-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WgaS/rjtNStWsMNmMvT6YhF67vSnpjFNE7cJN0BtrORNF56yWWD96UiZS7Iayf0G FCg8sQRN9lb9CEZZv8O5cQ== /in/edgar/work/20000803/0000922435-00-000021/0000922435-00-000021.txt : 20000921 0000922435-00-000021.hdr.sgml : 20000921 ACCESSION NUMBER: 0000922435-00-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSITUFORM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000353020 STANDARD INDUSTRIAL CLASSIFICATION: [1623 ] IRS NUMBER: 133032158 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10786 FILM NUMBER: 685519 BUSINESS ADDRESS: STREET 1: 702 SPIRIT 40 PARK DRIVE CITY: CHESTERFIELD STATE: MO ZIP: 63005 BUSINESS PHONE: 6365308000 MAIL ADDRESS: STREET 1: 702 SPIRIT 40 PARK DRIVE CITY: CHESTERFIELD STATE: MO ZIP: 63005 FORMER COMPANY: FORMER CONFORMED NAME: INSITUFORM OF NORTH AMERICA INC/TN/ DATE OF NAME CHANGE: 19930617 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2000 --------------------------------- Commission file number #0-10786 ------------------------------------------ Insituform Technologies, Inc. - ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3032158 - ---------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 702 Spirit 40 Park Drive, Chesterfield, Missouri 63005 - ---------------------------------------------------------------- (Address of Principal Executive Offices) (636) 530-8000 - ---------------------------------------------------------------- (Registrant's telephone number including area code) - ---------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 1, 2000 - -------------------------- --------------------------------- Class A Common Stock, 24,817,519 Shares $0.01 par value INDEX ----- Part I Financial Information: Item 1. Financial Statements: Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Cash Flow Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Part II Other Information and Signatures: Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K Signatures Index to Exhibits PART I. - FINANCIAL INFORMATION ------------------------------- ITEM 1. - FINANCIAL STATEMENTS INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
Unaudited June 30, 2000 December 31, 1999 ------------- ----------------- ASSETS - ------ CURRENT ASSETS -------------- Cash and cash equivalents $59,329 $68,183 Trade receivables, less allowance for doubtful accounts of $2,600 and $3,096, respectively 51,776 58,546 Retainage under construction contracts 13,586 13,253 Costs and estimated earnings in excess of billings 30,458 12,372 Inventories 13,566 12,525 Prepaid expenses and other 3,753 9,493 -------- -------- TOTAL CURRENT ASSETS 172,468 174,372 -------- -------- PROPERTY AND EQUIPMENT, less accumulated depreciation 63,664 54,188 -------- -------- OTHER ASSETS ------------ Goodwill, less accumulated amortization of $20,262 and $18,417, respectively 67,144 64,077 Other assets 17,196 18,988 -------- -------- TOTAL OTHER ASSETS 84,340 83,065 -------- -------- TOTAL ASSETS $320,472 $311,625 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES ------------------- Current maturities of long-term debt and notes payable $18,753 $3,188 Accounts payable and accrued expenses 55,319 51,004 -------- -------- TOTAL CURRENT LIABILITIES 74,072 54,192 LONG-TERM DEBT, less current maturities 98,947 114,954 OTHER LIABILITIES 1,079 1,168 -------- -------- TOTAL LIABILITIES 174,098 170,314 -------- -------- MINORITY INTERESTS 2,800 2,708 -------- -------- STOCKHOLDERS' EQUITY -------------------- Preferred stock, undesignated, $.10 par - shares authorized 2,000,000; none outstanding - - Common stock, $.01 par - shares authorized 40,000,000; shares outstanding 28,059,610 and 27,787,862 281 278 Additional paid-in capital 78,364 74,809 Retained earnings 126,806 112,338 Treasury stock - 3,204,266 and 2,744,101 shares (55,908) (45,118) Cumulative foreign currency translation adjustments (5,973) (3,704) -------- -------- TOTAL STOCKHOLDERS' EQUITY 143,574 138,603 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $320,472 $311,625 ======== ======== See accompanying notes to consolidated financial statements.
INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per share amounts)
For the Three Months For the Six Months Ended June 30, Ended June 30, --------------------- ------------------ 2000 1999 2000 1999 ---- ---- ---- ---- Revenue $99,371 $85,640 $193,654 $156,802 Cost of revenue 65,351 56,046 129,265 103,058 -------- -------- -------- -------- Gross profit 34,020 29,594 64,389 53,744 Operating expenses 18,730 16,761 37,481 31,983 -------- -------- -------- -------- Operating income 15,290 12,833 26,908 21,761 Other income (expense): - -------------- Interest expense (2,303) (2,230) (4,703) (4,444) Other income 637 618 1,740 1,545 -------- -------- -------- -------- Total other income (expense) (1,666) (1,612) (2,963) (2,899) Income before taxes on income 13,624 11,221 23,945 18,862 Taxes on income 5,450 4,607 9,578 7,699 -------- -------- -------- -------- Income before minority interests and equity in earnings 8,174 6,614 14,367 11,163 Minority interests in net income (114) (237) (249) (436) Equity in earnings of affiliated companies 315 16 350 (84) -------- -------- -------- -------- Net income $8,375 $6,393 $14,468 $10,643 ======== ======== ======== ======== Basic earnings per share $0.34 $0.25 $0.58 $0.41 ======== ======== ======== ======== Diluted earnings per share $0.33 $0.25 $0.57 $0.41 ======== ======== ======== ======== See accompanying notes to consolidated financial statements.
INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (in thousands)
For the Six Months Ended June 30, 2000 1999 ---- ---- Cash flow from operating activities: - ------------------------------------ Net income $14,468 $10,643 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 8,789 9,443 Other 13 266 Translation adjustments (1,375) (1,170) Deferred income taxes 154 (166) Changes in operating assets and liabilities, net of assets acquired: Receivables (11,071) (327) Inventories (1,171) 1,899 Prepaid expenses and other assets 5,131 (1,384) Accounts payable and accrued expenses 4,566 1,402 ------- ------ Net cash provided by operating activities 19,504 20,606 ------- ------ Cash flow from investing activities: - ------------------------------------ Capital expenditures (16,402) (4,682) Purchase of business, net of cash acquired (5,159) (11,771) Other investing activities 1,215 1,541 ------- ------ Net cash used in investing activities (20,346) (14,912) ------- ------ Cash flow from financing activities: - ------------------------------------ Proceeds from issuance of common stock 3,558 2,734 Purchases of treasury stock (10,790) (18,287) Repayments of long-term debt (569) (824) Increase (decrease) in short-term borrowings 414 (662) -------- -------- Net cash used in financing activities (7,387) (17,039) -------- -------- Effect of exchange rates changes on cash (625) (301) -------- -------- Net decrease in cash and cash equivalents for the period (8,854) (11,646) -------- -------- Cash and cash equivalents, beginning of period 68,183 76,904 -------- -------- Cash and cash equivalents, end of period $59,329 $65,258 ======== ======== Supplemental disclosures of cash flow information: - -------------------------------------------------- 2000 1999 ---- ---- Cash paid during six months ended June 30, for: -------------------------------------------------- Interest $4,639 $4,381 Income taxes $8,301 $7,129 See accompanying notes to consolidated financial statements.
INSITUFORM TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 2000 1. GENERAL In the opinion of the Company, the accompanying consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of June 30, 2000 (unaudited) and the unaudited results of operations and cash flows for the six months ended June 30, 2000 and 1999. The financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures normally made in an Annual Report on Form 10-K. Accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the financial statements and the footnotes thereto included in the Company's 1999 Annual Report on Form 10-K. The results of operations for the six months ended June 30, 2000 and 1999 are not necessarily indicative of the results to be expected for the full year. 2. COMPREHENSIVE INCOME For the quarters ended June 30, 2000 and 1999, comprehensive income was $7.8 million and $5.1 million, respectively. For the six months ended June 30, 2000 and 1999, comprehensive income was $12.2 million and $9.5 million, respectively. The Company's adjustment to comprehensive income consists solely of cumulative foreign currency translation adjustments. 3. EARNINGS PER SHARE Earnings per share have been calculated using the following share information:
Three Months Ended June 30, 2000 1999 ---- ---- Weighted average number of common shares used for basic EPS 24,860,034 25,435,941 Effect of dilutive stock options and warrants 775,311 551,949 ---------- ---------- Weighted average number of common shares and dilutive potential common stock 25,635,345 25,987,890 ========== ==========
Six Months Ended June 30, 2000 1999 ---- ---- Weighted average number of common shares used for basic EPS 24,814,062 25,700,211 Effect of dilutive stock options and warrants 733,920 470,778 ---------- ---------- Weighted average number of common shares and dilutive potential common stock 25,547,982 26,170,989 ========== ==========
