EX-99.1 CHARTER 2 ex99p1.htm EXHIBIT 99.1 Exhibit 99.1

Exhibit 99.1

(INSITUFORM-TECH)(INSU) Insituform Technologies, Inc. Reports Third Quarter 2005 Results

Chesterfield, MO - October 27, 2005 - Insituform Technologies, Inc. (Nasdaq National Market: INSU) today reported third quarter 2005 results.
Net income increased 63% to $5.8 million, or $0.21 per diluted share, from $3.5 million, or $0.13 per diluted share, in the year-ago third quarter. These results reflect exceptionally strong performance in the Tite Liner® segment, along with improved operating results in the Company’s core rehabilitation business, both in the United States and Europe. The tunneling segment incurred an operating loss due to negative margins on certain projects. Revenues for the third quarter of 2005 increased 7.2% to $155.2 million from $144.8 million in the prior year quarter.
For the third quarter of 2005 compared to the same quarter of 2004, revenues in the Company’s rehabilitation segment increased 4.8% to $107.8 million and gross profit increased 2.5% to $26.6 million. Gross profit margin was 24.7% for the third quarter of 2005 compared to 25.2% in the prior year quarter. The decline in gross profit margin was primarily attributable to job execution issues and higher commodity prices, particularly resin and fuel. Hurricanes Katrina and Rita adversely affected gross profit due to delayed and postponed projects in the Gulf Coast region, as well as costs associated with idle crews and equipment. Even so, operating income in the rehabilitation segment increased 16.5% to $8.5 million from $7.3 million for the third quarter of 2005 compared to the same quarter of 2004.
Revenues in the tunneling segment decreased 0.7% to $35.7 million while gross profit increased by 22.7% to $2.8 million in the third quarter of 2005 compared to the third quarter of 2004. The tunneling segment posted an operating loss of $1.3 million in the third quarter of 2005, compared to an operating loss of $0.3 million in the third quarter of 2004.
Third quarter 2005 tunneling results were favorably affected by the recognition of $2.0 million in net claims compared to $1.5 million recognized in the same quarter of 2004. The Company continues to aggressively pursue a number of claims against third parties, which had a gross face value of approximately $17 million as of September 30, 2005. Approximately, $4.9 million in claims receivable was outstanding as of September 30, 2005.
Tite Liner®’s revenue increased 96.6% to $11.7 million and gross profit increased 67.2% to $3.5 million in the third quarter of 2005 compared to the same quarter last year. Operating income was $2.2 million in the third quarter of 2005 compared to $1.1 million in the same period last year. In the third quarter of 2005, Tite Liner®’s South American and Canadian operations were positively impacted primarily by a market driven by higher oil prices. Gross margin in the Tite Liner® segment declined from 35.2% to 29.9% in the third quarter of 2005 compared to the third quarter of 2004 due to a higher volume of work in South America, which carried lower margins due to the nature of the work.
Year-to-date, the Company’s net income was $8.9 million, or $0.33 per diluted share, compared to $7.2 million, or $0.27 per diluted share, in the same period last year. For the nine months ended September 30, 2005, revenues increased 8.2% to $449.3 million from $415.2 million in the year ago period.
Revenues for the first nine months of 2005 increased in the rehabilitation segment 10.9% to $336.3 million and gross profit increased 14.3% to $81.2 million compared to the same period last year. Gross profit margin in the rehabilitation segment was 24.1% in the first nine months of 2005 compared to 23.4% in the first nine months of 2004. Operating income was $25.3 million in the first nine months of 2005 compared to $14.4 million in the same period last year.
The Company’s results for the nine months ended September 30, 2005 were favorably impacted by recognition in the second quarter of 2005 of a claim receivable from the Company’s excess insurance carrier related to rework for a project in Boston. The Company recognized a claim of $6.1 million for the estimated recoverable amounts related to the rework completed in 2004 and the work that was completed during the second and third quarters of 2005, which was offset by $2.4 million in costs to perform the rework on the remaining segment in 2005. As a result, the net benefit to the Company was $3.7 million ($2.6 million after-tax) in the second quarter of 2005.
Revenues in the tunneling segment decreased 8.6% to $85.1 million and gross loss increased 128.2% to $2.4 million in the first nine months of 2005 compared to the same period last year. During the first nine months of 2005, our tunneling operation experienced further margin deterioration on several projects. The tunneling segment posted an operating loss of $12.4 million in the first nine
 
