Edgar Filing: Aegion Corp

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

	For the quarterly period ended March 31, 2019



¨	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)

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

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 x 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 x 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 x		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 x

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 31,342,530 shares of Class A common stock, $0.01 par value per share, outstanding at April 26, 2019.

TABLE OF CONTENTS



PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited):

Consolidated Statements of Operations for the Quarters Ended March 31, 2019 and 2018	3

Consolidated Statements of Comprehensive Income for the Quarters Ended March 31, 2019 and 2018	4

Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	5

Consolidated Statements of Equity for the Quarters Ended March 31, 2019 and 2018	6

Consolidated Statements of Cash Flows for the Quarters Ended March 31, 2019 and 2018	7

Notes to Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3. Quantitative and Qualitative Disclosures About Market Risk	39

Item 4. Controls and Procedures	40

PART II—OTHER INFORMATION

Item 1. Legal Proceedings	42

Item 1A. Risk Factors	42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 4. Mine Safety Disclosures	42

Item 6. Exhibits	42

SIGNATURE	43

INDEX TO EXHIBITS	44

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share amounts)



	For the Quarters Ended March 31,
	2019			2018
Revenues	$	276,904		$	324,861
Cost of revenues	228,609			263,357
Gross profit	48,295			61,504
Operating expenses	47,870			56,142
Acquisition and divestiture expenses	113			392
Restructuring and related charges	1,086			1,789
Operating income (loss)	(774		)	3,181
Other income (expense):
Interest expense	(3,590		)	(5,443		)
Interest income	285			47
Other	(674		)	(262		)
Total other expense	(3,979		)	(5,658		)
Loss before tax benefit	(4,753		)	(2,477		)
Tax benefit on loss	(762		)	(1,001		)
Net loss	(3,991		)	(1,476		)
Non-controlling interests income	(10		)	(593		)
Net loss attributable to Aegion Corporation	$	(4,001	)	$	(2,069	)

Loss per share attributable to Aegion Corporation:
Basic	$	(0.13	)	$	(0.06	)
Diluted	$	(0.13	)	$	(0.06	)

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

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)



	For the Quarters Ended March 31,
	2019			2018
Net loss	$	(3,991	)	$	(1,476	)
Other comprehensive income (loss):
Currency translation adjustments	1,862			2,228
Deferred gain (loss) on hedging activity, net of tax ⁽¹⁾	(2,146		)	494
Pension activity, net of tax ⁽²⁾	(21		)	(7		)
Total comprehensive income (loss)	(4,296		)	1,239
Comprehensive (income) loss attributable to non-controlling interests	77			(646		)
Comprehensive income (loss) attributable to Aegion Corporation	$	(4,219	)	$	593

__________________________


⁽¹⁾	Amounts presented net of tax of $(59) and $177 for the quarters ended March 31, 2019 and 2018, respectively.


⁽²⁾	Amounts presented net of tax of $(5) and $(2) for the quarters ended March 31, 2019 and 2018, respectively.

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

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share amounts)



	March 31, 2019			December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	62,482		$	83,527
Restricted cash	1,235			1,359
Receivables, net of allowances of $9,826 and $9,695, respectively	196,954			204,541
Retainage	31,056			33,572
Contract assets	59,422			62,467
Inventories	56,221			56,437
Prepaid expenses and other current assets	31,431			32,172
Assets held for sale	17,479			7,792
Total current assets	456,280			481,867
Property, plant & equipment, less accumulated depreciation	110,052			107,059
Other assets
Goodwill	260,760			260,633
Intangible assets, less accumulated amortization	116,260			119,696
Operating lease assets	69,042			—
Deferred income tax assets	1,797			1,561
Other assets	21,919			21,601
Total other assets	469,778			403,491
Total Assets	$	1,036,110		$	992,417

Liabilities and Equity
Current liabilities
Accounts payable	$	54,343		$	64,562
Accrued expenses	95,551			88,020
Contract liabilities	27,060			32,339
Current maturities of long-term debt	30,625			29,469
Liabilities held for sale	10,762			5,260
Total current liabilities	218,341			219,650
Long-term debt, less current maturities	286,417			282,003
Operating lease liabilities	54,404			—
Deferred income tax liabilities	8,669			8,361
Other non-current liabilities	13,709			12,216
Total liabilities	581,540			522,230

(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 31,491,872 and 31,922,409, respectively	315			319
Additional paid-in capital	111,597			122,818
Retained earnings	375,889			379,890
Accumulated other comprehensive loss	(40,508		)	(40,290		)
Total stockholders’ equity	447,293			462,737
Non-controlling interests	7,277			7,450
Total equity	454,570			470,187
Total Liabilities and Equity	$	1,036,110		$	992,417

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

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(in thousands, except number of shares)



	Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Non- Controlling Interests			Total Equity
	Shares		Amount			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Non- Controlling Interests			Total Equity
BALANCE, December 31, 2017	32,462,542		$	325		$	140,749		$	376,694		$	(23,522	)	$	10,810		$	505,056
Cumulative effect adjustment (see Revenues: Note 3)	—		—			—			268			—			—			268
Net income (loss)	—		—			—			(2,069		)	—			593			(1,476		)
Issuance of shares pursuant to restricted stock units	275,384		3			—			—			—			—			3
Issuance of shares pursuant to performance units	296,909		3			—			—			—			—			3
Issuance of shares pursuant to deferred stock unit awards	4,568		—			—			—			—			—			—
Shares repurchased and retired	(571,580	)	(6		)	(13,670		)	—			—			—			(13,676		)
Equity-based compensation expense	—		—			2,158			—			—			—			2,158
Currency translation adjustments, derivative transactions and pension activity, net	—		—			—			—			2,662			53			2,715
BALANCE, March 31, 2018	32,467,823		$	325		$	129,237		$	374,893		$	(20,860	)	$	11,456		$	495,051

BALANCE, December 31, 2018	31,922,409		$	319		$	122,818		$	379,890		$	(40,290	)	$	7,450		$	470,187
Net income (loss)	—		—			—			(4,001		)	—			10			(3,991		)
Issuance of common stock upon stock option exercises, including tax benefit	52,783		1			955			—			—			—			956
Issuance of shares pursuant to restricted stock units	171,575		2			—			—			—			—			2
Issuance of shares pursuant to performance units	110,656		1			—			—			—			—			1
Issuance of shares pursuant to deferred stock unit awards	9,438		—			—			—			—			—			—
Shares repurchased and retired	(774,989	)	(8		)	(14,183		)	—			—			—			(14,191		)
Equity-based compensation expense	—		—			2,007			—			—			—			2,007
Distributions to non-controlling interests	—		—			—			—			—			(96		)	(96		)
Currency translation adjustments, derivative transactions and pension activity, net	—		—			—			—			(218		)	(87		)	(305		)
BALANCE, March 31, 2019	31,491,872		$	315		$	111,597		$	375,889		$	(40,508	)	$	7,277		$	454,570

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

AEGION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



	For the Quarter Ended March 31,
	2019			2018
Cash flows from operating activities:
Net loss	$	(3,991	)	$	(1,476	)
Adjustments to reconcile to net cash provided by (used in) operating activities:
Depreciation and amortization	8,655			9,554
Gain on sale of fixed assets	(308		)	(105		)
Equity-based compensation expense	2,007			2,158
Deferred income taxes	19			(38		)
Non-cash restructuring charges	(151		)	2,408
Loss on foreign currency transactions	772			315
Other	63			561
Changes in operating assets and liabilities (net of acquisitions):
Receivables net, retainage and contract assets	10,388			16,584
Inventories	(1,287		)	(2,223		)
Prepaid expenses and other assets	433			6,657
Accounts payable and accrued expenses	(18,017		)	(24,729		)
Contract liabilities	(4,307		)	(8,860		)
Other operating	(873		)	470
Net cash provided by (used in) operating activities	(6,597		)	1,276

Cash flows from investing activities:
Capital expenditures	(8,064		)	(5,189		)
Proceeds from sale of fixed assets	293			284
Patent expenditures	(69		)	(48		)
Net cash used in investing activities	(7,840		)	(4,953		)

Cash flows from financing activities:
Proceeds from issuance of common stock upon stock option exercises	956			—
Repurchase of common stock	(14,220		)	(13,670		)
Distributions to non-controlling interests	(96		)	—
Credit facility amendment fees	—			(1,093		)
Payments on notes payable, net	(138		)	(568		)
Proceeds from line of credit, net	13,000			5,000
Principal payments on long-term debt	(6,563		)	(6,563		)
Net cash used in financing activities	(7,061		)	(16,894		)
Effect of exchange rate changes on cash	329			1,870
Net decrease in cash, cash equivalents and restricted cash for the period	(21,169		)	(18,701		)
Cash, cash equivalents and restricted cash, beginning of year	84,886			108,545
Cash, cash equivalents and restricted cash, end of period	63,717			89,844
Cash, cash equivalents and restricted cash associated with assets held for sale, end of period	—			(813		)
Cash, cash equivalents and restricted cash, end of period	$	63,717		$	89,031

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

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, 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 CIPP businesses in Australia and Denmark; and (iv) reduce corporate and other operating costs.

Infrastructure Solutions Segment (“Infrastructure Solutions”)

On May 14, 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 March 31, 2019 and December 31, 2018. See Note 5.

Corrosion Protection Segment (“Corrosion Protection”)

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 Titeliner^® and CIPP joint venture in South Africa, Aegion South Africa Proprietary Limited (“Aegion South Africa”). Accordingly, the Company has classified the assets and liabilities of both businesses as held for sale on the Consolidated Balance Sheet at March 31, 2019. See Note 5.

