Infrastructure and Energy Alternatives, Inc. Announces Second Quarter 2019 Results, Additional Equity Commitment and Other Potential Financing and Sale Transactions

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INDIANAPOLIS, Aug. 14, 2019 (GLOBE NEWSWIRE) -- Infrastructure and Energy Alternatives, Inc. (NASDAQ: IEA) (“IEA” or the “Company”), a leading infrastructure construction company with specialized energy and heavy civil expertise, today announced its financial results for the second quarter ended June 30, 2019.

On August 13, 2019, the Company entered into an Equity Commitment Agreement (the “Equity Commitment Agreement”) among the Company, funds managed by the Private Equity Group of Ares Management Corporation (NYSE:ARES) (“Ares”), a leading global alternative asset manager, and funds managed by Oaktree Capital Management (solely for the limited purposes set forth therein) (“Oaktree”). Pursuant to the Equity Commitment Agreement, the Company agreed to issue and sell 50,000 shares of Series B Preferred Stock (with amended terms, as compared to the terms of the existing Series B Preferred Stock) and 900,000 warrants to purchase common stock (“Warrants”) to Ares for an aggregate purchase price of $50.0 million (the “Tranche One Transaction”). Consummation of the Tranche One Transaction is subject to a number of conditions; however, funding is expected to occur within 12 business days. In addition, Ares will have the right to designate an additional member of the Company’s Board following September 13, 2019, subject to the consummation of the Tranche One Transaction and certain other conditions.

On August 13, 2019, the Company also entered into a non-binding indicative term sheet with Ares (the “Term Sheet”) providing for, among other things:

The Term Sheet provides that the Tranche Two Transaction, if consummated, would include a right to participate by the Company’s common stockholders (subject, to a maximum participation of 15% of the 110,000 shares of Series B Preferred Stock being issued, and if the Merger is consummated an individual investment minimum of $50,000, an aggregate minimum of $3.0 million, a limit on the number of holders and other terms to be agreed between the Company, with approval of the Special Committee, and Ares).

The Tranche One Transaction and the Term Sheet were reviewed and approved by a special committee of the Company’s Board of Directors consisting solely of directors who are not affiliated with the parties in the proposed transactions and recommended by the special committee for approval by the Company's Board of Directors. The Company’s Board of Directors approved the Tranche One Transaction and the Term Sheet following receipt of the recommendation of the special committee.

The Tranche Two Transaction and the Merger are proposals that remain subject to, among other things, (i) a due diligence review by Ares of the Company satisfactory to Ares in its sole subjective discretion, (ii) receipt of final internal approvals by Ares, (iii) negotiation of definitive documentation, (iv) required shareholder and regulatory approvals, including the approval of the NASDAQ, (v) approval of the special committee of the Company’s Board of Directors and (vi) participation by a not yet identified third party purchaser for 40% of the Tranche One Transaction, Tranche Two Transaction and the Merger. The Term Sheet is non-binding, and there can be no assurance that the Company will enter into a binding agreement or consummate the Tranche Two Transaction or the Merger. Because of the non-binding nature of the Term Sheet, Ares has no obligation to complete the Tranche Two Transaction or the Merger.

For a more detailed description of the Tranche One Transaction and the proposed Tranche Two Transaction and Merger, and certain risks related to these transactions, please refer to our quarterly report on Form 10-Q for the second quarter of 2019, which will be filed with the Securities Exchange Commission today, as well as the Equity Commitment Agreement as exhibit thereto.

Guggenheim Securities, LLC acted as exclusive financial advisor to the Company in connection with the Tranche One Transaction and the Term Sheet and Perella Weinberg Partners LP acted as exclusive financial advisor to the special committee of the Company's Board of Directors.

JP Roehm, Chief Executive Officer of the Company, commented, “Today’s announcement of an additional equity investment from Ares is the next step in our previously announced plans to further strengthen our balance sheet and obtain the financial flexibility we need to execute our business plan for 2019 and support the growth of our larger, more diversified platform. We are delighted that Ares has agreed to take a bigger role as an investor and appreciate their continued support.”

Revenue for the second quarter 2019 totaled $328.0 million, up $153.9 million, or 88%, from the second quarter of 2018. The increase was primarily due to the inclusion of $134.8 million from our acquired businesses, as well as $10.2 million year-over-year growth in our renewable operations. On a comparable basis, taking into account the 2018 acquisitions of Consolidated Construction Solutions (“CCS”) and William Charles Construction Group (“William Charles”), revenue for the second quarter was down slightly from pro forma revenue of $332.1 million in the second quarter of 2018. During the current year quarter, revenue from our Renewables and our Specialty Civil segments represented 54.6% and 45.4% of total revenue, respectively.

Cost of revenue totaled $296.5 million, an increase of $139.3 million, compared to the same period in 2018. The increase was primarily due $121.1 million of costs related to the 2018 acquisitions and, to a lesser extent, increased cost related to increased business.

Gross profit totaled $31.4 million for the quarter, compared to gross profit of $16.8 million in the second quarter of 2018. As a percentage of revenue, gross profit remained relatively consistent period over period and totaled 9.6% in the quarter, as compared to 9.7% in the prior-year period. The Company's gross profit margin was still negatively impacted due to the continuing effort to complete the six projects affected by force majeure weather in the fourth quarter of 2018. These six projects caused a 0.4% reduction to gross margin in the second quarter of 2019. Excluding the impact of the 2018 weather-impacted projects, gross margin in the second quarter was 10.0%.

