aegn20190630_10q.htm
0000353020 Aegion Corp false --12-31 Q2 2020 6,431 7,224 0.10 0.10 2,000,000 2,000,000 0 0 0.01 0.01 125,000,000 125,000,000 30,768,399 30,768,399 30,715,959 30,715,959 3 4 2000000 1 7 10 0 3 For the six months ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the six months ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives. Total pre-tax restructuring charges for the quarter ended June 30, 2020, include cash charges of $2.6 million and non-cash charges of $2.2 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods. Operating income in the second quarter of 2020 and 2019 includes $0.1 million and $1.4 million, respectively, of restructuring charges (see Note 4) and $0.0 million and $0.4 million, respectively, of costs primarily related to the divestiture of certain international operations. Operating income in the first six months of 2020 and 2019 includes $0.5 million and $3.4 million, respectively, of restructuring charges (see Note 4) and $0.2 million and $0.5 million, respectively, of divestiture costs. Additionally, operating income in the second quarter and first six months of 2020 includes $0.7 million of impairment reversals while operating income in the second quarter and first six months of 2019 includes $9.0 million of impairment charges to assets held for sale. Amounts exclude operating lease assets of $0.3 million, accrued expenses of $0.2 million and other liabilities of $0.2 million that were classified as held for sale at December 31, 2019 (see Note 5). Amounts presented net of tax of $0 and $91 for the quarters ended June 30, 2020 and 2019, respectively, and $0 and $150 for the six months ended June 30, 2020 and 2019, respectively. Amounts exclude contract assets of $5.4 million and contract liabilities of $0.1 million that were classified as held for sale at December 31, 2019 (see Note 5). Revenues and gross profit are attributed to the country of origin Refers to cash utilized to settle charges during the first six months of 2019. Amounts exclude operating lease assets of less than $0.1 million, accrued expenses of less than $0.1 and other liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5). Amounts exclude contract assets of $0.7 million and contract liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5). For the quarter ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the quarter ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives. During the six months ended June 30, 2020, as a result of disposing of certain international entities, $0.8 million was reclassified out of accumulated other comprehensive loss to “Other expense” in the Consolidated Statements of Operations. Total pre-tax restructuring charges for the six months ended June 30, 2020, include cash charges of $5.8 million and non-cash charges of $2.7 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods. Operating income (loss) in the second quarter of 2020 and 2019 includes $1.3 million and $3.3 million, respectively, of restructuring charges (see Note 4). Operating loss in the first six months of 2020 and 2019 includes $3.1 million and $3.5 million, respectively, of restructuring charges (see Note 4). Additionally, operating income in the second quarter and first six months of 2019 includes $2.9 million of impairment charges to assets held for sale. During the second quarter of 2020, the Company recorded intangible asset impairments related to restructuring activities within Energy Services of $0.3 million for trademarks and $0.7 million for customer relationships (see Note 4). Amounts presented net of tax of $1 and $6 for the quarters ended June 30, 2020 and 2019, respectively, and $14 and $1 for the six months ended June 30, 2020 and 2019, respectively. Includes Environmental Techniques and land held at Corporate. Operating loss in the second quarter of 2020 and 2019 includes $0.9 million and $0.9 million, respectively, of restructuring charges (see Note 4) and $0.7 million and $0.4 million, respectively, of divestiture costs. Operating loss in the first six months of 2020 and 2019 includes $1.6 million and $1.3 million, respectively, of restructuring charges (see Note 4) and $1.3 million and $0.4 million, respectively, of divestiture costs. During the second quarter of 2020, the Company recorded a $1.3 million goodwill impairment related to restructuring activities in Energy Services (see Note 4). Other expense in the second quarter of 2020 includes gains of $0.9 million related to restructuring (see Note 4). Other expense in the second quarter of 2019 includes $0.9 million of restructuring charges (see Note 4). Other expense in the first six months of 2020 and 2019 includes gains of $0.3 million and charges of $1.1 million, respectively, related to restructuring (see Note 4). Other expense in the first six months of 2020 also includes gains of $0.7 million related to divestitures of Insituform Australia and Insituform Spain (see Note 1). Total pre-tax restructuring charges for the quarter ended June 30, 2019, include cash charges of $5.4 million and non-cash charges of $1.1 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods. Includes Insituform Australia, Insituform Spain, Environmental Techniques and land held at Corporate. Refers to cash utilized to settle charges during the first six months of 2020. Total pre-tax restructuring charges for the six months ended June 30, 2019, include cash charges of $8.5 million and non-cash charges of $0.9 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods. Operating loss in the second quarter of 2020 and 2019 includes $3.5 million and less than $0.1 million, respectively, of restructuring charges (see Note 4). Operating loss in the first six months of 2020 and 2019 includes $3.6 million and less than $0.1 million respectively, of restructuring charges (see Note 4). Additionally, operating loss in the second quarter and first six months of 2020 includes $1.3 million of goodwill impairment charges and $1.0 million of definite-lived intangible asset impairment charges. 00003530202020-01-012020-06-30 xbrli:shares 00003530202020-07-24 thunderdome:item iso4217:USD 00003530202020-04-012020-06-30 00003530202019-04-012019-06-30 00003530202019-01-012019-06-30 iso4217:USDxbrli:shares 00003530202020-06-30 00003530202019-12-31 0000353020us-gaap:CommonStockMember2020-03-31 0000353020us-gaap:CommonStockMember2019-03-31 0000353020us-gaap:CommonStockMember2019-12-31 0000353020us-gaap:CommonStockMember2018-12-31 0000353020us-gaap:CommonStockMember2020-04-012020-06-30 0000353020us-gaap:CommonStockMember2019-04-012019-06-30 0000353020us-gaap:CommonStockMember2020-01-012020-06-30 0000353020us-gaap:CommonStockMember2019-01-012019-06-30 0000353020us-gaap:RestrictedStockUnitsRSUMemberus-gaap:CommonStockMember2020-04-012020-06-30 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Table of Contents

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarter ended June 30, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from                                                              to                                                                     

 

Commission File Number: 001-35328

 

Aegion Corporation

(Exact name of registrant as specified in its charter)

   
 

Delaware

 

45-3117900

 
 

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 
 

 

 

 

 
 

17988 Edison Avenue, Chesterfield, Missouri

 

63005-1195

 
 

(Address of principal executive offices) 

 

(Zip Code)

 
 

 

 

 

 
 

Registrant’s telephone number, including area code:  (636) 530-8000

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Shares, $0.01 par value

AEGN

The Nasdaq Global Select Market

 

There were 30,771,371 shares of Class A common stock, $0.01 par value per share, outstanding at July 24, 2020.

 

 

 
 

TABLE OF CONTENTS

 

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited):

 

 

 

 

 

Consolidated Statements of Operations for the Quarters and Six Months Ended June 30, 2020 and 2019

3

 

 

 

 

Consolidated Statements of Comprehensive Income for the Quarters and Six Months Ended June 30, 2020 and 2019

4

 

 

 

 

Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

5

 

 

 

 

Consolidated Statements of Equity for the Quarters and Six Months Ended June 30, 2020 and 2019

6

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019

7

 

 

 

 

Notes to Consolidated Financial Statements

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

 

 

 

Item 4.

Controls and Procedures

48

 

 

 

PART II—OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

49

 

 

 

Item 1.A.

Risk Factors

49

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

50

 

 

 

Item 4.

Mine Safety Disclosures

50

     
Item 6.

Exhibits

51

 

 

 

SIGNATURE

52

 

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)

 

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Revenues

 $245,017  $318,740  $532,392  $595,644 

Cost of revenues

  191,442   251,303   428,933   479,912 

Gross profit

  53,575   67,437   103,459   115,732 

Operating expenses

  41,970   51,254   88,318   99,124 
Goodwill impairment  1,258      1,258    

Definite-lived intangible asset impairment

  957      957    
Impairment (gain) of assets held for sale  (658)  11,946   (658)  11,946 

Acquisition and divestiture expenses

  657   804   1,509   917 

Restructuring and related charges

  664   2,974   1,952   4,060 

Operating income (loss)

  8,727   459   10,123   (315)

Other income (expense):

                

Interest expense

  (4,690)  (3,566)  (7,886)  (7,156)

Interest income

  215   261   443   546 

Other

  964   (1,015)  1,389   (1,689)

Total other expense

  (3,511)  (4,320)  (6,054)  (8,299)

Income (loss) before taxes on income

  5,216   (3,861)  4,069   (8,614)

Taxes on income (loss)

  1,220   4,286   1,376   3,524 

Net income (loss)

  3,996   (8,147)  2,693   (12,138)

Non-controlling interests income

  (140)  (219)  (469)  (229)

Net income (loss) attributable to Aegion Corporation

 $3,856  $(8,366) $2,224  $(12,367)
                 

Income (loss) per share attributable to Aegion Corporation:

                
Basic $0.13  $(0.27) $0.07  $(0.39)
Diluted $0.12  $(0.27) $0.07  $(0.39)

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3

 

 

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 

 

   

Quarter Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Net income (loss)

  $ 3,996     $ (8,147 )   $ 2,693     $ (12,138 )

Other comprehensive income (loss):

                               
Currency translation adjustments     3,392       1,204       (1,245 )     3,066  
Deferred loss on hedging activity, net of tax (1)     (238 )     (3,553 )     (6,174 )     (5,699 )
Pension activity, net of tax (2)     4       24       61       3  

Total comprehensive income (loss)

    7,154       (10,472 )     (4,665 )     (14,768 )
Comprehensive income attributable to non-controlling interests     (313 )     (326 )     (379 )     (249 )

Comprehensive income (loss) attributable to Aegion Corporation

  $ 6,841     $ (10,798 )   $ (5,044 )   $ (15,017 )

 


 

(1) 

Amounts presented net of tax of $0 and $91 for the quarters ended June 30, 2020 and 2019, respectively, and $0 and $150 for the six months ended June 30, 2020 and 2019, respectively.

 

 

(2) 

Amounts presented net of tax of $1 and $6 for the quarters ended June 30, 2020 and 2019, respectively, and $14 and $1 for the six months ended June 30, 2020 and 2019, respectively.

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4

 

 

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share amounts)

 

 

  

June 30, 2020

  

December 31, 2019

 

Assets

        

Current assets

        

Cash and cash equivalents

 $95,324  $64,874 

Restricted cash

  994   1,348 

Receivables, net of allowances of $6,431 and $7,224, respectively

  171,245   192,604 

Retainage

  30,213   33,103 

Contract assets

  43,278   51,092 

Inventories

  49,589   57,193 

Prepaid expenses and other current assets

  34,570   33,909 

Assets held for sale

  10,367   16,092 

Total current assets

  435,580   450,215 

Property, plant & equipment, less accumulated depreciation

  100,082   101,091 

Other assets

        

Goodwill

  254,754   256,835 

Intangible assets, less accumulated amortization

  97,143   104,828 

Operating lease assets

  69,701   71,466 

Deferred income tax assets

  466   1,216 

Other non-current assets

  8,495   9,862 

Total other assets

  430,559   444,207 

Total Assets

 $966,221  $995,513 
         

Liabilities and Equity

        

Current liabilities

        

Accounts payable

 $58,402  $60,614 

Accrued expenses

  89,070   96,577 

Contract liabilities

  37,512   37,562 

Current maturities of long-term debt

  26,780   32,803 

Liabilities held for sale

  1,448   6,485 

Total current liabilities

  213,212   234,041 

Long-term debt, less current maturities

  233,097   243,629 
Other liabilities        

Operating lease liabilities

  55,455   56,253 

Deferred income tax liabilities

  11,404   11,254 

Other non-current liabilities

  23,435   15,243 
Total other liabilities  90,294   82,750 

Total liabilities

  536,603   560,420 
         

(See Commitments and Contingencies: Note 11)

        
         

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 30,768,399 and 30,715,959, respectively

  308   307 

Additional paid-in capital

  100,490   101,148 

Retained earnings

  361,222   358,998 

Accumulated other comprehensive loss

  (39,962)  (32,694)

Total stockholders’ equity

  422,058   427,759 

Non-controlling interests

  7,560   7,334 

Total equity

  429,618   435,093 

Total Liabilities and Equity

 $966,221  $995,513 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

5

 

 

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(in thousands, except number of shares)

 

 

   

Quarter Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Common Stock - Shares

                               
Balance, beginning of period     30,679,476       31,491,872       30,715,959       31,922,409  
Issuance of common stock upon stock option exercises                       52,783  
Issuance of shares pursuant to restricted stock units     35,949       33,699       188,545       205,274  
Issuance of shares pursuant to performance units           502       71,541       111,158  
Issuance of shares pursuant to deferred stock units     56,582       68,048       56,582       77,486  
Shares repurchased and retired     (3,608 )     (652,727 )     (264,228 )     (1,427,716 )

Balance, end of period

    30,768,399       30,941,394       30,768,399       30,941,394  
                                 

Common Stock - Amount

                               
Balance, beginning of period   $ 307     $ 315     $ 307     $ 319  
Issuance of common stock upon stock option exercises                       1  
Issuance of shares pursuant to restricted stock units                 2       2  
Issuance of shares pursuant to performance units                 1       1  
Issuance of shares pursuant to deferred stock units     1       1       1       1  
Shares repurchased and retired           (7 )     (3 )     (15 )

Balance, end of period

  $ 308     $ 309     $ 308     $ 309  
                                 

Additional Paid-In Capital

                               
Balance, beginning of period   $ 98,103     $ 111,597     $ 101,148     $ 122,818  
Issuance of common stock upon stock option exercises                       955  
Shares repurchased and retired     (56 )     (10,973 )     (5,101 )     (25,156 )
Equity-based compensation expense     2,443       2,217       4,443       4,224  

Balance, end of period

  $ 100,490     $ 102,841     $ 100,490     $ 102,841  
                                 

Retained Earnings

                               
Balance, beginning of period   $ 357,366     $ 375,889     $ 358,998     $ 379,890  
Net income (loss) attributable to Aegion Corporation     3,856       (8,366 )     2,224       (12,367 )

Balance, end of period

  $ 361,222     $ 367,523     $ 361,222     $ 367,523  
                                 

Accumulated Other Comprehensive Loss

                               
Balance, beginning of period   $ (42,947 )   $ (40,508 )   $ (32,694 )   $ (40,290 )
Currency translation adjustment and derivative transactions, net     2,985       (2,432 )     (7,268 )     (2,650 )

Balance, end of period

  $ (39,962 )   $ (42,940 )   $ (39,962 )   $ (42,940 )
                                 

Non-Controlling Interests

                               
Balance, beginning of period   $ 7,400     $ 7,277     $ 7,334     $ 7,450  
Net income     140       219       469       229  
Distributions to non-controlling interests     (153 )     (1,313 )     (153 )     (1,409 )
Currency translation adjustment, net     173       107       (90 )     20  

Balance, end of period

  $ 7,560     $ 6,290     $ 7,560     $ 6,290  
                                 

Total Equity

                               

Balance, beginning of period

  $ 420,229     $ 454,570     $ 435,093     $ 470,187  

Net income (loss)

    3,996       (8,147 )     2,693       (12,138 )

Issuance of common stock upon stock option exercises

                      956  

Issuance of shares pursuant to restricted stock units

                2       2  

Issuance of shares pursuant to performance units

                1       1  

Issuance of shares pursuant to deferred stock units

    1       1       1       1  

Shares repurchased and retired

    (56 )     (10,980 )     (5,104 )     (25,171 )

Equity-based compensation expense

    2,443       2,217       4,443       4,224  

Distributions to non-controlling interests

    (153 )     (1,313 )     (153 )     (1,409 )

Currency translation adjustment and derivative transactions, net

    3,158       (2,325 )     (7,358 )     (2,630 )

Balance, end of period

  $ 429,618     $ 434,023     $ 429,618     $ 434,023  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

6

 

 

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

  

Six Months Ended June 30,

 
  

2020

  

2019

 

Cash flows from operating activities:

        
Net income (loss) $2,693  $(12,138)

Adjustments to reconcile to net cash provided by operating activities:

        
Depreciation and amortization  18,001   17,615 
Gain on sale of fixed assets  (304)  (584)
Equity-based compensation expense  4,443   4,224 
Deferred income taxes  294   601 
Non-cash restructuring charges  503   1,409 
Goodwill impairment  1,258    
Definite-lived intangible asset impairment  957    
Impairment of assets held for sale     11,946 
Gain on sale of businesses  (680)   
(Gain) loss on foreign currency transactions  (319)  701 
Other  983   (190)

Changes in operating assets and liabilities (net of acquisitions):

        
Receivables net, retainage and contract assets  30,488   (289)
Inventories  6,705   (3,966)
Prepaid expenses and other assets  (821)  6,153 
Accounts payable and accrued expenses  (7,650)  (5,887)
Contract liabilities  216   (5,056)
Other operating  3,571   (360)

Net cash provided by operating activities

  60,338   14,179 
         

Cash flows from investing activities:

        
Capital expenditures  (10,576)  (14,328)
Proceeds from sale of fixed assets  557   968 
Patent expenditures  (154)  (197)
Sale of businesses, net of cash disposed  3,602    

Net cash used in investing activities

  (6,571)  (13,557)
         

Cash flows from financing activities:

        
Proceeds from issuance of common stock upon stock option exercises     956 
Repurchase of common stock  (5,104)  (25,171)
Distributions to non-controlling interests  (153)  (1,409)
Credit facility amendment fees  (1,995)   
Payments on notes payable, net     (179)
Proceeds from line of credit, net  2,000   7,000 
Principal payments on long-term debt  (17,500)  (13,125)

Net cash used in financing activities

  (22,752)  (31,928)
Effect of exchange rate changes on cash  (919)  226 

Net increase (decrease) in cash, cash equivalents and restricted cash for the period

  30,096   (31,080)

Cash, cash equivalents and restricted cash, beginning of year

  66,222   84,886 

Cash, cash equivalents and restricted cash, end of period

  96,318   53,806 

Cash, cash equivalents and restricted cash associated with assets held for sale, end of period

     (1,709)

Cash, cash equivalents and restricted cash, end of period

 $96,318  $52,097 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

7

 

AEGION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1.

GENERAL

 

The accompanying unaudited consolidated financial statements of Aegion Corporation and its subsidiaries (collectively, “Aegion” or the “Company”) reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the dates and periods presented. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. All significant intercompany related accounts and transactions have been eliminated in consolidation.

 

The Consolidated Balance Sheet as of December 31, 2019, which is derived from the audited consolidated financial statements, and the interim unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the requirements of Form 10-Q and Article 10 of Regulation S-X and, consequently, do not include all information or footnotes required by GAAP for complete financial statements or all the disclosures normally made in an Annual Report on Form 10-K. Accordingly, the unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 2, 2020.

 

Strategic Initiatives/Acquisitions/Divestitures

 

Restructuring Activities

 

On July 28, 2017, the Company’s board of directors approved a comprehensive global realignment and restructuring plan (the “Restructuring”) intended to generate more predictable and sustainable long‐term earnings growth, which included, among other things, actions to reduce upstream oil & gas exposure, the exit or divestiture of multiple smaller international businesses, the restructuring of unprofitable businesses in North America and other efforts to right‐size underperforming businesses and reduce corporate and other operating costs. See further discussion in Note 4.

 

Infrastructure Solutions Segment (“Infrastructure Solutions”)

 

On February 13, 2020, the Company sold its Spanish CIPP contracting entity, Insituform Technologies Iberica, S.A. (“Insituform Spain”) to Lajusocarley S.L. In connection with the sale, the Company entered into a five-year tube supply agreement whereby Insituform Spain will buy felt liners exclusively from the Company. Insituform Spain is also entitled to use the Insituform® trade name in Spain based on a trademark license granted for the same five-year time period. The Company had classified Insituform Spain’s assets and liabilities as held for sale on the Consolidated Balance Sheet at December 31, 2019. See Note 5.

 

On January 24, 2020, the Company sold its Australian CIPP contracting entity, Insituform Pacific Pty Limited (“Insituform Australia”), to Insituform Holdings Pty Ltd, an entity affiliated with Killard Infrastructure Pty Ltd. In connection with the sale, the Company entered into a five-year tube supply agreement whereby Insituform Australia, under its new ownership, will buy liners exclusively from the Company. Insituform Australia is also entitled to use the Insituform® trade name in Australia based on a trademark license granted for the same five-year time period. The Company had classified Insituform Australia’s assets and liabilities as held for sale on the Consolidated Balance Sheet at December 31, 2019. See Note 5.

 

During the second quarter of 2019, the Company initiated plans to sell its contracting business in Northern Ireland, Environmental Techniques Limited (“Environmental Techniques”). Accordingly, the Company has classified the assets and liabilities of this business as held for sale on the Consolidated Balance Sheets at June 30, 2020 and December 31, 2019. The Company has suspended the sales process for Environmental Techniques due to COVID-19 and expects to recommence the sales process as soon as reasonably practicable. See Note 5.

 

8

 
 

2.

ACCOUNTING POLICIES

 

Accumulated Other Comprehensive Loss

 

As set forth below, the Company’s accumulated other comprehensive loss is comprised of three main components: (i) currency translation; (ii) derivatives; and (iii) gains and losses associated with the Company’s defined benefit plan in the United Kingdom (in thousands):

 

  

June 30, 2020

  

December 31, 2019

 

Currency translation adjustments (1)

 $(28,396) $(27,241)

Derivative hedging activity

  (10,696)  (4,522)

Pension activity

  (870)  (931)

Total accumulated other comprehensive loss

 $(39,962) $(32,694

)

 

 

(1) 

During the six months ended June 30, 2020, as a result of disposing of certain international entities, $0.8 million was reclassified out of accumulated other comprehensive loss to “Other expense” in the Consolidated Statements of Operations.

 

For the Company’s international subsidiaries, the local currency is generally the functional currency. Assets and liabilities of these subsidiaries are translated into U.S. dollars using rates in effect at the balance sheet date while revenues and expenses are translated into U.S. dollars using average exchange rates. The cumulative translation adjustment resulting from changes in exchange rates are included in the Consolidated Balance Sheets as a component of “Accumulated other comprehensive loss” in total stockholders’ equity. Net foreign exchange transaction gains of $0.3 million and $0.1 million in the second quarters of 2020 and 2019, respectively, and losses of $0.3 million and $0.7 million for the six months ended June 30, 2020 and 2019, respectively, are included in “Other expense” in the Consolidated Statements of Operations.

 

Taxation

 

The Company provides for estimated income taxes payable or refundable on current year income tax returns as well as the estimated future tax effects attributable to temporary differences and carryforwards, based upon enacted tax laws and tax rates, and in accordance with FASB ASC 740, Income Taxes (“FASB ASC 740”). FASB ASC 740 also requires that a valuation allowance be recorded against any deferred tax assets that are not likely to be realized in the future. The determination is based on the Company’s ability to generate future taxable income and, at times, is dependent on its ability to implement strategic tax initiatives to ensure full utilization of recorded deferred tax assets. Should the Company not be able to implement the necessary tax strategies, it may need to record valuation allowances for certain deferred tax assets, including those related to foreign income tax benefits. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowances recorded against net deferred tax assets.

 

Earnings per Share

 

Earnings per share have been calculated using the following share information:

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Weighted average number of common shares used for basic EPS

  30,726,566   31,216,886   30,721,684   31,459,557 

Effect of dilutive stock options and restricted and deferred stock unit awards

  391,918      475,734    

Weighted average number of common shares and dilutive potential common stock used for dilutive EPS

  31,118,484   31,216,886   31,197,418   31,459,557 

 

The Company excluded 449,156 and 498,315 restricted and deferred stock units for the quarter and six-month period ended June 30, 2019, respectively, from the diluted earnings per share calculation for the Company’s common stock because of the reported net loss for the periods.

 

Cash, Cash Equivalents and Restricted Cash

 

The Company classifies highly liquid investments with original maturities of 90 days or less as cash equivalents. Recorded book values are reasonable estimates of fair value for cash and cash equivalents.

 

Cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets and Consolidated Statements of Cash Flows are as follows (in thousands):

 

Balance sheet data

 

June 30, 2020

  

December 31, 2019

 

Cash and cash equivalents

 $95,324  $64,874 

Restricted cash

  994   1,348 

Cash, cash equivalents and restricted cash

 $96,318  $66,222 

 

Restricted cash held in escrow primarily relates to funds reserved for legal requirements, deposits made in lieu of retention on specific projects performed for municipalities and state agencies, or advance customer payments and compensating balances for bank undertakings in Europe. Restricted cash related to operations is similar to retainage, and is, therefore, classified as a current asset, consistent with the Company’s policy on retainage.

 

9

 

Fair Value Measurements

 

FASB ASC 820, Fair Value Measurements (“FASB ASC 820”), defines fair value and establishes a framework for measuring and disclosing fair value instruments. The guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

 

 

Level 1 – defined as quoted prices in active markets for identical instruments;

 

Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

The Company uses these levels of hierarchy to measure the fair value of certain financial instruments on a recurring basis, such as for derivative instruments; on a non-recurring basis, such as for acquisitions and impairment testing; for disclosure purposes, such as for long-term debt; and for other applications, as discussed in their respective footnotes. Changes in assumptions or estimation methods could affect the fair value estimates. Other financial instruments including notes payable are recorded at cost, which approximates fair value, and is based on Level 2 inputs as previously defined. The Company had no transfers between Level 1, 2 or 3 inputs during the six months ended June 30, 2020 and 2019.

 

Investments in Variable Interest Entities

 

The Company evaluates all transactions and relationships with variable interest entities (“VIE”) to determine whether the Company is the primary beneficiary of the entities in accordance with FASB ASC 810, Consolidation. There were no changes in the Company’s VIEs during the quarter ended June 30, 2020.

 

Financial data for consolidated variable interest entities are summarized in the following tables (in thousands):

 

Balance sheet data

 

June 30, 2020

  

December 31, 2019

 

Current assets

 $16,546  $18,304 

Non-current assets

  7,892   7,635 

Current liabilities

  5,764   8,261 

Non-current liabilities

  2,521   1,962 

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 

Statement of operations data

 

2020

  

2019

  

2020

  

2019

 

Revenue

 $5,727  $7,519  $13,456  $13,444 

Gross profit

  2,078   2,416   4,381   4,051 

Net income (loss) attributable to Aegion Corporation

  70   (652)  355   (619)

 

 

Newly Issued Accounting Pronouncements

 

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improved consistent application. The guidance is effective for the Company’s fiscal year beginning January 1, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company early-adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year. The Company adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the way in which entities estimate and present credit losses for most financial assets, including accounts receivable. The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year. For the Company’s trade receivables, certain other receivables and certain other financial instruments, it will be required to use a new forward-looking “expected” credit loss model based on historical loss rates that will replace the existing “incurred” credit loss model, which will generally result in earlier recognition of allowances for credit losses. The Company adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

10

 
 

3.

REVENUES

 

Performance Obligations

 

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in FASB ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts in which construction, engineering and installation services are provided, there is generally a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The bundle of goods and services represents the combined output for which the customer has contracted. For product sales contracts with multiple performance obligations where each product is distinct, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good in the contract. For royalty license agreements whereby intellectual property is transferred to the customer, there is a single performance obligation as the license is not separately identifiable from the other goods and services in the contract.

 

The Company’s performance obligations are satisfied over time as work progresses or at a point in time. Revenues from products and services transferred to customers over time accounted for 90.6% and 92.3% of revenues for the quarters ended June 30, 2020 and 2019, respectively. Revenues from construction, engineering and installation services are recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress toward satisfying performance obligations.  Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and, when appropriate, general and administrative expenses. Revenues from maintenance contracts are structured such that the Company has the right to consideration from a customer in an amount that corresponds directly with the performance completed to date.  Therefore, the Company utilizes the practical expedient in FASB ASC 606-55-255, which allows the Company to recognize revenue in the amount to which it has the right to invoice. Applying this practical expedient, the Company is not required to disclose the transaction price allocated to remaining performance obligations under these agreements. Revenues from royalty license arrangements are recognized either at contract inception when the license is transferred or when the royalty has been earned, depending on whether the contract contains fixed consideration. Revenues from stand-alone product sales are recognized at a point in time, when control of the product is transferred to the customer. Revenues from these types of contracts accounted for 9.4% and 7.7% for the quarters ended June 30, 2020 and 2019, respectively.

 

On June 30, 2020, the Company had $501.8 million of remaining performance obligations from construction, engineering and installation services. The Company estimates that approximately $480.0 million, or 95.7%, of the remaining performance obligations at June 30, 2020 will be realized as revenues in the next 12 months.

 

Contract Estimates

 

Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract, and recognizes that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that sometimes span multiple years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer.

 

The Company’s contracts do not typically contain variable consideration or other provisions that increase or decrease the transaction price. In rare situations where the transaction price is not fixed, the Company estimates variable consideration at the most likely amount to which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. For royalty license agreements, the Company applies the sales-based and usage-based royalty exception and recognizes royalties at the later of: (i) when the subsequent sale or usage occurs; or (ii) the satisfaction or partial satisfaction of the performance obligation to which some or all of the sales-or usage-based royalty has been allocated. For contracts in which a portion of the transaction price is retained and paid after the good or service has been transferred to the customer, the Company does not recognize a significant financing component. The primary purpose of the retainage payment is often to provide the customer with assurance that the Company will perform its obligations under the contract, rather than to provide financing to the customer.

 

The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.

 
11

 

Revenue by Category

 

The following tables summarize revenues by segment and geography (in thousands):

 

   

Quarter Ended June 30, 2020

   

Quarter Ended June 30, 2019

 
    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

 

Geographic region:

                                                               

United States

  $ 114,705     $ 30,608     $ 52,134     $ 197,447     $ 110,957     $ 43,326     $ 85,704     $ 239,987  

Canada

    14,205       10,790             24,995       18,934       14,458             33,392  

Europe

    4,131       3,061             7,192       12,888       4,493             17,381  

Other foreign

    4,351       11,032             15,383       12,661       15,319             27,980  

Total revenues

  $ 137,392     $ 55,491     $ 52,134     $ 245,017     $ 155,440     $ 77,596     $ 85,704     $ 318,740  

 

   

Six Months Ended June 30, 2020

   

Six Months Ended June 30, 2019

 
   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

 

Geographic region:

                                                               

United States

  $ 218,123     $ 69,347     $ 143,197     $ 430,667     $ 208,848     $ 73,347     $ 166,567     $ 448,762  
Canada     25,228       21,622             46,850       29,545       27,915             57,460  
Europe     11,773       6,090             17,863       25,413       7,971             33,384  
Other foreign     12,512       24,500             37,012       23,177       32,861             56,038  

Total revenues

  $ 267,636     $ 121,559     $ 143,197     $ 532,392     $ 286,983     $ 142,094     $ 166,567     $ 595,644  

 

The following tables summarize revenues by segment and contract type (in thousands):

 

   

Quarter Ended June 30, 2020

   

Quarter Ended June 30, 2019

 
    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

 

Contract type:

                                                               

Fixed fee

  $ 121,395     $ 38,382     $ 1,213     $ 160,990     $ 136,212     $ 53,055     $ 1,291     $ 190,558  

Time and materials

          9,835       50,921       60,756             17,283       84,413       101,696  

Product sales

    15,997       7,274             23,271       19,184       7,258             26,442  

License fees

                            44                   44  

Total revenues

  $ 137,392     $ 55,491     $ 52,134     $ 245,017     $ 155,440     $ 77,596     $ 85,704     $ 318,740  

 

   

Six Months Ended June 30, 2020

   

Six Months Ended June 30, 2019

 
   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

 

Contract type:

                                                               

Fixed fee

  $ 233,906     $ 82,637     $ 2,943     $ 319,486     $ 255,127     $ 95,628     $ 2,210     $ 352,965  

Time and materials

          22,805       140,254       163,059             32,259       164,357       196,616  
Product sales     33,730       16,117             49,847       31,662       14,207             45,869  
License fees                             194                   194  

Total revenues

  $ 267,636     $ 121,559     $ 143,197     $ 532,392     $ 286,983     $ 142,094     $ 166,567     $ 595,644  

 

 

12

 

Contract Balances

 

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets and contract liabilities on the Consolidated Balance Sheets. Contract assets represent work performed that could not be billed either due to contract stipulations or the required contractual documentation has not been finalized. Substantially all unbilled amounts are expected to be billed and collected within one year.

 

For fixed fee and time-and-materials based contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. For some royalty license arrangements, minimum amounts are billed over the license term as quarterly royalty amounts are determined. This results in contract assets as the Company recognizes revenue for the license when the license is transferred to the customer at contract inception. The Company’s contract liabilities consist of advance payments, billings in excess of revenue recognized and deferred revenue.

 

The Company’s contract assets and contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. Advance payments, billings in excess of revenue recognized and deferred revenue are each classified as current.

 

Net contract assets (liabilities) consisted of the following (in thousands):

 

  

June 30, 2020 (1)

  

December 31, 2019 (2)

 

Contract assets – current

 $43,278  $51,092 

Contract liabilities – current

  (37,512)  (37,562)

Net contract assets

 $5,766  $13,530 

 

  (1) Amounts exclude contract assets of $0.7 million and contract liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5).
  (2) Amounts exclude contract assets of $5.4 million and contract liabilities of $0.1 million that were classified as held for sale at December 31, 2019 (see Note 5).

 

Substantially all of the $37.6 million and $32.3 million contract liabilities balances at December 31, 2019 and December 31, 2018, respectively, were recognized in revenues during the first six months of 2020 and 2019, respectively.

 

13

 
 

4.

RESTRUCTURING

 

On July 28, 2017, the Company’s board of directors approved the Restructuring. As part of the Restructuring, the Company announced plans to: (i) divest Bayou; (ii) exit all non-pipe related contract applications for the Tyfo® system in North America; (iii) right-size the cathodic protection services operation in Canada and the CIPP businesses in Australia and Denmark; and (iv) reduce corporate and other operating costs.

 

During 2018 and 2019, the Company’s board of directors approved additional actions with respect to the Restructuring, which included the decisions to: (i) divest the Australia and Denmark CIPP businesses; (ii) take actions to further optimize operations within North America, including measures to reduce consolidated operating costs; and (iii) divest or otherwise exit multiple additional international businesses, including: (a) the Company’s cathodic protection installation activities in the Middle East, including Corrpower International Limited, the Company’s cathodic protection materials manufacturing and production joint venture in Saudi Arabia; (b) United Pipeline de Mexico S.A. de C.V., the Company’s Tite Liner® joint venture in Mexico; (c) the Company’s Tite Liner® businesses in Brazil and Argentina; (d) Aegion South Africa Proprietary Limited, the Company’s Tite Liner® and CIPP joint venture in the Republic of South Africa; and (e) the Company’s CIPP contract installation operations in England, the Netherlands, Spain and Northern Ireland.

 

The Company completed the divestitures of Bayou and the Denmark CIPP business in 2018. The Company also completed the divestitures of the Netherlands CIPP business and its Tite Liner® joint venture in Mexico in 2019, as well as the shutdown of activities for the CIPP business in England. The Company completed the divestitures of CIPP operations in Australia and Spain in early 2020 (see Note 1). Remaining shutdown activities include Corrosion Protection entities in South America and South Africa, which are expected to be completed in 2020. Additionally, the exit of the Company’s cathodic protection installation activities in the Middle East is substantially complete, though management expects minimal wind-down activities will extend through the first quarter of 2021 related to a small number of projects remaining in backlog. The sale of the Northern Ireland contracting operation has been suspended due to COVID-19, but the Company expects to recommence the process as soon as reasonably practicable.

 

As part of efforts to optimize the cathodic protection operations in North America, management initiated plans during the fourth quarter of 2019 to further downsize operations in the U.S., including the closure of three branch offices and the exit of capital intensive drilling activities at four branch offices. These actions included a reduction of approximately 20% of the cathodic protection domestic workforce and an exit of drilling activities that contributed approximately 20% to our cathodic protection domestic revenues in 2019. Management expects these actions to improve our cathodic protection cost structure in the U.S., eliminate unprofitable results in certain parts of the business and reduce consolidated annual expenses for the business overall. Also during the fourth quarter of 2019, the Company reduced corporate headcount and took other actions to reduce corporate costs.

 

During the second quarter of 2020, the Company took additional actions to exit its specialty turnaround services businesses in Energy Services, Plant Performance Services LLC and P2S LLC (collectively “P2S”). Additionally, the Company executed reductions in force across the rest of the Company related to business slowdowns due to COVID-19.

 

Total pre-tax restructuring and related impairment charges since inception were $180.4 million ($162.6 million post-tax) and consisted of cash charges totaling $51.1 million and non-cash charges totaling $129.3 million. Cash charges included employee severance, retention, extension of benefits, employment assistance programs and other restructuring costs associated with the restructuring efforts described above. Non-cash charges included (i) $86.4 million related to goodwill and long-lived asset impairment charges recorded in 2017 as part of exiting the non-pipe FRP contracting market in North America, and (ii) $42.9 million related to allowances for accounts receivable, write-offs of inventory and long-lived assets, impairment of definite-lived intangible assets, release of cumulative currency translation adjustments as well as net losses on the disposal of both domestic and international entities. The Company reduced headcount by approximately 745 employees as a result of these actions.

 

During the second half of 2020, management expects to initiate additional restructuring actions as the Company balances the effects of COVID-19, with the majority of charges included within the Corrosion Protection segment. Additionally, the Company continues to monitor the impact COVID-19 is having on the oil refining markets in the United States and its Energy Services segment. The Company is prepared to proactively respond to the situation and may take further restructuring actions as warranted. The Company expects to incur additional cash charges related to this program of between $3 million and $5 million. It could also incur additional non-cash charges primarily associated with the release of cumulative currency translation adjustments and losses on the closure or liquidation of international entities.

 

14

 

During the quarters and six months ended June 30, 2020 and 2019, the Company recorded pre-tax expenses related to the Restructuring as follows (in thousands):

 

  

Quarter Ended June 30, 2020

  

Quarter Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

 

Severance and benefit related costs

 $118  $106  $69  $57  $350  $551  $1,575  $6  $  $2,132 

Contract termination costs

  36   175         211   (92)  790         698 

Relocation and other moving costs

     103         103      144         144 

Other restructuring costs (1)

  (199)  100   3,385   883   4,169   1,696   940      906   3,542 

Total pre-tax restructuring charges

 $(45) $484  $3,454  $940  $4,833  $2,155  $3,449  $6  $906  $6,516 

 

 

(1) 

For the quarter ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the quarter ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.

 

  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

 

Severance and benefit related costs

 $118  $969  $69  $332  $1,488  $833  $1,745  $40  $9  $2,627 

Contract termination costs

  36   229   62      327   333   807      98   1,238 

Relocation and other moving costs

     103   34      137   51   144         195 

Other restructuring costs (1)

  162   1,079   3,385   1,878   6,504   3,440   729      1,153   5,322 

Total pre-tax restructuring charges

 $316  $2,380  $3,550  $2,210  $8,456  $4,657  $3,425  $40  $1,260  $9,382 

 

 

(1) 

For the six months ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the six months ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.

 

Restructuring costs related to severance, other termination benefit costs and early contract termination costs were $0.7 million and $3.0 million for the quarters ended June 30, 2020 and 2019, respectively, and $2.0 million and $4.1 million for the six months ended June 30, 2020 and 2019, respectively, are reported on a separate line in the Consolidated Statements of Operations.

 

15

 

The following tables summarize all charges related to the Restructuring recognized in the quarters and six months ended June 30, 2020 and 2019 as presented in their affected line in the Consolidated Statements of Operations (in thousands):

 

  

Quarter Ended June 30, 2020

  

Quarter Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (1)

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (2)

 

Cost of revenues

 $52  $(131) $  $  $(79) $(67) $463  $  $  $396 

Operating expenses

  (133)  1,091   1,170   838   2,966   976   331      898   2,205 
Goodwill impairment        1,258      1,258                
Definite-lived intangible asset impairment        957      957                

Restructuring and related charges

  154   384   69   57   664   459   2,509   6      2,974 

Other expense

  (118)  (860)     45   (933)  787   146      8   941 

Total pre-tax restructuring charges

 $(45) $484  $3,454  $940  $4,833  $2,155  $3,449  $6  $906  $6,516 

 

 

(1) 

Total pre-tax restructuring charges for the quarter ended June 30, 2020, include cash charges of $2.6 million and non-cash charges of $2.2 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

 

 

(2) 

Total pre-tax restructuring charges for the quarter ended June 30, 2019, include cash charges of $5.4 million and non-cash charges of $1.1 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

 

  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (1)

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (2)

 

Cost of revenues

 $69  $175  $  $  $244  $(92) $562  $  $  $470 

Operating expenses

  316   1,642   1,170   1,219   4,347   2,322   268      1,145   3,735 

Goodwill impairment

        1,258      1,258                

Definite-lived intangible asset impairment

        957      957                

Restructuring and related charges

  154   1,301   165   332   1,952   1,217   2,696   40   107   4,060 

Other expense

  (223)  (738)     659   (302)  1,210   (101)     8   1,117 

Total pre-tax restructuring charges

 $316  $2,380  $3,550  $2,210  $8,456  $4,657  $3,425  $40  $1,260  $9,382 

 

 

(1) 

Total pre-tax restructuring charges for the six months ended June 30, 2020, include cash charges of $5.8 million and non-cash charges of $2.7 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

 

 

(2) 

Total pre-tax restructuring charges for the six months ended June 30, 2019, include cash charges of $8.5 million and non-cash charges of $0.9 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

 

16

 

The following tables summarize restructuring activity during the first six months of 2020 and 2019 (in thousands):

 

              

Utilized in 2020

     
  Reserves at December 31, 2019  

2020 Charge to Income

  

Foreign Currency Translation

  

Cash(1)

  

Non-Cash

  

Reserves at June 30, 2020

 
Severance and benefit related costs $4,389  $1,488  $(21) $4,104  $  $1,752 
Contract termination costs  953   327   (7)  575      698 
Relocation and other moving costs  367   137      211      293 
Other restructuring costs  2,379   6,504   (22)  4,791   2,718   1,352 

Total pre-tax restructuring charges

 $8,088  $8,456  $(50) $9,681  $2,718  $4,095 

 

 

(1) 

Refers to cash utilized to settle charges during the first six months of 2020.

 

 

              

Utilized in 2019

     
  Reserves at December 31, 2018  

2019 Charge to Income

  

Foreign Currency Translation

  

Cash(1)

  

Non-Cash

  

Reserves at June 30, 2019

 

Severance and benefit related costs

 $1,742  $2,627  $(10) $1,860  $  $2,499 

Contract termination costs

  359   1,238   (13)  606      978 

Relocation and other moving costs

     195   (1)  26      168 

Other restructuring costs

  311   5,322   (3)  3,450   1,409   771 

Total pre-tax restructuring charges

 $2,412  $9,382  $(27) $5,942  $1,409  $4,416 

 

 

(1) 

Refers to cash utilized to settle charges during the first six months of 2019.

 

 

17

 
 

5.

ASSETS AND LIABILITIES HELD FOR SALE

 

During 2018 and 2019, the Company initiated plans to divest certain of its international CIPP contracting businesses: Insituform Australia, Insituform Spain and Environmental Techniques. Also during 2019, the Company’s board of directors approved the action to sell several parcels of land located near its corporate headquarters.

 

During the first quarter of 2020, the Company completed sale transactions for Insituform Australia and Insituform Spain. See Note 1. Before the COVID-19 pandemic, the Company was in various stages of discussions with third parties for Environmental Techniques. Although the sale process has been suspended, the Company expects to recommence the process as soon as reasonably practicable. The Company believes it is probable that a sale of the land parcels will occur in 2020 or early 2021. In the event the Company is unable to liquidate the assets and liabilities at a price that is less than favorable, the Company could incur a loss on disposal.

 

The relevant asset and liability balances at June 30, 2020 and December 31, 2019 are accounted for as held for sale and measured at the lower of carrying value or fair value less cost to sell. Based on management’s expectation of fair value less cost to sell, the Company recorded an impairment of assets held for sale of $2.9 million in the Consolidated Statement of Operations during 2019 related to the land parcels. In the event the Company is unable to sell the assets and liabilities or sells them at a price or on terms that are less favorable, or at a higher cost than currently anticipated, the Company could incur additional impairment charges or a loss on disposal.

