8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported):February 22, 2007

INSITUFORM TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-10786	13-3032158
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

702 Spirit 40 Park Drive, Chesterfield, Missouri	63005
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number,

including area code (636) 530-8000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[   ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[   ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[   ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.Results of Operations and Financial Condition.

The Company issued an earnings release on February 22, 2007, to announce its financial results for the quarter and year ended December 31, 2006. A copy of the February 22, 2007 earnings release is furnished herewith as Exhibit 99.1. On February 23, 2007 the Company held a conference call in connection with its February 22, 2007 earnings release. A transcript of the conference call is furnished herewith as Exhibit 99.2.

The information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

Item 9.01.	Financial Statements and Exhibits.
	(d)	The following exhibits are filed as part of this report:

Exhibit Number	Description
99.1	Earnings Release of Insituform Technologies, Inc., dated February 22, 2007, filed herewith.
99.2	Transcript of Insituform Technologies, Inc.’s February 23, 2007 conference call, filed herewith.

**  *

SIGNATURES

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 hereunto duly authorized.

INSITUFORM TECHNOLOGIES, INC.

By:   /s/ David F. Morris

    David F. Morris

    Vice President, General Counsel and Secretary

Date:   February 28, 2007

INDEX TO EXHIBITS

These exhibits are numbered in accordance with the Exhibit Table of Item 6.01 of Regulation S-K.

Exhibit	Description
99.1	Earnings Release of Insituform Technologies, Inc., dated February 22, 2007.
99.2	Transcript of Insituform Technologies, Inc.’s February 23, 2007 conference call.

EX-99.1

Exhibit 99.l

(INSITUFORM-TECH) (INSU) Insituform Technologies, Inc. Reports Fourth Quarter and Year-End 2006 Results

Chesterfield, MO - February 22, 2007 - Insituform Technologies, Inc. (Nasdaq Global Select Market: INSU) today reported fourth quarter and 2006 year-end results.

For the quarter ended December 31, 2006, net income increased by 144.7% to $10.4 million, or $0.38 per diluted share, from $4.3 million, or $0.16 per diluted share in the fourth quarter of 2005. For the year ended December 31, 2006, net income was $24.7 million, or $0.90 per diluted share, compared to $13.2 million, or $0.49 per diluted share for the year ended December 31, 2005, representing a 87.5% increase.

Thomas S. Rooney Jr., President and Chief Executive Officer, commented, “The fourth quarter results represent one of the strongest earnings quarters we have seen in some time. Obviously, we benefited from some one-time gain recognition, related to sales of equipment and real estate, but we also experienced healthy improvements in profitability from our core rehabilitation and tunneling segments, and our TiteLinerÒ segment continued its strong year-to-date performance during the quarter. While our consolidated backlog did not increase during the quarter, our core rehabilitation business experienced double-digit revenue growth. We continued to make steady improvements in productivity and progress with technological advancements as we closed out the year. Overall, we are very pleased with the progress made in the fourth quarter and the financial results for the year.”

Consolidated revenues in the fourth quarter of 2006 were $154.9 million, which was $8.9 million higher than the $146.0 million in revenues recorded in the fourth quarter of 2005. Lower revenues in our Tite Liner® and tunneling segments were offset by a 15.9% increase in revenues in our rehabilitation segment.

Consolidated gross profit in the fourth quarter of 2006 was $33.6 million, with a gross profit margin of 21.7%, compared to $29.7 million, with a gross profit margin of 20.3%, in the fourth quarter of 2005. The gross profit margin percentages were lower in the fourth quarter of 2006 compared to 2005 in the rehabilitation segment, due primarily to a higher mix of smaller diameter work, coupled with lower pricing. One of our principal strategic initiatives over the last few years has been cost reductions through increased productivity and technological advancements. As a result of these cost reduction efforts, we have been more competitive in the marketplace, even while lowering pricing. Total feet of CIPP tube installed in the U.S. increased more than 20% in 2006 compared to 2005, while revenue only increased 8.1% in the rehabilitation segment in the same period. Gross profit margins increased in the tunneling and Tite Liner® segments in the fourth quarter of 2006 compared to the same period last year.

Consolidated operating expenses were slightly lower in the fourth quarter of 2006 compared to the fourth quarter of 2005, principally due to lower field operating costs. Corporate operating expenses were higher, due primarily to equity compensation expense, along with higher legal and professional fees. Equity compensation costs include expense recorded for stock option awards, which we were required to begin expensing effective January 1, 2006 due to a new accounting pronouncement. Expense recorded for stock options was $0.4 million in the fourth quarter of 2006. Legal expenses increased due to continued efforts to pursue contract claims and to further protect our intellectual property rights and shareholder rights in our joint ventures. Other professional fees also increased, resulting primarily from costs associated with legal and tax restructuring efforts in foreign countries to optimize our tax structure on a global basis.

Non-operating items also benefited the fourth quarter of 2006, including other income of $4.3 million, which primarily consisted of gains on sales of real estate and tunneling equipment, compared to other expense of $0.3 million in the fourth quarter of 2005. Interest income increased to $1.3 million in the fourth quarter of 2006, from $0.7 million in the fourth quarter of 2005 due to improved treasury practices, higher interest rates and higher cash balances. Equity earnings increased by $0.4 million in the fourth quarter of 2006 from the fourth quarter of 2005, as a result of improved performance in our 50% joint venture in Germany, which was partially offset by the results of a joint venture recently started in Hong Kong.

For the year ended December 31, 2006, consolidated revenues increased by $1.4 million, representing less than a 1% improvement compared to 2005. This was primarily due to a $42.4 million, or 38.0%, decline in revenues from our tunneling operation, offset by revenue increases in our rehabilitation and Tite Liner® segments. Rehabilitation, in particular, generated higher revenue due primarily to stronger performance in the second half of 2006 compared to the second half of 2005. Revenue in the rehabilitation segment, however, was negatively impacted by an increase in the mix of smaller diameter installations, coupled with lower pricing described earlier.

Consolidated gross profit was also higher in 2006, at nearly $128 million, compared to $116.8 million in 2005 due primarily to improved performance in the tunneling segment and, to a lesser extent, increased Tite Liner® margins. While rehabilitation gross profit margins decreased year over year, the prior year was favorably impacted by the recognition of a claim of $3.4 million related to an insurance matter discussed later. Our consolidated gross profit margin also improved to 21.4% in 2006, compared to 19.6% in 2005.

Consolidated operating expenses were 3.6% higher in 2006, at $96.5 million, compared to $93.1 million in 2005, due primarily to higher corporate expenses, including equity compensation expense and legal expenses, partially offset by lower business unit operating expenses. Consolidated operating income was $31.5 million in 2006 compared to $23.7 million in 2005.

Revenues in the rehabilitation segment increased to $126.1 million in the fourth quarter of 2006, which was $17.3 million, or 15.9%, higher than the revenue generated in the fourth quarter of 2005. Gross profit also increased to $30.2 million in the quarter, compared to $28.4 million in the fourth quarter of 2005. However, gross profit margin was lower in the fourth quarter of 2006, at 23.9%, compared to 26.1% in the fourth quarter of 2005, due to the impact of increased smaller diameter installations and lower pricing, as previously discussed.

Fourth quarter 2006 operating expenses in the rehabilitation segment increased by $1.0 million, but decreased as a percentage of revenue, to 16.2%, compared to 17.9% in the fourth quarter of 2005. Consequently, rehabilitation operating income increased to $9.8 million in the fourth quarter of 2006, compared to $9.0 million in the fourth quarter of last year. Rehabilitation operating margin, which is operating income as a percentage of revenue, declined slightly, to 7.8% in the fourth quarter of 2006 compared to 8.3% in the fourth quarter of 2005.

