EX-99.1 2 ex99_1.htm EXHIBIT 99.1 Exhibit 99.1 Exhibit 99.1

(INSITUFORM-TECH)(INSU) Insituform Technologies, Inc. Reports First Quarter 2006 Results

Chesterfield, MO - April 25, 2006 - Insituform Technologies, Inc. (Nasdaq National Market: INSU) today reported first quarter net income increased to $3.0 million, or $0.11 per diluted share, from $0.4 million, or $0.01 per diluted share, in the year-earlier quarter, reflecting strong performance in the Tite Liner® segment and ongoing improvement in the rehabilitation segment. Consolidated revenues increased 5.3% to $143.6 million from $136.3 million the prior year.
“First quarter results exceeded our business plan and we are increasingly optimistic about prospects for our full-year performance,” explained Thomas S. Rooney, Jr., president and chief executive officer. “All three business segments, including tunneling, are displaying signs of positive momentum. We fully expect the losses at tunneling to decline substantially as 2006 progresses and are confident that our strategic moves have tunneling headed in the right direction.”
Our results this year also included $1.2 million, or $0.7 million after-tax and $0.03 per share, of additional expenses related to new stock option accounting rules. We expect to expense $2.7 million, or $1.6 million after-tax and $.06 per share, for the full year related to stock options.
Rooney continued, “The outlook at Tite Liner® remains exceptionally bright, and while rehabilitation’s backlog, as expected, was up only moderately in the first quarter, we look for a noticeable pick-up in orders for the year.”
Revenue and gross profit in the rehabilitation segment increased 6.1% to $111.7 million and 6.4% to $25.3 million, respectively, during the first quarter 2006 compared to the first quarter of 2005 due to improved crew productivity, a larger proportion of medium- and large-diameter projects that typically generate higher revenues and gross margins, and continued manufacturing and logistics efficiency gains. Revenue gains were primarily in the North American CIPP operations, while Europe declined due to low workable backlog that persisted during most of the quarter. Operating income in the rehabilitation segment totaled $6.5 million, an increase of 26.1% over year-ago levels, primarily due to higher revenues, improved crew productivity and slightly lower operating expenses.
The prior implementation of a more selective bidding strategy in the tunneling segment caused lower backlog, which contributed to a revenue decline of 19.1% to $19.4 million
compared to the prior year quarter. The combination of management’s focus on completing existing large and problematic jobs and the more selective bidding strategy has resulted in a backlog decline over the past several quarters. Tunneling posted a loss at the gross profit line during the quarter of $0.6 million, due primarily to the problematic projects that are nearing completion, but continued to contribute to losses, along with underutilized equipment costs and the effects of low backlog. These losses were partially offset by a $0.9 million benefit to gross margin related to amounts previously reserved for rain contingencies on the Chicago project, which is in the final stages of completion. Operating expenses in the tunneling segment decreased 34.1% on a year-over-year basis due to reductions in administrative staffing and related costs to adjust to a lower operating base as well as lower allocated corporate costs necessary to support the business. Tunneling’s operating loss decreased to $3.0 million from $3.4 million.
Due to a strong market driven by high oil and other commodity prices, the Tite Liner® segment’s revenues climbed 76.4% to $12.5 million compared to $7.1 million in 2005. Increased revenues in the segment were attributable to higher backlog and increased volume, primarily in South America and other international markets. The gross profit margin rose to 31.5% from 28.5% due to improved margins worldwide, particularly in Canada and South America, as a result of efficiencies gained from increased volume. Operating expenses were considerably higher during the quarter because of additional staffing and corporate expenses allocated to the segment to support business growth. However, operating expenses as a percent of revenue fell to 12.8% in 2006 compared to 15.6% in 2005. Operating income in the Tite Liner® segment increased 155.7% to $2.3 million, an 18.7% operating margin for the quarter.
Operating expenses, on a consolidated basis, declined by 2.4%, or $0.6 million, due to lower tunneling administrative costs and controlled corporate expenses despite the increase in compensation expense of $1.2 million during the first quarter of 2006 related to the newly implemented accounting rules governing the expensing of stock options.
The unrestricted cash balance declined $12.9 million to $64.1 million at March 31, 2006 compared to December 31, 2005, primarily due to the regularly scheduled amortization payment of $15.7 million on the Company’s Senior Notes. Cash used by investing activities included $3.4 million in capital expenditures used to further develop the steam inversion process and the replacement of older equipment. Cash flow from operating activities provided $2.3 million in the first quarter of 2006 compared to $13.0 million used in the first quarter of 2005. Due primarily to the growth in revenues during the quarter, operating assets and liabilities increased by $7.7 million. The increase in operating assets and liabilities a year ago was $18.5 million, with the difference primarily attributable to stronger cash management practices now in place.
Total contract backlog decreased to $286.5 million at March 31, 2006, compared to $299.8 million at December 31, 2005 and $294.1 million at March 31, 2005. Contract backlog in the rehabilitation segment increased 1.4%, or $2.9 million, compared to December 31, 2005 and 19.2%, or $34.8 million, compared to March 31, 2005 due to growth in many of the North American regions. Tite Liner® contract backlog held steady at $20.1 million at March 31, 2006 compared to $20.2 million at December 31, 2005. However contract backlog was up more than 50% from year-ago levels because of significant increases of international work, including South America and Canada. Tunneling backlog, as expected, continued to decline compared to levels in December and March 2005. At March 31, 2006 contract backlog was $50.2 million compared to $66.3 million at December 31, 2005 and $99.5 million at March 31, 2005.
Insituform Technologies, Inc. is a leading worldwide provider of proprietary technologies and services for rehabilitating sewer, water and other underground piping systems without digging and disruption. More information about the Company can be found on its Internet site at www.insituform.com.
This news release contains forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) that are based on information currently available to the management of Insituform Technologies, Inc. and on management’s beliefs and assumptions. When used in this news release, the words “anticipate,” “estimate,” “believes,” “plans,” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected and include, among others, our belief that we are taking the right steps to return the Company’s tunneling division to a respectable level of profitability and our expectation of when we will complete several tunneling projects. Factors that could affect results include, among others, the competitive environment for the Company’s products and services, the availability and pricing of raw materials used in the Insituform® cured-in-place

