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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950124-01-001673.txt : 20010329
<SEC-HEADER>0000950124-01-001673.hdr.sgml : 20010329
ACCESSION NUMBER: 0000950124-01-001673
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010328
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: INSITUFORM TECHNOLOGIES INC
CENTRAL INDEX KEY: 0000353020
STANDARD INDUSTRIAL CLASSIFICATION: WATER, SEWER, PIPELINE, COMM AND POWER LINE CONSTRUCTION [1623]
IRS NUMBER: 133032158
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 000-10786
FILM NUMBER: 1581237
BUSINESS ADDRESS:
STREET 1: 702 SPIRIT 40 PARK DRIVE
CITY: CHESTERFIELD
STATE: MO
ZIP: 63005
BUSINESS PHONE: 6365308000
MAIL ADDRESS:
STREET 1: 702 SPIRIT 40 PARK DRIVE
CITY: CHESTERFIELD
STATE: MO
ZIP: 63005
FORMER COMPANY:
FORMER CONFORMED NAME: INSITUFORM OF NORTH AMERICA INC/TN/
DATE OF NAME CHANGE: 19930617
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>c60563e10-k.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ --------------
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:
CLASS A COMMON SHARES, $.01 PAR VALUE
-------------------------------------
(Title of class)
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. [ ]
<PAGE> 2
State the aggregate market value of the voting and non-voting stock
held by non-affiliates of the registrant. The aggregate market value shall be
computed by reference to the price at which the common stock was sold, or the
average bid and asked prices of such common equity, as of a specified date
within 60 days prior to the date of filing.
<TABLE>
<S> <C>
Aggregate market value as of March 15, 2001 . . . . . . . . . . . . . . . .$949,139,444
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date.
Class A Common Shares, $.01 par value, as of March 15, 2001 . . . . . 26,830,797 shares
</TABLE>
2
<PAGE> 3
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are incorporated
by reference herein, and the part of the Form 10-K into which the document is
incorporated:
-- Proxy Statement to be filed with respect to the 2000 Annual
Meeting of Stockholders: Part III
-- Portions of 2000 Annual Report to Stockholders: Part II
PART I
Item 1. Business
GENERAL
Insituform Technologies, Inc. (the "Company") is a worldwide company
specializing in the use of trenchless technologies to rehabilitate, replace,
maintain and install underground pipes. The company uses a variety of trenchless
technologies. The Insituform(R) cured-in-place pipe process (the "Insituform
Process") contributed approximately 74% of the Company's revenues during the
Company's most recent fiscal year.
In February 2001, the Company acquired Kinsel Industries, Inc.
("Kinsel"), a trans-regional provider of pipebursting and other sewer
rehabilitation services. In 2000, Kinsel had revenues of approximately $50
million from water and sewer work. In addition to trenchless pipe rehabilitation
services, it performs some open-cut pipe construction and erects water and sewer
treatment plants. Kinsel generated an additional $50 million in 2000 from
highway, bridge, airport and commercial construction. While valuable and
profitable, these operations do not fit the Company's strategy. The Company
expects to search for a possible buyer for these operations.
The Company was incorporated in Delaware in 1980 under the name
Insituform of North America, Inc., in order to act as the exclusive licensee of
the Insituform Process in most of the United States, and to license other
companies to market and provide Insituform installation services in return for
royalties and sales from materials manufactured by the Company.
Contemporaneously with the consummation in 1992 of the Company's acquisition of
its licensor, the name of the Company was changed to Insituform Technologies,
Inc. As a result of its successive licensee acquisitions, the Company has
further integrated its business to perform the entire process of manufacture and
installation using its trenchless processes.
As used in this Annual Report on Form 10-K, the term the "Company"
refers to the Company and, unless the context otherwise requires, its direct and
indirect subsidiaries. For certain information concerning each of the Company's
industry segments and domestic and foreign operations, see Note 14 of the Notes
to the Company's Consolidated Financial Statements included in response to "Item
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K," which
information is incorporated herein by reference.