However, backlog in the rehabilitation segment decreased by 5.4% at year-end 2006 compared to year-end 2005. The first half of 2006 was affected by a significant market softening in the United States, which occurred late in 2005 and lasted into the first quarter of 2006. During this slow period, there was heightened competition for fewer projects, resulting in low-margin pricing, and, consequently, a decrease in our workable backlog during the first half of 2006. The slow period was followed by modest growth in the second quarter of 2006, and even stronger growth in the second half of 2006. As a result, backlog grew in the second half of 2006 after declining during the first half of the year. During the second half of 2006, revenue was substantially higher than the same period in 2005 due to the improvement in the market.

For the year ended December 31, 2006,rehabilitation gross profit increased by $4.0 million, or 3.7%, to $113.6 million compared to $109.6 million in 2005, due primarily to higher revenues and increased crew efficiencies, partially offset by higher material costs and lower pricing. However, gross profit margins decreased by one percentage-point, to 23.6%, in 2006 compared to 24.6% in 2005. One of the primary factors in the percentage-point decline in gross profit margin is the effect of an insurance claim recognized in 2005, which provided a $3.4 million benefit to gross profit. In 2006, an additional $0.5 million related to the same claim was recorded. Excluding the effect of the insurance claim recognition, gross profit margin would have been 23.5% in 2006 compared to 23.8% in 2005. Crew productivity improved during 2006, which enabled us to generate higher revenue on essentially flat labor costs. This enabled us to be more competitive in the marketplace, particularly in the second half when the market strengthened, while pricing was driven lower.

Operating expenses in the rehabilitation segment were $6.6 million, or 8.8%, higher in 2006 compared to 2005 due to higher allocated corporate expenses, including equity compensation and legal expenses. These increases were partially offset by lower field expenses, primarily due to the reorganization undertaken earlier in 2006. Operating expenses, as a percentage of revenue, remained essentially unchanged at 17.0% in 2006 compared to 16.9% in 2005.

Tunneling revenues declined by $7.1 million, or 26.8%, to $19.5 million in the fourth quarter of 2006, compared to $26.6 million in the fourth quarter of 2005. However, gross profit increased to $0.3 million in the fourth quarter of 2006, compared to a gross loss of $1.7 million in the fourth quarter of 2005. Revenue in the tunneling business was below year-ago levels all year long due to our continued efforts to bring problematic jobs to a close. All problematic projects were substantially completed during 2006. Tunneling projects currently underway are earning profitable margins, but the tunneling segment continues to be hampered by excess equipment, resulting in underutilized equipment costs. In addition, tunneling’s gross profit in the fourth quarter of 2006 included a benefit of $0.6 million for claims recognized during the quarter. Tunneling’s gross loss in the fourth quarter of 2005 was adversely impacted by margin reductions of $2.6 million on two significant jobs, offset partially by claims recognized of $1.9 million.

Fourth quarter 2006 operating expenses in the tunneling business decreased $1.2 million, or 43.6%, to $1.6 million compared to $2.8 million in the fourth quarter of 2005. Administrative staffing and other overhead has been reduced to more appropriately fit tunneling’s lower operating base.

Tunneling revenues declined by 38.0%, or $42.4 million, for the year ended December 31, 2006 compared to 2005, due to fewer active projects and lower backlog during much of the year. Management’s focus on completing existing projects in late 2005 and early 2006, along with the implementation of a more selective bidding strategy, caused backlog in the tunneling business to decline sharply, beginning in 2005 and into the second quarter of 2006. Backlog grew during the second half of 2006 and totaled $75.7 million at December 31, 2006.

Tunneling’s gross loss narrowed to $1.0 million for the full year of 2006 compared to $4.2 million in 2005. As a result of the completion of several problematic low-margin or loss jobs, and the slow addition of new work, considerable idle tunneling equipment remains, resulting in significant underutilized equipment costs in 2006. Underutilized equipment costs, primarily depreciation and operating lease expenses, were $9.2 million in 2006 compared to $4.8 million in 2005. Partially offsetting underutilized equipment costs were $1.3 million recorded on contract claims in 2006, compared to $4.6 million in 2005. Tunneling’s gross loss in the prior year was materially affected by the continuation of large projects that experienced margin deterioration.

Tunneling operating expenses decreased significantly during 2006, as administrative staffing and other overhead expenses were reduced to adjust to a lower operating base. Partially offsetting lower administrative and overhead expenses were higher corporate costs allocated to tunneling for increased management efforts to run the business. Primarily resulting from lower revenue, operating expenses as a percentage of revenue were 12.0% in 2006 compared to 11.4% in 2005.

Tite Liner® revenues were $9.3 million in the fourth quarter of 2006, a $1.2 million, or 11.8%, decrease from the fourth quarter of 2005. However, gross profit remained essentially unchanged at $3.1 million in the fourth quarter of 2006, compared to $3.0 million in the fourth quarter of 2005. Consequently, gross profit margin was higher in the fourth quarter of 2006, at 33.5%, compared to 28.3% in the fourth quarter of 2005. Revenues and gross profit were strong in North American operations, while revenues were lower from our South American operations in the fourth quarter of 2006 compared to the fourth quarter of 2005.

Operating expenses increased by $0.2 million in the fourth quarter of 2006 compared to the prior-year quarter due to additional overhead necessary to support Tite Liner®’s growing business. Operating income was essentially unchanged in the fourth quarter of 2006, at $1.7 million in the quarters ended December 31, 2006 and 2005.

Tite Liner® revenues were $7.7 million, or 19.9%, higher for the full year of 2006 compared to 2005 due to strong performance across all units of our Tite Liner® business. Revenues from our North American operations increased by $6.0 million in 2006 compared to 2005, and revenues from our South American operations increased by $1.7 million over the same period.

Gross profit in the Tite Liner® business was $3.9 million, or 34.4%, higher in 2006 compared to 2005. In addition to higher revenues in 2006, Tite Liner’s® gross profit margin was also 3.6 percentage-points higher, at 33.3% in 2006 compared to 29.7% in 2005, due to improved operational efficiencies and favorable pricing trends. North American operations achieved a 36.3% gross profit margin in 2006 compared to 35.1% in 2005, and our South American operations achieved a 25.8% gross profit margin in 2006, compared to 17.1% in 2005.

Tite Liner® operating expenses were $1.2 million, or 23.2%, higher in 2006 compared to 2005, due primarily to additional staffing and corporate expenses necessary to support growth in the Tite Liner® business. As a percentage of revenue, operating expenses were 13.6% in 2006 compared to 13.2% in 2005.

Unrestricted cash increased to $96.4 million at December 31, 2006, compared to $77.1 million at December 31, 2005. Operating cash flow was $39.7 million during 2006, compared to $23.6 million in 2005, due principally to higher net income and higher non-cash expenses, most notably, equity compensation expense of $4.3 million, and improved working capital management. Investing activities used $7.1 million in 2006, compared to $26.3 million in 2005. Capital expenditures were lower in 2006, at $20.6 million, compared to $27.1 million in 2005. Capital expenditures in 2006 were primarily for equipment used in our steam-inversion process and replacement of older equipment, primarily in the United States. During 2006, capital expenditures were partially offset by $12.1 million of proceeds from asset and property disposals. Only $1.3 million was received from similar disposals in 2005. Financing activities used $12.4 million in 2006 compared to $12.3 million in 2005, and composed primarily of senior note debt amortization payments of $15.7 million in both years.

