Note 1 - General

9 Months Ended

Sep. 30, 2019

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, 2018, 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 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2019.

Acquisitions/Strategic Initiatives/Divestitures

2017 Restructuring

On July 28, 2017, the Company’s board of directors approved a realignment and restructuring plan (the “2017 Restructuring”).  As part of the 2017 Restructuring, the Company announced plans to: (i) divest the Company’s 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 cured-in-place pipe (“CIPP”) businesses in Australia and Denmark; and (iv) reduce corporate and other operating costs.

During 2018, the Company’s board of directors approved additional actions with respect to the 2017 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.  During the second quarter of 2019, the Company initiated plans to exit additional international businesses.  See further discussion in Note 4.

Infrastructure Solutions Segment (“Infrastructure Solutions”)

During 2018, the Company’s board of directors approved a plan to divest the Company’s CIPP business in Australia (“Insituform Australia”).  While restructuring actions in Insituform Australia led to improvements in operating results, an assessment of the long-term fit within the Company’s portfolio led to the decision to divest the business.  Accordingly, the Company has classified Insituform Australia’s assets and liabilities as held for sale on the Consolidated Balance Sheet at September 30, 2019 and December 31, 2018.  See Note 5.

During the second quarter of 2019, the Company initiated plans to sell its CIPP contracting businesses in Europe: Insituform Rioolrenovatietechnicken B.V. (“Insituform Netherlands”); Insituform Technologies Iberica SA (“Insituform Spain”); and Environmental Techniques Limited (“Environmental Techniques”).  Accordingly, the Company has classified the assets and liabilities of these businesses as held for sale on the Consolidated Balance Sheet at September 30, 2019.  See Note 5.  Additionally, see Note 14 for additional information on the sale of the CIPP contracting operations of Insituform Netherlands, effective October 11, 2019.

Corrosion Protection Segment (“Corrosion Protection”)

During the second quarter of 2019, the Company began negotiating with a prospective buyer for its interest in its Tite Liner^® joint venture in Mexico, United Pipeline de Mexico S.A. de C.V. (“United Mexico”).  Accordingly, the Company has classified the assets and liabilities of this business as held for sale on the Consolidated Balance Sheet at September 30, 2019.  See Note 5.  Additionally, see Note 14 for additional information on the sale of the Company’s interest in United Mexico, effective October 11, 2019.

During the first quarter of 2019, the Company initiated plans to sell its interest in its cathodic protection materials manufacturing and production joint venture in Saudi Arabia, Corrpower International Limited (“Corrpower”), and its interest in its Tite Liner^® and CIPP joint venture in South Africa, Aegion South Africa Proprietary Limited (“Aegion South Africa”).  During the third quarter of 2019, the Company ended its negotiations with potential buyers for Corrpower and Aegion South Africa.  Accordingly, the relevant assets and liabilities for each of the entities were removed from held for sale and accounted for as held and used at September 30, 2019.  These entities will now be exited as part of the 2017 Restructuring.

On August 31, 2018, the Company sold substantially all of the assets of its wholly-owned subsidiary, The Bayou Companies, LLC and its fifty-one percent (51%) interest in Bayou Wasco Insulation, LLC.  The sale price was $46 million, consisting of $38 million paid in cash at closing and $8 million in a fully secured, two-year loan payable to Aegion.  Aegion is also eligible to receive an additional $4 million in total earn-out payments based on performance of the divested businesses in 2019 and 2020.  Cash proceeds, net of customary closing costs, were used to repay outstanding borrowings on the Company’s line of credit.  The sale resulted in a pre-tax, non-cash loss of $8.7 million during the third quarter of 2018, which is included in “Other expense” in the Consolidated Statements of Operations.

On May 4, 2018, the Company acquired the operations of Hebna Inc., Hebna Canada Inc. and Hebna Corporation (collectively “Hebna”), for a total purchase price of $6.0 million ($3.0 million was paid during the second quarter of 2018 and $3.0 million was paid during the third quarter of 2018).  The transaction was funded from a combination of domestic and international cash balances, with fifty percent (50%) of the purchase price being paid by the Company’s joint venture in Oman, in which the Company is a fifty-one percent (51%) partner.  Hebna provided pipeline lining services, including compressed-fit lining, slip-lining, liner and free-standing pipe fusing, pipeline assessment and integrity management, pipeline pigging and calibration, and roto-lining services primarily in the United States, Canada and the Middle East.

Energy Services Segment (“Energy Services”)

On July 20, 2018, the Company acquired the operations of Plant Performance Services LLC and P2S LLC (collectively “P2S”), for a total purchase price of $3.0 million.  The transaction was funded from domestic cash balances.  P2S specializes in general mechanical turnaround services, specialty welding services and field fabrication services primarily for the downstream oil and gas industry.