) fell 14% since the company reported its third-quarter 2013
results on Oct 29. Adjusted earnings from continuing operations
fell 14% year over year to 44 cents per share, missing the Zacks
Consensus Estimate of 55 cents. While the North American Water
and Wastewater business excelled in the quarter, performances by
its Energy and Mining as well as Commercial and Structural
businesses were disappointing.
Including acquisition related expenses and credit facility fees
of 6 cents per share, earnings came in at 37 cents per share in
the reported quarter, compared with 50 cents in the prior-year
quarter. Earnings in the year-ago quarter included acquisition
related expense of a penny.
Total revenue was $308 million in the reported quarter, up 17%
year over year. The growth was driven by increased revenues in
the North American Water and Wastewater segment, partly offset by
decreased revenues from the Bayou Coatings operations. However,
revenues fell short of the Zacks Consensus Estimate of $340
Cost of sales increased 19% to $238 million from $200 million in
the year-ago quarter. Gross profit rose 10% year over year to $69
million. Gross margin contracted 130 basis points (bps) year over
year to 22.6%.
Adjusted operating expenses went up 13% year over year to $48
million. Adjusted operating income was $24.3 million, down 11.5%
year over year, leading to a 250 bps contraction in operating
margin to 7.9%.
Revenues from the
Energy and Mining
segment grew 22.8% year over year to $168.7 million. The
segment's operating income went down 40% year over year to $12.9
million, due to lack of project activity and decline in
international market conditions for United Pipeline Systems.
North American Water and Wastewater
segment's revenues increased 23.4% year over year to $96 million
compared with $77.8 million in the prior-year quarter. The
segment's operating income rose 64% year over year to $10
million. The growth was driven by increased volumes across all
Sales from the
International Water and Wastewater
segment were $27.7 million, down 5.8% from the year-ago quarter.
The segment reported an operating loss of $0.25 million,
narrowing from loss of $3.2 million in the year-ago quarter.
Lower workable backlog, project performance issues,
customer-driven project delays and fewer high margin pipeline
projects resulted in the loss; compensated by a large
manufacturing order for Canadian operations.
Revenues in the
Commercial and Structural
segment declined 15.5% year over year to $16.8 million. The
segment reported an operating loss of $0.9 million versus an
operating income of $2.3 million in the year-ago quarter.
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Consolidated backlog in the third quarter went up 38% year over
year to $714.6 million (including Brinderson backlog of $209.2
million). Contract backlog in the North American Water and
Wastewater segment was a record $241.7 million in the third
quarter, up 44.5% from the year-ago quarter. Global Commercial
and Structural backlog grew 3.2% year over year to $48.2 million.
However, backlog in the Energy and Mining segment declined 30.1%
year over year to $172.5 million. The International Water and
Wastewater business also recorded a decrease of 22.7% to $43
million in contract backlog.
As of Sep 30, 2013, cash and cash equivalents amounted to $126.7
million versus $133.6 million as of Dec 31, 2012. As of Sep 30,
2013 long-term debt increased to $366.5 million compared with
$221.8 million as of Dec 31, 2012. Debt-to-capitalization ratio
was 35% as of Sep 30, 2013 compared with 26% as of Dec 31, 2012.
Cash flow from operating activities was $31 million in the
quarter versus $58.7 million in the prior-year quarter. Capital
expenditure in the quarter declined to $20 million from $33.7
million in the year-ago quarter.
For full-year 2013, Aegion revised earnings per share guidance
(inclusive of the Brinderson contribution) to the new range of
$1.45 to $1.50 from $1.58 to $1.70. Revenues for the full-year
2013 are expected to be between $345 and $350 million and the
estimated operating margin is in the band of 8-9%. Aegion lowered
full-year outlook for cash flow from operations to $90 million
from $100 million.
The company projected full-year revenues in the range of $465 to
$470 million, excluding contributions from Brinderson acquisition
in the Energy and Mining segment. Operating margins are
forecasted in the range of 9-10%.
The International Water and Wastewater segment remains on track
to deliver operating income in the range $3-$4 million for the
European business, while the Asia-Pacific region will have a
modest operating loss of around $1.0 million. The North American
Water and Wastewater segment is expected to return to
profitability in the fourth quarter driven by efforts to enhance
the sales and strategic investments.
The company anticipates that the Commercial and Structural
segment will deliver revenues in the range of $75 to $80 million
with a growth rate of 20-25%. The guidance range for gross
margins is 35-40%. Aegion expects the segment to return to
profitability in the fourth quarter.
Chesterfield, Missouri-based Aegion is a diversified building and
construction company which provides infrastructure protection,
proprietary technologies and facilities. It also offers services
related to the rehabilitation and improvement of sewer, water,
energy and mining piping systems.
Aegion currently carries a Zacks Rank #3 (Hold). Other
better-placed stocks in the building and construction industry
Trex Co. Inc.
), both carrying a Zacks Rank #2 (Buy). Another one of Aegion's
Armstrong World Industries, Inc.
) reported an 11% decline in adjusted earnings to 87 cents per
share. However, earnings were ahead of the Zacks Consensus
Estimate by a penny.