Note 1 - General

6 Months Ended

Jun. 30, 2011

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.         GENERAL

The accompanying unaudited consolidated financial statements of Insituform Technologies, Inc. and its subsidiaries (collectively, “Insituform” or the “Company”) reflect all adjustments (consisting only of normal recurring adjustments, with the exception of the foreign currency translation adjustment as outline in Note 2) that are, in the opinion of management, necessary for a fair statement of the Company’s financial position as of June 30, 2011 and the results of operations for the three and six months ended June 30, 2011 and 2010 and the statements of equity and cash flows for the six months ended June 30, 2011 and 2010. The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the requirements of Form 10-Q and Article 10 of Regulation S-X and, consequently, do not include all information or footnotes required by GAAP for complete financial statements or all the disclosures normally made in an Annual Report on Form 10-K. Accordingly, the unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s 2010 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2011. Additionally, certain prior year amounts have been reclassified to conform to the current year presentation.

The results of operations for the three- and six-month periods ended June 30, 2011 are not necessarily indicative of the results to be expected for the full year.

Acquisitions/Strategic Initiatives

On June 30, 2011, the Company acquired all of the outstanding stock of CRTS, Inc., an Oklahoma company (“CRTS”). CRTS delivers patented and other proprietary internal and external coating services and equipment for new pipeline construction projects from offices in North America, the Middle East and Brazil and will be included as part of the Company’s Energy and Mining reportable segment. The purchase price was $24.0 million at closing with CRTS shareholders able to earn up to an additional $15.0 million upon the achievement of certain performance targets over the three-year period ending December 31, 2013 (the “CRTS earnout”). The Company recorded its estimate of the fair value of the CRTS earnout at $13.9 million as part of the initial acquisition accounting in June 2011. The purchase price paid at closing was funded by borrowings against the Company’s line of credit, as discussed in Note 5.

The Company has completed its initial accounting for this acquisition in accordance with the guidance included in FASB ASC 805, Business Combinations (“FASB ASC 805”). The Company has recorded finite-lived intangible assets at their preliminary determined fair value related to non-compete agreements, customer relationships, backlog, trade names and trademarks and patents and other acquired technologies. The acquisition resulted in goodwill related to, among other things, growth opportunities and unidentified intangible assets. The goodwill is not expected to be deductible for tax purposes. Additionally, the Company expensed costs of $0.3 million related to the acquisition in June 2011.

In accordance with FASB ASC 820, Fair Value Measurements (“FASB ASC 820”), the Company determined that the non-financial liabilities summarized above are derived from significant unobservable inputs (“Level 3 inputs”).

The following table summarizes the consideration recorded to acquire CRTS at June 30, 2011(in thousands):

Cash	$	24,000
Estimated fair value of earnout payments to CRTS shareholders		13,900
Total consideration recorded	$	37,900

CRTS did not contribute any revenue or earnings for the three- or six-month periods ended June 30, 2011, as the acquisition occurred on June 30, 2011. The following unaudited pro forma summary presents combined information of the Company as if this acquisition had occurred on January 1, 2010 (in thousands, except share amounts):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Revenues	$	226,050	$	233,529	$	437,702	$	436,048
Net income(1)		6,676		16,169		8,728		25,021
Diluted earnings per share		0.16		0.41		0.22		0.64
Diluted shares		39,732,077		39,414,003		39,717,919		39,397,342

(1) CRTS recorded a slight loss during the three- and six-month periods ended June 30, 2011 due to the seasonality of the business as well as the delay of several large projects that are expected to be performed in the second half of 2011.