Exhibit 99.1

(“Insituform CIPP”) process, increased competition upon expiration of the Company’s patents or the inadequacy of one or more of its CIPP process patents to protect its operations, the geographical distribution and mix of the Company’s work, the ability of the Company to attract business at acceptable margins, foreseeable and unforeseeable issues in projects that make it difficult or impossible to meet projected margins, the timely award or cancellation of projects, political circumstances impeding the progress of work, the Company’s ability to remain in compliance with its financial covenants, the regulatory environment, weather conditions, the outcome of the Company’s pending litigation and other factors set forth in reports and documents filed by the Company with the Securities and Exchange Commission from time to time. The Company does not assume a duty to update forward-looking statements. Please use caution and do not place reliance on forward-looking statements.

Exhibit 99.1


INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)

   
For the Three Months
Ended March 31,
  
   
2006
  
2005
  
Revenues
  
$
143,564
  
$
136,277
  
Cost of revenues
    
114,899
    
110,178
  
Gross profit
    
28,665
    
26,099
  
Selling, general and
              
administrative
    
22,887
    
23,458
  
Operating income
   
5,778
   
2,641
  
Other (expense) income:
              
Interest expense
    
(1,809
)
  
(2,167
)
Interest income
   
518
    
291
  
Other
    
133
    
45
  
Total other expense
    
(1,158
)
  
(1,831
)
Income before taxes
             
on income
    
4,620
    
810
  
Taxes on income
    
1,594
    
283
  
Income before minority
              
interests and equity in
             
earnings
    
3,026
    
527
  
Minority interests
    
(27
)
  
(40
)
Equity in earnings (losses) of
              
affiliated companies
    
35
    
(87
)
Net Income
    
3,034
    
400
 
Basic earnings per share:
 
$
0.11
  
$
0.01
  
Diluted earnings per share:
  
$
0.11
  
$
0.01
  
Weighted-average common
             
shares- basic
    
26,918
   
26,745
 
Weighted-average common
              
and equivalent shares-
              
diluted
    
27,347
   
26,918
 

Exhibit 99.1


SEGMENT DATA
          
Revenues
          
Rehabilitation
  
$
111,658
  
$
105,228
  
Tunneling
    
19,384
    
23,949
  
TiteLiner®
    
12,522
   
7,100
 
Total revenues
  
$
143,564
  
$
136,277
  
Gross profit
              
Rehabilitation
  
$
25,334
  
$
23,807
  
Tunneling
    
(616
)
  
