SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
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 Identification No.)
incorporation or organization)
702 SPIRIT 40 PARK DRIVE
CHESTERFIELD, MISSOURI 63005
--------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 636-530-8000
---------------
Securities registered pursuant to Section 12(b) of the Act: NONE
------
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
-------------------
Class A Common Shares, $.01 par value
Preferred Stock Purchase Rights
Indicate by a 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 as 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of March 15, 2002 was $573,500,807(1).
-----------------
(1) The aggregate market value as of March 15, 2002 was calculated in accordance
with the provisions of Form 10-K, and excludes stock held by affiliates of the
registrant (i.e., executive officers and directors of the registrant and persons
holding 10% or more of the registrant's stock). The aggregate market value
without these exclusions, as reported as of March 15, 2002, was $712,380,839.
Shares of the registrant's Class A Common Shares, $.01 par value,
outstanding as of March 15, 2002: 26,521,997 shares
DOCUMENTS INCORPORATED BY REFERENCE: Proxy Statement to be filed with
respect to the 2002 Annual Meeting of Stockholders-Part III.
Explanatory Note
This Amendment No. 1 to Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 amends Part IV, Item 14, "Exhibits, Financial Statement
Schedules, and Reports on Form 8-K" to correct clerical inaccuracies in Notes 7,
8, 16, and 18.
The remaining items in the registrant's Annual Report on Form 10-K
remain unchanged.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements:
The consolidated financial statements filed in this Annual Report on
Form 10-K/A are listed in the attached Index to Consolidated Financial
Statements and Schedules.
2. Financial Statement Schedules:
No financial statement schedules are included herein because they are
not required or are not applicable or the required information is contained in
the consolidated financial statements or notes thereto.
3. Exhibits:
The exhibits required to be filed as part of this Annual Report on Form
10-K/A are listed in the attached Index to Exhibits.
(b) Current Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: April 12, 2002 INSITUFORM TECHNOLOGIES, INC.
By: /s/ Joseph A. White
------------------------------------------
Joseph A. White
Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
* April 12, 2002
--------------------------------------------
Anthony W. Hooper Principal Executive Officer and
Director
/s/ Joseph A. White April 12, 2002
--------------------------------------------
Joseph A. White Principal Financial and Accounting
Officer
* April 12, 2002
--------------------------------------------
Robert W. Affholder Director
* April 12, 2002
--------------------------------------------
Paul A. Biddelman Director
* April 12, 2002
--------------------------------------------
Stephen P. Cortinovis Director
* April 12, 2002
--------------------------------------------
Juanita H. Hinshaw Director
* April 12, 2002
--------------------------------------------
Thomas Kalishman Director
Signature Title Date
--------- ----- ----
* April 12, 2002
--------------------------------------------
Sheldon Weinig Director
* April 12, 2002
--------------------------------------------
Alfred L. Woods Director
*By: /s/ Joseph A. White
-------------------------
Joseph A. White
(Attorney-in-Fact)
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . F-2
Report of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income for each of the three years
in the period ended December 31, 2001 . . . . . . . . . . . . . . . . . F-4
Consolidated Balance Sheets, December 31, 2001 and 2000 . . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended December 31, 2001 . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 2001 . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . F-8
No Financial Statement Schedules are included herein because they are
not required or not applicable or the required information is contained in the
consolidated financial statements or notes thereto.
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders of
Insituform Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Insituform
Technologies, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insituform Technologies, Inc.
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 1, 2002
F-2
REPORT OF MANAGEMENT
Management is responsible for the preparation, integrity and objectivity of
financial information included in this annual report. The financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts. Although the financial
statements reflect all available information and management's judgment and
estimates of current conditions and circumstances, and are prepared with the
assistance of specialists within and outside the Company, actual results could
differ from those estimates.
Management has established and maintains an internal control structure to
provide reasonable assurance that assets are safeguarded against loss from
unauthorized use or disposition, that the accounting records provide a reliable
basis for the preparation of financial statements and that such financial
statements are not misstated due to material fraud or error. Internal controls
include the careful selection of associates, the proper segregation of duties
and the communication and application of formal policies and procedures that are
consistent with high standards of accounting and administrative practices. An
important element of this system is an internal audit program.
Management continually reviews, modifies and improves its systems of accounting
and controls in response to changes in business conditions and operations and in
response to recommendations in the reports prepared by the independent public
accountants and internal auditors.
Management believes that it is essential for the Company to conduct its business
affairs in accordance with the highest ethical standards and in conformity with
the law. This standard is described in the Company's policies on business
conduct, which are publicized throughout the Company.
F-3
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands, except per share amounts)
2001 2000 1999
--------- --------- ---------
REVENUES $ 445,310 $ 409,434 $ 339,883
COST OF REVENUES 320,462 272,361 221,232
--------- --------- ---------
GROSS PROFIT 124,848 137,073 118,651
SELLING, GENERAL AND ADMINISTRATIVE 66,955 68,825 62,393
AMORTIZATION EXPENSE 7,001 5,282 5,589
RESTRUCTURING CHARGES 4,127 -- --
--------- --------- ---------
OPERATING INCOME 46,765 62,966 50,669
--------- --------- ---------
OTHER (EXPENSE) INCOME:
Interest expense (9,339) (9,347) (9,031)
Other 2,309 3,732 3,797
--------- --------- ---------
TOTAL OTHER EXPENSE (7,030) (5,615) (5,234)
--------- --------- ---------
INCOME BEFORE TAXES ON INCOME 39,735 57,351 45,435
TAXES ON INCOME 15,653 22,647 18,879
--------- --------- ---------
INCOME BEFORE MINORITY INTERESTS AND EQUITY IN
EARNINGS
24,082 34,704 26,556
MINORITY INTERESTS (273) (610) (837)
EQUITY IN EARNINGS OF AFFILIATED COMPANIES 1,131 812 264
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS 24,940 34,906 25,983
LOSS FROM DISCONTINUED OPERATIONS (72) -- --
--------- --------- ---------
NET INCOME $ 24,868 $ 34,906 $ 25,983
========= ========= =========
EARNINGS PER SHARE OF COMMON STOCK AND COMMON
STOCK EQUIVALENTS:
Basic:
Income from continuing operations $ 0.94 $ 1.41 $ 1.02
Discontinued operations -- -- --
--------- --------- ---------
Net Income $ 0.94 $ 1.41 $ 1.02
========= ========= =========
Diluted:
Income from continuing operations $ 0.93 $ 1.37 $ 1.00
Discontinued operations -- -- --
--------- --------- ---------
Net Income $ 0.92 $ 1.37 $ 1.00
========= ========= =========
The accompanying notes are an integral part of the financial statements.