4. SEGMENT REPORTING The Company has principally three operating segments: rehabilitation, tunneling, and corrosion and abrasion ("TiteLiner(R)"). These operating units represent strategic business units that offer distinct products and services and correspond with the current organization structure. The following disaggregated financial results have been prepared using a management approach, which is consistent with the basis and manner with which management internally disaggregates financial information for purposes of assisting in making internal operating decisions. Financial information by segment is as follows (in thousands): Three Months Ended June 30, 2000 1999 ---- ---- Revenues Rehabilitation $76,502 $67,279 Tunneling 12,930 11,005 TiteLiner(R) 9,939 7,356 ------- ------- Total Revenues $99,371 $85,640 ======= ======= Operating Income Rehabilitation $10,794 $11,929 Tunneling 1,631 1,647 TiteLiner(R) 2,865 (743) ------- ------ Total Operating Income $15,290 $12,833 ======= ====== Six Months Ended June 30, 2000 1999 ---- ---- Revenues Rehabilitation $152,710 $122,710 Tunneling 22,165 20,578 TiteLiner(R) 18,779 13,514 ------- ------- Total Revenues $193,654 $156,802 ======= ======= Operating Income Rehabilitation $19,178 $20,130 Tunneling 2,804 2,661 TiteLiner(R) 4,926 (1,030) ------- ------ Total Operating Income $26,908 $21,761 ======= ====== 5. ACQUISITION In February 2000, the Company acquired the rights to the Insituform(R) Process and NuPipe(R) Process for the states of New York and New Jersey, through the purchase of all of the shares of the capital stock of Insituform(R) Metropolitan, Inc. and the operating assets of certain of its affiliates. The purchase price is estimated at $5.2 million, inclusive of the closing payments. At closing, the Company paid the sellers or delivered into escrow an aggregate of $4.3 million in cash, in addition to assuming operating liabilities of the acquired business. The remaining balance will be paid after adjustments for net assets to be shown in a closing balance sheet of the acquired business, which is expected during the third quarter of 2000. 6. LITIGATION The Company is involved in certain litigation incidental to the conduct of its business. In the Company's opinion, none of these proceedings will have a material adverse effect on the Company's financial position, results of operations and liquidity. The financial statements include the estimated amounts of liabilities that are likely to be incurred from these and various other pending litigation and claims. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and results of operations during the periods included in the accompanying consolidated financial statements. GENERAL - ------- The Company's rehabilitation revenues are derived primarily from direct installation and other contracting activities generated by the Company's subsidiaries operating in the United States, Canada, France, United Kingdom, Netherlands, Japan, Spain, Chile, and Peru, and include product sales to, and royalties and license fees paid by, the Company's Insituform(R) licensees and sub-licensees and its NuPipe(R) licensees. During the three years ended December 31, 1999, 1998 and 1997, approximately 76.4%, 63.8% and 62.5%, respectively, of the Company's consolidated revenues related to the Insituform(R) Process. Statements contained in and preceding management's discussion and analysis include various forward-looking information that is based on data currently available to management and management's beliefs and assumptions. When used in this document, 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. Such statements are subject to risks and uncertainties, and the Company's actual results may vary materially from those anticipated, estimated or projected due to a number of factors, including, without limitation, the competitive environment for the Company's products and services, the geographical distribution and mix of the Company's work, and other factors set forth in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. RESULTS OF OPERATIONS - --------------------- Three and Six Months Ended June 30, 2000 and 1999 Total revenues for the second quarter increased 16.0% to $99.4 million from $85.6 million in 1999. This contributed to an increase in total revenues for the first half of 2000 of 23.5% to $193.6 million from $156.8 million in the first half of 1999. The principal reason for the increased volume in the second quarter was the continued growth in the Company's North American installation and tunneling operations. In addition, the Company's TiteLiner(R) revenues increased 35.1% or $2.6 million over the prior year's second quarter, and increased 38.9% or $5.3 million for the first half of 2000 compared to the first half of 1999. The Company's gross profit during the second quarter increased 15.0% to $34.0 million from $29.6 million in the second quarter of 1999, and during the first half of 2000 increased 19.8% to $64.4 million from $53.7 million during the first half of 1999. This increase was primarily due to increased revenues as well as increased profitability from the Company's North American rehabilitation and TiteLiner(R) operations. The overall gross profit margin for the second quarter of 2000 was 34.2% compared to 34.6% in the second quarter of 1999, and for the first half of 2000 was 33.2% compared to 34.3% in the prior year. In the second quarter 2000, operating costs and expenses increased 11.7% to $18.7 million from $16.8 million in the same quarter of the prior year, and during the first half of 2000 increased 17.2% to $37.5 million from $32.0 million in the same period of last year. This increase was primarily due to increased legal expense, compensation costs and the additions of the New York, New Jersey, Dutch and Spanish operations to expense in 2000. As a percentage of revenues, operating costs decreased in the second quarter of 2000 to 18.8% from 19.6% in the comparable quarter of the prior year, and for the first half of 2000 decreased to 19.4% from 20.4% in the first half of 1999. This decrease is primarily attributable to revenue volume increasing at a faster rate than operating costs. Interest expense in the second quarter of 2000 increased 3.3% to $2.3 million from $2.2 million in the second quarter