Aegion Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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EX-99.2 - EXHIBIT 99.2 - Aegion Corp	ex99-2.htm

Exhibit 99.1

AEGION CORPORATION

REPORTS FOURTH QUARTER AND YEAR-END 2011 RESULTS

·	Fourth quarter net income, excluding acquisition-related transaction expenses, was $15.2 million, or $0.38 per diluted share (non-GAAP), in line with revised guidance, on strong Energy and Mining results and stabilization in North American Sewer and Water Rehabilitation

·	Full year 2011 net income, inclusive of $6.8 million in pre-tax expense related to the redemption of prior debt, $6.4 million in pre-tax, acquisition-related transaction expense and $2.2 million in pre-tax expense related to restructuring activities, was $26.5 million, or $0.67 per diluted share

·	Full year 2011 net income, excluding acquisition-related transaction expenses, restructuring charges and expenses related to redemption of prior debt, was $36.9 million, or $0.93 per diluted share (non-GAAP), in line with revised guidance

·	Consolidated contract backlog at December 31, 2011 reached $464.2 million, a 13.6 percent increase from December 31, 2010. Energy and Mining contract backlog increased 75.5 percent to $256.4 million because of growth at UPS, CRTS and offshore projects for Bayou compared to December 31, 2010

·	2012 earnings guidance of $1.40 to $1.60 per diluted share (non-GAAP), excluding impacts of acquisition-related transaction expenses. Energy and Mining and the new Commercial and Structural segments are the primary anticipated drivers of earnings growth

St. Louis, MO – February 27, 2012 – Aegion Corporation (Nasdaq Global Select Market: AEGN) today reported fourth quarter net income of $15.2 million, or $0.38 per diluted share (non-GAAP), excluding impact of acquisition-related transaction expenses of $0.6 million (pre-tax), compared to net income of $17.4 million, or $0.44 per diluted share, in the fourth quarter of 2010. For the full year, net income, exclusive of acquisition-related transaction expenses, prior debt redemption costs and restructuring charges, was $36.9 million, or $0.93 per diluted share (non-GAAP), compared to $60.5 million, or $1.54 per diluted share, in 2010. Inclusive of these one-time charges, net income for 2011 was $26.5 million, or $0.67 per diluted share.

J. Joseph Burgess, President and Chief Executive Officer, commented, “In 2011, our Company continued to invest in premium products and services through the acquisitions of Fyfe North America, CRTS and Hockway and targeted higher value international growth in Asia and the Middle East. These investments accelerated our transition from a specialty municipal sewer contractor to a Company providing a range of infrastructure protection products and services across water, energy, mining and commercial structures. For the first time, revenues in 2011 from our North American Sewer and Water Rehabilitation business were surpassed by revenues of our Energy and Mining platform. That growth was fueled by the international expansion of United Pipeline Systems, based upon expanded acceptance of its Tite Liner® technology, and continued solid growth from Corrpro.”

“I am pleased we delivered on our revised non-GAAP diluted earnings per share guidance with $0.93 per share for the full year. But clearly, we were disappointed with the performance of the North American Sewer and Water Rehabilitation business in 2011. While the market dropped off substantially in 2011, we compounded the problem with slow fixed cost reduction and, in some cases, poor estimation and execution. As previously discussed, during the second half of 2011 we right sized our crew structure, eliminated excess corporate and business unit operating expenses, and tightened our bidding discipline. We also invested in additional estimating, scheduling and project management resources that produced improved transactional controls in the current small diameter, small transaction market environment. These actions produced stable results, as we’ve seen two consecutive quarters of profit contribution. The outlook for 2012 looks more promising as a result of these changes and bid margins in our backlog that are improved over earlier in 2011, positioning us to realize operating income margins in the range of high single digits.”

