Aegion to incur pre-tax impairment charge of about $85M in Q3 over restructuring
Aegion Corporation provided an update to the previously announced strategic actions and restructuring plan as well as related impacts to the third-quarter and full-year 2017 results. The company announced on August 1, 2017 a series of strategic actions to generate more predictable and sustainable long-term earnings growth. This announcement included: A plan to divest the Corrosion Protection platform's pipe coating and insulation business in Louisiana; the exit of the Infrastructure Solutions platform's North America activity for non-pressure pipe contract applications of the Tyfo Fibrwrap system; the restructuring of the Corrosion Protection platform's operations in Canada; the implementation of cost reduction initiatives across the company. As part of the repositioning of the Infrastructure Solutions platform's Tyfo Fibrwrap system operations in North America, the Company performed an impairment assessment of the long-lived assets and goodwill for the Fyfe reporting unit. As a result, the company will incur a non-cash, pre-tax impairment charge of approximately $85M for long-lived intangibles and goodwill in the third quarter of 2017. During the third quarter of 2017, the company also completed a detailed assessment of the Infrastructure Solutions businesses in Australia and Denmark that resulted in a restructuring program in both countries. Annual savings are expected to be between $2M-$3M in Australia and Denmark, with cash restructuring costs of $3M-$4M. Total annual savings from all restructuring activities and other cost reduction initiatives are estimated to be in excess of $17M and expected to be fully realized in 2018. Approximately $3M of annual savings are also anticipated to be realized from the reduction in annual amortization of intangibles. Total cash costs associated with the restructuring actions are estimated to be $12M-$15M. The strong order momentum achieved by Aegion in the first half of the year continued across all three platforms in the third quarter despite the challenges from Hurricanes Harvey and Irma in two key markets. The company continued to have performance issues in the portions of the business subject to restructuring actions, which combined with the impact on operations from the hurricanes are expected to impact third-quarter operating results by approximately $5M, or 10c per diluted share.