This Annual Report on Form 10-K contains various forward looking
statements and information that are based on information currently available to
management and management's beliefs and assumptions. When used in this document,
the words "anticipate," "estimate," "believes," "plans," and similar expressions
are intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. Such statements are subject to risks and
uncertainties, and the Company's actual results may vary materially from those
anticipated, estimated or projected due to a number of factors, including,
without limitation, the competitive environment for the Company's products and
1
<PAGE> 4
services, the geographical distribution and mix of the Company's work, and other
factors set forth in reports and other documents filed by the Company with the
Securities and Exchange Commission from time to time.
TECHNOLOGIES
Pipeline System Rehabilitation.
The Insituform Process for the rehabilitation of sewers,
pipelines and other conduits utilizes a custom-manufactured tube, or
liner, made of a synthetic fiber. After the tube is saturated
(impregnated) with a thermosetting resin mixture, it is installed in
the host pipe by various processes and the resin is then hardened,
usually by heating it by various means, forming a new rigid pipe within
a pipe.
The NuPipe(R) process (the "NuPipe Process") entails the
manufacture of a folded replacement pipe from a thermoplastic material
which is stored on a reel in a reduced shape. The pipe is heated at the
installation site in order to make it flexible enough to be inserted
into an existing conduit, pulled into place and then sequentially
expanded to match the existing conduit by internal heat and pressure
and progressive rounding, creating a tight fit against the conduit
being repaired.
Pipebursting is a method for trenchless replacement of
deteriorated and/or undersized pipelines. A bursting head is propelled
through the pipeline, fracturing the host pipe and displacing the
fragments outwards allowing a new pipe to be pulled in, replacing the
old line. Pipes can be replaced size-for-size or upsized.
Microtunneling is a remotely controlled, guided, pipe-jacking
process that provides continuous support to the excavation face and
does not require personnel entry into the tunnel. Applications are
typically for gravity sewers at depths greater than 15 feet, in
congested areas, where unstable ground conditions exist, where
construction is below the water table, or where contamination zones are
present.
Sliplining basically entails pushing or pulling a new pipeline
into an old one. With segmented sliplining, short segments of pipe are
joined to form the new pipe. For gravity sewer rehabilitation, these
short segments can often be joined in a manhole or access structure,
eliminating the need for a large pulling pit. Typically the annular
space between the new pipe and host pipe is filled with a grout
material.
See "Patents and Licenses" below for information concerning
the Company's Thermopipe(R) process (the "Thermopipe Process"), which
was not material to the Company's results of operations during the year
ended December 31, 2000.
Corrosion and Abrasion Protection. The Company's TiteLiner(R) process
(the "TiteLiner Process") is a method of lining new and existing steel pipe with
a corrosion and abrasion resistant polyethylene pipe.
Tunneling. Tunneling typically encompasses the construction of
man-entry sized pipelines with access only through vertical shafts. Although
tunnels can be hand-dug, typically a steerable, locally-controlled tunnel boring
machine (TBM) is utilized. For pipe installation, the TBM leads a string of
jacked pipes.
2
<PAGE> 5
REHABILITATION ACTIVITIES
The Company conducts its rehabilitation activities principally through
direct installation and other construction operations performed directly and
through wholly-owned and, in some cases, majority-owned, subsidiaries. In
addition, in those areas of the world in which the Company's management believes
it would not be desirable for the Company to exploit its trenchless processes
directly, the Company has granted licenses to unaffiliated companies. As
described under "Ownership Interests in Licensees" below, the Company has also
entered into joint ventures from time to time to encourage additional royalties,
sales of its products and exploitation of its trenchless rehabilitation
processes.