 

The following table provides the components of assets and liabilities held for sale (in thousands):

 

  

June 30, 2020(1)

  

December 31, 2019(2)

 

Assets held for sale:

        

Current assets

        

Receivables, net

 $266  $4,136 

Retainage

  463   518 

Contract assets

  698   5,350 

Inventories

  141   2,097 

Prepaid expenses and other current assets

  194   799 

Total current assets

  1,762   12,900 

Property, plant & equipment, less accumulated depreciation

  7,233   10,962 

Goodwill

  2,640   4,224 

Intangible assets, less accumulated amortization

  1,429   1,528 

Operating lease assets

  42   326 

Other non-current assets

  122   130 

Impairment of assets held for sale

  (2,861)  (13,978)

Total assets held for sale

 $10,367  $16,092 
         

Liabilities held for sale:

        

Current liabilities

        

Accounts payable

 $280  $2,174 

Accrued expenses

  1,072   3,961 

Contract liabilities

  43   122 

Total current liabilities

  1,395   6,257 

Operating lease liabilities

  6   174 

Other non-current liabilities

  47   54 

Total liabilities held for sale

 $1,448  $6,485 

 


 

(1) 

Includes Environmental Techniques and land held at Corporate.
 

(2) 

Includes Insituform Australia, Insituform Spain, Environmental Techniques and land held at Corporate.

 

18

 
 

6.

LEASES

 

The Company’s operating lease portfolio includes operational field locations, administrative offices, equipment, vehicles and information technology equipment. The majority of the Company’s leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more. Right-of-use assets are presented within “Operating lease assets” on the Consolidated Balance Sheet. The current portion of operating lease liabilities are presented within “Accrued expenses”, and the non-current portion of operating lease liabilities are presented within “Operating lease liabilities” on the Consolidated Balance Sheet.

 

Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term at inception. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating leases in effect prior to January 1, 2019 were recognized at the present value of the remaining payments on the remaining lease term as of January 1, 2019.  A portion of the Company’s real estate, equipment and vehicle leases is subject to periodic changes in the Consumer Price Index, LIBOR or other market index. The changes to these indexes are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. Because most leases do not provide an explicit rate of return, the Company utilizes its incremental secured borrowing rate on a lease-by-lease basis in determining the present value of lease payments at the commencement date of the lease.

 

The following table presents the components of lease expense (in thousands):

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Operating lease cost

 $4,932  $5,938  $10,138  $11,390 

Short-term lease cost

  4,785   5,482   10,866   12,721 

Total lease cost

 $9,717  $11,420  $21,004  $24,111 

 

Supplemental balance sheet information related to leases was as follows (in thousands):

 

  

June 30, 2020(1)

  

December 31, 2019(2)

 

Operating leases:

        

Operating lease assets

 $69,701  $71,466 
         

Accrued expenses

 $15,378  $15,828 

Other liabilities

  55,455   56,253 

Total operating lease liabilities

 $70,833  $72,081 
         

Weighted-average remaining lease term (in years)

  5.86   5.74 

Weighted-average discount rate

  5.12%  5.71%

 

 

(1)

Amounts exclude operating lease assets of less than $0.1 million, accrued expenses of  less than $0.1 and other liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5).
 (2)Amounts exclude operating lease assets of $0.3 million, accrued expenses of $0.2 million and other liabilities of $0.2 million that were classified as held for sale at December 31, 2019 (see Note 5).

 

19

 
 

7.

GOODWILL AND INTANGIBLE ASSETS

 

Goodwill

 

The following table presents a reconciliation of the beginning and ending balances of goodwill (in thousands):

 

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Total

 

Balance, December 31, 2019

                

Goodwill, gross

 $240,160  $76,946  $81,504  $398,610 

Accumulated impairment losses

  (62,848)  (45,400)  (33,527)  (141,775)

Goodwill, net

  177,312   31,546   47,977   256,835 

2020 Activity:

                
Impairment (1)        (1,258)  (1,258)

Foreign currency translation

  (436)  (387)     (823)

Balance, June 30, 2020

                

Goodwill, gross

  239,724   76,559   81,504   397,787 

Accumulated impairment losses

  (62,848)  (45,400)  (34,785)  (143,033)

Goodwill, net

 $176,876  $31,159  $46,719  $254,754 

 

  (1) During the second quarter of 2020, the Company recorded a $1.3 million goodwill impairment related to restructuring activities within Energy Services (see Note 4).

 

Intangible Assets

 

Intangible assets consisted of the following (in thousands):

 

  

June 30, 2020

  

December 31, 2019

 
  

Weighted Average Useful Lives (Years)

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

 

License agreements

 0.2  $3,894  $(3,871) $23  $3,894  $(3,824) $70 

Leases

 0.5   864   (820)  44   864   (777)  87 

Trademarks (1)

 9.2   15,437   (7,261)  8,176   15,699   (6,911)  8,788 

Non-competes

 2.9   2,048   (1,391)  657   2,301   (1,354)  947 

Customer relationships (1)

 6.9   156,817   (81,931)  74,886   157,576   (76,832)  80,744 

Patents and acquired technology

 7.3   38,728   (25,371)  13,357   39,289   (25,097)  14,192 

Total intangible assets

   $217,788  $(120,645) $97,143  $219,623  $(114,795) $104,828 

 

  (1) During the second quarter of 2020, the Company recorded intangible asset impairments related to restructuring activities within Energy Services of $0.3 million for trademarks and $0.7 million for customer relationships (see Note 4).

 

Amortization expense was $3.4 million and $3.4 million for the quarters ended June 30, 2020 and 2019, respectively, and $6.8 million and $6.9 million for the six months ended June 30, 2020 and 2019, respectively. Estimated amortization expense for the years ended December 31, 2020, 2021, 2022, 2023 and 2024 is $13.0 million, $12.9 million, $12.9 million, $12.9 million and $12.1 million, respectively.

 

20

 
 

8.

LONG-TERM DEBT AND CREDIT FACILITY

 

Long-term debt consisted of the following (in thousands):

 

   

June 30, 2020

   

December 31, 2019

 

Term note, due February 27, 2023, annualized rates of 4.25% and 4.09%, respectively

  $ 236,250     $ 253,750  

Line of credit, 4.25% and 4.01%, respectively

    26,000       24,000  

Other notes with interest rates from 3.3% to 7.8%

    681       770  

Subtotal

    262,931       278,520  

Less – Current maturities of long-term debt

    26,780       32,803  

Less – Unamortized loan costs

    3,054       2,088  

Total

  $ 233,097     $ 243,629  

 

In October 2015, the Company entered into an amended and restated $650.0 million senior secured credit facility with a syndicate of banks. In February 2018, December 2018 and April 2020, the Company amended this facility (the “amended Credit Facility”). At June 30, 2020, the amended Credit Facility consisted of a $175.0 million revolving line of credit and a $245.0 million term loan facility, each with a maturity date in February 2023.

 

Due to the potential impacts of COVID-19 on the Company’s business and the uncertainties associated with the duration of the pandemic, the Company amended its current credit facility on April 29, 2020 to provide additional liquidity and to ensure ongoing debt covenant compliance with the amended ratios. The amended Credit Facility now includes more flexible financial covenants and updated the defined terms to allow for the add-back of certain restructuring and divestiture charges. The amended Credit Facility also places certain limits on the Company’s open market share repurchase program and repurchases of common stock in connection with the Company’s equity compensation programs for employees. See Note 9.

 

The Company paid expenses of $2.0 million associated with the amended Credit Facility, $1.5 million related to up-front lending fees and $0.5 million related to third-party arranging fees and expenses, the latter of which was recorded in “Interest expense” in the Consolidated Statement of Operations in the second quarter of 2020. In addition, the Company had $1.9 million in unamortized loan costs associated with the amended Credit Facility, of which $0.2 million was written off and recorded in “Interest expense” in the Consolidated Statement of Operations in the second quarter of 2020.

 

Based on the April 2020 amendments, interest is charged on the principal amounts outstanding under the amended Credit Facility at the British Bankers Association LIBOR rate plus 3.50% from April 29, 2020 until the Company delivers its compliance certificate to the administrative agent for the first calendar quarter of 2021. Thereafter, interest is charged at the British Bankers Association LIBOR rate plus an applicable rate ranging from 1.75% to 3.50% depending on the Company’s consolidated leverage ratio. The amended Credit Facility also provided a 75 basis point floor for the base LIBOR rate. The applicable LIBOR borrowing rate (LIBOR plus Company’s applicable rate) as of June 30, 2020 was approximately 4.25%.

 

The Company’s indebtedness at June 30, 2020 consisted of $236.3 million outstanding from the term loan under the amended Credit Facility and $26.0 million on the line of credit under the amended Credit Facility. Additionally, the Company had $0.7 million of debt held by its joint ventures (representing funds loaned by its joint venture partners). During the second quarter of 2020, the Company repaid $32.0 million on the line of credit as a result of focused working capital management and strong operating cash flows.

 

As of June 30, 2020, the Company had $35.0 million in letters of credit issued and outstanding under the amended Credit Facility. Of such amount, $12.2 million was collateral for the benefit of certain of our insurance carriers and $22.8 million was for letters of credit or bank guarantees of performance or payment obligations of foreign subsidiaries.

 

The Company’s indebtedness at December 31, 2019 consisted of $253.8 million outstanding from the term loan under the amended Credit Facility, $24.0 million on the line of credit under the amended Credit Facility and $0.8 million of third-party notes and bank debt.

 

At June 30, 2020 and December 31, 2019, the estimated fair value of the Company’s long-term debt was approximately $274.0 million and $286.8 million, respectively. Fair value was estimated using market rates for debt of similar risk and maturity and a discounted cash flow model, which are based on Level 2 inputs as defined in Note 2.

 

In October 2015, the Company entered into an interest rate swap agreement for a notional amount of $262.5 million, which is set to expire in October 2020. The notional amount of this swap mirrors the amortization of a $262.5 million portion of the Company’s $350.0 million term loan drawn from the original Credit Facility. The swap requires the Company to make a monthly fixed rate payment of 1.46% calculated on the amortizing $262.5 million notional amount, and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $262.5 million notional amount. The receipt of the monthly LIBOR-based payment offsets a variable monthly LIBOR-based interest cost on a corresponding $262.5 million portion of the Company’s term loan from the original Credit Facility. After considering the impact of the interest rate swap agreement, the effective borrowing rate on the Company’s term note as of June 30, 2020 was approximately 5.11%. This interest rate swap is used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and is accounted for as a cash flow hedge. See Note 13.

 

21

 

In March 2018, the Company entered into an interest rate swap forward agreement that begins in October 2020 and expires in February 2023 to coincide with the amortization period of the amended Credit Facility. The swap will require the Company to make a monthly fixed rate payment of 2.937% calculated on the then amortizing $170.6 million notional amount, and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $170.6 million notional amount. The receipt of the monthly LIBOR-based payment will offset the variable monthly LIBOR-based interest cost on a corresponding $170.6 million portion of the Company’s term loan from the amended Credit Facility. This interest rate swap will be used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and accounted for as a cash flow hedge. See Note 13.

 

The amended Credit Facility is subject to certain financial covenants, including a consolidated financial leverage ratio and consolidated fixed charge coverage ratio. Subject to the specifically defined terms and methods of calculation as set forth in the amended Credit Facility’s credit agreement, the financial covenant requirements as of June 30, 2020 were defined as follows:

 

 

Consolidated financial leverage ratio compares consolidated funded indebtedness to amended Credit Facility defined income with a maximum amount not to exceed 4.00 to 1.00. At June 30, 2020, the Company’s consolidated financial leverage ratio was 2.65 to 1.00 and, using the amended Credit Facility defined income, the Company had the capacity to borrow up to $140.0 million of additional debt.

 

 

Consolidated fixed charge coverage ratio compares amended Credit Facility defined income to amended Credit Facility defined fixed charges with a minimum permitted ratio of not less than 1.10 to 1.00. At June 30, 2020, the Company’s fixed charge ratio was 1.41 to 1.00.

 

At June 30, 2020, the Company was in compliance with all of its debt and financial covenants as required under the amended Credit Facility.

 

 

9.

STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION

 

Share Repurchase Plan

 

In December 2019, the Company’s board of directors authorized the open market repurchase of up to an additional two million shares of the Company’s common stock upon completion of the two million share repurchase program approved by the board of directors in December 2018. As of June 30, 2020, 327,161 shares remained to be repurchased under the 2018 program and an additional two million shares under the 2019 program. Any shares repurchased are pursuant to one or more trading plans established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. In March 2020, the Company’s board of directors suspended the applicable 10b5-1 trading plans for the current open market repurchase program to increase liquidity and improve financial flexibility in light of COVID-19. The prior authorizations of the board of directors remain in effect as the program did not establish a time period in which the repurchases had to be made. Effective April 29, 2020, the amended Credit Facility limits open market repurchases of the Company’s common stock through June 30, 2021 to: (i) unlimited if the Company’s consolidated financial leverage ratio is less than 2.50 to 1.00; (ii) $20.0 million while the Company’s consolidated financial leverage ratio is greater than or equal to 2.50 to 1.00, but less than 3.00 to 1.00; and (iii) zero while the Company’s consolidated financial leverage ratio is greater than or equal to 3.00 to 1.00.

 

The Company’s board of directors also approved the purchase of up to $10.0 million of our common stock in each calendar year in connection with the Company’s equity compensation programs for employees. Effective April 29, 2020, the amended Credit Facility limits the amount repurchased to $5.0 million though June 30, 2021. The participants in the Company’s equity plans may surrender shares of common stock in satisfaction of tax obligations arising from the vesting of restricted stock, restricted stock unit awards and performance unit awards under such plans and in connection with the exercise of stock option awards. The deemed price paid is the closing price of the Company’s common stock on the Nasdaq Global Select Market on the date that the restricted stock, restricted stock unit or performance unit vests or the shares of the Company’s common stock are surrendered in exchange for stock option exercises. With regard to stock option awards, the option holder may elect a “net, net” exercise in connection with the exercise of employee stock options such that the option holder receives a number of shares equal to the built-in gain in the option shares divided by the market price of the Company’s common stock on the date of exercise, less a number of shares equal to the taxes due upon the exercise of the option divided by the market price of the Company’s common stock on the date of exercise. The shares of common stock surrendered for taxes due on the exercise of the option are deemed repurchased by the Company.

 

During the first six months of 2020, the Company acquired 180,491 shares of the Company’s common stock for $3.2 million ($17.80 average price per share) through the open market repurchase program discussed above, and 83,737 shares of the Company’s common stock for $1.9 million ($22.54 average price per share) in connection with the satisfaction of tax obligations in connection with equity compensation programs for employees. Once repurchased, the Company immediately retired all such shares.

 

During the first six months of 2019, the Company acquired 1,274,086 shares of the Company’s common stock for $22.0 million ($17.28 average price per share) through open market repurchases, 153,630 shares of the Company’s common stock for $3.1 million ($20.48 average price per share) in connection with the satisfaction of tax obligations in connection with the vesting of restricted stock, restricted stock units and performance units, and 48,409 shares of the Company’s common stock for $1.0 million ($20.52 average price per share) in connection with “net, net” exercises of employee stock options. Once repurchased, the Company immediately retired all such shares.

 

22

 

Equity-Based Compensation Plans

 

In April 2016, the Company’s stockholders approved the 2016 Employee Equity Incentive Plan, which was amended in 2017 by the First Amendment to the 2016 Employee Equity Incentive Plan (as amended, the “2016 Employee Plan”). In April 2018, the Company’s stockholders approved the Second Amendment to the 2016 Employee Equity Incentive Plan, which increased by 1,700,000 the number of shares of the Company’s common stock reserved and available for issuance in connection with awards issued under the 2016 Employee Plan. The 2016 Employee Plan, which replaced the 2013 Employee Equity Incentive Plan, provides for equity-based compensation awards, including restricted shares of common stock, performance awards, stock options, stock units and stock appreciation rights. The 2016 Employee Plan is administered by the Compensation Committee of the board of directors, which determines eligibility, timing, pricing, amount and other terms or conditions of awards. As of June 30, 20201,370,669 shares of the Company’s common stock were available for issuance under the 2016 Employee Plan.

 

In April 2016, the Company’s stockholders approved the 2016 Non-Employee Director Equity Incentive Plan (the “2016 Director Plan”), which replaced the 2011 Non-Employee Director Equity Incentive Plan. In April 2019, the Company’s stockholders approved an amendment and restatement of the 2016 Director Plan, which among other things, increased by 300,000 the number of shares of the Company’s common stock reserved and available for issuance in connection with awards issued under the 2016 Director Plan. The 2016 Director Plan provides for equity-based compensation awards, including non-qualified stock options and stock units. The board of directors administers the 2016 Director Plan and has the authority to establish, amend and rescind any rules and regulations related to the 2016 Director Plan. As of June 30, 2020257,396 shares of the Company’s common stock were available for issuance under the 2016 Director Plan.

 

Stock Awards

 

Stock awards, which include shares of restricted stock, restricted stock units and performance stock units, are awarded from time to time to executive officers and certain key employees of the Company. Stock award compensation is recorded based on the award date fair value and charged to expense ratably through the requisite service period. The forfeiture of unvested restricted stock, restricted stock units and performance stock units causes the reversal of all previous expense to be recorded as a reduction of current period expense.

 

A summary of the stock award activity is as follows:

 

  

Stock Awards

  

Weighted Average Award Date Fair Value

 

Outstanding at December 31, 2019

  1,034,964  $23.20 
Period Activity:        

Restricted stock units awarded

  391,171   20.02 

Performance stock units awarded

  131,755   22.96 

Restricted stock units distributed

  (188,545)  22.30 

Performance stock units distributed

  (71,541)  28.18 

Restricted stock units forfeited

  (28,928)  21.07 

Performance stock units forfeited

  (76,282)  27.46 

Outstanding at June 30, 2020

  1,192,594  $21.76 

 

Expense associated with stock awards was $2.3 million and $2.0 million for the quarters ended June 30, 2020 and 2019, respectively, and $4.0 million and $4.0 million for the six months ended June 30, 2020 and 2019, respectively. Unrecognized pre-tax expense of $15.9 million related to stock awards is expected to be recognized over the weighted average remaining service period of 1.9 years for awards outstanding at June 30, 2020.

 

23

 

Deferred Stock Unit Awards

 

Deferred stock units are generally awarded to directors of the Company and represent the Company’s obligation to transfer one share of the Company’s common stock to the grantee at a future date. Historically, awards were fully vested, and fully expensed, on the date of grant. Beginning in April 2019, as a result of the amendment and restatement of the 2016 Director Plan discussed above, the expense related to the issuance of deferred stock units is based on the award date fair value and charged to expense ratably through the requisite service period, which is generally one year. The forfeiture of unvested deferred stock units causes the reversal of all previous expense to be recorded as a reduction of current period expense.

 

A summary of deferred stock unit activity is as follows:

 

  

Deferred Stock Units

  

Weighted Average Award Date Fair Value

 

Outstanding at December 31, 2019

  253,340  $20.71 
Period Activity:        

Awarded

  64,010   14.55 

Distributed

  (56,582)  21.63 

Outstanding at June 30, 2020

  260,768  $19.00 

 

Expense associated with deferred stock unit awards was $0.2 million and $0.2 million for the quarters ended June 30, 2020 and 2019, respectively, and $0.4 million and $0.2 million for the six months ended June 30, 2020 and 2019, respectively. Unrecognized pre-tax expense is $0.8 million related to deferred stock unit awards is expected to be recognized over the weighted average service period of 0.8 years for awards outstanding at June 30, 2020.

 

Stock Options

 

Stock options on the Company’s common stock were previously awarded from time to time to executive officers and certain key employees of the Company. Stock options granted generally had a term of seven to ten years and an exercise price equal to the market value of the underlying common stock on the date of grant. There were 52,783 stock options exercised during the first quarter of 2019 with a weighted average exercise price of $18.11 per share. There were no stock options outstanding at June 30, 2020 and December 31, 2019.

 

 

10.

TAXES ON INCOME

 

The Company’s effective tax rate in the quarter and six-month period ended June 30, 2020 was 23.4% and 33.8%, respectively. The effective rates for both periods were negatively impacted, as compared to U.S. federal statutory tax rates, by valuation allowances on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized.

 

The Company’s effective tax rate in the quarter and six-month period ended June 30, 2019 was (111.0)% and (40.9)%, respectively, reflecting income tax expense on a pre-tax loss in both periods. The effective rates for both periods were negatively impacted by: (i) significant pre-tax charges primarily related to impairments of held for sale assets and currency translation adjustments, which were not deductible for tax purposes; (ii) a $2.1 million charge for foreign withholding taxes on the repatriation of foreign earnings; and (iii) valuation allowances recorded on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized.

 

24

 
 

11.

COMMITMENTS AND CONTINGENCIES

 

Litigation

 

The Company is involved in certain litigation incidental to the conduct of its business and affairs. Management, after consultation with legal counsel, does not believe that the outcome of any such litigation, individually or in the aggregate, will have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

 

Purchase Commitments

 

The Company had no material purchase commitments at June 30, 2020.

 

Guarantees

 

The Company has many contracts that require the Company to indemnify the other party against loss from claims, including claims of patent or trademark infringement or other third-party claims for injuries, damages or losses. The Company has agreed to indemnify its surety against losses from third-party claims of subcontractors. The Company has not previously experienced material losses under these provisions and, while there can be no assurances, currently does not anticipate any future material adverse impact on its consolidated financial position, results of operations or cash flows.

 

The Company regularly reviews its exposure under all its engagements, including performance guarantees by contractual joint ventures and indemnification of its surety. As a result of the most recent review, the Company has determined that the risk of material loss is remote under these arrangements and has not recorded a liability for these risks at June 30, 2020 on its Consolidated Balance Sheet.

 

25

 
 

12.

SEGMENT REPORTING

 

The Company has three operating segments, which are also its reportable segments: Infrastructure Solutions; Corrosion Protection; and Energy Services. The Company’s operating segments correspond to its management organizational structure. Each operating segment has leadership that reports to the chief operating decision manager (“CODM”). The operating results and financial information reported by each segment are evaluated separately, regularly reviewed and used by the CODM to evaluate segment performance, allocate resources and determine management incentive compensation.

 

The following disaggregated financial results have been prepared using a management approach that is consistent with the basis and manner with which management internally disaggregates financial information for the purpose of making internal operating decisions. The Company evaluates performance based on stand-alone operating income (loss), which includes acquisition and divestiture expenses and restructuring charges, if applicable.

 

Financial information by segment was as follows (in thousands):

 

   

Quarter Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Revenues:

                               

Infrastructure Solutions

  $ 137,392     $ 155,439     $ 267,636     $ 286,982  

Corrosion Protection

    55,491       77,597       121,559       142,095  

Energy Services

    52,134       85,704       143,197       166,567  

Total revenues

  $ 245,017     $ 318,740     $ 532,392     $ 595,644  
                                 

Gross profit:

                               

Infrastructure Solutions

  $ 35,667     $ 38,871     $ 67,037     $ 65,457  

Corrosion Protection

    14,111       16,692       23,028       29,565  

Energy Services

    3,797       11,874       13,394       20,710  

Total gross profit

  $ 53,575     $ 67,437     $ 103,459     $ 115,732  
                                 

Operating income (loss):

                               

Infrastructure Solutions (1)

  $ 21,004     $ 9,120     $ 34,559     $ 14,835  

Corrosion Protection (2)

    699       (3,863 )     (5,748 )     (5,623 )

Energy Services (3)

    (5,713 )     4,107       (3,537 )     5,222  

Corporate (4)

    (7,263 )     (8,905 )     (15,151 )     (14,749 )

Total operating income (loss)

    8,727       459       10,123       (315 )

Other income (expense):

                               

Interest expense

    (4,690 )     (3,566 )     (7,886 )     (7,156 )

Interest income

    215       261       443       546  

Other (5)

    964       (1,015 )     1,389       (1,689 )

Total other expense

    (3,511 )     (4,320 )     (6,054 )     (8,299 )

Income (loss) before taxes on income

  $ 5,216     $ (3,861 )   $ 4,069     $ (8,614 )

 


 

(1) 

Operating income in the second quarter of 2020 and 2019 includes $0.1 million and $1.4 million, respectively, of restructuring charges (see Note 4) and $0.0 million and $0.4 million, respectively, of costs primarily related to the divestiture of certain international operations. Operating income in the first six months of 2020 and 2019 includes $0.5 million and $3.4 million, respectively, of restructuring charges (see Note 4) and $0.2 million and $0.5 million, respectively, of divestiture costs. Additionally, operating income in the second quarter and first six months of 2020 includes $0.7 million of impairment reversals while operating income in the second quarter and first six months of 2019 includes $9.0 million of impairment charges to assets held for sale.

 

 

(2) 

Operating income (loss) in the second quarter of 2020 and 2019 includes $1.3 million and $3.3 million, respectively, of restructuring charges (see Note 4). Operating loss in the first six months of 2020 and 2019 includes $3.1 million and $3.5 million, respectively, of restructuring charges (see Note 4). Additionally, operating income in the second quarter and first six months of 2019 includes $2.9 million of impairment charges to assets held for sale.

 

  (3) Operating loss in the second quarter of 2020 and 2019 includes $3.5 million and less than $0.1 million, respectively, of restructuring charges (see Note 4). Operating loss in the first six months of 2020 and 2019 includes $3.6 million and less than $0.1 million respectively, of restructuring charges (see Note 4). Additionally, operating loss in the second quarter and first six months of 2020 includes $1.3 million of goodwill impairment charges and $1.0 million of definite-lived intangible asset impairment charges.

 

 

(4) 

Operating loss in the second quarter of 2020 and 2019 includes $0.9 million and $0.9 million, respectively, of restructuring charges (see Note 4) and $0.7 million and $0.4 million, respectively, of divestiture costs. Operating loss in the first six months of 2020 and 2019 includes $1.6 million and $1.3 million, respectively, of restructuring charges (see Note 4) and $1.3 million and $0.4 million, respectively, of divestiture costs.

 

 

(5) 

Other expense in the second quarter of 2020 includes gains of $0.9 million related to restructuring (see Note 4). Other expense in the second quarter of 2019 includes $0.9 million of restructuring charges (see Note 4). Other expense in the first six months of 2020 and 2019 includes gains of $0.3 million and charges of $1.1 million, respectively, related to restructuring (see Note 4).  Other expense in the first six months of 2020 also includes gains of $0.7 million related to divestitures of Insituform Australia and Insituform Spain (see Note 1).

 

26

 

The following table summarizes revenues and gross profit by geographic region (in thousands):

 

   

Quarter Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Revenues: (1)

                               

United States

  $ 197,447     $ 239,987     $ 430,667     $ 448,762  

Canada

    24,995       33,392       46,850       57,460  

Europe

    7,192       17,381       17,863       33,384  

Other foreign

    15,383       27,980       37,012       56,038  

Total revenues

  $ 245,017     $ 318,740     $ 532,392     $ 595,644  
                                 

Gross profit: (1)

                               

United States

  $ 41,334     $ 50,792     $ 80,970     $ 82,619  

Canada

    5,369       5,028       8,100       8,482  

Europe

    2,256       3,311       5,204       6,830  

Other foreign

    4,616       8,306       9,185       17,801  

Total gross profit

  $ 53,575     $ 67,437     $ 103,459     $ 115,732  

 


 

(1) 

Revenues and gross profit are attributed to the country of origin

 

 

 

13.

DERIVATIVE FINANCIAL INSTRUMENTS

 

As a matter of policy, the Company uses derivatives for risk management purposes, and does not use derivatives for speculative purposes. From time to time, the Company may enter into foreign currency forward contracts to hedge foreign currency cash flow transactions. For cash flow hedges, a gain or loss is recorded in the Consolidated Statements of Operations upon settlement of the hedge. All of the Company’s hedges that are designated as hedges for accounting purposes were highly effective; therefore, no notable amounts of hedge ineffectiveness were recorded in the Company’s Consolidated Statements of Operations for either the settlement of cash flow hedges or the outstanding hedged balance. The Company’s cash flow hedges were in a net deferred loss position of $10.7 million and $4.6 million at June 30, 2020 and December 31, 2019, respectively. The change during the period was due to unfavorable movements in short-term interest rates relative to the hedged position. The Company presents derivative instruments in the consolidated financial statements on a gross basis. Deferred losses were recorded in other non-current liabilities and other comprehensive income on the Consolidated Balance Sheets. The net periodic change of the Company’s cash flow hedges was recorded on the foreign currency translation adjustment and derivative transactions line of the Consolidated Statements of Equity.

 

The Company also engages in regular inter-company trade activities and receives royalty payments and management fees from certain of its wholly-owned entities, paid in local currency, rather than the Company’s functional currency, U.S. dollars. From time to time, the Company utilizes foreign currency forward exchange contracts to mitigate the currency risk associated with the anticipated future payments from certain of its international entities. No contracts were utilized during the first six months of 2020. During the first six months of 2019, a loss of $0.3 million was recorded upon settlement of foreign currency forward exchange contracts. Gains and losses of this nature are recorded to “Other income (expense)” in the Consolidated Statements of Operations.

 

In October 2015, the Company entered into an interest rate swap agreement for a notional amount of $262.5 million, which is set to expire in October 2020. The notional amount of this swap mirrored the amortization of a $262.5 million portion of the Company’s $350.0 million term loan drawn from the original Credit Facility. The swap requires the Company to make a monthly fixed rate payment of 1.46% calculated on the amortizing $262.5 million notional amount and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated by amortizing the $262.5 million same notional amount. The receipt of the monthly LIBOR-based payment offsets a variable monthly LIBOR-based interest cost on a corresponding $262.5 million portion of the Company’s term loan from the original Credit Facility. This interest rate swap is used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and is accounted for as a cash flow hedge.

 

27

 

On March 12, 2018, the Company entered into an interest rate swap forward agreement that begins in October 2020 and expires in February 2023 to coincide with the amortization period of the amended Credit Facility. The swap will require the Company to make a monthly fixed rate payment of 2.937% calculated on the then amortizing notional amount (scheduled to be $170.6 million in October 2020), and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $170.6 million notional amount. The receipt of the monthly LIBOR-based payment will offset the variable monthly LIBOR-based interest cost on a corresponding $170.6 million portion of the Company’s term loan from the amended Credit Facility. This interest rate swap will be used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and accounted for as a cash flow hedge.

 

The following table summarizes the Company’s derivative position at June 30, 2020:

 

   

Position

   

Notional Amount

   

Weighted Average Remaining Maturity In Years

   

Average Exchange Rate

 

Interest Rate Swap

        $ 177,187,500       2.50        

 

 

The following table provides a summary of the fair value amounts of our derivative instruments, all of which are Level 2 inputs as defined in Note 2 (in thousands):

 

Designation of Derivatives

Balance Sheet Location

 

June 30, 2020

   

December 31, 2019

 

Derivatives Designated as Hedging Instruments:

                 

Interest Rate Swaps

Other non-current assets

  $     $ 261  
 

Total Assets

  $     $ 261  
                   

Interest Rate Swaps

Other non-current liabilities

  $ 10,696     $ 4,899  
 

Total Liabilities

  $ 10,696     $ 4,899  
                   
 

Total Derivative Assets

  $     $ 261  
 

Total Derivative Liabilities

    10,696       4,899  
 

Total Net Derivative Liability

  $ (10,696 )   $ (4,638 )

 

 

28

 
 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following is management’s discussion and analysis of certain significant factors that have affected our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited consolidated financial statements. This discussion should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

We believe that certain accounting policies could potentially have a more significant impact on our consolidated financial statements, either because of the significance of the consolidated financial statements to which they relate or because they involve a higher degree of judgment and complexity. A summary of such critical accounting policies can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2019 and in Note 2 to the consolidated financial statements contained in this report.

 

Forward-Looking Information

 

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. We make forward-looking statements in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Quarterly Report on Form 10-Q 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 and projections and are not guarantees of future events or results. When used in this report, 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, 2019, as filed with the Securities and Exchange Commission on March 2, 2020, and in our subsequent filed reports, including this report, and, in particular, the impact of the current COVID-19 virus outbreak and the evolving response thereto both on the Company generally and on the other risks described therein. In light of these risks, uncertainties and assumptions, the forward-looking events discussed 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 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 report are qualified by these cautionary statements.

 

Executive Summary

 

Aegion combines innovative technologies with market leading expertise to maintain, rehabilitate and strengthen pipelines and other infrastructure around the world. For nearly 50 years, we have played a pioneering role in finding innovative solutions to rehabilitate aging infrastructure, primarily pipelines in the wastewater, water, energy, mining and refining industries. We also maintain the efficient operation of refineries and other industrial facilities and provide innovative solutions for the strengthening of buildings, bridges and other structures. We are committed to keeping infrastructure working better, safer and longer for customers and communities around the world. We believe the depth and breadth of our products and services make us a leading provider for the world’s infrastructure rehabilitation and protection needs.

 

29

 

Our Segments

We have three operating segments, which are also our reportable segments: Infrastructure Solutions, Corrosion Protection and Energy Services.  Our operating segments correspond to our management organizational structure.

Infrastructure Solutions – The majority of our work is performed in the municipal water and wastewater pipeline sector. While the pace of growth is primarily driven by government funding and spending, overall demand is strong due to required improvements to aging pipeline infrastructure in our core markets, which should result in a long-term stable growth opportunity for our market leading products, Insituform® CIPP, the Tyfo® system and Fusible PVC® pipe.

Corrosion Protection Corrosion Protection, over the longer term, is positioned to capture the benefits of continued oil and natural gas pipeline infrastructure developments across North America and internationally, as producers and midstream pipeline companies transport their product from onshore and offshore oil and gas fields to regional demand centers. We provide solutions to customers to enhance the safety, environmental integrity, reliability and compliance of their pipelines in the global transmission and distribution network, especially in the oil and gas markets. The segment has a broad portfolio of technologies, products and services to protect, maintain, rehabilitate, assess and monitor pipelines from the effects of corrosion, including cathodic protection, interior pipe linings, interior and exterior pipe and weld coatings and inspection and repair capabilities, as well as an increasing offering of asset integrity management data storage and analytics capabilities related to these services.

Energy Services We offer a unique value proposition based on our industry-leading safety and labor productivity programs, which allows us to provide cost-effective long-term maintenance, construction, turnaround and specialty services at customers’ refineries as well as chemical and other industrial facilities. We understand the demands and the level of critical planning required to ensure a successful turnaround or shutdown and offer a full range of services as part of our facility maintenance solutions, while maintaining a reputation for being safe, professional and providing predictable value. We have deep relationships with our customers, which give us insight into their critical needs and expectations.

COVID-19 Update

Over the past several months, the COVID-19 outbreak has significantly impacted domestic and international operations and economic activity. We expect these disruptions will continue in the second half of 2020 as general business and economic uncertainty persists.

The disruption caused by the pandemic has adversely impacted our employees, suppliers and customers. From a human capital perspective, to date, we have not had any material disruptions to our business due to confirmed or suspected COVID-19 cases. We support our employees by providing all the necessary equipment and implementing the appropriate procedures so that they can continue to perform their duties safely. The vast majority of our office staff has been able to effectively work remotely as a result of our existing information technology infrastructure and any remaining office staff as well as our field crews and laborers have generally been able to continue working safely with the necessary protective equipment and practices. Aegion serves as an ‘essential’ business in nearly all of North America and as such we have been able to continue to serve our customers in a safe and quality manner. From a supplier perspective, to date, we have not had any significant issues with critical suppliers, but we continue to communicate with them and closely monitor developments. Finally, from a customer perspective, we have not experienced any significant contract losses; however, we have experienced some disruption, including temporary facility shutdowns and reduced man hours in our Energy Services business, project delays and shelter-in-place and stay-at-home orders in certain international locations.

In order to help mitigate the negative financial impact caused by the pandemic, we have implemented a number of cost savings measures across our platforms and at our corporate office including employee furloughs, temporary wage adjustments, utilization of governmental job retention subsidies, elimination of non-essential travel and reduction of discretionary spend. We have also taken cash preservation measures to aggressively manage working capital, reduce non-critical capital expenditures, suspend open-market share repurchases and transition certain salaried compensation and board of directors’ fees to equity-based compensation. Certain of these spending restrictions were lifted in July, including wage reductions, and others are expected to remain in place for the duration of the 2020.

Additionally, on April 29, 2020, we amended our credit facility to provide more flexible financial covenants and increase the borrowing capacity on our revolving line of credit should we need it in the coming months.

During the second quarter of 2020, several initiatives led to reduced costs and/or improved profitability on the quarterly results. Such actions included: (i) savings of $2.2 million from the conversion of certain salaried compensation to short-term vesting, equity-based compensation; and (ii) savings of $1.2 million from the temporary suspension of employer contributions to 401(k) and other defined contribution plans. Certain of our international businesses also received approximately $2.7 million in government wage subsidies. Depending on the jurisdiction, the wage subsidy initiatives either offset incurred costs while revenue generating activities were suspended, or incentivized businesses to maintain their workforce rather than initiating furloughs. In both instances, the benefit to our businesses partially offset costs that would have likely been removed through company-initiated furloughs and workforce reductions.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The CARES Act did not have a material impact on our consolidated financial condition or results of operations as of and for the six months ended June 30, 2020. However, we have deferred payments of $3.9 million as of June 30, 2020 related to the timing of federal estimated tax payments and employer payroll taxes as permitted by the CARES Act.

The extent of the impact of the COVID-19 outbreak on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, its impact on our customers and suppliers and the range of governmental and community reactions to the pandemic, which are uncertain and cannot be fully predicted at this time. We will continue to proactively respond to the situation and may take further actions that alter our business operations as may be required by governmental authorities, or that we determine are in the best interests of our employees and customers.

30

 

Business Outlook

 

Due to the continued developing impacts and uncertainties of the COVID-19 pandemic, including the depth and duration of any disruptions to customers and suppliers, its future effect on our business, results of operations and financial condition cannot be predicted. While we are unable to accurately foresee these future impacts, we believe that our financial resources and liquidity levels, along with various contingency plans to reduce costs are sufficient to manage the impact currently anticipated from the COVID-19 pandemic, which will likely include reduced revenues and operating profits in all segments for at least the third quarter of 2020.

 

Because the COVID-19 pandemic continues to be a rapidly evolving situation, we will continue to monitor the business impact and may take further actions that we deem appropriate in light of the circumstances.

 

Strategic Initiatives/Divestiture

 

Restructuring

 

On July 28, 2017, our board of directors approved the Restructuring, a comprehensive global realignment and restructuring plan. As part of the Restructuring, we announced plans to: (i) divest our pipe coating and insulation businesses in Louisiana, The Bayou Companies, LLC and Bayou Wasco Insulation, LLC (collectively “Bayou”); (ii) exit all non-pipe related contract applications for the Tyfo® system in North America; (iii) right-size the cathodic protection services operation in Canada and the CIPP businesses in Australia and Denmark; and (iv) reduce corporate and other operating costs.

 

During 2018 and 2019, our board of directors approved additional actions with respect to the Restructuring, which included the decisions to: (i) divest the Australia and Denmark CIPP businesses; (ii) take actions to further optimize operations within North America, including measures to reduce consolidated operating costs; and (iii) divest or otherwise exit multiple additional international businesses, including: (a) our cathodic protection installation activities in the Middle East, including Corrpower International Limited, our cathodic protection materials manufacturing and production joint venture in Saudi Arabia; (b) United Pipeline de Mexico S.A. de C.V., our Tite Liner® joint venture in Mexico (“United Mexico”); (c) our Tite Liner® businesses in Brazil and Argentina; (d) Aegion South Africa Proprietary Limited, our Tite Liner® and CIPP joint venture in the Republic of South Africa; and (e) our CIPP contract installation operations in England, the Netherlands, Spain and Northern Ireland.

 

We completed the divestitures of Bayou and the Denmark CIPP business in 2018. We also completed the divestitures of the Netherlands CIPP business and Tite Liner® joint venture in Mexico in 2019, as well as the shutdown of activities for the CIPP business in England. We completed the divestitures of CIPP operations in Australia and Spain in early 2020. Remaining shutdown activities include Corrosion Protection entities in South America and South Africa, which are expected to be completed in 2020. Additionally, the exit of our cathodic protection installation activities in the Middle East is substantially complete, though we expect minimal wind-down activities will extend through the first quarter of 2021 related to a small number of projects remaining in backlog. The sale of the Northern Ireland contracting operation has been delayed due to the COVID-19 pandemic, but we believe it is probable that a sale will occur in the first half of 2021.

 

31

 

As part of efforts to optimize our cathodic protection operations in North America, management initiated plans during the fourth quarter of 2019 to further downsize operations in the U.S., including the closure of three branch offices and the exit of capital intensive drilling activities at four branch offices. These actions included a reduction of approximately 20% of the cathodic protection domestic workforce and an exit of drilling activities that contributed approximately 20% to our cathodic protection domestic revenues in 2019. We expect these actions to improve our cathodic protection cost structure in the U.S., eliminate unprofitable results in certain parts of the business and reduce consolidated annual expenses for the business overall. Also during the fourth quarter of 2019, we reduced corporate headcount and took other actions to reduce corporate costs.

 

During the second quarter of 2020, management took actions to exit its specialty turnaround services businesses in Energy Services, Plant Performance Services LLC and P2S LLC (collectively “P2S”). Additionally, we executed reductions in force across the rest of the company related to business slowdowns due to COVID-19.

 

Total pre-tax Restructuring charges recorded during the first six months of 2020 were $8.5 million ($6.8 million post-tax) and consisted of employee severance, retention, extension of benefits, employment assistance programs, early contract termination and other restructuring costs associated with the restructuring efforts described above. Total pre-tax Restructuring and related impairment charges since inception were $180.4 million ($162.6 million post-tax), including cash charges of $51.1 million and non-cash charges of $129.3 million, of which $86.4 million relates to goodwill and long-lived asset impairment charges recorded in 2017 as part of exiting the non-pipe FRP contracting market in North America. We reduced headcount by approximately 745 employees as a result of these actions.

 

During the second half of 2020, management expects to initiate additional restructuring actions as we balance the effects of COVID-19, with the majority of charges included within the Corrosion Protection segment. Additionally, we continue to monitor the impact COVID-19 is having on the oil refining markets in the United States and our Energy Services segment. We are prepared to proactively respond to the situation and may take further restructuring actions as warranted. We expect to incur additional cash charges related to this program of between $3 million and $5 million. We will continue to evaluate impacts on the business as a result of the COVID-19 pandemic and oil market declines to determine whether additional structural changes are required as a result of evolving long-term demand fundamentals, which could result in additional cash and non-cash restructuring charges. We could also incur additional non-cash charges primarily associated with the release of cumulative currency translation adjustments and losses on the closure or liquidation of international entities.

 

See Note 4 to the consolidated financial statements contained in this Report for a detailed discussion regarding our restructuring efforts.

 

Divestitures – Planned and Completed

 

Through our restructuring efforts to exit higher risk, low return markets and streamline our operations, we have divested, or planned to divest, certain businesses in our Infrastructure Solutions and Corrosion Protection segments during 2020 and 2019:

 

  i. In February 2020, we sold our CIPP contracting entity in Spain. In connection with the sale, we entered into a five-year tube-supply agreement whereby the buyer will exclusively purchase our Insituform® CIPP felt liners. The buyer is also entitled to use the Insituform® trade name in Spain based on a trademark license granted for the same five-year time period.
     
  ii. In January 2020, we sold our CIPP contracting entity in Australia. In connection with the sale, we entered into a five-year tube-supply agreement whereby the buyer will exclusively purchase our Insituform® CIPP liners. The buyer is also entitled to use the Insituform® trade name in Australia based on trademark license granted for the same five-year time period.
     
  iii. In October 2019, we sold the CIPP contracting operations of Insituform Netherlands.  We retained certain assets relating to the wet-out facility in The Netherlands and will continue such operation in order to provide liners in continental Europe as part of our tube manufacturing and product sales business.  In connection with the sale, we entered into a five-year tube supply agreement whereby the buyers will purchase our Insituform® CIPP liners. 
     
