Aegion Corporation Reports 2016 Second Quarter Financial Results

Aegion Corporation (Nasdaq Global Select Market: AEGN):

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The Company expects improved earnings in 2H’16 despite ongoing challenges in the energy markets.

• Q2’16 earnings per diluted share were $0.10 compared to $0.24 in Q2’15. Adjusted (non-GAAP)1 Q2’16 earnings per diluted share were $0.23 compared to $0.35 in Q2’15.
• A record cash balance in 2015 led to investments of approximately $91 million for acquisitions and $25 million for share repurchases during 1H’16, which resulted in consolidated cash and cash equivalents at June 30, 2016 of $111 million.
• 2016 Restructuring was substantially completed in Q2’16 with expected pre-tax annual cost reductions of $17 million, most of which are expected to be recognized in 2016, ahead of the previous expectation of $15 to $16 million.

1 Adjusted (non-GAAP) results for the quarters and six-month periods ended June 30, 2016 and 2015 exclude certain charges related to the Company’s restructuring efforts and acquisition-related expenses. The reconciliation of adjusted results is on page 2.

Q2 2016 HIGHLIGHTS

• Contract backlog was $752 million at June 30, 2016, including record backlog for cathodic protection services.
• Infrastructure Solutions set a Q2 record for project wins in the N.A. wastewater CIPP market, a portion of which is pending final contract approval.
• Infrastructure Solutions had a solid quarter despite the absence of a large industrial project completed in 2015.
• Improved performance in Corrosion Protection’s U.S. cathodic protection services was overshadowed by weakness in the upstream and Canadian energy markets.
• Additional costs to downsize upstream operations impacted Energy Services’ financial results.
• Preparations for the Shell Appomattox contract remain on track for the planned start in Q4’16.

“As we enter Aegion’s prime earnings season, we expect adjusted 2H’16 EPS to be largely in line with the prior year period. However, we don’t expect additional project activity to make up for the short-term issues in Q2’16, which means adjusted 2016 EPS will likely fall below the adjusted result in 2015. We are confident the tailwinds in the N.A. municipal pipe rehabilitation market, an improving U.S. midstream market and execution of the Appomattox contract will build positive momentum as we conclude 2016 and move into 2017.”

Charles R. Gordon
Aegion President and Chief Executive Officer

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(1) 2016 Non-GAAP pre-tax adjustments:

• Restructuring: Charges for cost of revenues of $10 related to the write-off of certain other assets; charges for operating expenses of $2,029 related to wind-down and other restructuring-related charges; charges of $1,535 related to employee severance, extension of benefits, employment assistance programs and early lease termination costs in accordance with ASC 420, Exit or Disposal Cost Obligations, and recorded as “Restructuring charges” in the Consolidated Statements of Operations; and charges for other expense of $249 related to the release of cumulative currency translation adjustments. The vast majority of restructuring charges relate to the 2016 Restructuring.
• Acquisition-Related Expenses: Charges for inventory step up expense of $2,363 to cost of revenues recognized as part of the accounting for business combinations in connection with the Company’s acquisition of Underground Solutions; and expenses of $704 incurred in connection with the Company’s acquisitions of Underground Solutions, selected assets of Fyfe Europe and the CIPP business of Leif M. Jensen A/S and other potential acquisition activity pursued by the Company during the quarter.

(2) 2015 Non-GAAP pre-tax adjustments:

• Restructuring: Charges for cost of revenues of $968 related to the write-off of certain other assets; charges for operating expenses of $4,500 related to reserves for potentially uncollectible receivables and other restructuring-related charges; charges of $204 related to employee severance, extension of benefits, employment assistance programs and early lease termination costs in accordance with ASC 420, Exit or Disposal Cost Obligations, and recorded as “Restructuring charges” in the Consolidated Statements of Operations; and pre-tax restructuring charges of $22 related to the write-off of certain other assets.

(1) Includes non-GAAP adjustments related to: (i) pre-tax restructuring charges associated with the write-off of certain other assets, severance and benefit related costs, and other restructuring charges; (ii) inventory step up expense recognized in connection with the Company’s acquisitions of Underground Solutions; and (iii) acquisition expenses incurred primarily in connection with the Company’s acquisitions of Underground Solutions, selected assets of Fyfe Europe and the CIPP business of Leif M. Jensen A/S.
(2) Includes non-GAAP adjustments related to pre-tax restructuring charges associated with reserves for potentially uncollectible receivables, early lease termination costs, severance and benefit related costs, and other restructuring charges.

(1) Includes non-GAAP adjustments related to pre-tax restructuring charges associated with the write-off of certain other assets, severance and benefit related costs, and other restructuring charges.

(1) Includes non-GAAP adjustments related to pre-tax restructuring charges associated with the write-off of certain other assets, early lease termination costs, severance and benefit related costs, and other restructuring charges.

About Aegion (NASDAQ: AEGN)

Aegion combines innovative technologies with market leading expertise to maintain, rehabilitate, and strengthen infrastructure around the world. Since 1971, the company has played a pioneering role in finding transformational solutions to rehabilitate aging infrastructure including pipelines in the wastewater, water, energy and mining industries; buildings, bridges and other structures; as well as maintain the efficient operation of refineries and other industrial facilities. Aegion is committed to Stronger. Safer. Infrastructure®. More information about Aegion can be found at www.aegion.com.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Aegion’s forward-looking statements in this news release represent its beliefs or expectations about future events or financial performance. These forward-looking statements are based on information currently available to Aegion and on management’s beliefs, assumptions, estimates or projections and are not guarantees of future events or results. When used in this document, the words “anticipate,” “estimate,” “believe,” “plan,” “intend, “may,” “will” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Such statements are subject to known and unknown risks, uncertainties and assumptions, including those referred to in the “Risk Factors” section of Aegion’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission on February 29, 2016, and in subsequently filed documents. In light of these risks, uncertainties and assumptions, the forward-looking events may not occur. In addition, Aegion’s actual results may vary materially from those anticipated, estimated, suggested or projected. Except as required by law, Aegion does not assume a duty to update forward-looking statements, whether as a result of new information, future events or otherwise. Investors should, however, review additional disclosures made by Aegion from time to time in Aegion’s filings with the Securities and Exchange Commission. Please use caution and do not place reliance on forward-looking statements. All forward-looking statements made by Aegion in this news release are qualified by these cautionary statements.

About Non-GAAP Financial Measures

Aegion has presented certain information in this release excluding certain items that impacted income, expense and earnings per share from continuing operations. The adjusted earnings per share in the quarters and six-month periods ended June 30, 2016 and 2015 exclude certain charges related to the Company’s restructuring efforts and acquisition-related expenses.

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®, Corrpro® and Underground Solutions® are registered trademarks of Aegion Corporation and its affiliates. (AEGN-ER)

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