Insituform Technologies, Inc. (Nasdaq Global Select Market: INSU) today
reported fourth quarter income from continuing operations of $9.0
million, or $0.33 per diluted share. This compares to $10.3 million, or
$0.37 per diluted share, earned in the fourth quarter of 2006.
The shutdown of the Company’s tunneling
division was substantially completed by year-end and has been classified
as a discontinued operation accordingly for all periods reported.
Taking into account our discontinued operation, fourth quarter net
income was $10.1 million, or $0.37 per diluted share. This compares to
net income of $10.4 million, or $0.38 per diluted share, for the fourth
quarter of 2006.
The fourth quarter 2007 continuing operations results benefited from a
$4.5 million pre-tax gain from a litigation settlement.
For the full year of 2007, income from continuing operations was $12.9
million, or $0.47 per diluted share, as compared to $26.3 million, or
$0.96 per diluted share in 2006. The net loss from discontinued
operations for the full year of 2007 was $10.3 million, or $0.38 per
diluted share, as compared to a net loss from discontinued operations of
$1.6 million, or $0.06 per diluted share in 2006. The 2007 loss from
discontinued operations was principally impacted by pre-tax closure
charges of $17.9 million, or $12.1 million after-tax ($0.44 per diluted
share). Net income for the full year of 2007 was $2.5 million, or $0.09
per diluted share. This compares to net income in the full year of 2006
of $24.7 million, or $0.90 per diluted share.
Alfred L. Woods, Chairman and Interim Chief Executive Officer, made the
following comments on the quarter’s and the
full year 2007 results:
"2007 was a difficult year for Insituform, and
no one at this Company is happy with the modest profit we have reported.
These results are not indicative of the performance that is expected and
do not reflect the potential of our Company. We are taking aggressive
steps to achieve the kind of earnings growth we owe our stockholders,
and in the last quarter of 2007, we began to see measurable progress
from these efforts.
"Much has been said about the weakness that
has been experienced in the U.S. sewer rehabilitation market in 2007. We
have also said that we experienced some further operational issues in a
few of our U.S. regional operations this past year. Those weaker
regional operations experienced significant fourth quarter margin
improvements. While our U.S. CIPP business volume is not yet where it
needs to be, we did see improvement in both backlog volume and backlog
margin in the fourth quarter of 2007 in many U.S. regional markets. We
are also encouraged by the fact that we experienced 12% growth in total
backlog orders for North American rehabilitation in the second half of
2007 over the first half of 2007.
"Operating expenses in our rehabilitation
segment were $2.9 million lower in the fourth quarter of 2007 than in
the same period in 2006. In fact, rehabilitation operating expenses for
the second half of 2007 were $4.3 million lower than in the second half
of 2006. Our total operating expenses decreased $2.6 million in 2007, or
2.8%, from 2006. The decrease occurred partly as a result of reduced
field support expenses in rehabilitation, but also as a result of
decreases in corporate spending. The fourth quarter reductions in
operating expenses were primarily attributable to our initiative to
realign our operating expenses. We have been able to achieve these
savings without compromising the investments we are making in our
international expansion and in Insituform Blue™.
"In 2008, we are continuing this focus on
cost realignment. We have targeted an annualized $12 million in savings
to be achieved without jeopardizing our ongoing strategic initiatives.
We will reinvest $4 million from these savings into our strategic
initiatives. We fully expect to realize the targeted savings by the end
of 2008. This realigned cost structure will enable us to be more
profitable and allow us to more economically invest in our strategic
growth initiatives.
"Last quarter, we discussed aggressive
pursuit of geographic diversification of our business as a response to
the weak market conditions in our U.S. rehabilitation segment. Since
then, we have won several major international contracts, including two
sewer rehabilitation contracts in Delhi, India, totaling $35.1 million,
the largest municipal CIPP project in our history. We won more than $13
million of water and sewer projects in Hong Kong, the majority of which
are Insituform Blue™ projects. We fully
expect to have $80 million in backlog by the end of 2008 in our new
international ventures. We are also excited about growth that we have
experienced in our other international businesses. We recently announced
that we won our largest sewer rehabilitation project in the United
Kingdom to date, totaling $14.7 million. Our Canadian and European
businesses performed extremely well during the fourth quarter and ended
the year with strong backlog as well.
"While revenues in our Tite Liner business
were down in 2007, our overall profitability improved. Our operating
margins improved to 21.9% in 2007 from 19.2% in 2006. We also ended the
year with a record balance in backlog at $26.2 million.