of 1999, and for the first half of 2000 increased 5.8% to $4.7 million from $4.4 million for the same period in the prior year. This increase was primarily due to additional debt from the acquisition in June 1999 of the Company's Dutch licensee. Other income in the second quarter of 2000 remained relatively unchanged compared to second quarter 1999, and increased in the first half of 2000 to $1.7 million from $1.5 million in the first half of 1999. This change was primarily related to increased investment income resulting from an increased rate of return on invested cash and cash equivalents and a gain from the sale of equipment in the Company's TiteLiner(R) operations in Latin America. In the second quarter of 2000, taxes on income increased 18.3% to $5.5 million from $4.6 million in 1999 due principally to a 21.4% increase in income before taxes. In the first half of 2000, taxes on income increased 24.4% to $9.6 million from $7.7 million in the first half of 1999 due primarily to a 27.0% increase in income before taxes. The Company's 2000 effective tax rate decreased to 40%, as compared to 40.8% in 1999. In the second quarter of 2000, minority interest in net income decreased to $0.1 million from $0.2 million in 1999, and for the first half of 2000 decreased to $0.2 million from $0.4 million for the first half of 1999. This decrease was due primarily to the Company's increased ownership in Insituform Linings Plc, the Company's manufacturing operation in Europe. Equity earnings of affiliated companies were $315,000 in the second quarter of 2000 as compared to $16,000 in the same period of 1999, and were $350,000 for the first half of 2000 as opposed to an $84,000 loss for the first half of 1999. This increase is due primarily to the earnings generated by the Company's contracting joint ventures in the United States and Germany and the elimination of losses from the Midsouth partnership from which the Company withdrew in the third quarter of 1999. As a result of the above, net income for the second quarter of 2000 increased 31% to $8.4 million, representing an 8.4% return on revenue, compared to $6.4 million for the second quarter of 1999, when a 7.5% return on revenue was achieved. For the first half of 2000, net income increased 36% to $14.5 million, or a 7.5% return on revenue, compared to $10.6 million in the first half of 1999, when a 6.8% return on revenue was achieved. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At June 30, 2000, the balance of cash, U.S. Treasury bills, and short-term investments was $59.3 million, compared to $68.2 million at December 31, 1999. The decrease in cash and cash equivalents in 2000 resulted primarily from operation of the Company's previously reported stock repurchase program, which used cash in the amount of $10.8 million in the first half of 2000, along with capital spending of $16.4 million. In addition, $5.2 million was used to acquire the Company's licensee in New York and New Jersey. These cash outlays were offset somewhat by the Company's continued strong positive generation of cash from operating activities of $19.5 million and proceeds from the issuance of common stock upon exercise of stock options of $3.6 million. Working capital was $98.4 million at June 30, 2000, compared to $120.2 million at December 31, 1999. The decrease was primarily due to recording an increase in current maturities of debt of $15.6 million equal to the first principal payment, due February 2001, on the Company's Senior Notes, Series A (final maturity February 14, 2007) (the "Senior Notes"). Trade receivables, together with costs and estimated earnings in excess of billings and retainage under construction contracts, increased 13.8% to $95.8 million from $84.2 million at December 1999. The collection of installation receivables involves contractual provisions for retainage by the project owner, often 5% to 15% of the contract amount, which extends the collection process. Collections are also sometimes further prolonged by the slow review processes often employed by the Company's municipal customers. In the United States, retainage receivables are generally received within 60 to 90 days after the completion of a contract. Capital expenditures were $16.4 million in the first half of 2000, compared to $4.7 million in the first half of 1999. The majority of the increase in capital expenditures represents additional equipment and real estate to implement the Company's growth strategies and productivity improvements. In February 2000, the Company acquired the rights to the Insituform(R) Process and NuPipe(R) Process for the states of New York and New Jersey, through the purchase of all of the shares of the capital stock of Insituform(R) Metropolitan, Inc. and the operating assets of certain of its affiliates. At closing, the Company paid the sellers or delivered into escrow an aggregate of $4.3 million in cash, in addition to assuming operating liabilities of the acquired business. The remainder of the purchase price (which is estimated at $5.2 million, inclusive of the closing payments) will be paid after adjustments for net assets to be shown in a closing balance sheet of the acquired business, which is expected during the third quarter of 2000. In July 2000, Insituform Italia s.r.l., a newly formed joint venture of the Company and Per Aarsleff A/S, acquired Italcontrolli Nord s.r.l., the Insituform(R) Process licensee in Italy. Financing activities used $7.4 million in the first half of 2000, as compared to cash used of $17.0 million in the first half of 1999. In mid-1998, the Company authorized the repurchase of up to 2,700,000 shares of the Company's class A common stock, $.01 par value ("Common Stock"), to be made from time to time over five years in open market transactions. The amount