Insituform Technologies, Inc. Reports First Quarter 2005 Results

    Business Editors

    CHESTERFIELD, Mo.--(BUSINESS WIRE)--April 28, 2005--Insituform Technologies, Inc. (Nasdaq:INSU) today reported first quarter 2005 results.
    The Company reported net income of $0.4 million, or $0.01 per diluted share, for the first quarter of 2005 compared to $0.5 million, or $0.02 per diluted share, in the same period a year ago. The lower results primarily were due to continued unfavorable margins of certain projects in the Company's tunneling business. Partially offsetting the results in tunneling was improvement in rehabilitation.
    For the first quarter of 2005 compared to the same quarter of 2004, revenues in the rehabilitation segment increased $9.6 million to $105.2 million and gross profit increased by $3.5 million to $23.8 million. The gross profit margins in the rehabilitation segment were 22.6% in the first quarter of 2005 compared to 21.2% in the first quarter of 2004. Rehabilitation operating income was $5.1 million in the first quarter of 2005 compared to $1.7 million in the first quarter of 2004.
    The first quarter of 2005 presented short-term challenges, including work release delays in several areas, along with severe winter weather in the Southwest, Northeast, Canada and portions of Europe. However, improved margins in several North American and European regions as well as greater efficiencies from the Company's manufacturing operations contributed to the overall gross profit margin improvement. Offsetting margin improvement were effects of significant increases in commodity prices, particularly resin, in the first quarter of 2005 compared to the same period last year.
    The Company's TiteLiner(R) business experienced marginal declines in gross profit and operating income in the first quarter of 2005 compared to the same period in 2004. The favorable closeout of a significant foreign project in the first quarter of 2004 provided a benefit to that period's gross profit.
    The tunneling business recorded a $3.4 million operating loss in the first quarter of 2005 compared to operating income of $0.5 million in the first quarter of 2004. During the quarter, the business unit experienced production delays on several projects. In addition, the unit's performance was negatively impacted by the continuation of projects that encountered unfavorable gross margin developments in the fourth quarter of 2004.
    The Company paid $17.7 million as a normal, scheduled debt principal and interest payment in February 2005. Investments in working capital and fixed assets were significant in the first quarter of 2005, as the rehabilitation business grew. Specifically, the Company spent $7.6 million in capital expenditures and built CIPP Tube inventories to accommodate anticipated second quarter production. The Company's manufacturing operations produced a record volume of CIPP Tube in March for work commencing in second quarter of 2005. Receivables also increased $14.6 million with the surge of work completed toward the end of the first quarter of 2005.
    Total contract backlog at March 31, 2005 was $294.1 million, a decrease of $34.2 million from December 31, 2004. In the Rehabilitation segment, contract backlog was $181.4 million, reflecting a slight decrease of $9.0 million from December 31, 2004. Contract backlog increased in the TiteLiner(R) business by $4.7 million to $13.3 million. The tunneling segment experienced a decline in the first quarter of 2005 from December 31, 2004 of $29.9 million to $99.5 million, as a result of work being completed and more selective bidding practices.
    As compared to March 31, 2004, total contract backlog increased by $13.0 million. In the rehabilitation segment, contract backlog increased $39.0 million or 27.3%, from one year ago. In the TiteLiner(R) segment, contract backlog increased $6.7 million, whereas tunneling's contract backlog decreased $32.6 million, from one year ago, for the reasons discussed above.
    Tom Rooney, President and Chief Executive Officer, stated: "While tunneling profits remain an issue, I am confident that we are taking the steps necessary to address the challenges in our tunneling division. More importantly, I am very encouraged by trends in the rehabilitation sector, which turned in an improved performance despite sharply higher resin costs."
    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 availability of raw materials used in the Insituform(R) cured-in-place ("Insituform CIPP") process, increased competition upon expiration of the Company's patents or the inadequacy of one or more of its CIPP process patents to protect its operations, the geographical distribution and mix of the Company's work, the ability of the Company to attract business at acceptable margins, foreseeable and unforeseeable issues in projects that make it difficult or impossible to meet projected margins, the timely award or cancellation of projects, political circumstances impeding the progress of work, the Company's ability to remain in compliance with its financial covenants, the regulatory environment, the outcome of the Company's pending litigation and other factors set forth in reports and documents filed by the Company with the Securities and Exchange Commission from time to time. The Company does not assume a duty to update forward-looking statements. Please use caution and do not place reliance on forward-looking statements.

