EXHIBIT 99.1
(INSITUFORM-TECH)(INSU) Insituform Technologies, Inc. Reports Second Quarter
2005 Results; Realigns North American CIPP Operations
Chesterfield, MO - August 2, 2005 - Insituform Technologies, Inc.
(Nasdaq National Market: INSU) today reported second quarter 2005 results.
The Company reported net income of $3.6 million, or $0.13 per
diluted share, for the second quarter of 2005 compared to $3.2 million, or
$0.12 per diluted share, in the same quarter a year ago. Year-to-date, net
income was $4.0 million, or $0.15 per diluted share compared to $3.7
million, or $0.14 per diluted share, in the same period last year. These
results reflect improvement in the Company's core rehabilitation and Tite
Liner(R) businesses, while the tunneling segment delivered operating losses
due to continued unfavorable performance on certain projects. Revenues in
the second quarter of 2005 increased 11.7% to $159.2 million from $142.4
million in the second quarter of 2004, while revenues for the first six
months of 2005 increased 9.3% to $295.4 million as compared to $270.3
million in the first six months of 2004.
For the second quarter of 2005 compared to the same quarter in
2004, revenues in the rehabilitation segment increased $18.6 million, or
17.8%, to $123.2 million and gross profit increased $6.0 million, or 24.3%,
to $30.8 million. Gross profit margin in the rehabilitation segment was
25.0% in the second quarter of 2005 compared to 23.7% in the second quarter
of 2004. Operating income in the rehabilitation segment was $11.7 million in
the second quarter of 2005 compared to $5.4 million in the second quarter of
2004.
Revenues in the rehabilitation segment increased $28.2 million, or
14.1%, to $228.5 million and gross profit increased $9.5 million, or 21.1%,
to $54.6 million in the first six months of 2005 compared to the same period
last year. Gross profit margin in the rehabilitation segment was 23.9% in
the first six months of 2005 compared to 22.5% in the first six months of
2004. Operating income in the rehabilitation segment was $16.8 million in
the first six months of 2005 compared to $7.1 million in the same period
last year.
The second quarter's rehabilitation results were favorably affected
by the recognition of a claim receivable from the Company's excess insurance
carrier related to rework for a project in Boston that was performed in the
first six months of 2004. In March 2005, the Company received a court ruling
in its favor, concluding that the Company's policy with its excess liability
insurance carrier provided coverage for costs associated with the rework of
the Boston project in excess of the primary comprehensive general liability
insurance. The Company's primary insurance carrier had previously paid its
portion of the claim related to the Boston project. In addition, in March
2005, the entire liner was inspected in accordance with the Company's
arrangement with the client, and it was determined that the one segment that
had not been treated in 2004 was in need of replacement in the same fashion
as all of the other segments replaced in 2004. Work began late in the second
quarter of 2005 to remove and repair this segment. The Company recognized a
claim of $6.1 million for the estimated recoverable amounts related to the
rework completed in 2004 and the work to be completed in 2005, which was
offset by the costs of performing the rework on the remaining segment,
estimated at $2.4 million. As a result, the net benefit to the Company's
gross profit for the second quarter of 2005 regarding activity surrounding
the Boston project was $3.4 million ($2.2 million after-tax). An additional
$0.3 million was recognized as pre-judgment interest related to the claim.
In the second quarter of 2005, the Company's rehabilitation
operations experienced revenue growth resulting from increased backlog in
most North American and European operations. Excluding the effect of the
insurance claim recognition, gross margin declined by 1.5 percentage points
due primarily to job execution issues, along with continuing effects of
increased commodity prices,
particularly in resin, on some of the longer-term projects where the Company
was unable to pass through these increases to its customers in real time.
The Company is undertaking an operational realignment of it North
American rehabilitation business units. The number of geographical regions
has been reduced from six to four in North America. The new structure is
intended to improve gross margins through enhanced execution and by
consistently aligning the roles and responsibilities of all field leadership
positions across all four business units.