With regards to our Energy and Mining segment, Burgess noted, “Energy and Mining had a very good year despite a significant decrease in large pipe coating activity at our Bayou New Iberia facility. While the decrease in coating activity and an increase in operating expenses to support international growth initiatives negatively impacted operating results in 2011, Energy and Mining delivered record revenues and operating profit in the fourth quarter and its backlog at the end of 2011 reached $256.4 million, a 75.5 percent increase over year-end 2010, indicating a very favorable outlook for 2012. Driving the increased backlog was United Pipeline Systems, which achieved record revenues and profits in 2011, surpassing the $100.0 million revenue mark for the first time at $123.0 million. International opportunities remain very robust heading into 2012, led by UPS’s $67.3 million Moroccan phosphate project, a majority of which is expected to be completed in 2012, along with other significant project opportunities. Corrpro achieved its highest revenue ever with $203.0 million in 2011, mostly from recurring business, representing 47 percent of the total Energy and Mining segment. Corrpro is well-positioned for further growth in 2012 as the business increases its presence in the Middle East and continued favorable market conditions in North America. Bayou’s 2012 outlook is very promising with $35 million in backlog at the end of 2011. This increased level of activity is primarily from off shore work in the Gulf of Mexico and strong market conditions for our Canadian operation. CRTS made a modest contribution to operating profit in 2011, but we anticipate a significant increase in profits in 2012. A few weeks ago, we received a notice cancelling approximating $18 million of the Saudi Arabia WASIT offshore gas field project. The cancellation involved the removal of certain small-diameter joint coatings from the scope of work as a cost savings measure, reducing the total contract to $30 million from $48 million. Although we are disappointed with this decision, the WASIT project remains a landmark project for CRTS supporting a solid backlog of projects for the Energy and Mining platform in 2012. We believe the successful execution of the WASIT project will drive new opportunities for CRTS’s proprietary robotics coating technology.”

Our European Sewer and Water Rehabilitation business grew revenues by 17 percent to $87.0 million in 2011 and increased operating profit by 20 percent to $6.0 million. “2011 was a successful year for our strategy, which began two years ago, to selectively participate in profitable contracting markets and focus our efforts in securing third party manufacturing sales of cured-in-place pipe in the balance of the markets,” Burgess continued. “We also improved execution in several European countries and are seeing slightly improved conditions in the United Kingdom. Our ability to compete effectively, either through our contracting services or third party manufacturing sales, gives us more flexibility to participate in these markets at an appropriate return, and we anticipate solid growth in revenues and profits for this business in 2012.”

Results in our Asia-Pacific Sewer and Water Rehabilitation segment were negatively impacted in 2011 by continued challenges and delays in India. The segment recorded a $2.5 million operating loss in 2011. “Difficulties in India overshadowed a strong market in Australia in 2011,” Burgess noted. “For 2012, we will continue our efforts to bring about more consistent profitability throughout Asia, with continued growth in Australia as we tap a solid backlog not only in Sydney, but in other major cities across the country and expansion into new markets. We also will refocus our efforts in India in order to achieve appropriate returns for the associated market risks.”

Our new Commercial and Structural segment completed its first full quarter with Aegion during the fourth quarter. Operating profit was $2.8 million (non-GAAP) in the fourth quarter, excluding $0.6 million in pre-tax acquisition-related expense, resulting in a 21 percent operating margin. “We have a tremendous opportunity with the Fyfe business,” Burgess added. “Our task in 2012 is to invest in Fyfe’s sales and marketing efforts to accelerate its 20 plus percent historical revenue growth rate while continuing to innovate and find new applications for Fibrwrap®, Fyfe’s proprietary fiber-reinforced polymer technology. We anticipate the Commercial and Structural segment will significantly contribute to earnings in 2012, not only because of having full year participation, but also from the momentum and significant growth opportunities the business enjoys today. Our focus will be to select end markets across commercial structures, pipelines, transportation and waterfront rehabilitation that have the best growth possibilities. As for Fyfe’s international markets, we closed on the acquisition of Fyfe Latin America in January and we expect to close the larger Fyfe Asia acquisition in the first quarter of 2012. Asia is a burgeoning market where Fibrwrap® has direct applicability in seismic zones and rehabilitation of aging or sub-optimally constructed structures.”

“2012 is the beginning for Aegion as a diversified growth and return-oriented company. The company we are today is not the same as the one just three short years ago. The investments we have made through acquisitions and to support organic growth have positioned our Company for sustainable growth through superior technologies and services offered in the end markets we serve. With strong growth expected from Energy and Mining, strong contributions from our new Commercial and Structural platform and improved profitability in our Sewer and Water Rehabilitation operations across the globe, we establish our 2012 annual earnings-per-share guidance at $1.40 to $1.60 per diluted share (excluding one-time, non-recurring charges and expenses). This guidance is supported by operating margins and return on invested capital each at approximately 9 percent. Our number one priority in 2012 is execution across all three platforms. I believe Aegion is positioned to deliver strong earnings and operating cash growth in 2012.”

Segment Reporting

Prior to the third quarter of 2011, we previously reported Water Rehabilitation as a separate segment. Based on an internal management reorganization, we have combined previously reported water rehabilitation results for all periods presented below, which have not been material, with the geographically separated Sewer Rehabilitation segments. Additionally, in connection with our recent acquisition of the North American operations of Fyfe Group, LLC, we have established the Commercial and Structural reportable segment.

