingone-off items

  Revenues $ 681,790 $ – $ – $ – $ 681,790 Cost of revenues   542,147       –       –       –     542,147   Gross profit 139,643 – – – 139,643 Operating expenses   116,816       (2,151 )     (5,764 )     –     108,901   Operating income 22,827 2,151 5,764 – 30,742 Other income (expense): Interest income 199 – – – 199 Interest expense (12,827 ) – – 6,811 (6,016 ) Other   1,013       –       –       –     1,013   Total other income   (11,615 )     –       –       6,811     (4,804 ) Income before taxes on income 11,212 2,151 5,764 6,811 25,938 Taxes on income   2,027       649       1,754       2,457     6,887   Income before equity in earnings of affiliated companies 9,185

1,502

4,010

4,354

19,051 Equity in earnings of affiliated companies   2,531       –       –       –     2,531   Net income 11,716 1,502 4,010 4,354 21,582 Less: net income attributable to noncontrolling interests   79      

–

     

–

     

–

    79   Net income attributable to common stockholders $ 11,795    

$

1,502

   

$

4,010

   

$

4,354

  $ 21,661     Earnings per share attributable to common stockholders: Basic: Income from continuing operations $ 0.30 $ 0.55 Loss from discontinued operations   –     –   Net income $ 0.30 $ 0.55 Diluted: Income from continuing operations $ 0.30 $ 0.55 Loss from discontinued operations   –     –   Net income $ 0.30 $ 0.55   Weighted average number of shares: Basic 39,427,237 39,427,237 Diluted 39,706,751 39,706,751          

AEGION CORPORATION AND SUBSIDIARIES

SEGMENT DATA

(Unaudited)

(In thousands)

  Three Months Ended

September 30,

  Nine Months Ended

September 30,

  2011       2010     2011       2010   Revenues: Energy and Mining $ 114,014 $ 102,881 $ 309,871 $ 276,970 North American Sewer and Water Rehabilitation 95,200 111,560 266,606 306,856 European Sewer and Water Rehabilitation 22,176 15,929 66,545 51,743 Asia-Pacific Sewer and Water Rehabilitation 11,163 9,215 35,103 33,390 Commercial and Structural   3,665       –     3,665       – Total revenues $ 246,218     $ 239,585   $ 681,790     $ 668,959   Gross profit: Energy and Mining $ 27,392 $ 29,606 $ 75,307 $ 78,467 North American Sewer and Water Rehabilitation 15,882 24,336 40,292 68,957 European Sewer and Water Rehabilitation 5,899 4,831 16,533 14,147 Asia-Pacific Sewer and Water Rehabilitation 1,915 2,646 5,970 7,727 Commercial and Structural   1,541       –     1,541       – Total gross profit $ 52,629     $ 61,419   $ 139,643     $ 169,298   Operating income (loss): Energy and Mining $ 7,118 $ 13,393 $ 20,493 $ 30,477 North American Sewer and Water Rehabilitation 4,413 11,944 2,563 28,864 European Sewer and Water Rehabilitation 1,261 1,323 3,584 2,524 Asia-Pacific Sewer and Water Rehabilitation (346 ) 295 (865 ) 343 Commercial and Structural   (2,948 )     –     (2,948 )     – Total operating income $ 9,498     $ 26,955   $ 22,827     $ 62,208            

 AEGION CORPORATION AND SUBSIDIARIES

CONTRACT BACKLOG

(Unaudited)

(In millions)

 

Backlog

    September 30,

2011

    June 30,

2011

    March 31,

2011

    December 31,

2010

    September 30,

2010

Energy and Mining

$

225.6

$

168.1

$

147.6

$

146.1

$

156.3

North American Sewer and Water Rehabilitation 157.5 169.5 152.6 159.5 191.0 European Sewer and Water Rehabilitation 19.2 22.2 24.0 23.3 26.0 Asia-Pacific Sewer and Water Rehabilitation 37.4 50.3 68.7 79.8 81.3 Commercial and Structural     17.5     –     –     –     – Total  

$

457.2

 

$

410.1

 

$

392.9

 

$

408.7

 

$

454.6

 

Contract backlog is our expectation of revenues to be generated from received, signed and uncompleted contracts, the cancellation of which is not anticipated at the time of reporting. Contract backlog excludes any term contract amounts for which there is not specific and determinable work released and projects where we have been advised that we are the low bidder, but have not formally been awarded the contract.