Total contract backlog was $290.2 million at December 31, 2006, compared to $299.8 million at December 31, 2005, representing a decrease of $9.6 million. However, total contract backlog increased by $17.7 million, or 6.5%, from June 30, 2006 to December 31, 2006.

Rehabilitation backlog decreased by 5.4% to $201.7 million at December 31, 2006, compared to $213.3 million at December 31, 2005. Due to market difficulties described previously, backlog in the rehabilitation segment decreased through the first six months of 2006, reaching a low of $186.8 million at June 30, 2006. The market began to strengthen in the second quarter of 2006 and continued through the rest of the year; consequently, backlog increased by 8.0% in the second half of 2006.

Tunneling backlog increased by 14.2%, to $75.7 million at December 31, 2006 compared to $66.3 million at December 31, 2005 as several problem projects were completed, and management was able to renew its focus on winning profitable work.

Tite Liner® backlog decreased by 36.6%, to $12.8 million at December 31, 2006, compared to $20.2 million at December 31, 2005, due to stronger revenues during 2006, and timing of released projects. Bidding opportunities continue to be robust throughout the world for Tite Liner®.

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 various 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 document, the words “anticipate,” “estimate,” “believe,” “plan,” 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 risks and uncertainties and include among others, our belief with respect to estimated and anticipated costs to complete ongoing projects, our belief that our documentation will substantiate contract claim conditions, our expectation with respect to the completion dates of ongoing projects and the amount of backlog we will perform, our belief of the amounts we may recover for pending claims, our intention to obtain work that is comparable with our tunneling operation’s core competency, our belief with respect to anticipated levels of operating expenses, our belief that we have adequate resources and liquidity to fund future cash requirements and debt repayments, our expectation with respect to the anticipated growth of our businesses and our belief with respect to the strength of our trademark and our degree of market penetration. Our actual results may vary materially from those anticipated, estimated or projected due to a number of factors, such as the competitive environment for our products and services, the availability and pricing of raw materials used in our operations, increased competition upon expiration of our patents or the inadequacy of one or more of our patents to protect our operations, the geographical distribution and mix of our work, our ability to attract business at acceptable margins, the strength of our marketing and sales skills, foreseeable and unforeseeable issues in projects that make it difficult or impossible to meet projected margins, the timely award or cancellation of projects, our ability to maintain adequate insurance coverage for our business activities, political circumstances impeding the progress of work, our ability to remain in compliance with the financial covenants included in our financing documents, the regulatory environment, weather conditions, the outcome of our pending litigation, our ability to enter new markets and other factors set forth in reports and other documents filed by us with the Securities and Exchange Commission from time to time. We do not assume a duty to update forward-looking statements. Please use caution and do not place reliance on forward-looking statements.

CONTACT:    Insituform Technologies, Inc.

 David A. Martin, Vice President and Controller

(636) 530-8000

INSITUFORM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

	For the Three Months Ended December 31,						For the Years Ended December 31,
	2006			2005			2006			2005
Revenues	$	154,874		$	145,951		$	596,715		$	595,282
Cost of revenues		121,286			116,282			468,761			478,441
Gross profit		33,588			29,669			127,954			116,841
Operating expenses		23,439			23,510			96,495			93,098
Operating income		10,149			6,159			31,459			23,743
Other (expense) income:
Interest expense		(1,692	)		(2,004	)		(6,834	)		(8,465	)
Interest income		1,347			719			3,889			2,081
Other		4,311			(287	)		6,256			(698	)
Total other income (expense)		3,966			(1,572	)		3,311			(7,082	)
Income before taxes on income		14,115			4,587			34,770			16,661
Taxes on income		4,255			566			11,057			4,188
Income before minority  interests and equity in earnings		9,860			4,021			23,713			12,473
Minority interests		(74	)		(38	)		(316	)		(166	)
Equity in earnings of affiliated companies		649			282			1,281			853
Net income		10,435			4,265			24,678			13,160
Earnings per share of common stock and common stock  equivalents:
Basic	$	0.39		$	0.16		$	0.91		$	0.49
Diluted		0.38			0.16			0.90			0.49
Weighted average number of  Shares:
Basic		27,102			26,838			27,044			26,783
Diluted		27,538			27,034			27,504			26,952

	For the Three Months Ended December 31,						For the Years Ended December 31,
SEGMENT DATA		2006			2005			2006			2005
Revenues
Rehabilitation	$	126,075		$	108,793		$	481,220		$	445,072
Tunneling		19,452			26,564			69,296			111,687
Tite Liner(R)		9,347			10,594			46,199			38,523
Total revenues	$	154,874		$	145,951		$	596,715		$	595,282
Gross profit (loss)
Rehabilitation	$	30,188		$	28,413		$	113,623		$	109,585
Tunneling		270			(1,746	)		(1,048	)		(4,184	)
Tite Liner(R)		3,130			3,002			15,379			11,440
Total gross profit	$	33,588		$	29,669		$	127,954		$	116,841
Operating income (loss)
Rehabilitation	$	9,789		$	8,990		$	31,749		$	34,310
Tunneling		(1,300	)		(4,532	)		(9,386	)		(16,907	)
Tite Liner(R)		1,660			1,701			9,096			6,340
Total operating income	$	10,149		$	6,159		$	31,459		$	23,743

INSITUFORM TECHNOLOGIES, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

    (In thousands)

ASSETS	December 31,
CURRENT ASSETS		2006		2005
Cash and cash equivalents	$	96,393	$	77,069
Restricted cash		934		5,588
Receivables, net		90,678		85,896
Retainage		37,193		33,138
Costs and estimated earnings  in excess of billings		41,512		32,503
Inventories		17,665		15,536
Prepaid expenses and other assets		25,989		24,294
TOTAL CURRENT ASSETS		310,364		274,024
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation		90,453		95,657
OTHER ASSETS
Goodwill		131,540		131,544
Other assets		17,712		17,103
TOTAL OTHER ASSETS		149,252		148,647
TOTAL ASSETS	$	550,069	$	518,328
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and line of credit	$	16,814	$	18,264
Accounts payable and accrued expenses		107,320		94,560
Billings in excess of costs  and estimated earnings		12,371		14,017
TOTAL CURRENT LIABILITIES		136,505		126,841
LONG-TERM DEBT, less current maturities		65,046		80,768
OTHER LIABILITIES		7,726		5,497
TOTAL LIABILITIES		209,277		213,106
MINORITY INTERESTS		2,181		1,726
TOTAL STOCKHOLDERS’ EQUITY		338,611		303,496
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	550,069	$	518,328

INSITUFORM TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	For the Years Ended December 31,
	2006	2005
Cash flows from operating activities:
Net income	$24,678	$13,160
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	20,258	19,744
Amortization	1,295	1,495
(Gain)loss on sale of assets/investment	(6,195)	1,813
Equity-based compensation expense	4,254	837
Change in restricted cash related to operating activities	4,653	(3,883)
Other	(1,577)	(556)
Deferred income taxes	2,175	2,352
Tax benefits relating to stock option  exercises	(772)	-
Changes in operating assets and liabilities	(9,027)	(11,404)
Net cash provided by operating activities	39,742	23,558
Cash flows from investing activities:
Capital expenditures	(20,635)	(27,081)
Proceeds from sale of fixed assets	12,079	1,296
Liquidation of life insurance cash  surrender value	1,423	-
Other investing activities	-	(557)
Net cash used in investing activities	(7,133)	(26,342)
Cash flows from financing activities:
Proceeds from issuance of common stock	4,122	1,243
Additional tax benefit from stock option  exercises recorded in additional paid-in capital	772	-
Proceeds from notes payable	2,662	6,179
Principal payments on notes payable	(4,101)	(3,650)
Principal payments on long-term debt, and lines of credit, net	(15,735)	(15,779)
Changes in restricted cash related to financing activities	-	-
Deferred financing costs paid	(106)	(260)
Net cash used in financing activities	(12,386)	(12,267)
Effect of exchange rate changes on cash	(899)	(1,126)
Net (decrease) increase in cash and cash equivalents for the year	19,324	(16,177)
Cash and cash equivalents, beginning of year	77,069	93,246
Cash and cash equivalents, end of year	$96,393	$77,069

EX-99.2

EXHIBIT 99.2

INSTITUFORM TECHNOLOGIES, INC.