 
 
months of 2005, compared to operating income of $1.0 million in the first nine months of 2004.
Tite Liner®’s revenue increased 48.3% to $27.9 million and gross profit increased 28.4% to $8.4 million in the first nine months of 2005 compared to the same period in 2004. Operating income was $4.6 million for the first nine months of 2005 compared to $3.6 million in the first nine months of 2004, which represents a 28.4% improvement.
The Company’s cash balance declined to $69.7 million at September 30, 2005 compared to $70.6 million at June 30, 2005 and $93.2 million at December 31, 2004, due primarily to working capital requirements to accommodate revenue growth. Receivables increased to $92.2 million at September 30, 2005 from $78.7 million at December 31, 2004, primarily due to revenue growth. Prepaid expenses and other current assets increased by $6.6 million compared to December 31, 2004 due primarily to the recognition of the $6.1 million claim against the Company’s excess liability insurance carrier in the second quarter of 2005. Accounts payable and accrued expenses increased by $15.0 million compared to December 31, 2004 due to business growth and improved working capital management. Capital expenditures were $5.2 million and $20.9 million in the third quarter and first nine months of 2005, respectively, compared to $8.9 million and $25.5 million in the third quarter and first nine months of last year, respectively.
Total contract backlog at September 30, 2005 was $302.1 million compared to $329.0 million at June 30, 2005, $328.3 million at December 31, 2004 and $271.1 million at September 30, 2004. Rehabilitation backlog increased $5.0 million, or 2.5% compared to June 30, 2005 and $79.1 million, or 61.4%, compared to September 30, 2004 due to growth in several North American regions. Tite Liner® backlog decreased by $2.1 million compared to June 30, 2005 due to progress made on projects in South America and Canada, but increased by $6.0 million, or 126.7%, compared to September 30, 2004 due to growth in a market driven by oil pricing. Tunneling backlog decreased by $29.8 million, or 26.3%, and $54.0 million, or 39.3%, compared to June 30, 2005 and September 30, 2004, respectively. Tunneling backlog has declined due to the Company’s focus on completion of existing jobs and improved, more selective bidding practices that are designed to obtain profitable work in alignment with tunneling’s core mining competency.
  The Company will host a conference call at 9:30 a.m. EDT on Friday, October 28. At such time, the call may be accessed by clicking on the Presentations tab on the Investor Relations page of the Company’s Web site (www.insituform.com) or by using the following link: www.shareholder.com/insituform/MediaList.com.
An audio archive of the webcast will be available approximately two hours after the call through www.insituform.com. The archive will be available for one week.
Insituform Technologies, Inc. is a leading worldwide provider of proprietary technologies and services for rehabilitating sewer, water and other underground piping systems without digging and disruption. More information about the Company can be found on its Internet site at www.insituform.com.
 
This news release contains forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) that are based on information currently available to the management of Insituform Technologies, Inc. and on management’s beliefs and assumptions. When used in this news release, the words “anticipate,” “estimate,”  “believes,”  “plans,” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors which could affect results include, among others, the competitive environment for the Company’s products and services, the availability and pricing of raw materials used in the Insituform® cured-in-place (“Insituform CIPP”) process, increased competition upon expiration of the Company’s patents or the inadequacy of one or more of its CIPP process patents to protect its operations, the geographical distribution and mix of the Company’s work, the ability of the Company to attract business at acceptable margins, foreseeable and unforeseeable issues in projects that make it difficult or impossible to meet projected margins, the timely award or cancellation of projects, political circumstances impeding the progress of work, the Company’s ability to remain in compliance with its financial covenants, the regulatory environment, weather conditions, the outcome of the Company’s pending litigation and other factors set forth in reports and documents filed by the Company with the Securities and Exchange Commission from time to time. The Company does not assume a duty to update forward-looking statements. Please use caution and do not place reliance on forward-looking statements.
 