     

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share amounts)

 

 

September 30,

2011

December 31,

2010

 

Assets

Current assets Cash and cash equivalents $ 96,740 $ 114,829 Restricted cash 145 745 Receivables, net 213,351 178,994 Retainage 31,742 28,726 Costs and estimated earnings in excess of billings 88,611 69,544 Inventories 53,163 42,524 Prepaid expenses and other assets 28,472 30,031 Current assets of discontinued operations   –     1,193 Total current assets   512,224     466,586 Property, plant and equipment, less accumulated depreciation   169,157     164,486 Other assets Goodwill 252,629 190,120 Identified intangible assets, less accumulated amortization 146,971 73,147 Investments in affiliated companies 25,441 27,989 Deferred income tax assets 7,098 4,115 Other assets   9,037     4,260 Total other assets 441,176 299,631 Non-current assets of discontinued operations   –     2,607   Total Assets $ 1,122,557   $ 933,310  

Liabilities and Equity

Current liabilities Accounts payable $ 77,201 $ 74,820 Other accrued expenses 73,066 73,035 Billings in excess of costs and estimated earnings 15,795 12,612 Current maturities of long-term debt and notes payable   26,769     13,028 Total current liabilities 192,831 173,495 Long-term debt, less current maturities 229,006 91,715 Deferred income tax liabilities 41,647 32,330 Other non-current liabilities   22,794     9,063 Total liabilities   486,278     306,603   Stockholders’ 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 39,738,478 and 39,246,015

397

392

Additional paid-in capital 264,621 251,578 Retained earnings 359,044 347,249 Accumulated other comprehensive income   4,243     18,113 Total stockholders’ equity before noncontrolling interests 628,305 617,332 Noncontrolling interests   7,974     9,375 Total equity   636,279     626,707   Total Liabilities and Equity $ 1,122,557   $ 933,310      

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

  For the Nine Months

Ended September 30,

2011   2010

Cash flows from operating activities:

Net income $ 11,716 $ 44,047 Loss from discontinued operations   –       93   Income from continuing operations 11,716 44,140 Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 26,234 22,971 (Gain) loss on sale of fixed assets (363 ) 19 Equity-based compensation expense 5,494 5,227 Deferred income taxes (3,035 ) 2,329 Equity in earnings of affiliated companies (2,531 ) (5,470 ) Write-off of unamortized debt issuance costs 1,043 – Reversal of earnout (1,700 ) (1,700 ) Gain on foreign currency transactions (1,426 ) – Other (1,841 ) (863 ) Changes in operating assets and liabilities (net of acquisitions – See Note1): Restricted cash 600 623 Return on equity method investments 5,415 6,410 Receivables net, retainage and costs and estimated earnings in excess of billings (42,127 ) (41,455 ) Inventories (4,836 ) (8,472 ) Prepaid expenses and other assets 830 (2,098 ) Accounts payable and accrued expenses 1,011 7,017 Other   (3,523 )     (26 ) Net cash provided by (used in) operating activities of continuing operations (9,039 ) 28,652 Net cash used in operating activities of discontinued operations   –       (441 ) Net cash provided by (used in) operating activities   (9,039 )     28,211    

Cash flows from investing activities:

Capital expenditures (16,075 ) (28,630 ) Proceeds from sale of fixed assets 653 381 Patent expenditures (967 ) (1,176 ) Purchase of Singapore licensee – (1,257 ) Purchase of CRTS, net of cash acquired (23,639 ) – Purchase of Hockway, net of cash acquired (4,004 ) – Purchase of Fyfe NA, net of cash acquired   (114,690 )     –   Net cash used in investing activities   (158,722 )     (30,682 )  

Cash flows from financing activities:

Proceeds from issuance of common stock, including tax benefit of stock option exercises 3,551 1,860 Proceeds from issuance of common stock in connect with acquisition of Fyfe NA 4,000 302 Proceeds from notes payable 35 597 Principal payments on notes payable (1,112 ) (1,808 ) Investments from noncontrolling interests 301 1,681 Distributions/dividends to noncontrolling interests (2,006 ) (398 ) Interest rate swap settlement (96 ) – Debt issuance costs (4,046 ) – Proceeds from term loan 250,000 – Debt amendment costs (173 ) – Principal payments on long-term debt   (97,500 )     (7,500 ) Net cash provided by (used in) financing activities   152,954       (5,266 ) Effect of exchange rate changes on cash   (3,282 )     (97 ) Net decrease in cash and cash equivalents for the period (18,089 ) (7,834 ) Cash and cash equivalents, beginning of period   114,829       106,064   Cash and cash equivalents, end of period $ 96,740     $ 98,230