The Company's principal rehabilitation activities in North America are
conducted directly or through subsidiaries which hold the Insituform Process and
NuPipe Process rights for substantially all of 44 of the 50 states, in addition
to Puerto Rico, the U.S. Virgin Islands and Canada, and the rights to the
Thermopipe Process. In February 2000, the Company acquired the operations of
Insituform Metropolitan, Inc. and certain of its affiliates, the Company's
licensees in the states of New York and New Jersey, and has integrated these
territories into its rehabilitation activities. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
Outside of North America, the Company conducts Insituform Process or
NuPipe Process direct installation operations through its subsidiaries in the
United Kingdom, France, Spain, the Netherlands and Belgium. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources." Through the operations of its
French subsidiary, Video Injection S.A. ("Video Injection"), acquired in 1998,
the Company utilizes multifunctional robotic devices developed by Video
Injection in connection with the inspection and repair of pipelines.
North American rehabilitation operations are headquartered in
Chesterfield, Missouri, with principal operations facilities maintained in
approximately 13 locations geographically dispersed through all major regions.
European operations are headquartered in Paris, France, with regional operations
facilities located in the United Kingdom, the Netherlands, Spain and Mitry Mory,
France.
The worldwide rights to the TiteLiner Process are applied by the
Company through its United Pipeline System division, which offers corrosion and
abrasion protection work worldwide.
The Company, through its subsidiary, Affholder, Inc., in addition to
tunneling, offers a range of pipe system rehabilitation services.
The direct installation business of the Company is project-oriented,
and contracts may be obtained through competitive bidding, usually requiring
performance at a fixed price. The profitability of these operations to the
Company depends upon the ability to estimate costs accurately, and such
estimates may prove to be inaccurate as a result of unforeseen conditions or
events. A substantial proportion of the work on any given project may be
subcontracted out to third parties by the Company.
Proper trenchless installation requires certain expertise that is
acquired on the job and through training, and, if an installation is improperly
performed, the Company may be required to repair the defect, which may involve
excavation. The Company, accordingly, has incurred significant costs in
establishing new field installation crews, in training new operations personnel
and in equipping its direct installation staff.
The Company generally invoices installation revenues on a
percentage-of-completion basis. Under ordinary circumstances, collection from
governmental agencies in the United States is made within 60 to
3
<PAGE> 6
90 days of billing. In most cases, five to 15 percent of the contract value is
withheld by the owner until testing is completed or the warranty period has
expired.
The Company is required to carry insurance and bonding in connection
with certain direct installation projects and, accordingly, maintains
comprehensive insurance policies, including workers' compensation, general and
automobile liability, and property coverage. The Company believes that it
presently maintains adequate insurance coverage for all direct installation
activities. The Company has also arranged bonding capacity for bid, performance
and payment bonds. Typically, the cost of a performance bond is less than
approximately 1% of the contract value. The Company is required to indemnify
surety companies for any payments the sureties are required to make under the
bonds.
The Company's principal rehabilitation activities are conducted through
the following majority-owned subsidiaries:
<TABLE>
<CAPTION>
Subsidiary Interest
- ---------- --------
<S> <C>
Insituform France S.A. 99.99% of stock(1)
United Pipeline de Mexico, S.A. 55% of stock(2)
Video Injection S.A. 79.8% of stock(3)
</TABLE>
- -----------------
(1) The remaining interest is held by the subsidiary's principals.
(2) The remaining interest is held by a subsidiary of Produtos y
Servicios Miller de Mexico, S.A.
(3) The remaining interest is held by the subsidiary's principal
employees and is subject to purchase by the Company in September 2003
(or earlier in specified events).
The Company's rehabilitation activities also extend to the grant of
licenses for the Insituform Process and the NuPipe Process, covering exclusive
and non-exclusive territories, to licensees who provide pipeline repair and
rehabilitation services throughout their respective licensed territories. The
licenses generally grant to the licensee the right to utilize the know-how and
practice the invention of the patent rights (where they exist) relating to the
subject process, and to use the Company's copyrights and trademarks. At present,
the Insituform Process is commercialized under license by an aggregate of 31
unaffiliated licensees and sublicensees, and the NuPipe Process is
commercialized under license by an aggregate of 5 unaffiliated licensees.
The Company's licensees generally are obligated to pay a royalty at a
specified rate, which in many cases is subject to a minimum royalty payment.