 
 
 
 INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)

 
 
For the Three Months
Ended September 30,
 
For the Nine Months
Ended September 30,
  
 
 
2005
  
2004
  
2005
  
2004
  
Revenues
  
$
155,213
  
$
144,821
  
$
449,331
  
$
415,169
  
Cost of revenues
    
122,363
    
114,545
    
362,159
    
328,962
  
Gross profit
    
32,850
    
30,276
    
87,172
    
86,207
  
Operating expenses
    
23,391
    
22,201
    
69,588
    
67,167
  
Operating income
    
9,459
    
8,075
    
17,584
    
19,040
  
Other (expense) income:
                         
Interest expense
    
(2,167
)
  
(2,318
)
  
(6,461
)
  
(7,113
)
Interest income
    
395
    
326
    
1,362
    
950
  
Other
    
(247
)
  
(224
)
  
(411
)
  
(561
)
Total other expense
    
(2,019
)
  
(2,216
)
  
(5,510
)
  
(6,724
)
Income before taxes on income
    
7,440
    
5,859
    
12,074
    
12,316
  
Taxes on income
    
2,000
    
2,268
    
3,622
    
4,931
  
Income before minority
                          
interests and equity in
                          
earnings
    
5,440
    
3,591
    
8,452
    
7,385
  
Minority interests
    
(48
)
  
(65
)
  
(128
)
  
(166
)
Equity in earnings of
                          
affiliated companies
    
368
    
-
    
571
    
(35
)
Net income
    
5,760
    
3,526
    
8,895
    
7,184
  
                           
Earnings per share of common
                          
stock and common stock
                          
equivalents:
                          
Basic
  
$
0.21
  
$
0.13
  
$
0.33
  
$
0.27
  
Diluted
    
0.21
    
0.13
    
0.33
    
0.27
  
                           
Weighted average number of
                         
Shares:
                          
Basic
    
26,793
    
26,698
    
26,764
    
26,624
  
Diluted
    
27,045
    
26,840
    
26,942
    
26,763
  



 
  
For the Three Months
Ended September 30,
  
For the Nine Months
Ended September 30,
  
SEGMENT DATA
  
2005
  
2004
  
2005
  
2004
  
Revenues
                  
Rehabilitation
  
$
107,821
  
$
102,924
  
$
336,279
  
$
303,178
  
Tunneling
    
35,724
    
35,963
    
85,123
    
93,158
  
Tite Liner(R)
    
11,668
    
5,934
    
27,929
    
18,833
  
Total revenues
  
$
155,213
  
$
144,821
  
$
449,331
  
$
415,169
  
                           
Gross profit (loss)
                          
Rehabilitation
  
$
26,596
  
$
25,935
  
$
81,172
  
$
70,997
  
Tunneling
    
2,767
    
2,255
    
(2,438
)
  
8,638
  
Tite Liner(R)
    
3,487
    
2,086
    
8,438
    
6,572
  
Total gross profit
  
$
32,850
  
$
30,276
  
$
87,172
  
$
86,207
  
                           
Operating income (loss)
                          
Rehabilitation
  
$
8,513
  
$
7,309
  
$
25,320
  
$
14,400
  
Tunneling
    
(1 267
)
  
(303
)
  
(12,375
)
  
1,028
  
Tite Liner(R)
    