265
 
TiteLiner®
    
3,947
    
2,027
 
Total gross profit
  
$
28,665
  
$
26,099
  
Operating income (loss)
              
Rehabilitation
  
$
6,460
  
$
5,122
  
Tunneling
    
(3,029
)
  
(3,399
)
TiteLiner®
    
2,347
    
918
  
Total operating income
  
$
5,778
  
$
2,641
  


Exhibit 99.1


INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)

   
March 31, 2006
  
December 31, 2005
  
ASSETS
          
CURRENT ASSETS
          
Cash and cash equivalents
  
$
64,148
  
$
77,069
  
Restricted cash
    
6,512
    
5,588
  
Receivables
    
84,516
   
85,896
  
Retainage
   
33,806
    
33,138
  
Costs and estimated earnings
              
  in excess of billings
    
39,647
    
32,503
  
Inventories
   
18,989
    
15,536
  
Prepaid expenses and other assets
    
23,579
    
24,294
  
TOTAL CURRENT ASSETS
   
271,197
    
274,024
  
PROPERTY, PLANT AND EQUIPMENT,
             
less accumulated depreciation
    
93,170
    
95,657
  
OTHER ASSETS
              
Goodwill
    
131,536
    
131,544
  
Other assets
    
15,774
    
17,103
  
TOTAL OTHER ASSETS
    
147,310
    
148,647
  
TOTAL ASSETS
  
$
511,677
  
$
518,328
  
LIABILITIES AND STOCKHOLDERS' EQUITY
              
CURRENT LIABILITIES
              
Current maturities of long-term
              
  debt and line of credit
  
$
16,646
  
$
18,264
  
Accounts payable and accrued
              
          expenses
    
94,110
    
94,560
  
Billings in excess of costs
              
  and estimated earnings
    
15,680
    
14,017
  
TOTAL CURRENT LIABILITIES
    
126,436
    
126,841
  
LONG-TERM DEBT, less current
              
         maturities
    
65,055
    
80,768
  
OTHER LIABILITIES
    
5,102
    
5,497
  
TOTAL LIABILITIES
    
196,593
    
213,106
  
MINORITY INTERESTS
    
1,759
    
1,726
  
TOTAL STOCKHOLDERS' EQUITY
    
313,325
    
303,496
  
TOTAL LIABILITIES AND
              
  STOCKHOLDERS' EQUITY
  
$
511,677
  
$
518,328
  

Exhibit 99.1

INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

   
For the Three Months
Ended March 31,
  
   
2006
  
2005
  
Cash flows from operating activities:
          
Net income
  
$
3,034
  
$
400
  
Adjustments to reconcile net cash provided
              
by (used in) operating activities:
              
Depreciation
    
5,059
    
4,573
  
Amortization
    
307
    
423
  
Deferred income taxes
    
(575
)
  
4
  
Equity-based compensation expense
    
1,420
    
84
  
Other
    
1,652
    
84
  
Change in restricted cash related to
             
  operating activities
    
(925
)
  
(96
)
Changes in operating assets and liabilities
    
(7,698
)
  
(18,473
)
Net cash provided by(used in)
              
operating activities
   
2,274
    
(13,001
)
Cash flows from investing activities:
              
Capital expenditures
   
(3,383
)
  
(7,631
)
Proceeds from sale of fixed assets
    
250
    
33
  
Liquidation of life insurance
             
  cash surrender value
    
1,423
    
-
  
Net cash used by investing activities
    
(1,710
)
  
(7,598
)
Cash flows from financing activities:
              
Proceeds from stock option exercises
    
3,012
    
26
  
Additional tax benefit from stock
             
  option exercises
    
625
    
-
 
Principal payments on long-term debt
    
(15,726
)
  
(15,738
)
Principal payments on notes payable
    
(1,606
)
  
-
  
Deferred financing costs paid
    
(103
)
  
(260
)
Net cash used in financing activities
    
(13,798
)
  
(15,972
)
Effects of exchange rates on cash
    
313
    
(1,178
)
Net decrease in cash and cash
              
        equivalents
    
(12,921
)
  
(37,749
)
Cash and cash equivalents, beginning
             
of period
    
77,069
    
93,246
  
Cash and cash equivalents, end of period
    
64,148
    
55,497
  

CONTACT:           Insituform Technologies, Inc.
David A. Martin, Vice President and Controller
(636) 530-8000