2. ACCOUNTING POLICIES

On January 1, 2019, the Company adopted FASB ASC 842, Leases (“FASB ASC 842”). See Note 6 for further information. Other than the adoption of FASB ASC 842, there were no material changes in accounting policies from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Accumulated Other Comprehensive Income (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):



	March 31, 2019			December 31, 2018
Currency translation adjustments	$	(39,158	)	$	(41,107	)
Derivative hedging activity	(431		)	1,715
Pension activity	(919		)	(898		)
Total accumulated other comprehensive loss	$	(40,508	)	$	(40,290	)

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 losses of $0.8 million and $0.3 million in the first quarters of 2019 and 2018, 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:



	Quarters Ended March 31,
	2019	2018
Weighted average number of common shares used for basic EPS	31,704,923	32,483,963
Effect of dilutive stock options and restricted and deferred stock unit awards	—	—
Weighted average number of common shares and dilutive potential common stock used for dilutive EPS	31,704,923	32,483,963

The Company excluded 549,679 restricted and deferred stock units for the quarter ended March 31, 2019, and 710,173 restricted and deferred stock units and stock options for the quarter ended March 31, 2018 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	March 31, 2019		December 31, 2018
Cash and cash equivalents	$	62,482	$	83,527
Restricted cash	1,235		1,359
Cash, cash equivalents and restricted cash	$	63,717	$	84,886

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.

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 March 31, 2019.

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



Balance sheet data	March 31, 2019⁽¹⁾		December 31, 2018
Current assets	$	29,847	$	33,066
Non-current assets	7,016		6,466
Current liabilities	12,006		12,953
Non-current liabilities	7,281		8,780

__________________________


⁽¹⁾	Includes $8.1 million of assets and $6.3 million of liabilities classified as held for sale relating to Corrpower and Aegion South Africa. See Note 5.



	Quarters Ended March 31,
Statement of operations data	2019		2018⁽¹⁾
Revenue	$	5,925	$	16,051
Gross profit	1,635		3,310
Net income attributable to Aegion Corporation	33		1,248

__________________________


⁽¹⁾	Includes activity from our pipe coating and insulation joint venture in Louisiana, which was sold during the third quarter of 2018.

Newly Issued Accounting Pronouncements

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 adoption of this standard is not expected to have a material impact on its consolidated financial statements.

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits a company to reclassify the income tax effects of the Tax Cuts and Jobs Act on items within accumulated other comprehensive income to retained earnings. Companies may adopt the new guidance using one of two transition methods: (i) retrospective to each period (or periods) in which the income tax effects are recognized, or (ii) at the beginning of the period of adoption. The Company adopted this standard effective January 1, 2019 and elected not to reclassify the tax effects due to the immaterial impact 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. Early adoption is permitted, although the Company does not intend to do so. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842), which requires lessees to present right-of-use assets and lease liabilities on the balance sheet for all leases with lease terms longer than twelve months. The Company adopted this standard, effective January 1, 2019, using the adoption-date transition provision, which recognizes and measures leases existing at January 1, 2019 but without retrospective application. See Note 6.

3. REVENUES

On January 1, 2018, the Company adopted FASB ASC 606 for all contracts that were not completed using the modified retrospective transition method. The Company recognized the cumulative effect of initially applying FASB ASC 606 as a net reduction to opening retained earnings of $0.3 million as of January 1, 2018 due to the cumulative impact of adopting FASB ASC 606, with the impact primarily related to royalty license fee 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 92.9% and 95.0% of revenues for the quarters ended March 31, 2019 and 2018, 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 7.1% and 5.0% of revenues for the quarters ended March 31, 2019 and 2018, respectively.

On March 31, 2019, the Company had $474.5 million of remaining performance obligations from construction, engineering and installation services. The Company estimates that approximately $445.1 million, or 93.8%, of the remaining performance obligations at March 31, 2019 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 March 31, 2019
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Primary geographic region:
United States	$	97,891	$	30,021	$	80,863	$	208,775
Canada	10,611		13,457		—		24,068
Europe	12,525		3,478		—		16,003
Other foreign	10,516		17,542		—		28,058
Total revenues	$	131,543	$	64,498	$	80,863	$	276,904



	Quarter Ended March 31, 2018
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Primary geographic region:
United States	$	93,845	$	50,356	$	92,329	$	236,530
Canada	12,269		16,570		—		28,839
Europe	13,143		2,866		—		16,009
Other foreign	15,170		28,313		—		43,483
Total revenues	$	134,427	$	98,105	$	92,329	$	324,861

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



	Quarter Ended March 31, 2019
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Contract type:
Fixed fee	$	118,915	$	42,572	$	919	$	162,406
Time and materials	—		14,977		79,944		94,921
Product sales	12,478		6,949		—		19,427
License fees	150				—		150
Total revenues	$	131,543	$	64,498	$	80,863	$	276,904



	Quarter Ended March 31, 2018
	Infrastructure Solutions		Corrosion Protection		Energy Services		Total
Contract type:
Fixed fee	$	125,263	$	77,901	$	5,757	$	208,921
Time and materials	—		13,107		86,572		99,679
Product sales	9,144		7,097		—		16,241
License fees	20		—		—		20
Total revenues	$	134,427	$	98,105	$	92,329	$	324,861

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):



	March 31, 2019⁽¹⁾			December 31, 2018⁽²⁾
Contract assets – current	$	59,422		$	62,467
Contract liabilities – current	(27,060		)	(32,339		)
Net contract assets	$	32,362		$	30,128

__________________________


⁽¹⁾	Amounts exclude contract assets of $2.9 million and contract liabilities of less than $1.1 million that were classified as held for sale at March 31, 2019 (see Note 5).


⁽²⁾	Amounts exclude contract assets of $1.8 million and contract liabilities of less than $0.1 million that were classified as held for sale at December 31, 2018 (see Note 5).

Included in the change of total net contract assets was a $3.0 million decrease in contract assets, primarily related to the timing between work performed on open contracts and contractual billing terms, and a $5.3 million decrease in contract liabilities, primarily related to the timing of customer advances on certain contracts.

Substantially all of the $32.3 million and $51.6 million contract liabilities balances at December 31, 2018 and December 31, 2017, respectively, were recognized in revenues during the first quarters of 2019 and 2018, respectively.

Impairment losses recognized on receivables and contract assets were not material during the first quarters of 2019 and 2018.

4. RESTRUCTURING

On July 28, 2017, the Company’s board of directors approved the 2017 Restructuring. As part of the 2017 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, 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, including: (a) the Company’s cathodic protection installation activities in the Middle East, including Corrpower; (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; and (e) the Company’s CIPP contract installation operations in England.

Total pre-tax 2017 Restructuring and related impairment charges since inception were $142.5 million ($128.5 million post-tax) and consisted of cash charges totaling $28.9 million and non-cash charges totaling $113.6 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) $27.2 million related to allowances for accounts receivable, write-offs of inventory and long-lived assets, impairment of definite-lived intangible assets, as well as net losses on the disposal of both domestic and international entities. The Company reduced headcount by approximately 440 employees as a result of these actions.

The Company expects to incur additional cash and non-cash charges of $12 million to $16 million during 2019. The identified charges are primarily focused in the international operations of both Infrastructure Solutions and Corrosion Protection, but will also include certain charges in Energy Services to a lesser extent. The Company expects to reduce headcount by an additional 50 employees as a result of these further actions.

During the quarters ended March 31, 2019 and 2018, the Company recorded pre-tax expenses related to the 2017 Restructuring as follows (in thousands):



	Quarter Ended March 31, 2019
	Infrastructure Solutions		Corrosion Protection			Energy Services		Corporate		Total
Severance and benefit related costs	$	282	$	170		$	34	$	9	$	495
Lease and contract termination costs	425		17			—		98		540
Relocation and other moving costs	51		—			—		—		51
Other restructuring costs ⁽¹⁾	1,744		(211		)	—		247		1,780
Total pre-tax restructuring charges	$	2,502	$	(24	)	$	34	$	354	$	2,866

__________________________


⁽¹⁾	Includes 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 the UK, exiting the cathodic protection operations in the Middle East and other cost savings initiatives.



	Quarter Ended March 31, 2018
	Infrastructure Solutions		Corrosion Protection		Energy Services		Corporate		Total
Severance and benefit related costs	$	780	$	121	$	—	$	170	$	1,071
Lease and contract termination costs	528		—		—		150		678
Relocation and other moving costs	40		—		—		—		40
Other restructuring costs ⁽¹⁾	1,868		1,344		—		243		3,455
Total pre-tax restructuring charges	$	3,216	$	1,465	$	—	$	563	$	5,244

__________________________


⁽¹⁾	Includes charges primarily related to certain wind-down costs, allowances for accounts receivable, fixed asset disposals and other restructuring-related costs in connection with exiting non-pipe-related contract applications for the Tyfo^® system in North America and right-sizing the CIPP operations in Australia and Denmark.

2017 Restructuring costs related to severance, other termination benefit costs and early lease and contract termination costs were $1.1 million and $1.8 million for the quarters ended March 31, 2019 and 2018, respectively, and are reported on a separate line in the Consolidated Statements of Operations.

The following tables summarize all charges related to the 2017 Restructuring recognized in the quarters ended March 31, 2019 and 2018 as presented in their affected line in the Consolidated Statements of Operations (in thousands):



	Quarter Ended March 31, 2019
	Infrastructure Solutions			Corrosion Protection			Energy Services		Corporate		Total ⁽¹⁾
Cost of revenues	$	(25	)	$	99		$	—	$	—	$	74
Operating expenses	1,346			(63		)	—		247		1,530
Restructuring and related charges	758			187			34		107		1,086
Other expense	423			(247		)	—		—		176
Total pre-tax restructuring charges	$	2,502		$	(24	)	$	34	$	354	$	2,866

__________________________


⁽¹⁾	Total pre-tax restructuring charges include cash charges of $3.1 million and non-cash charges of $(0.2) million. Cash charges consist of charges incurred during the quarter that will be settled in cash, either during the current period or future periods.



