-----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, SWAceu0nagIGNgLLkvVqNqboqR9CH+T1wEsfpqDp3/0pGiUJWNzw/hz4zKKeejPh y7ItfRCUya0qdhyMRfjpAw== /in/edgar/work/0000922435-00-000025/0000922435-00-000025.txt : 20001114 0000922435-00-000025.hdr.sgml : 20001114 ACCESSION NUMBER: 0000922435-00-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 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: 758970 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 September 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 November 1, 2000 - -------------------------- --------------------------------- Class A Common Stock, 24,839,996 Shares $0.01 par value INDEX ----- Part I Financial Information: Item 1. Financial Statements: Consolidated Balance Sheets 1 Consolidated Statements of Income 3 Consolidated Statements of Cash Flow 4 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 Part II Other Information and Signatures: Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 Index to Exhibits 18 PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. - FINANCIAL STATEMENTS INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
Unaudited September 30, 2000 December 31, 1999 ------------------ ----------------- ASSETS - ------ CURRENT ASSETS -------------- Cash and cash equivalents $60,544 $68,183 Trade receivables, less allowance for doubtful accounts of $2,097 and $3,096, respectively 78,703 58,546 Retainage under construction contracts 15,873 13,253 Costs and estimated earnings in excess of billings 24,155 12,372 Inventories 12,301 12,525 Prepaid expenses and other 4,534 9,493 -------- -------- TOTAL CURRENT ASSETS 196,110 174,372 -------- -------- PROPERTY AND EQUIPMENT, less accumulated depreciation 68,803 54,188 -------- -------- OTHER ASSETS ------------ Goodwill, less accumulated amortization of $21,218 and $18,417, respectively 66,979 64,077 Other assets 16,643 18,988 -------- -------- TOTAL OTHER ASSETS 83,622 83,065 -------- -------- TOTAL ASSETS $348,535 $311,625 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES ------------------- Current maturities of long-term debt and notes payable $29,448 $3,188 Accounts payable and accrued expenses 65,459 51,004 -------- -------- TOTAL CURRENT LIABILITIES 94,907 54,192 LONG-TERM DEBT, less current maturities 97,980 114,954 OTHER LIABILITIES 1,024 1,168 -------- -------- TOTAL LIABILITIES 193,911 170,314 -------- -------- MINORITY INTERESTS 2,205 2,708 -------- -------- STOCKHOLDERS' EQUITY -------------------- Preferred stock, undesignated, $.10 par - shares authorized 2,000,000; none outstanding - - Common stock, $.01 par - shares authorized 60,000,000; shares outstanding 28,086,347 and 27,787,862 281 278 Additional paid-in capital 78,645 74,809 Retained earnings 37,974 112,338 Treasury stock - 3,244,266 and 2,744,101 shares 58,178) (45,118) Cumulative foreign currency translation adjustments (6,303) (3,704) -------- -------- TOTAL STOCKHOLDERS' EQUITY 152,419 138,603 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $348,535 $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 Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 ---- ---- ---- ---- Revenue $111,042 $93,251 $304,696 $250,053 Cost of revenue 73,095 60,702 202,360 163,760 -------- -------- -------- -------- Gross profit 37,947 32,549 102,336 86,293 Selling, administrative and general expenses 18,429 16,915 55,910 48,898 -------- -------- -------- -------- Operating income 19,518 15,634 46,426 37,395 Other income (expense): - ---------------------- Interest expense (2,313) (2,269) (7,016) (6,713) Other income 1,152 624 2,892 2,169 -------- -------- -------- -------- Total other income (expense) (1,161) (1,645) (4,124) (4,544) Income before taxes on income 18,357 13,989 42,302 32,851 Taxes on income 7,194 5,975 16,772 13,674 -------- -------- -------- -------- Income before minority interests and equity in earnings 11,163 8,014 25,530 19,177 Minority interests in net income (211) (202) (460) (638) Equity in earnings of affiliated 216 174 566 90 companies -------- -------- -------- -------- Net income $11,168 $7,986 $25,636 $18,629 ======== ======== ======== ======== Basic earnings per share $0.45 $0.31 $1.03 $0.73 ======== ======== ======== ======== Diluted earnings per share $0.44 $0.31 $1.00 $0.71 ======== ======== ======== ======== See accompanying notes to consolidated financial statements.
INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (in thousands)
For the Nine Months Ended September 30, 2000 1999 ---- ---- Cash flow from operating activities: - ------------------------------------ Net income $25,636 $18,629 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 13,255 13,893 Other (1,136) 651 Translation adjustments (1,681) (872) Deferred income taxes 168 (244) Changes in operating assets and liabilities, net of assets acquired: Receivables (33,863) (2,866) Inventories 51 1,158 Prepaid expenses and other assets 5,509 (1,885) Accounts payable and accrued expenses 14,661 5,865 ------- ------ Net cash provided by operating activities 22,600 34,329 ------- ------ Cash flow from investing activities: - ------------------------------------ Capital expenditures (24,635) (7,957) Purchase of business, net of cash acquired (6,440) (11,775) Other investing activities 1,409 4,052 ------- ------ Net cash used in investing activities (29,666) (15,680) ------- ------ Cash flow from financing activities: - ------------------------------------ Proceeds from issuance of common stock 3,839 3,422 Purchases of treasury stock (13,060) (22,872) Proceeds from long-term debt 67 6,128 Repayments of long-term debt (2,550) (2,186) Increase (decrease) in short-term borrowings 12,167 (659) -------- -------- Net cash provided by (used in) financing activities 463 (16,167) -------- -------- Effect of exchange rate changes on cash (1,036) 417 -------- -------- Net increase (decrease) in cash and cash equivalents for the period (7,639) 2,899 -------- -------- Cash and cash equivalents, beginning of period 68,183 76,904 -------- -------- Cash and cash equivalents, end of period $60,544 $79,803 ======== ======== Supplemental disclosures of cash flow information: - -------------------------------------------------- 2000 1999 ---- ---- Cash paid during nine months ended September 30, for: ----------------------------------------------------- Interest $9,103 $8,730 Income taxes $12,225 $10,984 See accompanying notes to consolidated financial statements.
INSITUFORM TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 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 September 30, 2000 (unaudited) and the unaudited results of operations and cash flows for the three and nine months ended September 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 nine months ended September 30, 2000 and 1999 are not necessarily indicative of the results to be expected for the full year. In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements, which summarizes certain of the SEC staff's views on applying generally accepted accounting principles to revenue recognition in financial statements. The Company will adopt the accounting provisions of SAB 101 in the fourth quarter of 2000. Management believes that the implementation of SAB 101 will not have a significant effect on the Company's financial condition or results of operations. 2. COMPREHENSIVE INCOME For the quarters ended September 30, 2000 and 1999, comprehensive income was $10.8 million and $8.3 million, respectively. For the nine months ended September 30, 2000 and 1999, comprehensive income was $23.0 million and $17.8 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: INSITUFORM TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 2000
Three Months Ended September 30, 2000 1999 ---- ---- Weighted average number of common shares used for basic EPS 24,826,245 25,365,394 Effect of dilutive stock options and warrants 701,348 689,026 ---------- ---------- Weighted average number of common shares and dilutive potential common stock 25,527,593 26,054,420 ========== ========== Nine Months Ended September 30, 2000 1999 ---- ---- Weighted average number of common shares used for basic EPS 24,818,153 25,587,396 Effect of dilutive stock options and warrants 798,150 579,899 ---------- ---------- Weighted average number of common shares and dilutive potential common stock 25,616,303 26,167,295 ========== ==========
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): INSITUFORM TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 2000 Three Months Ended September 30, 2000 1999 ---- ---- Revenues Rehabilitation $87,482 $78,176 Tunneling 13,317 10,059 TiteLiner(R) 10,243 5,016 ------- ------- Total Revenues $111,042 $93,251 ======== ======= Operating Income Rehabilitation $16,039 $15,013 Tunneling 1,594 1,332 TiteLiner(R) 1,885 (711) ------- ------ Total Operating Income $19,518 $15,634 ======= ======= Nine Months Ended September 30, 2000 1999 ---- ---- Revenues Rehabilitation $240,192 $200,886 Tunneling 35,482 30,637 TiteLiner(R) 29,022 18,530 -------- -------- Total Revenues $304,696 $250,053 ======= ======= Operating Income Rehabilitation $35,217 $35,143 Tunneling 4,398 3,993 TiteLiner(R) 6,811 (1,741) ------- ------ Total Operating Income $46,426 $37,395 ======= ======= 5. ACQUISITIONS During the third quarter, the Company acquired the remaining 50% ownership of K-Insituform, N.V., its joint venture in Belgium, for approximately $0.3 million, along with the remaining 33% ownership of Insituform France, S.A., for approximately $0.8 million. In addition, in July, the Company completed its acquisition of 50% of Italcontrolli Nord, its licensee in Italy, for approximately $1.1 million. None of the aforementioned acquisitions were considered to be material. 