February 23, 2007

Operator:	Good day everyone and welcome to this Insituform fourth quarter 2006 earnings conference call. This call is being recorded.
	Any financial or statistical information presented during this call, including any non-GAAP measures, the most directly comparable GAAP measures, and reconciliation to GAAP results will be made available on our Web site at insituform.com.
	During this conference call, we'll make forward-looking statements which are inherently subject to risks and uncertainties. Our results could differ materially from those currently anticipated due to a number of factors described in our SEC filings and throughout this conference call. We do not assume the duty to update forward-looking statements, please use caution and do not rely on such statements.
	Now, I'll turn the conference over to Insituform's President and CEO, Mr. Tom Rooney. Please go ahead, sir.
Tom Rooney:	Good morning and welcome to Insituform's fourth quarter 2006 conference call. Yesterday, we reported earnings of 38 cents per share for the fourth quarter of 2006, and 90 cents per share for the entire year. Both are up significantly from what was earned by the company in the same period last year. We're clearly pleased with these results.
	We plan to file our 10-K later today, which will include a great deal of numerical detail. Given that that the K will shortly become available for you to review, I only plan to make a few brief remarks before taking your questions this morning.
	On the - on the issue of non-recurring income, in the fourth quarter, the company benefited from non-recurring income related to the sale of real estate and the sale of tunneling equipment. The sale of tunneling equipment lowers our ongoing depreciation costs in the division, so we will enjoy modest benefits from these equipment sales well into the future.
	The real estate sold in the fourth quarter, which amounted to $3.4 million of income, or eight cents of earnings per share, was sold as one of the final phases of our logistics streamlining effort.
	Turning to sewer rehabilitation, our core sewer rehab business performed nicely in the fourth quarter, although sales and backlog have continued to lag behind where we would ideally like to see them.
	Several analysts have expressed concern that our core sewer rehab business only grew by 8.1 percent in 2006. And I'd like to now address that concern.
	Our core sewer rehabilitation business expanded in 2006 by more than 20 percent on a footage basis, yet only 8.1 percent on a revenue basis. And the reason for this disparity is our strategic effort to compress market prices.
	It is of particular note that we have consciously driven down unit prices rather significantly throughout the industry while simultaneously increasing our overall profits. We have been able to do this because of the combined benefits we have gained through economies of scale, operational efficiencies, and technological improvements. We plan to continue to drive this same price compression trend going forward. Insituform will always be the price leader in this industry.
	On tunneling, thankfully tunneling was a somewhat quiet division in this fourth quarter, as we again trimmed losses in the division.
	Turning to our Tite Liner® division, Tite Liner® continues to be a very strong business for us, and the fourth quarter was no let down. Demand for our Tite Liner® product continues to grow on a global basis, although it has a tendency to ebb and flow with market conditions and demand.
	We have begun to invest more to stimulate greater global demand for Tite Liner® . The net effect will show us with steady growth in operations expenses.
	Let me turn to legal now. At this point it's important to point out that we spent approximately $3 million in 2006, of what I'll call additional, non-permanent or non-recurring legal fees to clean up old litigation, clean up old tunnel claims, and to revise our tax structure. I call this non-recurring in that it will fall back to normalized levels by 2008.
	Looking now at backlog. Growing our backlog - rehab backlog - continues to be my primary point of concern for the company at this point in time. We have made great strides in increasing our operations productivity, necessitating an ever-increasing amount of backlog to sustain our global growth objectives. To this end, we continue to grow the size of our sales force, both domestically and overseas.
	In addition to adding sales staff, we are embarking on a long-range approach to growing our markets through a concerted effort to change public awareness towards underground infrastructure for both sewer and potable water.
	Our effort is aimed at changing the industry dynamic from one where Insituform has historically waited and hoped for growth, to one where we stimulate municipalities to commence with work that otherwise has languished out of a lack of public support. Our efforts will at times be controversial, as we seek to make citizens, municipal leaders and regulators sit up and take notice of the miserable state of affairs in underground infrastructure.
	For too many years, our investor base has waited patiently for the inevitable market expansion that is destined to take place to meet the world's demands.
	For the first time ever, Insituform has entered the fray with the intent to move the markets, as opposed to simply waiting and hoping for change. Some of you may have already seen the fruits of this effort, as we have had a number of op-eds and feature stories published in dozens of newspapers around the world from Korea to London, as well as some of the most prominent news outlets in the United States.
	As the CEO of the largest underground infrastructure company in the world, this has become a personal initiative of mine, and one in which we have and will continue to spend significant sums of money. We simply have no choice.
	I'm going to turn now to capital structure. Now that we've turned an important corner in rebuilding the health and vitality of the company, we have begun the process of looking at making significant changes to the capital structure of the company.
	Our current long-term debt at $65 million is far too low for a company with our market capitalization and cash flow characteristics. As a result, we are considering a significant increase in our debt, followed by a return of equity to shareholders, possibly through a stock repurchase. Absolutely no decisions have been made at this point, but the process is likely to commence before the year is over.
	In conclusion, I'm very proud of the results for the year, clearly we could have done even better, but we are a company that has come a long way in reasserting itself as the leading firm in an exciting global market. With that said, the future is very bright.
	And now we'll open up the call for your questions.
Operator:	The question-and-answer session today will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit one on your touch-tone telephone. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will proceed in the order that you signal, and will take as many questions as time permits. Once again if you would like to ask a question, please do so by pressing the star key followed by the digit one now. We'll pause for just a moment to allow everyone a chance to signal.
	And we'll go first to Richard Paget, Morgan Joseph. Please go ahead.
Richard Paget:	Good morning everyone.
Tom Rooney:	Morning.
Richard Paget:	Wonder if you could circle back to your comments on, you know, you guys have the big market share, you're the price leader, but you want to push prices down. I mean is that to kind of squeeze out your smaller competitors, is it to make your products, you know, more available to more customers? If you could just walk me through that strategy.
Tom Rooney:	Well, yes, I will. We don't intend to squeeze out smaller competitors, there are - just for sake of discussion, there's roughly 100 competitors in North America. And there - it would be irrational and maybe even illegal to try to squeeze out the small competitors. The fact is this is a price-driven market, it's also a market where clients will do more work when the prices are at the correct price point, so you're going to have price elasticity issues. But what we're really starting with is the notion that Insituform thrives on scale, it enables us to invest greater sums in research development, it enables us to have greater crew productivity, it enables us to cover our corporate overheads. We thrive on scale.
	And we - it again enables us to have a very efficient manufacturing facility. You're seeing that take place right now as we gain from that. And I would tell you that there was about a five, six-year period when, arguably, we may not have recognized the degree to which scale benefits the company.  We're very aware of it now, and we're going to drive towards that. But it has nothing to do with focusing on our competitors, and it has everything to do with focusing on what makes this company successful and profitable.
Richard Paget:	OK. Would there be a point in time where you would look to, you know, raise prices?