F-4
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AS OF DECEMBER 31, 2001 AND 2000
(In thousands, except share information)
ASSETS
2001 2000
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of $4,262 and $1,584, respectively $ 74,649 $ 64,107
Receivables, net 86,191 78,607
Retainage 21,327 15,976
Costs and estimated earnings in excess of billings 23,719 19,151
Inventories 13,712 18,121
Prepaid expenses and other 8,135 5,046
Assets held for disposal 32,034 --
--------- ---------
Total current assets 259,767 201,008
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation 68,547 70,226
--------- ---------
OTHER ASSETS:
Goodwill, less accumulated amortization of $28,166 and $22,171, respectively 117,251 66,108
Other assets 18,057 17,632
--------- ---------
Total other assets 135,308 83,740
--------- ---------
Total assets $ 463,622 $ 354,974
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and line of credit $ 35,218 $ 18,023
Accounts payable and accrued expenses 68,302 63,829
Billings in excess of costs and estimated earnings 8,057 4,688
Liabilities related to discontinued operations 9,471 --
--------- ---------
Total current liabilities 121,048 86,540
LONG-TERM DEBT, less current maturities 88,853 98,217
OTHER LIABILITIES 2,039 2,570
--------- ---------
Total liabilities 211,940 187,327
--------- ---------
MINORITY INTERESTS 1,555 2,357
--------- ---------
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 28,571,158 and
28,152,570, shares outstanding 26,602,385 and 24,908,304 286 282
Additional paid-in capital 129,651 81,934
Retained earnings 172,112 147,244
Treasury stock - 1,968,773 and 3,244,266 shares (44,563) (58,478)
Cumulative foreign currency translation adjustments (7,359) (5,692)
--------- ---------
Total stockholders' equity 250,127 165,290
--------- ---------
Total liabilities and stockholders' equity $ 463,622 $ 354,974
========= =========
The accompanying notes are an integral part of the financial statements.
F-5
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands, except number of shares)
Cumulative
Foreign
Common Stock Additional Currency Total
------------------ Paid-In Retained Treasury Translation Stockholders' Comprehensive
Shares Amount Capital Earnings Stock Adjustments Equity Income
---------- ------ ---------- -------- -------- ---------- ------------- -------------
BALANCE, December 31, 1998 27,302,304 $ 273 $ 68,931 $ 86,355 $(13,097) $ (2,957) $ 139,505
Net income -- -- -- 25,983 -- -- 25,983 $ 25,983
Issuance of common stock
upon exercise of options,
including income tax
benefit of $907 485,558 5 5,878 -- -- -- 5,883 --
Common stock repurchased -- -- -- -- (32,021) -- (32,021) --
Foreign currency
translation adjustment -- -- -- -- -- (747) (747) (747)
-------------
Total comprehensive income -- -- -- -- -- -- -- $ 25,236
=============
---------- ------ ---------- -------- -------- ---------- -------------
BALANCE, December 31, 1999 27,787,862 $ 278 $ 74,809 $112,338 $(45,118) $ (3,704) $ 138,603
Net income -- -- -- 34,906 -- -- 34,906 $ 34,906
Issuance of common stock
upon exercise of options,
including income tax
benefit of $2,295 364,708 4 7,125 -- -- -- 7,129 --
Common stock repurchased -- -- -- -- (13,360) -- (13,360) --
Foreign currency
translation adjustment -- -- -- -- -- (1,988) (1,988) (1,988)
-------------
Total comprehensive income -- -- -- -- -- -- -- $ 32,918
=============
---------- ------ ---------- -------- -------- ---------- -------------
BALANCE, December 31, 2000 28,152,570 $ 282 $ 81,934 $147,244 $(58,478) $ (5,692) $ 165,290
Net income -- -- -- 24,868 -- -- 24,868 $ 24,868
Issuance of common stock
upon exercise of options,
including income tax
benefit of $2,209 418,588 4 8,257 -- -- -- 8,261 --
Issuance of common stock
pursuant to acquisition -- -- 39,460 -- 26,133 -- 65,593 --
Common stock repurchased -- -- -- -- (12,218) -- (12,218) --
Foreign currency
translation adjustment -- -- -- -- -- (1,667) (1,667) (1,667)
-------------
Total comprehensive income -- -- -- -- -- -- -- $ 23,201
=============
---------- ------ ---------- -------- -------- ---------- -------------
BALANCE, December 31, 2001 28,571,158 $ 286 $ 129,651 $172,112 $(44,563) $ (7,359) $ 250,127
========== ====== ========== ======== ======== ========== =============
The accompanying notes are an integral part of the financial statements.
F-6
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands)
2001 2000 1999
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 24,868 $ 34,906 $ 25,983
Loss from discontinued operations 72 -- --
-------- -------- --------
Income from continuing operations 24,940 34,906 25,983
-------- -------- --------
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation 14,382 13,398 12,655
Amortization 7,001 5,282 5,589
Other 1,425 (2,417) (475)
Deferred income taxes 891 1,057 1,689
Changes in operating assets and liabilities, net of purchased businesses
Receivables (6,054) (27,439) (9,718)
Inventories 4,761 (5,727) (1,125)
Prepaid expenses and other assets (1,530) 5,383 (3,703)
Accounts payable and accrued expenses (1,101) 18,180 3,484
-------- -------- --------
Net cash provided by operating activities of continuing operations 44,715 42,623 34,379
-------- -------- --------
Net cash used by operating activities of discontinued operations (9,879) -- --
-------- -------- --------
Net cash provided by operating activities 34,836 42,623 34,379
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (16,638) (30,208) (11,746)
Proceeds from sale of fixed assets 9,048 -- --
Purchases of businesses, net of cash acquired (1,878) (7,032) (11,325)
Other investing activities (2,147) 1,476 3,304
-------- -------- --------
Net cash used in investing activities (11,615) (35,764) (19,767)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 6,052 4,834 4,976
Purchases of treasury stock (12,218) (13,360) (32,021)
Proceeds from long-term debt -- 660 6,050
Principal payments on long-term debt (20,611) (2,765) (2,288)
Increase (decrease) in notes payable 14,995 542 (276)
-------- -------- --------
Net cash used in financing activities (11,782) (10,089) (23,559)
-------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (897) (846) 226
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,542 (4,076) (8,721)
CASH AND CASH EQUIVALENTS, beginning of year 64,107 68,183 76,904
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of year $ 74,649 $ 64,107 $ 68,183
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 9,652 $ 9,217 $ 8,852
Income taxes $ 15,121 $ 18,512 $ 17,593
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock pursuant to acquisition $ 65,593 $ -- $ --
Issuance of note payable pursuant to acquisition $ 5,350 $ -- $ --
The accompanying notes are an integral part of the financial statements.