Revenues in the tunneling segment decreased 14.1% to $26.8 million
in the second quarter of 2005 compared to $31.1 million in the second
quarter of 2004. In the first six months of 2005, tunneling revenues
decreased 11.3% to $50.7 million compared to $57.2 million in the first six
months of 2004. The decreases in revenues are due to lower backlog and more
selective bidding practices. The Company's tunneling business recorded
operating losses of $6.4 million and $9.8 million in the second quarter and
first six months of 2005, respectively. The most significant contributor to
the tunneling losses continued to be the Chicago project, which took a
further write-down of $4.8 million in the second quarter of 2005 and has
lost $4.9 million in the first six months of 2005. There were also further
adverse margin developments in the second quarter on certain other projects,
where in certain instances, the Company believes it will have a claim
against the client, which may benefit future periods. The Company is
currently in the process of developing a claim against one of its customers
which could approximate $2 million pre-tax and which has not been reflected
in income at this time.
Tite Liner(R)'s revenue increased $2.5 million, or 37.5%, to $9.2
million and gross profit increased $0.6 million, or 23.4%, to $2.9 million
in the second quarter of 2005 compared to the same quarter of 2004. Gross
profit margins were 31.9% and 35.6% in the second quarters of 2005 and 2004,
respectively. In the first six months of 2005, gross profit margin was 30.4%
compared to 34.8% for the same period last year. In 2005, there has been
more work in Tite Liner(R)'s South American operations, which traditionally
carries lower margins, causing the gross profit margin decline.
The Company improved its cash balance to $70.6 million at June 30,
2005 from $55.5 million at March 31, 2005, due primarily to improved
collections of receivables. Receivables remained relatively flat as compared
to the March 31, 2005 balance, despite an increase of $22.9 million in
revenue in the second quarter. Other current assets increased by $6.1
million as compared to March 31, 2005 and $8.9 million as compared to
December 31, 2004, due primarily to the recognition of the insurance claim
for the Boston project in the second quarter. Accounts payable and accrued
expenses increased $15.5 million and $16.7 million, respectively, as
compared to March 31, 2005 and December 31, 2004 due primarily to the growth
in the business and improved working capital management. Overall, cash flows
from operations provided $23.5 million in the quarter ended June 30, 2005.
Capital expenditures were $8.0 million in the second quarter and $15.6
million for the first six months of 2005, as compared to $8.9 and $16.6
million in the same periods in 2004.
Total contract backlog at June 30, 2005 was $327.7 million, a $33.6
million increase from March 31, 2005, and a $0.5 million decrease from
December 31, 2004. Rehabilitation backlog increased $21.5 million, or 11.8%
due to growth in several North American regions. Tunneling backlog increased
by $12.7 million, or 12.7%, from March 31, 2005, due primarily to the
signing of a $40 million project in Charleston, South Carolina during the
quarter. Compared to contract backlog at June 30, 2004, rehabilitation
backlog increased by $24.2 million, Tite Liner(R) backlog increased by $6.6
million and tunneling backlog decreased by $35.5 million.
The Company will host a conference call at 10:30 a.m. EDT on
Wednesday, August 3, 2005. 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.
2
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 of raw materials used in
the Insituform(R) 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, 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.