Energy and Mining Segment

(dollars in thousands)							Increase (Decrease)
	2011			2010			$			%
Three Months Ended December 31,
Revenues	$	123,359		$	105,276		$	18,083			17.2	%
Gross profit		34,446			26,842			7,604			28.3
Gross margin		27.9	%		25.5	%		n/a			2.4
Operating expenses		19,928			16,198			3,730			23.0
Operating income		14,518			10,644			3,874			36.4
Operating margin		11.8	%		10.1	%		n/a			1.7

Twelve Months Ended December 31,
Revenues	$	433,230		$	382,246		$	50,984			13.3	%
Gross profit		109,753			105,309			4,444			4.2
Gross margin		25.3	%		27.6	%		n/a			(2.3	)
Operating expenses		72,982			65,888			7,094			10.8
Reversal of earnout		(1,700	)		(1,700	)		–			–
Acquisition-related expenses		2,682			–			2,682			n/m
Restructuring charges		778			–			778			n/m
Operating income		35,011			41,121			(6,110	)		(14.9	)
Operating margin		8.1	%		10.8	%		n/a			(2.7	)

		December 31, 2011				September 30, 2011				June 30, 2011				March 31, 2011				December 31, 2010
Backlog (in millions)		$	256.4			$	225.6			$	168.1			$	147.6			$	146.1

In the fourth quarter of 2011, our Energy and Mining segment operating income increased by $3.9 million, or 36.4 percent, compared to the fourth quarter of 2010. The increase was primarily driven by our industrial linings operation, which more than doubled its operating income in the fourth quarter of 2011 compared to the same quarter of 2010. Our industrial linings business improved across all geographic regions. Additionally, our U.S. pipe coating operations experienced dramatic improvement over the fourth quarter of 2010. For a majority of 2011, our pipe coating operations suffered from a lack of large diameter pipe coating projects; however, during the fourth quarter of 2011, we began certain new large diameter coating projects. Also, our Canadian coating operation improved over the prior year as we continued to expand our presence in that market. Finally, our fourth quarter 2011 results include financial results of our recent acquisitions of CRTS and Hockway, which contributed approximately $0.9 million to operating income during the quarter. Approximately $1.3 million of the increase in operating expenses was attributable to purchase price depreciation and amortization related to the CRTS and Hockway acquisitions, with the remainder devoted to increased expenditures to support international expansion opportunities. We expect strong global energy markets will lead to growth within existing geographies as well as new geographies, specifically in Asia, the Middle East and North Africa, supported by the recent acquisitions within our corrosion, engineering and pipe coating businesses.

Our Energy and Mining segment contract backlog increased $110.3 million, or 75.5 percent, to $256.4 million at December 31, 2011 compared to December 31, 2010. We have increased backlog levels across all product lines with the largest growth coming from our industrial linings operation. Through our United Pipeline Systems joint venture in October 2011, we were awarded a $67.3 million project in Morocco, which is the largest contract received by this segment. Additionally, backlog increased from inclusion of project backlog from the recent acquisitions of CRTS and Hockway, which contributed $44.3 million to backlog as of December 31, 2011.

We continue to believe high commodity prices as a result of healthy global energy demand will result in significant opportunities for our Energy and Mining segment for future periods, particularly as it relates to new spending in the sector.

North American Sewer and Water Rehabilitation Segment

(dollars in thousands)							Increase (Decrease)
	2011			2010			$			%
Three Months Ended December 31,
Revenues	$	90,901		$	106,972		$	(16,071	)		(15.0	)%
Gross profit		15,151			24,419			(9,278	)		(38.0	)
Gross margin		16.7	%		22.8	%		n/a			(6.1	)
Operating expenses		10,965			12,452			(1,487	)		(11.9	)
Operating income		4,186			11,967			(7,781	)		(65.0	)
Operating margin		4.6	%		11.2	%		n/a			(6.6	)

Twelve Months Ended December 31,
Revenues	$	357,507		$	413,828		$	(56,321	)		(13.6	)%
Gross profit		55,443			93,376			(37,933	)		(40.6	)
Gross margin		15.5	%		22.6	%		n/a			(7.1	)
Operating expenses		48,191			52,545			(4,354	)		(8.3	)
Restructuring charges		503			–			503			n/m
Operating income		6,749			40,831			(34,082	)		(83.5	)
Operating margin		1.9	%		9.9	%		n/a			(8.0	)