2,213
    
1,069
    
4,639
    
3,612
  
Total operating income
  
$
9,459
  
$
8,075
  
$
17,584
  
$
19,040
  




































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

   
September 30, 2005 
December 31, 2004
ASSETS
          
CURRENT ASSETS
          
Cash and cash equivalents
  
    $
  69,665
               
         $
      93,246
                 
Restricted cash
    
4,260
    
1,705
  
Receivables, net
    
92,216
    
78,665
  
Retainage
    
31,151
    
25,655
  
Costs and estimated earnings
              
in excess of billings
    
36,907
    
34,789
  
Inventories
    
15,525
    
13,339
  
Prepaid expenses and other assets
    
28,087
    
21,469
  
TOTAL CURRENT ASSETS
    
277,811
    
268,868
  
PROPERTY, PLANT AND EQUIPMENT,
              
less accumulated depreciation
    
96,474
    
90,846
  
OTHER ASSETS
              
Goodwill
    
131,535
    
131,540
  
Other assets
    
16,938
    
17,567
  
TOTAL OTHER ASSETS
    
148,473
    
149,107
  
       
 
 
 
 
TOTAL ASSETS
 
$
522,758
 
$
 508,821
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
CURRENT LIABILITIES
              
Current maturities of long-term
              
debt and line of credit
  
$
20,047
  
$
15,778
  
Accounts payable and accrued
              
expenses
    
100,377
    
85,398
  
Billings in excess of costs
              
and estimated earnings
    
14,862
    
12,809
  
TOTAL CURRENT LIABILITIES
    
135,286
    
113,985
  
LONG-TERM DEBT, less current
              
maturities
    
80,758
    
96,505
  
OTHER LIABILITIES
    
6,370
    
6,848
  
TOTAL LIABILITIES
    
222,414
    
217,338
  
MINORITY INTERESTS
    
1,707
    
1,647
  
TOTAL STOCKHOLDERS’ EQUITY
    
298,637
    
289,836
  
               
TOTAL LIABILITIES AND
              
STOCKHOLDERS’ EQUITY
  
$
522,758
  
$
508,821
  
               


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

   
For the Nine Months
Ended September 30,
  
   
2005
  
2004
  
Cash flows from operating activities:
          
Net income
  
$
8,895
  
$
7,184
  
Adjustments to reconcile to net cash
              
provided (used) by operating activities:
              
Depreciation
    
13,915
    
12,149
  
Amortization
    
1,220
    
1,570
  
Deferred income taxes
    
2,909
    
430
  
Write-off of debt issuance costs
    
-
    
226
  
Other
    
242
    
1,031
  
Change in restricted cash related to
             
operating activities
    
(2,555
)
  
462
  
Changes in operating assets and liabilities:
             
Receivables, including costs and
             
estimated earnings in excess of billings
    
(23,059
)
  
(18,359
)
Inventories
    
(2,439
)
  
(2,966
)
Prepaid expenses and other assets
    
(10,271
)
  
7,591
  
Accounts payable and accrued expenses
    
19,445
    
6,822
  
Net cash provided by operating activities
    
8,302
    
16,140
  
Cash flows from investing activities:
              
Capital expenditures
    
(20,870
)
  
(25,521
)
Proceeds from sale of fixed assets
    
715
    
1,904
  
Investments in joint venture
     –     (844 )
Investment in patents
    
(557
)
  
-
  
Net cash used in investing activities
    
(20,712
)
  
(24,461
)
Cash flows from financing activities:
              
Proceeds from issuance of common stock
              
and exercise of stock options
    
1,041
    
3,042
  
Proceeds from notes payable
    
6,179
    
-
  
Principal payments on notes payable
    
(1,890
)
  
-
  
Principal payments on long-term debt
    
(15,767
)
  
(18,914
)
Deferred financing charges paid
    
(260
)
  
(633
)
Change in restricted cash related to
              
financing activities
    
-
    
4,602
  
Net cash used in financing activities
    
(10,697
)
  
(11,903
)
Effect of exchange rate on cash
    
(474
)
  
4,037
  
Net decrease in cash and cash
              
equivalents for the period
    
(23,581
)
  
(16,187
)
Cash and cash equivalents,
             
beginning of period
    
93,246
    
93,865
  
Cash and cash equivalents, end of period
    
69,665
    
77,678
  


CONTACT: Insituform Technologies, Inc.
Christian G. Farman, Senior Vice President and CFO
(636) 530-8000