INSITUFORM TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)

For the Three Months Ended March 31, -------------------------- 2005 2004 ---------- ----------

Revenues $ 136,277 $ 127,914 Cost of revenues 110,178 102,547 Gross profit 26,099 25,367 Selling, general and administrative 23,458 21,992 Operating income 2,641 3,375 Other (expense) income: Interest expense (1,876) (2,168) Other 45 (164) Total other expense (1,831) (2,332) Income before taxes on income 810 1,043 Taxes on income 283 425 Income before minority interests and equity in earnings 527 618 Minority interests (40) (56) Equity in losses of affiliated companies (87) (60) Net Income 400 502

Earnings per share: Basic: Net income $ 0.01 $ 0.02 Diluted: Net income $ 0.01 $ 0.02

Weighted-average common shares- basic 26,745 26,488 Weighted-average common and equivalent shares- diluted 26,918 26,646

SEGMENT DATA Revenues Rehabilitation $ 105,228 $ 95,629 Tunneling 23,949 26,050 TiteLiner 7,100 6,235 Total revenues $ 136,277 $ 127,914

Gross profit Rehabilitation $ 23,807 $ 20,305 Tunneling 265 2,946 TiteLiner 2,027 2,116 Total gross profit $ 26,099 $ 25,367

Operating income (loss) Rehabilitation $ 5,122 $ 1,727 Tunneling (3,399) 496 TiteLiner 918 1,152 Total operating income $ 2,641 $ 3,375

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

March 31, 2005 December 31, 2004 -------------- ----------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 55,497 $ 93,246 Restricted cash 1,801 1,705 Receivables 93,251 78,665 Retainage 26,078 25,655 Costs and estimated earnings in excess of billings 33,929 34,789 Inventories 16,096 13,339 Prepaid expenses and other assets 24,203 21,469 TOTAL CURRENT ASSETS 250,855 268,868 PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation 94,409 90,846 OTHER ASSETS Goodwill 131,533 131,540 Other assets 17,585 17,567 TOTAL OTHER ASSETS 149,118 149,107

TOTAL ASSETS $ 494,382 $ 508,821

LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt and line of credit $ 15,778 $ 15,778 Accounts payable and accrued expenses 86,620 85,398 Billings in excess of costs and estimated earnings 12,737 12,809 TOTAL CURRENT LIABILITIES 115,135 113,985 LONG-TERM DEBT, less current maturities 80,767 96,505 OTHER LIABILITIES 6,684 6,848 TOTAL LIABILITIES 202,586 217,338 MINORITY INTERESTS 1,681 1,647 TOTAL STOCKHOLDERS' EQUITY 290,115 289,836

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 494,382 $ 508,821

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

For the Three Months Ended March 31, -------------------- 2005 2004 --------- --------- Cash flows from operating activities: Net income $ 400 $ 502

Adjustments to reconcile net cash provided by operating activities: Depreciation 4,573 4,098 Amortization 423 606 (Gain) on sale of assets/investment (14) - Write-off of debt issuance costs - 226 Change in restricted cash related to operating activities (96) 210 Other 441 859 Deferred income taxes - (62) Changes in operating assets and liabilities (18,988) 9,703 Net cash (used)/provided by operating activities (13,261) 16,142 Cash flows from investing activities: Capital expenditures (7,631) (7,696) Proceeds from sale of fixed assets 33 243 Net cash used by investing activities (7,598) (7,453) Cash flows from financing activities: Proceeds from stock option exercises 26 2,770 Principal payments on long-term debt (15,738) (15,715) Change in restricted cash related to financing activities - 4,602 Deferred financing costs paid - (633) Net cash used in financing activities (15,712) (8,976) Effects of exchange rates on cash (1,178) (127) Net decrease in cash and cash equivalents (37,749) (414) Cash and cash equivalents, beginning of period 93,246 93,865 Cash and cash equivalents, end of period 55,497 93,451

--30--KT/na*

CONTACT: Insituform Technologies, Inc. Christian G. Farman, 636-530-8000

KEYWORD: MISSOURI INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION ENVIRONMENT MANUFACTURING EARNINGS SOURCE: Insituform Technologies, Inc.

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