		December 31, 2011				September 30, 2011				June 30, 2011				March 31, 2011				December 31, 2010
Backlog (in millions)		$	130.0			$	157.5			$	169.5			$	152.6			$	159.5

In the fourth quarter of 2011, North American Sewer and Water Rehabilitation operating income decreased by $7.8 million, or 65.0 percent, compared to the fourth quarter of 2010. The 2011 fourth quarter decline compared to the prior year was primarily because of the same factors that have plagued this reporting segment throughout 2011. Those being revenue declines because of bid and project release delays, compressed gross margins resulting from project execution issues and a significant shift to lower margin small diameter projects that pressure project management and crew operations. However, we continued to see improvements in this segment throughout the second half of 2011 as a result of the actions we have taken to position the business for improved and consistent success. We expect 2012 operating margins to be vastly improved from 2011 because of our more disciplined bidding process, higher margins on work awarded and our continued focus on project execution.

Contract backlog in our North American Sewer and Water Rehabilitation segment at December 31, 2011 was $130.0 million. This represented a $29.5 million, or 18.5 percent, decrease from backlog at December 31, 2010. Overall, our lower backlog level is due to weaker market conditions in the United States and our more disciplined bid process. We expect a more stable bid table during 2012 and are seeing improving margins for projects in backlog.

European Sewer and Water Rehabilitation Segment

(dollars in thousands)							Increase (Decrease)
	2011			2010			$			%
Three Months Ended December 31,
Revenues	$	20,472		$	22,517		$	(2,045	)		(9.1	)%
Gross profit		6,304			6,459			(155	)		(2.4	)
Gross margin		30.8	%		28.7	%		n/a			2.1
Operating expenses		3,888			3,970			(82	)		(2.1	)
Operating income		2,416			2,489			(73	)		(2.9	)
Operating margin		11.8	%		11.1	%		n/a			0.7

Twelve Months Ended December 31,
Revenues	$	87,017		$	74,260		$	12,757			17.2	%
Gross profit		22,837			20,606			2,231			10.8
Gross margin		26.2	%		27.7	%		n/a			(1.5	)
Operating expenses		16,140			15,593			547			3.5
Restructuring charges		697			–			697			n/m
Operating income		6,000			5,013			987			19.7
Operating margin		6.9	%		6.8	%		n/a			0.1

		December 31, 2011				September 30, 2011				June 30, 2011				March 31, 2011				December 31, 2010
Backlog (in millions)		$	20.7			$	19.2			$	22.2			$	24.0			$	23.3

In the fourth quarter of 2011, our European Sewer and Water Rehabilitation segment operating income declined approximately $0.1 million compared to the fourth quarter of 2010. The primary factor in the decrease was a 9.1% drop in revenues. However, gross profit margin increased by 210 basis points due to improvements in project execution in France and Spain and slightly improved market conditions in the United Kingdom. Improved gross margins and lower operating expenses led to an operating margin improvement of 70 basis points to 11.8 percent.

Contract backlog in this segment was $20.7 million at December 31, 2011. This represented a decrease of $2.6 million, or 11.2%, compared to December 31, 2010. Backlog has improved in France, while market conditions and increased competition have impacted backlog in the Netherlands. We expect stability in our core western European markets and growth in third-party tube sales in 2012.

Asia-Pacific Sewer and Water Rehabilitation Segment

(dollars in thousands)							Increase (Decrease)
	2011			2010			$			%
Three Months Ended December 31,
Revenues	$	8,614		$	11,251		$	(2,637	)		(23.4	)%
Gross profit		802			2,562			(1,760	)		(68.7	)
Gross margin		9.3	%		22.8	%		n/a			(13.5	)
Operating expenses		2,449			2,835			(386	)		(13.6	)
Operating loss		(1,647	)		(273	)		1,374			503.3
Operating margin		(19.1	)%		(2.4	)%		n/a			(16.7	)

Twelve Months Ended December 31,
Revenues	$	43,717		$	44,641		$	924			2.1	%
Gross profit		6,772			10,289			(3,517	)		(34.2	)
Gross margin		15.5	%		23.0	%		n/a			(7.5	)
Operating expenses		9,111			10,219			(1,108	)		(10.8	)
Restructuring charges		173			–			173			n/m
Operating income (loss)		(2,512	)		70			(2,582	)		(3,688.6	)
Operating margin		(5.7	)%		0.2	%		n/a			(5.9	)

		December 31, 2011				September 30, 2011				June 30, 2011				March 31, 2011				December 31, 2010
Backlog (in millions)		$	37.5			$	37.4			$	50.3			$	68.7			$	79.8

In the fourth quarter of 2011, our Asia-Pacific Sewer and Water Rehabilitation segment operating loss increased by $1.4 million compared to the fourth quarter of 2010. The increase was primarily because of a lack of profitable projects in India and poor results in Singapore relating to cost overruns and project release delays. Partially offsetting poor results in India and Singapore was continued growth in our Australian operation. Operating expenses decreased by $0.4 million for the quarter compared to the prior year principally because of cost containment efforts throughout the region.