 

iv.

In October 2019, we sold our interest in United Mexico to our joint venture partner. In connection with the sale, we entered into a long-term license agreement pursuant to which United Mexico will be the exclusive licensee in Mexico with respect to certain trademarks, patents and other intellectual property relating to our pipe lining business. We further expect to enter into a long-term agreement for the supply of equipment and consumables as well as the provision of services to United Mexico.

     
 

v.

During the second quarter of 2019, we initiated plans to sell Environmental Techniques, our contracting operation in Northern Ireland. The sale of the Northern Ireland contracting operation has been suspended due to COVID-19, but we expect to recommence the sales process as soon as reasonably practicable.

 

See Notes 1 and 5 to the consolidated financial statements contained in this Report for additional information.

 

32

 

Results of OperationsQuarters and Six-Month Periods Ended June 30, 2020 and 2019

 

Significant Events

 

Restructuring As part of our restructuring efforts, we recorded pre-tax charges of $8.5 million ($6.8 million post-tax) and $9.4 million ($10.0 million post-tax) during the first six months of 2020 and 2019, respectively. These charges include goodwill and intangible asset impairment charges of $1.3 million and $1.0 million, respectively, in the first six months of 2020 related to the exit of specialty turnaround services in Energy Services. See Notes 1 and 4 to the consolidated financial statements contained in this Report.

 

Impairment of Assets Held for Sale During the second quarter of 2020, we recorded a recovery of $0.7 million ($0.5 million post-tax) related to previously reserved customer receivables in our held for sale operations. During the second quarter of 2019, we recorded a loss on assets held for sale of $11.9 million ($11.9 million post-tax) based on our current expectation of fair value less cost to sell. Charges impacted the Infrastructure Solutions and Corrosion Protection reportable segments.

 

Acquisition and Divestiture Expenses We recorded pre-tax expenses of $1.5 million ($1.2 million post-tax) and $0.9 million ($0.8 million post-tax) during the first six months of 2020 and 2019, respectively, related primarily to the divestitures of Insituform Australia and Insituform Spain in 2020, and Insituform Australia in 2019. Expenses primarily impacted the Infrastructure Solutions and Corporate reportable segments.

 

Warranty Reserve In the first quarter of 2019, we recorded a pre-tax estimated project warranty reserve of $4.4 million ($3.3 million post-tax) related to a CIPP wastewater project in our North American operation of Infrastructure Solutions. Inspections of the installed liners revealed structural failures due to extreme environmental conditions at the time of the installation. The project was originally awarded in 2016, construction was substantially completed during 2017 and remediation was completed in early 2020.

 

Consolidated Operating Results

 

Key financial data for consolidated operations was as follows:

 

(dollars in thousands)

 

Quarter Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

    $    

%

 

Revenues

  $ 245,017     $ 318,740     $ (73,723 )     (23.1 )%

Gross profit

    53,575       67,437       (13,862 )     (20.6 )%

Gross profit margin

    21.9 %     21.2 %     N/A    

70bp

 

Operating expenses

    41,970       51,254       (9,284 )     (18.1 )%
Goodwill impairment     1,258             1,258     N/M  
Definite-lived intangible asset impairment     957             957     N/M  
Impairment (gain) of assets held for sale     (658 )     11,946       (12,604 )   N/M  

Acquisition and divestiture expenses

    657       804       (147 )     (18.3 )%

Restructuring and related charges

    664       2,974       (2,310 )     (77.7 )%

Operating income

    8,727       459       8,268       1801.3 %

Operating margin

    3.6 %     0.1 %     N/A    

350bp

 

Net income (loss) attributable to Aegion Corporation

    3,856       (8,366 )     12,222       (146.1 )%

 

(dollars in thousands)

 

Six Months Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

    $    

%

 

Revenues

  $ 532,392     $ 595,644     $ (63,252 )     (10.6 )%

Gross profit

    103,459       115,732       (12,273 )     (10.6 )%

Gross profit margin

    19.4 %     19.4 %     N/A    

bp

 

Operating expenses

    88,318       99,124       (10,806 )     (10.9 )%
Goodwill impairment     1,258             1,258     N/M  
Definite-lived intangible asset impairment     957             957     N/M  

Impairment (gain) of assets held for sale

    (658 )     11,946       (12,604 )  

N/M

 

Acquisition and divestiture expenses

    1,509       917       592       64.6 %

Restructuring and related charges

    1,952       4,060       (2,108 )     (51.9 )%

Operating income (loss)

    10,123       (315 )     10,438       (3313.7 )%

Operating margin

    1.9 %     (0.1 )%     N/A    

200bp

 

Net income (loss) attributable to Aegion Corporation

    2,224       (12,367 )     14,591       (118.0 )%

 


“N/A” represents not applicable.

“N/M” represents not meaningful.

 

Revenues

 

Revenues decreased $73.7 million, or 23.1%, in the second quarter of 2020 compared to the second quarter of 2019. The decrease in revenues was primarily due to: (i) a $33.6 million decrease in Energy Services and a $22.1 million decrease in Corrosion Protection due decreased project activities across each segment due to lower customer demand as a result of COVID-19 and reduced spending in the wake of reduced oil prices; and (ii) an $18.0 million decrease in Infrastructure Solutions primarily due to decreased international revenues from our CIPP contracting installation services operations as we exit or divest non-core operations as part of our restructuring efforts.

 

Revenues decreased $63.3 million, or 10.6%, in the first six months of 2020 compared to the first six months of 2019. The decrease in revenues was primarily due to a $23.4 million decrease in Energy Services driven by a decline in maintenance services and construction activities as noted above, partially offset by increased turnaround services activity. In addition, there was a $20.5 million decrease in Corrosion Protection and a $19.3 million decrease in Infrastructure Solutions primarily due to the same factors impacting the changes in revenues in the second quarter of 2020 compared to the second quarter of 2019.

 

33

 

Gross Profit and Gross Profit Margin

 

Gross profit decreased $13.9 million, or 20.6%, in the second quarter of 2020 compared to the second quarter of 2019. As part of our restructuring efforts, we recognized expense reversals of $0.1 million and charges of $0.4 million in the second quarters of 2020 and 2019, respectively. The decrease in gross profit was due to: (i) an $8.1 million decrease in Energy Services due to decreased revenues and associated gross profits from maintenance service and construction activities; (ii) a $3.2 million decrease in Infrastructure Solutions primarily due to lower revenues from international CIPP operations noted above, partially offset by improved productivity related to CIPP contracting installation services activity in our North American operation; and (iii) a $2.6 million decrease in Corrosion Protection primarily due to the lower revenues noted above.

 

Gross profit margin in the second quarter of 2020 was 21.9% compared to 21.2% in the second quarter of 2019. The increase was primarily due to Corrosion Protection, which had a 390 basis point increase in gross profit margin primarily from efficiencies and cost-cutting measures taken by our U.S. cathodic protection operations in response to the lower revenue environment and restructuring actions taken in the first quarter of 2020. Additionally, Infrastructure Solutions improved 100 basis points due to productivity improvements in North American CIPP contracting activity and improved margins in our international CIPP operations as we exit or divest non-core operations. Offsetting these increases was Energy Services, which declined 660 basis points primarily due to: (i) temporary three- to six-month price concessions granted to help refinery customers as a result of reduced demand due to COVID-19; and (ii) lower labor hours resulting in an unfavorable fixed cost absorption.

 

Gross profit decreased $12.3 million, or 10.6%, but gross profit margin remained consistent at 19.4% in the first six months of 2020 compared to the first six months of 2019. During the first six-months of 2020 and 2019, we recorded $0.2 million and $0.5 million of restructuring charges, respectively, and we recorded a $4.4 million charge for estimated project warranty costs in Infrastructure Solutions during the first six months of 2019. The decrease in gross profit and gross profit margin was due to: (i) a $7.3 million decrease in Energy Services primarily from decreased revenues and associated gross profits from maintenance service and construction activities; and (ii) a $6.5 million decrease in Corrosion Protection driven by the lower revenues noted above and reduced margins related to our coating services operation as larger, high margin projects in the Middle East were completed in the prior year and newer projects were delayed due to the impacts of COVID-19, partially offset by an increase in gross profit from our North American and Middle East industrial linings operations. Partially offsetting these decreases was a $1.6 million increase in Infrastructure Solutions primarily due to improved productivity related to CIPP contracting installation services activity in our North American operation and the project warranty charge in the first six months of 2019 noted above, partially offset by lower revenues from international CIPP operations noted above.

 

Operating Expenses

 

Operating expenses decreased $9.3 million, or 18.1%, in the second quarter of 2020 compared to the second quarter of 2019. As part of our restructuring efforts, we recognized charges of $3.0 million and $2.2 million in the second quarters of 2020 and 2019, respectively. The decrease in operating expenses was due to: (i) a $4.7 million decrease in Infrastructure Solutions primarily due to divesting certain international CIPP contracting installation operations, adopted cost savings initiatives such as salary deferrals and reduced employer retirement plan contributions, and lower restructuring charges; and (ii) decreases of $2.0 million, $0.5 million and $2.0 million in Corrosion Protection, Energy Services and Corporate, respectively, primarily due to lower activity across the business and achieved cost savings resulting from actions such as salary deferrals and reduced employer retirement plan contributions.

 

Operating expenses as a percentage of revenues were 17.1% in the second quarter of 2020 compared to 16.1% in the second quarter of 2019.

 

Operating expenses decreased $10.8 million, or 10.9%, in the first six months of 2020 compared to the first six months of 2019. As part of our restructuring efforts, we recognized charges of $4.3 million and $3.7 million in the first six months of 2020 and 2019, respectively. The decrease in operating expenses was mainly due to the same factors impacting the changes in operating expenses in the second quarter of 2020 compared to the second quarter of 2019. Partially offsetting this decrease was $0.4 million in earnout consideration reversed in the first six months of 2019.

 

Operating expenses as a percentage of revenues in the first six months of 2020 and 2019 was consistent at 16.6%.

 

Consolidated Net Income (Loss)

 

Consolidated net income was $3.9 million in the second quarter of 2020 compared to a loss of $8.4 million in the second quarter of 2019.

 

Included in consolidated net income (loss) were the following pre-tax items: (i) restructuring charges of $4.8 million and $6.5 million in the second quarters of 2020 and 2019, respectively, related to employee severance, retention, extension of benefits, employee assistance programs, wind-down costs, reserves for potentially uncollectible receivables, release of cumulative currency translation adjustments and other related restructuring costs; (ii) goodwill impairment charges of $1.3 million in the second quarter of 2020; (iii) definite-lived intangible asset impairment charges of $1.0 million in the second quarter of 2020; (iv) $0.7 million and $0.8 million of acquisition and divestiture expenses in the second quarters of 2020 and 2019, respectively; (v) impairment reversals of $0.7 million and impairment charges of $11.9 million related to assets held for sale in the second quarters of 2020 and 2019, respectively; (vi) credit facility amendment fees of $0.7 million in the second quarter of 2020; (vii) $0.2 million gain on the divestiture of Insituform Spain in the second quarter of 2020; and (viii) a $2.1 million charge in the second quarter of 2019 for foreign withholding taxes on the repatriation of foreign earnings.

 

The increase in consolidated net income in the second quarter of 2020 compared to the second quarter of 2019 was primarily due to fewer restructuring charges and the above-referenced impairment charges related to assets held for sale recorded in the prior year period. Partially offsetting these increases was lower operating income in Energy Services from a decline in maintenance service activities and construction activities as a result of COVID-19 and its impact on the oil refining markets, particularly on the West Coast of the United States. Consolidated net income in the second quarter of 2020, as compared to the second quarter of 2019, was positively impacted by a gain on the divestiture of Insituform Spain in the first six months of 2020, noted above, and a lower effective tax rate due to a charge in the second quarter of 2019 for foreign withholding taxes on the repatriation of foreign earnings, as noted above. Consolidated net income was negatively impacted by higher interest expense and the credit facility amendment fees, noted above, and higher foreign currency transaction losses.

 

34

 

Consolidated net income was $2.2 million in the first six months of 2020 compared to a loss of $12.4 million in the first six months of 2019.

 

Included in consolidated net income (loss) were the following pre-tax items; (i) restructuring charges of $8.5 million and $9.4 million in the first six months of 2020 and 2020, respectively, related to employee severance, retention, extension of benefits, employee assistance programs, wind-down costs, reserves for potentially uncollectible receivables, release of cumulative currency translation adjustments and other related restructuring costs; (ii) goodwill impairment charges of $1.3 million in the first six months of 2020; (iii) definite-lived intangible asset impairment charges of $1.0 million in the first six months of 2020; (iv) acquisition and divestiture expenses of $1.5 million and $0.9 million in the first six months of 2020 and 2019, respectively; (v) warranty reserve charges of $4.4 million related to a CIPP wastewater project in our North American operation of Infrastructure Solutions in the first six months of 2019; (vi) impairment reversals of $0.7 million and impairment charges of $11.9 million related to assets held for sale in the first six months of 2020 and 2019, respectively; (vii) credit facility amendment fees of $0.7 million in the first six months of 2020; (viii) $0.7 million gain on the divestitures of Insituform Australia and Insituform Spain in the first six months of 2020; and (ix) a $2.1 million charge in the first six months of 2019 for foreign withholding taxes on the repatriation of foreign earnings.

 

The increase in consolidated net income in the first six months of 2020 compared to the first six months of 2019 was primarily due to the above-referenced warranty reserve and impairment charges related to assets held for sale recorded in the prior year period. Additionally, operating income from Infrastructure Solutions increased due to improved profitability from our North American CIPP operation and loss avoidance from certain divestitures of international CIPP operations. Partially offsetting these increases was lower operating income in Energy Services, as noted above, and a decrease in Corrosion Protection due to lower revenues and related gross profit resulting from COVID-19, and lower revenues and related gross profit generated from our coating service operation in the Middle East, which completed larger, higher margin projects in the prior year. Consolidated net income was also positively impacted by foreign currency transaction gains in the first six months of 2020 compared to foreign currency transaction losses in the first six months of 2019, gains on the divestitures of Insituform Australia and Insituform Spain in the first six months of 2020, noted above, and a charge in the first six months of 2019 for foreign withholding taxes on the repatriation of foreign earnings, as noted above. Consolidated net income in the first six months of 2020 compared to the first six months of 2019 was negatively impacted by higher non-controlling interest income.

 

Contract Backlog

 

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. We assume that these signed contracts are funded. For government or municipal contracts, our customers generally obtain funding through local budgets or pre-approved bond financing. We have not undertaken a process to verify funding status of these contracts and, therefore, cannot reasonably estimate what portion, if any, of our contracts in backlog have not been funded. However, we have little history of signed contracts being canceled due to the lack of funding. Contract backlog excludes any term contract amounts for which there are not specific and determinable work releases or values beyond a renewal date in the forward 12-month period. Projects whereby we have been advised that we are the low bidder, but have not formally been awarded the contract, are not included. Although backlog represents only those contracts and Master Service Agreements (“MSAs”) that are considered to be firm, there can be no assurance that cancellation or scope adjustments will not occur with respect to such contracts.

 

The following table sets forth our consolidated backlog by segment (in millions):

 

   

June 30, 2020

   

March 31, 2020

   

December 31, 2019

   

June 30, 2019

 

Infrastructure Solutions (1)

  $ 312.4     $ 297.3     $ 303.2     $ 310.0  

Corrosion Protection (2)

    140.3       135.6       127.0       141.4  

Energy Services

    220.3       215.2       228.0       218.5  

Total backlog (3)

  $ 673.0     $ 648.1     $ 658.2     $ 669.9  

 


 

(1) 

Included backlog from exited or to-be exited operations of $3.8 million, $2.8 million, $11.1 million and $19.0 million at June 30, 2020, March 31, 2020, December 31, 2019 and June 30, 2019, respectively.

 

 

(2) 

Included backlog from exited or to-be exited operations of $0.6 million, $0.6 million, $2.4 million and $7.1 million at June 30, 2020, March 31, 2020, December 31, 2019 and June 30, 2019, respectively.

 

 

(3) 

Total backlog for June 30, 2020, March 31, 2020, December 31, 2019 and June 30, 2019 included backlog from exited or to-be exited operations of $4.4 million, $3.4 million, $13.5 million, and $26.1 million, respectively.

 

Included within backlog for Energy Services are amounts that represent expected revenues to be realized under long-term MSAs and other signed contracts. If the remaining term of these arrangements exceeds 12 months, the unrecognized revenues attributable to such arrangements included in backlog are limited to only the next 12 months of expected revenues. Although backlog represents only those contracts and MSAs that are considered to be firm, there can be no assurance that cancellation or scope adjustments will not occur with respect to such contracts.

 

Within our Infrastructure Solutions and Corrosion Protection segments, certain contracts are performed through our variable interest entities, in which we own a controlling portion of the entity. As of June 30, 2020, 17.3% of our Corrosion Protection backlog related to these variable interest entities. The backlog related to variable interest entities in Infrastructure Solutions was de minimus. A substantial majority of our contracts in these two segments are fixed price contracts with individual private businesses and municipal and federal government entities across the world.  Energy Services generally enters into cost reimbursable contracts that are based on costs incurred at agreed upon contractual rates.

 

Consolidated customer orders, net of cancellations (“New orders”), decreased $73.4 million, or 21.4%, to $269.1 million in the second quarter of 2020 compared to $342.5 million in the second quarter of 2019. New orders decreased $55.6 million, or 9.1%, to $552.1 million in the first six months of 2020 compared to $607.6 million in the first six months of 2019. Total orders in the second quarters of 2020 and 2019 included orders from exited or to-be exited businesses of $5.9 million and $17.6 million, respectively. Total orders in the first six months of 2020 and 2019 included orders from exited or to-be exited businesses of $12.0 million and $28.7 million, respectively.

 

35

 

Infrastructure Solutions Segment

 

Key financial data for Infrastructure Solutions was as follows:

 

(dollars in thousands)

 

Quarter Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

    $    

%

 

Revenues

  $ 137,392     $ 155,439     $ (18,047 )     (11.6 )%

Gross profit

    35,667       38,871       (3,204 )     (8.2 )%

Gross profit margin

    26.0 %     25.0 %     N/A    

100bp

 

Operating expenses

    15,167       19,869       (4,702 )     (23.7 )%
Impairment (gain) of assets held for sale     (658 )     8,996       (9,654 )     N/M  

Acquisition and divestiture expenses

          427       (427 )     (100.0 )%
Restructuring and related charges     154       459       (305 )     (66.4 )%

Operating income

    21,004       9,120       11,884       130.3 %

Operating margin

    15.3 %     5.9 %     N/A    

940bp

 

 

(dollars in thousands)

 

Six Months Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

    $    

%

 

Revenues

  $ 267,636     $ 286,982     $ (19,346 )     (6.7 )%

Gross profit

    67,037       65,457       1,580       2.4 %

Gross profit margin

    25.0 %     22.8 %     N/A    

220bp

 

Operating expenses

    32,819       39,908       (7,089 )     (17.8 )%

Impairment (gain) of assets held for sale

    (658 )     8,996       (9,654 )  

N/M

 

Acquisition and divestiture expenses

    163       501       (338 )     (67.5 )%

Restructuring and related charges

    154       1,217       (1,063 )     (87.3 )%

Operating income

    34,559       14,835       19,724       133.0 %

Operating margin

    12.9 %     5.2 %     N/A    

770bp

 

 


“N/A” represents not applicable.

“N/M” represents not meaningful.

 

Revenues

 

Revenues decreased $18.0 million, or 11.6%, in the second quarter of 2020 compared to the second quarter of 2019. The decrease in revenues was primarily due to: (i) decreased international revenues from our CIPP contracting installation services operations as we exit or divest non-core operations as part of our restructuring efforts; (ii) decreased FRP project activity in Asia where certain of our operations were either partially or fully closed due to government stay-at-home orders in response to COVID-19; and (iii) decreased FRP orders in North America as a result of reduced commercial construction activity. These decreases were partially offset by increased North American activity for CIPP contracting installation services project activity.

 

Revenues decreased $19.3 million, or 6.7%, in the first six months of 2020 compared to the first six months of 2019. The decrease in revenues was primarily due to the same factors impacting the changes in revenues in the second quarter of 2020 compared to the second quarter of 2019.

 

36

 

Gross Profit and Gross Profit Margin

 

Gross profit decreased $3.2 million, or 8.2%, in the second quarter of 2020 compared to the second quarter of 2019. The decrease in gross profit was primarily due to the decreased revenue noted above. Gross profit margin improved 100 basis points to 26.0% in the second quarter of 2020 compared to 25.0% in the second quarter of 2019. This increase was primarily due to greater execution efficiencies from CIPP contracting installation services activity in our North American operation and improved margins in our international CIPP operations as we exit or divest non-core operations.

 

Gross profit increased $1.6 million, or 2.4%, and gross profit margin improved 220 basis points in the first six months of 2020 compared to the first six months of 2019. As part of our restructuring efforts, we recognized charges of $0.1 million and expense reversals of $0.1 million in the first six months of 2020 and 2019, respectively. Additionally, we recorded a $4.4 million charge for estimated project warranty costs related to one CIPP contracting installation project in our North American operation during the first half of 2019. The increases in gross profit and gross profit margin were primarily due to improved productivity related to CIPP contracting installation services activity in our North American operation and the project warranty charge in the first six months of 2019 noted above, partially offset by the decreased revenue noted above.

 

Operating Expenses

 

Operating expenses decreased $4.7 million, or 23.7%, in the second quarter of 2020 compared to the second quarter of 2019. As part of our restructuring efforts, we recognized expense reversals of $0.1 million and charges of $1.0 million in the second quarters of 2020 and 2019, respectively. The decrease in operating expenses was primarily due to: (i) exiting CIPP contracting installation services in certain international locations; (ii) lower restructuring charges noted above; (iii) savings of $1.0 million in the second quarter of 2020 from salary deferrals, suspension of employer retirement plan contributions and other cost savings initiatives; and (iv) lower activity across the segment in response to lower revenues.

 

Operating expenses as a percentage of revenues were 11.0% in the second quarter of 2020 compared to 12.8% in the second quarter of 2019.

 

Operating expenses decreased $7.1 million, or 17.8%, in the first six months of 2020 compared to the first six months of 2019. As part of our restructuring efforts, we recognized charges of $0.3 million and $2.3 million in the first six months of 2020 and 2019, respectively. The decrease in operating expenses was primarily due to the same factors impacting the changes in operating expenses in the second quarter of 2020 compared to the second quarter of 2019.

 

Operating expenses as a percentage of revenues were 12.3% for the first six months of 2020 compared to 13.9% in the first six months of 2019.

 

Operating Income and Operating Margin

 

Operating income increased $11.9 million, or 130.3%, to $21.0 million in the second quarter of 2020 compared to $9.1 million in the second quarter of 2019. Operating margin improved to 15.3% in the second quarter of 2020 compared to 5.9% in the second quarter of 2019.

 

Included in operating income were the following items: (i) restructuring charges of $0.1 million and $1.4 million in the second quarters of 2020 and 2019, respectively, related to employee severance, retention, extension of benefits, employee assistance programs, wind-down and other related restructuring costs; (ii) acquisition and divestiture related expenses of $0.4 million in the second quarter of 2019; and (iii) impairment reversals of $0.7 million and impairment charges of $9.0 million related to assets held for sale in the second quarters of 2020 and 2019, respectively.

 

Operating income increased primarily due to: (i) impairment charges related to assets held for sale recorded in the second quarter of 2019; (ii) lower restructuring charges in the second quarter of 2020 compared to the second quarter of 2019; (iii) improved profitability from our North American CIPP operation due to increased revenues and crew productivity improvement; (iv) loss avoidance from certain divestitures of international CIPP operations; and (v) lower operating expenses in connection with salary deferrals, reduced employer retirement plan contributions and other actions. These increases were partially offset by decreased profitability from lower FRP project activity in our North American and Asian operations due to government stay-at-home orders and reduced commercial construction activity.

 

Operating income increased $19.7 million, or 133.0%, to $34.6 million in the first six months of 2020 compared to $14.8 million in the first six months of 2019. Operating margin increased 770 basis points to 12.9% in the first six months of 2020 compared to 5.2% in the first six months of 2019.

 

Included in operating income were the following items: (i) restructuring charges of $0.5 million and $3.4 million in the first six months of 2020 and 2019, respectively; (ii) acquisition and divestiture related expenses of $0.2 million and $0.5 million in the first six months of 2020 and 2019, respectively; (iii) a $4.4 million charge in the first six months of 2019 for estimated project warranty costs related to one CIPP contracting installation project in our North American operation; and (iv) impairment reversals of $0.7 million and impairment charges of $9.0 million related to assets held for sale in the first six months of 2020 and 2019, respectively.

 

The increase in operating income was primarily due to the same factors impacting the improvement in operating income in the second quarter of 2020 compared to the second quarter of 2019.

 

37

 

Corrosion Protection Segment

 

Key financial data for Corrosion Protection was as follows:

 

(dollars in thousands)

 

Quarter Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

   

$

   

%

 

Revenues

  $ 55,491     $ 77,597     $ (22,106 )     (28.5 )%

Gross profit

    14,111       16,692       (2,581 )     (15.5 )%

Gross profit margin

    25.4 %     21.5 %     N/A    

390bp

 

Operating expenses

    13,028       15,077       (2,049 )     (13.6 )%
Impairment of assets held for sale           2,950       (2,950 )     (100.0 )%
Acquisition and divestiture expenses           19       (19 )     (100.0 )%

Restructuring and related charges

    384       2,509       (2,125 )     (84.7 )%

Operating income (loss)

    699       (3,863 )     4,562       (118.1 )%

Operating margin

    1.3 %     (5.0 )%     N/A    

630bp

 

 

(dollars in thousands)

 

Six Months Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

    $    

%

 

Revenues

  $ 121,559     $ 142,095     $ (20,536 )     (14.5 )%

Gross profit

    23,028       29,565       (6,537 )     (22.1 )%

Gross profit margin

    18.9 %     20.8 %     N/A    

(190)bp

 

Operating expenses

    27,475       29,484       (2,009 )     (6.8 )%
Impairment of assets held for sale           2,950       (2,950 )     (100.0 )%

Acquisition and divestiture expenses

          58       (58 )     (100.0 )%

Restructuring and related charges

    1,301       2,696       (1,395 )     (51.7 )%

Operating loss

    (5,748 )     (5,623 )     (125 )     2.2 %

Operating margin

    (4.7 )%     (4.0 )%     N/A    

(70)bp

 

 


“N/A” represents not applicable.

“N/M” represents not meaningful.

 

Revenues

 

Revenues decreased $22.1 million, or 28.5%, in the second quarter of 2020 compared to the second quarter of 2019. The decrease was primarily due to decreased project activities across the segment due to lower customer demand as a result of COVID-19 and reduced spending in the wake of reduced oil prices.

 

Revenues decreased $20.5 million, or 14.5%, in the first six months of 2020 compared to the first six months of 2019. The decrease was primarily due to the impact of COVID-19 as discussed above and decreased revenue related to our coating services operation as larger high margin projects in the Middle East were completed in the prior year and newer projects were delayed due to the impacts of COVID-19. Partially offsetting the decreases was increased project activity from our North American and Middle East industrial linings operations.

 

38

 

Gross Profit and Gross Profit Margin

 

Gross profit decreased $2.6 million, or 15.5%, in the second quarter of 2020 compared to the second quarter of 2019. As part of our restructuring efforts, we recognized expense reversals of $0.1 million and charges of $0.5 million in the second quarters of 2020 and 2019, respectively. Gross profit decreased primarily due to the lower revenues noted above.

 

Gross profit margin improved 390 basis points to 25.4% in the second quarter of 2020 compared to 21.5% in the second quarter of 2019. This increase was primarily due to: (i) efficiencies and cost-cutting measures taken by our U.S. cathodic protection operations in response to the lower revenue environment and restructuring actions taken in the first quarter of 2020; and (ii) $1.5 million in government wage subsidies, primarily benefiting our Canadian cathodic protection and industrial linings operations. Partially offsetting these improvements was a 440 basis point decline in gross profit margin from our coating services operation due to COVID-19-related project delays in the Middle East and higher absorption costs associated with lower revenues in North America.

 

Gross profit decreased $6.5 million, or 22.1%, and gross profit margin declined 190 basis points in the first six months of 2020 compared to the first six months of 2019. As part of our restructuring efforts, we recognized charges of $0.2 million and $0.6 million in the first six months of 2020 and 2019, respectively. Gross profit decreased primarily due to the lower revenues noted above, partially offset by an increase in gross profit from our North American and Middle East industrial linings operations. Gross profit margins decreased in the first six months of 2020 compared to the first six months of 2019 primarily due to lower margins generated from our coating services operation, most notably in the Middle East, as larger, higher margin projects were completed in the prior year and newer projects were delayed due to COVID-19. Partially offsetting this decrease were improvements noted in our U.S. cathodic protection operations and the impact of government subsidies noted in the second quarter discussion above.

 

Operating Expenses

 

Operating expenses decreased $2.0 million, or 13.6%, in the second quarter of 2020 compared to the second quarter of 2019. As part of our restructuring efforts, we recognized charges of $1.1 million and $0.3 million in the second quarters of 2020 and 2019, respectively. Operating expenses decreased primarily due to: (i) savings of $0.7 million in the second quarter of 2020 from salary deferrals, suspension of employer retirement plan contributions and other cost savings initiatives; (ii) government wage subsidies, primarily in Canada; and (iii) cost savings achieved in connection with restructuring actions in our cathodic protection operations in North America. Partially offsetting these decreases was an increase in restructuring charges in the second quarter of 2020 compared to the second quarter of 2019, noted above.

 

Operating expenses as a percentage of revenues were 23.5% in the second quarter of 2020 compared to 19.4% in the second quarter of 2019. The increase, as a percentage of revenues, was primarily driven by the lower revenues resulting from COVID-19 and reduced spending in the wake of reduced oil prices, as noted above.

 

Operating expenses decreased $2.0 million, or 6.8%, in the first six months of 2020 compared to the first six months of 2019. As part of our restructuring efforts, we recognized charges of $1.6 million and $0.3 million in the first six months of 2020 and 2019, respectively. Operating expenses decreased mainly due to the same factors impacting the changes in operating expenses in the second quarter of 2020 compared to the second quarter of 2019. Operating expenses as a percentage of revenues were 22.6% in the first six months of 2020 compared to 20.7% in the first six months of 2019.

 

Operating Income (Loss) and Operating Margin

 

Operating income increased $4.6 million to $0.7 million in the second quarter of 2020 compared to a loss of $3.9 million in the second quarter of 2019. Operating margin improved to 1.3% in the second quarter of 2020 compared to (5.0)% in the second quarter of 2019. Included in operating income (loss) were: (i) restructuring charges of $1.3 million and $3.3 million in the second quarters of 2020 and 2019, respectively, related to employee severance, retention, extension of benefits, employee assistance programs, wind-down and other related restructuring costs; and (ii) impairment charges of $2.9 million related to assets held for sale in the second quarter of 2019.

 

The increase in operating income was primarily due to: (i) impairment charges related to assets held for sale recorded in the second quarter of 2019; (ii) lower restructuring charges in the second quarter of 2020 compared to the second quarter of 2019; (iii) efficiencies and cost-cutting measures taken by our U.S. cathodic protection operations in response to the lower revenue environment and restructuring actions taken in the first quarter of 2020; (iv) lower operating expenses in connection with salary deferrals, reduced employer retirement plan contributions and other actions; and (v) government wage subsidies, primarily benefiting our Canadian cathodic protection and industrial linings operations. These increases were partially offset by lower revenues and related gross profit resulting from COVID-19 and reduced oil prices.

 

Operating loss increased $0.1 million to a loss of $5.7 million in the first six months of 2020 compared to a loss of $5.6 million in the first six months of 2019. Operating margin declined to (4.7)% in the first six months of 2020 compared to (4.0)% in the first six months of 2019. Included in operating loss were (i) restructuring charges of $3.1 million and $3.5 million in the first six months of 2020 and 2019, respectively; (ii) acquisition and divestiture related expenses of $0.1 million in the first six months of 2019; and (iii) impairment charges of $2.9 million in the first six months of 2019 related to assets held for sale.

 

The decreases in operating income and operating margin were primarily the result of: (i) lower revenues and related gross profit resulting from COVID-19 and reduced oil prices; and (ii) lower revenues and related gross profit generated from our coating service operation in the Middle East, as larger, higher margin projects were completed in the prior year and newer projects were delayed due to COVID-19. These decreases were partially offset by (i) impairment charges related to assets held for sale recorded in the first six months of 2019; (ii) lower restructuring charges in the first six months of 2020 compared to the first six months of 2019; (iii) increased revenues and improved operational performance from the U.S. and Middle East industrial linings operations; (iv) improvements noted in our U.S. cathodic protection operations; (v) lower operating expenses in connection with salary deferrals, reduced employer retirement plan contributions and other actions; and (vi) the impact of government wage subsidies noted in the second quarter discussion above.

 

39

 

Energy Services Segment

 

Key financial data for Energy Services was as follows:

 

(dollars in thousands)

 

Quarter Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

   

$

   

%

 

Revenues

  $ 52,134     $ 85,704     $ (33,570 )     (39.2 )%

Gross profit

    3,797       11,874       (8,077 )     (68.0 )%

Gross profit margin

    7.3 %     13.9 %     N/A    

(660)bp

 

Operating expenses

    7,226       7,761       (535 )     (6.9 )%
Goodwill impairment     1,258             1,258       N/M  
Definite-lived intangible asset impairment     957             957       N/M  
Restructuring and related charges     69       6       63       N/M  

Operating income (loss)

    (5,713 )     4,107       (9,820 )     (239.1 )%

Operating margin

    (11.0 )%     4.8 %     N/A    

(1580)bp

 

 

(dollars in thousands)

 

Six Months Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

    $    

%

 

Revenues

  $ 143,197     $ 166,567     $ (23,370 )     (14.0 )%

Gross profit

    13,394       20,710       (7,316 )     (35.3 )%

Gross profit margin

    9.4 %     12.4 %     N/A    

(300)bp

 

Operating expenses

    14,551       15,448       (897 )     (5.8 )%
Goodwill impairment     1,258             1,258     N/M  

Definite-lived intangible asset impairment

    957             957    

N/M

 
Restructuring and related charges     165       40       125       312.5 %

Operating income (loss)

    (3,537 )     5,222       (8,759 )     (167.7 )%

Operating margin

    (2.5 )%     3.1 %     N/A    

(560)bp

 

 


“N/A” represents not applicable.

“N/M” represents not meaningful.

 

Revenues

 

Revenues decreased $33.6 million, or 39.2%, in the second quarter of 2020 compared to the second quarter of 2019. The decrease was due to a decline in maintenance service and construction activities as a result of COVID-19 and its impact on the oil refining markets, particularly on the West Coast of the United States.

 

Revenues decreased $23.4 million, or 14.0%, in the first six months of 2020 compared to the first six months of 2019. The decrease was due primarily to decline in maintenance service and construction activities, as noted above, partially offset by higher turnaround service activities in the first six months of 2020.

 

40

 

Gross Profit and Gross Profit Margin

 

Gross profit decreased $8.1 million, or 68.0%, in the second quarter of 2020 compared to the second quarter of 2019 and gross profit margin declined 660 basis points in the second quarter of 2020 compared to the second quarter of 2019. The decrease in gross profit was due to decreased revenues and associated gross profits from maintenance service and construction activities noted above. The decline in gross profit margin was primarily due to: (i) temporary three- to six-month price concessions granted to help refinery customers as a result of reduced demand due to COVID-19; and (ii) lower labor hours resulting in an unfavorable fixed cost absorption.

 

Gross profit decreased $7.3 million, or 35.3%, and gross profit margin declined 300 basis points in the first six months of 2020 compared to the first six months of 2019. The decreases in gross profit and gross profit margin were primarily due to the same factors impacting the changes in gross profit and gross profit margin in the second quarter of 2020 compared to the second quarter of 2019 .

 

Operating Expenses

 

Operating expenses in the second quarter of 2020 declined $0.5 million to $7.2 million compared to $7.8 million in the second quarter of 2019. As part of our restructuring efforts, we recognized charges of $1.2 million in the second quarter of 2020. Operating expenses decreased primarily due to: (i) savings of $0.7 million in the second quarter of 2020 from salary deferrals, suspension of employer retirement plan contributions and other cost savings initiatives; and (ii) lower activity across the segment in response to lower revenues. These decreases were partially offset by the restructuring charges recorded in the second quarter of 2020, noted above. Operating expenses as a percentage of revenues were 13.9% in the second quarter of 2020 compared to 9.1% in the second quarter of 2019. The increase, as a percentage of revenues, was primarily driven by the lower revenues resulting from COVID-19 and its impact on the oil refining markets, as noted above.

 

Operating expenses in the first six months of 2020 decreased $0.9 million, or 5.8%, compared to the first six months of 2019. As part of our restructuring efforts, we recognized charges of $1.2 million in the first six months of 2020. The decrease in operating expenses was primarily due to the same factors impacting the changes in operating expenses in the second quarter of 2020 compared to the second quarter of 2019. Operating expenses as a percentage of revenues were 10.2% in the first six months of 2020 compared to 9.3% in the first six months of 2019.

 

Operating Income (Loss) and Operating Margin

 

Operating income (loss) decreased $9.8 million to a loss of $5.7 million in the second quarter of 2020 compared to income of $4.1 million in the second quarter of 2019. Included in operating income (loss) were: (i) restructuring charges of $1.2 million in the second quarter of 2020 related to employee severance, retention, extension of benefits, employee assistance programs, reserves for potentially uncollectible receivables and other related restructuring costs; (ii) goodwill impairment charges of $1.3 million in the second quarter of 2020; and (iii) definite-lived intangible asset impairment charges of $1.0 million in the second quarter of 2020. Operating income (loss) decreased primarily due to: (i) restructuring and impairment charges recorded in the second quarter of 2020, noted above; and (ii) a decline in maintenance service activities and construction activities as a result of COVID-19 and its impact on the oil refining markets, particularly on the West Coast of the United States. These decreases were partially offset by lower operating expenses in the second quarter of 2020 in connection with salary deferrals, reduced employer retirement plan contributions and other actions.

 

Operating income (loss) decreased $8.8 million to a loss of $3.5 million in the first six months of 2020 compared to income of $5.2 million in the first six months of 2019. Included in operating income (loss) were: (i) restructuring charges of $1.3 million in the first six months of 2020 related to employee severance, retention, extension of benefits, employee assistance programs, reserves for potentially uncollectible receivables and other related restructuring costs; (ii) goodwill impairment charges of $1.3 million in the first six months of 2020; and (iii) definite-lived intangible asset impairment charges of $1.0 million in the first six months of 2020. Operating income (loss) decreased in the first six months of 2020 compared to the same period in the prior year primarily due to restructuring and impairment charges and the impact of COVID-19 as discussed above, partially offset by increased turnaround activities noted in the first six months of 2020 and lower operating expenses in connection with salary deferrals, reduced employer retirement plan contributions and other actions.

 

41

 

Corporate

 

Key financial data for Corporate was as follows:

 

(dollars in thousands)

 

Quarter Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

   

$

   

%

 

Revenues

  $     $     $       %

Gross profit

                       

Gross profit margin

    N/A       N/A       N/A       N/A  

Operating expenses

    6,549       8,547       (1,998 )     (23.4 )%

Acquisition and divestiture expenses

    657       358       299       83.5 %

Restructuring and related charges

    57             57    

N/M

 

Operating loss

    (7,263 )     (8,905 )     1,642       (18.4 )%

Operating margin

    N/A       N/A       N/A       N/A  

 

(dollars in thousands)

 

Six Months Ended June 30,

   

Increase (Decrease)

 
   

2020

   

2019

    $    

%

 

Revenues

  $     $     $       %

Gross profit

                       

Gross profit margin

    N/A       N/A       N/A       N/A  

Operating expenses

    13,473       14,284       (811 )     (5.7 )%
Acquisition and divestiture expenses     1,346       358       988       276.0 %

Restructuring and related charges

    332       107       225       210.3 %

Operating loss

    (15,151 )     (14,749 )     (402 )     2.7 %

Operating margin

    N/A       N/A       N/A       N/A  

 


“N/A” represents not applicable.

“N/M” represents not meaningful.

 

Operating Expenses

 

Operating expenses decreased $2.0 million, or 23.4%, in the second quarter of 2020 compared to the second quarter of 2019. As part of our restructuring efforts, we recognized charges of $0.8 million and $0.9 million in the second quarters of 2020 and 2019, respectively. Operating expenses decreased primarily due to: (i) savings of $1.0 million in the second quarter of 2020 from salary deferrals, suspension of employer retirement plan contributions and other cost savings initiatives; and (ii) lower activity across the business in response to lower revenues. Corporate operating expenses as a percentage of consolidated revenues were 2.7% in the second quarters of 2020 and 2019.

 

Operating expenses in the first six months of 2020 decreased $0.8 million, or 5.7% compared to the first six months of 2019. As part of our restructuring efforts, we recognized charges of $1.2 million and $1.1 million in the first six months of 2020 and 2019, respectively.  Operating expenses decreased mainly due to the same factors impacting the changes in operating expenses in the second quarter of 2020 compared to the second quarter of 2019. Partially offsetting this decrease was $0.4 million in earnout consideration reversed in the first six months of 2019. Corporate operating expenses as a percentage of consolidated revenues were 2.5% in the first six months of 2020 compared to 2.4% in the first six months of 2019.

 

42

 

Other Income (Expense)

 

Interest Income and Expense

 

Interest income decreased an immaterial amount in the second quarter of 2020 compared to the prior year quarter primarily due changes in interest rates. Interest expense increased $1.1 million in the second quarter of 2020 compared to the prior year quarter primarily due to: (i) expenses of $0.7 million related to certain arrangement and other fees associated with amending our credit facility in April 2020 as well as the write-off of previously unamortized deferred financing costs; and (ii) higher borrowing costs under our Credit Facility due to an increase in interest rates. Partially offsetting these increases were reduced loan principal balances during the second quarter of 2020 compared to the second quarter of 2019.

 

Interest income decreased $0.1 million in the first six months of 2020 compared to the prior year period primarily due to changes in interest rates. Interest expense increased $0.7 million in the first six months of 2020 compared to the same period in the prior year primarily due to the same factors impacting the changes in interest expense in the second quarter of 2020 compared to the second quarter of 2019.

 

Other (Income) Expense

 

Other income was $1.0 million and other expense $1.0 million in the quarters ended June 30, 2020 and 2019, respectively. As part of our restructuring efforts, we recognized gains of $0.9 million and charges of $0.9 million in the second quarters of 2020 and 2019, respectively, related to the dissolution of certain restructured entities including the release of cumulative currency translation adjustments resulting from those disposals. Additionally, we recorded a $0.2 million gain on the divestiture of Insituform Spain in the second quarter of 2020. The remaining amounts primarily consisted of net foreign currency transaction losses of $0.2 million and $0.1 million in the second quarters of 2020 and 2019, respectively.

 

Other income was $1.4 million and other expense was $1.7 million in the six months ended June 30, 2020 and 2019, respectively. As part of our restructuring efforts, we recognized gains of $0.3 million and charges of $1.1 million in the first six months of 2020 and 2019, respectively, related to the dissolution of certain restructured entities including the release of cumulative currency translation adjustments resulting from those disposals. Additionally, we recorded net gains of $0.7 million related to the sale of our our CIPP contracting businesses in Australia and Spain in the first six months of 2020. The remaining amounts primarily consisted of net foreign currency transaction gains of $0.4 million in the first six months of 2020 and net foreign currency transaction losses of $0.6 million in the first six months of 2019.

