EX-99.1 2 c93544exv99w1.txt EARNINGS RELEASE EXHIBIT 99.1 (INSITUFORM-TECH)(INSU) Insituform Technologies, Inc. Reports Fourth Quarter and Year-End 2004 Results Chesterfield, MO - March 16, 2005 - Insituform Technologies, Inc. (Nasdaq National Market: INSU) today reported fourth quarter and 2004 year-end results and debt covenant resolution. The Company posted a fourth quarter net loss of $6.6 million, or $(0.25) per diluted share, primarily reflecting losses in its tunneling segment. The Company reported a net loss of $11.0 million, or $(0.41) per diluted share, in the fourth quarter of 2003. For the year ended December 31, 2004, net income was $0.6 million, or $0.02 per share, compared to $3.5 million, or $0.13 per share, reported a year ago. The fourth quarter net loss was greater than the estimate previously reported on January 27, 2005 due primarily to the results of a comprehensive project-by-project review of all the work in the tunneling segment during the fourth quarter of 2004 and the early part of 2005. As a result of this review, the estimated margins on the projects referred to above were evaluated and adjusted accordingly. Primarily as a result of the tunneling losses, the Company violated one of its debt covenants under its debt agreements at December 31, 2004. The Company has negotiated amendments to its debt agreements with less restrictive financial covenants in place. The Company believes it will maintain compliance with these new covenants throughout 2005 and beyond. The Company's other businesses, Rehabilitation and Tite Liner(R), performed generally within expectations during 2004, except for two North American regional operations. For the year, Rehabilitation revenues increased 11.6% to $409.4 million compared to $366.7 million in 2003. Gross profit similarly increased 12.0% to $94.3 million compared to $84.2 million in 2003. The gross profit margin remained stable at 23.0% in both 2004 and 2003. Despite a revenue increase from the third quarter of 2004 to the fourth quarter of 2004, the Rehabilitation segment experienced a decline in gross profit of $2.6 million from quarter to quarter, which represented a 3.3 basis point decrease in gross margin percentage. Two regions in North America experienced a decline in profitability due to higher subcontractor utilization, which carried lower margins, coupled with the effects of under-utilized labor and equipment resulting from temporary backlog shortfalls and work release delays. In addition, the Company experienced an increase in fuel and resin costs in the fourth quarter of 2004 of approximately $1.1 million compared to the third quarter of 2004. This increase in raw materials is expected to continue in 2005, as the underlying commodity prices remain at higher levels. Tite Liner(R) improved its 2004 results over 2003. Revenues were up 19.0% to $24.5 million in 2004 compared to $20.6 million in 2003. Gross profit increased 28.1% to $8.3 million compared to $6.5 million in 2003. Gross profit margins improved to 34.0% in 2004 from 31.6% in 2003. The successful completion of a significant foreign project along with improved pricing contributed to Tite Liner(R)'s success in 2004. Total contract backlog at December 31, 2004 was $328.3 million, an increase of $120.2 million from December 31, 2003. In the Rehabilitation segment, contract backlog was $190.4 million, reflecting an increase of $78.6 million, or 70.3%, from the prior year, and an increase of $28.8 million, or 17.8%, from September 30, 2004. This increase is reflective of stronger markets in the United States and Europe, along with management's investment in business development and expanding the Company's sales force during the year. Contract backlog also increased during 2004 from the prior year in the tunneling and Tite Liner(R) segments by $40.0 million and $1.6 million, respectively. As previously reported on January 27, 2005, the Company's unrestricted cash balance was $93.2 million at December 31, 2004 compared to $93.9 million at the end of 2003. This position was achieved after $35.2 million in capital expenditures and $19.0 million in debt repayments in 2004. The Company also received $9.1 million in tax refunds and $3.6 million from the exercise of stock options during the year. The Company expects to use these funds for a variety of purposes including, among other things, working capital to fund growth, capital and operating expenses, research and development of new products and development of new markets. A regularly scheduled debt amortization payment of $17.7 million, inclusive of interest, was made on February 14, 2005. The losses in the tunneling segment discussed above primarily stem from a significant adverse gross margin adjustment on one large tunneling project in Chicago. The total gross adjustment was $7.3 million during the fourth quarter of 2004, and $11.0 million for the year ended December 31, 2004. During the third quarter of 2004, the Company recorded a downward adjustment to the gross margin on this project of $3.7 million. These margin adjustments stem from additional labor and related overhead costs due to delays and issues encountered while completing concrete finishing work. In addition, the project suffered from higher-than-anticipated material costs related to inflationary increases including increased concrete and steel pricing. The project had been essentially on target until the later stages. There also were unexpected job costs on a number of other tunneling projects during the fourth quarter of 2004 caused by higher-than-expected material costs and unfavorable labor productivity issues. Several projects incurred costs related to changed or differing site conditions, which will likely have associated claims that may benefit future periods. The Company has successfully implemented certain strategic initiatives over the past year. A few examples include: o A study of the Company's logistics was conducted, and improvements were implemented, which are expected to yield meaningful cost savings in the coming years. o The manufacturing facility in Batesville, Mississippi, completed its expansion and consolidation during the year and, in the second half of 2004, delivered cost savings due to efficiency gains and reductions from the elimination of higher third-party supply costs. o Due to stepping up crew training and continuing safety efforts, a 30% improvement in our safety recordable incident rate was achieved during the year in North America. o Quality was improved during the year, with sewer back-ups down by more than 40% in 2004 compared to 2003. o The research and development team made significant strides in developing and commercializing the highly efficient use of steam in the CIPP curing process. These advances allowed the Company to install more than 400,000 feet of CIPP using steam in 2004, while advancing the technical envelope for the use of steam in varying conditions. o The growth in two of our core businesses (Rehabilitation and Tite Liner(R)) is encouraging and reflects our increased professional sales group and the increased number of Insituform CIPP Process crews employed. Finally, the outlook for 2005 is encouraging, but not without challenges. Already in the first quarter of 2005, the Company has experienced continued margin pressure from increased resin costs as well as low crew productivity as a result of severe weather conditions in certain regions. The Company also expects to continue to work through various issues in the tunneling business. However, in the core businesses, the Company expects to benefit from an estimated 9.0% increase in 2005 in sewer rehabilitation spending compared to 2004, as reported in Underground Construction Magazine (February 2005). 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, which 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 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 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 (LOSS) (In thousands, except per share amounts)