	Quarter Ended March 31, 2018
	Infrastructure Solutions		Corrosion Protection		Energy Services		Corporate		Total ⁽¹⁾
Operating expenses	$	1,868	$	1,344	$	—	$	243	$	3,455
Restructuring and related charges	1,348		121		—		320		1,789
Total pre-tax restructuring charges	$	3,216	$	1,465	$	—	$	563	$	5,244

__________________________


⁽¹⁾	Total pre-tax restructuring charges include cash charges of $2.8 million and non-cash charges of $2.4 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 the 2017 Restructuring activity during the first quarters of 2019 and 2018 (in thousands):



	Reserves at December 31, 2018		2019 Charge to Income		Foreign Currency Translation			Utilized in 2019					Reserves at March 31, 2019
	Reserves at December 31, 2018		2019 Charge to Income		Foreign Currency Translation			Cash⁽¹⁾		Non-Cash			Reserves at March 31, 2019
Severance and benefit related costs	$	1,742	$	495	$	(5	)	$	1,102	$	—		$	1,130
Lease and contract termination costs	359		540		3			310		—			592
Relocation and other moving costs	—		51		—			—		—			51
Other restructuring costs	311		1,780		(2		)	1,852		(151		)	388
Total pre-tax restructuring charges	$	2,412	$	2,866	$	(4	)	$	3,264	$	(151	)	$	2,161

__________________________


⁽¹⁾	Refers to cash utilized to settle charges during the first quarter of 2019.



	Reserves at December 31, 2017		2018 Charge to Income		Foreign Currency Translation		Utilized in 2018				Reserves at March 31, 2018
	Reserves at December 31, 2017		2018 Charge to Income		Foreign Currency Translation		Cash⁽¹⁾		Non-Cash		Reserves at March 31, 2018
Severance and benefit related costs	$	3,864	$	1,071	$	20	$	2,305	$	—	$	2,650
Lease and contract termination costs	650		678		—		793		—		535
Relocation and other moving costs	—		40		—		40		—		—
Other restructuring costs	675		3,455		—		1,272		2,408		450
Total pre-tax restructuring charges	$	5,189	$	5,244	$	20	$	4,410	$	2,408	$	3,635

__________________________


⁽¹⁾	Refers to cash utilized to settle charges during the first quarter of 2018.

5. ASSETS AND LIABILITIES HELD FOR SALE

During the first quarter of 2019, the Company initiated plans to sell its interests in Corrpower and Aegion South Africa. The Company is currently in discussions with third parties for each of the entities and believes that it is probable that sales of each entity will occur in the second half of 2019.

On May 14, 2018, the Company’s board of directors approved a plan to divest the assets and liabilities of Insituform Australia (see Note 1). The Company is currently in discussions with a third party and management believes that it is probable that a sale will occur in the first half of 2019.

The relevant asset and liability balances at March 31, 2019 and December 31, 2018 are accounted for as held for sale and measured at the lower of carrying value or fair value less cost to sell. No impairment charges were recorded on these assets as the net carrying value approximated or was less than management’s current expectation of fair value less cost to sell. 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 impairment charges or a loss on disposal.

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



	March 31, 2019⁽¹⁾		December 31, 2018⁽²⁾
Assets held for sale:
Current assets
Cash and cash equivalents	$	—	$	—
Receivables, net	4,237		1,309
Retainage	234		15
Contract assets	2,920		1,777
Inventories	3,971		2,123
Prepaid expenses and other current assets	587		300
Total current assets	11,949		5,524
Property, plant & equipment, less accumulated depreciation	3,395		2,268
Operating lease assets	2,135		—
Total assets held for sale	$	17,479	$	7,792

Liabilities held for sale:
Current liabilities
Accounts payable	$	1,801	$	1,331
Accrued expenses	5,516		3,891
Contract liabilities	1,100		38
Current maturities of long-term debt	895		—
Total current liabilities	9,312		5,260
Operating lease liabilities	1,219		—
Other non-current liabilities	231		—
Total liabilities held for sale	$	10,762	$	5,260

__________________________


⁽¹⁾	Includes Corrpower, Aegion South Africa and Insituform Australia.


⁽²⁾	Includes Insituform Australia.

6. LEASES

Effective January 1, 2019, the Company adopted FASB ASC 842 using the adoption-date transition provision rather than at the earliest comparative period presented in the financial statements. Therefore, the Company recognized and measured leases existing at January 1, 2019 but without retrospective application. The Company also elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and the lessee practical expedient to combine lease and non-lease components. The Company also made a policy election to not recognize right-of-use assets and lease liabilities for short-term leases for all asset classes. The impact of FASB ASC 842 on the Consolidated Balance Sheet beginning January 1, 2019 was through the recognition of operating lease assets and corresponding operating lease liabilities of $70.5 million. No impact was recorded to the Consolidated Statement of Operations or beginning retained earnings.

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 March 31, 2019
Operating lease cost	$	5,452
Short-term lease cost	7,239
Total lease cost	$	12,691

Supplemental cash flow information related to leases was as follows (in thousands):



	Quarter Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,462

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	6,126

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



	March 31, 2019⁽¹⁾
Operating leases:
Operating lease assets	$	69,042

Accrued expenses	$	15,174
Other liabilities	54,404
Total operating lease liabilities	$	69,578

Weighted-average remaining lease term (in years)	5.78
Weighted-average discount rate	6.31		%

__________________________


⁽¹⁾	Amounts exclude operating lease assets of $2.1 million, accrued expenses of $0.9 million, and other liabilities of $1.2 million that were classified as held for sale at March 31, 2019 (see Note 5).

Operating lease liabilities under non-cancellable leases were as follows (in thousands):



	March 31, 2019
Nine months ended December 31, 2019	$	14,615
2020	16,496
2021	13,954
2022	11,223
2023	8,916
Thereafter	18,891
Total undiscounted operating lease liability	84,095
Less: Imputed interest	(14,517		)
Total discounted operating lease liability	$	69,578

Minimum rental commitments under non-cancellable leases as of December 31, 2018 for years 2019 through 2023 were $19.8 million, $15.1 million, $11.5 million, $8.1 million and $5.4 million, respectively, and $7.2 million thereafter.

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, 2018:
Goodwill, gross	$	244,521		$	76,383		$	81,504		$	402,408
Accumulated impairment losses	(62,848		)	(45,400		)	(33,527		)	(141,775		)
Goodwill, net	181,673			30,983			47,977			260,633
2019 Activity:
Foreign currency translation	(15		)	142			—			127
Balance, March 31, 2019:
Goodwill, gross	244,506			76,525			81,504			402,535
Accumulated impairment losses	(62,848		)	(45,400		)	(33,527		)	(141,775		)
Goodwill, net	$	181,658		$	31,125		$	47,977		$	260,760

Intangible Assets

Intangible assets consisted of the following (in thousands):



	March 31, 2019								December 31, 2018
	Weighted Average Useful Lives (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
License agreements	1.5	$	3,894	$	(3,751	)	$	143	$	3,894	$	(3,716	)	$	178
Leases	1.8	864		(711		)	153		864		(689		)	175
Trademarks	9.5	15,788		(6,416		)	9,372		15,751		(6,202		)	9,549
Non-competes	4.1	2,527		(1,296		)	1,231		2,529		(1,229		)	1,300
Customer relationships	8.6	159,592		(69,329		)	90,263		159,719		(66,753		)	92,966
Patents and acquired technology	5.6	38,582		(23,484		)	15,098		38,338		(22,810		)	15,528
Total intangible assets		$	221,247	$	(104,987	)	$	116,260	$	221,095	$	(101,399	)	$	119,696

Amortization expense was $3.5 million and $3.5 million for the quarters ended March 31, 2019 and 2018, respectively. Estimated amortization expense by year is as follows (in thousands):



2019	$	13,686
2020	13,624
2021	13,477
2022	13,398
2023	13,398

8. LONG-TERM DEBT AND CREDIT FACILITY

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



	March 31, 2019		December 31, 2018
Term note, due February 27, 2023, annualized rates of 4.52% and 4.59%, respectively	$	275,625	$	282,188
Line of credit, 4.49% and 4.45%, respectively	44,000		31,000
Other notes with interest rates from 3.3% to 7.8%	—		1,031
Subtotal	319,625		314,219
Less – Current maturities of long-term debt	30,625		29,469
Less – Unamortized loan costs	2,583		2,747
Total	$	286,417	$	282,003

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 and December 2018, the Company amended this facility (the “amended Credit Facility”). The amended Credit Facility consists of a $275.0 million five-year revolving line of credit and a $308.4 million five-year term loan facility, each with a maturity date in February 2023.

During the first quarter of 2018, the Company paid expenses of $2.4 million associated with the amended Credit Facility, $0.9 million related to up-front lending fees and $1.5 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 addition, the Company had $2.4 million in unamortized loan costs associated with the original Credit Facility, of which $0.2 million was written off and recorded in “Interest expense” in the Consolidated Statement of Operations during the first quarter of 2018.

Generally, interest is charged on the principal amounts outstanding under the amended Credit Facility at the British Bankers Association LIBOR rate plus an applicable rate ranging from 1.25% to 2.25% depending on the Company’s consolidated leverage ratio. The Company can also opt for an interest rate equal to a base rate (as defined in the credit documents) plus an applicable rate, which also is based on the Company’s consolidated leverage ratio. The applicable LIBOR borrowing rate (LIBOR plus Company’s applicable rate) as of March 31, 2019 was approximately 4.49%.

The Company’s indebtedness at March 31, 2019 consisted of $275.6 million outstanding from the term loan under the amended Credit Facility and $44.0 million on the line of credit under the amended Credit Facility. Additionally, the Company had $0.9 million of debt held by its joint ventures (representing funds loaned by its joint venture partners) listed as held for sale at March 31, 2019 related to the planned sales of Corrpower and Aegion South Africa. During the first quarter of 2019, the Company borrowed $13.0 million on the line of credit for domestic working capital needs.

As of March 31, 2019, the Company had $22.6 million in letters of credit issued and outstanding under the amended Credit Facility. Of such amount, $12.3 million was collateral for the benefit of certain of our insurance carriers and $10.3 million was for letters of credit or bank guarantees of performance or payment obligations of foreign subsidiaries.

The Company’s indebtedness at December 31, 2018 consisted of $282.2 million outstanding from the term loan under the amended Credit Facility, $31.0 million on the line of credit under the amended Credit Facility and $1.0 million of third-party notes and bank debt.