 

Taxes on Income (Loss)

 

The tax expense on pre-tax income in the second quarter of 2020 was $1.2 million compared to tax expense of $4.3 million on a pre-tax loss in the second quarter of 2019. Our effective tax rate was 23.4% in the quarter ended June 30, 2020 compared to (111.0)% on a pre-tax loss in the quarter ended June 30, 2019. The effective rate for the second quarter of 2020 was negatively impacted by valuation allowances on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized. During the second quarter of 2019, the effective tax rate was negatively impacted by: (i) significant pre-tax charges primarily related to impairments of held for sale assets and currency translation adjustments, which were not deductible for tax purposes; (ii) a $2.1 million charge for foreign withholding taxes on the repatriation of foreign earnings; and (iii) valuation allowances recorded on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized.

 

Tax expense on pre-tax income in the first six months of 2020 was $1.4 million compared to tax expense of $3.5 million on a pre-tax loss in the first six months of 2019. Our effective tax rate was 33.8% in the six months ended June 30, 2020 compared to (40.9)% on a pre-tax loss in the six months ended June 30, 2019. The effective tax rates for the six months ended June 30, 2020 and 2019 were impacted by the same factors impacting the effective tax rates in the second quarters of 2020 and 2019.

 

Non-controlling Interests

 

Income attributable to non-controlling interests was $0.1 million and $0.2 million in the quarters ended June 30, 2020 and 2019, respectively. In the second quarter of 2020, income was primarily driven from our Corrosion Protection joint venture in Oman and our Infrastructure Solutions joint ventures in Asia, partially offset by losses from our Corrosion Protection joint venture in South Africa. In the second quarter of 2019, income was primarily driven from our Corrosion Protection joint venture in Oman and our Infrastructure Solutions joint ventures in Asia, partially offset by losses from our Corrosion Protection joint ventures in South Africa, Mexico and Saudi Arabia.

 

Income attributable to non-controlling interests was $0.5 million and $0.2 million in the first six months of 2020 and 2019, respectively. and due to the same factors impacting non-controlling interests in the second quarters of 2020 and 2019 noted above.

 

43

 

Liquidity and Capital Resources

 

Sources and Uses of Cash

 

Our primary source of cash is operating activities, which include the collection of accounts receivable as well as the ultimate billing and collection of contract assets. At June 30, 2020, we believed our net accounts receivable and our contract assets, as reported on our Consolidated Balance Sheet, were fully collectible and a significant portion of the receivables will be collected within the next twelve months. From time to time, we have net receivables recorded that we believe will be collected but are being disputed by the customer in some manner. Disputes of this nature could meaningfully impact the timing of receivable collection or require us to invoke our contractual or legal rights in a lawsuit or alternative dispute resolution proceeding. If in a future period we believe any of these receivables are no longer collectible, we would increase our allowance for bad debts through a charge to earnings.

 

We also occasionally borrow under our line of credit’s available capacity to fund operating activities, including working capital investments. On April 29, 2020, we amended our credit facility to include more flexible financial covenants, which based on current projections, provide the Company with additional expected borrowing capacity over the next twelve months of more than $100 million.

 

We expect the principal operational use of funds for the foreseeable future will be for working capital, debt service and, to a lesser extent for the remainder of 2020, capital expenditures.

 

During the first six months of 2020, capital expenditures were primarily used to support our Infrastructure Solutions North American CIPP business and expand our Corrosion Protection businesses in the Middle East. For 2020, we anticipate that we will spend between $15 million and $20 million for capital expenditures, which is below prior year levels, and in response to cash preservation measures we have taken in the wake of COVID-19.

 

Repurchases of Aegion’s common stock, including both open market repurchases and those in connection with equity compensation programs for employees, totaled 264,228 shares, or $5.1 million, in the first six months of 2020. Shares repurchased in the open market are done so in accordance with applicable regulatory requirements and subject to cash availability, market conditions and other factors. We are not obligated to acquire any particular amount of common stock and, subject to applicable regulatory requirements, may commence, suspend or discontinue purchases at any time without notice or authorization. In March 2020, our board of directors suspended the applicable 10b5-1 trading plans for the current open market repurchase program to increase liquidity and improve financial flexibility in light of COVID-19. Upon reinstatement of the open market share repurchase plan, our board of directors has authorized the open market repurchase of up to 2,327,161 shares; however the authorization is limited on an annual basis by our amended senior secured credit facility. See Notes 9 and 14 to the consolidated financial statements contained in this Report for additional information regarding our stock repurchase plans.

 

As part of our Restructuring, we utilized cash of $9.7 million during the first six months of 2020 and $46.8 million in cumulative cash payments since 2017 related to employee severance, extension of benefits, employment assistance programs, early lease and contract termination and other restructuring related costs. Cumulatively, we have incurred both cash and non-cash charges of $180.4 million, of which $86.4 million relates to goodwill and long-lived asset impairment charges recorded in 2017 as part of exiting the non-pipe FRP contracting market in North America. We expect to incur additional cash charges related to this program of between $3 million and $5 million. We could also incur additional non-cash charges primarily associated with the release of cumulative currency translation adjustments and losses on the closure or liquidation of international entities.

 

We will continue to evaluate impacts on the business as a result of the COVID-19 pandemic and oil market declines to determine whether additional structural changes are required as a result of evolving long-term demand fundamentals, which could result in additional cash and non-cash restructuring charges. See Note 4 to the consolidated financial statements contained in this Report for additional information and disclosures regarding our Restructuring.

 

44

 

The following table is a condensed schedule of cash flows used in the discussion of liquidity and capital resources (in thousands):

 

   

Six Months Ended June 30,

 
   

2020

   

2019

 

Net cash provided by operating activities

  $ 60,338     $ 14,179  

Net cash used in investing activities

    (6,571 )     (13,557 )

Net cash used in financing activities

    (22,752 )     (31,928 )

Effect of exchange rate changes on cash

    (919 )     226  

Net increase (decrease) in cash, cash equivalents and restricted cash for the period

  $ 30,096     $ (31,080 )

 

Cash Flows from Operating Activities

 

Cash flows from operating activities provided $60.3 million in the first six months of 2020 compared to $14.2 million provided in the first six months of 2019. The increase in operating cash flow from the prior year period was primarily due to improved working capital management as we provided $28.9 million of cash during the first six months of 2020 compared to $9.0 million used in the first six months of 2019. Partially offsetting this positive variance was lower operating income during the first half of 2020 as compared to the first half of 2019, exclusive of significant non-cash charges in both periods. Cash flows during the first six months of 2020 and 2019 were negatively impacted by $9.6 million and $5.9 million, respectively, in cash payments related to our restructuring activities, but positively impacted by $3.9 million of deferred payments in the first six months of 2020 related to the timing of federal estimated tax payments and employer payroll taxes as permitted by the CARES Act.

 

Cash Flows from Investing Activities

 

Cash flows from investing activities used $6.6 million during the first six months of 2020 compared to $13.6 million used during the first six months of 2019. We used $10.6 million in cash for capital expenditures in the first six months of 2020 compared to $14.3 million in the first six months of 2019. In the first six months of 2020 and 2019, $0.8 and $1.0 million, respectively, of non-cash capital expenditures were included in accounts payable and accrued expenses. Capital expenditures in the first six months of 2020 and 2019 were partially offset by $0.6 million and $1.0 million, respectively, in proceeds received from asset disposals. During the first six months of 2020, we received $3.4 million from the divestitures of the CIPP contracting operations in Australia and Spain.

 

Cash Flows from Financing Activities

 

Cash flows from financing activities used $22.8 million during the first six months of 2020 compared to $31.9 million used in the first six months of 2019. During the first six months of 2020 and 2019, we used net cash of $5.1 million and $24.2 million to repurchase 264,228 and 1,427,716 shares, respectively, of our common stock through open market purchases and in connection with our equity compensation programs as discussed in Note 9 to the consolidated financial statements contained in this report. During the first six months of 2020, we had net borrowings of $2.0 million on our line of credit to fund domestic working capital needs. Additionally, during the first six months of 2020, we used cash of $17.5 million to pay down the principal balance of our term loan and used cash of $2.0 million to amend our credit facility, as discussed in Note 8 to the consolidated financial statements contained in this report. During the first six months of 2019, we had net borrowings of $7.0 million on our line of credit and we used cash of $13.1 million to pay down the principal balance of our term loan.

 

45

 

Financial Condition

 

The following table presents our capitalization (in thousands):

 

   

June 30, 2020

   

December 31, 2019

 

Cash and cash equivalents

  $ 95,324     $ 64,874  

Restricted cash

    994       1,348  
Total long-term debt     259,877       276,432  
Total equity     429,618       435,093  
Total capitalization (debt plus equity)     689,495       711,525  
Debt to total capitalization     38 %     39 %

 

Cash and Cash Equivalents

 

At June 30, 2020, our cash balances were located worldwide for working capital and support needs. Given the breadth of our international operations, approximately $19.8 million, or 20.8%, of our cash was denominated in currencies other than the United States dollar as of June 30, 2020. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct business and the cost effectiveness with which those funds can be accessed. The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to regulatory capital requirements; however, those balances are generally available without legal restrictions to fund ordinary business operations. Certain provisions within the Tax Cuts and Jobs Act (the “TCJA”) effectively transition the U.S. to a territorial system and eliminates deferral on U.S. taxation for certain amounts of income that are not taxed at a minimum level. At this time, we do not intend to distribute earnings in a taxable manner, and therefore, intend to limit distributions to: (i) earnings previously taxed in the U.S.; (ii) earnings that would qualify for the 100 percent dividends received deduction provided in the TCJA; or (iii) earnings that would not result in significant foreign taxes. As a result, we did not recognize a deferred tax liability on any remaining undistributed foreign earnings at June 30, 2020.

 

Restricted cash held in escrow primarily relates to funds reserved for legal requirements, deposits made in lieu of retention on specific projects performed for municipalities and state agencies, or advance customer payments and compensating balances for bank undertakings in Europe.

 

Long-Term Debt

 

In October 2015, we entered into an amended and restated $650.0 million senior secured credit facility with a syndicate of banks. In February 2018, December 2018 and April 2020, we amended this facility (the “amended Credit Facility”). At June 30, 2020, the amended Credit Facility consisted of a $175.0 million revolving line of credit and a $245.0 million term loan facility, each with a maturity date in February 2023.

 

Due to the potential impacts of COVID-19 on our business and the uncertainties associated with the duration of the pandemic, we amended our current credit facility on April 29, 2020 to provide additional liquidity and to ensure ongoing debt covenant compliance with the amended ratios. The amended Credit Facility now includes more flexible financial covenants and updated the defined terms to allow for the add-back of certain restructuring and divestiture charges. The amended Credit Facility also places certain limits on our open market share repurchase program and repurchases of common stock in connection with our equity compensation programs for employees.

 

We paid expenses of $2.0 million associated with the amended Credit Facility, $1.5 million related to up-front lending fees and $0.5 million related to third-party arranging fees and expenses, the latter of which was recorded in “Interest expense” in the Consolidated Statement of Operations in the second quarter of 2020. In addition, we had $1.9 million in unamortized loan costs associated with the amended Credit Facility, of which $0.2 million was written off and recorded in “Interest expense” in the Consolidated Statement of Operations in the second quarter of 2020.

 

Our indebtedness at June 30, 2020 consisted of $236.3 million outstanding from the term loan under the amended Credit Facility and $26 million on the line of credit under the amended Credit Facility. Additionally, we had $0.7 million of debt held by our joint ventures (representing funds loaned by our joint venture partners).

 

As of  June 30, 2020, we had $35.0 million in letters of credit issued and outstanding under the amended Credit Facility. Of such amount, $12.2 million was collateral for the benefit of certain of our insurance carriers and $22.8 million was for letters of credit or bank guarantees of performance or payment obligations of foreign subsidiaries.

 

In October 2015, we entered into an interest rate swap agreement for a notional amount of $262.5 million, which is set to expire in October 2020. The notional amount of this swap mirrors the amortization of a $262.5 million portion of our $350.0 million term loan drawn from the original Credit Facility. The swap requires us to make a monthly fixed rate payment of 1.46% calculated on the amortizing $262.5 million notional amount, and provides for us to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $262.5 million notional amount. The receipt of the monthly LIBOR-based payment offsets a variable monthly LIBOR-based interest cost on a corresponding $262.5 million portion of our term loan from the Credit Facility. This interest rate swap is used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and is accounted for as a cash flow hedge.

 

In March 2018, we entered into an interest rate swap forward agreement that begins in October 2020 and expires in February 2023 to coincide with the amortization period of the amended Credit Facility. The swap will require us to make a monthly fixed rate payment of 2.937% calculated on the then amortizing notional amount (scheduled to be $170.6 million in October 2020), and provides for us to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $170.6 million notional amount. The receipt of the monthly LIBOR-based payment will offset the variable monthly LIBOR-based interest cost on a corresponding $170.6 million portion of our term loan from the amended Credit Facility. This interest rate swap will be used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and accounted for as a cash flow hedge.

 

The amended Credit Facility is subject to certain financial covenants including a consolidated financial leverage ratio and consolidated fixed charge coverage ratio. We were in compliance with all covenants at June 30, 2020 and expect continued compliance for the next twelve months.

 

We believe that we have adequate resources and liquidity to fund future cash requirements and debt repayments with cash generated from operations, existing cash balances and additional short- and long-term borrowing capacity for the next 12 months. At June 30, 2020, we had the capacity to borrow up to $140.0 million of additional debt under our amended Credit Facility.

 

See Note 8 to the consolidated financial statements contained in this report for additional information and disclosures regarding our long-term debt.

 

46

 

COVID-19 Considerations

 

In March 2020, the CARES Act was signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The CARES Act did not have a material impact on our consolidated financial condition or results of operations as of and for the six months ended June 30, 2020. However, we have deferred payments of $3.9 million as of June 30, 2020 related to the timing of federal estimated tax payments and employer payroll taxes as permitted by the CARES Act.

 

Due to the continued developing impacts and uncertainties of the COVID-19 pandemic, including the depth and duration of any disruptions to customers and suppliers, its future effect on the Company’s business, results of operations and financial condition cannot be predicted. While management is unable to accurately foresee these future impacts, the Company believes that its financial resources and liquidity levels, along with various contingency plans to reduce costs are sufficient to manage the impact currently anticipated from the COVID-19 pandemic, which will likely include reduced revenues and operating profits in all segments and lower operating cash flows for at least the third quarter of 2020. Because the COVID-19 pandemic is a rapidly evolving situation, management will continue to monitor the business impact and may take further actions that are deemed appropriate in light of the circumstances.

 

Disclosure of Contractual Obligations and Commercial Commitments

 

There were no material changes in contractual obligations and commercial commitments from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019. See Note 11 to the consolidated financial statements contained in this report for further discussion regarding our commitments and contingencies.

 

Critical Accounting Policies

 

Goodwill

 

We assess recoverability of goodwill on an annual basis or when events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable, such as a decline in stock price and market capitalization. During the second quarter of 2020, our stock price experienced high volatility and caused a temporary decline in our enterprise market capitalization below book value. At June 30, 2020, however, our enterprise market capitalization of approximately $488.3 million was greater than our reported book value of $429.6 million. We determined that a triggering event did not occur based on: (i) the temporary decline and subsequent improvement in our stock price; (ii) the business results that we reported for the second quarter of 2020; and (iii) the impacts of COVID-19 and depressed oil prices on trading markets worldwide and analyst indications that improvements are expected. If a decrease in our stock price and market capitalization continues over a sustained period, there could be a risk of future impairment charges.

 

Additionally, we continue to monitor the impact COVID-19 is having on the oil and gas industry and its impact on customer demand and reduced spending in the wake of reduced oil prices. In the event conditions impacting our reporting units worsen or extend for a prolonged period beyond our current expectations, there could be risk of future impairment charges. At-risk reporting units include Corrpro, United Pipeline Systems, Coating Services and Energy Services. Total goodwill recorded for these reporting units was $77.9 million at June 30, 2020.

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Market Risk

 

We are exposed to the effect of interest rate changes and of foreign currency and commodity price fluctuations. We currently do not use derivative contracts to manage commodity risks. From time to time, we may enter into foreign currency forward contracts to fix exchange rates for net investments in foreign operations to hedge our foreign exchange risk.

 

Interest Rate Risk

 

The fair value of our cash and short-term investment portfolio at June 30, 2020 approximated carrying value. Given the short-term nature of these instruments, market risk, as measured by the change in fair value resulting from a hypothetical 100 basis point change in interest rates, would not be material.

 

Our objectives in managing exposure to interest rate changes are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we maintain fixed rate debt whenever favorable; however, the majority of our debt at June 30, 2020 was variable rate debt. We substantially mitigate our interest rate risk through interest rate swap agreements, which are used to hedge the volatility of monthly LIBOR rate movement of our debt. We currently utilize interest rate swap agreements with a notional amount that mirrors approximately 75% of our outstanding borrowings from the term loan under our amended Credit Facility.

 

At June 30, 2020, the estimated fair value of our long-term debt was approximately $274.0 million. Fair value was estimated using market rates for debt of similar risk and maturity and a discounted cash flow model. Market risk related to the potential increase in fair value resulting from a hypothetical 100 basis point increase in our debt specific borrowing rates at June 30, 2020 would result in a $0.7 million increase in interest expense.

 

47

 

Foreign Exchange Risk

 

We operate subsidiaries and are associated with licensees and affiliated companies operating solely outside of the United States and in foreign currencies. Consequently, we are inherently exposed to risks associated with the fluctuation in the value of the local currencies compared to the U.S. dollar. At June 30, 2020, a substantial portion of our cash and cash equivalents was denominated in foreign currencies, and a hypothetical 10% change in currency exchange rates could result in an approximate $2.0 million impact to our equity through accumulated other comprehensive income (loss).

 

In order to help mitigate this risk, we may enter into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations. We do not engage in hedging transactions for speculative investment reasons. There can be no assurance that our hedging operations will eliminate or substantially reduce risks associated with fluctuating currencies. At June 30, 2020, there were no material foreign currency hedge instruments outstanding. See Note 13 to the consolidated financial statements contained in this report for additional information and disclosures regarding our derivative financial instruments.

 

Commodity Risk

 

We have exposure to the effect of limitations on supply and changes in commodity pricing relative to a variety of raw materials that we purchase and use in our operating activities, most notably resin, chemicals, staple fiber, fuel, metals and pipe. We manage this risk by entering into agreements with certain suppliers utilizing a request for proposal, or RFP, format and purchasing in bulk, and advantageous buying on the spot market for certain metals, when possible. We also manage this risk by continuously updating our estimation systems for bidding contracts so that we are able to price our products and services appropriately to our customers. However, we face exposure on contracts in process that have already been priced and are not subject to any cost adjustments in the contract. This exposure is potentially more significant on our longer-term projects.

 

We obtain a majority of our global resin requirements, one of our primary raw materials, from multiple suppliers in order to diversify our supplier base and thus reduce the risks inherent in concentrated supply streams. We have qualified a number of vendors in North America, Europe and Asia that can deliver, and are currently delivering, proprietary resins that meet our specifications.

 

The primary products and raw materials used by our infrastructure rehabilitation operations in the manufacture of fiber reinforced polymer composite systems are carbon, glass, resins, fabric and epoxy raw materials. Fabric and epoxies are the largest materials purchased, which are currently purchased through a select group of suppliers, although we believe these and the other materials are available from a number of vendors. The price of epoxy historically is affected by the price of oil. In addition, a number of factors such as worldwide demand, labor costs, energy costs, import duties and other trade restrictions may influence the price of these raw materials.

 

We rely on a select group of third-party extruders to manufacture our Fusible PVC® pipe products.

 

 

Item 4. Controls and Procedures

 

Our management, under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), has conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 30, 2020. Based upon and as of the date of this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act (a) is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms and (b) is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

48

 

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

 

We are involved in certain actions incidental to the conduct of our business and affairs.  Management, after consultation with legal counsel, does not believe that the outcome of any such actions, individually and in the aggregate, will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

 

 

Item 1A. Risk Factors

 

Other than as described in Item 1A Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, there have been no material changes to the risk factors described in Item 1A Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

 

 

 

49

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Issuer Purchases of Equity Securities

 

    Total Number of Shares (or Units) Purchased     Average Price Paid per Share (or Unit)     Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs     Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs  

January 2020 (1) (2)

    33,028     $ 22.02       31,221       2,476,431  

February 2020 (1) (2)

    108,231       22.52       31,161       2,445,270  

March 2020 (1) (2)

    119,361       15.76       118,109       2,327,161  
April 2020 (2)     965       15.10             2,327,161  
May 2020 (2)     786       14.74             2,327,161  
June 2020 (2)     1,857       15.56             2,327,161  

Total

    264,228     $ 19.30       180,491       (1 )

 


 

(1)

In December 2019, our board of directors authorized the open market repurchase of up to an additional two million shares of our common stock upon completion of the two million share repurchase program approved by the board of directors in December 2018. As of June 30, 2020, 327,161 shares remained to be repurchased under the 2018 program and an additional two million shares under the 2019 program. Any shares repurchased are pursuant to one or more 10b5-1 plans and promptly retired. In March 2020, our board of directors suspended the applicable 10b5-1 trading plans for the current open market repurchase program to increase liquidity and improve financial flexibility in light of COVID-19. Upon reinstatement of the 10b5-1 plan, the prior authorizations of the board of directors remain in effect as the program did not establish a time period in which the repurchases had to be made. Effective April 29, 2020, in connection with amendments to our senior secured credit facility, open market repurchases of our common stock are limited through June 30, 2021 to: (i) unlimited if our consolidated financial leverage ratio is less than 2.50 to 1.00; (ii) $20.0 million while our consolidated financial leverage ratio is greater than or equal to 2.50 to 1.00, but less than 3.00 to 1.00; and (iii) zero while our consolidated financial leverage ratio is greater than or equal to 3.00 to 1.00.

 

 

(2)

In connection with approval of our senior secured credit facility, our board of directors approved the purchase of up to $10.0 million of our common stock in each calendar year in connection with our equity compensation programs for employees. The number of shares purchased includes shares surrendered to us to pay the exercise price and/or to satisfy tax withholding obligations in connection with the vesting of restricted stock, restricted stock units or performance units issued to employees. For the six months ended June 30, 2020, 83,737 shares were surrendered in connection with restricted stock unit and performance unit transactions. The deemed price paid was the closing price of our common stock on the Nasdaq Global Select Market on the date that the restricted stock units or performance units vested. Once repurchased, we promptly retired the shares. Effective April 29, 2020, in connection with amendments to our senior secured credit facility, purchases of our common stock in connection with our equity compensation programs are limited to $5.0 million through June 30, 2021.

 

 

Item 4. Mine Safety Disclosures.

 

Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of SEC Regulation S-K is included in Exhibit 95 to this quarterly report on Form 10-Q.

 

 

50

 

Item 6. Exhibits

 

The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed on the Index to Exhibits attached hereto.

 

INDEX TO EXHIBITS

 

These exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.

 

10.1 Fourth Amendment to Credit Agreement, dated April 29, 2020, among Aegion Corporation, the Guarantors, Bank of America, N.A., as Administrative Agent, and the other parties thereto (incorporated by reference to Exhibit 10.7 to the quarterly report filed on Form 10-Q for the quarter ended March 31, 2020).
   
10.2 Form of Restricted Stock Unit Agreement for Grants in Lieu of Forgone Salary, dated June 30, 2020, between Aegion Corporation and each executive officers of Aegion Corporation (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed on July 2, 2020). (1)
   
10.3 Form of Director Deferred Stock Unit Agreement for Grants in Lieu of Second Quarter 2020 Retainer, dated June 30, 2020, between Aegion Corporation and each non-employee director of Aegion Corporation, filed herewith. (1)
   
10.4 Severance Policy, filed herewith. (1)
   
10.5 Third Amendment to 2016 Employee Equity Incentive Plan of the Company, filed herewith. (1)
   
10.6 Amended and Restated Management Annual Incentive Plan, filed herewith. (1)
   

31.1

Certification of Charles R. Gordon pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

 

 

31.2

Certification of David F. Morris pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

 

 

32.1

Certification of Charles R. Gordon pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

 

 

32.2

Certification of David F. Morris pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

 

 

95

Mine Safety and Health Disclosure, filed herewith.

 

 

101.INS

Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)*

 

 

101.SCH

Inline XBRL Taxonomy Extension Schema Document*

 

 

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document*

 

 

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document*

 

 

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document*

 

 

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document*

   
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

*   In accordance with Rule 406T under Regulation S-T, the XBRL-related information in Exhibit 101 shall be deemed “furnished” and not “filed”.

 

 

(1) 

Management contract or compensatory plan, contract or arrangement.

 

51

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

AEGION CORPORATION

   

 

 

Date: July 31, 2020

/s/ David F. Morris

 

David F. Morris

 

Executive Vice President and Chief Financial Officer

 

(Principal Financial Officer)

 

 

52

ex_183348.htm

Exhibit 10.3

 

 

Name:

Award Date:

Deferred Stock Units

 

Director Deferred Stock Unit Agreement for Grants in Lieu of Second Quarter 2020 Retainer under the

Amended and Restated Aegion Corporation 2016 Non-Employee Director Equity Plan

 

Aegion Corporation (the “Company”) hereby awards to you the number of Deferred Stock Units shown above, effective as of the Award Date.  Each Deferred Stock Unit represents the obligation of the Company to transfer one share of the Company’s Class A common stock, par value $0.01 per share (the “Common Stock”) to you at the time provided in this Agreement.  This award is granted to you pursuant to the Amended and Restated Aegion Corporation 2016 Non-Employee Director Equity Plan (the “Plan”), and is subject to the terms and conditions in the Plan and those set forth below.  Any capitalized, but undefined, term used in this Agreement shall have the meaning ascribed to it in the Plan.  Your signature below constitutes your acceptance of this award and acknowledgment of your agreement to all the terms and conditions contained herein.  Please return an executed copy to the Company’s General Counsel, or such officer’s designee.

 

Accepted by Director: AEGION CORPORATION
   
   
                                                                               By:                                                                       
(Name)        Mark A. Menghini, Senior Vice President,
         General Counsel and Secretary

 

 

Terms and Conditions

 

 

1.   Bookkeeping Account.  The Company will record the number of Deferred Stock Units granted to you under this Agreement to a bookkeeping account for you (the “Deferred Stock Unit Account”).  Your Deferred Stock Unit Account will be reduced by the number of shares of Common Stock transferred to you in accordance with Section 3.  Your Deferred Stock Unit Account also will be adjusted from time to time for any stock dividends, stock splits and other such transactions in accordance with Section 5.  The Deferred Stock Unit Account represents an unsecured promise by the Company to deliver shares of Common Stock in the future.  Your rights to your Deferred Stock Unit Account will be no greater than that of other general, unsecured creditor of the Company you will have no right to receive the underlying related Common Stock.  However, if your termination of service from the Company’s Board of Directors is due to your Retirement (as defined below), you will receive a cash payment upon Retirement equal to the closing price of the Company’s Common Stock on the date of your Retirement multiplied by the number of unvested Deferred Stock Units that were  forfeited and by a fraction, the numerator of which is the number of days of service you completed during the vesting period, and the denominator of which is three hundred sixty-five (365).  For these purposes, “Retirement” means your voluntary resignation from the Company’s Board of Directors for reasons unrelated to death, disability or Change in Control.

 

2.   Vesting; Transferability Restriction.  Your Deferred Stock Units are subject to a one-year vesting period from the date of grant.  Deferred Stock Units will vest on the one-year anniversary of the date of grant; provided that Deferred Stock Units will vest immediately upon a Change in Control or upon your termination of service from the Company’s Board of Directors due to your death or disability (as determined by the Company).  Deferred Stock Units that have not vested upon your termination of service from the Company’s Board of Directors will be automatically and immediately forfeited and you will have no right to receive the underlying related Common Stock.  However, if your termination of service from the Company’s Board of Directors is due to your Retirement (as defined below), you will receive a cash payment upon Retirement equal to the closing price of the Company’s Common Stock on the date of your Retirement multiplied by the number of unvested Deferred Stock Units that were  forfeited and by a fraction, the numerator of which is the number of days of service you completed during the vesting period, and the denominator of which is three hundred sixty-five (365).  For these purposes, “Retirement” means your voluntary resignation from the Company’s Board of Directors for reasons unrelated to death, disability or Change in Control.

 

      Your Deferred Stock Units are not transferable by you.  Except as may be required by federal income tax withholding provisions or by the tax laws of any state, your interests (and the interests of your beneficiaries, if any) under this Agreement are not subject to the claims of your creditors and may not be voluntarily or involuntarily sold, transferred, alienated, assigned, pledged, anticipated, or encumbered.  Any attempt to sell, transfer, alienate, assign, pledge, anticipate, encumber, charge or otherwise dispose of any right to benefits payable hereunder shall be void.

 

 

 

3.   Distribution of Shares of Common Stock.  Promptly after the date(s) you specified in a written distribution election filed with the Company on or before December 31, 2019, shares of Common Stock equal to the number of vested Deferred Stock Units reflected in your Deferred Stock Unit Account, shall be distributed to you in accordance with your election.  If you did not file such an election, distribution with respect to vested Deferred Stock Units will be made promptly following your termination of service on the Company’s Board of Directors, or, if earlier, upon a Change in Control.  Distributions shall be made in shares of Common Stock, with fractional shares rounded up to the nearest whole share.

 

4.   Death Beneficiary Designation.  You may designate a beneficiary or beneficiaries (contingently, consecutively or successively) to receive shares of Common Stock, if you die while Deferred Stock Units are held in your Deferred Stock Unit Account, and, upon your death, the Company will transfer shares of Common Stock equal in number to the vested Deferred Stock Units, if any, reflected in your Deferred Stock Unit Account to your beneficiary(ies).

 

      You may designate a beneficiary or beneficiaries from time to time, and you may change your designated beneficiary(ies).  A beneficiary may be a trust.  A beneficiary designation must be made in writing in a form prescribed by the Company and delivered to the Company while you are alive.  If you do not have a designated beneficiary surviving at the time of your death, any transfer of shares of Common Stock will be made to your surviving spouse, if any, and if you do not have a surviving spouse, then to your estate.

 

5.   Cash Dividend Equivalents; Adjustments.  If the Company pays a cash dividend on its Common Stock, then, as soon as practical after such cash dividend is paid, the Company will pay you an amount in cash equal to the amount per share of such cash dividend multiplied by the number of Deferred Stock Units credited to your Deferred Stock Unit Account as of the record date of such cash dividend.  Notwithstanding the foregoing, dividend equivalents payable with respect to unvested Deferred Stock Units will be payable on the one-year anniversary of grant.

 

      If there is any change in the Common Stock by reason of stock dividends, split-ups, mergers, consolidations, reorganizations, combinations or exchanges of shares or the like, the number of Deferred Stock Units credited to your Deferred Stock Unit Account shall be adjusted appropriately so that the number of Deferred Stock Units reflected in your Deferred Stock Unit Account after such an event shall equal the number of shares of Common Stock a stockholder would own after such an event if the stockholder, at the time such an event occurred, had owned shares of Common Stock equal to the number of Deferred Stock Units reflected in your Deferred Stock Unit Account immediately before such an event.

 

6.   No Stockholder Rights.  You will not have any stockholder rights, such as rights to vote or to receive dividends or other distributions, with respect to any Deferred Stock Units reflected in your Deferred Stock Unit Account.  You will have only the cash dividend equivalent and adjustment rights provided in this Agreement.

 

7.   Securities Laws.  Shares of Common Stock will not be transferred under this Agreement if such transfer would violate any federal or state securities law.  The Company may take any appropriate action to achieve compliance with those laws in connection with any transfer of Common Stock to you.

 

8.   No Right to Further Grants.  Deferred Stock Unit grants are within the discretion of the Plan Administrator, and no such grant entitles you to any further grants.

 

9.   Interpretations Binding.  Plan Administrator interpretations and determinations are binding and conclusive.

 

10.  Notices.  Notices to the Company or the Plan Administrator shall be sent to the Company’s Corporate Headquarters, Attn:  “General Counsel.”

 
ex_195396.htm

Exhibit 10.4

 

 

 

 

 

 

 

  Policy #: P-HR-02
 

Effective Date:

March 20, 2020

Subject:

Severance Policy

Maintained By:

VP & Global Employment Counsel

   

Approved By:

Compensation Committee

Applies to:  

Aegion and/or its Subsidiaries

Supersedes:

December 21, 2018

 

Scope

 

This Severance Policy (the “Policy”) is applicable to Aegion Corporation and its subsidiaries (together the “Company”).

 

March 20, 2020 Amendment

 

In order to address the unprecedented financial impact of COVID-19, this Policy is amended as follows: Effective March 20, 2020, notwithstanding anything to the contrary set forth herein, the maximum severance period available to any Company employee under this Policy shall be three months. “Base salary” shall refer to an employee’s base salary as of March 20, 2020, regardless of when an employee is eligible for benefits provided under the Policy after March 20, 2020.

 

Purpose

 

This Policy is designed to provide a competitive package to aid employees affected by a position elimination or reduction in force during their transition period. The Plan creates a tiered approach that considers tenure and position level in determining employee benefits.

 

Policy

 

 

A.

Eligibility

 

This Policy applies to non-union employees of the Company who are actively employed, have completed a minimum of six (6) months’ continuous service time (or two (2) years’ continuous service time for hourly field/production employees), are in good standing with the Company and whose employment is terminated involuntarily as a result of a reduction in force or position elimination, where a comparable position is not available. This Policy does not apply in the event of termination for cause or termination due to a violation of the Company’s Code of Conduct.

 

International employees generally are eligible for benefits pursuant to provincial or country requirement. Should none exist, this Policy will apply. Employees subject to an employment agreement that sets forth severance benefits different than those contained in this Policy will not be eligible for payments under this plan.

 

 

B.

Summary of Benefits

 

Severance benefits due a separated employee will be determined by position and uninterrupted tenure, as outlined below, and will be provided pursuant to the execution of any requested actions, including, but not limited to: timely return of an unaltered and signed release agreement, return of all company property, and completion of any position-related tasks specific to the Company. All severance payments will be processed as extended payroll, with applicable taxes and deductions, through the term of the applicable severance period.

 

U.S. employees will be eligible for COBRA benefits immediately upon termination. During the severance period, U.S. employees receiving severance payments under this plan and who have fulfilled the obligations described above will be eligible to exercise his/her COBRA benefits while paying only his/her normal employee contribution via payroll deduction from the severance payments. Notwithstanding the foregoing, employees who are receiving severance payments under this plan and have exercised COBRA benefits have an affirmative obligation to notify the Company if they become eligible for health insurance benefits through employment with another employer during the severance period. If an employee who is receiving severance payments under this plan and has exercised COBRA becomes eligible for health insurance benefits through employment by another employer during the severance period, the employee must immediately enroll in the new employer’s health plan or pay the entire premium (both the employee and Company’s premium contributions) for continued coverage through the Company’s health benefit plan.

 

 

 

For Canadian employees, group supplemental health and welfare coverage will be extended through the term of severance payments at the normal employee contribution rate taken via payroll deduction.

 

Severance periods are based on employee classification, as set forth below:

 

 

Tier 1 Employees. If the termination of employment occurs prior to the employee’s third anniversary of continuous employment with the Company, employees classified as Tier 1 will receive their base salary for a period of twelve (12) months after they have satisfied all of their obligations under this Policy. If the termination of employment occurs on or after the employee’s third anniversary of continuous employment with the Company, employees classified as Tier 1 will receive their base salary for a period of eighteen (18) months after they have satisfied all of their obligations under this Policy. In addition, for either of the preceding events, employees classified as Tier 1 employees are eligible for up to $15,000 in outplacement services, provided by a vendor of the Company’s choosing. Payments for these services will be paid directly by the Company.

 

 

Tier 1.5 Employees. If the termination of employment occurs prior to the employee’s third anniversary of continuous employment with the Company, employees classified as Tier 1.5 will receive their base salary for a period of ten (10) months after they have satisfied all of their obligations under this Policy. If the termination of employment occurs on or after the employee’s third anniversary of continuous employment with the Company, employees classified as Tier 1.5 will receive their base salary for a period of fifteen (15) months after they have satisfied all of their obligations under this Policy. In addition, for either of the preceding events, employees classified as Tier 1.5 employees are eligible for up to $15,000 in outplacement services, provided by a vendor of the Company’s choosing. Payments for these services will be paid directly by the Company.

 

 

Tier 2.5 Employees. If the termination of employment occurs prior to the employee’s third anniversary of continuous employment with the Company, employees classified as Tier 2.5 will receive their base salary for a period of eight (8) months after they have satisfied all of their obligations under this Policy. If the termination of employment occurs on or after the employee’s third anniversary of continuous employment with the Company, employees classified as Tier 2.5 will receive their base salary for a period of twelve (12) months after they have satisfied all of their obligations under this Policy. In addition, for either of the preceding events, employees classified as Tier 2.5 employees are eligible for up to $10,000 in outplacement services, provided by a vendor of the Company’s choosing. Payments for these services will be paid directly by the Company.

 

 

Tiers 3.0-3.5 Employees. Employees classified as Tiers 3.0-3.5 will receive their base salary for a period of six (6) months after they have satisfied all of their obligations under this Policy. Notwithstanding the foregoing, these employees will continue to receive base salary for the greater of (a) a period of six (6) months; or (b) a period calculated as twelve (12) weeks, plus two (2) additional weeks for each full year of continuous service time with the Company, not to exceed forty-two (42) weeks of base salary. In addition, they are eligible for up to $7,500 in outplacement services, provided by a vendor of the Company’s choosing. Payments for these services will be paid directly by the Company.

 

 

Vice Presidents who are not Tiers 1 to 3.5. Vice presidents who are not classified as Tiers 1 - 3.5 will receive their base salary after they have satisfied all of their obligations under this Policy for a period calculated as follows: twelve (12) weeks, plus two (2) additional weeks for each full year of continuous service time with the Company. These employees will continue to receive base salary for a period of no less than twelve (12) and no more than forty-two (42) weeks. In addition, they are eligible for up to $7,500 in outplacement services, provided by a vendor of the Company’s choosing. Payments for these services will be paid directly by the Company.

 

 

Directors who are not included in any of above classifications. Employees who are in director-level positions will receive their base salary payments for a period calculated as follows: six (6) weeks, plus two (2) additional weeks for each full year of continuous service time with the Company. Employees in these positions will receive no less than six (6) and no more than thirty-six (36) weeks of base salary. In addition, these employees are eligible for up to $5,000 in outplacement services, provided by a vendor of the Company’s choosing. Payments for these services will be paid directly by the Company.

 

 

Salaried exempt who are not included in any of above classifications. Salaried exempt employees (“Exempt Employees”) will receive their base salary payments for a period calculated as follows: two (2) weeks, plus one (1) additional week for each full year of continuous service time with the Company. Exempt Employees will receive no less than two (2) and no more than seventeen (17) weeks of base salary. In addition, Exempt Employees are eligible for up to $2,000 in outplacement services, provided by a vendor of the Company’s choosing.

 

 

Staff non-exempt. Staff non-exempt employees (“Non-exempt employees”) will receive their base salary payments for a period calculated as follows: one (1) week of salary (based on forty (40) hours per week), plus one (1) additional week (based on forty (40) hours per week) for each full year of continuous service time with the Company. Non-exempt employees will receive no less than two (2) and no more than fifteen (15) weeks of base salary (based on forty (40) hours per week).

 

 

 

 

 

Field/Production hourly. Hourly field/production employees (“Field Employees”) will receive severance payments based on continuous service time with the Company. The severance period will be calculated as follows, based on forty (40) hours per week:

 

 

o

Completed at least two (2) to five (5) years - Two (2) weeks of base pay severance

 

o

Completed at least five (5) to ten (10) years - Three (3) weeks of base pay severance

 

o

Ten (10) years or more - Four (4) weeks of base pay severance

 

 

C.

Changes to Policy

 

This Policy is a statement of intent and is not a contract. It is not a guarantee of employment and employment with the Company remains “at will.” This Policy may be modified, suspended or terminated at any time and all payments are at the discretion of the Compensation Committee of the Board of Directors of Aegion Corporation. This Policy may be changed during the year without any obligation to pay for the elapsed part of the year in the manner described in the Policy. The decisions of the General Counsel, the Senior Vice President of Human Resources, the Board of Directors and/or the Compensation Committee in administering the Policy are final and binding on all persons.

 

Compliance

 

Aegion employees are expected to comply fully with the letter and the spirit of this Policy. Failure to comply with this Policy shall be considered grounds for disciplinary action up to and including termination of employment. Fraud or theft will be pursued and prosecuted to the full extent the law allows. If you have any questions regarding the compliance to this Policy, you should either contact the Policy maintainer or the Company’s Human Resources Department.

 

 
ex_195436.htm

Exhibit 10.5

 

THIRD AMENDMENT TO THE

AEGION CORPORATION

2016 EMPLOYEE EQUITY INCENTIVE PLAN

 

Aegion Corporation (the “Company”) previously adopted the Aegion Corporation 2016 Employee Equity Incentive Plan (as amended, the “Plan”), the First Amendment to the Plan and the Second Amendment to the Plan. Section 21 of the Plan provides that the Board of Directors of the Company may modify the Plan at any time, but that no amendment may increase the number of shares available for issuance under the plan without approval of the stockholders of the Company.

 

The Company now desires to further amend the Plan.

 

Now, therefore, the Plan is hereby amended, effective as of the date it is approved by the Board of Directors of the Company, as follows:

 

 

1.

The following sentence shall be inserted at the end of Section 12:

     
    Notwithstanding any provision herein to the contrary, the minimum restriction period or performance period shall not apply to any Award granted in lieu of any cash compensation to be paid to any Participant or forgone by any Participant.

 

 

2.

Except as amended hereby, the Plan remains in full force and effect without change.

 

 

3.

This Third Amendment to the Plan shall become effective as of the date it is approved by the Board of Directors of the Company.

 

 

 
ex_195602.htm

Exhibit 10.6

 

 

 

 

AEGION CORPORATION

AMENDED AND RESTATED

Management Annual Incentive Plan

Corporate employees

 

This Amended and Restated Management Annual Incentive Plan (the “Plan”) of Aegion Corporation (the “Company”) is effective as of the 1st day of January 2020.

 

A. Plan Purpose

 

The purpose of this Plan is to enhance business performance by motivating and rewarding executive and management employees for the achievement of incentive goals structured to achieve desired corporate results.

 

B. Eligible Employees

 

A committee comprised of the Company’s Chief Executive Officer, General Counsel, Chief Financial Officer and Senior Vice President – Human Resources (together, the “Plan Committee”), shall designate the employees of the Company and its subsidiaries who are to be participants (the “Participants”) in the Plan for the applicable fiscal year, which, in this case, is January 1, 2020 through December 31, 2020 (the “Plan Year”).

 

Except where prohibited by law, as a condition to participation in the Plan and the receipt of any payment hereunder, Participants shall be required to sign any (i) confidentiality, non-solicitation and/or non-competition agreement, (ii) acknowledgement of the Company’s right to recoup any incentive compensation and/or (iii) acknowledgment of and agreement to comply with the Company’s Code of Conduct, each as may be required by the Company and enforceable under applicable law. Certain Participants who are employees of a business unit may participate in both this Plan and the plan for business unit employees, with a total award based in part on performance in this Plan and in part on performance under the plan for business unit employees.

 

To be eligible for payment under the Plan, an employee must be a current employee in good standing at the time of payout, which includes, but is not limited to, completing the Company’s annual compliance training requirements within the time period provided for completion. In addition, to be eligible for payment under the Plan a Participant must:

 

● have up to date performance reviews (for the Participant and the Participant’s direct reports) completed by February 28, 2020;

 

● have individual personal objectives in place and approved by June 30, 2020 for each of the Participant’s direct reports, as well as the Participant; and

 

● (for eligibility for the Non-Financial Goal only) have at least three of his/her personal objectives certified as 100% complete by their supervisor no later than

    January 21st of the year following the Plan Year.

 

The Company has the right, in its sole discretion, to determine whether an employee is in good standing and/or otherwise eligible for a Plan award.