Tom Rooney:	Yes, sure. I don't know if it's raise prices as much as it is raise margins.  I'm not sure that prices themselves will come up, but I believe that incremental gains in cost of goods sold may relate more to expansion of gross margins. But, you know, depending on how the market reacts, you may or may not even increase prices to the client. But the - in the essence of your question, the answer is yes.
Richard Paget:	OK, and then on the - on the gains, you said three, four of that was from real estate, which would mean, you know, the balance is from tunneling equipment. Is that to suggest that you are selling some of these at gains?
Tom Rooney:	Yes, we're selling some at gains, we're selling some at losses.  It's a pretty thin market, we'd still like to sell quite a bit more equipment than we've sold, and we've sold some at mild losses, we sold some at mild gains. We have not cherry picked the - if it might concern you, we've not cherry picked, and only sold what we can sell for gains, we've basically sold what we can sell. The net effect is that the annual depreciation costs for the division is down now, not down far enough, but it's down. And so whereas we're reporting certain gains, what you will begin to see is the depreciation carrying costs for the tunneling division is down.
.	So on the one hand, you might dismiss tunneling gains as non-recurring, but I can tell you that the benefits of having sold those are recurring.
Richard Paget:	OK, so then in terms of, you know, tunneling finally being right-sized in getting to, you know, an acceptable operating margin, is it more that you need to get revenues back up a bit, or is it more you still have to get rid of some of these assets?
Tom Rooney:	Both, and by the way, they both play into each other, not that I'd necessarily want this, but if we have three times as much business tomorrow, we would need all of those assets, and we would not have any underutilized equipment. The catchy - or the challenge is three times the revenue would take us to a place in - with risk where we don't want to be. Tunneling still has a risk - a well-run tunneling company still has a risk characteristic that is very tough to stomach for a publicly traded company. Right now it's run at a size and a scale that seems to make sense for us, and it avails us of all kinds of opportunities going forward.
Richard Paget:	OK, thanks, I'll get back in queue.
Tom Rooney:	Thank you.
Operator:	And we'll go next to John Quealy, Canaccord Adams. Please go ahead.
Mark Siegel:	Hi, good morning, it's Mark Siegel for John.
Tom Rooney:	OK, good morning.
Mark Siegel:	Couple of questions here. One, if you could provide an update on Insituform Blue™ specifically how many crews do you have working in that regard? In what geographies are they in? And how many projects have you completed to date?
Tom Rooney:	No, I don't have that data for you, the answer is we have a handful of crews …
Mark Siegel:	OK.
Tom Rooney:	… who were actually just featured on the cover of "Trenchless Technology" for a water - an Insituform Blue™ project in the U.K. So off the top of my head, I know - I know Europe, North America, both Canada and the United States, and we're either at the brink of doing a job, we're doing a job in Hong Kong, and I'm not really clear on that. So …
Mark Siegel:	OK.
Tom Rooney:	… it's - as we had depicted, it is a success - it's beginning to show nice signs of success, but success is not going to be articulated as big income for a couple of years.
Mark Siegel:	OK, great. And then coming back to rehab and the lower prices that you guys are going to be implementing, is there any targeted margin rate that you guys would like to run at, either gross or operating margin?
Tom Rooney:	Well we've not really discussed that, and for us it's more about the net effect of scale, so no, not yet.
Mark Siegel:	OK, great, that's it for me, thanks.
Tom Rooney:	Thank you.
Operator:	And we'll go next to Arnie Ursaner, CJS Securities. Please go ahead.
Arnie Ursaner:	Hi, Arnie Ursaner, CJS Securities. Good morning.
Tom Rooney:	Good morning, Arnie.
Arnie Ursaner:	Tom, you threw out a comment regarding your capital structure, you mentioned that the long-term debt of 55 million was far too low.  What is your desired capital structure, and are there any steps specifically you would have to take or occur before you could do what might be viewed as a recap?
Tom Rooney:	Right. Well the debt at 65 million is round figures one times EBITDA, and so we would be a risky business at five, six, seven times EBITDA, but I think we're a - we have a lazy balance sheet at one times EBITDA, be it - the specific answer to your question is, we're currently working with investment banks and investment bankers right now to pore over that, on the one hand our EBITDA is clearly on a positive incline, our cash characteristics are positive. I think it's worth noting that we are - the swing in cash year-over-year was about positive $39 million or so, meaning that we're both a growth company and a cash company now, and that avails us of a lot of opportunities.
	We need to maintain a degree of consistency; we can't afford unduly rigid covenants quarter to quarter, because ours is a lumpy business. But Arnie, it would be premature for me to outline too many steps that we're undertaking, but we're very clearly cognizant and aware of the fact that $65 million of debt with a $65 - or 60 something million dollar EBITDA company that's growing and throwing off cash is not optimizing shareholder wealth, and we intend to aggressively address that.
Arnie Ursaner:	Is this action in response to a specific proposal from perhaps a more aggressive shareholder? Is there some actual catalyst forcing or encouraging the board to look this way?
Tom Rooney:	No, not at all. We've had to my knowledge no shareholder activity of any kind, we - you know, you may know, we have been put on certain party's lists of likely takeover candidates, but stock valuation I think keeps many people at bay in that regard.  But no, this has to do with the desire to optimize shareholder value, and we current have - currently have a single digit return on equity, high single digit. Part of that is because our - the book equity is 339 million or so. And the fact is to have an optimal structure to reap the greatest shareholder returns.  You know, all well run companies should have the optimal capital structure - I'm obviously preaching to the choir, but this was - this was something that frankly I became conscious of, and the impetus for all of this has really come from me.
Arnie Ursaner:	OK, final question if I can. Your SG&A both in dollars and as a percent of sales were surprisingly under control, despite much better than expected revenue. I guess two questions related to that, one were there any true-ups, insurance settlements or rebates or any other factors that may have trued up at year end that affected the SG&A line? And as a corollary to that, is the current level more sustainable on a go forward basis?
Tom Rooney:	The answer is - the answer to the last part of your question is yes. But, you know, we have lots of nickels and dimes that tend to true-up at and the end of the year, we did in fact incur rather significant legal expenses that came towards the end of the year for the negative. And my comment from - I'd really like to stress my comment from earlier which was that we have expended a surprising amount intentionally in legal bills, and we have a number of settlement opportunities available to us right now with interesting up sides to them.
	And my point to shareholders is this, year-over-year we've seen our legal expenses move up in excess of $3 million: a) that is not a long-range recurring item, and b) the net effects of what we're doing will be highly accretive as we begin to see things unfold over the next two to three years.
	So I think to your point, not only is our SG&A somewhat under control, but we're spending money in rather significant ways to continue to create value. As an example, I will tell you in the fourth quarter, we spent roughly a million dollars just in the fourth quarter in tax consulting, which will have a net effect of lowering our effective tax rates - tax rates next year, not even this year, not even - excuse me - have the net effect of lowering tax rates in '07 and going forward, not - and had no effect in '06.
	So, Arnie, as was consistent with what I said three and a half years ago when I took over as CEO, we were not going to be bashful about spending money to make money, and we clearly spent quite a bit of money throughout '06 and even in the fourth quarter. So I'm not at all concerned about telling you that SG&A is under control, and we have opportunities to drive it down.
Arnie Ursaner:	… softball down the middle, what will your tax rate be in '07?
Tom Rooney:	All right, give me a second here. Thirty percent or less.
Arnie Ursaner:	Thank you very much.
Tom Rooney:	Thank you.
Arnie Ursaner:	Nice job, thank you.
Operator:	And we'll take our next question from Jack Kasprzak, BB&T Capital Markets. Please go ahead.
Jack Kasprzak:	Thanks, good morning.
Tom Rooney:	Good morning.
Jack Kasprzak:	You mentioned in your prepared remarks regarding the legal expenses you've paid this year, what drove that, and I got the settling of some tunneling contracts. What were the - could you just repeat the other items?