At March 31, 2019 and December 31, 2018, the estimated fair value of the Company’s long-term debt was approximately $323.8 million and $307.7 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 3 inputs as defined in Note 13.

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 March 31, 2019 was approximately 3.74%. 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.

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 each quarterly reporting period end, are defined as follows:


•	Consolidated financial leverage ratio compares consolidated funded indebtedness to amended Credit Facility defined income with a maximum amount not to exceed 3.75 to 1.00. At March 31, 2019, the Company’s consolidated financial leverage ratio was 3.23 to 1.00 and, using the amended Credit Facility defined income, the Company had the capacity to borrow up to $54.0 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 1.15 to 1.00. At March 31, 2019, the Company’s fixed charge ratio was 1.35 to 1.00.

At March 31, 2019, 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 2018, the Company’s board of directors authorized the open market repurchase of up to two million shares of the Company’s common stock. The program did not establish a time period in which the repurchases had to be made. In December 2018, the Company amended its Credit Facility, which limits the open market share repurchases to $32.0 million for 2019. Once repurchased, the Company promptly retires such shares.

The Company is also authorized to repurchase up to $10.0 million of the Company’s common stock in each calendar year in connection with the Company’s equity compensation programs for employees. 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 quarter of 2019, the Company acquired 622,043 shares of the Company’s common stock for $11.1 million ($17.82 average price per share) through the open market repurchase program discussed above, 152,946 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 units and performance units, and 48,409 shares of the Company’s common stock in connection with “net, net” exercises of employee stock options. Once repurchased, the Company immediately retired all such shares.

During the first quarter of 2018, the Company acquired 353,831 shares of the Company’s common stock for $8.4 million ($23.78 average price per share) through the open market repurchase program discussed above and 217,749 shares of the Company’s common stock for $5.3 million ($24.14 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. Once repurchased, the Company immediately retired all such shares. The Company did not acquire any of the Company’s common stock in connection with “net, net” exercises of employee stock options.

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 March 31, 2019, 1,944,014 shares of the Company’s common stock were available for issuance under the 2016 Employee Plan.

In April 2016, the Company’s stockholders also approved the 2016 Non-Employee Director Equity Incentive Plan (the “2016 Director Plan”), which replaced the 2011 Non-Employee Director Equity Incentive 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 March 31, 2019, 68,689 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:



	Quarter Ended March 31, 2019
	Stock Awards		Weighted Average Award Date Fair Value
Outstanding at December 31, 2018	1,143,205		$	23.26
Restricted stock units awarded	283,472		20.24
Performance stock units awarded	146,367		22.78
Restricted stock units distributed	(171,073	)	18.21
Performance stock units distributed	(111,155	)	25.85
Restricted stock units forfeited	(6,655	)	23.13
Performance stock units forfeited	(42,939	)	25.90
Outstanding at March 31, 2019	1,241,222		$	22.88

Expense associated with stock awards was $2.0 million and $2.1 million for the quarters ended March 31, 2019 and 2018, respectively. Unrecognized pre-tax expense of $16.7 million related to stock awards is expected to be recognized over the weighted average remaining service period of 2.96 years for awards outstanding at March 31, 2019.

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 a recent amendment of the 2016 Director Plan, 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:



	Quarter Ended March 31, 2019
	Deferred Stock Units		Weighted Average Award Date Fair Value
Outstanding at December 31, 2018	287,350		$	22.80
Awarded	2,891		16.69
Distributed	(9,438	)	18.69
Outstanding at March 31, 2019	280,803		$	20.83

Expense associated with deferred stock unit awards was less than $0.1 million for each of the quarters ended March 31, 2019 and 2018.

Stock Options

Stock options on the Company’s common stock were 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 quarter ended March 31, 2019 with a weighted average exercise price of $18.11 per share. There were no stock options outstanding at March 31, 2019.

10. TAXES ON INCOME

The Company’s effective tax rate in the quarter ended March 31, 2019 was a benefit of 16.0% on a pre-tax loss. The effective rate was negatively impacted by valuation allowances recorded 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 ended March 31, 2018 was a benefit of 40.4% on a pre-tax loss. The benefit was positively impacted by a $1.5 million net tax benefit, or 60.0% benefit to the effective tax rate, related to employee share-based payments vested during the first quarter of 2018. Excluding this benefit, the Company recorded income tax expense on a pre-tax loss primarily due to valuation allowances recorded on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized.

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 March 31, 2019.

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 March 31, 2019 on its Consolidated Balance Sheet.

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 a president who reports to the Company’s chief executive officer, who is also 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.

During the first quarter of 2019, the Company began reporting Corporate expenses separately rather than allocating those costs to the operating segments. The reported information for the quarter ended March 31, 2018 has been revised to conform to the current period presentation.

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



	Quarters Ended March 31,
	2019			2018
Revenues:
Infrastructure Solutions	$	131,543		$	134,427
Corrosion Protection	64,498			98,105
Energy Services	80,863			92,329
Total revenues	$	276,904		$	324,861

Gross profit:
Infrastructure Solutions	$	26,586		$	26,709
Corrosion Protection	12,873			23,576
Energy Services	8,836			11,219
Total gross profit	$	48,295		$	61,504

Operating income (loss):
Infrastructure Solutions ⁽¹⁾	$	5,715		$	3,237
Corrosion Protection ⁽²⁾	(1,760		)	4,962
Energy Services	1,115			3,127
Corporate ⁽³⁾	(5,844		)	(8,145		)
Total operating income (loss)	(774		)	3,181
Other income (expense):
Interest expense	(3,590		)	(5,443		)
Interest income	285			47
Other ⁽⁴⁾	(674		)	(262		)
Total other expense	(3,979		)	(5,658		)
Loss before tax benefit	$	(4,753	)	$	(2,477	)

_______________________

⁽¹⁾

Operating income in the first quarter of 2019 includes $2.1 million of 2017 Restructuring charges (see Note 4) and $0.1 million of costs primarily related to the planned divestitures of Insituform Australia. Operating income in the first quarter of 2018 includes: (i) $3.2 million of 2017 Restructuring charges (see Note 4); and (ii) $0.1 million of costs incurred primarily related to the acquisition of Environmental Techniques.


⁽²⁾	Operating loss in the first quarter of 2019 includes $0.2 million of 2017 Restructuring charges (see Note 4). Operating income in the first quarter of 2018 includes $1.5 million of 2017 Restructuring charges (see Note 4).


⁽³⁾	Operating loss in the first quarter of 2019 includes $0.4 million of 2017 Restructuring charges (see Note 4).


⁽⁴⁾	Other expense in the first quarter of 2019 includes $0.2 million of 2017 Restructuring charges (see Note 4).

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



	Quarters Ended March 31,
	2019		2018
Revenues: ⁽¹⁾
United States	$	208,775	$	236,530
Canada	24,068		28,839
Europe	16,003		16,009
Other foreign	28,058		43,483
Total revenues	$	276,904	$	324,861

Gross profit: ⁽¹⁾
United States	$	31,827	$	40,707
Canada	3,454		4,775
Europe	3,519		1,134
Other foreign	9,495		14,888
Total gross profit	$	48,295	$	61,504

__________________________


⁽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. At March 31, 2019, the Company’s cash flow hedges were in a net deferred loss position of $0.4 million compared to a net deferred gain position of $1.8 million at December 31, 2018. 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 gains and losses were recorded in other non-current assets and other non-current liabilities, respectively, 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 from certain of its wholly-owned entities, paid in local currency, rather than the Company’s functional currency, U.S. dollars. 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. During the first three months of 2019 and 2018, a gain of $0.2 million and a loss of $0.1 million, respectively, were 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 $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.

The following table summarizes the Company’s derivative positions at March 31, 2019:



	Position	Notional Amount		Weighted Average Remaining Maturity In Years	Average Exchange Rate
USD/British Pound	Sell	£	3,552,000	0.3	1.31
EURO/British Pound	Sell	£	2,568,300	0.3	1.16
Interest Rate Swap		$	206,718,750	3.8

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



Designation of Derivatives	Balance Sheet Location	March 31, 2019			December 31, 2018
Derivatives Designated as Hedging Instruments:
Interest Rate Swaps	Other non-current assets	$	2,546		$	3,648
	Total Assets	$	2,546		$	3,648

Interest Rate Swaps	Other non-current liabilities	$	2,988		$	1,885
	Total Liabilities	$	2,988		$	1,885

Derivatives Not Designated as Hedging Instruments:
Forward Currency Contracts	Prepaid expenses and other current assets	$	—		$	—
	Total Assets	$	—		$	—

Forward Currency Contracts	Accrued expenses	$	83		$	44
	Total Liabilities	$	83		$	44

	Total Derivative Assets	$	2,546		$	3,648
	Total Derivative Liabilities	3,071			1,929
	Total Net Derivative Asset (Liability)	$	(525	)	$	1,719

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;


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

In accordance with FASB ASC 820, the Company determined that the value of all of its derivative instruments, which are measured at fair value on a recurring basis, are derived from significant observable inputs, referred to as Level 2 inputs.

The Company had no transfers between Level 1, 2 or 3 inputs during the quarter ended March 31, 2019. Certain financial instruments are required to be recorded at fair value. Changes in assumptions or estimation methods could affect the fair value estimates; however, the Company does not believe any such changes would have a material impact on its financial condition, results of operations or cash flows. Other financial instruments including cash and cash equivalents and short-term borrowings, including notes payable, are recorded at cost, which approximates fair value, which is based on Level 2 inputs as previously defined.

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, 2018.

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, 2018 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, 2018, as filed with the Securities and Exchange Commission on March 1, 2019, and in our subsequent filed reports, including this report. 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. Since 1971, 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 Stronger. Safer. Infrastructure^®. 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.

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 the Company’s management organizational structure.

Infrastructure Solutions – The majority of our work is performed in the municipal water and wastewater pipeline sector and, while the pace of growth is primarily driven by government funding and spending, overall demand due to required infrastructure improvements in our core markets 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 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. 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 coatings and inspection and repair capabilities, as well as an increasing offering of data management capabilities related to these services. 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.