 

C. Participant Incentive Award Goals

 

The Plan Committee shall establish an incentive award goal (a “Goal”) for each Participant that shall be expressed as a percentage of such Participant’s “Plan eligible earnings”. “Plan eligible earnings” is defined as the Participant’s salary as of June 15, 2020 (not adjusted for temporary salary reductions) (for 1H2020 payout), September 15, 2020 (for Q3 2020 payout) and December 15, 2020 (for Q4 2020, 2H2020 and Annual payouts), prorated by the number of days the Participant was actively employed during the period in which the Participant was eligible for a payout under the Plan, less any period of time the Participant was on a leave of absence greater than 30 days. Participant Goals shall be reviewed and approved by the Plan Committee on an annual basis. The Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) shall approve Goals and Bookings Targets (as defined below), if applicable, of all executive officers of the Company.

 

 

 

D. Funding and Award Summary

 

Each Participant’s Goal shall be measured and achieved through two separately weighted elements: (a) a Financial Goal weighted at 75% of the overall Goal; and (b) a Non-Financial Goal weighted at 25% of the overall Goal.

 

Financial Goal: 75% of each Goal under the Plan (the “Financial Goal”) shall be based upon total Company performance for the Plan Year or portion of Plan Year, as applicable for the biannual awards described in Section H of this Plan (the “Biannual Awards”),1 subject to the discretion of the Compensation Committee based upon other subjective performance factors. Total Company performance shall be measured based on the actual consolidated Company EBT (as defined below) achieved (“Actual EBT”) as compared against the targeted consolidated Company EBT (“EBT Target”) for the Plan Year, or portion of Plan Year, as applicable for the Biannual Awards (“Biannual EBT Targets”), each as approved by the Compensation Committee. However, with respect to only Participants who have, as a primary job function, the oversight of sales (e.g., “Chief Sales Officer”), 50% of the Financial Goal shall be measured based on the actual consolidated Company Bookings (as defined below) achieved for the Plan Year (“Actual Bookings”) as compared against the target Bookings (“Bookings Target”) for the Plan Year, or portion of Plan Year, as applicable for the Biannual Awards (“Biannual Bookings Targets”), as approved by the Company’s Chief Executive Officer, and the remaining 50% of the Financial Goal shall be based on Actual EBT.

 

Non-Financial Goal: 25% of each Goal under the Plan shall be based upon the achievement of at least three of four individual personal objectives for the Plan Year (the “Non-Financial Goal”). A Participant’s individual personal objectives for the Plan Year shall be approved by the Participant’s direct supervisor no later than June 30, 2020; however, a Participant and his/her direct supervisor may jointly modify a Participant’s objectives during the Plan Year if circumstances warrant. A Participant’s achievement of such objectives shall be determined by the Participant’s direct supervisor, with the supervisor’s certification of the completion of at least three objectives no later than January 21, 2021. A Participant’s achievement of at least three of their personal objectives shall entitle them to a 25% payout of his/her Goal. Failure to achieve at least three personal objectives will result in zero payout of the Non-Financial Goal. The Non-Financial Goal is an “all or nothing” pay-out goal. A Participant will be eligible for full payment of the Non-Financial Goal regardless of whether the Annual EBT Target is achieved. The Company’s failure to achieve at least 100% of the Annual EBT Target shall not impact the funding or payment of the Non-Financial Goal.

 

E. EBT and Bookings

 

For purposes of this Plan, “EBT” shall be defined as “income before taxes on income and before extraordinary items less income/(loss) before taxes of non-controlling interests” of the Company for the Plan Year, which shall mean the consolidated income before taxes on income and less income/(loss) before taxes of non-controlling interests of the Company during the fiscal year, as determined by the Plan Committee in conformity with accounting principles generally accepted in the United States of America and contained in financial statements that are subject to an audit report of the Company’s independent public accounting firm, but excluding:

 

 

  i. operating results and/or losses associated with the write-down of assets of a subsidiary, business unit or division that has been designated by the Board of Directors as a discontinued business operation or to be liquidated or sold;
     
 

ii.

gains or losses on the sale of any subsidiary, business unit or division, or the assets or business thereof;

 

 

iii.

gains or losses from the disposition of material capital assets (other than in a transaction described in subsection (ii)) or the refinancing of indebtedness, including, among other things, any make-whole payments and prepayment fees;

 

 

iv.

losses associated with the write-down of goodwill or other intangible assets of the Company due to the determination under applicable accounting standards that the assets have been impaired;

 

 

v.

gains or losses from material property casualty occurrences or condemnation awards, taking into account the proceeds paid by insurance companies and other third parties in connection with the casualty or condemnation;

 

 

vi.

any income statement effect resulting from a change in tax laws, accounting principles (including, without limitation, generally accepted accounting principles), regulations, or other laws regulations affecting reported results, except, in each case, to the extent the effect of such a change is already reflected in the target EBT amount;

 

 

vii.

reorganization or restructuring charges and acquisition- or divestiture-related transaction expenses and costs;

 

 

 

 

viii.

any gains or losses from unusual nonrecurring or extraordinary items;

 

 

ix.

operating results of any entity or business acquired during the Plan Year, but only to the extent the operating income contributed by the entity or business acquired during the Plan Year exceeds ten percent (10%) of the total operating income generated by the business unit in which it resides (such that any operating income contributed by the acquired entity or business equal to or less than ten percent of the total operating income generated by the business unit in which it resides shall not be excluded from EBT);

 

 

x.

operating results of any entity or business disposed of during the Plan Year, except to the extent such entity or business was not included in the Company’s operating business plan for the Plan Year;

 

 

xi.

any gain or loss resulting from currency fluctuations or translations as set forth in the Aegion Corporation Foreign Exchange Rate Policy for Annual Incentive Plan and Long-Term Incentive Plan;

 

 

xii.

any material income or loss item the realization of which is not directly attributable to the actions of current senior management of the Company; and

 

 

xiii.

the income taxes (benefits) of any of the above-designated gains or losses.

 

 

For purposes of this Plan, “Bookings” shall be defined as either (i) actual consolidated orders booked by the Company for the Plan Year (reduced by any previously recorded orders that were cancelled during the Plan Year), or (ii) actual consolidated gross profit for actual consolidated orders booked by the Company for the Plan Year (reduced by the actual gross profit associated with any previously recorded orders that were canceled during the Plan Year), each of which shall be calculated and determined by the Company’s Chief Financial Officer in a manner consistent with how the Company records and reports hard backlog.

 

The Compensation Committee shall have final authority with respect to any determination by the Plan Committee regarding the definition of “EBT” and “Bookings” and, in exercising such authority, may consult with the Company’s independent auditor and/or Audit Committee as it deems necessary and advisable.

 

FConsolidated Company Financial Performance Pool Funding

 

The Financial Goal portion of the Plan shall be funded based on the EBT performance and Bookings performance of the Company as a whole (such funding pool shall be referred to as the “Consolidated Company Financial Performance Pool”). At the outset of each Plan Year, the Compensation Committee shall determine (i) the EBT Target for the Plan Year; (ii) with respect to Sales Participants who are executive officers, if applicable, the Bookings Target for the Plan Year; and (iii) the target funding amount (the “Company Target Funding Amount”) based on both the EBT Target and the Bookings Target for the Consolidated Company Financial Performance Pool. The actual amount funded to the Consolidated Company Financial Performance Pool shall be determined upon calculation of Actual EBT and Actual Bookings after the end of the Plan Year, subject to any adjustments required pursuant to Section E hereof.

 

  1. If Actual EBT equals the EBT Target, the portion of the Consolidated Company Financial Performance Pool related to EBT shall be equal to the portion Company Target Funding Amount related to EBT, subject to the additional terms specified in Exhibit A.
     
 

2.

If Actual EBT exceeds or falls below the EBT Target, the portion of Consolidated Company Financial Performance Pool related to EBT shall be determined in accordance with the chart in Exhibit A (using interpolation for Actual EBT levels as specified therein), and subject to the additional terms specified therein.

 

 

3.

If Actual EBT is less than the threshold percentage of the EBT Target specified in the chart in Exhibit A, the maximum amount funded to the Consolidated Company Financial Performance Pool shall be equal to $500,000; provided, however, that (i) such amount shall only be awarded to individual Participants for extraordinary performance, as determined by the Company’s Chief Executive Officer in his sole discretion (subject to the review and approval by the Compensation Committee of any awards to executive officers of the Company); (ii) such amount shall be reduced such that any funding under this paragraph and the similar mechanism in Section F(13) of the Management Annual Incentive Plan for Business Unit Employees shall together not exceed $500,000.

 

 

4.

If Actual Bookings equals the Bookings Target, the portion of the Consolidated Company Financial Performance Pool related to Bookings shall be equal to the portion of Company Target Funding Amount related to Bookings, subject to the additional terms specified in Exhibit B.

 

 

 

 

5.

If Actual Bookings exceeds or falls below the Bookings Target, the portion of the Consolidated Company Financial Performance Pool related to Bookings shall be determined in accordance with the chart in Exhibit B (using interpolation for Actual Bookings levels as specified therein), and subject to the additional terms specified therein.

 

 

6.

If Actual Bookings are less than the threshold percentage of the Bookings Target (after the threshold percentage has been determined by the Chief Executive Officer in his sole discretion, per Exhibit B), the amount funded to the Consolidated Company Financial Performance Pool shall be equal to $0.

 

The maximum funding amount for the Consolidated Company Financial Performance Pool shall be 200% of the Company Target Funding Amount. In all events, the Compensation Committee, subject to any required approval of the Board of Directors, shall have the ability and authority to increase or decrease the amount of the Consolidated Company Financial Performance Pool calculated in accordance with the provisions of this Plan to reflect any extraordinary or unforeseen events or occurrences during the Plan Year.

 

GConsolidated Company Financial Performance Bonus Pool Awards

 

The Consolidated Company Financial Performance Pool shall be awarded to Participants subject to available pool funding. Except as otherwise provided in Section L below, a Participant must be an employee in good standing at the time the award is paid. The Company has the right, in its sole discretion, to determine whether an employee is in good standing and/or otherwise eligible for a Plan award.

 

H. Award Opportunities for Non-Sales Participants

 

Each non-sales Participant has the following opportunities to be paid an Award:

 

1.   1H2020 Award 

If the Company achieves the 1H2020 EBT Target in the first half of the Plan Year, each non-Sales Participant shall be eligible to receive an Award of up to one-third of his/her Financial Goal (“1H2020 Award”).  The following Participants are not eligible for a 1H2020 Award:

 

 

Participants who are Section 16 Officers of the Company on June 30, 2020

 

2.   2H2020 Award

If the Company achieves the 2H2020 EBT Target in the second half of the Plan Year, each non-Sales Participant shall be eligible to receive an Award of up to one-third of his/her Financial Goal (“2H2020 Award”), subject to the payout offsets described in Section J. 

 

3.   Annual Award

If a non-sales Participant achieves his/her individual personal objectives tied to the Non-Financial Goal for the Plan Year (as required under Section D herein), as determined by Participant’s direct supervisor, the Participant will receive 25% of his/her Goal (“Personal Objectives Award”).  A Participant will be eligible for a Personal Objective Award regardless of whether the Annual EBT Target is achieved. 

If the Company achieves its EBT threshold for the Plan Year, each non-Sales Participant shall be eligible to receive an Annual Award of up to 200% of his/her Financial Goal (“Annual Award”), less the amount of any 1H2020 Award and/or 2H2020 Award paid to the Participant and subject to the payout offsets described in Section J.  The payout scale shall be as follows:

 

 

If actual EBT is less than 75% of the EBT Target, the Consolidated Company Financial Performance Pool shall not be funded (subject to Section F(3)).

 

If actual EBT is at least 75% of the EBT Target but less than 100% of EBT Target, each Participant shall be eligible to receive a minimum of 50% of his/her Financial Goal.

 

If actual EBT is at least 100% of the EBT Target but less than 110% of EBT Target, each Participant shall be eligible to receive a minimum of 100% of his/her Financial Goal.

 

If actual EBT is at least 110% of the EBT Target but less than 120% of EBT Target, each Participant shall be eligible to receive a minimum of 150% of his/her Financial Goal.

 

If actual EBT is at least 120% of the EBT Target, each Participant shall be eligible to receive 200% of his/her Financial Goal.

 

To the extent the Company’s actual EBT is greater than or equal to 75% of Target EBT but less than 100% of Target EBT, or greater than or equal to 100% of Target EBT but less than 110% of Target EBT, or greater than or equal to 110% of Target EBT but less than 120% of Target EBT, the payout level shall be calculated based on a straight-line, sliding scale using the performance levels (75% and 100% in the first instance, 100% and 110% in the second instance, and 110% and 120% in the third instance) between which the Company’s actual performance falls as the end points for this calculation.

 

 

 

I. Award Opportunities for Chief Sales Officer

 

If specifically and separately designated in writing by the Chief Executive Officer as eligible for an AIP award in 2020, the Chief Sales Officer (or equivalent position as determined by the Chief Executive Officer) has the opportunity to be paid an Annual Award, as follows:

 

  25% of the target payout is tied to a Non-Financial Goal, as set forth herein.
     
 

75% of the target payout is tied to a Financial Sales Goal, defined as follows:

 

 

o

50% of the target payout for each Sales Participant tied to a Financial Sales Goal shall be based on EBT, as described in Section H, and as set forth in the payout scale in Exhibit A (the “EBT Sales Goal”).

 

 

o

50% of the target payout tied to a Financial Sales Goal shall be based on Bookings, as set forth in the payout scale in Exhibit B, and in accordance with the following parameters (the “Bookings Sales Goal”):

 

 

If Actual Bookings are less than 95% of the Bookings Target (at 100%), the Bookings Sales Goal shall not be funded with respect to Bookings. 

 

 

The Target Payout percentage for the threshold Bookings Target for the Chief Sales Officer with Bookings Goals also shall be equal to the average of the percentage of Target Payout for each of the three Senior Vice Presidents of Sales, or as otherwise designated, for the Company’s three platforms.

 

 

To the extent the Company’s Actual Bookings are greater than the threshold Bookings Target but less than 100% of Bookings Target, or greater than 100% of the Bookings Target but less than the maximum Bookings Target, the payout level of the Bookings Sales Goal shall be calculated based on a straight-line, sliding scale using the performance levels (threshold and target, on the one hand, and target and maximum, on the other hand) between which the Company’s Actual Bookings performance falls as the end points for this calculation.

 

JPayout Offsets for 2H2020 and Annual Awards

 

For 2H2020 and Annual Awards, once performance criteria have been met and a Target Payout has been calculated per the tables above, Financial Goal payouts may be reduced subject to one or more of the following offsets:

 

  Payout shall be reduced by 15% if the Company fails to achieve its Company consolidated Total Recordable Incident Rate ("TRIR") goal for 2020.
     
 

Annual Awards shall be offset by amounts paid for 1H2020 and 2H2020 Awards.  In the event that a Participant receives a 1H2020 and/or 2H2020 Award, but is not eligible for an Annual Award due to failure to meet the Annual EBT threshold, the Participant will not be required to pay back the 1H2020 and/or 2H2020 Award or any portion thereof.

 

K. Revenue Growth Multiplier for Annual Awards

 

Not applicable.

 

LTiming of Awards; Allocation of Unearned Awards; Maximum Award Amount

 

Awards shall be paid as follows:

 

1. 1H2020 Awards shall be paid by September 15 of the Plan Year.

 

2. 2H2020 Awards shall be paid by March 15 of the succeeding Plan Year.

 

3. Annual Awards shall be paid by March 15 of the succeeding Plan Year.

 

Except as otherwise provided below, or under special circumstances as determined by the Plan Committee, the Chief Executive Officer and/or the Compensation Committee, and where allowed by law, Participants who are not employed on the payment date shall not be eligible to receive any payment.    

 

 

 

Except as otherwise provided below and where allowed by law, Participants who are not employed on the payment date shall not be eligible to receive any payment.    

 

For the 1H2020 Award, a Participant who becomes employed after January 1 or who takes an approved leave of absence for more than 15 days during the first half of the Plan Year shall only be eligible to receive an award prorated for the amount of time the Participant was actively working during the first half of the Plan Year (based on the number of days out of 181).

 

For the 2H2020 Award, a Participant who becomes employed after July 1 shall not be eligible to receive a 2H2020 Award. A Participant who takes an approved leave of absence for more than 15 days during the second half of the Plan Year shall only be eligible to receive an award prorated for the amount of time the Participant was actively working during the second half of the Plan Year (based on the number of days out of 184).

 

For the Annual Award, a Participant who becomes employed after January 1 but prior to October 1 of a Plan Year shall only be eligible to receive an award prorated for the amount of time the Participant was employed during the Plan Year (based on the number of days of employment out of 365). A Participant who takes an approved leave of absence for more than 30 days during the Plan Year shall only be eligible to receive an award prorated for the amount of time the Participant was actively working during the Plan Year (based on the number of days out of 365). A Participant must be employed as of October 1 in a Plan Year to be eligible to receive an Annual Award.

 

If a Participant changes to another Management Annual Incentive Plan during the Plan Year, the Participant’s potential 1H2020, 2H2020 and/or Annual Award payouts will be calculated based upon the performance of the business unit the Participant was in on June 30, 2020 (1H2020 payout) and December 31, 2020 (2H2020 and Annual Award payouts). 

 

A Participant who Retires (as defined below) during a Plan Year (or before an amount for a Plan Year becomes payable) shall not be eligible to receive any portion of the Non-Financial Goal, and shall be eligible to receive an award for the Financial Goal prorated for the amount of time the Participant was employed as a Participant during such Plan Year (based on the number of days of employment out of 365). For these purposes, “Retires” means that the Participant voluntarily terminates his or her employment by written notice to the Company during the Plan Year after (i) attaining the age of 55 and completing at least 10 years of service for the Company; (ii) attaining the age of 60 and completing at least five years of service for the Company; or (iii) attaining the age of 65. A Participant who Retires between January 1, 2020 and the 1H2020 Award payout date (as set forth in Section L) will not be eligible to receive a 1H2020 Award or 2H2020 Award. A Participant who Retires between July 1, 2020 and the 2H2020 payout date (as set forth in Section L) will not be eligible to receive a 2H2020 Award.

 

The Beneficiary (as defined below) of a Participant who dies during a Plan Year shall not be eligible to receive any portion of the Non-Financial Goal, and shall be eligible to receive an award for the Financial Goal prorated for the amount of time the individual was a Participant during such Plan Year prior to his or her death (based on the number of days of employment out of 365). The amount of such award shall be based on the Participant’s annualized base salary and the target award level (i.e., without regard to actual performance). Payment shall be made within 30 days of the date of death. For these purposes, “Beneficiary” means the Participant’s surviving spouse and, if the Participant leaves no surviving spouse, the Participant’s estate. Beneficiaries of Participant who dies between January 1, 2020 and the 1H2020 Award payout date (as set forth in Section L) will not be eligible to receive a 1H2020 Award or 2H2020 Award. Beneficiaries of Participant who dies between July 1, 2020 and the 2H2020 payout date (as set forth in Section L) will not be eligible to receive a 2H2020 Award.

 

A Participant who incurs a Disability (as defined below) during a Plan Year shall not be eligible to receive any portion of the Non-Financial Goal, and shall be eligible to receive an award for the Financial Goal prorated for the amount of time the individual was a Participant during such Plan Year prior to his or her Disability (based on the number of days of active employment out of 365). The amount of such award shall be based on the Participant’s annualized base salary and the target award level (i.e., without regard to actual performance). Payment shall be made within 30 days of the date of the Disability. For these purposes, “Disability” means that the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company. A Participant who incurs a Disability between January 1, 2020 and the 1H2020 Award payout date (as set forth in Section L) will not be eligible to receive a 1H2020 Award or 2H2020 Award. A Participant who incurs a Disability between July 1, 2020 and the 2H2020 payout date (as set forth in Section L) will not be eligible to receive a 2H2020 Award.

 

 

 

In the event of a Change in Control (as defined below), outstanding awards shall become payable, based on the annualized base salary of each Participant, prorated based on the days in the Plan Year prior to the Change in Control, using the greater of the actual performance at the date of the Change in Control or the target award level. Payment shall be made within 30 days of the date of the Change in Control and will be offset by payments made for 1H2020 and/or 2H2020 Awards. For these purposes, a “Change in Control” shall mean (i) the acquisition by one person, or more than one person acting as a group, in a transaction or series of related transactions, of ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 30% of the total fair market value or total voting power of the stock of the Company; and/or (ii) a majority of the members of the Company’s Board of Directors is replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the date of the appointment or election; and/or (iii) the consummation of a merger or consolidation of the Company other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; and/or (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is a consummated sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

 

For purposes hereof, “person” shall mean any person, entity or “group” within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except that such term shall not include (i) the Company or any of its affiliates; (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company, or (v) a person or group as used in Rule 13d-1(b) under the Exchange Act.

 

Persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

 

Any accrued bonus amount attributable to (i) employees who are not in good standing at the time of payout or (ii) employees who are no longer eligible to receive bonus awards due to their employment ending prior to the bonus award payment date, shall be reallocated to other eligible bonus awards.

 

The maximum Award payable under this Plan (inclusive of any quarterly payout) to any Participant shall be 200% of such Participant’s Goal.

 

M. Salary & Eligibility Percentage Measurement

 

Payouts for 1H2020 Awards shall be based upon:

 

 

a Participant’s Plan eligible earnings (i.e., salary), as of June 15, 2020 (not reflective of any temporary reduction); and

 

 

the Participant’s AIP Goal (%) that exists on June 15, 2020.

 

Payouts for 2H2020 Awards and Annual Awards shall be based upon:

 

 

a Participant’s Plan eligible earnings (i.e., salary), as of December 15, 2020,; and

 

 

the Participant’s AIP Goal (%) that exists on December 15, 2020.

 

 

 

NNature of Plan

 

This Plan is a statement of intent and is not a contract. This Plan constitutes a discretionary bonus plan and is not a guarantee of employment, and each Participant’s employment with the Company remains “at will” to the maximum extent permitted by applicable law. This Plan may be modified, suspended or terminated at any time during the Plan Year, and all awards are at the discretion of the Company’s Board of Directors or the Compensation Committee until the end of the Plan Year, when the bonus pool will become unconditionally funded based on the criteria set forth in this Plan document. This Plan may be changed during a Plan Year without any obligation of the Company to pay for the elapsed part of the Plan Year in the manner described in the Plan. The decisions of Company management, the Plan Committee, the Board of Directors and/or the Compensation Committee in administering and interpreting the Plan are final and binding on all persons.

 

O. Additional Q3 2020 and Q4 2020 Payouts

 

In addition to all other opportunities under this Plan, Participants are eligible for Q3 2020 and Q4 2020 payouts on the following terms:

 

 

1.

For each of Q3 2020 and Q4 2020, a Participant may be eligible for up to fifteen percent (15%) of his/her Plan Goal if consolidated EBT targets, as set forth in the tables below, are achieved.  As used herein, “Quarterly Payout” is equal to fifteen percent (15%) of Participant’s Plan Goal.

 

 

2.

Q3 2020 payouts shall not be impacted by the potential TRIR offset referenced in Section J of this Plan.  Q4 2020 payouts are subject to the TRIR offset referenced in Section J of this Plan, up to the amount of the Q4 2020 payout.

 

 

3.

Q3 2020 payouts shall be paid by November 30, 2020. 

 

 

4.

Q4 2020 payouts shall be paid by March 15, 2021.

 

 

5.

Q3 2020 and Q4 2020 payouts shall be calculated on a straight line basis between the threshold payout of 50% of Quarterly Payout and target payout of 100% of Quarterly Payout.

 

 

6.

In the event a Participant is entitled to a 2H 2020 or Annual Award under this Plan, such payout shall be reduced by 67% of the actual Q3 2020 and/or Q4 2020 payout received by the Participant.

 

 

7.

A Participant must be a Company employee on July 1, 2020 (and continuously thereafter through the date of payment for Q3 2020 Payout) in order to be entitled to a Q3 2020 Payout.  A Participant must be a Company employee on October 1, 2020 (and continuously thereafter through the date of payment for Q4 2020 Payout) in order to be entitled to a Q4 2020 Payout.

 

 

8.

The specific EBT targets and payout scales for the Q3 2020 and Q4 2020 Payouts are set forth in Exhibit C.

 

P. Negative Operating Results

 

Notwithstanding anything to the contrary set forth in this Plan, a Participant is not eligible for any quarterly, 2H 2020 or Annual Award if the Company’s EBT in the respective quarter, half-year or year are negative.

 

 

 
ex_146875.htm

Exhibit 31.1

 

CERTIFICATIONS

 

I, Charles R. Gordon, certify that:

 

 

1.     I have reviewed this Quarterly Report on Form 10-Q of Aegion Corporation;

 

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.     The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.     The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

 

Date: July 31, 2020

 

 

 

 
 

/s/ Charles R. Gordon

Charles R. Gordon

President and Chief Executive Officer

(Principal Executive Officer)

 

 
ex_146876.htm

Exhibit 31.2

 

CERTIFICATIONS

 

I, David F. Morris, certify that:

 

1.     I have reviewed this Quarterly Report on Form 10-Q of Aegion Corporation;

 

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.     The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.     The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

 

Date: July 31, 2020

 
 

/s/ David F. Morris

David F. Morris
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

 

 

 
ex_146877.htm

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report on Form 10-Q of Aegion Corporation (the “Company”) for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, Charles R. Gordon, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.     the Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.     information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: July 31, 2020

 

 
 

/s/ Charles R. Gordon

Charles R. Gordon

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

ex_146878.htm

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

In connection with the Quarterly Report on Form 10-Q of Aegion Corporation (the “Company”) for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, David F. Morris, Executive Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)     the Form 10-Q fully complies with the requirements of section 13(a) or the Securities Exchange Act of 1934; and

 

(2)     information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: July 31, 2020

 

 
 

/s/ David F. Morris

David F. Morris
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

 

 

 

ex_146879.htm

Exhibit 95

 

Mine Safety and Health Disclosure

Mine Safety and Health Administration Contractor Identification Number VBW

 

The operation of mines located in the U.S. is subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). Under the Mine Act, an independent contractor who provides onsite services to a mine is deemed to be an “operator” of the mine. United Pipeline Systems, Inc., a wholly-owned subsidiary of the Company, performs services or construction at mines in the U.S. from time to time. As such, we are providing this report pursuant to section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of SEC Regulation S-K.

 

The table below sets forth, by mining complex, the total number of citations and/or orders issued by MSHA, under the indicated provisions of the Mine Act, to the Company during quarter ended June 30, 2020 that require disclosure, together with the total dollar value of proposed MSHA assessments.  Section references are to sections of MSHA.  The table below also sets forth information with respect to legal actions for the quarter ended June 30, 2020.

 

Mine or Operating

Name / MSHA

Identification Number

Section 104 S&S Citations

(#)

Section 104(b) Orders

(#)

Section 104(d) Citations and Orders

(#)

Section 110(b)(2) Violations

(#)

Section 107(a) Orders

(#)

Total Dollar Value of MSHA Assessments Proposed

($)

Total Number of Mining Related Fatalities

(#)

Received Notice of Pattern of Violations Under Section 104(e)

(yes/no)

Received Notice of Potential to Have Pattern Under Section 104(e)

(yes/no)

Legal Actions Pending

(#)

Legal Actions Initiated

(#)

Legal Actions Resolved

(#)

Kennecott Utah Copper, LLC

(Bingham Canyon)

4200149

0

0

0

0

0

0

0

no

no

0

0

0

Kennecott Utah Copper, LLC

(Copperton Concentrator)

42011996

0 0 0 0 0 0 0 no no 0 0 0

 

 

 

 
v3.20.2
Document And Entity Information - shares
6 Months Ended
Jun. 30, 2020
Jul. 24, 2020
Document Information [Line Items]    
Entity Central Index Key 0000353020  
Entity Registrant Name Aegion Corp  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2020  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 001-35328  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 45-3117900  
Entity Address, Address Line One 17988 Edison Avenue  
Entity Address, City or Town Chesterfield  
Entity Address, State or Province MO  
Entity Address, Postal Zip Code 63005-1195  
City Area Code 636  
Local Phone Number 530-8000  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Title of 12(b) Security Class A Common Shares, $0.01 par value  
Trading Symbol AEGN  
Security Exchange Name NASDAQ  
Entity Common Stock, Shares Outstanding   30,771,371
v3.20.2
Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenues [1] $ 245,017 $ 318,740 $ 532,392 $ 595,644
Cost of revenues 191,442 251,303 428,933 479,912
Gross profit [1] 53,575 67,437 103,459 115,732
Operating expenses 41,970 51,254 88,318 99,124
Goodwill impairment 1,258 0 1,258 [2] 0
Definite-lived intangible asset impairment 957 0 957 0
Impairment (gain) of assets held for sale (658) 11,946 (658) 11,946
Acquisition and divestiture expenses 657 804 1,509 917
Restructuring and related charges 664 2,974 1,952 4,060
Operating income (loss) 8,727 459 10,123 (315)
Other income (expense):        
Interest expense (4,690) (3,566) (7,886) (7,156)
Interest income 215 261 443 546
Other [3] 964 (1,015) 1,389 (1,689)
Total other expense (3,511) (4,320) (6,054) (8,299)
Income (loss) before taxes on income 5,216 (3,861) 4,069 (8,614)
Taxes on income (loss) 1,220 4,286 1,376 3,524
Net income (loss) 3,996 (8,147) 2,693 (12,138)
Non-controlling interests income (140) (219) (469) (229)
Net income (loss) attributable to Aegion Corporation $ 3,856 $ (8,366) $ 2,224 $ (12,367)
Income (loss) per share attributable to Aegion Corporation:        
Basic (in dollars per share) $ 0.13 $ (0.27) $ 0.07 $ (0.39)
Diluted (in dollars per share) $ 0.12 $ (0.27) $ 0.07 $ (0.39)
[1] Revenues and gross profit are attributed to the country of origin
[2] During the second quarter of 2020, the Company recorded a $1.3 million goodwill impairment related to restructuring activities in Energy Services (see Note 4).
[3] Other expense in the second quarter of 2020 includes gains of $0.9 million related to restructuring (see Note 4). Other expense in the second quarter of 2019 includes $0.9 million of restructuring charges (see Note 4). Other expense in the first six months of 2020 and 2019 includes gains of $0.3 million and charges of $1.1 million, respectively, related to restructuring (see Note 4). Other expense in the first six months of 2020 also includes gains of $0.7 million related to divestitures of Insituform Australia and Insituform Spain (see Note 1).
v3.20.2
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Net income (loss) $ 3,996 $ (8,147) $ 2,693 $ (12,138)
Other comprehensive income (loss):        
Currency translation adjustments 3,392 1,204 (1,245) 3,066
Deferred loss on hedging activity, net of tax (1) [1] (238) (3,553) (6,174) (5,699)
Pension activity, net of tax (2) [2] 4 24 61 3
Total comprehensive income (loss) 7,154 (10,472) (4,665) (14,768)
Comprehensive income attributable to non-controlling interests (313) (326) (379) (249)
Comprehensive income (loss) attributable to Aegion Corporation $ 6,841 $ (10,798) $ (5,044) $ (15,017)
[1] Amounts presented net of tax of $0 and $91 for the quarters ended June 30, 2020 and 2019, respectively, and $0 and $150 for the six months ended June 30, 2020 and 2019, respectively.
[2] Amounts presented net of tax of $1 and $6 for the quarters ended June 30, 2020 and 2019, respectively, and $14 and $1 for the six months ended June 30, 2020 and 2019, respectively.
v3.20.2
Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current assets    
Cash and cash equivalents $ 95,324 $ 64,874
Restricted cash 994 1,348
Receivables, net of allowances of $6,431 and $7,224, respectively 171,245 192,604
Retainage 30,213 33,103
Contract assets 43,278 [1] 51,092 [2]
Inventories 49,589 57,193
Prepaid expenses and other current assets 34,570 33,909
Assets held for sale 10,367 16,092
Total current assets 435,580 450,215
Property, plant & equipment, less accumulated depreciation 100,082 101,091
Other assets    
Goodwill 254,754 256,835
Intangible assets, less accumulated amortization 97,143 104,828
Operating lease assets 69,701 [3] 71,466 [4]
Deferred income tax assets 466 1,216
Other non-current assets 8,495 9,862
Total other assets 430,559 444,207
Total Assets 966,221 995,513
Current liabilities    
Accounts payable 58,402 60,614
Accrued expenses 89,070 96,577
Contract liabilities 37,512 [1] 37,562 [2]
Current maturities of long-term debt 26,780 32,803
Liabilities held for sale 1,448 6,485
Total current liabilities 213,212 234,041
Long-term debt, less current maturities 233,097 243,629
Other liabilities    
Operating lease liabilities 55,455 56,253
Deferred income tax liabilities 11,404 11,254
Other non-current liabilities 23,435 15,243
Total other liabilities 90,294 82,750
Total liabilities 536,603 560,420
Equity    
Preferred stock, undesignated, $.10 par – shares authorized 2,000,000; none outstanding 0 0
Common stock, $.01 par – shares authorized 125,000,000; shares issued and outstanding 30,768,399 and 30,715,959, respectively 308 307
Additional paid-in capital 100,490 101,148
Retained earnings 361,222 358,998
Accumulated other comprehensive loss (39,962) (32,694)
Total stockholders’ equity 422,058 427,759
Non-controlling interests 7,560 7,334
Total equity 429,618 435,093
Total Liabilities and Equity $ 966,221 $ 995,513
[1] Amounts exclude contract assets of $0.7 million and contract liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5).
[2] Amounts exclude contract assets of $5.4 million and contract liabilities of $0.1 million that were classified as held for sale at December 31, 2019 (see Note 5).
[3] Amounts exclude operating lease assets of less than $0.1 million, accrued expenses of less than $0.1 and other liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5).
[4] Amounts exclude operating lease assets of $0.3 million, accrued expenses of $0.2 million and other liabilities of $0.2 million that were classified as held for sale at December 31, 2019 (see Note 5).
v3.20.2
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Allowance for doubtful accounts receivable $ 6,431 $ 7,224
Preferred stock, undesignated, par value (in dollars per share) $ 0.10 $ 0.10
Preferred stock, undesignated, shares authorized (in shares) 2,000,000 2,000,000
Preferred stock, undesignated, shares outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 125,000,000 125,000,000
Common stock, shares issued (in shares) 30,768,399 30,715,959
Common stock, shares outstanding (in shares) 30,768,399 30,715,959
v3.20.2
Consolidated Statements of Equity (Unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
Restricted Stock Units (RSUs) [Member]
Common Stock [Member]
Performance Shares [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Noncontrolling Interest [Member]
Restricted Stock Units (RSUs) [Member]
Performance Shares [Member]
Total
Balance, beginning of period (in shares) at Dec. 31, 2018     31,922,409              
Issuance of common stock upon stock option exercises (in shares)                   52,783
Balance, end of period (in shares) at Mar. 31, 2019     31,491,872              
Balance, beginning of period at Dec. 31, 2018     $ 319 $ 122,818 $ 379,890 $ (40,290) $ 7,450     $ 470,187
Balance, end of period at Mar. 31, 2019     $ 315 111,597 375,889 (40,508) 7,277     454,570
Balance, beginning of period (in shares) at Dec. 31, 2018     31,922,409              
Issuance of common stock upon stock option exercises (in shares)     52,783              
Issuance of shares pursuant to restricted stock units (in shares) 205,274 111,158                
Issuance of shares pursuant to deferred stock units (in shares)     77,486              
Shares repurchased and retired (in shares)     (1,427,716)              
Balance, end of period (in shares) at Jun. 30, 2019     30,941,394              
Balance, beginning of period at Dec. 31, 2018     $ 319 122,818 379,890 (40,290) 7,450     470,187
Issuance of common stock upon stock option exercises     1 955           956
Issuance of shares pursuant to restricted stock units $ 2 $ 1           $ 2 $ 1  
Issuance of shares pursuant to deferred stock units     1             1
Shares repurchased and retired     (15) (25,156)           (25,171)
Balance, end of period at Jun. 30, 2019     $ 309 102,841 367,523 (42,940) 6,290     434,023
Equity-based compensation expense       4,224           4,224
Net income (loss)         (12,367)   229     (12,138)
Currency translation adjustment and derivative transactions, net           (2,650) 20     (2,630)
Distributions to non-controlling interests             (1,409)     (1,409)
Balance, beginning of period (in shares) at Mar. 31, 2019     31,491,872              
Issuance of common stock upon stock option exercises (in shares)     0              
Issuance of shares pursuant to restricted stock units (in shares) 33,699 502                
Issuance of shares pursuant to deferred stock units (in shares)     68,048              
Shares repurchased and retired (in shares)     (652,727)              
Balance, end of period (in shares) at Jun. 30, 2019     30,941,394              
Balance, beginning of period at Mar. 31, 2019     $ 315 111,597 375,889 (40,508) 7,277     454,570
Issuance of common stock upon stock option exercises     0 0           0
Issuance of shares pursuant to restricted stock units $ 0 $ 0           0 0  
Issuance of shares pursuant to deferred stock units     1             1
Shares repurchased and retired     (7) (10,973)           (10,980)
Balance, end of period at Jun. 30, 2019     $ 309 102,841 367,523 (42,940) 6,290     434,023
Equity-based compensation expense       2,217           2,217
Net income (loss)         (8,366)   219     (8,147)
Currency translation adjustment and derivative transactions, net           (2,432) 107     (2,325)
Distributions to non-controlling interests             (1,313)     $ (1,313)
Balance, beginning of period (in shares) at Dec. 31, 2019     30,715,959             30,715,959
Issuance of common stock upon stock option exercises (in shares)     0              
Issuance of shares pursuant to restricted stock units (in shares) 188,545 71,541                
Issuance of shares pursuant to deferred stock units (in shares)     56,582              
Shares repurchased and retired (in shares)     (264,228)              
Balance, end of period (in shares) at Jun. 30, 2020     30,768,399             30,768,399
Balance, beginning of period at Dec. 31, 2019     $ 307 101,148 358,998 (32,694) 7,334     $ 435,093
Issuance of common stock upon stock option exercises     0 0           0
Issuance of shares pursuant to restricted stock units $ 2 $ 1           2 1  
Issuance of shares pursuant to deferred stock units     1             1
Shares repurchased and retired     (3) (5,101)           (5,104)
Balance, end of period at Jun. 30, 2020     $ 308 100,490 361,222 (39,962) 7,560     429,618
Equity-based compensation expense       4,443           4,443
Net income (loss)         2,224   469     2,693
Currency translation adjustment and derivative transactions, net           (7,268) (90)     (7,358)
Distributions to non-controlling interests             (153)     $ (153)
Balance, beginning of period (in shares) at Mar. 31, 2020     30,679,476              
Issuance of common stock upon stock option exercises (in shares)     0              
Issuance of shares pursuant to restricted stock units (in shares) 35,949 0                
Issuance of shares pursuant to deferred stock units (in shares)     56,582              
Shares repurchased and retired (in shares)     (3,608)              
Balance, end of period (in shares) at Jun. 30, 2020     30,768,399             30,768,399
Balance, beginning of period at Mar. 31, 2020     $ 307 98,103 357,366 (42,947) 7,400     $ 420,229
Issuance of common stock upon stock option exercises     0 0           0
Issuance of shares pursuant to restricted stock units $ 0 $ 0           $ 0 $ 0  
Issuance of shares pursuant to deferred stock units     1             1
Shares repurchased and retired     0 (56)           (56)
Balance, end of period at Jun. 30, 2020     $ 308 100,490 361,222 (39,962) 7,560     429,618
Equity-based compensation expense       $ 2,443           2,443
Net income (loss)         $ 3,856   140     3,996
Currency translation adjustment and derivative transactions, net           $ 2,985 173     3,158
Distributions to non-controlling interests             $ (153)     $ (153)
v3.20.2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Cash flows from operating activities:          
Net income (loss) $ 3,996 $ (8,147) $ 2,693 $ (12,138)  
Adjustments to reconcile to net cash provided by operating activities:          
Depreciation and amortization     18,001 17,615  
Gain on sale of fixed assets     (304) (584)  
Equity-based compensation expense     4,443 4,224  
Deferred income taxes     294 601  
Non-cash restructuring charges     503 1,409  
Goodwill impairment 1,258 0 1,258 [1] 0  
Definite-lived intangible asset impairment 957 0 957 0  
Impairment of assets held for sale     0 11,946  
Gain on sale of businesses     (680) 0  
(Gain) loss on foreign currency transactions     (319) 701  
Other     983 (190)  
Changes in operating assets and liabilities (net of acquisitions):          
Receivables net, retainage and contract assets     30,488 (289)  
Inventories     6,705 (3,966)  
Prepaid expenses and other assets     (821) 6,153  
Accounts payable and accrued expenses     (7,650) (5,887)  
Contract liabilities     216 (5,056)  
Other operating     3,571 (360)  
Net cash provided by operating activities     60,338 14,179  
Cash flows from investing activities:          
Capital expenditures     (10,576) (14,328)  
Proceeds from sale of fixed assets     557 968  
Patent expenditures     (154) (197)  
Sale of businesses, net of cash disposed     3,602 0  
Net cash used in investing activities     (6,571) (13,557)  
Cash flows from financing activities:          
Proceeds from issuance of common stock upon stock option exercises     0 956  
Repurchase of common stock     (5,104) (25,171)  
Distributions to non-controlling interests     (153) (1,409)  
Credit facility amendment fees     (1,995) 0  
Payments on notes payable, net     0 (179)  
Proceeds from line of credit, net     2,000 7,000  
Principal payments on long-term debt     (17,500) (13,125)  
Net cash used in financing activities     (22,752) (31,928)  
Effect of exchange rate changes on cash     (919) 226  
Net increase (decrease) in cash, cash equivalents and restricted cash for the period     30,096 (31,080)  
Cash, cash equivalents and restricted cash, beginning of year     66,222 84,886 $ 84,886
Cash, cash equivalents and restricted cash, end of period 96,318 53,806 96,318 53,806 66,222
Cash, cash equivalents and restricted cash associated with assets held for sale, end of period 0 (1,709) 0 (1,709)  
Cash, cash equivalents and restricted cash, end of period $ 96,318 $ 52,097 $ 96,318 $ 52,097 $ 66,222
[1] During the second quarter of 2020, the Company recorded a $1.3 million goodwill impairment related to restructuring activities in Energy Services (see Note 4).
v3.20.2
Note 1 - General
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.

GENERAL

 

The accompanying unaudited consolidated financial statements of Aegion Corporation and its subsidiaries (collectively, “Aegion” or the “Company”) reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the dates and periods presented. Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. All significant intercompany related accounts and transactions have been eliminated in consolidation.

 

The Consolidated Balance Sheet as of December 31, 2019, which is derived from the audited consolidated financial statements, and the interim unaudited consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the requirements of Form 10-Q and Article 10 of Regulation S-X and, consequently, do not include all information or footnotes required by GAAP for complete financial statements or all the disclosures normally made in an Annual Report on Form 10-K. Accordingly, the unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 2, 2020.

 

Strategic Initiatives/Acquisitions/Divestitures

 

Restructuring Activities

 

On July 28, 2017, the Company’s board of directors approved a comprehensive global realignment and restructuring plan (the “Restructuring”) intended to generate more predictable and sustainable long‐term earnings growth, which included, among other things, actions to reduce upstream oil & gas exposure, the exit or divestiture of multiple smaller international businesses, the restructuring of unprofitable businesses in North America and other efforts to right‐size underperforming businesses and reduce corporate and other operating costs. See further discussion in Note 4.

 

Infrastructure Solutions Segment (“Infrastructure Solutions”)

 

On February 13, 2020, the Company sold its Spanish CIPP contracting entity, Insituform Technologies Iberica, S.A. (“Insituform Spain”) to Lajusocarley S.L. In connection with the sale, the Company entered into a five-year tube supply agreement whereby Insituform Spain will buy felt liners exclusively from the Company. Insituform Spain is also entitled to use the Insituform® trade name in Spain based on a trademark license granted for the same five-year time period. The Company had classified Insituform Spain’s assets and liabilities as held for sale on the Consolidated Balance Sheet at December 31, 2019. See Note 5.