3
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,
2005 2004 2005 2004
Revenues $159,153 $142,434 $295,430 $270,348
Cost of revenues 129,618 111,870 239,796 214,417
Gross profit 29,535 30,564 55,634 55,931
Operating expenses 22,739 22,974 46,197 44,966
Operating income 6,796 7,590 9,437 10,965
Other (expense) income:
Interest expense (2,127) (2,258) (4,294) (4,795)
Interest income 676 255 967 624
Other (209) (173) (164) (337)
Total other expense (1,660) (2,176) (3,491) (4,508)
Income before taxes on income 5,136 5,414 5,946 6,457
Taxes on income 1,797 2,238 2,081 2,663
Income before minority
interests and equity in
earnings 3,339 3,176 3,865 3,794
Minority interests (40) (45) (79) (101)
Equity in earnings of
affiliated companies 289 25 202 (35)
Net income 3,588 3,156 3,988 3,658
Earnings per share of common
stock and common stock
equivalents
Basic $0.13 $0.12 $0.15 $0.14
Diluted 0.13 0.12 0.15 0.14
Average Number of Shares
Basic 26,754 26,685 26,750 26,587
Average Number of Shares
Diluted 26,851 26,782 26,869 26,718
4
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
SEGMENT DATA
Revenues
Rehabilitation $123,231 $104,625 $228,458 $200,254
Tunneling 26,761 31,145 50,711 57,195
Tite Liner(R) 9,161 6,664 16,261 12,899
Total revenues $159,153 $142,434 $295,430 $270,348
Gross profit (loss)
Rehabilitation $30,769 $24,757 $54,576 $45,062
Tunneling (4,158) 3,437 (3,893) 6,383
Tite Liner(R) 2,924 2,370 4,951 4,486
Total gross profit $29,535 $30,564 $55,634 $55,931
Operating income (loss)
Rehabilitation $11,684 $5,364 $16,807 $7,091
Tunneling (6,396) 835 (9,796) 1,331
Tite Liner(R) 1,508 1,391 2,426 2,543
Total operating income $6,796 $7,590 $9,437 $10,965
5
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands)
June 30, 2005 December 31, 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $70,583 $93,246
Restricted cash 1,394 1,705
Receivables, net 90,303 78,665
Retainage 28,584 25,655
Costs and estimated earnings
in excess of billings 34,710 34,789
Inventories 14,463 13,339
Prepaid expenses and other assets 30,323 21,469
TOTAL CURRENT ASSETS 270,360 268,868
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation 97,094 90,846
OTHER ASSETS
Goodwill 131,529 131,540
Other assets 16,742 17,567
TOTAL OTHER ASSETS 148,271 149,107
TOTAL ASSETS $515,725 $508,821
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt and line of credit $16,447 $15,778
Accounts payable and accrued
expenses 102,085 85,398
Billings in excess of costs
and estimated earnings 15,025 12,809
TOTAL CURRENT LIABILITIES 133,557 113,985
LONG-TERM DEBT, less current
maturities 80,774 96,505
OTHER LIABILITIES 8,042 6,848
TOTAL LIABILITIES 222,373 217,338
MINORITY INTERESTS 1,676 1,647
TOTAL STOCKHOLDERS' EQUITY 291,676 289,836
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $515,725 $508,821
6
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Six Months
Ended June 30,
2005 2004
Cash flows from operating activities:
Net income $3,988 $3,658
Adjustments to reconcile to net cash
provided (used) by operating activities:
Depreciation 8,960 8,164
Amortization 812 1,190
Deferred income taxes 512 35
Write-off of debt issuance costs - 226
Other (583) 3,256
Changes in operating assets and liabilities:
Change in restricted cash related to
operating activities 311 181
Receivables, including costs and
estimated earnings in excess of billings (17,643) (7,612)
Inventories (1,415) (2,192)
Prepaid expenses and other assets (8,099) 11,077
Accounts payable and accrued expenses 23,681 4,608
Net cash provided by operating activities 10,524 22,591
Cash flows from investing activities:
Capital expenditures (15,642) (16,598)
Proceeds from sale of fixed assets 523 473
Investment in joint venture - (844)
Net cash used in investing activities (15,119) (16,969)
Cash flows from financing activities:
Proceeds from issuance of common stock 325 2,913
Principal payments on long-term debt (15,750) (15,813)
Deferred financing charges paid (260) (633)
Change in restricted cash related to
financing activities - 4,602
Net cash used in financing activities (15,685) (8,931)
Effect of exchange rate on cash (2,383) (728)
Net decrease in cash and cash
equivalents for the period (22,663) (4,037)
Cash and cash equivalents,
beginning of period 93,246 93,865
Cash and cash equivalents, end of period 70,583 89,828
CONTACT: Insituform Technologies, Inc.
Christian G. Farman, Senior Vice President and CFO
(636) 530-8000
7