Domestic licensees are also obligated to pay specified royalty surcharges on
their sales and contracts outside of their licensed territories, which are then
paid by the Company to the domestic licensee in whose territory the installation
was performed. Any improvements or modifications a licensee may make in the
subject process during the term of the license agreement becomes the property of
the Company or are licensed to the Company. Should a licensee fail to meet its
royalty obligations or other material obligations, the Company may terminate the
license. Many licensees (including the domestic licensees), upon prior notice to
the Company, may also terminate the license for any reason. The Company may vary
the agreement used with new licensees according to prevailing conditions.
The Company acts as licensor under arrangements relating to the use of
the Thermopipe Process in Germany, on an exclusive basis, and in the United
Kingdom, on a non-exclusive basis.
Insituform East, Incorporated ("East") holds six Sub-Licenses to the
Insituform Process to operate in the States of Virginia, Delaware, Maryland,
Ohio, a portion of Kentucky, West Virginia and the District of Columbia under
the Company's exclusive license to the Insituform Process for entire United
States.
4
<PAGE> 7
(The United States rights to the Insituform Process are owned by the Company's
subsidiary, Insituform (Netherlands) B.V. ("Insituform Netherlands")). Pursuant
to a July 1999 settlement agreement with East and several affiliates of East
(the "Settlement Agreement"), Midsouth Partners, an affiliate of East, retains a
limited, non-exclusive right in Midsouth Partners' former territory to utilize
the Insituform Process and technology in the condition and state as commercially
practiced on the date of settlement.
As previously reported by the Company and Insituform Netherlands
initiated litigation against Insituform East and Midsouth Partners in Federal
District Court for the Middle District of Tennessee (Civil Action No. 3-99-1130)
and filed an Amended Complaint on June 13, 2000, alleging among other matters,
trademark violations and a non-curable breach of the Settlement Agreement; and,
seeking: (i) the right to terminate the grant of the limited license to Midsouth
Partners under the Settlement Agreement; (ii) the affirmation of East's
obligations to make royalty payments and cross-over royalty payments on work
performed by East or any of its affiliates within the scope of the subject
matter of East's Sub-Licenses outside East's licensed territories under East's
Sub-Licenses; and (iii) a declaration that the Company is not obligated to
continue payment of certain finder's fees to East.
Defendants have filed an answer and counterclaim denying the material
allegations of the Company's amended complaint and seek, among other things,
declarations and injunctions essentially the opposite of those requested by the
Company. East has petitioned the Court for leave to amend its answer and
counterclaims to include a defense of patent misuse which East contends
prohibits the Company from enforcing the royalty provisions under its
Sub-Licenses. The Court has not yet acted upon such motion for leave to amend
and the Company has opposed such motion. Even if the Court were to grant East's
motion for leave to amend, the Company believes it has substantial and
meritorious defenses to East's allegations. In any event, should East prevail
under its theories, or if the Company should fail under its theories, the result
would not have a material adverse effect on the Company's financial performance
or income.
OWNERSHIP INTERESTS IN LICENSEES
The Company, through its subsidiary, Insituform Holdings (UK) Limited,
holds one-half of the equity interest in Insituform Rohrsanierungstechniken
GmbH, the Company's licensee of the Insituform and NuPipe Processes in Germany.
The remaining interest is held by Per Aarsleff A/S, a Danish contractor ("Per
Aarsleff"). The joint venture partners have rights of-first-refusal in the event
either party determines to divest its interest.
The Company, through its subsidiary, INA Acquisition Corp., holds
one-half of the equity interest in Italcontrolli-Insituform S.r.l., the
Company's licensee of the Insituform Process in Italy. The remaining interest is
held by Per Aarsleff. The joint venture partners have rights of-first-refusal in
the event either party determines to divest its interest.
The Company holds a 50 percent joint venture interest in Ka-Te
Insituform A.G., the Company's licensee of the Insituform Process in
Switzerland, Liechtenstein and Voralberg, Austria. The remaining interest is
held by Ka-Te Holding A.G.