 

On January 24, 2020, the Company sold its Australian CIPP contracting entity, Insituform Pacific Pty Limited (“Insituform Australia”), to Insituform Holdings Pty Ltd, an entity affiliated with Killard Infrastructure Pty Ltd. In connection with the sale, the Company entered into a five-year tube supply agreement whereby Insituform Australia, under its new ownership, will buy liners exclusively from the Company. Insituform Australia is also entitled to use the Insituform® trade name in Australia based on a trademark license granted for the same five-year time period. The Company had classified Insituform Australia’s assets and liabilities as held for sale on the Consolidated Balance Sheet at December 31, 2019. See Note 5.

 

During the second quarter of 2019, the Company initiated plans to sell its contracting business in Northern Ireland, Environmental Techniques Limited (“Environmental Techniques”). Accordingly, the Company has classified the assets and liabilities of this business as held for sale on the Consolidated Balance Sheets at June 30, 2020 and December 31, 2019. The Company has suspended the sales process for Environmental Techniques due to COVID-19 and expects to recommence the sales process as soon as reasonably practicable. See Note 5.

 

v3.20.2
Note 2 - Accounting Policies
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Significant Accounting Policies [Text Block]

2.

ACCOUNTING POLICIES

 

Accumulated Other Comprehensive Loss

 

As set forth below, the Company’s accumulated other comprehensive loss is comprised of three main components: (i) currency translation; (ii) derivatives; and (iii) gains and losses associated with the Company’s defined benefit plan in the United Kingdom (in thousands):

 

  

June 30, 2020

  

December 31, 2019

 

Currency translation adjustments (1)

 $(28,396) $(27,241)

Derivative hedging activity

  (10,696)  (4,522)

Pension activity

  (870)  (931)

Total accumulated other comprehensive loss

 $(39,962) $(32,694

)

 

 

(1) 

During the six months ended June 30, 2020, as a result of disposing of certain international entities, $0.8 million was reclassified out of accumulated other comprehensive loss to “Other expense” in the Consolidated Statements of Operations.

 

For the Company’s international subsidiaries, the local currency is generally the functional currency. Assets and liabilities of these subsidiaries are translated into U.S. dollars using rates in effect at the balance sheet date while revenues and expenses are translated into U.S. dollars using average exchange rates. The cumulative translation adjustment resulting from changes in exchange rates are included in the Consolidated Balance Sheets as a component of “Accumulated other comprehensive loss” in total stockholders’ equity. Net foreign exchange transaction gains of $0.3 million and $0.1 million in the second quarters of 2020 and 2019, respectively, and losses of $0.3 million and $0.7 million for the six months ended June 30, 2020 and 2019, respectively, are included in “Other expense” in the Consolidated Statements of Operations.

 

Taxation

 

The Company provides for estimated income taxes payable or refundable on current year income tax returns as well as the estimated future tax effects attributable to temporary differences and carryforwards, based upon enacted tax laws and tax rates, and in accordance with FASB ASC 740, Income Taxes (“FASB ASC 740”). FASB ASC 740 also requires that a valuation allowance be recorded against any deferred tax assets that are not likely to be realized in the future. The determination is based on the Company’s ability to generate future taxable income and, at times, is dependent on its ability to implement strategic tax initiatives to ensure full utilization of recorded deferred tax assets. Should the Company not be able to implement the necessary tax strategies, it may need to record valuation allowances for certain deferred tax assets, including those related to foreign income tax benefits. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowances recorded against net deferred tax assets.

 

Earnings per Share

 

Earnings per share have been calculated using the following share information:

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Weighted average number of common shares used for basic EPS

  30,726,566   31,216,886   30,721,684   31,459,557 

Effect of dilutive stock options and restricted and deferred stock unit awards

  391,918      475,734    

Weighted average number of common shares and dilutive potential common stock used for dilutive EPS

  31,118,484   31,216,886   31,197,418   31,459,557 

 

The Company excluded 449,156 and 498,315 restricted and deferred stock units for the quarter and six-month period ended June 30, 2019, respectively, from the diluted earnings per share calculation for the Company’s common stock because of the reported net loss for the periods.

 

Cash, Cash Equivalents and Restricted Cash

 

The Company classifies highly liquid investments with original maturities of 90 days or less as cash equivalents. Recorded book values are reasonable estimates of fair value for cash and cash equivalents.

 

Cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets and Consolidated Statements of Cash Flows are as follows (in thousands):

 

Balance sheet data

 

June 30, 2020

  

December 31, 2019

 

Cash and cash equivalents

 $95,324  $64,874 

Restricted cash

  994   1,348 

Cash, cash equivalents and restricted cash

 $96,318  $66,222 

 

Restricted cash held in escrow primarily relates to funds reserved for legal requirements, deposits made in lieu of retention on specific projects performed for municipalities and state agencies, or advance customer payments and compensating balances for bank undertakings in Europe. Restricted cash related to operations is similar to retainage, and is, therefore, classified as a current asset, consistent with the Company’s policy on retainage.

 

Fair Value Measurements

 

FASB ASC 820, Fair Value Measurements (“FASB ASC 820”), defines fair value and establishes a framework for measuring and disclosing fair value instruments. The guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

 

 

Level 1 – defined as quoted prices in active markets for identical instruments;

 

Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

The Company uses these levels of hierarchy to measure the fair value of certain financial instruments on a recurring basis, such as for derivative instruments; on a non-recurring basis, such as for acquisitions and impairment testing; for disclosure purposes, such as for long-term debt; and for other applications, as discussed in their respective footnotes. Changes in assumptions or estimation methods could affect the fair value estimates. Other financial instruments including notes payable are recorded at cost, which approximates fair value, and is based on Level 2 inputs as previously defined. The Company had no transfers between Level 1, 2 or 3 inputs during the six months ended June 30, 2020 and 2019.

 

Investments in Variable Interest Entities

 

The Company evaluates all transactions and relationships with variable interest entities (“VIE”) to determine whether the Company is the primary beneficiary of the entities in accordance with FASB ASC 810, Consolidation. There were no changes in the Company’s VIEs during the quarter ended June 30, 2020.

 

Financial data for consolidated variable interest entities are summarized in the following tables (in thousands):

 

Balance sheet data

 

June 30, 2020

  

December 31, 2019

 

Current assets

 $16,546  $18,304 

Non-current assets

  7,892   7,635 

Current liabilities

  5,764   8,261 

Non-current liabilities

  2,521   1,962 

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 

Statement of operations data

 

2020

  

2019

  

2020

  

2019

 

Revenue

 $5,727  $7,519  $13,456  $13,444 

Gross profit

  2,078   2,416   4,381   4,051 

Net income (loss) attributable to Aegion Corporation

  70   (652)  355   (619)

 

 

Newly Issued Accounting Pronouncements

 

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improved consistent application. The guidance is effective for the Company’s fiscal year beginning January 1, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company early-adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year. The Company adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the way in which entities estimate and present credit losses for most financial assets, including accounts receivable. The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year. For the Company’s trade receivables, certain other receivables and certain other financial instruments, it will be required to use a new forward-looking “expected” credit loss model based on historical loss rates that will replace the existing “incurred” credit loss model, which will generally result in earlier recognition of allowances for credit losses. The Company adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

v3.20.2
Note 3 - Revenues
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

3.

REVENUES

 

Performance Obligations

 

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in FASB ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For contracts in which construction, engineering and installation services are provided, there is generally a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. The bundle of goods and services represents the combined output for which the customer has contracted. For product sales contracts with multiple performance obligations where each product is distinct, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good in the contract. For royalty license agreements whereby intellectual property is transferred to the customer, there is a single performance obligation as the license is not separately identifiable from the other goods and services in the contract.

 

The Company’s performance obligations are satisfied over time as work progresses or at a point in time. Revenues from products and services transferred to customers over time accounted for 90.6% and 92.3% of revenues for the quarters ended June 30, 2020 and 2019, respectively. Revenues from construction, engineering and installation services are recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress toward satisfying performance obligations.  Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and, when appropriate, general and administrative expenses. Revenues from maintenance contracts are structured such that the Company has the right to consideration from a customer in an amount that corresponds directly with the performance completed to date.  Therefore, the Company utilizes the practical expedient in FASB ASC 606-55-255, which allows the Company to recognize revenue in the amount to which it has the right to invoice. Applying this practical expedient, the Company is not required to disclose the transaction price allocated to remaining performance obligations under these agreements. Revenues from royalty license arrangements are recognized either at contract inception when the license is transferred or when the royalty has been earned, depending on whether the contract contains fixed consideration. Revenues from stand-alone product sales are recognized at a point in time, when control of the product is transferred to the customer. Revenues from these types of contracts accounted for 9.4% and 7.7% for the quarters ended June 30, 2020 and 2019, respectively.

 

On June 30, 2020, the Company had $501.8 million of remaining performance obligations from construction, engineering and installation services. The Company estimates that approximately $480.0 million, or 95.7%, of the remaining performance obligations at June 30, 2020 will be realized as revenues in the next 12 months.

 

Contract Estimates

 

Accounting for long-term contracts involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract, and recognizes that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that sometimes span multiple years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer.

 

The Company’s contracts do not typically contain variable consideration or other provisions that increase or decrease the transaction price. In rare situations where the transaction price is not fixed, the Company estimates variable consideration at the most likely amount to which it expects to be entitled. The Company includes estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. For royalty license agreements, the Company applies the sales-based and usage-based royalty exception and recognizes royalties at the later of: (i) when the subsequent sale or usage occurs; or (ii) the satisfaction or partial satisfaction of the performance obligation to which some or all of the sales-or usage-based royalty has been allocated. For contracts in which a portion of the transaction price is retained and paid after the good or service has been transferred to the customer, the Company does not recognize a significant financing component. The primary purpose of the retainage payment is often to provide the customer with assurance that the Company will perform its obligations under the contract, rather than to provide financing to the customer.

 

The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available.

 

 

Revenue by Category

 

The following tables summarize revenues by segment and geography (in thousands):

 

   

Quarter Ended June 30, 2020

   

Quarter Ended June 30, 2019

 
    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

 

Geographic region:

                                                               

United States

  $ 114,705     $ 30,608     $ 52,134     $ 197,447     $ 110,957     $ 43,326     $ 85,704     $ 239,987  

Canada

    14,205       10,790             24,995       18,934       14,458             33,392  

Europe

    4,131       3,061             7,192       12,888       4,493             17,381  

Other foreign

    4,351       11,032             15,383       12,661       15,319             27,980  

Total revenues

  $ 137,392     $ 55,491     $ 52,134     $ 245,017     $ 155,440     $ 77,596     $ 85,704     $ 318,740  

 

   

Six Months Ended June 30, 2020

   

Six Months Ended June 30, 2019

 
   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

 

Geographic region:

                                                               

United States

  $ 218,123     $ 69,347     $ 143,197     $ 430,667     $ 208,848     $ 73,347     $ 166,567     $ 448,762  
Canada     25,228       21,622             46,850       29,545       27,915             57,460  
Europe     11,773       6,090             17,863       25,413       7,971             33,384  
Other foreign     12,512       24,500             37,012       23,177       32,861             56,038  

Total revenues

  $ 267,636     $ 121,559     $ 143,197     $ 532,392     $ 286,983     $ 142,094     $ 166,567     $ 595,644  

 

The following tables summarize revenues by segment and contract type (in thousands):

 

   

Quarter Ended June 30, 2020

   

Quarter Ended June 30, 2019

 
    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

 

Contract type:

                                                               

Fixed fee

  $ 121,395     $ 38,382     $ 1,213     $ 160,990     $ 136,212     $ 53,055     $ 1,291     $ 190,558  

Time and materials

          9,835       50,921       60,756             17,283       84,413       101,696  

Product sales

    15,997       7,274             23,271       19,184       7,258             26,442  

License fees

                            44                   44  

Total revenues

  $ 137,392     $ 55,491     $ 52,134     $ 245,017     $ 155,440     $ 77,596     $ 85,704     $ 318,740  

 

   

Six Months Ended June 30, 2020

   

Six Months Ended June 30, 2019

 
   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

 

Contract type:

                                                               

Fixed fee

  $ 233,906     $ 82,637     $ 2,943     $ 319,486     $ 255,127     $ 95,628     $ 2,210     $ 352,965  

Time and materials

          22,805       140,254       163,059             32,259       164,357       196,616  
Product sales     33,730       16,117             49,847       31,662       14,207             45,869  
License fees                             194                   194  

Total revenues

  $ 267,636     $ 121,559     $ 143,197     $ 532,392     $ 286,983     $ 142,094     $ 166,567     $ 595,644  

 

 

Contract Balances

 

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets and contract liabilities on the Consolidated Balance Sheets. Contract assets represent work performed that could not be billed either due to contract stipulations or the required contractual documentation has not been finalized. Substantially all unbilled amounts are expected to be billed and collected within one year.

 

For fixed fee and time-and-materials based contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. For some royalty license arrangements, minimum amounts are billed over the license term as quarterly royalty amounts are determined. This results in contract assets as the Company recognizes revenue for the license when the license is transferred to the customer at contract inception. The Company’s contract liabilities consist of advance payments, billings in excess of revenue recognized and deferred revenue.

 

The Company’s contract assets and contract liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period. Advance payments, billings in excess of revenue recognized and deferred revenue are each classified as current.

 

Net contract assets (liabilities) consisted of the following (in thousands):

 

  

June 30, 2020 (1)

  

December 31, 2019 (2)

 

Contract assets – current

 $43,278  $51,092 

Contract liabilities – current

  (37,512)  (37,562)

Net contract assets

 $5,766  $13,530 

 

  (1) Amounts exclude contract assets of $0.7 million and contract liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5).
  (2) Amounts exclude contract assets of $5.4 million and contract liabilities of $0.1 million that were classified as held for sale at December 31, 2019 (see Note 5).

 

Substantially all of the $37.6 million and $32.3 million contract liabilities balances at December 31, 2019 and December 31, 2018, respectively, were recognized in revenues during the first six months of 2020 and 2019, respectively.

 

v3.20.2
Note 4 - Restructuring
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Restructuring, Impairment, and Other Activities Disclosure [Text Block]

4.

RESTRUCTURING

 

On July 28, 2017, the Company’s board of directors approved the Restructuring. As part of the Restructuring, the Company announced plans to: (i) divest Bayou; (ii) exit all non-pipe related contract applications for the Tyfo® system in North America; (iii) right-size the cathodic protection services operation in Canada and the CIPP businesses in Australia and Denmark; and (iv) reduce corporate and other operating costs.

 

During 2018 and 2019, the Company’s board of directors approved additional actions with respect to the Restructuring, which included the decisions to: (i) divest the Australia and Denmark CIPP businesses; (ii) take actions to further optimize operations within North America, including measures to reduce consolidated operating costs; and (iii) divest or otherwise exit multiple additional international businesses, including: (a) the Company’s cathodic protection installation activities in the Middle East, including Corrpower International Limited, the Company’s cathodic protection materials manufacturing and production joint venture in Saudi Arabia; (b) United Pipeline de Mexico S.A. de C.V., the Company’s Tite Liner® joint venture in Mexico; (c) the Company’s Tite Liner® businesses in Brazil and Argentina; (d) Aegion South Africa Proprietary Limited, the Company’s Tite Liner® and CIPP joint venture in the Republic of South Africa; and (e) the Company’s CIPP contract installation operations in England, the Netherlands, Spain and Northern Ireland.

 

The Company completed the divestitures of Bayou and the Denmark CIPP business in 2018. The Company also completed the divestitures of the Netherlands CIPP business and its Tite Liner® joint venture in Mexico in 2019, as well as the shutdown of activities for the CIPP business in England. The Company completed the divestitures of CIPP operations in Australia and Spain in early 2020 (see Note 1). Remaining shutdown activities include Corrosion Protection entities in South America and South Africa, which are expected to be completed in 2020. Additionally, the exit of the Company’s cathodic protection installation activities in the Middle East is substantially complete, though management expects minimal wind-down activities will extend through the first quarter of 2021 related to a small number of projects remaining in backlog. The sale of the Northern Ireland contracting operation has been suspended due to COVID-19, but the Company expects to recommence the process as soon as reasonably practicable.

 

As part of efforts to optimize the cathodic protection operations in North America, management initiated plans during the fourth quarter of 2019 to further downsize operations in the U.S., including the closure of three branch offices and the exit of capital intensive drilling activities at four branch offices. These actions included a reduction of approximately 20% of the cathodic protection domestic workforce and an exit of drilling activities that contributed approximately 20% to our cathodic protection domestic revenues in 2019. Management expects these actions to improve our cathodic protection cost structure in the U.S., eliminate unprofitable results in certain parts of the business and reduce consolidated annual expenses for the business overall. Also during the fourth quarter of 2019, the Company reduced corporate headcount and took other actions to reduce corporate costs.

 

During the second quarter of 2020, the Company took additional actions to exit its specialty turnaround services businesses in Energy Services, Plant Performance Services LLC and P2S LLC (collectively “P2S”). Additionally, the Company executed reductions in force across the rest of the Company related to business slowdowns due to COVID-19.

 

Total pre-tax restructuring and related impairment charges since inception were $180.4 million ($162.6 million post-tax) and consisted of cash charges totaling $51.1 million and non-cash charges totaling $129.3 million. Cash charges included employee severance, retention, extension of benefits, employment assistance programs and other restructuring costs associated with the restructuring efforts described above. Non-cash charges included (i) $86.4 million related to goodwill and long-lived asset impairment charges recorded in 2017 as part of exiting the non-pipe FRP contracting market in North America, and (ii) $42.9 million related to allowances for accounts receivable, write-offs of inventory and long-lived assets, impairment of definite-lived intangible assets, release of cumulative currency translation adjustments as well as net losses on the disposal of both domestic and international entities. The Company reduced headcount by approximately 745 employees as a result of these actions.

 

During the second half of 2020, management expects to initiate additional restructuring actions as the Company balances the effects of COVID-19, with the majority of charges included within the Corrosion Protection segment. Additionally, the Company continues to monitor the impact COVID-19 is having on the oil refining markets in the United States and its Energy Services segment. The Company is prepared to proactively respond to the situation and may take further restructuring actions as warranted. The Company expects to incur additional cash charges related to this program of between $3 million and $5 million. It could also incur additional non-cash charges primarily associated with the release of cumulative currency translation adjustments and losses on the closure or liquidation of international entities.

 

During the quarters and six months ended June 30, 2020 and 2019, the Company recorded pre-tax expenses related to the Restructuring as follows (in thousands):

 

  

Quarter Ended June 30, 2020

  

Quarter Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

 

Severance and benefit related costs

 $118  $106  $69  $57  $350  $551  $1,575  $6  $  $2,132 

Contract termination costs

  36   175         211   (92)  790         698 

Relocation and other moving costs

     103         103      144         144 

Other restructuring costs (1)

  (199)  100   3,385   883   4,169   1,696   940      906   3,542 

Total pre-tax restructuring charges

 $(45) $484  $3,454  $940  $4,833  $2,155  $3,449  $6  $906  $6,516 

 

 

(1) 

For the quarter ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the quarter ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.

 

  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

 

Severance and benefit related costs

 $118  $969  $69  $332  $1,488  $833  $1,745  $40  $9  $2,627 

Contract termination costs

  36   229   62      327   333   807      98   1,238 

Relocation and other moving costs

     103   34      137   51   144         195 

Other restructuring costs (1)

  162   1,079   3,385   1,878   6,504   3,440   729      1,153   5,322 

Total pre-tax restructuring charges

 $316  $2,380  $3,550  $2,210  $8,456  $4,657  $3,425  $40  $1,260  $9,382 

 

 

(1) 

For the six months ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the six months ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.

 

Restructuring costs related to severance, other termination benefit costs and early contract termination costs were $0.7 million and $3.0 million for the quarters ended June 30, 2020 and 2019, respectively, and $2.0 million and $4.1 million for the six months ended June 30, 2020 and 2019, respectively, are reported on a separate line in the Consolidated Statements of Operations.

 

The following tables summarize all charges related to the Restructuring recognized in the quarters and six months ended June 30, 2020 and 2019 as presented in their affected line in the Consolidated Statements of Operations (in thousands):

 

  

Quarter Ended June 30, 2020

  

Quarter Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (1)

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (2)

 

Cost of revenues

 $52  $(131) $  $  $(79) $(67) $463  $  $  $396 

Operating expenses

  (133)  1,091   1,170   838   2,966   976   331      898   2,205 
Goodwill impairment        1,258      1,258                
Definite-lived intangible asset impairment        957      957                

Restructuring and related charges

  154   384   69   57   664   459   2,509   6      2,974 

Other expense

  (118)  (860)     45   (933)  787   146      8   941 

Total pre-tax restructuring charges

 $(45) $484  $3,454  $940  $4,833  $2,155  $3,449  $6  $906  $6,516 

 

 

(1) 

Total pre-tax restructuring charges for the quarter ended June 30, 2020, include cash charges of $2.6 million and non-cash charges of $2.2 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

 

 

(2) 

Total pre-tax restructuring charges for the quarter ended June 30, 2019, include cash charges of $5.4 million and non-cash charges of $1.1 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

 

  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (1)

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (2)

 

Cost of revenues

 $69  $175  $  $  $244  $(92) $562  $  $  $470 

Operating expenses

  316   1,642   1,170   1,219   4,347   2,322   268      1,145   3,735 

Goodwill impairment

        1,258      1,258                

Definite-lived intangible asset impairment

        957      957                

Restructuring and related charges

  154   1,301   165   332   1,952   1,217   2,696   40   107   4,060 

Other expense

  (223)  (738)     659   (302)  1,210   (101)     8   1,117 

Total pre-tax restructuring charges

 $316  $2,380  $3,550  $2,210  $8,456  $4,657  $3,425  $40  $1,260  $9,382 

 

 

(1) 

Total pre-tax restructuring charges for the six months ended June 30, 2020, include cash charges of $5.8 million and non-cash charges of $2.7 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

 

 

(2) 

Total pre-tax restructuring charges for the six months ended June 30, 2019, include cash charges of $8.5 million and non-cash charges of $0.9 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.

 

The following tables summarize restructuring activity during the first six months of 2020 and 2019 (in thousands):

 

              

Utilized in 2020

     
  Reserves at December 31, 2019  

2020 Charge to Income

  

Foreign Currency Translation

  

Cash(1)

  

Non-Cash

  

Reserves at June 30, 2020

 
Severance and benefit related costs $4,389  $1,488  $(21) $4,104  $  $1,752 
Contract termination costs  953   327   (7)  575      698 
Relocation and other moving costs  367   137      211      293 
Other restructuring costs  2,379   6,504   (22)  4,791   2,718   1,352 

Total pre-tax restructuring charges

 $8,088  $8,456  $(50) $9,681  $2,718  $4,095 

 

 

(1) 

Refers to cash utilized to settle charges during the first six months of 2020.

 

 

              

Utilized in 2019

     
  Reserves at December 31, 2018  

2019 Charge to Income

  

Foreign Currency Translation

  

Cash(1)

  

Non-Cash

  

Reserves at June 30, 2019

 

Severance and benefit related costs

 $1,742  $2,627  $(10) $1,860  $  $2,499 

Contract termination costs

  359   1,238   (13)  606      978 

Relocation and other moving costs

     195   (1)  26      168 

Other restructuring costs

  311   5,322   (3)  3,450   1,409   771 

Total pre-tax restructuring charges

 $2,412  $9,382  $(27) $5,942  $1,409  $4,416 

 

 

(1) 

Refers to cash utilized to settle charges during the first six months of 2019.

 

 

v3.20.2
Note 5 - Assets and Liabilities Held for Sale
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

5.

ASSETS AND LIABILITIES HELD FOR SALE

 

During 2018 and 2019, the Company initiated plans to divest certain of its international CIPP contracting businesses: Insituform Australia, Insituform Spain and Environmental Techniques. Also during 2019, the Company’s board of directors approved the action to sell several parcels of land located near its corporate headquarters.

 

During the first quarter of 2020, the Company completed sale transactions for Insituform Australia and Insituform Spain. See Note 1. Before the COVID-19 pandemic, the Company was in various stages of discussions with third parties for Environmental Techniques. Although the sale process has been suspended, the Company expects to recommence the process as soon as reasonably practicable. The Company believes it is probable that a sale of the land parcels will occur in 2020 or early 2021. In the event the Company is unable to liquidate the assets and liabilities at a price that is less than favorable, the Company could incur a loss on disposal.

 

The relevant asset and liability balances at June 30, 2020 and December 31, 2019 are accounted for as held for sale and measured at the lower of carrying value or fair value less cost to sell. Based on management’s expectation of fair value less cost to sell, the Company recorded an impairment of assets held for sale of $2.9 million in the Consolidated Statement of Operations during 2019 related to the land parcels. In the event the Company is unable to sell the assets and liabilities or sells them at a price or on terms that are less favorable, or at a higher cost than currently anticipated, the Company could incur additional impairment charges or a loss on disposal.

 

The following table provides the components of assets and liabilities held for sale (in thousands):

 

  

June 30, 2020(1)

  

December 31, 2019(2)

 

Assets held for sale:

        

Current assets

        

Receivables, net

 $266  $4,136 

Retainage

  463   518 

Contract assets

  698   5,350 

Inventories

  141   2,097 

Prepaid expenses and other current assets

  194   799 

Total current assets

  1,762   12,900 

Property, plant & equipment, less accumulated depreciation

  7,233   10,962 

Goodwill

  2,640   4,224 

Intangible assets, less accumulated amortization

  1,429   1,528 

Operating lease assets

  42   326 

Other non-current assets

  122   130 

Impairment of assets held for sale

  (2,861)  (13,978)

Total assets held for sale

 $10,367  $16,092 
         

Liabilities held for sale:

        

Current liabilities

        

Accounts payable

 $280  $2,174 

Accrued expenses

  1,072   3,961 

Contract liabilities

  43   122 

Total current liabilities

  1,395   6,257 

Operating lease liabilities

  6   174 

Other non-current liabilities

  47   54 

Total liabilities held for sale

 $1,448  $6,485 

 


 

(1) 

Includes Environmental Techniques and land held at Corporate.
 

(2) 

Includes Insituform Australia, Insituform Spain, Environmental Techniques and land held at Corporate.

 

v3.20.2
Note 6 - Leases
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]

6.

LEASES

 

The Company’s operating lease portfolio includes operational field locations, administrative offices, equipment, vehicles and information technology equipment. The majority of the Company’s leases have remaining lease terms of 1 year to 20 years, some of which include options to extend the leases for 5 years or more. Right-of-use assets are presented within “Operating lease assets” on the Consolidated Balance Sheet. The current portion of operating lease liabilities are presented within “Accrued expenses”, and the non-current portion of operating lease liabilities are presented within “Operating lease liabilities” on the Consolidated Balance Sheet.

 

Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term at inception. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating leases in effect prior to January 1, 2019 were recognized at the present value of the remaining payments on the remaining lease term as of January 1, 2019.  A portion of the Company’s real estate, equipment and vehicle leases is subject to periodic changes in the Consumer Price Index, LIBOR or other market index. The changes to these indexes are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. Because most leases do not provide an explicit rate of return, the Company utilizes its incremental secured borrowing rate on a lease-by-lease basis in determining the present value of lease payments at the commencement date of the lease.

 

The following table presents the components of lease expense (in thousands):

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Operating lease cost

 $4,932  $5,938  $10,138  $11,390 

Short-term lease cost

  4,785   5,482   10,866   12,721 

Total lease cost

 $9,717  $11,420  $21,004  $24,111 

 

Supplemental balance sheet information related to leases was as follows (in thousands):

 

  

June 30, 2020(1)

  

December 31, 2019(2)

 

Operating leases:

        

Operating lease assets

 $69,701  $71,466 
         

Accrued expenses

 $15,378  $15,828 

Other liabilities

  55,455   56,253 

Total operating lease liabilities

 $70,833  $72,081 
         

Weighted-average remaining lease term (in years)

  5.86   5.74 

Weighted-average discount rate

  5.12%  5.71%

 

 

(1)

Amounts exclude operating lease assets of less than $0.1 million, accrued expenses of  less than $0.1 and other liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5).
 (2)Amounts exclude operating lease assets of $0.3 million, accrued expenses of $0.2 million and other liabilities of $0.2 million that were classified as held for sale at December 31, 2019 (see Note 5).

 

v3.20.2
Note 7 - Goodwill and Intangible Assets
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

7.

GOODWILL AND INTANGIBLE ASSETS

 

Goodwill

 

The following table presents a reconciliation of the beginning and ending balances of goodwill (in thousands):

 

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Total

 

Balance, December 31, 2019

                

Goodwill, gross

 $240,160  $76,946  $81,504  $398,610 

Accumulated impairment losses

  (62,848)  (45,400)  (33,527)  (141,775)

Goodwill, net

  177,312   31,546   47,977   256,835 

2020 Activity:

                
Impairment (1)        (1,258)  (1,258)

Foreign currency translation

  (436)  (387)     (823)

Balance, June 30, 2020

                

Goodwill, gross

  239,724   76,559   81,504   397,787 

Accumulated impairment losses

  (62,848)  (45,400)  (34,785)  (143,033)

Goodwill, net

 $176,876  $31,159  $46,719  $254,754 

 

  (1) During the second quarter of 2020, the Company recorded a $1.3 million goodwill impairment related to restructuring activities within Energy Services (see Note 4).

 

Intangible Assets

 

Intangible assets consisted of the following (in thousands):

 

  

June 30, 2020

  

December 31, 2019

 
  

Weighted Average Useful Lives (Years)

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

 

License agreements

 0.2  $3,894  $(3,871) $23  $3,894  $(3,824) $70 

Leases

 0.5   864   (820)  44   864   (777)  87 

Trademarks (1)

 9.2   15,437   (7,261)  8,176   15,699   (6,911)  8,788 

Non-competes

 2.9   2,048   (1,391)  657   2,301   (1,354)  947 

Customer relationships (1)

 6.9   156,817   (81,931)  74,886   157,576   (76,832)  80,744 

Patents and acquired technology

 7.3   38,728   (25,371)  13,357   39,289   (25,097)  14,192 

Total intangible assets

   $217,788  $(120,645) $97,143  $219,623  $(114,795) $104,828 

 

  (1) During the second quarter of 2020, the Company recorded intangible asset impairments related to restructuring activities within Energy Services of $0.3 million for trademarks and $0.7 million for customer relationships (see Note 4).

 

Amortization expense was $3.4 million and $3.4 million for the quarters ended June 30, 2020 and 2019, respectively, and $6.8 million and $6.9 million for the six months ended June 30, 2020 and 2019, respectively. Estimated amortization expense for the years ended December 31, 2020, 2021, 2022, 2023 and 2024 is $13.0 million, $12.9 million, $12.9 million, $12.9 million and $12.1 million, respectively.

 

v3.20.2
Note 8 - Long-term Debt and Credit Facility
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Debt Disclosure [Text Block]

8.

LONG-TERM DEBT AND CREDIT FACILITY

 

Long-term debt consisted of the following (in thousands):

 

   

June 30, 2020

   

December 31, 2019

 

Term note, due February 27, 2023, annualized rates of 4.25% and 4.09%, respectively

  $ 236,250     $ 253,750  

Line of credit, 4.25% and 4.01%, respectively

    26,000       24,000  

Other notes with interest rates from 3.3% to 7.8%

    681       770  

Subtotal

    262,931       278,520  

Less – Current maturities of long-term debt

    26,780       32,803  

Less – Unamortized loan costs

    3,054       2,088  

Total

  $ 233,097     $ 243,629  

 

In October 2015, the Company entered into an amended and restated $650.0 million senior secured credit facility with a syndicate of banks. In February 2018, December 2018 and April 2020, the Company amended this facility (the “amended Credit Facility”). At June 30, 2020, the amended Credit Facility consisted of a $175.0 million revolving line of credit and a $245.0 million term loan facility, each with a maturity date in February 2023.

 

Due to the potential impacts of COVID-19 on the Company’s business and the uncertainties associated with the duration of the pandemic, the Company amended its current credit facility on April 29, 2020 to provide additional liquidity and to ensure ongoing debt covenant compliance with the amended ratios. The amended Credit Facility now includes more flexible financial covenants and updated the defined terms to allow for the add-back of certain restructuring and divestiture charges. The amended Credit Facility also places certain limits on the Company’s open market share repurchase program and repurchases of common stock in connection with the Company’s equity compensation programs for employees. See Note 9.

 

The Company paid expenses of $2.0 million associated with the amended Credit Facility, $1.5 million related to up-front lending fees and $0.5 million related to third-party arranging fees and expenses, the latter of which was recorded in “Interest expense” in the Consolidated Statement of Operations in the second quarter of 2020. In addition, the Company had $1.9 million in unamortized loan costs associated with the amended Credit Facility, of which $0.2 million was written off and recorded in “Interest expense” in the Consolidated Statement of Operations in the second quarter of 2020.

 

Based on the April 2020 amendments, interest is charged on the principal amounts outstanding under the amended Credit Facility at the British Bankers Association LIBOR rate plus 3.50% from April 29, 2020 until the Company delivers its compliance certificate to the administrative agent for the first calendar quarter of 2021. Thereafter, interest is charged at the British Bankers Association LIBOR rate plus an applicable rate ranging from 1.75% to 3.50% depending on the Company’s consolidated leverage ratio. The amended Credit Facility also provided a 75 basis point floor for the base LIBOR rate. The applicable LIBOR borrowing rate (LIBOR plus Company’s applicable rate) as of June 30, 2020 was approximately 4.25%.

 

The Company’s indebtedness at June 30, 2020 consisted of $236.3 million outstanding from the term loan under the amended Credit Facility and $26.0 million on the line of credit under the amended Credit Facility. Additionally, the Company had $0.7 million of debt held by its joint ventures (representing funds loaned by its joint venture partners). During the second quarter of 2020, the Company repaid $32.0 million on the line of credit as a result of focused working capital management and strong operating cash flows.

 

As of June 30, 2020, the Company had $35.0 million in letters of credit issued and outstanding under the amended Credit Facility. Of such amount, $12.2 million was collateral for the benefit of certain of our insurance carriers and $22.8 million was for letters of credit or bank guarantees of performance or payment obligations of foreign subsidiaries.

 

The Company’s indebtedness at December 31, 2019 consisted of $253.8 million outstanding from the term loan under the amended Credit Facility, $24.0 million on the line of credit under the amended Credit Facility and $0.8 million of third-party notes and bank debt.

 

At June 30, 2020 and December 31, 2019, the estimated fair value of the Company’s long-term debt was approximately $274.0 million and $286.8 million, respectively. Fair value was estimated using market rates for debt of similar risk and maturity and a discounted cash flow model, which are based on Level 2 inputs as defined in Note 2.

 

In October 2015, the Company entered into an interest rate swap agreement for a notional amount of $262.5 million, which is set to expire in October 2020. The notional amount of this swap mirrors the amortization of a $262.5 million portion of the Company’s $350.0 million term loan drawn from the original Credit Facility. The swap requires the Company to make a monthly fixed rate payment of 1.46% calculated on the amortizing $262.5 million notional amount, and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $262.5 million notional amount. The receipt of the monthly LIBOR-based payment offsets a variable monthly LIBOR-based interest cost on a corresponding $262.5 million portion of the Company’s term loan from the original Credit Facility. After considering the impact of the interest rate swap agreement, the effective borrowing rate on the Company’s term note as of June 30, 2020 was approximately 5.11%. This interest rate swap is used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and is accounted for as a cash flow hedge. See Note 13.

 

In March 2018, the Company entered into an interest rate swap forward agreement that begins in October 2020 and expires in February 2023 to coincide with the amortization period of the amended Credit Facility. The swap will require the Company to make a monthly fixed rate payment of 2.937% calculated on the then amortizing $170.6 million notional amount, and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $170.6 million notional amount. The receipt of the monthly LIBOR-based payment will offset the variable monthly LIBOR-based interest cost on a corresponding $170.6 million portion of the Company’s term loan from the amended Credit Facility. This interest rate swap will be used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and accounted for as a cash flow hedge. See Note 13.

 

The amended Credit Facility is subject to certain financial covenants, including a consolidated financial leverage ratio and consolidated fixed charge coverage ratio. Subject to the specifically defined terms and methods of calculation as set forth in the amended Credit Facility’s credit agreement, the financial covenant requirements as of June 30, 2020 were defined as follows:

 

 

Consolidated financial leverage ratio compares consolidated funded indebtedness to amended Credit Facility defined income with a maximum amount not to exceed 4.00 to 1.00. At June 30, 2020, the Company’s consolidated financial leverage ratio was 2.65 to 1.00 and, using the amended Credit Facility defined income, the Company had the capacity to borrow up to $140.0 million of additional debt.

 

 

Consolidated fixed charge coverage ratio compares amended Credit Facility defined income to amended Credit Facility defined fixed charges with a minimum permitted ratio of not less than 1.10 to 1.00. At June 30, 2020, the Company’s fixed charge ratio was 1.41 to 1.00.

 

At June 30, 2020, the Company was in compliance with all of its debt and financial covenants as required under the amended Credit Facility.

 

v3.20.2
Note 9 - Stockholders' Equity and Equity Compensation
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]

9.

STOCKHOLDERS’ EQUITY AND EQUITY COMPENSATION

 

Share Repurchase Plan

 

In December 2019, the Company’s board of directors authorized the open market repurchase of up to an additional two million shares of the Company’s common stock upon completion of the two million share repurchase program approved by the board of directors in December 2018. As of June 30, 2020, 327,161 shares remained to be repurchased under the 2018 program and an additional two million shares under the 2019 program. Any shares repurchased are pursuant to one or more trading plans established in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. In March 2020, the Company’s board of directors suspended the applicable 10b5-1 trading plans for the current open market repurchase program to increase liquidity and improve financial flexibility in light of COVID-19. The prior authorizations of the board of directors remain in effect as the program did not establish a time period in which the repurchases had to be made. Effective April 29, 2020, the amended Credit Facility limits open market repurchases of the Company’s common stock through June 30, 2021 to: (i) unlimited if the Company’s consolidated financial leverage ratio is less than 2.50 to 1.00; (ii) $20.0 million while the Company’s consolidated financial leverage ratio is greater than or equal to 2.50 to 1.00, but less than 3.00 to 1.00; and (iii) zero while the Company’s consolidated financial leverage ratio is greater than or equal to 3.00 to 1.00.

 

The Company’s board of directors also approved the purchase of up to $10.0 million of our common stock in each calendar year in connection with the Company’s equity compensation programs for employees. Effective April 29, 2020, the amended Credit Facility limits the amount repurchased to $5.0 million though June 30, 2021. The participants in the Company’s equity plans may surrender shares of common stock in satisfaction of tax obligations arising from the vesting of restricted stock, restricted stock unit awards and performance unit awards under such plans and in connection with the exercise of stock option awards. The deemed price paid is the closing price of the Company’s common stock on the Nasdaq Global Select Market on the date that the restricted stock, restricted stock unit or performance unit vests or the shares of the Company’s common stock are surrendered in exchange for stock option exercises. With regard to stock option awards, the option holder may elect a “net, net” exercise in connection with the exercise of employee stock options such that the option holder receives a number of shares equal to the built-in gain in the option shares divided by the market price of the Company’s common stock on the date of exercise, less a number of shares equal to the taxes due upon the exercise of the option divided by the market price of the Company’s common stock on the date of exercise. The shares of common stock surrendered for taxes due on the exercise of the option are deemed repurchased by the Company.

 

During the first six months of 2020, the Company acquired 180,491 shares of the Company’s common stock for $3.2 million ($17.80 average price per share) through the open market repurchase program discussed above, and 83,737 shares of the Company’s common stock for $1.9 million ($22.54 average price per share) in connection with the satisfaction of tax obligations in connection with equity compensation programs for employees. Once repurchased, the Company immediately retired all such shares.

 

During the first six months of 2019, the Company acquired 1,274,086 shares of the Company’s common stock for $22.0 million ($17.28 average price per share) through open market repurchases, 153,630 shares of the Company’s common stock for $3.1 million ($20.48 average price per share) in connection with the satisfaction of tax obligations in connection with the vesting of restricted stock, restricted stock units and performance units, and 48,409 shares of the Company’s common stock for $1.0 million ($20.52 average price per share) in connection with “net, net” exercises of employee stock options. Once repurchased, the Company immediately retired all such shares.

 

Equity-Based Compensation Plans

 

In April 2016, the Company’s stockholders approved the 2016 Employee Equity Incentive Plan, which was amended in 2017 by the First Amendment to the 2016 Employee Equity Incentive Plan (as amended, the “2016 Employee Plan”). In April 2018, the Company’s stockholders approved the Second Amendment to the 2016 Employee Equity Incentive Plan, which increased by 1,700,000 the number of shares of the Company’s common stock reserved and available for issuance in connection with awards issued under the 2016 Employee Plan. The 2016 Employee Plan, which replaced the 2013 Employee Equity Incentive Plan, provides for equity-based compensation awards, including restricted shares of common stock, performance awards, stock options, stock units and stock appreciation rights. The 2016 Employee Plan is administered by the Compensation Committee of the board of directors, which determines eligibility, timing, pricing, amount and other terms or conditions of awards. As of June 30, 2020, 1,370,669 shares of the Company’s common stock were available for issuance under the 2016 Employee Plan.

 

In April 2016, the Company’s stockholders approved the 2016 Non-Employee Director Equity Incentive Plan (the “2016 Director Plan”), which replaced the 2011 Non-Employee Director Equity Incentive Plan. In April 2019, the Company’s stockholders approved an amendment and restatement of the 2016 Director Plan, which among other things, increased by 300,000 the number of shares of the Company’s common stock reserved and available for issuance in connection with awards issued under the 2016 Director Plan. The 2016 Director Plan provides for equity-based compensation awards, including non-qualified stock options and stock units. The board of directors administers the 2016 Director Plan and has the authority to establish, amend and rescind any rules and regulations related to the 2016 Director Plan. As of June 30, 2020, 257,396 shares of the Company’s common stock were available for issuance under the 2016 Director Plan.

 

Stock Awards

 

Stock awards, which include shares of restricted stock, restricted stock units and performance stock units, are awarded from time to time to executive officers and certain key employees of the Company. Stock award compensation is recorded based on the award date fair value and charged to expense ratably through the requisite service period. The forfeiture of unvested restricted stock, restricted stock units and performance stock units causes the reversal of all previous expense to be recorded as a reduction of current period expense.

 

A summary of the stock award activity is as follows:

 

  

Stock Awards

  

Weighted Average Award Date Fair Value

 

Outstanding at December 31, 2019

  1,034,964  $23.20 
Period Activity:        

Restricted stock units awarded

  391,171   20.02 

Performance stock units awarded

  131,755   22.96 

Restricted stock units distributed

  (188,545)  22.30 

Performance stock units distributed

  (71,541)  28.18 

Restricted stock units forfeited

  (28,928)  21.07 

Performance stock units forfeited

  (76,282)  27.46 

Outstanding at June 30, 2020

  1,192,594  $21.76 

 

Expense associated with stock awards was $2.3 million and $2.0 million for the quarters ended June 30, 2020 and 2019, respectively, and $4.0 million and $4.0 million for the six months ended June 30, 2020 and 2019, respectively. Unrecognized pre-tax expense of $15.9 million related to stock awards is expected to be recognized over the weighted average remaining service period of 1.9 years for awards outstanding at June 30, 2020.

 

Deferred Stock Unit Awards

 

Deferred stock units are generally awarded to directors of the Company and represent the Company’s obligation to transfer one share of the Company’s common stock to the grantee at a future date. Historically, awards were fully vested, and fully expensed, on the date of grant. Beginning in April 2019, as a result of the amendment and restatement of the 2016 Director Plan discussed above, the expense related to the issuance of deferred stock units is based on the award date fair value and charged to expense ratably through the requisite service period, which is generally one year. The forfeiture of unvested deferred stock units causes the reversal of all previous expense to be recorded as a reduction of current period expense.