Tom Rooney:	We have a major group of - we have a group of litigation against a past joint venture partner in Europe, litigating in at least three different countries regarding royalties and other issues that have transpired over the last 10 plus years. And it's our intent to recoup rather significant sums of money.  In fact, I would point to you the fact that our equity line item has gone up this year, I believe $300,000 - $400,000, but I would tell you that we have a German - we have a joint venture in Germany, a company called IRT, and because of our conduct in the ongoing litigation, our German joint venture has increased its profitability year-over-year by $700,000, largely, if not exclusively attributable to the fact that we litigated with our joint venture partner to change the conduct.
	And so it's - and by the way, that $700,000 increase is merely our 50 percent of the increases in profitability in Germany. We've also had positive settlements with that same joint venture partner in other countries, but we actually anticipate seven figure settlements at some point in the future regarding this overseas litigation. So that'd be one very large part of it, another is a large piece of litigation worth - hypothetically worth $10 million or more in the name of Cat Contracting. We're also litigating and have litigated successfully against our largest CIPP competitor in North America, we're actually in the damages phase now, because of - and it deals with intellectual property, and contract rights between ourselves and our largest competitor in North America. And again as I say, we've successfully litigated, and now in the damages phase, and so we feel very good about that.
	I'm no attorney, so I'm giving you a non-attorney's version of all this. But all of this is very aggressive offensive seeking to remedy that which has transpired over the last five, six years, and we feel very good about what this will reap for us in the next 24, 36 months.
Jack Kasprzak:	Thanks. And what drove the restricted cash line down below a million bucks, you know, it's all - throughout '06, it had been $5, 6, 7 million. What was happening there by the end of the year?
Tom Rooney:	It's release of escrow.
Jack Kasprzak:	And the potential capital structure changes which you said, your - is an ongoing process, can you give us any sense of timing when you might come to a decision?
Tom Rooney:	Well, I think I'd mentioned that we're already meeting with and dealing with investment bankers, so it's more than - it's gone from concept and talk to forms of action. We've made no announcements, and I don't want to make an announcement here and now, but I do - I did think and do think it's critically important for shareholders to understand that we are very active in this area. I would say that within the next two quarters we should be making a significant announcement, and before the year's over we should be implementing.
Jack Kasprzak:	OK. And one last question, you - on the subject of margins and, granted, you said you didn't want to necessarily give any targets, Tom, but do you think the rehab business is a seven or eight percent operating margin business theoretically without putting a timeframe around it versus where we've been, you know, maybe five or six percent? Or does it have potential perhaps to get to double digits?
Tom Rooney:	I think - I think near term, as in a two-year timeframe, it's the eight percent range that you're referring to, and I believe that the long range goals are really in the double digits, long range being the two to five-year horizon.
Jack Kasprzak:	Right. Great, thanks very much.
Tom Rooney:	My pleasure.
Operator:	And we'll go next to David Cohen, Midwood Capital. Please go ahead.
David Cohen:	Hi, guys.
Tom Rooney:	Good morning.
David Cohen:	I missed like the first 10 minutes, so if some of this covers ground you talked about, I apologize. But as you look at tunneling, I don't know if you gave any sort of outlook there as to the likelihood that that can reach break even. The loss got down to 1.3 in the fourth quarter, still annualizes it greater than five million, but what is the outlook there as far as that being break even, or getting to possibly break even?
Tom Rooney:	OK, well there are three drivers; one is not to lose money on projects, or at least not in any spectacular fashion. The second is to right-size the equipment so the - so that the depreciation doesn't take us under. And the third, which ties back to the second, is to have - or sufficient revenues to justify the overhead in the business. I'm comfortable that we have put together the operations in a fashion that we are relatively consistent now about making profit on the projects we have, we've put behind us the losing projects of the past. It will - it has and will continue to take us time to eliminate excess equipment, but at the same time, we continue to bid in the market to bring in more revenue, or more projects that generate revenue, and in fact I would tell you that there is no formal word, but we were the apparent low bidder on a project in Milwaukee over - in the last month that would move up our revenues for the year.
	So we seem to be moving nicely in the - in the right direction nicely in all three of those levers, but this is not a business where you can exact quick changes, because those quick changes can result in very negative consequences.
David Cohen:	I understand. I mean so - I mean given the visibility you do have, what your expectations are in equipment sales, the fact that you put money losing projects behind you, I mean is it - is it at - can it be profitable, or can it get to break even I mean in 2007?
Tom Rooney:	Well I think we'll - I think we'll be marginally under water in '07, but not by a lot. We could have a couple of positive occurrences, we could have a couple of negative occurrences. But we are trying to move that into the right place to be - you know, it is cash positive right now, and now we're trying to make it income positive, and so - but we're exceedingly patient about what we want to do there. So I would - I would suggest lower expectations in '07, and modest expectations beyond that.
David Cohen:	OK. And on Tite Liner® , which looked like it had a terrific first half, and I guess, you know, decent second half of the year, but I mean given the - and I don't know if there's inherent seasonality, or in fact the market started to slow down. I mean what type of growth potential do you see on that on a sustained basis?
Tom Rooney:	OK, well if - on a sustained basis, if you ask me about growth characteristics in a - in a six, eight-year timeframe, they're tremendous. If you ask me about over the next couple of quarters I'm going to tell you it'll be extremely volatile, in fact we're not expecting significant growth out of the division in 2007. A couple of reasons, one is that when the BP pipeline hit the news at Prudhoe Bay over the summer, a lot of people expected to see - and that would be the classic kind of work that we would do. A lot of people expected that we would go gangbusters the next day because of that.
	Well interestingly enough, at the end of this year, we see - or we currently are dealing with clients on significant projects that are likely to come off the drawing boards and go into the works at the end of this year and make 2008 potentially a gang buster year. The fact is everybody's working on those projects, and I think - I think you could attribute those projects to the learnings of Prudhoe Bay last summer.
	So it appears that rather dramatic pick up around the world could well take place as a result of the learnings of BP at Prudhoe Bay, but we're not likely to see that until the very end of this year, and things pick up in a dramatic way in 2008. By the way, we don't usually see projects that far out in advance, so it's rather telling that we're dealing with so much work on the so-called drawing board.
	'07 will be a good year, but it - you know, it will not be a spectacular year. I would also tell you that on the - on the last conference call that we made, I suggested that we had a significant project in Mexico that would - that would fall into the backlog in the first quarter. We have in fact inked that deal, we are working in Mexico, it's a rather profitable project. We chose to only book about $2 million of that backlog, even though the contract is significantly larger. The reason being projects of this nature we don't want to get ahead of ourselves in terms of booking what they are, and instead we're going more on a real time basis of booking the work.
	So we have, if you will, nice backlog to take us through 2007, but we're a bit cautious right now given the lumpy nature of it, and I think it would be - I think it would do people well to remain tempered in their expectation in '07, and rather expect rather good numbers in '08.
David Cohen:	OK. And given - this is a generalization, but given the - just accommodating whether that - many parts of the country had in December, would you say in any way the rehab business had benefited from that from an ability to kind of pull forward revenue, or accelerate the timing of your work on jobs …
Tom Rooney:	Sure.
David Cohen:	… the fourth quarter?
Tom Rooney:	Yes, it did, and that end …
David Cohen:	Can you quantify that?