For the Three Months For the Twelve Months Ended December 31, Ended December 31, 2004 2003 2004 2003 Revenues $ 127,429 $ 121,786 $ 542,598 $ 487,272 Cost of revenues 114,137 104,083 443,099 384,614 Gross profit 13,292 17,703 99,499 102,658 Operating expenses 24,154 25,354 91,321 81,067 Operating income (loss) (10,862) (7,651) 8,178 21,591 Other (expense) income: Interest expense (2,192) (2,472) (9,305) (8,235) Other 822 (1,847) 1,212 (1,274) Total other expense (1,370) (4,319) (8,093) (9,509) Income (loss) before taxes on income (12,232) (11,970) 85 12,082 Taxes (benefit) (5,766) (2,572) (835) 6,809 Income (loss) before minority interests, equity in earnings (loss) and discontinued operations (6,466) (9,398) 920 5,273 Minority interests 60 (67) (107) (211) Equity in losses of affiliated companies (181) (635) (216) (434) Income (loss) from continuing operations (6,587) (10,100) 597 4,628 Loss from discontinued operations -- (872) -- (1,103) Net income (loss) $ (6,587) $ (10,972) $ 597 $ 3,525 Earnings per share: Basic: Income (loss) from continuing operations $ (0.25) $ (0.38) $ 0.02 $ 0.17 Loss from discontinued operations -- (0.03) -- (0.04) Net income (loss) $ (0.25) $ (0.41) $ 0.02 $ 0.13 Diluted: Income (loss) from continuing operations $ (0.25) $ (0.38) $ 0.02 $ 0.17 Loss from discontinued operations -- (0.03) -- (0.04) Net income (loss) $ (0.25) $ (0.41) $ 0.02 $ 0.13 Weighted-average common shares- basic 26,726 26,457 26,649 26,471 Weighted-average common and equivalent shares- diluted 26,993 26,606 26,810 26,621