Contract backlog in our Asia-Pacific Sewer and Water Rehabilitation segment decreased by $42.3 million, or 53.0 percent, to $37.5 million at December 31, 2011 from $79.8 million at December 31, 2010. The decrease was largely driven by the lack of large new project awards in 2011, from continued work release delays and due to our efforts to work through backlog in Australia, Hong Kong and Singapore. Additionally, backlog from a Singapore project were adjusted downward in 2011 because of project revisions. For 2012, prospects continue to be strong in the Asia-Pacific region, outside India, for expansion, including third-party tube sales. We expect continued strong bid activity with new tenders in Sydney and elsewhere in Australia. We also expect activity to build in Malaysia where we are pursuing a number of projects in Kuala Lumpur.

Commercial and Structural Segment

(dollars in thousands)						Increase (Decrease)
	2011			2010		$			%
Three Months Ended December 31,
Revenues	$	13,449		$	–	$	13,449			–
Gross profit		6,778			–		6,778			–
Gross margin		50.4	%		–		n/a			–
Operating expenses		3,933			–		3,933			–
Acquisition-related expenses		608			–		608			–
Operating income		2,237			–		2,237			–
Operating margin		16.6	%		–		n/a			–

Twelve Months Ended December 31,
Revenues	$	17,114		$	–	$	17,114			–
Gross profit		8,319			–		8,319			–
Gross margin		48.6	%		–		n/a			–
Operating expenses		5,340			–		5,340			–
Acquisition-related expenses		3,690			–		3,690			–
Operating income		(711	)		–		(711	)		–
Operating margin		(4.2	)%		–		n/a			–

		December 31, 2011				September 30, 2011
Backlog (in millions)		$	19.6			$	17.5

The 2011 time period represents financial results from September 1, 2011, following our acquisition of the North American business of Fyfe Holdings, LLC on August, 31, 2011. Fyfe North America delivered strong fourth quarter results, as expected, because of solid execution with high gross margin pipeline projects. During 2011, we incurred $3.7 million of acquisition-related expenses for this business as well as current and former acquisition targets. In connection with the Fyfe North America acquisition we were granted exclusive negotiating rights to acquire Fyfe Group’s international operations in Latin America, Asia and Europe. In January 2012, we completed our purchase of Fyfe Latin America and we expect to close the Fyfe Asia acquisition in the first quarter of 2012. Backlog at December 31, 2011 for the Commercial and Structural segment was $19.6 million, a $2.1 million, or 12.0%, increase from September 30, 2011. Excluding acquisition-related expenses, we anticipate that the Commercial and Structural segment will generate strong earnings and revenue growth in 2012.

Cash Flow

Unrestricted cash at December 31, 2011 was $106.1 million compared to $96.7 million at September 30, 2011 and $114.8 million at December 31, 2010. Our lower operating cash flow for 2011 was primarily because of transaction costs related to recent acquisitions, along with restructuring charges, prior debt redemption costs and lower earnings from our North American Sewer and Water Rehabilitation segment. Cash flow from operating activities from September 30, 2011 through the end of the year increased significantly to $31.9 million because of higher earnings and improved working capital management. This increase was partially offset by our previously announced share repurchase program, pursuant to which we repurchased $5.0 million of our common stock during the fourth quarter of 2011. We expect to see increased cash flows in 2012 from earnings growth and continued optimization of our cash management practices.

Aegion Corporation is a global leader in infrastructure protection, providing proprietary technologies and services to protect against the corrosion of industrial pipelines and for the rehabilitation and strengthening of sewer, water, energy and mining piping systems and buildings, bridges, tunnels and waterfront structures. More information about Aegion can be found on its internet site at www.aegion.com.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. The Company makes forward-looking statements in this news release that represent the Company’s beliefs or expectations about future events or financial performance. These forward-looking statements are based on information currently available to the Company and on management’s beliefs, assumptions, estimates or projections and are not guarantees of future events or results. When used in this document, the words “anticipate,” “estimate,” “believe,” “plan,” “intend, “may,” “will” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Such statements are subject to known and unknown risks, uncertainties and assumptions, including those referred to in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on February 28, 2011 under the name Insituform Technologies, Inc., and in the Company’s subsequent Quarterly Reports on Form 10-Q. In light of these risks, uncertainties and assumptions, the forward-looking events 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 the Company from time to time in its periodic 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 the Company in this news release are qualified by these cautionary statements.