F-7
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Insituform Technologies, Inc. (a Delaware corporation) and subsidiaries
(collectively, the "Company") is a worldwide provider of proprietary trenchless
technologies for the rehabilitation and improvement of sewer, water, gas and
industrial pipes. The Company's primary technology is the Insituform(R) process,
a "cured-in-place" pipeline rehabilitation process (the "Insituform CIPP
Process"). Pipebursting is a trenchless method of dilating and replacing an old
pipeline with a new plastic pipe. The microtunneling process is a method of
drilling a new tunnel from surface operated equipment. Sliplining is a method
used to push or pull a new pipeline into an old one. The Company's TiteLiner
("TiteLiner") process is a method of lining steel lines with a corrosion and
abrasion resistant pipe. The Company is engaged in trenchless tunneling used in
the installation of new underground services.
2. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries, including a 75%-owned United Kingdom
subsidiary, Insituform Linings Plc.; a 55%-owned Mexican subsidiary, United
Pipeline de Mexico, S.A.; and a 89.6%-owned French subsidiary, Video Injection,
S.A. For contractual joint ventures, the Company recognizes revenue and profits
on its portion of the contract. All intercompany transactions and balances have
been eliminated.
Accounting Estimates
--------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
-----------------
Certain previously reported amounts have been restated to conform to
classifications adopted in 2001 or to reflect the Company's wastewater
treatment, commercial construction and highway operations as discontinued
operations.
Revenues
--------
Revenues include construction and installation revenues which are recognized
using the percentage-of-completion method of accounting in the ratio of costs
incurred to estimated final costs. Contract costs include all direct material
and labor costs and those indirect costs related to contract performance, such
as indirect labor, supplies, tools and equipment costs. Since the financial
reporting of these contracts depends on estimates, which are assessed
continually during the term of these contracts, recognized revenues and profit
are subject to revisions as the contract progresses to completion. Revisions in
profit estimates are reflected in the period in which the facts that give rise
to the revision become known. When estimates indicate that a loss will be
incurred on a contract on completion, a provision for the expected loss is
recorded in the period in which the loss becomes evident. At December 31, 2001,
there are no significant provisions for expected losses on contracts. Revenue
from change orders, extra work, variations in the scope of work and claims is
recognized when realization is reasonably assured.
Research and Development
------------------------
The Company expenses research and development costs as incurred. Research and
development costs of $2.3 million, $2.4 million, and $2.4 million for the years
ended December 31, 2001, 2000 and 1999, respectively, are included in selling,
general and administrative expenses in the accompanying consolidated statements
of income.
F-8
Taxes on Income
---------------
The Company provides for estimated income taxes payable or refundable on current
year income tax returns as well as the estimated future tax effects attributable
to temporary differences and carryforwards, based upon enacted tax laws and tax
rates.
Earnings Per Share
------------------
Earnings per share have been calculated using the following share information:
2001 2000 1999
---------- ---------- ----------
Weighted average number of common shares used for basic EPS 26,427,276 24,834,413 25,460,287
Effect of dilutive stock options and warrants 495,996 705,751 619,245
---------- ---------- ----------
Weighted average number of common shares and dilutive
potential common stock used in dilutive EPS 26,923,272 25,540,164 26,079,532
========== ========== ==========
Cash and Cash Equivalents
-------------------------
The Company classifies highly liquid investments with original maturities of 90
days or less as cash equivalents. Recorded book values are reasonable estimates
of fair value for cash and cash equivalents.
Allowance for Doubtful Accounts
-------------------------------
Management makes estimates of the uncollectibility of accounts receivable. The
Company records a reserve for specific accounts to reduce receivables to the
amount that is expected to be collected. The specific reserves are reevaluated
and adjusted as additional information is received. After all attempts to
collect the receivable have failed, the receivable is written off against the
reserve.
Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out) or market.
Actual cost is used to value raw materials and supplies. Standard cost, which
approximates actual cost, is used to value work-in-process, finished goods and
construction materials. Standard cost includes direct labor, raw materials, and
manufacturing overhead based on practical capacity.
Long-Lived Assets
-----------------
Property, plant and equipment, goodwill and other intangibles are recorded at
cost and are amortized on a straight-line basis over their estimated useful
lives. Intangible assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Such impairment tests are based on a comparison of undiscounted
cash flows to the recorded value of the asset. If impairment is indicated, the
asset value is written down to its fair value.
Goodwill
--------
The Company amortizes goodwill over periods of 15 to 25 years on the
straight-line basis. Amortization expense related to goodwill for the years
ended December 31, 2001, 2000 and 1999 was $6.2 million, $3.8 million and $3.3
million, respectively.
New Accounting Pronouncements
-----------------------------
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations,"
and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." SFAS No. 141
requires that all business combinations be accounted for using the purchase
method
F-9
of accounting and requires separate recognition of intangible assets that meet
certain criteria. This statement applies to all business combinations completed
after June 30, 2001. The adoption of SFAS 141 did not have a significant impact
on the Company's financial statements.
SFAS 142 requires that an intangible asset that is acquired shall be initially
recognized and measured based on its fair value. This statement also provides
that goodwill should not be amortized, but shall be tested for impairment
annually, or more frequently if circumstances indicate potential impairment,
through a comparison of fair value to its carrying amount. SFAS No. 142 is
effective for fiscal periods beginning after December 15, 2001. As a result of
this new standard, the Company continued to amortize goodwill which existed
prior to June 30, 2001, through December 31, 2001, at which time amortization
ceased and a transitional impairment test will be performed. Management is
currently reviewing the new standard and evaluating the impact on its future
consolidated financial statements and accounting policies and practices.
Amortization of goodwill for 2001 totaled $6.2 million.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This standard will be adopted by the Company on January 1, 2003.
Management believes that the adoption of SFAS No. 143 will not have a material
impact on its future consolidated financial statements.
