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Q1 2013 Earnings Call
April 25, 2013 9:30 am ET
J. Joseph Burgess - Chief Executive Officer, President, Executive Director and Member of Strategic Planning & Finance Committee
David A. Martin - Chief Financial Officer, Principal Accounting Officer and Senior Vice President
Brian J. Clarke - Senior Vice President of Business Integration
Arnold Ursaner - CJS Securities, Inc.
Eric Stine - Craig-Hallum Capital Group LLC, Research Division
Liam D. Burke - Janney Montgomery Scott LLC, Research Division
David L. Rose - Wedbush Securities Inc., Research Division
Noelle C. Dilts - Stifel, Nicolaus & Co., Inc., Research Division
Previous Statements by AEGN
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Any financial or statistical information presented during this call, including any non-GAAP information, the most directly comparable GAAP measures and reconciliation to GAAP results will be available on Aegion's website at www.aegion.com.
During this conference call, the company will make forward-looking statements which are inherently subject to risks and uncertainties. Results could differ materially from those currently anticipated due to a number of factors described in our SEC filings and throughout this conference call. The company does not assume the duty to update forward-looking statements. Please use caution, and do not rely on such statements.
I would now turn the call over to Joe Burgess, President and CEO of Aegion. Sir, you may begin.
J. Joseph Burgess
Thank you, and welcome to our first quarter 2013 earnings call. With me today are David Martin, Senior Vice President and Chief Financial Officer; Brian Clarke, Senior Vice President of Business Integration; and Ruben Mella, Vice President of Investor Relations and Corporate Communications.
We have much to share with you this morning about the challenges we faced in the first quarter and why they do not alter our full year outlook. That's really the central message for this call. Our 2013 guidance remains intact, giving the underlying strength of our backlog and the markets we serve across our 3 platforms.
As we shared in our pre-announcement last month, inclement weather exceeded our typical first quarter seasonality, as did the number of customer-directed project delays. Yet, the seasonal nature of nearly all of our businesses doesn't give the first quarter the moniker of trendsetter for the full year.
Of course, we prefer our crews to work year-round with limited delays. But the period we're entering now through the remainder of the year is, in fact, the one upon which our full year results typically depend. Our assessment of the markets we serve, backlog and bid table leads us to remain committed to our original guidance of diluted earnings per share of $1.60 to $1.80. I'll discuss that outlook in more detail after David shares some insights on our first quarter. David?
David A. Martin
Thank you, Joe, and good morning. Let me start with a change in our segment reporting for this quarter where we have combined the European and Asia-Pacific Water and Wastewater businesses into a single, new International Water and Wastewater segment. This change reflects the management reorganization we've put in place recently for the entire Water and Wastewater platform. Joe will discuss that further later, but we're taking actions that are very focused on cash management, increasing margins through manufacturing and technical services and eliminating low-return, underperforming contracting assets. We will continue to discuss these key markets we serve within this new segment throughout the year for clarity.
Secondly, I just want to mention that we posted some background slides to augment our discussion today. You will find that on our website, and we also filed that in the 8-K this morning.
With our results detailed in the press release, I'll focus my attention on providing some insights into our quarterly results. As Joe stated in his opening remarks, the first quarter is always by far the lightest quarter for us, typically producing about 10% of our full year expected earnings. It can be a volatile one, as well as excessive [ph] unpredictable winter weather, primarily in the Northern Hemisphere. We're accustomed to dealing with weather delays during this time of the year, and we plan our project activity accordingly to maximize crew utilization.
Unfortunately, the severity of the winter storms in Western Canada and Northeastern regions of the U.S., as well as the unusual late March storms in the Midwest, led to additional project delays we experienced in the quarter. Coupled with the unexpected increase in the number of projects pushed by certain customers, you have the results we reported yesterday of $0.07 per diluted share.
Growth in operating margins were down in the -- as the higher-margin projects we expected to begin or be completed in the quarter were pushed out into the remainder of 2013.
Now let me put our performance into context because we're in a really good position to achieve our objectives over the remainder of the year. The largest variance from our expectations for the quarter was customer-directed delays related to Commercial and Structural, CRTS and the Tite Liner Morocco project, in that order of importance. Our Commercial and Structural platform had several key projects in North America unexpectedly moved by our customers to the second and third quarters of this year.
The largest project that affected our quarter -- the quarterly operating results by approximately $1.1 million itself. There was simply a shift in the maintenance schedule with the customer, and we anticipate it will now begin in late third quarter. We also had a large number of smaller hospital projects that experienced similar schedule shifts to the coming quarter. These delays demand to approximately $1.8 million in pretax profit shifting to later in the year in the C&S business.