"I am also encouraged with the progress in
the continued development and validation of our Insituform Blue™
products. We performed a number of projects, both domestically and
internationally, and we gained vital experience and knowledge that will
set us up well for 2008 and beyond. We expect that Insituform Blue™
products will contribute modest profitability in 2008.
"During the fourth quarter, we substantially
completed the shutdown of our tunneling division. As a result, we were
able to classify the business as discontinued operations in the quarter.
The remaining tunneling shutdown activities will be completed by the
middle of the second quarter of 2008, and we anticipate only minor
earnings impact in 2008. Substantially all of the shutdown charges were
recorded by year-end 2007, and equipment sales were better than
anticipated. We ended the year with $17.9 million in closure charges,
versus an original estimate of $21 million.
"As we have closed out 2007, I feel confident
that 2008 will bring about significant improvement in our performance.
This management team is focused on delivering the results that our
stakeholders expect and deserve.”
Consolidated revenues for the fourth quarter of 2007 decreased $5.4
million, or 4.0%, from the same period in 2006. The consolidated results
were negatively impacted by the continued weakness in the U.S. sewer
rehabilitation market, along with a slight decrease in Tite Liner
revenues, driven principally by market weakness in Canada. While there
was a decline in our North American CIPP revenues, we experienced 33%
growth in revenues in our European contracting operations, which have
been fueled by our expansion into eastern Europe, and continued growth
in most western European countries.
Consolidated gross profit for the fourth quarter of 2007 decreased $8.3
million, or 24.9%, from the same period in 2006. Gross profit was
primarily impacted by the decline in revenues and margins in the U.S.
sewer rehabilitation business. Gross profit improved in the European
contracting operations by almost 31% due to revenue growth.
Consolidated operating expenses in the fourth quarter of 2007 decreased
$2.8 million, or 12.0%, to $20.2 million from $23.0 million in the same
period in 2006, primarily due to decreases in field support expenses in
rehabilitation as a result of restructuring efforts. A portion of the
decrease in the fourth quarter 2007 operating expenses related to a
favorable impact of the voluntary cancellation of certain equity
compensation of senior management. There were also decreases in
corporate operating expenses due to our ongoing cost reduction efforts.
As mentioned earlier, the fourth quarter results reflect the settlement
of Insituform Technologies, Inc. et al. v. Cat Contracting et al. In
1990, Insituform initiated proceedings against Cat Contracting, Inc.,
Michigan Sewer Construction Company, Inc. and Inliner U.S.A., Inc.
(subsequently renamed FirstLiner USA, Inc.), along with another party,
alleging infringement of certain of Insituform’s
in-liner patents. In December 2007, Insituform reached a settlement in
principle, for the amount of $4.5 million, in exchange for releases of
the various parties. On February 15, 2008, Insituform received proceeds
of $4.5 million in connection with the settlement.
Consolidated revenues in 2007 declined $31.8 million, or 6.0%, to $495.6
million from $527.4 million in 2006. This decline was driven essentially
by the reduction in U.S. rehabilitation business in 2007. Gross profit
declined $29.9 million, or 23.2%, to $99.1 million from $129.0 million
in 2006. Margins were compressed in 2007 due primarily to the impact of
reduced revenues in the U.S., coupled with a shift to smaller diameter
installations, which are less profitable. The first quarter of 2007 was
the most notable period of decline year over year for gross profit, due
to these factors, as well as weak performance in several U.S. regional
operations. Operating expenses declined $2.6 million, or 2.8%, to $90.1
million from $92.7 million in 2006, due in large part to the same
factors described in the fourth quarter of 2007. Operating income
decreased $22.8 million, or 62.7%, to $13.5 million from $36.3 million
in 2006.
Total contract backlog was $260.3 million at December 31, 2007 compared
to $224.6 million at September 30, 2007 and $214.5 million at December
31, 2006.
At December 31, 2007, backlog in the rehabilitation segment increased by
12.4% to $234.1 million, compared to $208.3 million at September 30,
2007. This increase was primarily driven by the acquisition of $35.1
million in contracts in India. Backlog was relatively flat in North
America, as compared to September 30, 2007, and it was down relative to
backlog at December 31, 2006. However, as mentioned earlier, backlog
orders increased by 12% in the second half of 2007 over the first half
of 2007. Europe experienced a slight decline in backlog in the fourth
quarter of 2007, due to strong revenue generation, but there was a 13.4%
increase from the prior year’s ending
backlog. Total backlog in the rehabilitation segment increased by $32.4
million, or 16.1%, as compared to $201.7 million in backlog at December
31, 2006.