Energy Services – We offer a unique value proposition based on our world-class safety and labor productivity programs, which allow us to provide cost-effective construction, maintenance, 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.

During the first quarter of 2019, we began reporting Corporate expenses separately rather than allocating those costs to the operating segments. The reported information for the quarter ended March 31, 2018 has been revised to conform to the current period presentation.

Our Long-Term Strategy

We are committed to being a valued partner to our customers, with a constant focus on expanding those relationships by solving complex infrastructure problems, enhancing our capabilities and improving execution while also developing or acquiring innovative technologies and comprehensive services. We are pursuing three key strategic initiatives:

Municipal Pipeline Rehabilitation – The fundamental driver in the global municipal pipeline rehabilitation market is the growing gap between the need and current spend. While we do not expect the spending gap to close any time soon, the increasing need for pipeline rehabilitation supports a long-term sustainable market for the technologies and services offered by our Infrastructure Solutions segment. We are committed to maintaining our market leadership position in the rehabilitation of wastewater pipelines in North America using our CIPP technology, the largest contributor to Aegion’s consolidated revenues. We have a diverse portfolio of trenchless technologies to rehabilitate aging and damaged municipal pipelines. The focus today is growing our presence in the rehabilitation of pressure pipelines through both internal development and acquisitions. Our pressure pipe portfolio includes Fusible PVC^®, InsituMain^® CIPP, Tyfo^®fiber-reinforce polymer (“FRP”) and Tite Liner^® high-density polyethylene (“HDPE”) systems. Our international strategy is to use a blend of third-party product sales as well as CIPP and FRP contract installation operations in select markets. A key to the success of this strategy is a continuing focus on improving productivity to reduce costs and increase efficiencies across the entire value chain from engineering, manufacturing and installation of our technology-based solutions.

Pipeline Integrity and Corrosion Management – There are over one million miles of regulated pipelines in North America, which remain the safest and most cost-effective mode of oil and gas transmission. Within our Corrosion Protection segment, the design and installation of cathodic protection systems to help prevent pipeline corrosion have historically represented a large portion of the revenues and profits for the segment. We also provide inspection services to monitor these systems and detect early signs of corrosion. In 2017, we launched a new asset integrity management program designed to increase the efficiency and accuracy of the pipeline corrosion assessment data we collect as well as upgrade how we share this valuable information with customers. Through this program, we seek to improve customer regulatory compliance and add new services in the areas of data gathering and validation, advanced analytics and predictive maintenance.

Downstream Oil Refining and Industrial Facility Maintenance – We have long-term relationships with oil refinery and industrial customers on the United States West Coast through our Energy Services segment. Our objective is to leverage those relationships to expand the services we provide in mechanical maintenance, electrical and instrumentation services, small capital construction, shutdown and turnaround maintenance activity and specialty services. We also continue to promote our safety and scaffolding services. There are opportunities in other industries on the West Coast such as oil and oil product terminals, chemicals, industrial gas and power to leverage our experience in maintenance and construction services. In addition, we are looking to expand our turnaround and specialty services beyond the West Coast.

Business Outlook

We believe a positive commercial outlook and the progress made over the last several years to simplify and position the Company in markets with favorable scale and earnings profiles will lead to modest earnings growth in 2019, despite a projected decline in consolidated revenues due to the lack of large project contributions during the year. Longer term, we believe our core businesses can generate annual revenue growth in the low to mid-single digit range, which should result in low double-digit annual earnings per share growth.

Infrastructure Solutions

One of the most attractive areas for growth is in the rehabilitation of municipal wastewater and pressure pipelines, primarily in North America. We offer a diverse portfolio of solutions in a highly fragmented and growing market. We made investments in 2018 to expand the use of Insituform^® CIPP in several regions currently underserved by Insituform in the North American wastewater pipeline market. Outside North America, we also have an attractive market in Asia-Pacific for large-diameter pressure pipe strengthening, and we are continuing to pursue a strategy of growing third-party product sales around the globe. Our objective is to maintain growth and our share in a large and mature market through a continued focus on productivity and offering customer-driven solutions through technological differentiation.

Over the last few years, we completed a research and development effort that significantly reduced material and installation costs for the Tyfo^® system while maintaining the superior material properties and quality of the technology. We also improved our InsituMain^® CIPP technology to give customers a more robust solution. In 2019, we are focused on two key technology initiatives to serve the pressure pipe and wastewater rehabilitation business. We are in final development and field testing for a robotic system to mechanically and effectively seal the service connection between a CIPP pressurized water main line to residential lines into homes. Success with this development initiative could address a weak point in current commercially available small-diameter pressure pipe rehabilitation systems today. We also recently introduced the application of ultraviolet light technology to cure felt CIPP tubes, which has the potential to reduce the environmental and equipment footprint that is currently required for the curing process. Any new technology takes time to penetrate the market, but we believe both initiatives represent long-term growth levers for the segment.

Corrosion Protection

Over 50 percent of Corrosion Protection’s revenues come from cathodic protection services for midstream oil and gas pipelines in North America, an attractive and growing market that we believe justifies further investment to outpace market growth. To that end, we continue to promote our new asset integrity management program for pipeline corrosion assessments. This new service improves data accuracy and processing efficiency, customizes the data transfer format (including geospatial mapping) and provides faster access to the information by customers. Corrosion Protection’s pipeline assessment services are expected to create a multiplier effect for our other capabilities in direct pipeline assessments, engineering, cathodic protection system installation and pipeline corrosion remediation. Our objective is to expand the relationships with our top customers, who are the leading pipeline owners in North America, to accelerate revenue growth.

With oil prices trading in a more stable range, we have seen improved demand for our Tite Liner^® lining pipeline protection system and our field pipe coatings applications, both in our North America market as well as overseas. We are focused on capturing additional opportunities in the Middle East, where we see a robust sales funnel over the next several years as national energy companies look to increase production through multiple major onshore and offshore gas and oil field development and expansion projects.

Energy Services

We expect Energy Services to continue to build on the momentum achieved in 2018. The outlook for day-to-day downstream refinery maintenance remains robust based on long-term contracts and our position as the lead outsourced provider of maintenance services at 14 out of the 17 refineries on the United States West Coast. We have an effort underway to expand our services to those customers in mechanical maintenance, turnaround service, electrical and instrumentation maintenance, scaffolding services and small capital construction activities.

Strategic Initiatives/Divestiture

2017 Restructuring

On July 28, 2017, our board of directors approved the 2017 Restructuring. As part of the 2017 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, our 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, 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; (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.

We divested our Bayou and Denmark CIPP businesses in 2018. Discussions are underway with a prospective buyer for the sale of the Australia CIPP business and we believe that it is probable that a sale will occur in the first half of 2019. During the first quarter of 2019, we also initiated plans to sell our cathodic protection joint venture in Saudi Arabia, Corrpower International Limited (“Corrpower”), and our Titeliner^® and CIPP joint venture in South Africa, Aegion South Africa Proprietary Limited (“Aegion South Africa”). We are currently in discussions with third parties for each of the entities and believe it is probable that sales will occur in the second half of 2019. Planned exits of the remaining international businesses noted above are expected to be substantially complete by June 30, 2019.

Total pre-tax 2017 Restructuring charges recorded during the first quarter of 2019 were $2.9 million ($2.6 million post-tax) and consisted of employee severance, retention, extension of benefits, employment assistance programs, early lease and contract termination and other restructuring costs associated with the restructuring efforts described above. Total pre-tax 2017 Restructuring and related impairment charges since inception were $142.5 million ($128.5 million post-tax), including cash charges of $28.9 million and non-cash charges of $113.6 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 and non-cash charges of $12 million to $16 million during 2019. The identified charges are primarily focused in the international operations of both Infrastructure Solutions and Corrosion Protection, but will also include certain charges in Energy Services and Corporate to a lesser extent. We expect to reduce headcount by an additional 50 employees as a result of these further actions.

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 2019 and 2018:


i.	During the first quarter of 2019, we entered into discussions with prospective buyers regarding the sale of our interests in Corrpower and Aegion South Africa. We currently believe it is probable that sales will occur in the second half of 2019.

ii.

On November 1, 2018, we sold substantially all of the fixed assets and inventory from our CIPP operations in Denmark. In connection with the sale, we entered into a five-year exclusive tube-supply agreement whereby the buyers will exclusively purchase our Insituform^®CIPP liners. The buyers will also be entitled to use the Insituform^® trade name based on a trademark license granted for the same five-year time period.


iii.	On August 31, 2018, we sold substantially all of the assets of Bayou and our ownership interest in Bayou Wasco Insulation LLC, which collectively had been held for sale as part of the 2017 Restructuring and reflected our desire to reduce further our exposure in the North American upstream oil and gas markets.

iv.

On May 14, 2018, our board of directors approved plans to divest the assets and liabilities of our CIPP operations in Australia (“Insituform Australia”). While restructuring actions in Insituform Australia led to year-over-year improvements in operating results in 2018, an assessment of the long-term fit within Aegion’s portfolio led to the decision to divest the business. We are currently in discussions with a third party and, if those discussions are successful, we expect to close a transaction in the first half of 2019.

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

Results of Operations – Quarters Ended March 31, 2019 and 2018

Significant Events

2017 Restructuring – As part of the 2017 Restructuring, we recorded pre-tax charges of $2.9 million ($2.6 million post-tax) and $5.2 million ($4.7 million post-tax) during the first quarter of 2019 and 2018, respectively. Restructuring charges primarily impacted the Infrastructure Solutions and Corrosion Protection reportable segments. See Note 4 to the consolidated financial statements contained in this Report.

Acquisition and Divestiture Expenses – We recorded pre-tax expenses of $0.1 million and $0.4 million during the first quarter of 2019 and 2018, respectively, related primarily to the planned divestitures of Insituform Australia, Corrpower and Aegion South Africa in 2019 and the Bayou divestiture and Hebna acquisition in 2018. Expenses primarily impacted the Corrosion Protection and Infrastructure Solutions reportable segments.