 

A summary of deferred stock unit activity is as follows:

 

  

Deferred Stock Units

  

Weighted Average Award Date Fair Value

 

Outstanding at December 31, 2019

  253,340  $20.71 
Period Activity:        

Awarded

  64,010   14.55 

Distributed

  (56,582)  21.63 

Outstanding at June 30, 2020

  260,768  $19.00 

 

Expense associated with deferred stock unit awards was $0.2 million and $0.2 million for the quarters ended June 30, 2020 and 2019, respectively, and $0.4 million and $0.2 million for the six months ended June 30, 2020 and 2019, respectively. Unrecognized pre-tax expense is $0.8 million related to deferred stock unit awards is expected to be recognized over the weighted average service period of 0.8 years for awards outstanding at June 30, 2020.

 

Stock Options

 

Stock options on the Company’s common stock were previously awarded from time to time to executive officers and certain key employees of the Company. Stock options granted generally had a term of seven to ten years and an exercise price equal to the market value of the underlying common stock on the date of grant. There were 52,783 stock options exercised during the first quarter of 2019 with a weighted average exercise price of $18.11 per share. There were no stock options outstanding at June 30, 2020 and December 31, 2019.

 

v3.20.2
Note 10 - Taxes on Income
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

10.

TAXES ON INCOME

 

The Company’s effective tax rate in the quarter and six-month period ended June 30, 2020 was 23.4% and 33.8%, respectively. The effective rates for both periods were negatively impacted, as compared to U.S. federal statutory tax rates, by valuation allowances on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized.

 

The Company’s effective tax rate in the quarter and six-month period ended June 30, 2019 was (111.0)% and (40.9)%, respectively, reflecting income tax expense on a pre-tax loss in both periods. The effective rates for both periods were negatively impacted by: (i) significant pre-tax charges primarily related to impairments of held for sale assets and currency translation adjustments, which were not deductible for tax purposes; (ii) a $2.1 million charge for foreign withholding taxes on the repatriation of foreign earnings; and (iii) valuation allowances recorded on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized.

 

v3.20.2
Note 11 - Commitments and Contingencies
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

11.

COMMITMENTS AND CONTINGENCIES

 

Litigation

 

The Company is involved in certain litigation incidental to the conduct of its business and affairs. Management, after consultation with legal counsel, does not believe that the outcome of any such litigation, individually or in the aggregate, will have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

 

Purchase Commitments

 

The Company had no material purchase commitments at June 30, 2020.

 

Guarantees

 

The Company has many contracts that require the Company to indemnify the other party against loss from claims, including claims of patent or trademark infringement or other third-party claims for injuries, damages or losses. The Company has agreed to indemnify its surety against losses from third-party claims of subcontractors. The Company has not previously experienced material losses under these provisions and, while there can be no assurances, currently does not anticipate any future material adverse impact on its consolidated financial position, results of operations or cash flows.

 

The Company regularly reviews its exposure under all its engagements, including performance guarantees by contractual joint ventures and indemnification of its surety. As a result of the most recent review, the Company has determined that the risk of material loss is remote under these arrangements and has not recorded a liability for these risks at June 30, 2020 on its Consolidated Balance Sheet.

 

v3.20.2
Note 12 - Segment Reporting
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

12.

SEGMENT REPORTING

 

The Company has three operating segments, which are also its reportable segments: Infrastructure Solutions; Corrosion Protection; and Energy Services. The Company’s operating segments correspond to its management organizational structure. Each operating segment has leadership that reports to the chief operating decision manager (“CODM”). The operating results and financial information reported by each segment are evaluated separately, regularly reviewed and used by the CODM to evaluate segment performance, allocate resources and determine management incentive compensation.

 

The following disaggregated financial results have been prepared using a management approach that is consistent with the basis and manner with which management internally disaggregates financial information for the purpose of making internal operating decisions. The Company evaluates performance based on stand-alone operating income (loss), which includes acquisition and divestiture expenses and restructuring charges, if applicable.

 

Financial information by segment was as follows (in thousands):

 

   

Quarter Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Revenues:

                               

Infrastructure Solutions

  $ 137,392     $ 155,439     $ 267,636     $ 286,982  

Corrosion Protection

    55,491       77,597       121,559       142,095  

Energy Services

    52,134       85,704       143,197       166,567  

Total revenues

  $ 245,017     $ 318,740     $ 532,392     $ 595,644  
                                 

Gross profit:

                               

Infrastructure Solutions

  $ 35,667     $ 38,871     $ 67,037     $ 65,457  

Corrosion Protection

    14,111       16,692       23,028       29,565  

Energy Services

    3,797       11,874       13,394       20,710  

Total gross profit

  $ 53,575     $ 67,437     $ 103,459     $ 115,732  
                                 

Operating income (loss):

                               

Infrastructure Solutions (1)

  $ 21,004     $ 9,120     $ 34,559     $ 14,835  

Corrosion Protection (2)

    699       (3,863 )     (5,748 )     (5,623 )

Energy Services (3)

    (5,713 )     4,107       (3,537 )     5,222  

Corporate (4)

    (7,263 )     (8,905 )     (15,151 )     (14,749 )

Total operating income (loss)

    8,727       459       10,123       (315 )

Other income (expense):

                               

Interest expense

    (4,690 )     (3,566 )     (7,886 )     (7,156 )

Interest income

    215       261       443       546  

Other (5)

    964       (1,015 )     1,389       (1,689 )

Total other expense

    (3,511 )     (4,320 )     (6,054 )     (8,299 )

Income (loss) before taxes on income

  $ 5,216     $ (3,861 )   $ 4,069     $ (8,614 )

 


 

(1) 

Operating income in the second quarter of 2020 and 2019 includes $0.1 million and $1.4 million, respectively, of restructuring charges (see Note 4) and $0.0 million and $0.4 million, respectively, of costs primarily related to the divestiture of certain international operations. Operating income in the first six months of 2020 and 2019 includes $0.5 million and $3.4 million, respectively, of restructuring charges (see Note 4) and $0.2 million and $0.5 million, respectively, of divestiture costs. Additionally, operating income in the second quarter and first six months of 2020 includes $0.7 million of impairment reversals while operating income in the second quarter and first six months of 2019 includes $9.0 million of impairment charges to assets held for sale.

 

 

(2) 

Operating income (loss) in the second quarter of 2020 and 2019 includes $1.3 million and $3.3 million, respectively, of restructuring charges (see Note 4). Operating loss in the first six months of 2020 and 2019 includes $3.1 million and $3.5 million, respectively, of restructuring charges (see Note 4). Additionally, operating income in the second quarter and first six months of 2019 includes $2.9 million of impairment charges to assets held for sale.

 

  (3) Operating loss in the second quarter of 2020 and 2019 includes $3.5 million and less than $0.1 million, respectively, of restructuring charges (see Note 4). Operating loss in the first six months of 2020 and 2019 includes $3.6 million and less than $0.1 million respectively, of restructuring charges (see Note 4). Additionally, operating loss in the second quarter and first six months of 2020 includes $1.3 million of goodwill impairment charges and $1.0 million of definite-lived intangible asset impairment charges.

 

 

(4) 

Operating loss in the second quarter of 2020 and 2019 includes $0.9 million and $0.9 million, respectively, of restructuring charges (see Note 4) and $0.7 million and $0.4 million, respectively, of divestiture costs. Operating loss in the first six months of 2020 and 2019 includes $1.6 million and $1.3 million, respectively, of restructuring charges (see Note 4) and $1.3 million and $0.4 million, respectively, of divestiture costs.

 

 

(5) 

Other expense in the second quarter of 2020 includes gains of $0.9 million related to restructuring (see Note 4). Other expense in the second quarter of 2019 includes $0.9 million of restructuring charges (see Note 4). Other expense in the first six months of 2020 and 2019 includes gains of $0.3 million and charges of $1.1 million, respectively, related to restructuring (see Note 4).  Other expense in the first six months of 2020 also includes gains of $0.7 million related to divestitures of Insituform Australia and Insituform Spain (see Note 1).

 

The following table summarizes revenues and gross profit by geographic region (in thousands):

 

   

Quarter Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Revenues: (1)

                               

United States

  $ 197,447     $ 239,987     $ 430,667     $ 448,762  

Canada

    24,995       33,392       46,850       57,460  

Europe

    7,192       17,381       17,863       33,384  

Other foreign

    15,383       27,980       37,012       56,038  

Total revenues

  $ 245,017     $ 318,740     $ 532,392     $ 595,644  
                                 

Gross profit: (1)

                               

United States

  $ 41,334     $ 50,792     $ 80,970     $ 82,619  

Canada

    5,369       5,028       8,100       8,482  

Europe

    2,256       3,311       5,204       6,830  

Other foreign

    4,616       8,306       9,185       17,801  

Total gross profit

  $ 53,575     $ 67,437     $ 103,459     $ 115,732  

 


 

(1) 

Revenues and gross profit are attributed to the country of origin

 

 

v3.20.2
Note 13 - Derivative Financial Instruments
6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

13.

DERIVATIVE FINANCIAL INSTRUMENTS

 

As a matter of policy, the Company uses derivatives for risk management purposes, and does not use derivatives for speculative purposes. From time to time, the Company may enter into foreign currency forward contracts to hedge foreign currency cash flow transactions. For cash flow hedges, a gain or loss is recorded in the Consolidated Statements of Operations upon settlement of the hedge. All of the Company’s hedges that are designated as hedges for accounting purposes were highly effective; therefore, no notable amounts of hedge ineffectiveness were recorded in the Company’s Consolidated Statements of Operations for either the settlement of cash flow hedges or the outstanding hedged balance. The Company’s cash flow hedges were in a net deferred loss position of $10.7 million and $4.6 million at June 30, 2020 and December 31, 2019, respectively. The change during the period was due to unfavorable movements in short-term interest rates relative to the hedged position. The Company presents derivative instruments in the consolidated financial statements on a gross basis. Deferred losses were recorded in other non-current liabilities and other comprehensive income on the Consolidated Balance Sheets. The net periodic change of the Company’s cash flow hedges was recorded on the foreign currency translation adjustment and derivative transactions line of the Consolidated Statements of Equity.

 

The Company also engages in regular inter-company trade activities and receives royalty payments and management fees from certain of its wholly-owned entities, paid in local currency, rather than the Company’s functional currency, U.S. dollars. From time to time, the Company utilizes foreign currency forward exchange contracts to mitigate the currency risk associated with the anticipated future payments from certain of its international entities. No contracts were utilized during the first six months of 2020. During the first six months of 2019, a loss of $0.3 million was recorded upon settlement of foreign currency forward exchange contracts. Gains and losses of this nature are recorded to “Other income (expense)” in the Consolidated Statements of Operations.

 

In October 2015, the Company entered into an interest rate swap agreement for a notional amount of $262.5 million, which is set to expire in October 2020. The notional amount of this swap mirrored the amortization of a $262.5 million portion of the Company’s $350.0 million term loan drawn from the original Credit Facility. The swap requires the Company to make a monthly fixed rate payment of 1.46% calculated on the amortizing $262.5 million notional amount and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated by amortizing the $262.5 million same notional amount. The receipt of the monthly LIBOR-based payment offsets a variable monthly LIBOR-based interest cost on a corresponding $262.5 million portion of the Company’s term loan from the original Credit Facility. This interest rate swap is used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and is accounted for as a cash flow hedge.

 

On March 12, 2018, the Company entered into an interest rate swap forward agreement that begins in October 2020 and expires in February 2023 to coincide with the amortization period of the amended Credit Facility. The swap will require the Company to make a monthly fixed rate payment of 2.937% calculated on the then amortizing notional amount (scheduled to be $170.6 million in October 2020), and provides for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same amortizing $170.6 million notional amount. The receipt of the monthly LIBOR-based payment will offset the variable monthly LIBOR-based interest cost on a corresponding $170.6 million portion of the Company’s term loan from the amended Credit Facility. This interest rate swap will be used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and accounted for as a cash flow hedge.

 

The following table summarizes the Company’s derivative position at June 30, 2020:

 

   

Position

   

Notional Amount

   

Weighted Average Remaining Maturity In Years

   

Average Exchange Rate

 

Interest Rate Swap

        $ 177,187,500       2.50        

 

 

The following table provides a summary of the fair value amounts of our derivative instruments, all of which are Level 2 inputs as defined in Note 2 (in thousands):

 

Designation of Derivatives

Balance Sheet Location

 

June 30, 2020

   

December 31, 2019

 

Derivatives Designated as Hedging Instruments:

                 

Interest Rate Swaps

Other non-current assets

  $     $ 261  
 

Total Assets

  $     $ 261  
                   

Interest Rate Swaps

Other non-current liabilities

  $ 10,696     $ 4,899  
 

Total Liabilities

  $ 10,696     $ 4,899  
                   
 

Total Derivative Assets

  $     $ 261  
 

Total Derivative Liabilities

    10,696       4,899  
 

Total Net Derivative Liability

  $ (10,696 )   $ (4,638 )

 

 

v3.20.2
Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Comprehensive Income, Policy [Policy Text Block]

Accumulated Other Comprehensive Loss

 

As set forth below, the Company’s accumulated other comprehensive loss is comprised of three main components: (i) currency translation; (ii) derivatives; and (iii) gains and losses associated with the Company’s defined benefit plan in the United Kingdom (in thousands):

 

  

June 30, 2020

  

December 31, 2019

 

Currency translation adjustments (1)

 $(28,396) $(27,241)

Derivative hedging activity

  (10,696)  (4,522)

Pension activity

  (870)  (931)

Total accumulated other comprehensive loss

 $(39,962) $(32,694

)

 

 

(1) 

During the six months ended June 30, 2020, as a result of disposing of certain international entities, $0.8 million was reclassified out of accumulated other comprehensive loss to “Other expense” in the Consolidated Statements of Operations.

 

For the Company’s international subsidiaries, the local currency is generally the functional currency. Assets and liabilities of these subsidiaries are translated into U.S. dollars using rates in effect at the balance sheet date while revenues and expenses are translated into U.S. dollars using average exchange rates. The cumulative translation adjustment resulting from changes in exchange rates are included in the Consolidated Balance Sheets as a component of “Accumulated other comprehensive loss” in total stockholders’ equity. Net foreign exchange transaction gains of $0.3 million and $0.1 million in the second quarters of 2020 and 2019, respectively, and losses of $0.3 million and $0.7 million for the six months ended June 30, 2020 and 2019, respectively, are included in “Other expense” in the Consolidated Statements of Operations.

 

Income Tax, Policy [Policy Text Block]

Taxation

 

The Company provides for estimated income taxes payable or refundable on current year income tax returns as well as the estimated future tax effects attributable to temporary differences and carryforwards, based upon enacted tax laws and tax rates, and in accordance with FASB ASC 740, Income Taxes (“FASB ASC 740”). FASB ASC 740 also requires that a valuation allowance be recorded against any deferred tax assets that are not likely to be realized in the future. The determination is based on the Company’s ability to generate future taxable income and, at times, is dependent on its ability to implement strategic tax initiatives to ensure full utilization of recorded deferred tax assets. Should the Company not be able to implement the necessary tax strategies, it may need to record valuation allowances for certain deferred tax assets, including those related to foreign income tax benefits. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation allowances recorded against net deferred tax assets.

 

Earnings Per Share, Policy [Policy Text Block]

Earnings per Share

 

Earnings per share have been calculated using the following share information:

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Weighted average number of common shares used for basic EPS

  30,726,566   31,216,886   30,721,684   31,459,557 

Effect of dilutive stock options and restricted and deferred stock unit awards

  391,918      475,734    

Weighted average number of common shares and dilutive potential common stock used for dilutive EPS

  31,118,484   31,216,886   31,197,418   31,459,557 

 

The Company excluded 449,156 and 498,315 restricted and deferred stock units for the quarter and six-month period ended June 30, 2019, respectively, from the diluted earnings per share calculation for the Company’s common stock because of the reported net loss for the periods.

 

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash, Cash Equivalents and Restricted Cash

 

The Company classifies highly liquid investments with original maturities of 90 days or less as cash equivalents. Recorded book values are reasonable estimates of fair value for cash and cash equivalents.

 

Cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets and Consolidated Statements of Cash Flows are as follows (in thousands):

 

Balance sheet data

 

June 30, 2020

  

December 31, 2019

 

Cash and cash equivalents

 $95,324  $64,874 

Restricted cash

  994   1,348 

Cash, cash equivalents and restricted cash

 $96,318  $66,222 

 

Restricted cash held in escrow primarily relates to funds reserved for legal requirements, deposits made in lieu of retention on specific projects performed for municipalities and state agencies, or advance customer payments and compensating balances for bank undertakings in Europe. Restricted cash related to operations is similar to retainage, and is, therefore, classified as a current asset, consistent with the Company’s policy on retainage.

 

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

 

FASB ASC 820, Fair Value Measurements (“FASB ASC 820”), defines fair value and establishes a framework for measuring and disclosing fair value instruments. The guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

 

 

Level 1 – defined as quoted prices in active markets for identical instruments;

 

Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

Level 3 – defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

The Company uses these levels of hierarchy to measure the fair value of certain financial instruments on a recurring basis, such as for derivative instruments; on a non-recurring basis, such as for acquisitions and impairment testing; for disclosure purposes, such as for long-term debt; and for other applications, as discussed in their respective footnotes. Changes in assumptions or estimation methods could affect the fair value estimates. Other financial instruments including notes payable are recorded at cost, which approximates fair value, and is based on Level 2 inputs as previously defined. The Company had no transfers between Level 1, 2 or 3 inputs during the six months ended June 30, 2020 and 2019.

 

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Investments in Variable Interest Entities

 

The Company evaluates all transactions and relationships with variable interest entities (“VIE”) to determine whether the Company is the primary beneficiary of the entities in accordance with FASB ASC 810, Consolidation. There were no changes in the Company’s VIEs during the quarter ended June 30, 2020.

 

Financial data for consolidated variable interest entities are summarized in the following tables (in thousands):

 

Balance sheet data

 

June 30, 2020

  

December 31, 2019

 

Current assets

 $16,546  $18,304 

Non-current assets

  7,892   7,635 

Current liabilities

  5,764   8,261 

Non-current liabilities

  2,521   1,962 

 

  

Quarter Ended June 30,

  

Six Months Ended June 30,

 

Statement of operations data

 

2020

  

2019

  

2020

  

2019

 

Revenue

 $5,727  $7,519  $13,456  $13,444 

Gross profit

  2,078   2,416   4,381   4,051 

Net income (loss) attributable to Aegion Corporation

  70   (652)  355   (619)

 

New Accounting Pronouncements, Policy [Policy Text Block]

Newly Issued Accounting Pronouncements

 

In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improved consistent application. The guidance is effective for the Company’s fiscal year beginning January 1, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company early-adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement: Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year. The Company adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Measurement of Credit Losses on Financial Instruments, which changes the way in which entities estimate and present credit losses for most financial assets, including accounts receivable. The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year. For the Company’s trade receivables, certain other receivables and certain other financial instruments, it will be required to use a new forward-looking “expected” credit loss model based on historical loss rates that will replace the existing “incurred” credit loss model, which will generally result in earlier recognition of allowances for credit losses. The Company adopted this standard effective January 1, 2020, the impact of which was not material on the Company’s consolidated financial statements.

 

v3.20.2
Note 2 - Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]
  

June 30, 2020

  

December 31, 2019

 

Currency translation adjustments (1)

 $(28,396) $(27,241)

Derivative hedging activity

  (10,696)  (4,522)

Pension activity

  (870)  (931)

Total accumulated other comprehensive loss

 $(39,962) $(32,694

)

Schedule of Weighted Average Number of Shares [Table Text Block]
  

Quarter Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Weighted average number of common shares used for basic EPS

  30,726,566   31,216,886   30,721,684   31,459,557 

Effect of dilutive stock options and restricted and deferred stock unit awards

  391,918      475,734    

Weighted average number of common shares and dilutive potential common stock used for dilutive EPS

  31,118,484   31,216,886   31,197,418   31,459,557 
Restrictions on Cash and Cash Equivalents [Table Text Block]

Balance sheet data

 

June 30, 2020

  

December 31, 2019

 

Cash and cash equivalents

 $95,324  $64,874 

Restricted cash

  994   1,348 

Cash, cash equivalents and restricted cash

 $96,318  $66,222 
Schedule of Variable Interest Entities [Table Text Block]

Balance sheet data

 

June 30, 2020

  

December 31, 2019

 

Current assets

 $16,546  $18,304 

Non-current assets

  7,892   7,635 

Current liabilities

  5,764   8,261 

Non-current liabilities

  2,521   1,962 
  

Quarter Ended June 30,

  

Six Months Ended June 30,

 

Statement of operations data

 

2020

  

2019

  

2020

  

2019

 

Revenue

 $5,727  $7,519  $13,456  $13,444 

Gross profit

  2,078   2,416   4,381   4,051 

Net income (loss) attributable to Aegion Corporation

  70   (652)  355   (619)
v3.20.2
Note 3 - Revenues (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Disaggregation of Revenue [Table Text Block]
   

Quarter Ended June 30, 2020

   

Quarter Ended June 30, 2019

 
    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

 

Geographic region:

                                                               

United States

  $ 114,705     $ 30,608     $ 52,134     $ 197,447     $ 110,957     $ 43,326     $ 85,704     $ 239,987  

Canada

    14,205       10,790             24,995       18,934       14,458             33,392  

Europe

    4,131       3,061             7,192       12,888       4,493             17,381  

Other foreign

    4,351       11,032             15,383       12,661       15,319             27,980  

Total revenues

  $ 137,392     $ 55,491     $ 52,134     $ 245,017     $ 155,440     $ 77,596     $ 85,704     $ 318,740  
   

Six Months Ended June 30, 2020

   

Six Months Ended June 30, 2019

 
   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

 

Geographic region:

                                                               

United States

  $ 218,123     $ 69,347     $ 143,197     $ 430,667     $ 208,848     $ 73,347     $ 166,567     $ 448,762  
Canada     25,228       21,622             46,850       29,545       27,915             57,460  
Europe     11,773       6,090             17,863       25,413       7,971             33,384  
Other foreign     12,512       24,500             37,012       23,177       32,861             56,038  

Total revenues

  $ 267,636     $ 121,559     $ 143,197     $ 532,392     $ 286,983     $ 142,094     $ 166,567     $ 595,644  
   

Quarter Ended June 30, 2020

   

Quarter Ended June 30, 2019

 
    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

    Infrastructure Solutions     Corrosion Protection     Energy Services    

Total

 

Contract type:

                                                               

Fixed fee

  $ 121,395     $ 38,382     $ 1,213     $ 160,990     $ 136,212     $ 53,055     $ 1,291     $ 190,558  

Time and materials

          9,835       50,921       60,756             17,283       84,413       101,696  

Product sales

    15,997       7,274             23,271       19,184       7,258             26,442  

License fees

                            44                   44  

Total revenues

  $ 137,392     $ 55,491     $ 52,134     $ 245,017     $ 155,440     $ 77,596     $ 85,704     $ 318,740  
   

Six Months Ended June 30, 2020

   

Six Months Ended June 30, 2019

 
   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

   

Infrastructure Solutions

   

Corrosion Protection

   

Energy Services

   

Total

 

Contract type:

                                                               

Fixed fee

  $ 233,906     $ 82,637     $ 2,943     $ 319,486     $ 255,127     $ 95,628     $ 2,210     $ 352,965  

Time and materials

          22,805       140,254       163,059             32,259       164,357       196,616  
Product sales     33,730       16,117             49,847       31,662       14,207             45,869  
License fees                             194                   194  

Total revenues

  $ 267,636     $ 121,559     $ 143,197     $ 532,392     $ 286,983     $ 142,094     $ 166,567     $ 595,644  
Contract Asset and Liability [Table Text Block]
  

June 30, 2020 (1)

  

December 31, 2019 (2)

 

Contract assets – current

 $43,278  $51,092 

Contract liabilities – current

  (37,512)  (37,562)

Net contract assets

 $5,766  $13,530 
v3.20.2
Note 4 - Restructuring (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Restructuring and Related Costs [Table Text Block]
  

Quarter Ended June 30, 2020

  

Quarter Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

 

Severance and benefit related costs

 $118  $106  $69  $57  $350  $551  $1,575  $6  $  $2,132 

Contract termination costs

  36   175         211   (92)  790         698 

Relocation and other moving costs

     103         103      144         144 

Other restructuring costs (1)

  (199)  100   3,385   883   4,169   1,696   940      906   3,542 

Total pre-tax restructuring charges

 $(45) $484  $3,454  $940  $4,833  $2,155  $3,449  $6  $906  $6,516 
  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total

 

Severance and benefit related costs

 $118  $969  $69  $332  $1,488  $833  $1,745  $40  $9  $2,627 

Contract termination costs

  36   229   62      327   333   807      98   1,238 

Relocation and other moving costs

     103   34      137   51   144         195 

Other restructuring costs (1)

  162   1,079   3,385   1,878   6,504   3,440   729      1,153   5,322 

Total pre-tax restructuring charges

 $316  $2,380  $3,550  $2,210  $8,456  $4,657  $3,425  $40  $1,260  $9,382 
  

Quarter Ended June 30, 2020

  

Quarter Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (1)

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (2)

 

Cost of revenues

 $52  $(131) $  $  $(79) $(67) $463  $  $  $396 

Operating expenses

  (133)  1,091   1,170   838   2,966   976   331      898   2,205 
Goodwill impairment        1,258      1,258                
Definite-lived intangible asset impairment        957      957                

Restructuring and related charges

  154   384   69   57   664   459   2,509   6      2,974 

Other expense

  (118)  (860)     45   (933)  787   146      8   941 

Total pre-tax restructuring charges

 $(45) $484  $3,454  $940  $4,833  $2,155  $3,449  $6  $906  $6,516 
  

Six Months Ended June 30, 2020

  

Six Months Ended June 30, 2019

 
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (1)

  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Corporate

  

Total (2)

 

Cost of revenues

 $69  $175  $  $  $244  $(92) $562  $  $  $470 

Operating expenses

  316   1,642   1,170   1,219   4,347   2,322   268      1,145   3,735 

Goodwill impairment

        1,258      1,258                

Definite-lived intangible asset impairment

        957      957                

Restructuring and related charges

  154   1,301   165   332   1,952   1,217   2,696   40   107   4,060 

Other expense

  (223)  (738)     659   (302)  1,210   (101)     8   1,117 

Total pre-tax restructuring charges

 $316  $2,380  $3,550  $2,210  $8,456  $4,657  $3,425  $40  $1,260  $9,382 
Schedule of Restructuring Reserve by Type of Cost [Table Text Block]
              

Utilized in 2020

     
  Reserves at December 31, 2019  

2020 Charge to Income

  

Foreign Currency Translation

  

Cash(1)

  

Non-Cash

  

Reserves at June 30, 2020

 
Severance and benefit related costs $4,389  $1,488  $(21) $4,104  $  $1,752 
Contract termination costs  953   327   (7)  575      698 
Relocation and other moving costs  367   137      211      293 
Other restructuring costs  2,379   6,504   (22)  4,791   2,718   1,352 

Total pre-tax restructuring charges

 $8,088  $8,456  $(50) $9,681  $2,718  $4,095 
              

Utilized in 2019

     
  Reserves at December 31, 2018  

2019 Charge to Income

  

Foreign Currency Translation

  

Cash(1)

  

Non-Cash

  

Reserves at June 30, 2019

 

Severance and benefit related costs

 $1,742  $2,627  $(10) $1,860  $  $2,499 

Contract termination costs

  359   1,238   (13)  606      978 

Relocation and other moving costs

     195   (1)  26      168 

Other restructuring costs

  311   5,322   (3)  3,450   1,409   771 

Total pre-tax restructuring charges

 $2,412  $9,382  $(27) $5,942  $1,409  $4,416 
v3.20.2
Note 5 - Assets and Liabilities Held for Sale (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Disposal Groups, Including Discontinued Operations [Table Text Block]
  

June 30, 2020(1)

  

December 31, 2019(2)

 

Assets held for sale:

        

Current assets

        

Receivables, net

 $266  $4,136 

Retainage

  463   518 

Contract assets

  698   5,350 

Inventories

  141   2,097 

Prepaid expenses and other current assets

  194   799 

Total current assets

  1,762   12,900 

Property, plant & equipment, less accumulated depreciation

  7,233   10,962 

Goodwill

  2,640   4,224 

Intangible assets, less accumulated amortization

  1,429   1,528 

Operating lease assets

  42   326 

Other non-current assets

  122   130 

Impairment of assets held for sale

  (2,861)  (13,978)

Total assets held for sale

 $10,367  $16,092 
         

Liabilities held for sale:

        

Current liabilities

        

Accounts payable

 $280  $2,174 

Accrued expenses

  1,072   3,961 

Contract liabilities

  43   122 

Total current liabilities

  1,395   6,257 

Operating lease liabilities

  6   174 

Other non-current liabilities

  47   54 

Total liabilities held for sale

 $1,448  $6,485 
v3.20.2
Note 6 - Leases (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Lease, Cost [Table Text Block]
  

Quarter Ended June 30,

  

Six Months Ended June 30,

 
  

2020

  

2019

  

2020

  

2019

 

Operating lease cost

 $4,932  $5,938  $10,138  $11,390 

Short-term lease cost

  4,785   5,482   10,866   12,721 

Total lease cost

 $9,717  $11,420  $21,004  $24,111 
Lease, Supplemental Financial Statement Disclosures, Balance Sheet [Table Text Block]
  

June 30, 2020(1)

  

December 31, 2019(2)

 

Operating leases:

        

Operating lease assets

 $69,701  $71,466 
         

Accrued expenses

 $15,378  $15,828 

Other liabilities

  55,455   56,253 

Total operating lease liabilities

 $70,833  $72,081 
         

Weighted-average remaining lease term (in years)

  5.86   5.74 

Weighted-average discount rate

  5.12%  5.71%
v3.20.2
Note 7 - Goodwill and Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Goodwill [Table Text Block]
  

Infrastructure Solutions

  

Corrosion Protection

  

Energy Services

  

Total

 

Balance, December 31, 2019

                

Goodwill, gross

 $240,160  $76,946  $81,504  $398,610 

Accumulated impairment losses

  (62,848)  (45,400)  (33,527)  (141,775)

Goodwill, net

  177,312   31,546   47,977   256,835 

2020 Activity:

                
Impairment (1)        (1,258)  (1,258)

Foreign currency translation

  (436)  (387)     (823)

Balance, June 30, 2020

                

Goodwill, gross

  239,724   76,559   81,504   397,787 

Accumulated impairment losses

  (62,848)  (45,400)  (34,785)  (143,033)

Goodwill, net

 $176,876  $31,159  $46,719  $254,754 
Schedule of Finite-Lived Intangible Assets [Table Text Block]
  

June 30, 2020

  

December 31, 2019

 
  

Weighted Average Useful Lives (Years)

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

  

Gross Carrying Amount

  

Accumulated Amortization

  

Net Carrying Amount

 

License agreements

 0.2  $3,894  $(3,871) $23  $3,894  $(3,824) $70 

Leases

 0.5   864   (820)  44   864   (777)  87 

Trademarks (1)

 9.2   15,437   (7,261)  8,176   15,699   (6,911)  8,788 

Non-competes

 2.9   2,048   (1,391)  657   2,301   (1,354)  947 

Customer relationships (1)

 6.9   156,817   (81,931)  74,886   157,576   (76,832)  80,744 

Patents and acquired technology

 7.3   38,728   (25,371)  13,357   39,289   (25,097)  14,192 

Total intangible assets

   $217,788  $(120,645) $97,143  $219,623  $(114,795) $104,828 
v3.20.2
Note 8 - Long-term Debt and Credit Facility (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Long-term Debt Instruments [Table Text Block]
   

June 30, 2020

   

December 31, 2019

 

Term note, due February 27, 2023, annualized rates of 4.25% and 4.09%, respectively

  $ 236,250     $ 253,750  

Line of credit, 4.25% and 4.01%, respectively

    26,000       24,000  

Other notes with interest rates from 3.3% to 7.8%

    681       770  

Subtotal

    262,931       278,520  

Less – Current maturities of long-term debt

    26,780       32,803  

Less – Unamortized loan costs

    3,054       2,088  

Total

  $ 233,097     $ 243,629  
v3.20.2
Note 9 - Stockholders' Equity and Equity Compensation (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]
  

Stock Awards

  

Weighted Average Award Date Fair Value

 

Outstanding at December 31, 2019

  1,034,964  $23.20 
Period Activity:        

Restricted stock units awarded

  391,171   20.02 

Performance stock units awarded

  131,755   22.96 

Restricted stock units distributed

  (188,545)  22.30 

Performance stock units distributed

  (71,541)  28.18 

Restricted stock units forfeited

  (28,928)  21.07 

Performance stock units forfeited

  (76,282)  27.46 

Outstanding at June 30, 2020

  1,192,594  $21.76 
Share-based Payment Arrangement, Outstanding Award, Activity, Excluding Option [Table Text Block]
  

Deferred Stock Units

  

Weighted Average Award Date Fair Value

 

Outstanding at December 31, 2019

  253,340  $20.71 
Period Activity:        

Awarded

  64,010   14.55 

Distributed

  (56,582)  21.63 

Outstanding at June 30, 2020

  260,768  $19.00 
v3.20.2
Note 12 - Segment Reporting (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Segment Reporting Information, by Segment [Table Text Block]
   

Quarter Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Revenues:

                               

Infrastructure Solutions

  $ 137,392     $ 155,439     $ 267,636     $ 286,982  

Corrosion Protection

    55,491       77,597       121,559       142,095  

Energy Services

    52,134       85,704       143,197       166,567  

Total revenues

  $ 245,017     $ 318,740     $ 532,392     $ 595,644  
                                 

Gross profit:

                               

Infrastructure Solutions

  $ 35,667     $ 38,871     $ 67,037     $ 65,457  

Corrosion Protection

    14,111       16,692       23,028       29,565  

Energy Services

    3,797       11,874       13,394       20,710  

Total gross profit

  $ 53,575     $ 67,437     $ 103,459     $ 115,732  
                                 

Operating income (loss):

                               

Infrastructure Solutions (1)

  $ 21,004     $ 9,120     $ 34,559     $ 14,835  

Corrosion Protection (2)

    699       (3,863 )     (5,748 )     (5,623 )

Energy Services (3)

    (5,713 )     4,107       (3,537 )     5,222  

Corporate (4)

    (7,263 )     (8,905 )     (15,151 )     (14,749 )

Total operating income (loss)

    8,727       459       10,123       (315 )

Other income (expense):

                               

Interest expense

    (4,690 )     (3,566 )     (7,886 )     (7,156 )

Interest income

    215       261       443       546  

Other (5)

    964       (1,015 )     1,389       (1,689 )

Total other expense

    (3,511 )     (4,320 )     (6,054 )     (8,299 )

Income (loss) before taxes on income

  $ 5,216     $ (3,861 )   $ 4,069     $ (8,614 )
   

Quarter Ended June 30,

   

Six Months Ended June 30,

 
   

2020

   

2019

   

2020

   

2019

 

Revenues: (1)

                               

United States

  $ 197,447     $ 239,987     $ 430,667     $ 448,762  

Canada

    24,995       33,392       46,850       57,460  

Europe

    7,192       17,381       17,863       33,384  

Other foreign

    15,383       27,980       37,012       56,038  

Total revenues

  $ 245,017     $ 318,740     $ 532,392     $ 595,644  
                                 

Gross profit: (1)

                               

United States

  $ 41,334     $ 50,792     $ 80,970     $ 82,619  

Canada

    5,369       5,028       8,100       8,482  

Europe

    2,256       3,311       5,204       6,830  

Other foreign

    4,616       8,306       9,185       17,801  

Total gross profit

  $ 53,575     $ 67,437     $ 103,459     $ 115,732  
v3.20.2
Note 13 - Derivative Financial Instruments (Tables)
6 Months Ended
Jun. 30, 2020
Notes Tables  
Schedule of Notional Amounts of Outstanding Derivative Positions [Table Text Block]
   

Position

   

Notional Amount

   

Weighted Average Remaining Maturity In Years

   

Average Exchange Rate

 

Interest Rate Swap

        $ 177,187,500       2.50        
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

Designation of Derivatives

Balance Sheet Location

 

June 30, 2020

   

December 31, 2019

 

Derivatives Designated as Hedging Instruments:

                 

Interest Rate Swaps

Other non-current assets

  $     $ 261  
 

Total Assets

  $     $ 261  
                   

Interest Rate Swaps

Other non-current liabilities

  $ 10,696     $ 4,899  
 

Total Liabilities

  $ 10,696     $ 4,899  
                   
 