Regulation G Statement

Aegion has presented certain information in this release excluding certain items that impacted income, expense and earnings per share. The (non-GAAP) earnings per share exclude the earnings impact of acquisition-related expenses, restructuring charges and prior debt redemption costs. Aegion management uses such non-GAAP information internally to evaluate financial performance for its operations, as the Company believes it allows the Company to more accurately compare the Company’s ongoing performance across periods.

Aegion™, the Aegion™ logo, Insituform®, the Insituform® logo, United Pipeline Systems®, Bayou Companies™, Corrpro® , Fiberwrap® and Fyfe™ are the registered and unregistered trademarks of Aegion Corporation and its affiliates.

CONTACT: Aegion Corporation

David A. Martin, Senior Vice President and Chief Financial Officer

(636) 530-8000

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per share information)

	For the Three Months Ended December 31,						For the Twelve Months Ended December,
	2011			2010			2011			2010

Revenues	$	256,795		$	246,016		$	938,585		$	914,975
Cost of revenues		193,314			185,734			735,461			685,395
Gross profit		63,481			60,282			203,124			229,580
Operating expenses		41,163			35,455			151,764			144,245
Earnout reversal		–			–			(1,700	)		(1,700	)
Acquisition-related expenses		608			–			6,372			–
Restructuring charges		–			–			2,151			–
Operating income		21,710			24,827			44,537			87,035
Other income (expense):
Interest expense		(2,248	)		(2,487	)		(15,075	)		(8,691	)
Interest income		148			92			347			332
Other		942			(991	)		1,955			(947	)
Total other expense		(1,158	)		(3,386	)		(12,773	)		(9,306	)
Income before taxes on income		20,552			21,441			31,764			77,729
Taxes on income		5,538			5,422			7,565			23,040
Income before equity in earnings of affiliated companies		15,014			16,019			24,199			54,689
Equity in earnings of affiliated companies, net of tax		940			1,821			3,471			7,291
Income before discontinued operations		15,954			17,840			27,670			61,980
Loss from discontinued operations, net of tax		–			(7	)		–			(100	)
Net income		15,954			17,833			27,670			61,880
Less: net income attributable to noncontrolling interests		(1,202	)		(419	)		(1,123	)		(1,418	)
Net income attributable to Aegion Corporation	$	14,752		$	17,414		$	26,547		$	60,462

Earnings per share attributable to Aegion Corporation:
Basic:
Income from continuing operations	$	0.37		$	0.44		$	0.67		$	1.55
Loss from discontinued operations		–			(0.00	)		–			(0.01	)
Net income	$	0.37		$	0.44		$	0.67		$	1.54
Diluted:
Income from continuing operations	$	0.37		$	0.44		$	0.67		$	1.54
Loss from discontinued operations		–			(0.00	)		–			(0.01	)
Net income	$	0.37		$	0.44		$	0.67		$	1.53

Basic		39,406,355			39,063,200			39,362,138			39,040,386
Diluted		39,649,466			39,493,386			39,698,455			39,413,880

AEGION CORPORATION AND SUBSIDIARIES

STATEMENT OF OPERATIONS RECONCILIATION

For the Three Months Ended December 31, 2011

(Unaudited) (Non-GAAP)

(in thousands, except share and per share information)

	Consolidated Results			Acquisition -Related Expenses			Results Excluding One-time Items

Revenues	$	256,795		$	–		$	256,795
Cost of revenues		193,314			–			193,314
Gross profit		63,481			–			63,481
Operating expenses		41,771			(608	)		41,163
Operating income		21,710			608			22,318
Other income (expense):
Interest expense		(2,248	)		–			(2,248	)
Interest income		148			–			148
Other		942			–			942
Total other income		(1,158	)		–			(1,158	)
Income before taxes on income		20,542			608			21,160
Taxes on income		5,538			148			5,686
Income before equity in earnings of affiliated companies		15,014			460			15,474
Equity in earnings of affiliated companies		940			–			940
Net income		15,954			460			16,414
Less: net income attributable to noncontrolling interests		(1,202	)		–			(1,202	)
Net income attributable to Aegion Corporation	$	14,752		$	460		$	15,212