Warranty Reserve – During 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. The project was originally awarded in 2016 and construction was substantially completed during 2017. Recent inspections of the installed liners revealed structural failures due to extreme environmental conditions at the time of the installation. Replacement work will be performed during 2019 to remediate the warranty issues.

Consolidated Operating Results

Key financial data for consolidated operations was as follows:



(dollars in thousands)	Quarters Ended March 31,						Increase (Decrease)
	2019			2018			$			%
Revenues	$	276,904		$	324,861		$	(47,957	)	(14.8	)%
Gross profit	48,295			61,504			(13,209		)	(21.5	)
Gross profit margin	17.4		%	18.9		%	N/A			(150	)bp
Operating expenses	47,870			56,142			(8,272		)	(14.7	)
Acquisition and divestiture expenses	113			392			(279		)	(71.2	)
Restructuring and related charges	1,086			1,789			(703		)	(39.3	)
Operating income (loss)	(774		)	3,181			(3,955		)	(124.3	)
Operating margin	(0.3		)%	1.0		%	N/A			(130	)bp
Net loss attributable to Aegion Corporation	(4,001		)	(2,069		)	(1,932		)	93.4

_____________________________

“N/A” represents not applicable.

Revenues

Revenues decreased $48.0 million, or 14.8%, in the first quarter of 2019 compared to the first quarter of 2018. The decrease in revenues was due to a $33.6 million decrease in Corrosion Protection primarily from the sale of our pipe coating and insulation operation in 2018 and lower revenues in our Middle East coating services operation, a $11.5 million decrease in Energy Services due to a decrease in turnaround and construction services activities, and a $2.9 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 the 2017 Restructuring.

Gross Profit and Gross Profit Margin

Gross profit decreased $13.2 million, or 21.5%, in the first quarter of 2019 compared to the first quarter of 2018. During the first quarter of 2019, we recorded a $4.4 million charge for estimated project warranty costs in Infrastructure Solutions. Excluding this charge, gross profit decreased $8.7 million, or 14.2%, in the first quarter of 2019 compared to the first quarter of 2018. The decrease in gross profit was due to: (i) a $10.7 million decrease in Corrosion Protection primarily from lost gross profit related to our divested pipe coating and insulation operation and lower gross margins associated with our Middle East coating services operation as larger projects were completed in the prior year; and (ii) a $2.4 million decrease in Energy Services mainly due to a lower mix of higher-margin turnaround projects. Partially offsetting these decreases was a $4.3 million increase in Infrastructure Solutions primarily due to higher revenues and improved productivity related to CIPP contracting installation services activity in our North American operation and loss avoidance due to the divestiture of the Denmark CIPP operation in 2018.

Gross profit margin declined to 17.4% in the first quarter of 2019 from 18.9% in the first quarter of 2018. Excluding the project warranty charge noted above, gross profit margin improved 20 basis points to 19.1% in the first quarter of 2019. The improvement was primarily due to productivity improvements related to North American CIPP contracting installation services activity noted above and loss avoidance from Denmark. Partially offsetting the improvement in Infrastructure Solutions were decreases in Corrosion Protection from lower gross margins associated with our Middle East coating services operation and North American cathodic protection operations, and decreases in Energy Services from a lower mix of higher-margin turnaround projects.

Operating Expenses

Operating expenses decreased $8.3 million, or 14.7%, in the first quarter of 2019 compared to the first quarter of 2018. As part of our restructuring efforts, we recognized charges of $1.5 million and $3.5 million in the first quarters of 2019 and 2018, respectively. Excluding restructuring charges, operating expenses decreased $6.3 million, or 12.0%, in the first quarter of 2019 compared to the first quarter of 2018. The decrease in operating expenses was due to: (i) a $2.6 million decrease in Corrosion

Protection primarily due to our divested pipe coating and insulation operation and cost savings achieved in connection with our 2017 Restructuring actions; (ii) a $1.5 million decrease in Infrastructure Solutions primarily from exiting CIPP contracting installation services in certain international locations in Europe and Asia, and achieved cost savings in North America in connection with our 2017 Restructuring actions; and (iii) a $1.8 million decrease in Corporate expenses due to decreased spending and other cost-cutting measures as a result of the 2017 Restructuring, lower incentive compensation expense and lower medical and prescription drug expenses.

Operating expenses as a percentage of revenues were 17.3% in the first quarters of both 2019 and 2018. Excluding restructuring charges, operating expenses as a percentage of revenues were 16.7% in the first quarter of 2019 compared to 16.2% in the first quarter of 2018.

Consolidated Net Loss

Consolidated net loss was $4.0 million in the first quarter of 2019, an increase of $1.9 million from a loss of $2.1 million in the first quarter of 2018.

Included in consolidated net loss were the following pre-tax items: (i) restructuring charges of $2.9 million and $5.2 million in the first quarters of 2019 and 2018, respectively, related to employee severance, retention, extension of benefits, employee assistance programs, wind-down and other related restructuring costs; (ii) acquisition and divestiture expenses of $0.1 million and $0.4 million in the first quarters of 2019 and 2018, respectively; and (iii) a $4.4 million charge for estimated project warranty costs in Infrastructure Solutions in the first quarter of 2019.

Excluding the after-tax effect of the above items, consolidated net income was $2.0 million in the first quarter of 2019, a decrease of $2.2 million, or 52.9%, from $4.2 million in the first quarter of 2018. The decrease was primarily due to lower operating income in Corrosion Protection due to the divestiture of our pipe coating and insulation operation and lower contributions from the high-margin, large projects in our Middle East coating services operation. Partially offsetting the decrease in consolidated net income was an increase from Infrastructure Solutions related to higher revenues and profitability from our North American CIPP operation, loss avoidance from the Denmark sale in 2018 and improved execution of CIPP project activity in our Australian operation. Consolidated net income in the first quarter of 2019, as compared to the first quarter of 2018, was also positively impacted by lower non-controlling interest income, but negatively impacted by a higher tax rate due to certain discrete tax benefits recorded during the first quarter of 2018.

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):



	March 31, 2019		December 31, 2018		March 31, 2018
Infrastructure Solutions ⁽¹⁾	$	305.2	$	323.3	$	349.2
Corrosion Protection ⁽²⁾	130.7		127.9		155.6
Energy Services	218.4		218.2		215.6
Total backlog ⁽³⁾	$	654.3	$	669.4	$	720.4

__________________________


⁽¹⁾	Included backlog from exited or to-be exited operations of $14.9 million, $10.0 million and $29.7 million at March 31, 2019, December 31, 2018 and March 31, 2018, respectively.


⁽²⁾	Included backlog from exited or to-be exited operations of $8.0 million, $11.6 million and $30.7 million at March 31, 2019, December 31, 2018 and March 31, 2018, respectively.


⁽³⁾	Total backlog for March 31, 2019, December 31, 2018 and March 31, 2018 included backlog from exited or to-be exited operations of $22.9 million, $21.6 million and $60.4 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 March 31, 2019, 0.1% and 18.4% of our Infrastructure Solutions backlog and Corrosion Protection backlog, respectively, related to these variable interest entities. 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 $88.0 million, or 24.9%, to $264.8 million in the first quarter of 2019 compared to $352.8 million in the first quarter of 2018.

Infrastructure Solutions Segment

Key financial data for Infrastructure Solutions was as follows:



(dollars in thousands)	Quarters Ended March 31,						Increase (Decrease)
	2019			2018			$			%
Revenues	$	131,543		$	134,427		$	(2,884	)	(2.1	)%
Gross profit	26,586			26,709			(123		)	(0.5	)
Gross profit margin	20.2		%	19.9		%	N/A			30	bp
Operating expenses	20,039			22,101			(2,062		)	(9.3	)
Acquisition and divestiture expenses	74			23			51			221.7
Restructuring and related charges	758			1,348			(590		)	(43.8	)
Operating income	5,715			3,237			2,478			76.6
Operating margin	4.3		%	2.4		%	N/A			190	bp

______________________________

“N/A” represents not applicable.

Revenues

Revenues decreased $2.9 million, or 2.1%, in the first quarter of 2019 compared to the first quarter of 2018. The decrease in revenues was primarily due to decreased international revenues from our CIPP contracting installation services operations as we exit or divest non-core operations as part of the 2017 Restructuring. Partially offsetting the decrease in revenues was an increase in CIPP contracting installation services activity in North America as a result of improved crew productivity following significant weather, labor and equipment challenges in the prior year.

Gross Profit and Gross Profit Margin

Gross profit decreased $0.1 million, or 0.5%, in the first quarter of 2019 compared to the first quarter of 2018. During the first quarter of 2019, we recorded a $4.4 million charge for estimated project warranty costs related to one CIPP contracting installation project in our North American operation. Excluding this charge, gross profit increased $4.3 million, or 16.0%, in the first quarter of 2019 compared to the first quarter of 2018. The increase in gross profit was primarily due to: (i) higher revenues and execution efficiencies related to CIPP contracting installation services activity in our North American operation; (ii) loss avoidance due to the divestiture of Denmark in 2018; and (iii) improved execution of CIPP project activity in our Australian operation.

Gross profit margin improved 30 basis points in the first quarter of 2019 compared to the first quarter of 2018 mainly due to the same factors that improved gross profit above.

Operating Expenses

Operating expenses decreased $2.1 million, or 9.3%, in the first quarter of 2019 compared to the first quarter of 2018. As part of our restructuring efforts, we recognized charges of $1.3 million and $1.9 million in the first quarters of 2019 and 2018, respectively. Excluding restructuring charges, operating expenses decreased $1.5 million, or 7.6%, in the first quarter of 2019 compared to the first quarter of 2018. The decrease in operating expenses was primarily due to exiting CIPP contracting installation services in certain international locations in Europe and Asia, and achieved cost savings in North America in connection with our 2017 Restructuring actions.