The Company has also entered into several contractual joint ventures in
order to develop joint bids on contracts for its direct installation business,
and for tunneling operations. The Company continues to investigate opportunities
for expanding its business through such arrangements.
MARKETING
The Company has focused the marketing of its rehabilitation
technologies primarily on the municipal wastewater markets worldwide, which the
Company expects to remain the largest part of its
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<PAGE> 8
business for the foreseeable future. The Company produces sales literature and
presentations, participates in trade shows, conducts national advertising and
executes other marketing programs for the Company's own sales force and those of
unaffiliated licensees.
The Company intends that its marketing and sales processes will undergo
significant changes during 2001, as the Company builds on its target market
approach to selling. Historically, the Company's sales effort focused on larger
cities, where it built customer relationships at the technical level. To help
shape decision-making at every step, the Company intends to formalize its sales
effort with a multi-level sales force structured around key accounts, focusing
on engineers, consultants, administrators and elected officials, in addition to
technical staff.
The Company's distribution efforts are implemented predominantly
through the direct installation activities. See "Rehabilitation Activities"
above for a description of the Company's licensing operations and "Ownership
Interests in Licensees" for a description of investments in licensees. The
Company's unaffiliated licensees are responsible for marketing and sales
activities in their respective territories, and each has a staff for that
purpose.
The Company offers its corrosion and abrasion protection technologies
worldwide to line new and existing steel pipelines.
No customer accounted for more than ten percent of the Company's
consolidated revenues during the years ended December 31, 2000, 1999 and 1998,
respectively.
BACKLOG
At December 31, 2000 and 1999, respectively, the Company recorded
backlog from construction operations (excluding projects where the Company has
been advised that it is the low bidder, but not formally awarded the contract)
in the amounts of approximately $114.8 million and $132.3 million, respectively.
The Company anticipates that substantially all construction backlog recorded at
December 31, 2000 will be completed in 2001.
PRODUCT DEVELOPMENT
The Company, by utilizing its own laboratories and test facilities and
outside consulting organizations and academic institutions, continues to develop
improvements to its proprietary processes, including the materials used and the
methods of manufacturing and installing pipe. During the years ended December
31, 2000, 1999 and 1998, the Company spent approximately $2.4 million, $2.4
million and $2.2 million, respectively, on all research and development
activities.
MANUFACTURING AND SUPPLIERS
The Company maintains its principal North American liner manufacturing
facility in Batesville, Mississippi, with an additional facility located in
Memphis, Tennessee. In Europe, Insituform Linings Plc ("Linings"), a
majority-owned subsidiary, manufactures and sells linings from its plant located
in Wellingborough, United Kingdom. The Company holds a 75% interest in Linings
and Per Aarsleff the remainder, which interests are subject to rights of first
refusal held by the Company and Per Aarsleff in the event of any proposed
disposition. The Company also maintains a liner manufacturing facility in
Matsubuse, Japan.
Although raw materials used in the Company's Insituform products are
typically available from multiple sources, the Company's historical practice has
been to purchase materials from a limited number
6
<PAGE> 9
of suppliers. The Company maintains its own felt manufacturing facility
contiguous to its Insitutube manufacturing facility in Batesville, and purchases
substantially all of its fiber requirements from one source, alternate vendors
of which the Company believes are readily available. Although it has worked with
one vendor to develop a uniform and standard resin to source substantially all
of its resin requirements in North America, the Company believes that resins are
also readily available from a number of major corporations should there be a
need for alternative resin sourcing. The Company believes that the sources of
supply in connection with its Insituform operations are adequate for its needs.
The Company purchases the thermoplastic pipe to satisfy the substantial
portion of its NuPipe requirements from an unaffiliated party. The Company
believes that alternative sources of supply for its pipe requirements in
connection with the NuPipe Process are available. If the Company were unable to
obtain its NuPipe requirements under its existing third party arrangements, the
Company might be adversely affected until arrangements with alternative sources
are formulated.
Under its arrangements for the acquisition of the Thermopipe Process,
the seller will to continue to manufacture and supply Thermopipe products to the
Company through 2004.