Selling, general and administrative expenses were $25.9 million for the second quarter, an increase of 181% year-over-year. SG&A expenses as a percentage of revenues were 7.9% in the second quarter, compared to 5.3% in the same period in 2018. Both the dollar and percentage increase in SG&A expenses were primarily driven by our larger operating platform due in part to the 2018 acquisitions.

The effective tax rates for the period ended June 30, 2019 and 2018 were 49.6% and 19.3%, respectively. The higher effective tax rate in the second quarter of 2019 is primarily attributable to changes from the interest accrued for the Series B Preferred Stock, which is not deductible for federal and state income taxes.

Net income for the quarter was $6.2 million, or ($0.61) per diluted share compared to net income of $4.9 million, or $0.19 per share in the second quarter of 2018. Net income for the quarter includes an $18.8 million gain that is a mark-to market adjustment and is required to be excluded from the numerator of earnings per share, which results in a net loss for the earnings per share calculation.

Adjusted EBITDA was $20.6 million for the quarter, as compared to pro forma adjusted EBITDA of $29.7 million in the second quarter of 2018. The decrease in Adjusted EBITDA was primarily due to a higher percentage of projects in the earlier phases of completion than in the prior year. Profit margins tend to increase as the projects near completion. For a reconciliation of net income to Adjusted EBITDA, please see the tables following the results of operations.

Cash used in operations during the second quarter totaled $23.3 million, compared to cash provided by operations of $13.3 million in the second quarter of 2018. The reduction in cash from operations was primarily driven by the impact of the timing of receipts from customers and payments to vendors.

As of June 30, 2019, the Company had $20.3 million of total cash and cash equivalents and $353.4 million of debt (excluding $77.8 million of capital leases). At the end of the second quarter, the Company had $34.4 million of availability under its credit facility.

Backlog as of June 30, 2019 totaled $2.6 billion, up from $2.2 billion at the end of the first quarter of 2019.

We define “backlog” as the amount of revenue we expect to realize from the uncompleted portions of existing construction contracts, including new contracts under which work has not begun and awarded contracts for which the definitive project documentation is being prepared, as well as the impact of change orders and renewal options.

The Company remains confident that with its existing backlog, growing pipeline of opportunities and continued strength across all of its end markets, it can confirm the guidance that was provided on the year-end and first quarter earnings conference call.

For the full year 2019, we anticipate revenues in the range of $1.0 billion to $1.2 billion and Adjusted EBITDA to be in the range of $90 million to $110 million. For a reconciliation of Adjusted EBITDA and discussion of further adjustments for cost savings and synergies, please see the appendix to this release.

In light of the Equity Commitment Agreement and Term Sheet announced today in this press release, the Company will not be conducting the previously scheduled conference call to discuss its second quarter results. For further details regarding the Company’s financial results and more description of these proposed transactions, please refer to its quarterly report on Form 10-Q for the second quarter of 2019, which will be filed with the Securities Exchange Commission today, as well as the Equity Commitment Letter and the Term Sheet filed as exhibits thereto.

Infrastructure and Energy Alternatives, Inc. (IEA) is a leading infrastructure construction company with specialized energy and heavy civil expertise. Headquartered in Indianapolis, Indiana, with operations throughout the country, IEA’s service offering spans the entire construction process. The Company offers a full spectrum of delivery models including full engineering, procurement, and construction, turnkey, design-build, balance of plant, and subcontracting services. IEA is one of three Tier 1 wind energy contractors in the United States and has completed more than 200 wind and solar projects across North America. In the heavy civil space, IEA offers a number of specialty services including environmental remediation, industrial maintenance, specialty transportation infrastructure and other site development for public and private projects. For more information, please visit IEA’s website at or follow IEA on , and for the latest company news and events.

This press release is not a proxy statement or solicitation of a proxy, consent or authorization with respect to any proposed transaction, and shall not constitute an offer to sell or a solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.  No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act of 1933, as amended (the “Securities Act”), or an applicable exemption.

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements can be identified by the use of forward-looking terminology including “may,” “should,” “likely,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “forecast,” “seek,” “target,” “continue,” “plan,” “intend,” “project,” or other similar words. All statements, other than statements of historical fact included in this press release, regarding expectations for future financial performance, business strategies, expectations for our business, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans, objectives and beliefs of management are forward-looking statements.  These forward-looking statements are based on information available as of the date of this release and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurance that such expectations will prove correct. Forward-looking statements should not be relied upon as representing our views as of any subsequent date. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

We do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

We define EBITDA as net income (loss), determined in accordance with GAAP, for the period presented, before depreciation and amortization, interest expense and provision (benefit) for income taxes. We define Adjusted EBITDA as net income (loss) plus depreciation and amortization, interest expense, provision (benefit) for income taxes, restructuring expenses, acquisition or disposition related expenses, non-cash stock compensation expense, and certain other non-cash charges, unusual, non-operating or non-recurring items and other items that we believe are not representative of our core business or future operating performance.

Adjusted EBITDA is a supplemental non-GAAP financial measure and, when considered along with other performance measures, is a useful measure as it reflects certain drivers of the business, such as revenue growth and operating costs. We believe Adjusted EBITDA can be useful in providing an understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under GAAP, management uses this financial measure to evaluate and forecast business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not consider certain requirements, such as capital expenditures and depreciation, principal and interest payments, and tax payments. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.

The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

The following table outlines the reconciliation from net income (loss) to Adjusted EBITDA for the periods indicated:

The following table outlines the reconciliation from estimated net income (loss) to estimated Adjusted EBITDA for December 31, 2019:

The following tables outline the impact to complete the 2018 weather related projects for the three and six months ended June 30, 2019:

 

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Globe Newswire: 13:00 GMT Wednesday 14th August 2019

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