Tom Rooney:	It - your assertion and assumption is correct, and I would also tell you that the converse of that is true, and that January and February have been poor months for us. And - but they're always - by the way, January - the first quarter is always poor for us, January and February have been particularly poor for us. And there is a weather element to that, and there always has been in this company.
David Cohen:	Yes, OK. And last question I think Arnie asked it about claims that may have hit the P&L or claims recovery may have hit the P&L in the fourth quarter. Anything of significance there, like the Boston Project, I mean …
Tom Rooney:	No, in fact tunnel claims in 2005 were 4.6 million.  In all of 2006 they were only 1.3 million. So we've moved down in terms of tunnel claims year-over-year by three and a half million, or about - what's that, eight cents or so. And the other large claim was our Boston claim in 2005, we recorded …
David Cohen:	Yes.
Tom Rooney:	… 3.5 million in 2006, and I'm not even sure at all even in the fourth quarter, only about a half a million. By the way, we feel extremely good about both of those claims. But they had next to no impact on us at all throughout the year - this year.
David Cohen:	All right, thanks, Tom.
Tom Rooney:	Thank you.
Operator:	And as a reminder, that's star one if you would like to ask a question at this time. We'll go next to Debra Coy, Janney Montgomery. Please go ahead.
Debra Coy:	Yes, good morning, Tom.
Tom Rooney:	Good morning.
Debra Coy:	Can you talk a little bit more about the demand outlook in the rehab segment? You said that's your key focus and area of concern, obviously backlog didn't show growth in the fourth quarter. Can you talk to us about how it's looking as we're well into 1Q?
	And also it sounds like it's going to be increasingly important to try and understand the differences between unit growth and revenue growth, can you - can you talk about what you're seeing in terms of bookings and order growth from both of those standpoints as we start out the new year?
Tom Rooney:	Right, good point, good questions. The market is not as robust as we'd like. Now that said, it was this time last year where we were reeling from very depressed markets. Well we saw acceptable markets - I mean good markets in the third quarter, acceptable in the fourth quarter, but it is definitely my concern that our company - our company has become a productivity machine, and we run best when we can feed that machine. We will always need to be a productivity machine, but we've done it - we've gotten our productivity levels very high, and we need to feed that beast, if you will. And my greatest concern is that the market is not and may not grow fast enough for our appetite. Fast enough could be described as high single digits, whereas we would prefer to see market growth in the 12 to 15 percent range.
	To that end, and I made rather pointed comments to the fact that we've now woken up to the reality that it is not sufficient for Insituform as the dominating market leader to accept the growth that the market avails. And instead, we must lead. And so we're spending more than half a million dollars, possibly close to a million dollars a year right now on market stimulation, whether it's my time and we're going to begin to invest heavily in lobbyists to try to change regulatory climates, and so on, raise public awareness, and so on. We see this as a critical imperative for the company going forward.
	So I guess my point is this, we no longer accept that the market grows at the rate that it wants to grow at, because I don't think it's growing fast enough for our appetite, that is to say eight to 10 percent. We seek to cause the market to grow much faster than that.
	So that said, the other half of your question was around productivity. We've talked at great length about crew productivity, we have - and I guess your question really was unit prices per foot or per meter, or what have you. We've clearly lowered our break even or even profit making position per foot, and we've done it through crew productivity, materials, procurement, logistics savings, insurance savings, there's a whole long list, and it - and all one has to do is go back over the last three and a half years we talked about safety and we talked about logistics, we talked about crew productivity, project management, more efficient manufacturing, and so on and so forth.
	We are absolutely gaining from that. And so we've been able to compress unit prices in the market 10 percent plus this year, we've raised our revenues eight percent and our footage has also gone up more than 20 percent. So it's a - it's a good place for us to be, we're making it - we're arguably making it very difficult because competitors now need to pick the pace up in terms of their ability to become efficient, and that's a good thing for the market, it's a good thing for the clients. But yes, I think that we'll all - we are very focused on our unit prices, and I think that's going to be one of the key ideas moving forward.
Debra Coy:	Well it sounds like you didn't say specifically how things are shaping up thus far in 1Q on the order book, but it sounds like what you're saying is that we seem to be in a period again of a bit quieter booking activity, and we've certainly seen that ebb and flow. And I guess what Insituform then is trying to deal with is that this is not a steady business, it's a business that has quarterly ebbs and flows in terms of - in terms of demand and bookings. And whether - and you're not yet at the point where you have the most efficient flow of work that runs through every quarter, I mean clearly you worked down some backlog in the most recent quarter, and it sounds like you haven't really filled that pipeline yet looking into 1Q and 2Q?
Tom Rooney:	We have not, and you're absolutely right, we have not filled the pipeline. And the reason we've not filled the pipeline is because our ability to consume what's in the pipeline continues to move up rather dramatically. And what's an interesting phenomenon here is that this market - with or without us - ebbs and flows, as you say. Well when you hold call it 50 percent of that market or more, you can't help but ebb and flow point by point with the market.
Debra Coy:	Right.
Tom Rooney:	If we were one or two percent of the market, we wouldn't ebb and flow as much with the market, because the scale of the market would be less significant. Because we're almost analogous to the market in size, we're held hostage to the flows in the market. That is, by the way, back to the original point why we're going to begin - and we have begun to assert ourselves in terms of policy and so on to try to stimulate growth in the market that would meet the appetite that we have.
	But unmistakably, this company is going to ebb and flow on quarterly bases, and I can't tell you what the - what the market conditions will look like in the second, third or fourth quarter this year, I have general concepts and ideas, we have future outlooks, but this is a very quarter to quarter lumpy industry, and Insituform, no matter how it tries, will always be hostage to those flows.
Debra Coy:	OK. So I mean I'm just trying to sense - you're still not giving us guidance, I'm trying to get a sense of what you're seeing, and it sounds to me like we're looking at some revenue slowdown in the next couple of quarters relative to what we saw in fourth - in fourth quarter.
Tom Rooney:	I think that's …
Debra Coy:	Is that fair?
Tom Rooney:	I think that's possible, I would characterize the orders so far in the first quarter as OK, you know, not as much as we'd like to see. We're certainly doing fine at the - at the bid table, love to see more in the market. Kind of - certainly not as bad as it was in the fourth quarter of last year or the first quarter of - or fourth quarter of '05, or the first quarter of '06, but not great. And, you know, maybe our internal expectations are just higher than what the market seems to bear. It's OK, I mean it's not - it's not spectacular.
Debra Coy:	OK, that's helpful. And then finally maybe as much of a comment as a question, you know, we're continuing to see the tunneling business be a drag on overall operations, even though it's less of a drag than it was before. And what I'm hearing is that you're working to stabilize and bring the cost structure into some sort of balance with reasonable profitable demand, but that we shouldn't really expect this business to contribute in '07. Is - does the board consider that to be an acceptable outcome for the tunneling business?
Tom Rooney:	Well I can't speak for the board in that regard.
Debra Coy:	That's fair.
Tom Rooney:	But from a business …
Debra Coy:	It's hard to see that investors will find that to be acceptable.
Tom Rooney:	Well it's - the challenges that we've had with tunneling are a well recognized, well beaten path. And given the - given the options available to us, we're managing the situation.
Debra Coy:	OK, fair enough. And would you characterize the Tite Liner® business in the same way? Again it seems, you know, opportunistically this is really an oil field, you know, and mining services business, it's not a water business, that you're building a strong case for improvement in '08, lesser contribution in '07, is Tite Liner® as such a small piece of overall revenues considered part of the strategic makeup of Insituform going forward?