The Company sells liners and related products utilized in the
Insituform Process, and the thermoplastic pipe utilized in the application of
the NuPipe Process, to its licensees, when appropriate pursuant to fixed-term
supply contracts. Under the arrangements assumed in connection with the
acquisition of the Thermopipe Process, the Company also furnishes Thermopipe
products to its approved contractors and licensees.
The Company manufactures certain equipment used in its corrosion and
abrasion protection operations, and, in connection with any licenses to
unaffiliated parties, will sell such equipment to its licensees.
PATENTS AND LICENSES
The Company currently holds 69 patents in the United States relating to
the Insituform Process, the last of which to expire will remain in effect until
2017, and has obtained patent protection in its principal overseas markets
covering aspects of the Insituform Process. These patents cover certain aspects
of the Insituform Process, including the process of reconstructing the pipeline.
The Company's patent relating to the resin saturation process expired in
February 2001. The patent relating to the manufacture of liners will expire in
May 2001. Two of the significant patents relating to the Insituform Process,
covering, respectively, the curing of a resin-impregnated tube and material
aspects of the inversion process, have expired where previously in effect.
The specifications and/or rights granted in relation to each patent
will vary from jurisdiction to jurisdiction. In addition, as a result of
differences in the nature of the work performed and in the climate of the
countries in which the work is carried out, not every licensee uses each patent,
and the Company does not necessarily seek patent protection for all of its
inventions in every jurisdiction in which it does business.
There can be no assurance that the validity of the Company's patents
will not be successfully challenged or that they are sufficient to afford
protection against another company utilizing a process similar to the Insituform
Process. The Company's business could be adversely affected by increased
competition in the event that one or more of the patents were adjudicated to be
invalid or inadequate in scope to protect the Company's operations or upon
expiration of the patents. The Company believes, however, that although the
Company has relied on the strength and validity of its patents, the Company's
long experience with the Insituform Process, its continued commitment to support
and develop the
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<PAGE> 10
Insituform Process, the strength of its trademarks, and its degree of market
penetration, should enable the Company to continue to compete effectively in the
pipeline rehabilitation market.
Twelve patents covering the NuPipe Process or the materials used in
connection with the NuPipe Process have been issued in the United States. The
Company holds patents in connection with the NuPipe Process in 17 other
countries.
The Company believes that the success of its corrosion and abrasion
protection business, operated through its United Pipeline Systems division, will
depend primarily upon its proprietary know-how and its marketing and sales
skills. The Company holds two patents issued in the United States and one patent
outside of the United States relating to the Thermopipe Process for
rehabilitating potable water and other aqueous fluid pipes. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Result of
Operating-Liquidity and Capital Resources."
The Company holds the exclusive rights to use the patents, trademarks
and know-how related to the Paltem-HL system, a process for rehabilitating
pressure pipes, which includes the Paltem-Frepp system, for substantially all of
North America and, on a non-exclusive basis, additional territories in the
eastern hemisphere and Latin America. See "Government Regulation" below. Under
the license, the Company is required to pay royalties at specified rates on
installations and sales of liners. During the year ended December 31, 2000, the
Company did not have any material operations under this license. The Company is
renegotiating the terms of this license.
COMPETITION
The pipeline reconstruction, rehabilitation and repair business is
highly competitive, and the Company competes against many companies, some of
which have far greater financial resources and experience than the Company.
Accordingly, there can be no assurance as to the success of the Company's
processes in competition with such companies and alternative technologies for
pipeline rehabilitation.
In each of its rehabilitation markets, the Company currently faces
competition from more conventional methods, including: (i) total replacement,
which is the excavation and replacement of an entire section of pipe; (ii) point
repair, which is the replacement of cracked or structurally failed sections of
pipes by actual excavation and replacement; (iii) sliplining, which is the
insertion of a smaller pipe within an existing deteriorated pipe; and (iv) the
placement of gelatinous material, hydraulic cement, or other acceptable material
in defective pipes to repair leaks and prevent infiltration in gravity sewers.