Foreign Currency Translation
----------------------------
Results of operations for foreign entities are translated using the average
exchange rates during the period. Current assets and liabilities are translated
to U.S. dollars using the exchange rates in effect at the balance sheet date,
and the related translation adjustments are reported as a separate component of
stockholders' equity.
3. BUSINESS ACQUISITIONS
On February 28, 2001, the Company acquired 100% of the stock of Kinsel
Industries, Inc. ("Kinsel") and an affiliated company, Tracks of Texas, Inc.
("Tracks"). Kinsel has operations in pipebursting, microtunneling, wastewater
treatment plant construction, commercial construction and highway construction
and maintenance. Tracks is a real estate and construction equipment leasing
company that primarily leases equipment to Kinsel. The purchase price was
approximately $80 million, paid in a combination of cash, notes and 1,847,165
shares of the Company's common stock valued at $35.51 per share. The transaction
was accounted for by the purchase method of accounting, and accordingly, their
results are included in the Company's consolidated income statement from the
date of acquisition. The purchase price was allocated to assets and liabilities
based on their respective fair value at the date of acquisition and resulted in
goodwill of $61.2 million, which is being amortized over 20 years. There are no
contingent payments, options, or commitments in connection with the acquisition.
The Company subsequently decided to sell off portions of Kinsel that did not fit
the Company's overall business strategy. (See Note 4.)
The following unaudited pro forma summary presents information as if Kinsel and
Tracks had been acquired as of January 1, 2000. The pro forma amounts include
certain adjustments, primarily to recognize depreciation and amortization,
including amortization of goodwill, based on the allocated purchase price of
Kinsel and Tracks assets, and do not reflect any benefits from economies which
might be achieved from combining operations. The unaudited pro forma information
has been presented for comparative purposes and does not necessarily reflect the
actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined companies (in thousands, except per
share amounts):
For the year ended December 31,
(unaudited)
2001 2000
----------- -----------
Revenues $ 454,923 $ 441,756
Income from continuing operations 25,398 35,338
Loss from discontinued operations (843) (550)
Net income 24,555 34,788
Earnings (loss) per share:
Basic
Income from continuing operations 0.96 1.32
Loss from discontinued operations (0.03) (0.02)
Net income 0.93 1.30
F-10
Diluted
Income from continuing operations 0.94 1.29
Loss from discontinued operations (0.03) (0.02)
Net income 0.91 1.27
During the third quarter of 2000, the Company acquired the remaining 50%
ownership of Insituform Belgium N.V. (formerly known as K-Insituform N.V.), its
joint venture in Belgium, for approximately $0.3 million, along with the
remaining 33% ownership in Insituform France, S.A., for approximately $0.8
million. In addition, in July 2000, the Company completed its acquisition of 50%
of Italcontrolli-Insituform S.r.l. (formerly known as Italcontrolli Nord
S.r.l.), its licensee in Italy, for approximately $1.2 million. There was no
material goodwill resulting from these acquisitions.
In February 2000, the Company acquired the rights to the Insituform CIPP 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 in 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.
The acquisition was accounted for by the purchase method and resulted in
goodwill of $4.8 million.
On June 1, 1999, the Company completed its acquisition of all of the shares of
its exclusive licensee of the Insituform CIPP Process in the Netherlands now
named Insituform Rioolrenovatietechnieken B.V. from BFI Holdings B.V. The
purchase price was NLG 25 million (approximately U.S. $11.7 million), which was
paid in cash at closing. The acquisition was accounted for by the purchase
method and resulted in goodwill of $10.8 million.
4. DISCONTINUED OPERATIONS
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The Company has elected to early adopt the
provisions of SFAS No. 144 for the year ended December 31, 2001. SFAS No. 144
supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets to
Be Disposed Of" and provides a single accounting model for long-lived assets to
be disposed of by sale. SFAS No. 144 clarifies certain provisions related to
SFAS No. 121 and expands the use of discontinued operations to all components of
a business for which separate results of operations can be identified.
In the fourth quarter of 2001, the Company made the decision to sell certain
operations acquired in the Kinsel transaction. Accordingly, the Company has
classified as discontinued the wastewater treatment plant, commercial
construction and highway operations acquired as part of the Kinsel acquisition.
These operations are not consistent with the Company's operating strategy of
providing differentiated trenchless rehabilitation and tunneling services. In
February 2002, the Company completed the sale of the wastewater treatment plant
effective January 1, 2002. The Company received $1.5 million in cash and a $2.0
million note for a total sale price of $3.5 million, resulting in a slight loss
on the sale. The Company is currently marketing Kinsel's commercial construction
and highway operations. As of December 31, 2001, assets held for disposal
totaled $32.0 million, which included $7.6 million of unbilled receivables,
while liabilities related to discontinued operations totaled $9.5 million. The
results of operations for the discontinued operations are as follows (in
thousands):
2001
--------
REVENUES:
Wastewater Treatment Plant $ 26,336
Commercial Construction and Highway Operations 30,576
--------
$ 56,912
========
INCOME (LOSS) FROM DISCONTINUED OPERATIONS:
Wastewater Treatment Plant, net of tax of $230 $ 354
Commercial Construction and Highway Operations, net of tax benefit
of $277 (426)
--------
$ (72)
========
F-11
5. RESTRUCTURING
In the fourth quarter of 2001, the Company recorded a restructuring charge of
$4.1 million, $0.9 million of which is severance costs associated with the
elimination of 112 company-wide positions specifically identified as of December
31, 2001. An additional $3.2 million of the charge relates to asset write-downs,
lease cancellations and other costs associated with the closure of eight
facilities in the United States and the disposal of the associated assets. As of
December 31, 2001, the remaining liability is $1.4 million.
6. ALLOWANCE FOR DOUBTFUL ACCOUNTS
Activity in the allowance for doubtful accounts is summarized as follows for the
years ended December 31 (in thousands):
2001 2000 1999
------- ------- -------
Balance, at beginning of year $ 2,067 $ 3,096 $ 2,909
Charged to expense 537 442 590
Write-offs and adjustments (396) (1,471) (403)
------- ------- -------
Balance, at end of year $ 2,208 $ 2,067 $ 3,096
======= ======= =======
7. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts consist of the following
at December 31 (in thousands):
2001 2000
---------- ----------
Costs incurred on uncompleted contracts $ 230,004 $ 172,529
Estimated earnings 61,859 54,499
---------- ----------
291,863 227,028
Less- Billings to date (276,201) (212,565)
---------- ----------
$ 15,662 $ 14,463
========== ==========
Included in the accompanying balance sheets:
Costs and estimated earnings in excess of billings $ 23,719 $ 19,151
Billings in excess of costs and estimated earnings (8,057) (4,688)
---------- ----------
$ 15,662 $ 14,463
========== ==========
Costs and estimated earnings in excess of billings represent work performed
which either due to contract stipulations or lacking contractual documentation
needed, could not be billed. Substantially all unbilled amounts are expected to
be billed and collected within one year. Retainage due after one year is
approximately $5.5 million at December 31, 2001.