Total Derivative Assets

  $     $ 261  
 

Total Derivative Liabilities

    10,696       4,899  
 

Total Net Derivative Liability

  $ (10,696 )   $ (4,638 )
v3.20.2
Note 2 - Accounting Policies (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Reclassification Adjustment from AOCI, Realized upon Sale or Liquidation, Net of Tax, Total     $ 800  
Foreign Currency Transaction Gain (Loss), Realized     $ 319 $ (701)
Stock Options and Restricted and Deferred Stock Units [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)     449,156 498,315
Other Expense [Member]        
Foreign Currency Transaction Gain (Loss), Realized $ 300 $ 100 $ (300) $ (700)
v3.20.2
Note 2 - Accounting Policies - Accumulated Other Comprehensive Income Loss (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Currency translation adjustments [1] $ (28,396) $ (27,241)
Derivative hedging activity (10,696) (4,522)
Pension activity (870) (931)
Total accumulated other comprehensive loss $ (39,962) $ (32,694)
[1] During the six months ended June 30, 2020, as a result of disposing of certain international entities, $0.8 million was reclassified out of accumulated other comprehensive loss to “Other expense” in the Consolidated Statements of Operations.
v3.20.2
Note 2 - Accounting Policies - Earnings Per Share (Details) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Weighted average number of common shares used for basic EPS (in shares) 30,726,566 31,216,886 30,721,684 31,459,557
Effect of dilutive stock options and restricted and deferred stock unit awards (in shares) 391,918 0 475,734 0
Weighted average number of common shares and dilutive potential common stock used for dilutive EPS (in shares) 31,118,484 31,216,886 31,197,418 31,459,557
v3.20.2
Note 2 - Accounting Policies - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Cash and cash equivalents $ 95,324 $ 64,874  
Restricted cash 994 1,348  
Cash, cash equivalents and restricted cash $ 96,318 $ 66,222 $ 52,097
v3.20.2
Note 2 - Accounting Policies - Investments in Variable Interest Entities (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Current assets $ 435,580   $ 435,580   $ 450,215
Current liabilities 213,212   213,212   234,041
Revenue [1] 245,017 $ 318,740 532,392 $ 595,644  
Gross profit [1] 53,575 67,437 103,459 115,732  
Net income (loss) attributable to Aegion Corporation 3,856 (8,366) 2,224 (12,367)  
Variable Interest Entity, Primary Beneficiary [Member]          
Current assets 16,546   16,546   18,304
Non-current assets 7,892   7,892   7,635
Current liabilities 5,764   5,764   8,261
Non-current liabilities 2,521   2,521   $ 1,962
Revenue 5,727 7,519 13,456 13,444  
Gross profit 2,078 2,416 4,381 4,051  
Net income (loss) attributable to Aegion Corporation $ 70 $ (652) $ 355 $ (619)  
[1] Revenues and gross profit are attributed to the country of origin
v3.20.2
Note 3 - Revenues 1 (Details Textual) - USD ($)
$ in Millions
3 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Dec. 31, 2018
Disposal Group, Including Discontinued Operation, Contract Assets, Current $ 0.7   $ 5.4  
Disposal Group, Including Discontinued Operation, Contract Liabilities, Current 0.1   0.1  
Contract with Customer, Liability, Total     $ 37.6 $ 32.3
Construction, Engineering and Installation Services [Member]        
Revenue, Remaining Performance Obligation, Amount $ 501.8      
Product and Services [Member]        
Revenue Recognized, Percent 90.60% 92.30%    
Product [Member]        
Revenue Recognized, Percent 9.40% 7.70%    
v3.20.2
Note 3 - Revenues 2 (Details Textual) - Construction, Engineering and Installation Services [Member]
$ in Millions
Jun. 30, 2020
USD ($)
Revenue, Remaining Performance Obligation, Amount $ 501.8
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01  
Revenue, Remaining Performance Obligation, Amount $ 480.0
Revenue, Remaining Performance Obligation, Percentage 95.70%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period (Month) 12 months
v3.20.2
Note 3 - Revenues - Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenues [1] $ 245,017 $ 318,740 $ 532,392 $ 595,644
Fixed-price Contract [Member]        
Revenues 160,990 190,558 319,486 352,965
Time-and-materials Contract [Member]        
Revenues 60,756 101,696 163,059 196,616
Product Sales [Member]        
Revenues 23,271 26,442 49,847 45,869
License Fees [Member]        
Revenues 0 44 0 194
Infrastructure Solutions [Member]        
Revenues 137,392 155,440 267,636 286,983
Infrastructure Solutions [Member] | Fixed-price Contract [Member]        
Revenues 121,395 136,212 233,906 255,127
Infrastructure Solutions [Member] | Time-and-materials Contract [Member]        
Revenues 0 0 0 0
Infrastructure Solutions [Member] | Product Sales [Member]        
Revenues 15,997 19,184 33,730 31,662
Infrastructure Solutions [Member] | License Fees [Member]        
Revenues 0 44 0 194
Corrosion Protection [Member]        
Revenues 55,491 77,596 121,559 142,094
Corrosion Protection [Member] | Fixed-price Contract [Member]        
Revenues 38,382 53,055 82,637 95,628
Corrosion Protection [Member] | Time-and-materials Contract [Member]        
Revenues 9,835 17,283 22,805 32,259
Corrosion Protection [Member] | Product Sales [Member]        
Revenues 7,274 7,258 16,117 14,207
Corrosion Protection [Member] | License Fees [Member]        
Revenues 0 0 0 0
Energy Services [Member]        
Revenues 52,134 85,704 143,197 166,567
Energy Services [Member] | Fixed-price Contract [Member]        
Revenues 1,213 1,291 2,943 2,210
Energy Services [Member] | Time-and-materials Contract [Member]        
Revenues 50,921 84,413 140,254 164,357
Energy Services [Member] | Product Sales [Member]        
Revenues 0 0 0 0
Energy Services [Member] | License Fees [Member]        
Revenues 0 0 0 0
UNITED STATES        
Revenues [1] 197,447 239,987 430,667 448,762
UNITED STATES | Infrastructure Solutions [Member]        
Revenues 114,705 110,957 218,123 208,848
UNITED STATES | Corrosion Protection [Member]        
Revenues 30,608 43,326 69,347 73,347
UNITED STATES | Energy Services [Member]        
Revenues 52,134 85,704 143,197 166,567
CANADA        
Revenues [1] 24,995 33,392 46,850 57,460
CANADA | Infrastructure Solutions [Member]        
Revenues 14,205 18,934 25,228 29,545
CANADA | Corrosion Protection [Member]        
Revenues 10,790 14,458 21,622 27,915
CANADA | Energy Services [Member]        
Revenues 0 0 0 0
Europe [Member]        
Revenues [1] 7,192 17,381 17,863 33,384
Europe [Member] | Infrastructure Solutions [Member]        
Revenues 4,131 12,888 11,773 25,413
Europe [Member] | Corrosion Protection [Member]        
Revenues 3,061 4,493 6,090 7,971
Europe [Member] | Energy Services [Member]        
Revenues 0 0 0 0
Other Foreign Countries [Member]        
Revenues [1] 15,383 27,980 37,012 56,038
Other Foreign Countries [Member] | Infrastructure Solutions [Member]        
Revenues 4,351 12,661 12,512 23,177
Other Foreign Countries [Member] | Corrosion Protection [Member]        
Revenues 11,032 15,319 24,500 32,861
Other Foreign Countries [Member] | Energy Services [Member]        
Revenues $ 0 $ 0 $ 0 $ 0
[1] Revenues and gross profit are attributed to the country of origin
v3.20.2
Note 3 - Revenues- Contract Assets (Liabilities) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
[1]
Dec. 31, 2019
[2]
Contract assets – current $ 43,278 $ 51,092
Contract liabilities – current (37,512) (37,562)
Net contract assets $ 5,766 $ 13,530
[1] Amounts exclude contract assets of $0.7 million and contract liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5).
[2] Amounts exclude contract assets of $5.4 million and contract liabilities of $0.1 million that were classified as held for sale at December 31, 2019 (see Note 5).
v3.20.2
Note 4 - Restructuring (Details Textual)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended 35 Months Ended
Jun. 30, 2020
USD ($)
Dec. 31, 2019
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Dec. 31, 2019
Dec. 31, 2017
USD ($)
Jun. 30, 2020
USD ($)
Restructuring Charges, Non-Cash       $ 503 $ 1,409      
Minimum [Member]                
Expected Restructuring Cash Charges Related to COVID-19 $ 3,000     3,000       $ 3,000
Maximum [Member]                
Expected Restructuring Cash Charges Related to COVID-19 5,000     5,000       5,000
Restructuring 2017 [Member]                
Restructuring Charges Pre Tax               180,400
Restructuring Charges, Net of Tax               162,600
Payments for Restructuring       9,681 [1] 5,942 [2]     51,100
Restructuring Reserve, Settled without Cash               $ 129,300
Restructuring and Related Cost, Number of Positions Eliminated               745
Restructuring Charges, Cash 2,600   $ 5,400 5,800 8,500      
Restructuring Charges, Non-Cash 2,200   1,100 2,700 900      
Downsize Operation in US [Member]                
Restructuring and Related Cost, Number of Office Closed   3            
Restructuring and Related Cost, Number of Offices Exiting Capital Intensive Drilling Activities   4            
Restructuring and Related Cost, Number of Positions Eliminated, Period Percent           20.00%    
Restructuring and Related Cost, Contributed To Cathodic Protection Domestic Revenue, Percentage           20.00%    
Restructuring Charges Related to Goodwill and Long-lived Asset Impairment Charges [Member] | Restructuring 2017 [Member]                
Restructuring Reserve, Settled without Cash             $ 86,400  
Allowance, Write-offs and Long-lived Assets, Impairment of Intangible Assets and Net Losses On Disposal of Entities [Member] | Restructuring 2017 [Member]                
Restructuring Reserve, Settled without Cash             $ 42,900  
Severance, Other Termination Benefit Costs and Contract Termination Costs [Member] | Restructuring 2017 [Member]                
Restructuring and Related Costs, Incurred Cost, Total $ 700   $ 3,000 $ 2,000 $ 4,100      
[1] Refers to cash utilized to settle charges during the first six months of 2020.
[2] Refers to cash utilized to settle charges during the first six months of 2019.
v3.20.2
Note 4 - Restructuring - Pre Tax Restructuring Cost (Details) - Restructuring 2017 [Member] - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Restructuring charges $ 4,833 [1] $ 6,516 [2] $ 8,456 [3] $ 9,382 [4]
Cost of Revenues [Member]        
Restructuring charges (79) [1] 396 [2] 244 [3] 470 [4]
Operating Expense [Member]        
Restructuring charges 2,966 [1] 2,205 [2] 4,347 [3] 3,735 [4]
Goodwill Impairment [Member]        
Restructuring charges 1,258 [1] 0 [2] 1,258 [3] 0 [4]
Definite-lived Intangible Asset Impairment [Member]        
Restructuring charges 957 [1] 0 [2] 957 [3] 0 [4]
Restructuring and Related Charges [Member]        
Restructuring charges 664 [1] 2,974 [2] 1,952 [3] 4,060 [4]
Other Expense [Member]        
Restructuring charges (933) [1] 941 [2] (302) [3] 1,117 [4]
Employee Severance [Member]        
Restructuring charges 350 2,132 1,488 2,627
Contract Termination [Member]        
Restructuring charges 211 698 327 1,238
Employee Relocation [Member]        
Restructuring charges 103 144 137 195
Other Restructuring [Member]        
Restructuring charges 4,169 [5] 3,542 [5] 6,504 [6] 5,322 [6]
Operating Segments [Member] | Infrastructure Solutions [Member]        
Restructuring charges (45) 2,155 316 4,657
Operating Segments [Member] | Infrastructure Solutions [Member] | Cost of Revenues [Member]        
Restructuring charges 52 (67) 69 (92)
Operating Segments [Member] | Infrastructure Solutions [Member] | Operating Expense [Member]        
Restructuring charges (133) 976 316 2,322
Operating Segments [Member] | Infrastructure Solutions [Member] | Goodwill Impairment [Member]        
Restructuring charges 0 0 0 0
Operating Segments [Member] | Infrastructure Solutions [Member] | Definite-lived Intangible Asset Impairment [Member]        
Restructuring charges 0 0 0 0
Operating Segments [Member] | Infrastructure Solutions [Member] | Restructuring and Related Charges [Member]        
Restructuring charges 154 459 154 1,217
Operating Segments [Member] | Infrastructure Solutions [Member] | Other Expense [Member]        
Restructuring charges (118) 787 (223) 1,210
Operating Segments [Member] | Infrastructure Solutions [Member] | Employee Severance [Member]        
Restructuring charges 118 551 118 833
Operating Segments [Member] | Infrastructure Solutions [Member] | Contract Termination [Member]        
Restructuring charges 36 (92) 36 333
Operating Segments [Member] | Infrastructure Solutions [Member] | Employee Relocation [Member]        
Restructuring charges 0 0 0 51
Operating Segments [Member] | Infrastructure Solutions [Member] | Other Restructuring [Member]        
Restructuring charges (199) [5] 1,696 [5] 162 [6] 3,440 [6]
Operating Segments [Member] | Corrosion Protection [Member]        
Restructuring charges 484 3,449 2,380 3,425
Operating Segments [Member] | Corrosion Protection [Member] | Cost of Revenues [Member]        
Restructuring charges (131) 463 175 562
Operating Segments [Member] | Corrosion Protection [Member] | Operating Expense [Member]        
Restructuring charges 1,091 331 1,642 268
Operating Segments [Member] | Corrosion Protection [Member] | Goodwill Impairment [Member]        
Restructuring charges 0 0 0 0
Operating Segments [Member] | Corrosion Protection [Member] | Definite-lived Intangible Asset Impairment [Member]        
Restructuring charges 0 0 0 0
Operating Segments [Member] | Corrosion Protection [Member] | Restructuring and Related Charges [Member]        
Restructuring charges 384 2,509 1,301 2,696
Operating Segments [Member] | Corrosion Protection [Member] | Other Expense [Member]        
Restructuring charges (860) 146 (738) (101)
Operating Segments [Member] | Corrosion Protection [Member] | Employee Severance [Member]        
Restructuring charges 106 1,575 969 1,745
Operating Segments [Member] | Corrosion Protection [Member] | Contract Termination [Member]        
Restructuring charges 175 790 229 807
Operating Segments [Member] | Corrosion Protection [Member] | Employee Relocation [Member]        
Restructuring charges 103 144 103 144
Operating Segments [Member] | Corrosion Protection [Member] | Other Restructuring [Member]        
Restructuring charges 100 [5] 940 [5] 1,079 [6] 729 [6]
Operating Segments [Member] | Energy Services [Member]        
Restructuring charges 3,454 6 3,550 40
Operating Segments [Member] | Energy Services [Member] | Cost of Revenues [Member]        
Restructuring charges 0 0 0 0
Operating Segments [Member] | Energy Services [Member] | Operating Expense [Member]        
Restructuring charges 1,170 0 1,170 0
Operating Segments [Member] | Energy Services [Member] | Goodwill Impairment [Member]        
Restructuring charges 1,258 0 1,258 0
Operating Segments [Member] | Energy Services [Member] | Definite-lived Intangible Asset Impairment [Member]        
Restructuring charges 957 0 957 0
Operating Segments [Member] | Energy Services [Member] | Restructuring and Related Charges [Member]        
Restructuring charges 69 6 165 40
Operating Segments [Member] | Energy Services [Member] | Other Expense [Member]        
Restructuring charges 0 0 0 0
Operating Segments [Member] | Energy Services [Member] | Employee Severance [Member]        
Restructuring charges 69 6 69 40
Operating Segments [Member] | Energy Services [Member] | Contract Termination [Member]        
Restructuring charges 0 0 62 0
Operating Segments [Member] | Energy Services [Member] | Employee Relocation [Member]        
Restructuring charges 0 0 34 0
Operating Segments [Member] | Energy Services [Member] | Other Restructuring [Member]        
Restructuring charges 3,385 [5] 0 [5] 3,385 [6] 0 [6]
Corporate, Non-Segment [Member]        
Restructuring charges 940 906 2,210 1,260
Corporate, Non-Segment [Member] | Cost of Revenues [Member]        
Restructuring charges 0 0 0 0
Corporate, Non-Segment [Member] | Operating Expense [Member]        
Restructuring charges 838 898 1,219 1,145
Corporate, Non-Segment [Member] | Goodwill Impairment [Member]        
Restructuring charges 0 0 0 0
Corporate, Non-Segment [Member] | Definite-lived Intangible Asset Impairment [Member]        
Restructuring charges 0 0 0 0
Corporate, Non-Segment [Member] | Restructuring and Related Charges [Member]        
Restructuring charges 57 0 332 107
Corporate, Non-Segment [Member] | Other Expense [Member]        
Restructuring charges 45 8 659 8
Corporate, Non-Segment [Member] | Employee Severance [Member]        
Restructuring charges 57 0 332 9
Corporate, Non-Segment [Member] | Contract Termination [Member]        
Restructuring charges 0 0 0 98
Corporate, Non-Segment [Member] | Employee Relocation [Member]        
Restructuring charges 0 0 0 0
Corporate, Non-Segment [Member] | Other Restructuring [Member]        
Restructuring charges $ 883 [5] $ 906 [5] $ 1,878 [6] $ 1,153 [6]
[1] Total pre-tax restructuring charges for the quarter ended June 30, 2020, include cash charges of $2.6 million and non-cash charges of $2.2 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[2] Total pre-tax restructuring charges for the quarter ended June 30, 2019, include cash charges of $5.4 million and non-cash charges of $1.1 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[3] Total pre-tax restructuring charges for the six months ended June 30, 2020, include cash charges of $5.8 million and non-cash charges of $2.7 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[4] Total pre-tax restructuring charges for the six months ended June 30, 2019, include cash charges of $8.5 million and non-cash charges of $0.9 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[5] For the quarter ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the quarter ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.
[6] For the six months ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the six months ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.
v3.20.2
Note 4 - Restructuring - Recognized Cost Restructuring Activities (Details) - Restructuring 2017 [Member] - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 35 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Restructuring reserve, balance     $ 8,088 $ 2,412  
Restructuring charges $ 4,833 [1] $ 6,516 [2] 8,456 [3] 9,382 [4]  
Restructuring reserve, foreign currency translation     (50) (27)  
Restructuring reserve, settled with cash     9,681 [5] 5,942 [6] $ 51,100
Restructuring reserve, settled without cash     2,718 1,409  
Restructuring reserve, balance 4,095 4,416 4,095 4,416 4,095
Employee Severance [Member]          
Restructuring reserve, balance     4,389 1,742  
Restructuring charges 350 2,132 1,488 2,627  
Restructuring reserve, foreign currency translation     (21) (10)  
Restructuring reserve, settled with cash     4,104 [5] 1,860 [6]  
Restructuring reserve, settled without cash     0 0  
Restructuring reserve, balance 1,752 2,499 1,752 2,499 1,752
Contract Termination [Member]          
Restructuring reserve, balance     953 359  
Restructuring charges 211 698 327 1,238  
Restructuring reserve, foreign currency translation     (7) (13)  
Restructuring reserve, settled with cash     575 [5] 606 [6]  
Restructuring reserve, settled without cash     0 0  
Restructuring reserve, balance 698 978 698 978 698
Employee Relocation [Member]          
Restructuring reserve, balance     367 0  
Restructuring charges 103 144 137 195  
Restructuring reserve, foreign currency translation     0 (1)  
Restructuring reserve, settled with cash     211 [5] 26 [6]  
Restructuring reserve, settled without cash     0 0  
Restructuring reserve, balance 293 168 293 168 293
Other Restructuring [Member]          
Restructuring reserve, balance     2,379 311  
Restructuring charges 4,169 [7] 3,542 [7] 6,504 [8] 5,322 [8]  
Restructuring reserve, foreign currency translation     (22) (3)  
Restructuring reserve, settled with cash     4,791 [5] 3,450 [6]  
Restructuring reserve, settled without cash     2,718 1,409  
Restructuring reserve, balance $ 1,352 $ 771 $ 1,352 $ 771 $ 1,352
[1] Total pre-tax restructuring charges for the quarter ended June 30, 2020, include cash charges of $2.6 million and non-cash charges of $2.2 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[2] Total pre-tax restructuring charges for the quarter ended June 30, 2019, include cash charges of $5.4 million and non-cash charges of $1.1 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[3] Total pre-tax restructuring charges for the six months ended June 30, 2020, include cash charges of $5.8 million and non-cash charges of $2.7 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[4] Total pre-tax restructuring charges for the six months ended June 30, 2019, include cash charges of $8.5 million and non-cash charges of $0.9 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[5] Refers to cash utilized to settle charges during the first six months of 2020.
[6] Refers to cash utilized to settle charges during the first six months of 2019.
[7] For the quarter ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the quarter ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.
[8] For the six months ended June 30, 2020, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals, release of cumulative currency translation adjustments and other restructuring-related costs in connection with optimizing the cathodic protection operations in North America, exiting the CIPP operations in Europe, disposing of certain international businesses and other cost savings initiatives. Amounts also include goodwill and definite-lived intangible asset impairments related to the exiting P2S. For the six months ended June 30, 2019, charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals and other restructuring-related costs in connection with exiting the CIPP operations in Europe, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.
v3.20.2
Note 5 - Assets and Liabilities Held for Sale (Details Textual) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Impairment of Long-Lived Assets to be Disposed of $ 0 $ 11,946  
Corporate, Non-Segment [Member]      
Impairment of Long-Lived Assets to be Disposed of     $ 2,900
v3.20.2
Note 5 - Assets and Liabilities Held for Sale - Assets and Liabilities Held for Sale (Details) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Disposal Group, Including Discontinued Operation, Contract Assets, Current $ 700   $ 5,400
Total current assets 10,367   16,092
Impairment of assets held for sale 0 $ (11,946)  
Disposal Group, Including Discontinued Operation, Contract Liabilities, Current 100   100
Total current liabilities 1,448   6,485
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]      
Receivables, net 266 [1]   4,136 [2]
Retainage 463 [1]   518 [2]
Disposal Group, Including Discontinued Operation, Contract Assets, Current 698 [1]   5,350 [2]
Inventories 141 [1]   2,097 [2]
Prepaid expenses and other current assets 194 [1]   799 [2]
Total current assets 1,762 [1]   12,900 [2]
Property, plant & equipment, less accumulated depreciation 7,233 [1]   10,962 [2]
Goodwill 2,640 [1]   4,224 [2]
Intangible assets, less accumulated amortization 1,429 [1]   1,528 [2]
Operating lease assets 42 [1]   326 [2]
Other non-current assets 122 [1]   130 [2]
Impairment of assets held for sale (2,861) [1]   (13,978) [2]
Total assets held for sale 10,367 [1]   16,092 [2]
Accounts payable 280 [1]   2,174 [2]
Accrued expenses 1,072 [1]   3,961 [2]
Disposal Group, Including Discontinued Operation, Contract Liabilities, Current 43 [1]   122 [2]
Total current liabilities 1,395 [1]   6,257 [2]
Operating lease liabilities 6 [1]   174 [2]
Other non-current liabilities 47 [1]   54 [2]
Total liabilities held for sale $ 1,448 [1]   $ 6,485 [2]
[1] Includes Environmental Techniques and land held at Corporate.
[2] Includes Insituform Australia, Insituform Spain, Environmental Techniques and land held at Corporate.
v3.20.2
Note 6 - Leases (Details Textual) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Lessee, Operating Lease, Renewal Term (Year) 5 years  
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]    
Disposal Group, Including Discontinued Operation, Operating Lease, Right-of-Use Asset 1 $ 0.1 $ 0.3
Disposal Group, Including Discontinued Operation, Accrued Expense 0.1 0.2
Disposal Group, Including Discontinued Operation, Other Liabilities $ 0.1 $ 0.2
Minimum [Member]    
Lessee, Operating Lease, Remaining Lease Term (Year) 1 year  
Maximum [Member]    
Lessee, Operating Lease, Remaining Lease Term (Year) 20 years  
v3.20.2
Note 6 - Leases - Lease Expenses (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Operating lease cost $ 4,932 $ 5,938 $ 10,138 $ 11,390
Short-term lease cost 4,785 5,482 10,866 12,721
Total lease cost $ 9,717 $ 11,420 $ 21,004 $ 24,111
v3.20.2
Note 6 - Leases - Supplement Financial Statement Disclosure (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Operating lease assets $ 69,701 [1] $ 71,466 [2]
Other liabilities $ 55,455 $ 56,253
Weighted-average remaining lease term (Year) 5 years 10 months 9 days [1] 5 years 8 months 26 days [2]
Weighted-average discount rate 5.12% [1] 5.71% [2]
Accrued Expense [Member]    
Accrued expenses $ 15,378 [1] $ 15,828 [2]
Other Liabilities [Member]    
Other liabilities 55,455 [1] 56,253 [2]
Accrued Expense and Other Liabilities [Member]    
Total operating lease liabilities $ 70,833 [1] $ 72,081 [2]
[1] Amounts exclude operating lease assets of less than $0.1 million, accrued expenses of less than $0.1 and other liabilities of less than $0.1 million that were classified as held for sale at June 30, 2020 (see Note 5).
[2] Amounts exclude operating lease assets of $0.3 million, accrued expenses of $0.2 million and other liabilities of $0.2 million that were classified as held for sale at December 31, 2019 (see Note 5).
v3.20.2
Note 7 - Goodwill and Intangible Assets (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Goodwill, Impairment Loss $ 1,258 $ 0 $ 1,258 [1] $ 0
Impairment of Intangible Assets, Finite-lived 957 0 957 0
Amortization of Intangible Assets, Total 3,400 $ 3,400 6,800 $ 6,900
Finite-Lived Intangible Asset, Expected Amortization, Remainder of Fiscal Year 13,000   13,000  
Finite-Lived Intangible Asset, Expected Amortization, Year Two 12,900   12,900  
Finite-Lived Intangible Asset, Expected Amortization, Year Three 12,900   12,900  
Finite-Lived Intangible Asset, Expected Amortization, Year Four 12,900   12,900  
Finite-Lived Intangible Asset, Expected Amortization, Year Five 12,100   12,100  
Energy Services [Member]        
Goodwill, Impairment Loss 1,300   1,258 [1]  
Impairment of Intangible Assets, Finite-lived     $ 1,000  
Energy Services [Member] | Trademarks [Member]        
Impairment of Intangible Assets, Finite-lived 300      
Energy Services [Member] | Customer Relationships [Member]        
Impairment of Intangible Assets, Finite-lived $ 700      
[1] During the second quarter of 2020, the Company recorded a $1.3 million goodwill impairment related to restructuring activities in Energy Services (see Note 4).
v3.20.2
Note 7 - Goodwill and Intangible Assets - Reconciliation Goodwill (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Goodwill, gross $ 397,787   $ 397,787   $ 398,610
Accumulated impairment losses (143,033)   (143,033)   (141,775)
Goodwill, net 254,754   254,754   256,835
Impairment (1) (1,258) $ 0 (1,258) [1] $ 0  
Foreign currency translation     (823)    
Infrastructure Solutions [Member]          
Goodwill, gross 239,724   239,724   240,160
Accumulated impairment losses (62,848)   (62,848)   (62,848)
Goodwill, net 176,876   176,876   177,312
Impairment (1) [1]     0    
Foreign currency translation     (436)    
Corrosion Protection [Member]          
Goodwill, gross 76,559   76,559   76,946
Accumulated impairment losses (45,400)   (45,400)   (45,400)
Goodwill, net 31,159   31,159   31,546
Impairment (1) [1]     0    
Foreign currency translation     (387)    
Energy Services [Member]          
Goodwill, gross 81,504   81,504   81,504
Accumulated impairment losses (34,785)   (34,785)   (33,527)
Goodwill, net 46,719   46,719   $ 47,977
Impairment (1) $ (1,300)   (1,258) [1]    
Foreign currency translation     $ 0    
[1] During the second quarter of 2020, the Company recorded a $1.3 million goodwill impairment related to restructuring activities in Energy Services (see Note 4).
v3.20.2
Note 7 - Goodwill and Intangible Assets - Intangible Assets (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Gross carrying amount $ 217,788 $ 219,623
Accumulated amortization (120,645) (114,795)
Net carrying amount $ 97,143 104,828
Licensing Agreements [Member]    
Weighted average useful lives (Year) 2 months 12 days  
Gross carrying amount $ 3,894 3,894
Accumulated amortization (3,871) (3,824)
Net carrying amount $ 23 70
Lease Agreements [Member]    
Weighted average useful lives (Year) 6 months  
Gross carrying amount $ 864 864
Accumulated amortization (820) (777)
Net carrying amount $ 44 87
Trademarks [Member]    
Weighted average useful lives (Year) [1] 9 years 2 months 12 days  
Gross carrying amount [1] $ 15,437 15,699
Accumulated amortization [1] (7,261) (6,911)
Net carrying amount [1] $ 8,176 8,788
Noncompete Agreements [Member]    
Weighted average useful lives (Year) 2 years 10 months 24 days  
Gross carrying amount $ 2,048 2,301
Accumulated amortization (1,391) (1,354)
Net carrying amount $ 657 947
Customer Relationships [Member]    
Weighted average useful lives (Year) [1] 6 years 10 months 24 days  
Gross carrying amount [1] $ 156,817 157,576
Accumulated amortization [1] (81,931) (76,832)
Net carrying amount [1] $ 74,886 80,744
Patents [Member]    
Weighted average useful lives (Year) 7 years 3 months 18 days  
Gross carrying amount $ 38,728 39,289
Accumulated amortization (25,371) (25,097)
Net carrying amount $ 13,357 $ 14,192
[1] During the second quarter of 2020, the Company recorded intangible asset impairments related to restructuring activities within Energy Services of $0.3 million for trademarks and $0.7 million for customer relationships (see Note 4).
v3.20.2
Note 8 - Long-term Debt and Credit Facility (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 11 Months Ended 23 Months Ended
Apr. 29, 2020
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2019
Mar. 31, 2021
Feb. 28, 2023
Dec. 31, 2019
Mar. 12, 2018
Oct. 31, 2015
Long-term Debt, Total   $ 262,931 $ 262,931       $ 278,520    
Payments of Financing Costs, Total     1,995 $ (0)          
Long-term Debt, Fair Value   274,000 274,000       286,800    
Derivative, Fixed Interest Rate               2.937%  
A 2015 Interest Rate Swap [Member]                  
Derivative Asset, Notional Amount                 $ 262,500
Derivative, Fixed Interest Rate                 1.46%
A 2018 Interest Rate Swap [Member]                  
Derivative Asset, Notional Amount               $ 170,600  
Derivative, Fixed Interest Rate               2.937%  
Derivative, Amount of Hedged Item               $ 170,600  
London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]                  
Debt Instrument, Basis Spread on Variable Rate 0.75%                
Term Loan [Member]                  
Long-term Debt, Total   236,300 236,300       253,800    
A 2015 Credit Facility [Member]                  
Debt Instrument, Face Amount                 $ 650,000
Line of Credit Facility, Maximum Borrowing Capacity                 350,000
Long-term Line of Credit, Total   26,000 26,000       24,000    
Other Loans Payable, Total   700 700       $ 800    
Letters of Credit Outstanding, Amount   $ 35,000 $ 35,000            
Derivative, Amount of Hedged Item                 $ 262,500
Credit Facility Maximum Consolidated Leverage Ratio   4.00 4.00            
Credit Facility Actual Consolidated Leverage Ratio   2.65 2.65            
Line of Credit Facility, Remaining Borrowing Capacity   $ 140,000 $ 140,000            
Credit Facility Minimum Consolidated Fixed Charge Ratio   1.10 1.10            
Credit Facility Actual Consolidated Fixed Charge Ratio   1.41 1.41            
A 2015 Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]                  
Debt Instrument, Interest Rate, Effective Percentage   4.25% 4.25%            
A 2015 Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Forecast [Member]                  
Debt Instrument, Basis Spread on Variable Rate         3.50%        
A 2015 Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Forecast [Member] | Minimum [Member]                  
Debt Instrument, Basis Spread on Variable Rate           1.75%      
A 2015 Credit Facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | Forecast [Member] | Maximum [Member]                  
Debt Instrument, Basis Spread on Variable Rate           3.50%      
A 2015 Credit Facility [Member] | Term Loan [Member]                  
Long-term Debt, Total   $ 245,000 $ 245,000            
Debt Instrument, Interest Rate, Effective Percentage   5.11% 5.11%            
A 2015 Credit Facility [Member] | Revolving Credit Facility [Member]                  
Line of Credit Facility, Maximum Borrowing Capacity   $ 175,000 $ 175,000            
Payments of Financing Costs, Total   2,000              
Line Of Credit Facility, Unamortized Loan Costs   1,900              
Interest Expense, Debt, Total   200              
Proceeds from Lines of Credit, Total   32,000              
A 2015 Credit Facility [Member] | Revolving Credit Facility [Member] | Up-front Lending Fees [Member]                  
Payments of Financing Costs, Total   1,500              
A 2015 Credit Facility [Member] | Revolving Credit Facility [Member] | Third-party Arranging Fees and Expenses [Member]                  
Payments of Financing Costs, Total   500              
A 2015 Credit Facility [Member] | Insurance Carries Collateral [Member]                  
Letters of Credit Outstanding, Amount   12,200 12,200            
A 2015 Credit Facility [Member] | Working Performance Obligation [Member]                  
Letters of Credit Outstanding, Amount   $ 22,800 $ 22,800            
v3.20.2
Note 8 - Long-term Debt and Credit Facility - Long-term Debt (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Long term debt $ 262,931 $ 278,520
Less – Current maturities of long-term debt 26,780 32,803
Less – Unamortized loan costs 3,054 2,088
Total 233,097 243,629
Medium-term Notes [Member]    
Long term debt 236,250 253,750
Line of Credit [Member]    
Long term debt 26,000 24,000
Notes Payable, Other Payables [Member]    
Long term debt $ 681 $ 770
v3.20.2
Note 9 - Stockholders' Equity and Equity Compensation (Details Textual)
$ / shares in Units, $ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
shares
Jun. 30, 2019
USD ($)
Mar. 31, 2019
$ / shares
shares
Jun. 30, 2020
USD ($)
$ / shares
shares
Jun. 30, 2019
USD ($)
$ / shares
shares
Apr. 29, 2020
USD ($)
Dec. 31, 2019
shares
Apr. 30, 2019
shares
Dec. 31, 2018
shares
Apr. 30, 2018
shares
Stock Repurchase Program, Authorized Amount | $           $ 5.0        
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period (Year)       1 year            
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period (in shares)     52,783              
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price (in dollars per share) | $ / shares     $ 18.11              
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance (in shares) 0     0     0      
A 2016 Employee Plan [Member]                    
Stock Repurchase Program, Number of Shares Authorized to be Repurchased (in shares)                   1,700,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares) 1,370,669     1,370,669            
A 2016 Director Plan [Member]                    
Stock Repurchase Program, Number of Shares Authorized to be Repurchased (in shares)               300,000    
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares) 257,396     257,396            
Share-based Payment Arrangement, Option [Member]                    
Stock Repurchased During Period, Shares (in shares)         48,409          
Stock Repurchased During Period, Value | $         $ 1.0          
Treasury Stock Acquired, Average Cost Per Share (in dollars per share) | $ / shares         $ 20.52          
Current Stock Awards [Member]                    
Share-based Payment Arrangement, Expense | $ $ 2.3 $ 2.0   $ 4.0 $ 4.0          
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $ 15.9     $ 15.9            
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)       1 year 10 months 24 days            
Deferred Stock Units [Member]                    
Share-based Payment Arrangement, Expense | $ 0.2 $ 0.2   $ 0.4 $ 0.2          
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total | $ $ 0.8     $ 0.8            
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)       9 months 18 days            
Maximum [Member] | Share-based Payment Arrangement, Option [Member]                    
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)       10 years            
Minimum [Member] | Share-based Payment Arrangement, Option [Member]                    
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)       7 years            
A 2015 Credit Facility [Member] | Revolving Credit Facility [Member] | Maximum [Member]                    
Credit Facility Consolidated Leverage Ratio for Unlimited Share Repurchases           2.50        
Credit Facility Consolidated Leverage Ratio for 20 Million Share Repurchases           3.00        
A 2015 Credit Facility [Member] | Revolving Credit Facility [Member] | Minimum [Member]                    
Credit Facility Consolidated Leverage Ratio for 20 Million Share Repurchases           2.50        
Credit Facility Consolidated Leverage Ratio for Zero Share Repurchases           3.00        
The 2019 Program [Member]                    
Stock Repurchase Program, Number of Shares Authorized to be Repurchased (in shares)             2,000,000      
The 2018 Program [Member]                    
Stock Repurchase Program, Number of Shares Authorized to be Repurchased (in shares)                 2,000,000  
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased (in shares) 327,161     327,161            
In Connection With Equity Compensation Programs [Member]                    
Stock Repurchase Program, Authorized Amount | $ $ 10.0     $ 10.0            
Stock Repurchased During Period, Shares (in shares)       83,737 153,630          
Stock Repurchased During Period, Value | $       $ 1.9 $ 3.1          
Treasury Stock Acquired, Average Cost Per Share (in dollars per share) | $ / shares       $ 22.54 $ 20.48          
Through The Open Market Repurchase Program [Member]                    
Stock Repurchased During Period, Shares (in shares)       180,491 1,274,086          
Stock Repurchased During Period, Value | $       $ 3.2 $ 22.0          
Treasury Stock Acquired, Average Cost Per Share (in dollars per share) | $ / shares       $ 17.80 $ 17.28          
v3.20.2
Note 9 - Stockholders' Equity and Equity Compensation - Summary of Stock Award Activity (Details)
6 Months Ended
Jun. 30, 2020
$ / shares
shares
Stock Awards, Outstanding (in shares) | shares 1,034,964
Weighted average award date fair value (in dollars per share) | $ / shares $ 23.20
Stock Awards, Outstanding (in shares) | shares 1,192,594
Weighted average award date fair value (in dollars per share) | $ / shares $ 21.76
Restricted Stock Units (RSUs) [Member]  
Awards, grants during period (in shares) | shares 391,171
Weighted average award date fair value, award granted (in dollars per share) | $ / shares $ 20.02
Awards, distributed during period (in shares) | shares (188,545)
Weighted average award date fair value, award distributed (in dollars per share) | $ / shares $ 22.30
Awards, forfeited during period (in shares) | shares (28,928)
Weighted average award date fair value, award forfeited (in dollars per share) | $ / shares $ 21.07
Performance Shares [Member]  
Awards, grants during period (in shares) | shares 131,755
Weighted average award date fair value, award granted (in dollars per share) | $ / shares $ 22.96
Awards, distributed during period (in shares) | shares (71,541)
Weighted average award date fair value, award distributed (in dollars per share) | $ / shares $ 28.18
Awards, forfeited during period (in shares) | shares (76,282)
Weighted average award date fair value, award forfeited (in dollars per share) | $ / shares $ 27.46
v3.20.2
Note 9 - Stockholders' Equity and Equity Compensation - Deferred Stock Unit Activity (Details)
6 Months Ended
Jun. 30, 2020
$ / shares
shares
Stock Awards, Outstanding (in shares) | shares 1,034,964
Weighted average award date fair value (in dollars per share) | $ / shares $ 23.20
Stock Awards, Outstanding (in shares) | shares 1,192,594
Weighted average award date fair value (in dollars per share) | $ / shares $ 21.76
Deferred Stock Units [Member]  
Stock Awards, Outstanding (in shares) | shares 253,340
Weighted average award date fair value (in dollars per share) | $ / shares $ 20.71
Awards, grants during period (in shares) | shares 64,010
Weighted average award date fair value, award granted (in dollars per share) | $ / shares $ 14.55
Awards, distributed during period (in shares) | shares (56,582)
Weighted average award date fair value, award distributed (in dollars per share) | $ / shares $ 21.63
Stock Awards, Outstanding (in shares) | shares 260,768
Weighted average award date fair value (in dollars per share) | $ / shares $ 19.00
v3.20.2
Note 10 - Taxes on Income (Details Textual) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Effective Income Tax Rate Reconciliation, Percent, Total 23.40% (111.00%) 33.80% (40.90%)
Effective Income Tax Rate Reconciliation, Repatriation of Foreign Earnings, Amount       $ 2.1
v3.20.2
Note 12 - Segment Reporting (Details Textual)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Number of Reportable Segments     3  
Impairment of Long-Lived Assets to be Disposed of     $ 0 $ 11,946
Goodwill, Impairment Loss $ 1,258 $ 0 1,258 [1] 0
Impairment of Intangible Assets, Finite-lived 957 0 957 0
Infrastructure Solutions [Member]        
Impairment of Long-Lived Assets to be Disposed of     700 9,000
Goodwill, Impairment Loss [1]     (0)  
Corrosion Protection [Member]        
Impairment of Long-Lived Assets to be Disposed of       2,900
Goodwill, Impairment Loss [1]     (0)  
Energy Services [Member]        
Goodwill, Impairment Loss 1,300   1,258 [1]  
Impairment of Intangible Assets, Finite-lived     1,000  
Restructuring 2017 [Member]        
Restructuring Charges, Total 4,833 [2] 6,516 [3] 8,456 [4] 9,382 [5]
Restructuring 2017 [Member] | Operating Income (Loss) [Member] | Infrastructure Solutions [Member]        
Restructuring Charges, Total 100 1,400 500 3,400
Restructuring 2017 [Member] | Operating Income (Loss) [Member] | Infrastructure Solutions [Member] | Divestiture of International Operations [Member]        
Restructuring Charges, Total 0 400 200 500
Restructuring 2017 [Member] | Operating Income (Loss) [Member] | Corrosion Protection [Member]        
Restructuring Charges, Total 1,300 3,300 3,100 3,500
Restructuring 2017 [Member] | Operating Income (Loss) [Member] | Energy Services [Member]        
Restructuring Charges, Total 3,500 100 3,600 100
Restructuring 2017 [Member] | Operating Income (Loss) [Member] | Corporate Segment [Member]        
Restructuring Charges, Total 900 900 1,600 1,300
Restructuring 2017 [Member] | Operating Income (Loss) [Member] | Corporate Segment [Member] | Divestiture of International Operations [Member]        
Restructuring Charges, Total 700 400 1,300 400
Restructuring 2017 [Member] | Other Nonoperating Income (Expense) [Member]        
Restructuring Charges, Total $ 900 $ 900 300 $ 1,100
Restructuring 2017 [Member] | Other Nonoperating Income (Expense) [Member] | Divestiture of International Operations [Member]        
Restructuring Charges, Total     $ 700  
[1] During the second quarter of 2020, the Company recorded a $1.3 million goodwill impairment related to restructuring activities in Energy Services (see Note 4).
[2] Total pre-tax restructuring charges for the quarter ended June 30, 2020, include cash charges of $2.6 million and non-cash charges of $2.2 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[3] Total pre-tax restructuring charges for the quarter ended June 30, 2019, include cash charges of $5.4 million and non-cash charges of $1.1 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[4] Total pre-tax restructuring charges for the six months ended June 30, 2020, include cash charges of $5.8 million and non-cash charges of $2.7 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
[5] Total pre-tax restructuring charges for the six months ended June 30, 2019, include cash charges of $8.5 million and non-cash charges of $0.9 million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.
v3.20.2
Note 12 - Segment Reporting - Summary of Revenues (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Revenues [1] $ 245,017 $ 318,740 $ 532,392 $ 595,644
Gross profit [1] 53,575 67,437 103,459 115,732
Total operating income (loss) 8,727 459 10,123 (315)
Interest expense (4,690) (3,566) (7,886) (7,156)
Interest income 215 261 443 546
Other [2] 964 (1,015) 1,389 (1,689)
Total other expense (3,511) (4,320) (6,054) (8,299)
Income (loss) before taxes on income 5,216 (3,861) 4,069 (8,614)
UNITED STATES        
Revenues [1] 197,447 239,987 430,667 448,762
Gross profit [1] 41,334 50,792 80,970 82,619
CANADA        
Revenues [1] 24,995 33,392 46,850 57,460
Gross profit [1] 5,369 5,028 8,100 8,482
Europe [Member]        
Revenues [1] 7,192 17,381 17,863 33,384
Gross profit [1] 2,256 3,311 5,204 6,830
Other Foreign Countries [Member]        
Revenues [1] 15,383 27,980 37,012 56,038
Gross profit [1] 4,616 8,306 9,185 17,801
Infrastructure Solutions [Member]        
Revenues 137,392 155,440 267,636 286,983
Infrastructure Solutions [Member] | UNITED STATES        
Revenues 114,705 110,957 218,123 208,848
Infrastructure Solutions [Member] | CANADA        
Revenues 14,205 18,934 25,228 29,545
Infrastructure Solutions [Member] | Europe [Member]        
Revenues 4,131 12,888 11,773 25,413
Infrastructure Solutions [Member] | Other Foreign Countries [Member]        
Revenues 4,351 12,661 12,512 23,177
Corrosion Protection [Member]        
Revenues 55,491 77,596 121,559 142,094
Corrosion Protection [Member] | UNITED STATES        
Revenues 30,608 43,326 69,347 73,347
Corrosion Protection [Member] | CANADA        
Revenues 10,790 14,458 21,622 27,915
Corrosion Protection [Member] | Europe [Member]        
Revenues 3,061 4,493 6,090 7,971
Corrosion Protection [Member] | Other Foreign Countries [Member]        
Revenues 11,032 15,319 24,500 32,861
Energy Services [Member]        
Revenues 52,134 85,704 143,197 166,567
Energy Services [Member] | UNITED STATES        
Revenues 52,134 85,704 143,197 166,567
Energy Services [Member] | CANADA        
Revenues 0 0 0 0
Energy Services [Member] | Europe [Member]        
Revenues 0 0 0 0
Energy Services [Member] | Other Foreign Countries [Member]        
Revenues 0 0 0 0
Operating Segments [Member] | Infrastructure Solutions [Member]        
Revenues 137,392 155,439 267,636 286,982
Gross profit 35,667 38,871 67,037 65,457
Total operating income (loss) [3] 21,004 9,120 34,559 14,835
Operating Segments [Member] | Corrosion Protection [Member]        
Revenues 55,491 77,597 121,559 142,095
Gross profit 14,111 16,692 23,028 29,565
Total operating income (loss) [4] 699 (3,863) (5,748) (5,623)
Operating Segments [Member] | Energy Services [Member]        
Revenues 52,134 85,704 143,197 166,567
Gross profit 3,797 11,874 13,394 20,710
Total operating income (loss) [5] (5,713) 4,107 (3,537) 5,222
Corporate, Non-Segment [Member]        
Total operating income (loss) [6] $ (7,263) $ (8,905) $ (15,151) $ (14,749)
[1] Revenues and gross profit are attributed to the country of origin
[2] Other expense in the second quarter of 2020 includes gains of $0.9 million related to restructuring (see Note 4). Other expense in the second quarter of 2019 includes $0.9 million of restructuring charges (see Note 4). Other expense in the first six months of 2020 and 2019 includes gains of $0.3 million and charges of $1.1 million, respectively, related to restructuring (see Note 4). Other expense in the first six months of 2020 also includes gains of $0.7 million related to divestitures of Insituform Australia and Insituform Spain (see Note 1).
[3] Operating income in the second quarter of 2020 and 2019 includes $0.1 million and $1.4 million, respectively, of restructuring charges (see Note 4) and $0.0 million and $0.4 million, respectively, of costs primarily related to the divestiture of certain international operations. Operating income in the first six months of 2020 and 2019 includes $0.5 million and $3.4 million, respectively, of restructuring charges (see Note 4) and $0.2 million and $0.5 million, respectively, of divestiture costs. Additionally, operating income in the second quarter and first six months of 2020 includes $0.7 million of impairment reversals while operating income in the second quarter and first six months of 2019 includes $9.0 million of impairment charges to assets held for sale.
[4] Operating income (loss) in the second quarter of 2020 and 2019 includes $1.3 million and $3.3 million, respectively, of restructuring charges (see Note 4). Operating loss in the first six months of 2020 and 2019 includes $3.1 million and $3.5 million, respectively, of restructuring charges (see Note 4). Additionally, operating income in the second quarter and first six months of 2019 includes $2.9 million of impairment charges to assets held for sale.
[5] Operating loss in the second quarter of 2020 and 2019 includes $3.5 million and less than $0.1 million, respectively, of restructuring charges (see Note 4). Operating loss in the first six months of 2020 and 2019 includes $3.6 million and less than $0.1 million respectively, of restructuring charges (see Note 4). Additionally, operating loss in the second quarter and first six months of 2020 includes $1.3 million of goodwill impairment charges and $1.0 million of definite-lived intangible asset impairment charges.
[6] Operating loss in the second quarter of 2020 and 2019 includes $0.9 million and $0.9 million, respectively, of restructuring charges (see Note 4) and $0.7 million and $0.4 million, respectively, of divestiture costs. Operating loss in the first six months of 2020 and 2019 includes $1.6 million and $1.3 million, respectively, of restructuring charges (see Note 4) and $1.3 million and $0.4 million, respectively, of divestiture costs.
v3.20.2
Note 13 - Derivative Financial Instruments (Details Textual) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2019
Jun. 30, 2020
Dec. 31, 2019
Mar. 12, 2018
Oct. 31, 2015
Gain (Loss) on Foreign Currency Derivatives Recorded in Earnings, Net $ (300)        
Derivative, Fixed Interest Rate       2.937%  
A 2015 Interest Rate Swap [Member]          
Derivative, Fixed Interest Rate         1.46%
Derivative Asset, Notional Amount         $ 262,500
A 2018 Interest Rate Swap [Member]          
Derivative, Amount of Hedged Item       $ 170,600  
Derivative, Fixed Interest Rate       2.937%  
Derivative Asset, Notional Amount       $ 170,600  
A 2015 Credit Facility [Member]          
Derivative, Amount of Hedged Item         262,500
Line of Credit Facility, Maximum Borrowing Capacity         $ 350,000
A 2018 Credit Facility [Member]          
Derivative Asset, Notional Amount       $ 170,600  
Designated as Hedging Instrument [Member]          
Derivative Assets (Liabilities), at Fair Value, Net, Total   $ (10,696) $ (4,638)    
Fair Value, Recurring [Member] | Designated as Hedging Instrument [Member]          
Derivative Assets (Liabilities), at Fair Value, Net, Total   $ (10,700) $ (4,600)    
v3.20.2
Note 13 - Derivative Financial Instruments - Summary of Derivative Positions (Details) - Interest Rate Swap [Member]
6 Months Ended
Jun. 30, 2020
USD ($)
Notional amount $ 177,187,500
Weighted average remaining maturities (Year) 2 years 6 months
v3.20.2
Note 13 - Derivative Financial Instruments - Summary of Fair Value Amounts of Derivative Instruments (Details) - Designated as Hedging Instrument [Member] - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Derivative assets $ 0 $ 261
Derivative liabilities 10,696 4,899
Net Derivative Asset (Liability) (10,696) (4,638)
Other Noncurrent Assets [Member] | Interest Rate Swap [Member]    
Derivative assets 0 261
Other Noncurrent Liabilities [Member] | Interest Rate Swap [Member]    
Derivative liabilities $ 10,696 $ 4,899