Earnings per share attributable to Aegion Corporation:
Basic:
Net income	$	0.37					$	0.39
Diluted:
Net income	$	0.37					$	0.38

Weighted average number of shares:
Basic		39,406,355						39,406,355
Diluted		39,649,466						39,649,466

AEGION CORPORATION AND SUBSIDIARIES

STATEMENT OF OPERATIONS RECONCILIATION

For the Twelve Months Ended December 31, 2011

(Unaudited) (Non-GAAP)

(in thousands, except share and per share information)

	Consolidated Results			Restructuring Charges			Acquisition -Related Expenses			Prior Debt Redemption Costs			Results Excluding One-time Items

Revenues	$	938,585		$	–		$	–		$	–		$	938,585
Cost of revenues		735,461			–			–			–			735,461
Gross profit		203,124			–			–			–			203,124
Operating expenses		158,587			(2,151	)		(6,372	)		–			150,064
Operating income		44,537			2,151			6,372			–			53,060
Other income (expense):
Interest expense		(15,075	)		–			–			(6,811	)		(8,264	)
Interest income		347			–			–			–			347
Other		1,955			–			–			–			1,955
Total other income		(12,773	)		–			–			(6,811	)		(5,962	)
Income before taxes on income		31,764			2,151			6,372			6,811			47,098
Taxes on income		7,565			655			1,669			2,684			12,573
Income before equity in earnings of affiliated companies		24,199			1,496			4,703			4,127			34,525
Equity in earnings of affiliated companies		3,471			–			–			–			3,471
Net income		27,670			1,496			4,703			4,127			37,996
Less: net income attributable to noncontrolling interests		(1,123	)		–			–			–			(1,123	)
Net income attributable to Aegion Corporation		26,547		$	1,496		$	4,703		$	4,127			36,873

Earnings per share attributable to Aegion Corporation:
Basic:
Net income	$	0.67											$	0.94
Diluted:
Net income	$	0.67											$	0.93

Weighted average number of shares:
Basic		39,362,138												39,362,138
Diluted		39,698,455												39,698,455

AEGION CORPORATION AND SUBSIDIARIES

SEGMENT DATA

(Unaudited)

(In thousands)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2011			2010			2011			2010

Revenues:
Energy and Mining	$	123,359		$	105,276		$	433,230		$	382,246
North American Sewer and Water Rehabilitation		90,901			106,972			357,507			413,828
European Sewer and Water Rehabilitation		20,472			22,517			87,017			74,260
Asia-Pacific Sewer and Water Rehabilitation		8,614			11,251			43,717			44,641
Commercial and Structural		13,449			–			17,114			–
Total revenues	$	256,795		$	246,016		$	938,585		$	914,975

Gross profit:
Energy and Mining	$	34,446		$	26,842		$	109,753		$	105,309
North American Sewer and Water Rehabilitation		15,151			24,419			55,443			93,376
European Sewer and Water Rehabilitation		6,304			6,459			22,837			20,606
Asia-Pacific Sewer and Water Rehabilitation		802			2,562			6,772			10,289
Commercial and Structural		6,778			–			8,319			–
Total gross profit	$	63,481		$	60,282		$	203,124		$	229,580

Operating income (loss):
Energy and Mining	$	14,518		$	10,644		$	35,011		$	41,121
North American Sewer and Water Rehabilitation		4,186			11,967			6,749			40,831
European Sewer and Water Rehabilitation		2,416			2,489			6,000			5,013
Asia-Pacific Sewer and Water Rehabilitation		(1,647	)		(273	)		(2,512	)		70
Commercial and Structural		2,237			–			(711	)		–
Total operating income	$	21,710		$	24,827		$	44,537		$	87,035

AEGION CORPORATION AND SUBSIDIARIES

CONTRACT BACKLOG

(Unaudited)

(in millions)

Backlog	December 31, 2011		September 30, 2011		June 30, 2011		March 31, 2011		December 31, 2010
Energy and Mining	$	256.4	$	225.6	$	168.1	$	147.6	$	146.1
North American Sewer and Water Rehabilitation		130.0		157.5		169.5		152.6		159.5
European Sewer and Water Rehabilitation		20.7		19.2		22.2		24.0		23.3
Asia-Pacific Sewer and Water Rehabilitation		37.5		37.4		50.3		68.7		79.8
Commercial and Structural		19.6		17.5		–		–		–
Total	$	464.2	$	457.2	$	410.1	$	392.9	$	408.7

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. Contract backlog excludes any term contract amounts for which there is not specific and determinable work released and projects where we have been advised that we are the low bidder, but have not formally been awarded the contract.