F-12
8. INVENTORIES
Inventories are summarized as follows at December 31 (in thousands):
2001 2000
----------- -----------
Raw materials and supplies $ 710 $ 1,376
Work-in-process 4,958 4,522
Finished products 1,670 1,872
Construction materials 6,374 10,351
----------- -----------
$ 13,712 $ 18,121
=========== ===========
9. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31 (in
thousands):
Estimated Useful
Lives (Years) 2001 2000
---------------- --------- --------
Land and land improvements 15 - 20 $ 9,336 $ 11,485
Buildings and improvements 5 - 40 25,342 24,474
Machinery and equipment 4 - 10 94,368 89,360
Furniture and fixtures 3 - 10 11,300 10,927
Autos and trucks 3 - 10 5,208 5,728
Construction in progress 6,839 7,183
--------- --------
152,393 149,157
Less- Accumulated depreciation (83,846) (78,931)
--------- --------
$ 68,547 $ 70,226
========= ========
10. LONG-TERM DEBT AND LINE OF CREDIT
Long-term debt and line of credit consists of the following at December 31 (in
thousands):
2001 2000
--------- ---------
7.88% Senior Notes, payable in $15,715 annual installments beginning
February 2001 through 2007, with interest payable semiannually $ 94,285 $ 110,000
Line of credit facility 15,913 --
5.5% bank term loan, EUR 5.7 million, payable in seven equal annual
installments through July 2006, with interest payable quarterly 3,618 4,582
Other notes, interest rates from 5.0% to 10.5% 10,255 1,658
--------- ---------
124,071 116,240
Less- Current maturities (35,218) (18,023)
--------- ---------
$ 88,853 $ 98,217
========= =========
The 7.88% 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 Notes without any premium thereon. The agreements 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. Such agreements also obligate the
Company's subsidiaries to provide guarantees to the holders of the Senior Notes
if guarantees are given by them to certain other lenders.
F-13
During 2000, the Company obtained a line of credit facility with the capacity to
borrow up to $50 million. The commitment fee paid per annum by the Company is
0.2% on the unborrowed balance. The Company is obligated to comply with certain
financial ratios, and restrictive covenants, which mirror the Senior Note
agreements. This line of credit facility expires March 31, 2003. The interest
rates under this facility vary and are based on the prime rate. As of December
31, 2001, the rate was 4.75%. The unused availability on the line of credit
facility as of December 31, 2001 was $34.1 million. There was no outstanding
balance on the line of credit at the end of 2000.
At December 31, 2001 and 2000, the estimated fair value of the Company's
long-term debt was approximately $124.4 million and $111.0 million,
respectively. Fair value was estimated using discounted market rates for debt of
similar risk and maturity.
Principal payments required to be made for each of the next five years and
thereafter are summarized as follows (in thousands):
Year Amount
---- ------
2002 $ 35,218
2003 21,572
2004 17,229
2005 16,881
2006 16,475
After 2006 16,696
--------
Total $124,071
========
11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at December 31
(in thousands):
2001 2000
--------- ---------
Accounts payable - trade $ 43,905 $ 34,271
Compensation and profit sharing 6,153 14,158
Interest 3,039 3,632
Other 15,205 11,768
--------- ---------
$ 68,302 $ 63,829
========= =========
12. STOCKHOLDERS' EQUITY
Stock Option Plans
------------------
The 2001 Employee Equity Incentive Plan (the "Employee Incentive Plan") provides
for the granting to employees of stock-based awards, including (a) stock
appreciation rights, (b) restricted shares of common stock, (c) performance
awards, (d) stock options and (e) stock units. The maximum number of shares of
common stock which currently may be issued under the Employee Incentive Plan is
1,000,000. The Employee Incentive Plan is administered by the Board of
Directors, which determines the eligibility, timing, pricing, amount, vesting
and other terms and conditions of awards, including stock option awards. The
Company accounts for options granted under this plan in accordance with APB 25.
The exercise price of each option issued under the 2001 Employee Incentive Plan,
equals the closing market price of the Company's stock on the date of grant and,
therefore, the Company makes no charge to earnings with respect to these
options. Stock options, issued under the 2001 Employee Incentive Plan, generally
vest over three years and have an expiration date of up to five to ten years
after the date of grant.
The 2001 Non-Employee Director Equity Incentive Plan (the "Non-Employee Director
Incentive Plan"), provides for the granting of stock options to non-employee
directors. The total number of shares of common stock available for
F-14
issuance under the Non-Employee Director Incentive Plan is 200,000. The
Non-Employee Director Incentive Plan is administered by the Board of Directors.
Under the terms of the Non-Employee Director Incentive Plan, each non-employee
director receives a stock option to purchase shares of common stock each year on
the date of the Annual Meeting of Stockholders (or promptly thereafter, as
determined by the Board), provided, that such director continues to be a
non-employee director following such Annual Meeting. The purchase price per
share of common stock for which each option is exercisable is the fair market
value per share of common stock on the date the option is granted. Each option
granted under the Non-Employee Director Incentive Plan is fully vested and
exercisable immediately, and expires not later than ten years from the date of
the grant.
Under the 1992 Employee Stock Option Plan (the "Employee Plan") and Director
Stock Option Plan (the "Director Plan"), the Company may grant options to its
employees and directors not to exceed 2,850,000 and 1,500,000 shares of common
stock, respectively. No options are to be granted under the Employee Plan or the
Director Plan since the adoption of the Employee Incentive Plan and the
Non-Employee Director Incentive Plan. The plans are administered by the Board of
Directors, which determines the timing of awards, individuals to be granted
awards, the number of options to be awarded and the price, vesting schedule and
other conditions of the options. The exercise price of each option equals the
closing market price of the Company's stock on the date of grant and, therefore,
the Company makes no charge to earnings with respect to these options. Options
generally vest over three years and have an expiration date of up to five or ten
years after the date of grant.