The Company has not completed its final purchase price accounting of the acquisition due to the timing of the acquisition. As the Company completes its final accounting for this acquisition, there may be changes, some of which may be material, to this initial accounting. The following table summarizes the preliminary fair value of identified assets and liabilities of CRTS at the acquisition date based on the initial analysis (in thousands):

Cash	$	361
Receivables and cost and estimated earnings in excess of billings		2,365
Inventories		21
Prepaid expenses and other current assets		175
Property, plant and equipment		1,317
Identified intangible assets		29,325
Accounts payable, accrued expenses and billings in excess of cost and estimated earnings		(2,530	)
Deferred tax liabilities		(11,151	)
Total identifiable net assets	$	19,883
Total consideration recorded	$	37,900
Less: total identifiable net assets		19,883
Goodwill at acquisition date	$	18,017

On June 30, 2011, the Company executed definitive agreements to acquire Hockway Limited and Hockway Middle East FZC, based in the United Kingdom and UAE, respectively (collectively, “Hockway”). Hockway was established in the United Kingdom in 1975 to service the cathodic protection requirements of British engineers working in the Middle East. In 2009, Hockway established operations in Dubai, United Arab Emirates. Hockway provides both onshore and offshore cathodic protection services in addition to manufacturing a wide array of cathodic protection components. The purchase price will be $4.6 million at closing with Hockway shareholders able to earn up to an additional $1.5 million upon the achievement of certain performance targets over the three-year period ending December 31, 2013 (the “Hockway earnout”). The purchase price will be funded out of the Company’s cash balances. The transaction is expected to close on or around July 31, 2011 following approval from the regulatory authorities in the UAE.

On June 27, 2011, the Company created a joint venture in Saudi Arabia between Saudi Trading & Research Co., Ltd. (“STARC”) and Corrpro Companies, Inc. (“Corrpro”), a subsidiary of the Company. Based in Al-Khobar, Saudi Arabia since 1992, STARC delivers a wide range of products and services for its clients in the oil, gas, power and desalination industries. The joint venture, Corrpower International Limited (“Corrpower”), which is 70% owned by Corrpro and 30% by STARC, will provide a fully integrated corrosion protection product and service offering to government and private sector clients throughout the Kingdom of Saudi Arabia, including engineering, product and material sales, construction, installation, inspection, monitoring and maintenance. The joint venture will serve as a platform for the continued expansion of the Company’s Energy and Mining group in the Middle East. Corrpower is expected to commence providing corrosion protections services by early 2012.

In April 2011, the Company organized a joint venture, Bayou Wasco Insulation, LLC (“Bayou Wasco”) to provide insulation services primarily for projects located in the United States, Central America, the Gulf of Mexico and the Caribbean Sea. The Company holds a fifty-one percent (51%) majority interest in Bayou Wasco, while Wasco Energy Ltd., a subsidiary of Wah Seong Corporation Berhad (“Wasco Energy”), owns the remaining interest. Bayou Wasco is expected to commence providing insulation services by early 2012.

In April 2011, the Company also expanded its Corrpro and United Pipeline Systems (“UPS”) operations in Asia and Australia through its joint venture, WCU Corrosion Technologies Pte. Ltd. (“WCU”), located in Singapore. WCU will offer the Company’s Tite Liner® process in the oil and gas sector and onshore corrosion services, each in Asia and Australia. The Company holds a forty-nine percent (49%) ownership interest in WCU, while Wasco Energy owns the remaining interest. WCU immediately began marketing its products and services (see “Investments in Affiliated Companies” for additional detail).

In February 2010, the Company expanded its pipe coating services through the formation of Delta Double Jointing LLC (“Bayou Delta”) through which the Company offers pipe jointing and other services for the steel-coated pipe industry. The Company, through its Bayou subsidiary, owns a fifty-nine percent (59%) ownership interest in Bayou Delta with the remaining forty-one percent (41%) ownership belonging to Bayou Coating, L.L.C. (“Bayou Coating”), which the Company, through its Bayou subsidiary, holds a forty-nine percent (49%) equity interest.

On January 29, 2010, the Company acquired its Singapore licensee, Insitu Envirotech (S.E. Asia) Pte. Ltd. (“Insituform-Singapore”), in order to expand its Singapore operations. The purchase price was $1.3 million. This entity is now a wholly-owned subsidiary.