Insituform Technologies, Inc. Reports Record Quarterly Revenues and Net Income as Second Quarter Earnings per Share Increase 33%

Business Wire, July 18, 2000

Business Editors

CHESTERFIELD, Mo.--(BUSINESS WIRE)--July 18, 2000

Insituform Technologies, Inc. (Nasdaq/NM:INSUA) (the "Company") today announces record quarterly revenue and earnings for the second quarter ended June 30, 2000.

For the second quarter, revenues were $99.4 million compared to $85.6 million in the same period in 1999, an increase of 16%. For the first half, revenues rose 24% to $193.7 million from $156.8 million in 1999. Net income was a record for the second quarter at $8.4 million, or $.33 per share, an increase of 31% over second quarter 1999 net income of $6.4 million, or $.25 per share. For the first half, net income increased 37% to $14.5 million from $10.6 million in 1999.

Anthony W. Hooper, Chairman of the Board, President and Chief Executive Officer of the Company, stated, "These are very strong results. This is the twelfth consecutive quarter in which we are reporting strong profit growth. It is also the ninth consecutive quarter in which income from operations set a new record for the quarter.

"Not only did we set all-time records for revenue and net income in the quarter, we also reached new levels of return on sales at 8.4% and return on equity at 21.5%.

"Revenues were more balanced between the first two quarters this year. In 1999 we had relatively weak first quarter and strong second quarter revenues. The growth rate of 24% in the first half we believe is a better indicator of our performance than either of the quarterly comparisons.

"As expected, the gross margin ratio improved in the second quarter to 34.2%, a more normal level. The operating margin was good at 15.4%.

"We are pleased to see this revenue growth and gross margin level. Two items are worth mentioning in this context. Firstly, in the UK, the water companies curtailed spending as they shifted to the tariff levels set in the new four-year asset management plan established by the government regulator. This had a big impact in our second quarter and six months results. UK revenues were down $3.3 million for the second quarter and $4.7 million for the six months resulting in an operating income drop of $1.2 million for the second quarter and $1.5 million for the six months compared to 1999. We expect revenues and profitability in the UK to return to normal levels by the fourth quarter.

"Secondly, in the North American Rehab operation we are increasingly successful in the small diameter segment, which is the largest and most competitive part of the market. In fact, small diameter sales accounted for a larger portion of our mix in the first half than we originally expected. We achieved our revenue levels with this less-favorable mix by growing unit sales at a higher rate. The impact on gross margins has been limited because of our major improvements in small-diameter productivity.

"Continued strong results in the TiteLiner segment also contributed to our improvement in operating margin.

"Stronger order intake in all business segments increased the backlog during the quarter. The outlook for orders in the third quarter appears very strong. We have increased the focus on marketing and sales.

"As we previously indicated, we have focused on cash management. The operating cash flow for the first six months of 2000 was $19.5 million, of which $18.5 million was achieved in the second quarter. Cash as of June 30, 2000 was $59.3 million, representing a $7.9 million increase in the second quarter.

"One area of focus for the third quarter will be to improve our billing practices. Our asset account "Cost and estimated earnings in excess of billings" grew from $18.7 million to $30.4 million during the last three months due to increases in Rehabilitation jobs and incurring considerable cost in the initial phases of several large Tunneling jobs. Our goal will be to convert this asset into cash at a quicker pace.

"During the second quarter we repurchased 76,000 shares of stock at an average price of $25.84. As of June 30, 2000, our purchases for the year total 490,165 shares at an average price of $26.15.

"Going forward into the third quarter, we intend to continue our pursuit of revenue and profit growth. We believe the market is strong and offers us the opportunity to continue revenue growth. We believe our cost reduction efforts continue to bear fruit and we are working on further productivity gains. We are getting more leverage of our operating costs and debt service charges, which are declining as a percentage of sales and increasing the drop through from gross margin to net income. Our outlook is very positive."

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 press 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, and other factors set forth in reports and documents filed by the Company with the Securities and Exchange Commission from time to time. Please use caution and do not place reliance on forward-looking statements.