financial reports

Aegion Corp. Reports Strong 2014 for Infrastructure Solutions Division, Projects the Same for 2015

financial reportsThe Aegion Corp. (Nasdaq Global Select Market: AEGN) recently reported financial results for the fourth quarter and full year 2014. For the full year, Aegion reported a loss from continuing operations of $31.6 million compared to income from continuing operations of $50.8 million in 2013. Pre-tax restructuring and impairment related charges totaled $102.3 million in 2014.

This includes a fourth quarter 2014 pre-tax charge of $52.7 million related to long-term asset impairments, including goodwill. Excluding the pre-tax restructuring and impairment charges in 2014, as well as acquisition-related expenses in 2014 and 2013, 2014 non-GAAP1 income from continuing operations was $52.2 million compared to $49.5 million for 2013.

For the fourth quarter of 2014, Aegion reported a GAAP loss from continuing operations of $33.7 million,compared to income from continuing operations of $14.5 million in 2013. Excluding pre-tax restructuring, impairment charges and acquisition-related expenses, non-GAAP income from continuing operations for the fourth quarter of 2014 was $18.2 million, compared to $15.5 million for the fourth quarter of 2013.

Aegion president and CEO Charles R. Gordon said, “We met the high end of our revised 2014 guidance with one of the company’s strongest operating quarters in recent years. The October 2014 realignment and restructuring plan initiatives are largely behind us. We also finished the year with a record quarter of cash collections which enabled us to close the year with the highest cash balance in the company’s history. The restructuring efforts are proceeding ahead of plan, which is reflected in the increased savings realized during the fourth quarter. There is strong interest in our CIPP products in the restructured international markets. The restructuring is also complete at our Louisiana coating facility. The combination of Fyfe/Fibrwrap and Insituform is also proceeding as planned. We made great progress on these initiatives during the fourth quarter.

“Infrastructure Solutions had an outstanding year as Insituform’s North American operations delivered revenue growth and improved profitability for the third straight year. Fyfe/Fibrwrap generated a profit for 2014 on strong recovery in North America in the second half as well as growth in Asia. Energy Services grew revenues and operating income significantly in 2014, reflecting strength in the downstream refining markets. Corrosion Protection benefited from a strong Canadian market in 2014, as well as a reduction in the operating loss at our coating facility in Louisiana. This was partially offset by a profit decline in the energy pipe lining business due to lower revenues.

“2014 was a good year for Aegion, reflecting strong demand for our products and services. I am particularly pleased with execution across the enterprise coupled with our successful restructuring initiatives in the fourth quarter.”

2015 Outlook

“As we look to 2015, the majority of our business is well positioned for stability and growth within the municipal water and wastewater, commercial infrastructure and the United States midstream pipeline and downstream refining end markets,” said Gordon. “The Infrastructure Solutions platform is projected to have a strong year in 2015 for operating income growth, particularly in North America where our continued focus is on delivering superior customer solutions, rigorous cost management and improving market intelligence along with attaining all of the planned restructuring savings.

“Our management teams in Corrosion Protection and Energy Services have been in contact with our oil and gas customers over the last three months, a number of whom are understandably cautious and are curtailing costs. Aegion will be affected by the sharp decline in crude oil prices because 15 to 20 percent of total revenues are dedicated to the upstream energy market and there may be some exposure to the midstream market in Canada. The anticipated earnings contribution from Infrastructure Solutions and the estimated annual savings from the realignment and restructuring plan will offset, to a large degree, the likely impact we may see in 2015. However, at this time, we don’t have sufficient visibility into the second half of the year, especially with respect to the Canadian market and the impact of foreign currency translation. Given the current environment, we are not providing financial guidance for 2015. We will continue to keep our investors apprised of our overall positioning in the markets we serve. We are highly confident in the long-term opportunities for our technologies and services to protect, rehabilitate and strengthen urban and energy infrastructure, primarily pipelines, based on demands of aging infrastructure and the expansion of non-conventional oil and gas recovery in North America and other regions.”

Infrastructure Solutions

Infrastructure Solutions began 2015 in a strong position with a 2.3 percent increase in backlog from yearend 2013 to $337.5 million at Dec. 31, 2014, led by 4.8 percent and 16.2 percent backlog increases for Insituform North America and Fyfe/Fibrwrap, respectively. Offsetting these increases was the expected decline in international business backlog as a result of our decision to exit cured-in-place pipe (CIPP) contracting activities in certain countries in Europe and Asia. Current estimates for 2015 expenditures in the North America municipal CIPP market indicate mid-single digit growth compared to 2014. Fyfe/Fibrwrap entered 2015 in a strong backlog position, particularly in North America through continued focus on improving the sales channel and execution.

Corrosion Protection

Corrosion Protection anticipates continued pipeline infrastructure investment in 2015 for the midstream oil and gas pipeline market in North America. Backlog as of Dec. 31, 2014, was $176 million, a 9.5 percent increase over backlog as of Dec. 31, 2013. The cathodic protection business began 2015 with greater backlog than at the beginning of 2014, and the coating services business has a sizable backlog, most of which is for a large pipeline project currently under way in Chile. The actions taken last year to reposition the pipe coating facility in Louisiana have lowered the required revenue for the plant to break-even.

The Corrosion Protection market in Canada is under pressure due to the declining price of oil. This is a critical market for all of our businesses, and customers have already curtailed spending in certain upstream activities. Based on current midstream backlog and discussions we have had with customers, the first half of 2015 should be a strong finish to the current Canadian pipeline construction season. However, securing backlog for the second half of the year is less certain. The pipe ordering season in Canada begins during the summer months and the pace of orders will be an important indicator as to whether customers maintain or grow pipeline infrastructure investment for the 2015/2016 winter construction season.
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