In accordance with SFAS No. 123, the Company has estimated the fair value of
each option grant using the Black-Scholes option-pricing model. The following
weighted average assumptions were used for the grants in 2001, 2000, and 1999,
respectively: expected volatility of 75%, 62%, and 41%; risk-free interest rates
of 4.8%, 5.1%, and 6.4%; expected lives of seven, five and five years and no
dividends. Had compensation cost for the stock options granted been determined
based on their fair value at the grant dates, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below (in thousands, except per share amounts):
2001 2000 1999
---------- ---------- ----------
Net income:
As reported $ 24,868 $ 34,906 $ 25,983
Pro forma 20,022 32,298 24,404
Basic earnings per share:
As reported 0.94 1.41 1.02
Pro forma 0.76 1.30 0.96
Dilutive earnings per share:
As reported 0.92 1.37 1.00
Pro forma 0.74 1.26 0.94
The following tables summarize information about options outstanding at December
31, 2001:
Options Outstanding Options Exercisable
--------------------------------------- -------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
-------------- ----------- ----------- -------- ----------- ---------
$4.00 to $10.00 222,759 5.5 years $ 8.76 222,759 $ 8.76
$10.00 to $20.00 513,703 4.1 years $14.42 379,663 $14.37
$20.00 and above 1,120,840 6.2 years $28.93 450,357 $28.81
---------- -----------
1,857,302 5.5 years $22.50 1,052,779 $19.36
========== ===========
F-15
2001 2000 1999
------------------------ ----------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
----------- -------- ----------- -------- ----------- ----------
Options outstanding, beginning of
year 1,743,002 $18.10 1,478,829 $12.14 1,508,998 $10.51
Granted 656,463 29.02 630,100 28.99 493,000 15.16
Exercised (416,963) 14.46 (364,708) 12.83 (485,558) 10.18
Forfeited (125,200) 22.20 (1,219) 10.84 (37,611) 11.56
----------- ----------- -----------
Options outstanding, end of
year 1,857,302 $22.50 1,743,002 $18.09 1,478,829 $12.14
=========== =========== ===========
Options exercisable, end of year 1,052,779 $19.36 913,824 $15.10 775,783 $11.32
=========== =========== ===========
Weighted average fair value of
options granted $ 21.26 $ 16.58 $ 6.98
At December 31, 2001, 4,077,584 shares of common stock were reserved pursuant to
stock option plans.
13. OTHER INCOME (EXPENSE)
Other income (expense) is comprised of the following at December 31 (in
thousands):
2001 2000 1999
------ ------ ------
Investment income $2,226 $3,493 $3,464
Other 83 239 333
------ ------ ------
$2,309 $3,732 $3,797
====== ====== ======
14. TAXES ON INCOME
Income from continuing operations before taxes on income is as follows for the
years ended December 31 (in thousands):
2001 2000 1999
------- ------- -------
Domestic $28,871 $46,801 $39,463
Foreign 10,864 10,550 5,972
------- ------- -------
Total $39,735 $57,351 $45,435
======= ======= =======
Provisions for taxes on income from continuing operations consist of the
following components for the years ended December 31 (in thousands):
2001 2000 1999
-------- -------- --------
Current:
Federal $ 8,320 $ 14,844 $ 12,670
Foreign 4,822 4,454 2,491
State 1,620 2,292 2,029
-------- -------- --------
$ 14,762 $ 21,590 $ 17,190
-------- -------- --------
F-16
Deferred:
Federal 580 727 1,682
Foreign 247 249 (180)
State 64 81 187
-------- -------- --------
$ 891 $ 1,057 $ 1,689
-------- -------- --------
Total Tax Provision $ 15,653 $ 22,647 $ 18,879
======== ======== ========
A reconciliation between the U.S. federal statutory tax rate and the effective
tax rate follows:
2001 2000 1999
--------- --------- ---------
Income taxes at U.S. federal statutory tax rate 35.0% 35.0% 35.0%
Increase in taxes resulting from:
State income taxes, net of federal income tax benefit 3.2 3.6 3.6
Goodwill amortization 2.4 1.3 1.6
Effect of foreign income taxed at foreign rates (0.1) 0.3 0.2
Other (1.1) (0.7) 1.2
--------- --------- ---------
Total taxes on income 39.4% 39.5% 41.6%
========= ========= =========
Net deferred taxes consist of the following at December 31 (in thousands):
2001 2000
------- -------
Deferred income tax assets:
Foreign tax credits and net operating loss carryforwards $ 1,183 $ 2,511
Accrued expenses 2,597 2,937
Other 1,143 690
------- -------
Total deferred income tax assets 4,923 6,138
------- -------
Deferred income tax liabilities:
Property, plant and equipment (4,114) (2,818)
Other (3,438) (5,058)
------- -------
Total deferred income tax liabilities (7,552) (7,876)
------- -------
Net deferred income tax liabilities $(2,629) $(1,738)
======= =======
Subject to the future taxable income on certain of the Company's subsidiaries,
the Company's various foreign tax credits and net operating loss carryforwards
have varying expiration dates, some ranging from 2006-2016, while $197,300 of
net operating loss carryforwards have indefinite lives.
15. COMMITMENTS AND CONTINGENCIES
Leases
------
The Company leases a number of its administrative operations facilities under
noncancellable operating leases expiring at various dates through 2020. In
addition, the Company leases certain construction, automotive and computer
equipment on a multiyear, monthly or daily basis. Rent expense under all
operating leases for 2001, 2000 and 1999 was $22.3 million, $17.7 million and
$11.3 million, respectively. Rental expense paid to related parties was
$453,500, $392,750 and $288,000 for the years ended December 31, 2001, 2000 and
1999, respectively. At December 31, 2001, the Company had under lease equipment
with an original market value of approximately $57.8 million.
F-17
At December 31, 2001, the future minimum lease payments required under the
noncancellable operating leases were as follows (in thousands):
Year Minimum Lease Payments
---- ----------------------
2002 $14,370
2003 10,878
2004 7,873
2005 4,141
2006 2,382
After 2006 4,845
-------
Total $44,489
=======
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.
Retirement Plans
----------------
Substantially all of the Company's employees are eligible to participate in
Company sponsored defined contribution savings plans, which are qualified plans
under the requirements of Section 401(k) of the Internal Revenue Code. Total
contributions to the domestic plans were $1.5 million, $4.4 million and $3.5
million for the years ended December 31, 2001, 2000 and 1999, respectively.