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share amounts)

	December 31, 2011		December 31, 2010

Assets
Current assets
Cash and cash equivalents	$	106,129	$	114,829
Restricted cash		82		745
Receivables, net		228,313		178,994
Retainage		33,933		28,726
Costs and estimated earnings in excess of billings		67,683		69,544
Inventories		54,540		42,524
Prepaid expenses and other assets		27,305		30,031
Current assets of discontinued operations		–		1,193
Total current assets		517,985		466,586
Property, plant and equipment, less accumulated depreciation		168,945		164,486
Other assets
Goodwill		249,888		190,120
Identified intangible assets, less accumulated amortization		149,655		73,147
Investments in affiliated companies		26,680		27,989
Deferred income tax assets		5,418		4,115
Other assets		6,393		4,260
Total other assets		438,034		299,631
Non-current assets of discontinued operations		–		2,607

Total Assets	$	1,124,964	$	933,310

Liabilities and Equity
Current liabilities
Accounts payable	$	72,326	$	74,820
Other accrued expenses		69,417		73,035
Billings in excess of costs and estimated earnings		24,435		12,612
Current maturities of long-term debt and notes payable		26,541		13,028
Total current liabilities		192,719		173,495
Long-term debt, less current maturities		222,868		91,715
Deferred income tax liabilities		38,167		32,330
Other non-current liabilities		22,221		9,063
Total liabilities		475,975		306,603

Stockholders’ 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 39,352,375 and 39,246,015		394		392
Additional paid-in capital		260,680		251,578
Retained earnings		373,796		347,249
Accumulated other comprehensive income		5,862		18,113
Total stockholders’ equity before noncontrolling interests		640,732		617,332
Noncontrolling interests		8,257		9,375
Total equity		648,989		626,707

Total Liabilities and Equity	$	1,124,964	$	933,310

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	2011			2010
Cash flows from operating activities:
Net income	$	27,670		$	61,880
Loss from discontinued operations		–			100
Income from continuing operations		27,670			61,980
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization		36,039			30,732
Equity-based compensation expense		6,491			6,713
Deferred income taxes		(2,320	)		8,024
Equity in earnings of affiliated companies		(3,471	)		(7,291	)
Earnout reversal		(1,700	)		(1,700	)
Gain on foreign currency transactions		(1,155	)		98
Other		200			(1,173	)
Changes in operating assets and liabilities:
Restricted cash		663			538
Return on equity method investments		7,018			7,803
Receivables net, retainage and costs and estimated earnings in excess of billings		(38,310	)		(39,214	)
Inventories		(5,992	)		(9,677	)
Prepaid expenses and other assets		2,045			(539	)
Accounts payable and accrued expenses		(2,248	)		(3,781	)
Other operating		(2,046	)		962
Net cash provided by operating activities of continuing operations		22,884			53,475
Net cash provided by (used in) operating activities of discontinued operations		–			(446	)
Net cash provided by operating activities		22,884			53,029

Cash flows from investing activities:
Capital expenditures		(21,554	)		(36,858	)
Proceeds from sale of fixed assets		755			482
Patent expenditures		(1,130	)		(1,346	)
Purchase of CRTS, Hockway and Fyfe NA, net of cash acquired		(144,134	)		–
Purchase of Singapore licensee		–			(1,257	)
Net cash used in investing activities		(166,063	)		(38,979	)

Cash flows from financing activities:
Proceeds from issuance of common stock, including tax effect of stock option exercises		3,610			2,302
Proceeds from issuance of common stock in connection with acquisition of Fyfe NA		4,000			–
Stock repurchase program		(5,000	)		–
Distributions/dividends to noncontrolling interests		(1,661	)		(398	)
Investments by noncontrolling interests		546			2,578
Proceeds from notes payable		354			1,986
Principal payments on notes payable		(1,499	)		(1,808	)
Credit facility and other financing fees		(4,320	)		–
Principal payments on long-term debt		(103,750	)		(10,000	)
Proceeds from long-term debt		250,000			–
Net cash provided by (used in) financing activities		142,280			(5,340	)
Effect of exchange rate changes on cash		(7,801	)		55
Net increase (decrease) in cash and cash equivalents for the year		(8,700	)		8,765
Cash and cash equivalents, beginning of year		114,829			106,064
Cash and cash equivalents, end of year	$	106,129		$	114,829

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