SEGMENT DATA Revenues Rehabilitation $ 106,230 $ 90,984 $ 409,408 $ 366,690 Tunneling 15,571 25,439 108,729 100,020 Tite Liner 5,628 5,363 24,461 20,562 Total revenues $ 127,429 $ 121,786 $ 542,598 $ 487,272 Gross profit (loss) Rehabilitation $ 23,309 $ 13,737 $ 94,305 $ 84,215 Tunneling (11,767) 2,221 (3,128) 11,946 Tite Liner 1,750 1,745 8,322 6,497 Total gross profit $ 13,292 $ 17,703 $ 99,499 $ 102,658 Operating income (loss) Rehabilitation $ 2,733 $ (8,028) $ 17,132 $ 14,465 Tunneling (14,238) (337) (13,208) 3,956 Tite Liner 643 714 4,254 3,170 Total operating income (loss) $ (10,862) $ (7,651) $ 8,178 $ 21,591 INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands)

December 31, 2004 December 31, 2003 ASSETS CURRENT ASSETS Cash and cash equivalents $ 93,246 $ 93,865 Restricted cash 1,705 6,126 Receivables, net 78,665 90,814 Retainage 25,655 24,902 Costs and estimated earnings in excess of billings 34,789 27,853 Inventories 13,339 12,935 Prepaid expenses and other assets 21,469 19,515 Assets related to discontinued operations -- 1,263 TOTAL CURRENT ASSETS 268,868 277,273 PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation 90,846 75,667 OTHER ASSETS Goodwill 131,540 131,613 Other assets 17,567 23,807 TOTAL OTHER ASSETS 149,107 155,420 TOTAL ASSETS $ 508,821 $ 508,360 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt and line of credit $ 15,778 $ 16,938 Accounts payable and accrued expenses 85,398 82,670 Billings in excess of costs and estimated earnings 12,809 8,495 Liabilities related to discontinued operations -- 1,770 TOTAL CURRENT LIABILITIES 113,985 109,873 LONG-TERM DEBT, less current maturities 96,505 114,323 OTHER LIABILITIES 6,848 3,530 TOTAL LIABILITIES 217,338 227,726 MINORITY INTERESTS 1,647 1,465 TOTAL STOCKHOLDERS' EQUITY 289,836 279,169 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 508,821 $ 508,360

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

For the Twelve Months Ended December 31, 2004 2003 Cash flows from operating activities: Net income $ 597 $ 3,525 Loss from discontinued operations -- 1,103 Income from continuing operations 597 4,628 Adjustments to reconcile net cash provided by operating activities: Depreciation 17,502 15,521 Amortization 1,936 1,595 (Gain) loss on sale of assets/investment 610 1,375 Write-off of debt issuance costs 226 -- Change in restricted cash related to operating activities (181) 2,461 Reserve for notes receivable -- 1,090 Other 4,922 1,912 Asset impairment and restructuring charge -- (261) Deferred income taxes 1,481 (1,624) Changes in operating assets and liabilities, net of purchased businesses 15,464 5,157 Net cash provided by operating activities of continuing operations 42,557 31,854 Net cash provided by operating activities of discontinued operations -- 5,192 Net cash provided by operating activities 42,557 37,046 Cash flows from investing activities: Capital expenditures (35,195) (19,929) Proceeds from sale of fixed assets 1,904 1,365 Proceeds from sale of investment -- -- Net proceeds from sale of businesses (discontinued operations) -- -- Purchases of businesses, net of cash acquired -- (7,776) Other investing activities (844) -- Net cash used by investing activities (34,135) (26,340) Cash flows from financing activities: Proceeds from the issuance of common stock 3,580 430 Purchases of treasury stock -- (1,597) Proceeds from long-term debt -- 65,112 Principal payments on long-term debt and lines of credit, net (18,978) (50,224) Change in restricted cash related to financing activities 4,602 (4,602) Deferred financing costs paid (633) (867) Net cash (used) provided in financing activities (11,429) 8,252 Effect of exchange rate changes on cash 2,388 3,506 Net increase (decrease) in cash and cash equivalents (619) 22,464 Cash and cash equivalents, beginning of period 93,865 71,401 Cash and cash equivalents, end of period 93,246 93,865

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