and timing of purchases will be dependent upon a number of factors, including the price and availability of the Company's shares, general market conditions and competing alternative uses of funds, and may be discontinued at any time. In October 1999, the Company increased the original authorization by an additional 2,000,000 shares of Common Stock through the period ending June 2003. During the six months ended June 30, 2000, the Company used cash in the amount of $10.8 million for the repurchase of 460,165 shares. The Company has used cash in the cumulative amount of $53.9 million for the repurchase of 2,948,465 shares through June 30, 2000 since inception of the stock repurchase program. The repurchased shares will be held as treasury stock. In the first half of 2000, the Company made principal payments totaling $0.6 million relating to the Company's existing debt, as compared to $0.8 million in the first half of 1999. The Company generated $3.6 million from the issuance of Common Stock from stock options granted to employees and directors, as compared to $2.7 million in the first half of 1999. The Company's $110 million principal amount of Senior Notes bear interest, payable semi-annually in August and February of each year, at the rate per annum of 7.88%. Each year, from February 2001 to February 2006, inclusive, the Company will be required to make principal payments of $15.7 million, together with an equivalent payment at maturity. The Senior Notes may be prepaid at the Company's option, in whole or in part, at any time, together with a make whole premium, and upon specified change in control events each holder has the right to require the Company to purchase its Senior Note without any premium thereon. In March 2000, the Company entered into a new credit agreement (the "Credit Agreement") whereby the lender will make available to the Company up to $50,000,000 aggregate principal amount for working capital and permitted acquisitions, including $30,000,000 available for standby and commercial letters of credit, on a revolving basis through March 30, 2003, at which time principal will be repayable. Interest on outstanding advances accrues, at the election of the Company, at either the lender's prime rate, the federal funds rate plus .5% or the lender's offshore rate plus a margin ranging from .5% to 1.5% depending on the maintenance of certain financial ratios, and is payable quarterly. Upon specified change in control events, the lender has the right to require the Company to repay outstanding amounts without any premium thereon. At the end of the second quarter of 2000, the Company had no amounts outstanding under the Credit Agreement. The note purchase agreements pursuant to which the Senior Notes were acquired, and the Credit Agreement, obligate the Company to comply with certain financial ratios and restrictive covenants that, among other things, place limitations on operations and sales of assets by the Company or its subsidiaries, and limit the ability of the Company to incur further secured indebtedness and liens and of subsidiaries to incur indebtedness, and, in the event of default, limit the ability of the Company to pay cash dividends or make other distributions to the holders of its capital stock or to redeem such stock. The Credit Agreement also obligates certain of the Company's domestic subsidiaries to guaranty the Company's obligations, as a result of which the same subsidiaries have also delivered their guaranty with respect to the Senior Notes. In July 1999, the Company borrowed EUR 5,672,000 in order to refinance a portion of the purchase price for its Dutch licensee. Such amount is repayable in seven equal installments annually on each July 31 beginning in 2000, and accrues interest, payable quarterly, at the rate of 5.5% per annum. Management believes its current working capital will be adequate to meet its requirements for the foreseeable future. MARKET RISK - ----------- The Company conducts its rehabilitation activities on a worldwide basis, giving rise to exposures related to changes in foreign currency exchange rates. For example, foreign currency exchange rate movements may create a degree of risk to the Company's operations by affecting: (i) the U.S. dollar value of sales made in foreign currencies, and (ii) the U.S. dollar value of costs incurred in foreign currencies. In addition, the Company is exposed to market risks related to changes in interest rates. The Company's objective is to minimize the volatility in earnings and cash flow from these risks. The Company has selectively used, and will continue to use, forward exchange contracts in order to manage its currency exposure. Forward exchange contracts are executed by the Company only with large, reputable banks and financial institutions and are denominated in currencies of major industrial countries. Given its assessment of such risk, the Company has not deemed it necessary to offset any interest rate exposure. Furthermore, the Company does not enter into transactions involving derivative financial instruments for speculative trading purposes. Based on the Company's overall currency exchange rate and interest rate exposure at June 30, 2000, a 10% weakening in the U.S. dollar across all currencies or 10% increase in interest rates would not have a material impact on the financial position, results of operations or cash flows of the Company. These effects of hypothetical changes in currency exchange rates and in interest rates, however, ignore other effects the same movement may have arising from other variables, and actual results could differ from the sensitivity calculations of the Company. The Company regularly assesses these variables, establishes policies and business practices to protect against the adverse effects of foreign currency and interest rate fluctuations and does not anticipate any material losses generated by these risks. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK For information concerning this item, see "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk," which information is incorporated herein by reference. PART II. - OTHER INFORMATION ---------------------------- ITEM 1. LEGAL PROCEEDINGS In previously reported proceedings initiated by the Company and its subsidiary, Insituform (Netherlands) B.V., against Insituform East, Inc. ("Insituform East"), Midsouth Partners ("Midsouth") and certain of their affiliates in the United States District Court for the Middle District of Tennessee (Civil Action No. 3-99-1130), plaintiffs in June 2000 amended their complaint to seek: (i) a declaration that, as a consequence of non-curable breaches thereof, the Company may terminate the non-exclusive grant to an Insituform East subsidiary of the right to utilize the Company's cured-in-place process and technology, in the condition and state and limited to the assigned territory in which it was commercially practiced under Midsouth's terminated Insituform(R) Process license; (ii) the affirmation of cross-over payments under Insituform East's licenses from the Company for any installation work performed outside of the territory assigned, and within the subject matter covered under such licenses; and (iii) a declaration that, as a result of the termination of certain Insituform Process licenses previously granted to companies that have since been acquired by, and merged into, the Company, the Company is not obligated to continue payment of certain finder's fees to Insituform East that were to continue while the subject licenses remained in effect. Defendants have filed an answer and counterclaim denying the material allegations of the Company's amended complaint and seek, among other things, declarations and injunctions essentially the opposite of those requested by the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) On May 25, 2000, the Company convened its Annual Meeting of Stockholders (the "Annual Meeting"). (b) Not applicable because (i) proxies for the Annual Meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934 together with the Company's Proxy Statement dated April 17, 2000 (the "Proxy Statement"); (ii) there was no solicitation in opposition to management's nominees as listed in the Proxy Statement and (iii) all of such nominees were elected. (c) At the Annual Meeting, the stockholders voted in favor of a proposal to approve an amendment to the Company's Restated Certificate of Incorporation to increase the number of authorized shares of the Common Stock of the Company from 40,000,000 shares to 60,000,000 shares. The holders of 21,241,243 shares voted in favor of, the holders of 1,464,640 shares voted against, the holders of 77,689 shares abstained and there were no broker non-votes with respect to approval of such proposal. At the Annual Meeting, the stockholders voted in favor of a proposal to approve and adopt an amendment to the Company's 1992 Employee Stock Option Plan to increase the number of shares of the Company's Common Stock, issuable pursuant to the exercise of options from 1,850,000 shares to 2,850,000 shares of Common Stock. The holders of 16,680,692 shares voted in favor of, the holders of 2,766,930 shares voted against, the holders of 87,494 shares abstained and there were 3,248,456 broker non-votes with respect to approval and adoption of such proposal. At the Annual Meeting, the stockholders voted in favor of a proposal to approve and adopt an amendment to the Company's 1992 Director Stock Option Plan to increase the number of shares of Common Stock issuable pursuant to the exercise of options from 1,000,000 shares to 1,500,000 shares of Common Stock. The holders of 17,751,737 shares voted in favor of, the holders of 1,691,974 shares voted against, the holders of 91,405 shares abstained and there were 3,248,456 broker non-votes with respect to approval and adoption of such proposal. At the Annual Meeting, the stockholders voted in favor of management's nominees for election as directors of the Company. The holders of 21, 963,209 shares voted in favor of, and holders of 820,363 shares withheld their vote for, the election of Robert W. Affholder; the holders of 21,963,309 shares voted in favor of, and holders of 820,263 shares withheld their vote for, the election of Paul A. Biddelman; the holders of 21,962,964 shares voted in favor of, and holders of 820,608 shares withheld their vote for, the election of Stephen P. Cortinovis; the holders of 21,963,194 shares voted in favor of, and holders of 820,378 shares withheld their vote for the election of Juanita H. Hinshaw; the holders of 21,963,309 shares voted in favor of, and holders of 820,263 shares withheld their vote for, the election of Anthony W. Hooper; the holders of 21,942,209 shares voted in favor of, and holders of 841,363 shares withheld their vote for, the election of Thomas N. Kalishman; the holders of 21,963,009 shares voted in favor of, and holders of 820,563 shares withheld their vote for, the election of Sheldon Weinig; the holders of 21,963,309 shares voted in favor of, and holders of 820,263 shares withheld their vote for, the election of Russell B. Wight, Jr.; and the holders of 21,962,964 shares voted in favor of, and holders of 820,608 shares withheld their vote for, the election of Alfred L. Woods. (d) Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The exhibits filed as part of this Quarterly Report on Form 10-Q are listed on the annexed Index to Exhibits. (b) During the quarter ended June 30, 2000, the Company did not file any Current Reports on Form 8-K. 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 thereunto duly authorized. INSITUFORM TECHNOLOGIES, INC. August 3, 2000 By: s/Joseph A. White --------------------------------- Joseph A. White Vice President - Chief Financial Officer Principal Financial and Accounting Officer INDEX TO EXHIBITS ------------------ 3.1 - Restated Certificate of Incorporation, as amended. 27 - Financial Data Schedule, which is submitted electronically to the Securities and Exchange Commission for information only and is not filed. EX-27 2 0002.txt