Tom Rooney:	Well we have - we're clearly looking at the total future of the company. Obviously the two historic - or the historic core of the business has been sewer. The - we've just launched the Insituform Blue™, which is also a water business. And I would say as an enlightened board and management team, we're evaluating all of our options with regards to all the divisions of the company. And where we land with that is yet to be decided.
Debra Coy:	OK, thanks, Tom.
Tom Rooney:	Thank you.
Operator:	And we'll go next to Francesca McCann, Stanford Capital. Please go ahead.
Tom Rooney:	Good morning.
Francesca McCann:	Good morning. Most of my questions have been answered, but I guess one is kind of on the funding side and some pickup at the municipal level, with, you know, an increase in PPPs, and some activity forward with private activity bonds, is that something that, you know, should kind of help kick in a little bit, but still not for another several quarters, or how much of a contribution would you see that being, and in what timeframe?
Tom Rooney:	Well I think it has to make up for some deficits coming from state and federal funding.
Francesca McCann:	Right.
Tom Rooney:	And as yet seen, there's obviously a tremendous amount of attention now being focused on this industry, cover stories, "New York Times," and Booz Allen Hamilton's monthly reports, major investment funds putting water funds together. So there's an enormous amount of attention, but I think that the real impact is - as would affect us is probably a year or more away.
Francesca McCann:	OK. That's …
Tom Rooney:	It's great to see that degree of attention, it's great to see that kind of money being mustered, so the practical reality is i's being dotted and t's crossed, that's probably going to be something of a benefit to us in '08.
Francesca McCann:	OK. And any update on the CFO search?
Tom Rooney:	No.
Francesca McCann:	OK. And then what about looking internationally, anything kind of stellar or exciting that is new?
Tom Rooney:	Well we've been successful in expanding ourselves into Eastern Europe, Poland, Romania, a number of other countries, that's very exciting for us, there's a tremendous amount of growth there. The Asian Basin is also expanding for us nicely, we have entertained the government of Malaysia here for tours, and other countries that we frankly didn't have in our - in our - on our horizon just a year ago.
	So yes, one of the most exciting parts for this company is global expansion, in fact I would tell you that we held our first ever global partners conference here in Chesterfield last month, and it was a tremendous success with potential new partners from the Middle East where we've never been before, South America for cured-in-place and water pipes. So we're truly expanding globally in a very rapid fashion, and that bodes well for us.
Francesca McCann:	OK. Well great, I think that's all for now, thank you.
Tom Rooney:	Thank you. Looks like we have time for one more call.
Operator:	All right. And our final question will come from Steve Tabb, Tocqueville Asset Management. Please go ahead.
Steve Tabb:	Hi. I wanted to ask you about - a number of questions, first on the depreciation savings that you expect because you sold off certain tunneling equipment. Can you tell us the annual expected savings?
Tom Rooney:	About 700,000 on the equipment sold.
Steve Tabb:	Depreciation?
Tom Rooney:	Yes.
Steve Tabb:	Yes, thanks. You didn't mention what the stock option expense was before and after taxes for the quarter and the year.
Tom Rooney:	Well for the year before taxes, stock options expenses were $2.9 million, and I - about 400,000 in the - in the fourth quarter, and 31 percent tax rate would suggest what the after tax effect was.
Steve Tabb:	Before taxes. You mentioned that you expected to begin to realize some tax savings, but you used that in 2007 the rate would be 30 percent or so, but that was the exact rate that you had this past year. So is there going to be any savings in the - in the fourth quarter? I mean in 2007?
Tom Rooney:	Well our tax rate for the year was 31.8 percent in 2006, and we've articulated a tax rate that is 30 percent or less going forward.
Steve Tabb:	I See.
Tom Rooney:	By the way, our - the taxes for the company are all different depending on where the taxes come from, different countries, different tax rates, so on and so forth, so with one of the higher tax rates being in the United States. But we definitely will see marked improvement in our - in our tax rate on a go forward basis as a result of the million dollars that we spent in the fourth quarter of 2006.
Steve Tabb:	On the last call, or the call before, I think it was the last call, you mentioned that you were - had some people now working with Wall Street to help localities finance their pipeline work. And that you thought this would - could develop favorably for the country - for the company in - resulting in added work. How is that working out?
Tom Rooney:	It's working fine, we are working with a number of clients right now on those, and we haven't disclosed the names because of confidentiality.
Steve Tabb:	Have they resulted in any additional orders yet, or you expect that to kick in this year?
Tom Rooney:	We expect that to kick in this year.
Steve Tabb:	I just want to voice my opinion on your financing with Wall Street to do more long-term debt financing. As a stockholder, I don't think it's a good idea, I think if you have some extra funds, you might increase the dividends without incurring long-term liabilities that will exist over many years. And that would help drive the stock too, because if a stock begins to pay a dividend say of two percent or something like that, then you - or one and a half percent that will add to the value of the stock. And perhaps down the road through your international plans and your other financing plans and so forth, that in time that you would be able to utilize it and help grow the company more and paying well in excess of book value to buy back stock. I just want to express that viewpoint.
Tom Rooney:	Well I appreciate that. And it's - suffice it to say, we're taking a lot of perspectives into account as we go through this evaluation.
Steve Tabb:	And the last thing, you said that there - you wanted to limit your exposure to tunneling or the amount of revenue you're getting, because there are quite a few risks in that division. Could you enunciate on that a little more, expand on that a little more?
Tom Rooney:	Sure, tunneling is by its - by its inherent nature completely underground, and no one knows what one will encounter hundreds of feet underground when processing sometimes miles in distance. We frequently find huge scenes of water, cave ins, sand where rock is intended, rock where sand is intended, so on and so forth. And those issues become somewhat explosive between a client and a tunneling contractor as to who the responsible party is.
	That requires us therefore to sometimes proceed with the work and have to litigate after the fact with uncertain sums, in some cases - in some cases we're able to settle, but they're never - they're never positive outcomes, they can't be, somebody has to pick up a large tab.
	Some contracts in some places try to encumber us with the risk of the unforeseen, and so given all of those circumstances, cash flow can move up and down in almost violent swings, and also income can move up and down in almost violent swings, all of which predicated on the uncertainty of that which lies underground. Less to do with the competency of your organization, and more to do with that which you don't know.
Steve Tabb:	All right, one final area. You mentioned that you're expanding, you know, your international operations, and you had this global conference with partners and potential partners, et cetera. But it would be helpful to have some sort of idea what percentage of your income and operating income and net income comes from foreign operations in '06, what do you expect in '07? I know it's hard to project further out, or - but in '07 and '08, so what are your goals that - or you're shooting for? To give stockholders some idea of what the company is shooting for.
Tom Rooney:	OK. In the area of guidance, we've been very clear that we're not giving guidance at this point. So I appreciate your call, and I appreciate the questions that you've asked, and at this stage, I think we'll end the call by thanking everybody for participating today. I'd like to stress the fact that although it has been a good quarter and a good year for us, our aspirations and expectations were for even more in '06, we therefore could have done better. We still feel good about how we performed in the year, and we continue to invest even at the expense of earnings erosion in the current period in favor of earnings gains in the future period.
	So again a good year, not perfect, greatest concerns obviously being to now continue the trend going forward. But I do appreciate everybody's involvement today, thank you very much.
Operator:	This does conclude today's conference. We thank you for your participation; you may disconnect your lines at any time.