In addition, certain foreign subsidiaries maintain various other defined
contribution retirement plans. Company contributions to such plans for the years
ended December 31, 2001, 2000 and 1999, were $214,552, $352,000 and $138,000,
respectively.
16. SEGMENT AND GEOGRAPHIC INFORMATION
The Company has principally three operating segments: rehabilitation, tunneling
and TiteLiner. The rehabilitation segment provides trenchless methods of
rehabilitating sewers, pipelines and other conduits using a variety of
technologies including the Insituform CIPP Process, pipebursting,
microtunneling, and sliplining. The tunneling segment engages in trenchless
tunneling used in the installation of new underground services, and the
TiteLiner segment provides a method of lining steel lines with a corrosion and
abrasion resistant pipe. These operating units represent strategic business
units that offer distinct products and services and serve different markets.
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 the purpose of
assisting in making internal operating decisions. The Company evaluates
performance based on standalone operating income.
There were no customers which accounted for more than 10% of the Company's
revenues during each of the three years ended December 31, 2001.
Financial information by segment is as follows at December 31 (in thousands):
F-18
2001 2000 1999
--------- --------- ---------
Revenues:
Rehabilitation $ 369,219 $ 325,773 $ 276,438
Tunneling 49,019 46,866 40,049
TiteLiner 27,072 36,795 23,396
--------- --------- ---------
Total revenues $ 445,310 $ 409,434 $ 339,883
========= ========= =========
Operating income (loss):
Rehabilitation $ 36,191 $ 48,997 $ 47,178
Tunneling 5,754 5,858 4,965
TiteLiner 4,820 8,111 (1,474)
--------- --------- ---------
Total operating income $ 46,765 $ 62,966 $ 50,669
========= ========= =========
Total assets:
Rehabilitation $ 311,949 $ 244,383 $ 197,670
Tunneling 30,346 18,422 14,112
TiteLiner 12,523 16,531 15,185
Corporate 76,770 75,638 84,658
Discontinued 32,034 0 0
--------- --------- ---------
Total assets $ 463,622 $ 354,974 $ 311,625
========= ========= =========
2001 2000 1999
--------- --------- ---------
Capital expenditures:
Rehabilitation $ 8,474 $ 17,053 $ 7,583
Tunneling 6,045 2,564 588
TiteLiner 61 1,381 274
Corporate 2,058 9,210 3,301
--------- --------- ---------
Total capital expenditures $ 16,638 $ 30,208 $ 11,746
========= ========= =========
Depreciation and amortization:
Rehabilitation $ 16,893 $ 12,482 $ 12,131
Tunneling 1,292 1,498 1,270
TiteLiner 1,136 2,034 2,234
Corporate 2,062 2,666 2,609
--------- --------- ---------
Total depreciation and amortization $ 21,383 $ 18,680 $ 18,244
========= ========= =========
Financial information by geographic area is as follows at December 31 (in
thousands):
2001 2000 1999
--------- --------- ---------
Revenues:
United States $ 361,194 $ 333,246 $ 266,113
Canada 23,482 22,199 12,856
Other Foreign 60,634 53,989 60,914
--------- --------- ---------
Total revenues $ 445,310 $ 409,434 $ 339,883
========= ========= =========
F-19
Operating income:
United States $ 39,003 $ 55,326 $ 46,446
Canada 3,714 3,674 316
Other Foreign 4,048 3,966 3,907
--------- --------- ---------
Total operating income $ 46,765 $ 62,966 $ 50,669
========= ========= =========
Long-lived assets:
United States $ 63,467 $ 67,224 $ 55,448
Canada 2,969 4,942 2,546
Other Foreign 20,168 15,692 15,182
--------- --------- ---------
Total long-lived assets $ 86,604 $ 87,858 $ 73,176
========= ========= =========
17. SUBSEQUENT EVENTS
In February 2002, the Company's Board of Directors adopted a Shareholder Rights
Plan. Pursuant to the Shareholder Rights Plan, the Board of Directors declared a
dividend distribution of one preferred stock purchase right ("Right") for each
outstanding share of the Company's common stock, $.01 par value ("Common
Stock"), payable to the Company's stockholders of record as of March 13, 2002.
Each Right, when exercisable, entitles the holder to purchase from the Company
one one-hundredth of a share of a new series of voting preferred stock,
designated as Series A Junior Participating Preferred Stock, $0.10 par value, at
an exercise price of $116.00 per one one-hundredth of a share.
The Rights will trade in tandem with the Common Stock until ten days after a
"distribution event" (i.e., the announcement of an intention to acquire or the
actual acquisition of 20% or more of the outstanding shares of Common Stock), at
which time the Rights would become exercisable. Upon exercise, the holders of
the Rights (other than the person who triggered the distribution event) will be
able to purchase for the exercise price shares of Common Stock having the then
market value of two times the aggregate exercise price of the rights. The rights
expire on March 12, 2012, unless redeemed, exchanged or otherwise terminated at
an earlier date.
18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share data)
1st 2nd 3rd 4th
---------- ---------- ---------- ----------
Year ended December 31, 2001:
Revenues $ 98,850 $ 118,071 $ 112,310 $ 116,079
Operating income 9,359 19,779 7,804 9,823
Income from continuing operations 4,542 11,081 3,895 5,422
Net income 4,626 11,437 4,001 4,804
Basic earnings per share:
Income from continuing operations $ 0.18 $ 0.41 $ 0.15 $ 0.20
Income (loss) from discontinued operations -- 0.01 -- (0.02)
---------- --------- ---------- ----------
Net income $ 0.18 $ 0.43 $ 0.15 $ 0.18
Dilutive earnings per share:
Income from continuing operations $ 0.17 $ 0.40 $ 0.14 $ 0.20
Income (loss) from discontinued operations -- 0.01 -- (0.02)
---------- --------- ---------- ----------
Net income $ 0.18 $ 0.42 $ 0.15 $ 0.18
Year ended December 31, 2000:
Revenues $ 94,283 $ 99,371 $ 111,042 $ 104,738
Operating income 11,619 15,289 19,518 16,540
Net income 6,093 8,375 11,168 9,270
Basic earnings per share 0.25 0.34 0.45 0.37
Dilutive earnings per share 0.24 0.33 0.44 0.36
F-20
INDEX TO EXHIBITS(1),(2)
2 Agreement and Plan of Merger dated January 13, 2001 by and among the
Company, K Acquisition Corp. and TRX Acquisition Corp., Kinsel
Industries, Inc. and Tracks of Texas, Inc. and the Kinsel/Tracks
Shareholders (Incorporated by reference to Exhibit 2 to the Current
Report on Form 8-K dated February 28, 2001 and filed March 14, 2001).