5 3-MOS DEC-31-2000 JUN-30-2000 59,329 0 65,362 2,600 13,566 172,468 63,664 76,522 320,472 74,072 0 0 0 281 143,293 320,472 0 99,371 0 65,351 18,730 0 2,303 13,624 5,450 8,375 0 0 0 8,375 0.34 0.33
EX-3 3 0003.txt EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF INSITUFORM TECHNOLOGIES, INC. INSITUFORM TECHNOLOGIES, INC., a corporation organized and existing by virtue of the General Corporation Law of Delaware (the "Corporation"), pursuant to the General Corporation Law of Delaware does hereby certify as follows: FIRST: (a) The present name of the Corporation is INSITUFORM TECHNOLOGIES, INC. (b) The name under which the Corporation was originally incorporated is INSITUFORM OF NORTH AMERICA, INC.; and the date of filing the original certificate of incorporation with the Secretary of State of the State of Delaware is March 27, 1980. SECOND: The provisions of the certificate of incorporation of the Corporation, as heretofore amended and/or supplemented, are hereby restated and integrated into the single instrument which is hereinafter set forth, and which is entitled Restated Certificate of Incorporation of Insituform Technologies, Inc., without further amendment and without any discrepancy between the provisions of the certificate of incorporation, as heretofore amended and supplemented, and the provisions of the said single instrument hereinafter set forth. THIRD: The Board of Directors of the Corporation has duly adopted this Restated Certificate of Incorporation pursuant to the provisions of Section 245 of the General Corporation Law of Delaware in the form set forth as follows: "RESTATED CERTIFICATE OF INCORPORATION OF INSITUFORM TECHNOLOGIES, INC. FIRST: The name of the corporation is INSITUFORM TECHNOLOGIES, INC. SECOND: The registered office of the corporation is to be located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, State of Delaware. The name of its registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: The corporation shall be authorized to issue forty- two million (42,000,000) shares, consisting of forty million (40,000,000) Class A Common shares, par value one cent ($0.01) per share; and two million (2,000,000) Preferred shares, par value ten cents ($0.10) per share ("Preferred Stock"). The shares of Preferred Stock shall be issued in one or more series designated by the Board of Directors without further shareholder action and shall bear such terms and designation as the Board of Directors may fix, including dividend rates, redemption rights, conversion rights, liquidation preferences, voting rights (provided that the Board of Directors may designate that the holders of one or more series of Preferred Stock shall be entitled as a series to elect one director and the Board of Directors may at its discretion grant the holders of one or more series of the corporation's shares of Preferred Stock the right to elect additional directors in the event that dividends on such series shall be in arrears) and such other terms as the Board of Directors shall determine. Any shares of Preferred Stock reacquired by the corporation may be reissued without further shareholder approval. FIFTH: The name and address of the incorporator are as follows: Name Address ---- ------- Ray A. Barr 9 East 40th Street New York, New York 10016 SIXTH: The following provisions are inserted for the management of the business and for the conduct of the affairs of the corporation, and for further definition, limitation and regulation of the powers of the corporation and of its directors and shareholders: (1) The number of directors of the corporation shall be such as from time to time shall be fixed by, or in the manner provided in, the by-laws; provided, however, that the number of directors of the corporation shall not be less than six (6) nor shall the number of directors of the corporation exceed fifteen (15). Election of directors need not be by ballot unless the by-laws so provide. (2) Vacancies in the Board of Directors shall be filled by a majority of the directors then in office subject to the procedures set forth in the by-laws of the corporation. A director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Notwithstanding any provision of this Article SIXTH, whenever the holders of any one or more series of Preferred Stock issued by the corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of shareholders or any class or series, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation or the resolution or resolutions adopted by the Board of Directors pursuant to Article FOURTH hereof applicable thereto. (3) The Board of Directors shall have power without the assent or vote of the shareholders: (a) To make, alter, amend, change, add to or repeal the by-laws of the corporation; to fix and vary the amount to be reserved for any proper purpose; to authorize and cause to be executed mortgages and liens upon all or any part of the property of the corporation; to determine the use and disposition of any surplus or net profits; and to fix the times for the declaration and payment of dividends. (b) To determine from time to time whether, and to what extent, and at what times and places, and under what conditions the accounts and books of the corporation (other than the stock ledger) or any of them, shall be open to the inspection of the