Operating expenses as a percentage of revenues were 15.2% in the first quarter of 2019 compared to 16.4% in the first quarter of 2018. Excluding restructuring charges, operating expenses as a percentage of revenues were 14.2% in the first quarter of 2019 compared to 15.1% in the first quarter of 2018.

Operating Income and Operating Margin

Operating income increased $2.5 million, or 76.6%, to $5.7 million in the first quarter of 2019 compared to $3.2 million in the first quarter of 2018. Operating margin improved to 4.3% in the first quarter of 2019 compared to 2.4% in the first quarter of 2018.

Included in operating income are the following items: (i) restructuring charges of $2.1 million and $3.2 million in the first quarters of 2019 and 2018, 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 $0.1 million and less than $0.1 million in the first quarters of 2019 and 2018, respectively; and (iii) a $4.4 million charge in the first quarter of 2019 for estimated project warranty costs related to one CIPP contracting installation project in our North American operation.

Excluding the above items, operating income increased $5.8 million, or 89.9%, to $12.3 million in the first quarter of 2019 compared to $6.5 million in the first quarter of 2018, and operating margin improved 450 basis points to 9.3% in the first quarter of 2019 compared to 4.8% in the first quarter of 2018. Operating income increased primarily due to higher revenues and profitability from our North American CIPP operation due to crew productivity improvement, loss avoidance due to the divestiture of Denmark in 2018 and improved execution of CIPP project activity in our Australian operation.

Corrosion Protection Segment

Key financial data for Corrosion Protection was as follows:



(dollars in thousands)	Quarters Ended March 31,						Increase (Decrease)
	2019			2018			$			%
Revenues	$	64,498		$	98,105		$	(33,607	)	(34.3	)%
Gross profit	12,873			23,576			(10,703		)	(45.4	)
Gross profit margin	20.0		%	24.0		%	N/A			(400	)bp
Operating expenses	14,407			18,461			(4,054		)	(22.0	)
Acquisition and divestiture expenses	39			32			7			21.9
Restructuring and related charges	187			121			66			54.5
Operating income (loss)	(1,760		)	4,962			(6,722		)	(135.5	)
Operating margin	(2.7		)%	5.1		%	N/A			(780	)bp

______________________________

“N/A” represents not applicable.

Revenues

Revenues decreased $33.6 million, or 34.3%, in the first quarter of 2019 compared to the first quarter of 2018. The decrease was primarily due to: (i) an $11.6 million decrease in revenues related to our pipe coating and insulation operation, which was divested in the third quarter of 2018; (ii) decreased revenue from our coating services operation, which benefited in the first quarter of 2018 from large project activity in the Middle East; (iii) decreased project activities in our cathodic protection operations; and (iv) decreased international revenues from our industrial linings and cathodic protection operations as we exit or divest non-core operations as part of the 2017 Restructuring.

Gross Profit and Gross Profit Margin

Gross profit decreased $10.7 million, or 45.4%, and gross profit margin declined 400 basis points in the first quarter of 2019 compared to the first quarter of 2018. Gross profit decreased primarily due to: (i) a $3.1 million decrease in gross profit

related to our divested pipe coating and insulation operation; (ii) lower revenues and gross margins associated with our coating services operation, most notably in the Middle East, as larger projects were completed; and (iii) decreased gross profit from certain international industrial linings and cathodic protection operations as noted above. Gross profit and gross profit margin were also negatively impacted by our North American cathodic protection operations, which experienced lower revenues and project delays in Canada.

Operating Expenses

Operating expenses decreased $4.1 million, or 22.0%, in the first quarter of 2019 compared to the first quarter of 2018. As part of our restructuring efforts, we recognized charges of $0.1 million and $1.3 million in the first quarters of 2019 and 2018, respectively. Excluding restructuring charges, operating expenses decreased $2.6 million, or 15.5%, in the first quarter of 2019 compared to the first quarter of 2018. Operating expenses decreased primarily due to: (i) a $1.5 million decrease related to our divested pipe coating and insulation operation; (ii) cost savings achieved in connection with our 2017 Restructuring actions; and (iii) lower incentive compensation expense.

Operating expenses as a percentage of revenues were 22.3% in the first quarter of 2019 compared to 18.8% in the first quarter of 2018. Excluding restructuring charges, operating expenses as a percentage of revenues were 22.4% in the first quarter of 2019 compared to 17.4% in the first quarter of 2018. The increase, as a percentage of revenues, was primarily driven by the lower revenues generated from our coating services operation during the first quarter of 2019, as compared to the same period in 2018.

Operating Income (Loss) and Operating Margin

Operating income decreased $6.7 million, or 135.5%, to a loss of $1.8 million in the first quarter of 2019 compared to income of $5.0 million in the first quarter of 2018. Operating margin declined to (2.7)% in the first quarter of 2019 compared to 5.1% in the first quarter of 2018.

Included in operating income are (i) restructuring charges of $0.2 million and $1.5 million in the first quarters of 2019 and 2018, respectively, related to employee severance, retention, extension of benefits, employee assistance programs, wind-down and other related restructuring costs; and (ii) acquisition and divestiture related expenses of less than $0.1 million in each of the first quarters of 2019 and 2018.

Excluding restructuring charges and acquisition and divestiture expenses, operating income decreased $8.0 million to a loss of $1.5 million in the first quarter of 2019 compared to income of $6.5 million in the first quarter of 2018 and operating margin declined to (2.3)% in the first quarter of 2019 compared to 6.6% in the first quarter of 2018. The decreases in operating income and operating margin were primarily the result of: (i) decreased operating income related to our divested pipe coating and insulation operation; (ii) lower revenues and related gross profit generated from our coating service operation in the Middle East; and (iii) lower revenues and decreased project performance in our North American cathodic protection operations.

Energy Services Segment

Key financial data for Energy Services was as follows:



(dollars in thousands)	Quarters Ended March 31,						Increase (Decrease)
	2019			2018			$			%
Revenues	$	80,863		$	92,329		$	(11,466	)	(12.4	)%
Gross profit	8,836			11,219			(2,383		)	(21.2	)
Gross profit margin	10.9		%	12.2		%	N/A			(130	)bp
Operating expenses	7,687			8,092			(405		)	(5.0	)
Operating income	1,115			3,127			(2,012		)	(64.3	)
Operating margin	1.4		%	3.4		%	N/A			(200	)bp

______________________________

“N/A” represents not applicable.

Revenues

Revenues decreased $11.5 million, or 12.4%, in the first quarter of 2019 compared to the first quarter of 2018. The decrease was due primarily to lower turnaround activities and, to a lesser extent, lower construction activity compared to the record revenues achieved in the prior year quarter. These decreases were partially offset by a higher volume of maintenance services activity as we continue to expand our presence with existing customers.

Gross Profit and Gross Profit Margin

Gross profit decreased $2.4 million, or 21.2%, in the first quarter of 2019 compared to the first quarter of 2018 and gross profit margin declined 130 basis points in the first quarter of 2019 compared to the first quarter of 2018. The decreases in gross profit and gross profit margin were primarily due to a lower mix of higher-margin turnaround projects. Gross profit margin associated with maintenance activities also decreased slightly due to a greater mix of lower margin services.

Operating Expenses

Operating expenses decreased $0.4 million, or 5.0%, in the first quarter of 2019 compared to the first quarter of 2018. The decrease was primarily due to lower variable costs associated with decreased turnaround and construction activity as well as higher prior year costs to support the labor transitions at refineries to comply with labor laws in California. Operating expenses as a percentage of revenues were 9.5% in the first quarter of 2019 compared to 8.8% in the first quarter of 2018.

Operating Income and Operating Margin

Operating income decreased $2.0 million, or 64.3%, to $1.1 million in the first quarter of 2019 compared to $3.1 million in the first quarter of 2018, primarily due to the decreased turnaround and construction activities discussed above. Operating margin declined to 1.4% in the first quarter of 2019 compared to 3.4% in the first quarter of 2018.

Corporate

Key financial data for Corporate was as follows:



(dollars in thousands)	Quarters Ended March 31,						Increase (Decrease)
	2019			2018			$			%
Revenues	$	—		$	—		$	—		—	%
Gross profit	—			—			—			—
Gross profit margin	N/A			N/A			N/A
Operating expenses	5,737			7,488			(1,751		)	(23.4	)
Acquisition and divestiture expenses	—			337			(337		)	(100.0	)
Restructuring and related charges	107			320			(213		)	(66.6	)
Operating loss	(5,844		)	(8,145		)	2,301			(28.3	)
Operating margin	N/A			N/A			N/A

______________________________

“N/A” represents not applicable.

Operating Expenses

Operating expenses decreased $1.8 million, or 23.4%, in the first quarter of 2019 compared to the first quarter of 2018. As part of our restructuring efforts, we recognized charges of $0.2 million in each of the first quarters of 2019 and 2018. The decrease in operating expenses was primarily due to: (i) decreased spending and other cost reduction initiatives as a result of the 2017 Restructuring; (ii) lower medical and prescription drug expenses as a result of improved claims history and changes to the structure of our medical plan to reduce costs; and (iii) lower incentive compensation expense. Corporate operating expenses as a percentage of consolidated revenues were 2.1% in the first quarter of 2019 compared to 2.3% in the first quarter of 2018.

Other Income (Expense)

Interest Income and Expense

Interest income increased $0.2 million in the first quarter of 2019 compared to the prior year quarter primarily due to interest received on the $8.0 million note receivable acquired in the Bayou sale during the third quarter of 2018. Interest expense decreased $1.9 million in the first quarter of 2019 compared to the prior year quarter primarily due to expenses of $1.7 million recorded in the first quarter of 2018 for certain arrangement and other fees associated with amending our credit facility as well as the write-off of previously unamortized deferred financing costs. Additionally, interest expense decreased due to reduced loan principal balances during the first quarter of 2019 compared to the first quarter of 2018, partially offset by higher LIBOR-based borrowing costs under our Credit Facility.

Other Expense

Other expense was $0.7 million and $0.3 million in the quarters ended March 31, 2019 and 2018. The balances primarily consisted of foreign currency transaction losses.