3.1 Restated Certificate of Incorporation, as amended, of the Company
(Incorporated by reference to Exhibit 3.1 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000), and Certificate of
Designation, Preferences and Rights of Series A Junior Participating
Preferred Stock.
3.2 By-Laws of the Company, as amended (Incorporated by reference to
Exhibit 3.2 to the Annual Report on Form 10-K for the year ended
December 31, 2000).
4 Rights Agreement dated as of February 26, 2002 between Insituform
Technologies, Inc. and American Stock Transfer & Trust Company
(Incorporated by reference to Exhibit 1 to the Registration Statement
on Form 8-A dated March 8, 2002).
10.1 Multicurrency Credit Agreement dated as of March 30, 2000 between the
Company and Bank of America, N.A. (Incorporated by reference to Exhibit
10.1 to the Quarterly Report on Form 10-Q for the quarter ended March
31, 2000).
10.2 Note Purchase Agreements (the "Note Purchase Agreements") dated as of
February 14, 1997 among the Company and, respectively, each of the
lenders (the "Noteholders") listed therein (Incorporated by reference
to Exhibit 10.6 to the Annual Report on Form 10-K for the year ended
December 31, 1996), as amended by First Amendment to the Note Purchase
Agreements dated as of August 20, 1997 (Incorporated by reference to
Exhibit 10(a) to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997), as further amended by Second Amendment dated
as of March 30, 2000 to Note Purchase Agreements (Incorporated by
reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).
10.3 Master Guaranty dated as of March 30, 2000 by the Company and those
subsidiaries of the Company named therein (Incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000).
10.4 Amended and Restated Intercreditor Agreement dated as of March 30, 2000
among Bank of America, N.A. and the Noteholders (Incorporated by
reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).
10.5 Employment Letter dated July 15, 1998 between the Company and Anthony
W. Hooper (Incorporated by reference to Exhibit 10.1 to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998).(3)
--------
(1) The Company's current, quarterly and annual reports are filed with the
Securities and Exchange Commission under file no. 0-10786.
(2) Pursuant to Reg. Section 229.601, does not include certain instruments with
respect to long-term debt of the Company and its consolidated subsidiaries not
exceeding 10% of the total assets of the Company and its subsidiaries on a
consolidated basis. The Company undertakes to furnish to the Securities and
Exchange Commission, upon request, a copy of all long-term debt instruments not
filed herewith.
(3) Management contract or compensatory plan or arrangement.
(4) Filed previously with original report on Form 10-K.
10.6 Employment Agreement dated October 25, 1995 between the Company and
Robert W. Affholder (Incorporated by reference to Exhibit 2(d) to the
Current Report on Form 8-K dated October 25, 1995), as amended by
Amendment No. 1 dated as of October 25, 1998 to Employment Agreement
(Incorporated by reference to Exhibit 10.9 to the Annual Report on Form
10-K for the year ended December 31, 1998), and as amended by Amendment
No. 2 dated as of December 31, 1999 to Employment Agreement, and as
amended by Amendment No. 3 dated as of December 31, 2000 to Employment
Agreement (Incorporated by reference to Exhibit 10.1 to the Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001), and as
amended by Amendment No. 4 dated as of December 31, 2001 to Employment
Agreement.(3)
10.7 Letter agreement dated as of February 9, 1999 between the Company and
Thomas N. Kalishman (Incorporated by reference to Exhibit 10.10 to the
Annual Report on Form 10-K for the year ended December 31, 1998).(3)
10.8 Employment Agreement dated February 1, 2001 between Insituform Europe
and Antoine Menard. (Incorporated by reference to Exhibit 10.10 to the
Annual Report on Form 10-K for the year ended December 31, 2000).(3)
10.9 Equipment Lease for 125 Ton American Crane (1) dated as of July 1, 2001
between A-Y-K-E Partnership and Affholder, Inc.(4)
10.10 Equipment Lease for 90 Ton Link Belt Crane dated as of January 1, 2002
between A-Y-K-E Partnership and Affholder, Inc.(4)
10.11 Equipment Lease for 125 Ton American Crane (2) dated as of January 1,
2002 between A-Y-K-E Partnership and Affholder, Inc.(4)
10.12 Equipment Lease for 110 Ton American Crane dated as of January 1, 2002
between A-Y-K-E Partnership and Affholder, Inc.(4)
10.13 1992 Employee Stock Option Plan of the Company (Incorporated by
reference to Exhibit 10.11 to the Annual Report on Form 10-K for the
year ended December 31, 1999).(3)
10.14 1992 Director Stock Option Plan of the Company (Incorporated by
reference to Exhibit 10.12 to the Annual Report on Form 10-K for the
year ended December 31, 1999).(3)
10.15 2001 Employee Equity Incentive Plan (Incorporated by reference to
Exhibit 99.1 to the Registration Statement on Form S-8 No.
33-66714).(3)
10.16 2001 Non-Employee Director Equity Incentive Plan (Incorporated by
reference to Exhibit 99.1 to the Registration Statement on Form S-8 No.
33-66712).(3)
10.17 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to
the Quarterly Report on Form 10-Q for the quarter ended June 30,
2001).(3)
10.18 Insituform Mid-America, Inc. Stock Option Plan, as amended
(Incorporated by reference to Exhibit 4(i) to the Registration
Statement on Form S-8 No. 33-63953).(3)
10.19 Senior Management Voluntary Deferred Compensation Plan of the Company
(Incorporated by reference to Exhibit 10.19 to the Annual Report on
Form 10-K for the year ended December 31, 1998), as amended by First
Amendment thereto dated as of October 25, 2000.(3)
10.20 Form of Directors' Indemnification Agreement (Incorporated by reference
to Exhibit 10.47 to the Annual Report on Form 10-K for the year ended
December 31, 1988).(3)
21 Subsidiaries of the Company.(4)
23 Consent of Arthur Andersen LLP.
24 Power of Attorney.(4)
99.1 Letter of the Company, addressed to the Securities and Exchange
Commission, regarding representations to the Company by Arthur Andersen
LLP pursuant to Temporary Note 3T to Article 3 of Regulation S-X.(4)