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) INSITUFORM TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 2000 Metropolitan, Inc. and the operating assets of certain of its affiliates. The Company paid the sellers or delivered into escrow an aggregate of $5.0 million in cash, in addition to assuming operating liabilities of the acquired business. 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, United Kingdom, Belgium, Spain, France, Netherlands, 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 Nine Months Ended - --------------------- September 30, 2000 and 1999 Total revenues for the third quarter increased 19.1% to $111.0 million from $93.3 million in 1999. This contributed to an increase in total revenues for the first nine months of 2000 of 21.9% to $304.7 million from $250.1 million in the first nine months of 1999. The principal reason for the Company's increased revenues for the third quarter continued to be growth in the Company's North American installation and tunneling operations. In addition, the Company's TiteLiner(R) revenues increased 104.2% or $5.2 million over the prior year's third quarter, and increased 56.6% or $10.5 million for the first nine months of 2000 compared to the same period last year. The Company's gross profit during the third quarter increased 16.6% to $37.9 million from $32.5 million in the third quarter of 1999, and during the first nine months of 2000 increased 18.6% to $102.3 million from $86.3 million during the first nine months 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 third quarter of 2000 was 34.2% compared to 34.9% in the third quarter of 1999, and for the first nine months of 2000 was 33.6% compared to 34.5% in the prior year. The principal reason for the lower gross profit margin for the third quarter and first nine months of 2000 was weaker margins in Europe resulting from lower revenue, as well as an increased contribution from the Company's tunneling operations, which traditionally achieve a lower margin base. In the third quarter of 2000, selling, administrative and general expenses increased 9.0% to $18.4 million from $16.9 million in the same quarter of the prior year, and during the first nine months of 2000 increased 14.3% to $55.9 million from $48.9 million in the same period of last year. The third quarter increase was mainly due to ongoing costs related to the Company's management information system improvements, as well as increases in compensation from additions made to field personnel in North America and the additions of the New York, Spanish and Belgian operations to expense in 2000. As a percentage of revenues, selling, administrative and general expenses decreased in the third quarter of 2000 to 16.6% from 18.1% in the comparable quarter of the prior year, and for the first nine months of 2000 decreased to 18.3% from 19.6% in the first nine months of 1999. This decrease is primarily attributable to revenue volume increasing at a faster rate than selling, administrative and general costs, along with management control of costs. Interest expense in the third quarter of 2000 was unchanged at $2.3 million compared to the third quarter of 1999, and for the first nine months of 2000 increased 4.5% to $7.0 million from $6.7 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, offset somewhat by payments of deferred consideration attributable to the Company's 1998 acquisition of Video Injection, S.A. Other income increased in the third quarter of 2000 to $1.2 million from $0.6 million in the third quarter of 1999, and increased in the first nine months of 2000 to $2.9 million from $2.2 million in the first nine months of 1999. This change was related to increased investment income resulting from a maturity of a long-term investment during the third quarter of 2000 and more effective management of investments. For the nine months ended September 30, 2000, the Company's effective income tax rate was 39.6% compared to 41.6% for the nine-month period in 1999. This was due primarily to more effective management over worldwide taxes, along with the reduced effect of non-deductible goodwill amortization. In the third quarter of 2000, taxes on income increased 20.4% to $7.2 million from $6.0 million in 1999. In the first nine months of 2000, taxes on income increased 22.7% to $16.8 million from $13.7 million in the first nine months of 1999 due primarily to a 28.8% increase in income before taxes. In the third quarter of 2000, minority interest in net income was relatively unchanged compared to the prior year, and for the first nine months of 2000 decreased to $0.5 million from $0.6 million for the first nine months 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 $216,000 in the third quarter of 2000 as compared to $174,000 in the same period of 1999, and were $566,000 for the first nine months of 2000 as compared to $90,000 for the same period last year. This increase is due primarily to 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 third quarter of 2000 increased 39.8% to $11.2 million, representing a 10.1% return on revenue, compared to $8.0 million for the third quarter of 1999, when an 8.6% return on revenue was achieved. For the first nine months of 2000, net income increased 37.6% to $25.6 million, or an 8.4% return on revenue, compared to $18.6 million in the first nine months of 1999, when a 7.5% return on revenue was achieved. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At September 30, 2000, the balance of cash, U.S. Treasury bills, and short-term investments was $60.5 million, compared to $68.2 million at December 31, 1999. The decrease in cash and cash equivalents in 2000 resulted primarily from capital expenditures of $24.6 million, along with operation of the Company's previously reported stock repurchase program, which used cash in the amount of $13.1 million in the first nine months of 2000. In addition, $7.4 million was used to acquire the Company's licensee in New York and New Jersey, one-half of the interest in the Company's Italian licensee, and the entire equity interest held by unaffiliated parties in the Company's French licensee (33%) and its Belgian licensee (50%). These cash outlays were offset somewhat by generation of cash from operating activities of $22.6 million and proceeds from the issuance of common stock upon exercise of stock options of $3.8 million. Working capital was $101.2 million at September 30, 2000, compared to $120.2 million at December 31, 1999. The decrease was primarily due to an increase in current maturities of long-term debt of $15.7 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"), along with an increase in borrowings on current revolving credit facilities of $12.1 million. Trade receivables, together with costs and estimated earnings in excess of billings and retainage under construction contracts, increased 41.1% to $118.7 million from $84.2 million at December 1999. This increase was primarily attributable to the growth in the Company's revenue for the third quarter of 2000. 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 $24.6 million in the first nine months of 2000, compared to $8.0 million in the first nine months of 1999. Capital expenditures generally reflect replacement equipment required by the Company's installation operations. During the first nine months of 2000, capital expenditures also reflected approximately $8.1 million related to the acquisition of real estate, including properties adjacent to the Company's Chesterfield campus, as part of the Company's growth strategies and productivity improvements, as well as additional installation equipment to support the growth experienced in North America. During the first quarter of 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 Company paid the sellers or delivered into escrow an aggregate of $5.0 million in cash, in addition to assuming operating liabilities of the acquired business. During the third quarter of 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, for $1.2 million. During the third quarter, the Company acquired the remaining 50% ownership of K- Insituform, N.V., its joint venture in Belgium, for approximately $0.3 million, along with the remaining 33% ownership of Insituform France, S.A., for approximately $0.8 million. Financing activities provided $0.5 million in the first nine months of 2000, as compared to cash used of $16.2 million in the first nine months 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 nine months ended September 30, 2000, the Company used cash in the amount of $13.1 million for the repurchase of 500,165 shares. The Company has used cash in the cumulative amount of $54.9 million for the repurchase of 2,988,465 shares through September 30, 2000 since inception of the stock repurchase program. The repurchased shares will be held as treasury stock. In the first nine months of 2000, the Company made principal payments totaling $2.6 million relating to the Company's existing debt, as compared to $2.2 million in the first nine months of 1999. The Company generated $3.8 million from the issuance of Common Stock from stock options granted to employees and directors, as compared to $3.4 million in the first nine months 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 third quarter of 2000, the Company had $12 million outstanding under the Credit Agreement, which has been subsequently repaid. 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 September 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 There have been no material changes since the filing of the Company's Form 10-Q for the period ended June 30, 2000. See Form 10-Q, Part II, Item 1, "Legal Proceedings." 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 September 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. November 13, 2000 By: s/Joseph A. White --------------------------------- Joseph A. White Vice President - Chief Financial Officer Principal Financial and Accounting Officer INDEX TO EXHIBITS ------------------ 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 MAR-31-2000 51,371 0 74,032 2,970 11,810 164,415 59,941 75,552 310,326 74,044 0 0 0 278 133,185 310,326 0 94,283 0 69,913 18,751 0 2,400 10,321 4,128 6,193 0 0 0 6,193 0.25 0.24
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