Tax Benefit on Loss

The tax benefit on the pre-tax loss was $0.8 million and $1.0 million in the first quarters of 2019 and 2018, respectively. Our effective tax rate was a benefit of 16.0% on a pre-tax loss in the quarter ended March 31, 2019 compared to a benefit of 40.4% on a pre-tax loss in the quarter ended March 31, 2018. During both periods, the effective rates were negatively impacted by valuation allowances recorded on certain net operating losses in foreign jurisdictions for which no income tax benefits are expected to be recognized. The effective tax rate for the quarter ended March 31, 2018, however, was positively impacted by a $1.5 million net tax benefit, or 60.0% benefit to the effective tax rate, related to employee share-based payments that vested during the first quarter of 2018.

Non-controlling Interests

Income attributable to non-controlling interests was less than $0.1 million in the quarter ended March 31, 2019 compared to income of $0.6 million in the quarter ended March 31, 2018. In the first quarter of 2019, income was primarily driven from our Corrosion Protection joint venture in Saudi Arabia and our Infrastructure Solutions joint ventures in Asia, partially offset by our Corrosion Protection joint ventures in Oman and South Africa. In the first quarter of 2018, income was primarily driven from our Corrosion Protection joint ventures in Louisiana, Saudi Arabia and Oman.

Liquidity and Capital Resources

Cash and Cash Equivalents



(in thousands)	March 31, 2019		December 31, 2018
Cash and cash equivalents	$	62,482	$	83,527
Restricted cash	1,235		1,359

Sources and Uses of Cash

We expect the principal operational use of funds for the foreseeable future will be for capital expenditures, working capital, debt service and share repurchases.

During the first quarter of 2019, capital expenditures were primarily used to: (i) support our Infrastructure Solutions North American CIPP business and expand our Corrosion Protection businesses in the Middle East; and (ii) boost our information systems platform with upgrades to our enterprise resource planning system. For 2019, we anticipate that we will spend approximately $25.0 to $30.0 million for capital expenditures, which is slightly below that in 2018.

In December 2018, our board of directors authorized the open market repurchase of up to two million shares of our common stock. The program did not establish a time period in which the repurchases had to be made. That authorization is now limited to $32.0 million in 2019 due to the December 2018 amendment to our Credit Facility. The shares are repurchased from time to time in the open market, subject to cash availability, market conditions and other factors, and in accordance with applicable regulatory requirements. 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. During the quarter ended March 31, 2019, we acquired 622,043 shares of our common stock for $11.1 million ($17.82 average price per share) through the open market repurchase program discussed above. In addition, we repurchased 152,946 shares of our 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 units and performance units. Any shares repurchased during 2019 are expected to be funded primarily through available cash. Once repurchased, we promptly retire such shares.

As part of our 2017 Restructuring, we utilized cash of $3.3 million during the first quarter of 2019 and $26.5 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 as we exit our non-pipe related contract applications

for the Tyfo^® system in North America, right-size our cathodic protection services operations in Canada, right-size our Infrastructure Solutions businesses in Australia and Denmark, and reduce corporate and other operating costs. Cumulatively, we have incurred both cash and non-cash charges of $142.5 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 and non-cash charges of $12 million to $16 million during 2019.

At March 31, 2019, our cash balances were located worldwide for working capital and support needs. Approximately $43.6 million, or 69.7%, of our cash was denominated in currencies other than the United States dollar as of March 31, 2019. 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. 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 Tax Cuts and Jobs Act; 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 March 31, 2019.

Our primary source of cash is operating activities. We occasionally borrow under our line of credit’s available capacity to fund operating activities, including working capital investments. Our operating activities include the collection of accounts receivable as well as the ultimate billing and collection of contract assets. At March 31, 2019, 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.

Cash Flows from Operations

Cash flows from operating activities used $6.6 million in the first quarter of 2019 compared to $1.3 million provided in the first quarter of 2018. The decrease in operating cash flow from the prior year period was primarily due to lower operating income during the first quarter of 2019 as compared to the first quarter of 2018, exclusive of non-cash charges in both periods. Additionally, cash flows during the quarters ended March 31, 2019 and 2018 were negatively impacted by $3.3 million and $4.4 million, respectively, in cash payments related to our restructuring activities. Working capital used $12.8 million of cash during the first quarter of 2019 compared to $12.6 million used in the first quarter of 2018.

Cash Flows from Investing Activities

Cash flows from investing activities used $7.8 million during the first quarter of 2019 compared to $5.0 million used during the first quarter of 2018. We used $8.1 million in cash for capital expenditures in the first quarter of 2019 compared to $5.2 million in the prior year period. In the first quarter of 2019 and 2018, $1.0 million of non-cash capital expenditures were included in accounts payable and accrued expenses in both periods. Capital expenditures in the first quarter of 2019 and 2018 were partially offset by $0.3 million and $0.3 million, respectively, in proceeds received from asset disposals.

Cash Flows from Financing Activities

Cash flows from financing activities used $7.1 million during the first quarter of 2019 compared to $16.9 million used in the first quarter of 2018. During the first quarter of 2019 and 2018, we used net cash of $13.3 million and $13.7 million, respectively, to repurchase 774,989 and 571,580 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 quarter of 2019, we had net borrowings of $13.0 million on our line of credit to fund domestic working capital needs. Additionally, during the first quarter of 2019, we used cash of $6.6 million to pay down the principal balance of our term loans. During the first quarter of 2018, we had net borrowings of $5.0 million from our line of credit primarily to fund domestic working capital needs, and we used cash of $6.6 million to pay down the principal balance of our term loan and used cash of $1.7 million to amend our original credit facility, as discussed in Note 8 to the consolidated financial statements contained in this report.

Long-Term Debt

Following the sale of Bayou, the amended Credit Facility consists of a $275.0 million five-year revolving line of credit and a $308.4 million five-year term loan facility, each with a maturity date in February 2023.

Our indebtedness at March 31, 2019 consisted of $275.6 million outstanding from the term loan under the amended Credit Facility and $44.0 million on the line of credit under the amended Credit Facility. Additionally, the Company had $0.9 million of debt held by its joint ventures (representing funds loaned by its joint venture partners) listed as held for sale at March 31, 2019 related to the planned sales of Corrpower and Aegion South Africa.

As of March 31, 2019, we had $22.6 million in letters of credit issued and outstanding under the amended Credit Facility. Of such amount, $12.3 million was collateral for the benefit of certain of our insurance carriers and $10.3 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 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.

On March 12, 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 $170.6 million notional amount, 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 March 31, 2019 and expect continued compliance for the foreseeable future.

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.

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

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, 2018. See Note 11 to the consolidated financial statements contained in this report for further discussion regarding our commitments and contingencies.

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 March 31, 2019 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 March 31, 2019 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 March 31, 2019, the estimated fair value of our long-term debt was approximately $323.8 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 March 31, 2019 would result in a $0.8 million increase in interest expense.

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 March 31, 2019, 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 $5.0 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 March 31, 2019, 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 March 31, 2019. 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

During the quarter ended March 31, 2019, we implemented new controls as part of our efforts to adopt FASB ASC 842. These new controls relate to: (i) gathering, monitoring and assessing the necessary lease data; and (ii) a new third-party

software as a system to capture, calculate and properly account for leases under FASB ASC 842. There were no other changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

There have been no material changes to the risk factors described in Items 1A in our Annual Report on Form 10-K for the year ended December 31, 2018.

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 2019 ^{(1) (2)}	232,134		$	17.96	222,901	1,777,099
February 2019^{(1) (2)}	280,640		19.86		137,107	1,639,992
March 2019 ^{(1) (2)}	262,215		17.07		262,035	1,377,957
Total	774,989		$	18.35	622,043

_________________________________

⁽¹⁾

In December 2018, our board of directors authorized the open market repurchase of up to two million shares of our common stock beginning January 1, 2019. Any shares repurchased are pursuant to one or more 10b5-1 plans. The program expires on the earlier of the repurchase by the Company of two million shares of common stock pursuant to the program or the board of directors' termination of the program. In December 2018, we amended our senior secured credit facility, which limits the open market repurchase of our common stock to be made during 2019 to $32.0 million. We began repurchasing shares under this program in January 2019. Once repurchased, we promptly retired the shares.

⁽²⁾

In connection with approval of our 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 and directors. 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 “net, net” exercises of employee stock options and/or the vesting of restricted stock, restricted stock units or performance units issued to employees. During the quarter ended March 31, 2019, 48,409 shares were surrendered in connection with stock swap transactions and 104,537 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.

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.

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.

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: May 3, 2019	/s/ David F. Morris
	David F. Morris
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer)

INDEX TO EXHIBITS

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



10.1	Management Annual Incentive Plan, effective January 1, 2019, filed herewith. ⁽¹⁾

10.2	Form of Director Deferred Stock Unit Agreement for Annual Grants (for Non-Employee Directors), filed herewith. ⁽¹⁾

10.3	Form of Director Deferred Stock Unit Agreement for Grants in Lieu of Cash (for Non-Employee Directors), filed herewith. ⁽¹⁾

10.4	Form of Performance Unit Agreement, dated February 18, 2019, between Aegion Corporation and certain executive officers of Aegion Corporation (incorporated by reference to Exhibit 10.21 to the annual report filed on Form 10-K for the year ended December 31, 2018). ⁽¹⁾

10.5	Form of Restricted Stock Unit Agreement, dated February 18, 2019, between Aegion Corporation and certain executive officers of Aegion Corporation (incorporated by reference to Exhibit 10.22 to the annual report filed on Form 10-K for the year ended December 31, 2018). ⁽¹⁾

10.6	Amended and Restated Aegion Corporation 2016 Non-Employee Director Equity Plan (incorporated by reference to Appendix A to the definitive proxy statement on Schedule 14A filed March 6, 2019 in connection with the 2019 annual meeting of stockholders). ⁽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	XBRL Instance Document*

101.SCH	XBRL Taxonomy Extension Schema Document*

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB	XBRL Taxonomy Extension Label Linkbase Document*

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*


*	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.