shareholders. (4) The directors at their discretion may submit any contract or act for approval or ratification at any annual meeting of shareholders or at any meeting of the shareholders called for the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of the corporation which is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of shareholders be there represented in person or by proxy) shall be as valid and as binding upon the corporation and upon all the shareholders as though it had been approved or ratified by every shareholder of the corporation, whether or not the contract or act would otherwise be open to legal attack because of directors' interest, or for any other reason. (5) In addition to the powers and authorities hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the corporation; subject, nevertheless, to the provisions of the statutes of Delaware, of this certificate, and to any by-laws from time to time made by the shareholders; provided, however, that no by-laws so made shall invalidate any prior act of the directors which would have been valid if such by-law had not been made. SEVENTH: The corporation shall, to the full extent permitted by Section 145 of the Delaware General Corporation Law, as amended, from time to time, indemnify all persons whom it may indemnify pursuant thereto. EIGHTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware, may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. NINTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders, directors and officers are subject to this reserved power. TENTH: No person who is or was at any time a director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty by such person as a director; provided, however, that, unless and except to the extent otherwise permitted from time to time by applicable law, the provisions of this Paragraph Tenth shall not eliminate or limit the liability of a director (i) for breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for any act or omission by the director which is not in good faith or which involves intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, (iv) for any transaction from which the director derived an improper personal benefit or (v) for any act or omission occurring prior to the date this Paragraph Tenth becomes effective. No amendment to or repeal of this Paragraph Tenth shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any act or omission of such director occurring prior to such amendment or repeal. ELEVENTH: Subject to the rights of the holders of any class or series of Preferred Stock expressly set forth in this Certificate of Incorporation, the Certificate of Designation related to such class or series of Preferred Stock or as otherwise required by law, any action required or permitted to be taken by the shareholders of the corporation must be effected exclusively at a duly called annual or special meeting of such shareholders and may not be effected by any consent in writing by such shareholders. This Article ELEVENTH may not be repealed or amended in any respect, and no provision inconsistent with this Article ELEVENTH may be adopted, unless such action is approved by the affirmative vote of the holders of not less than eighty (80) percent of the combined voting power of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors." IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be executed on its behalf by Anthony W. Hooper, its President, and attested by Howard Kailes, its Secretary, as of this 8th day of June, 1999. ATTEST: s/Howard Kailes s/Anthony W. Hooper - --------------------------- --------------------------------- Howard Kailes Anthony W. Hooper Secretary President CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF INSITUFORM TECHNOLOGIES, INC. INSITUFORM TECHNOLOGIES, INC., a corporation organized and existing by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), pursuant to the provisions of the General Corporation Law of the State of Delaware (the "GCL") DOES HEREBY CERTIFY as follows: FIRST: The Restated Certificate of Incorporation of the Corporation is hereby amended by deleting the first paragraph of Article FOURTH in its entirety and substituting therefor a new first paragraph of Article FOURTH in the following form: "FOURTH: The corporation shall be authorized to issue sixty-two million (62,000,000) shares consisting of sixty million (60,000,000) Class A common shares, par value one cent ($0.01) per share; and two million (2,000,000) Preferred shares, par value ten cents ($0.10) per share ("Preferred Stock")." SECOND: The amendments to the Restated Certificate of Incorporation of the Corporation set forth in this Certificate of Amendment have been duly adopted in accordance with the applicable provisions of Section 242 of the GCL: (a) the Board of Directors of the Corporation having duly adopted resolutions setting forth the proposed amendments and declaring their advisability by unanimous written consent of the Board of Directors of the Corporation dated March 31, 2000 in conformity with the By-laws of the Corporation and (b) the stockholders of the Corporation having duly adopted such amendments by the affirmative vote of the holders of a majority of the outstanding stock entitled to vote thereon, on May 25, 2000, taken at the Corporation's annual meeting of stockholders duly called and held upon notice in accordance with Section 222 of the GCL. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be executed on its behalf by Anthony W. Hooper, its President, and attested by Howard Kailes, its Secretary, as of this 25th day of May, 2000. ATTEST: s/Howard Kailes s/Anthony W. Hooper - ------------------------- --------------------------- Howard Kailes Anthony W. Hooper Secretary President -----END PRIVACY-ENHANCED MESSAGE-----