Contract backlog at December 31, 2007 reached the highest level in the
Tite Liner segment’s history, with an
increase of $9.9 million, or 60.7%, to $26.2 million from $16.3 million
at September 30, 2007. This represented a 105% increase from December
31, 2006 backlog, which was $12.8 million.
Unrestricted cash increased to $79.0 million at December 31, 2007 from
$78.0 million at September 30, 2007 due to stronger cash collections,
along with proceeds from the sale of certain tunneling assets. During
the fourth quarter, there were $5 million in repayments against the
Company’s line of credit facility. Year-end
unrestricted cash compares to unrestricted cash of $96.4 million at
December 31, 2006. This decrease was principally driven by senior debt
repayments of $15.7 million in February 2007.
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.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor” for forward-looking statements. The
Company makes forward-looking statements in this news release that
represent the company’s beliefs or
expectations about future events or financial performance. These
forward-looking statements are based on information currently available
to the company and on management’s beliefs,
assumptions, estimates and projections and are not guarantees of future
events or results. When used in this document, the words "anticipate,” "estimate,” "believe,” "plan,” "intend,” "may,” "will”
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 known and unknown risks,
uncertainties and assumptions, including those referred to from time to
time in Insituform Technologies Inc.’s
filings with the Securities and Exchange Commission. In light of these
risks, uncertainties and assumptions, the forward-looking events
discussed may not occur. In addition, our actual results may vary
materially from those anticipated, estimated, suggested or projected.
Except as required by law, we do not assume a duty to update
forward-looking statements, whether as a result of new information,
future events or otherwise. Please use caution and do not place reliance
on forward-looking statements. All forward-looking statements made by
the Company in this news release are qualified by these cautionary
statements.
Insituform®, the Insituform®
logo, Insituform Blue™, and Tite Liner®
are the registered and unregistered trademarks of Insituform
Technologies, Inc. and its affiliates.
INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
For the Three Months Ended December 31,
For the Years Ended December 31, 2007
2006 2007
2006
Revenues
$
129,979
$
135,422
$
495,570
$
527,419
Cost of revenues
104,943
102,103
396,462
398,416
Gross profit
25,036
33,319
99,108
129,003
Operating expenses
20,233
23,003
90,078
92,692
Gain on settlement of litigation
(4,500
)
-
(4,500
)
-
Operating income
9,303
10,316
13,530
36,311
Other income (expense):
Interest expense
(1,228
)
(1,692
)
(5,368
)
(6,834
)
Interest income
1,110
1,347
3,458
3,888
Other
407
3,506
1,451
3,799
Total other income (expense)
289
3,161
(459
)
853
Income before taxes (benefit) on income
9,592
13,477
13,071
37,164
Taxes (benefit) on income
456
3,772
(149
)
11,826
Income before minority interests and equity in earnings of
affiliated companies
9,136
9,705
13,220
25,338
Minority interests
(273
)
(74
)
(525
)
(316
)
Equity in earnings of affiliated companies
179
648
171
1,281
Income from continuing operations
9,042
10,279
12,866
26,303
Income (loss) from discontinued operations
1,099
155
(10,323
)
(1,625
)
Net income
$
10,141
$
10,434
$
2,543
$
24,678
Earnings (loss) per share: Basic:
Income from continuing operations
$
0.33
$
0.37
$
0.47
$
0.97
Income (loss) from discontinued operations
0.04
0.01
(0.38
)
(0.06
)
Net income
$
0.37
$
0.38
0.09
$
0.91
Diluted:
Income from continuing operations
$
0.33
$
0.37
$
0.47
$
0.96
Income (loss) from discontinued operations
0.04
0.01
(0.38
)
(0.06
)
Net income
$
0.37
$
0.38
0.09
$
0.90
Weighted average number of shares:
Basic
27,469,613
27,101,908
27,330,835
27,043,651
Diluted
27,599,457
27,538,038
27,644,928
27,504,268
INSITUFORM TECHNOLOGIES, INC. SEGMENT DATA
(Unaudited)
(In thousands, except per share amounts)
For the Three Months Ended December 31,
For the Years Ended December 31, 2007
2006 2007
2006
Revenues:
Rehabilitation
$
121,269
$
126,074
$
453,964
$
481,220
Tite Liner
8,710
9,348
41,606
46,199
Total revenues
$
129,979
$
135,422
$
495,570
$
527,419
Gross profit:
Rehabilitation
$
22,097
$
30,189
$
83,179
$
113,625
Tite Liner
2,939
3,130
15,929
15,378
Total gross profit
$
25,036
$
33,319
$
99,108
$
129,003
Operating income:
Rehabilitation
$
8,019
(1)
$
8,706
$
4,410
(1)
$
27,458
Tite Liner
1,284
1,610
9,120
8,853
Total operating income
$
9,303
$
10,316
$
13,530
$
36,311
(1) Includes $4.5 million of litigation
settlement related to the rehabilitation segment.
INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands)
December 31, 2007
December 31, 2006
Assets Current Assets
Cash and cash equivalents
$
78,961
$
96,389
Restricted cash
2,487
934
Receivables, net
85,774
83,009
Retainage
23,444
27,509
Costs and estimated earnings in excess of billings
40,590
31,425
Inventories
17,789
17,665
Prepaid expenses and other assets
28,975
25,084
Current assets of discontinued operations
31,269
28,349
Total current assets
309,289
310,364
Property, plant and equipment, less accumulated depreciation
73,368
76,432
Other assets
Goodwill
122,560
122,620
Other assets
26,532
15,342
Total other assets
149,092
137,962
Non-current assets of discontinued operations
9,391
25,311
Total Assets
$
541,140
$
550,069
Liabilities and Stockholders’
Equity Current liabilities
Current maturities of long-term debt and notes payable
$
1,097
$
16,814
Accounts payable and accrued expenses
87,935
96,321
Billings in excess of costs and estimated earnings
8,602
9,511
Current liabilities of discontinued operations
14,830
13,859
Total current liabilities
112,464
136,505
Long-term debt, less current maturities
65,000
65,046
Other liabilities
7,465
3,686
Non-current liabilities of discontinued operations
953
4,040
Total liabilities
185,882
209,277
Minority interests
2,717
2,181
Stockholders’ equity
Preferred stock, undesignated, $.10 par –
shares authorized 2,000,000; none Outstanding
-
-
Common stock, $.01 par – shares
authorized 60,000,000; shares issued 27,397,973 and 29,597,044;
shares outstanding 27,397,973 and 27,239,580
275
296
Additional paid-in capital
104,332
149,802
Retained earnings
238,976
236,763
Treasury stock – at cost, 0 and 2,357,464
shares
-
(51,596
)
Accumulated other comprehensive income
8,958
3,346
Total stockholders’ equity
352,541
338,611
Total Liabilities and Stockholders’
Equity
$
541,140
$
550,069
INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Year Ended December 31, 2007
2006
Cash flows from operating
activities: Net income
$
2,543
$
24,678
Loss from discontinued operations
10,323
1,625
Income from continuing operations
12,866
26,303
Adjustments to reconcile to net cash provided by operating
activities:
Depreciation and amortization
16,252
16,620
(Gain) loss on sale of assets/investments
389
(3,223
)
Equity-based compensation expense
2,766
4,254
Write-off of debt issuance costs
162
–
Tax benefits related to stock option exercises
(1
)
(772
)
Deferred income taxes
(4,205
)
908
Other
(442
)
5,070
Changes in operating assets and liabilities:
Change in restricted cash related to operating activities
(1,569
)
4,653
Receivables net, retainage and costs and estimated earnings in
excess of billings
(2,039
)
(17,357
)
Inventories
2,008
(1,766
)
Prepaid expenses and other assets
(2,857
)
(1,922
)
Accounts payable and accrued expenses
(13,755
)
10,837
Net cash provided by operating activities of continuing operations
9,575
43,605
Net cash provided by (used in) operating activities of
discontinued operations
(1,532
)
(3,863
)
Net cash provided by operating activities
8,043
39,742
Cash flows from investing
activities:
Capital expenditures
(14,978
)
(19,713
)
Proceeds from sale of fixed assets
2,610
7,296
Liquidation of life insurance cash surrender value
–
1,423
Net cash used in investing activities of continuing operations
(12,368
)
(10,994
)
Net cash provided by investing activities of discontinued
operations
1,530
3,861
Net cash used in investing activities
(10,838
)
(7,133
)
Cash flows from financing
activities:
Proceeds from issuance of common stock
4,247
4,122
Additional tax benefit from stock option exercises recorded in
additional paid-in capital
148
772
Proceeds from notes payable
1,966
2,662
Principal payments on notes payable
(1,959
)
(4,101
)
Principal payments on long-term debt
(15,768
)
(15,735
)
Changes in restricted cash related to financing activities
–
(106
)
Net cash used in financing activities
(11,366
)
(12,386
)
Effect of exchange rate changes on cash
(3,269
)
(899
)
Net (decrease) increase in cash and cash equivalents for the
period
(17,430
)
19,324
Cash and cash equivalents, beginning of year
96,393
77,069
Cash and cash equivalents, end of year
$
78,963
$
96,393
Bookmarken