In addition, the Company faces competition from other trenchless
processes throughout the world. In the United States, the Company faces
competition from several cured-in-place processes and, outside of the United
States, from additional cured-in-place processes currently in regional use. The
Company also faces competition from several fold and formed thermoplastic
processes. Several companies offer in-place polyethylene lining systems which
compete with the Company's abrasion and corrosion protection technologies.
The Company's trenchless processes may also encounter competition from
alternative trenchless approaches such as pipebursting and other methods.
Kinsel, acquired by the Company in February 2001, employs the pipebursting,
microtunneling and sliplining methods.
The Company's tunneling operation competes with utility contracting
firms throughout North America.
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<PAGE> 11
SEASONALITY
Although the Company's operations can be affected by severe weather,
for the past five years seasonal variation in work performed has not had a
material effect on the Company's consolidated results of operations.
EMPLOYEES
As of December 31, 2000, the Company employed 1,771 individuals.
Certain of the Company's contracting operations are parties to collective
bargaining agreements covering an aggregate of 213 employees. The Company
generally considers its relations with its employees to be good.
GOVERNMENT REGULATION
The Company and its licensees are required to comply with all
applicable U.S. federal, foreign, state and local statutes, regulations and
ordinances. In addition, the Company's direct installation and other
construction operations, and those of its licensees, may have to comply with
relevant code specifications, permit requirements, and bonding and insurance
requirements as well as with fire regulations relating to the storage, handling
and transporting of flammable materials. The Company's manufacturing facilities,
as well as its direct installation operations and those of its licensees, are
subject to state and national environmental protection regulations, none of
which presently has any material effect on the Company's capital expenditures,
earnings or competitive position in connection with the Company's present
business. However, although the Company's direct installation operations have
established monitoring programs relating to the use of solvents, further
restrictions could be imposed on the use of solvents or the thermosetting resins
used in the Insituform Process. The Company believes that it is in material
compliance with environmental laws and regulations applicable to it.
The use of both thermoplastics and thermosetting resin materials in
contact with drinking water is strictly regulated in most countries. In the
United States, a consortium led by NSF International ("NSF"), under arrangements
with the United States Environmental Protection Agency (the "EPA"), establishes
minimum requirements for the control of potential human health effects from
substances added indirectly to water via contact with treatment, storage,
transmission and distribution system components, by defining the maximum
permissible concentration of materials which may be leached from such components
into drinking water, and methods for testing them. In February 1996, the Paltem-
HL and Frepp processes under license from Ashimori were certified by the NSF for
use in drinking water systems. In April 1997, the Insituform PPL(R) liner was
certified by the NSF for use in drinking water systems, followed in April 1999
by NSF certification of the Insituform RPP(R) liner for such use. The Thermopipe
product also has NSF approval. The NSF assumes no liability for use of any
products, and the NSF's arrangements with the EPA do not constitute the EPA's
endorsement of the NSF, the NSF's policies or its standards. Because of the need
for dedicated equipment in connection with use of these products in drinking
water applications, and the time required for the marketing process, the Company
does not expect meaningful revenues from drinking water rehabilitation at least
through 2001.
EXECUTIVE OFFICERS
The executive officers of the Company, and their respective ages and
positions with the Company, are as follows:
9
<PAGE> 12
<TABLE>
<CAPTION>
Age at
Name March 15, 2001 Position with the Company
- ---- -------------- -------------------------
<S> <C> <C>
Anthony W. Hooper 53 Chairman of the Board, President and Chief Executive Officer
Robert W. Affholder 65 Senior Executive Vice President
Joseph A. White 47 Vice President-Chief Financial Officer
Carroll W. Slusher 52 Vice President-North America
Antoine Menard 50 Vice President-Europe
Thomas A. A. Cook(1) 36 Vice President-General Counsel
</TABLE>
(1) Mr. Cook became Vice President-General Counsel of the Company in
September 2000.
Anthony W. Hooper has been Chairman of the Board of the Company since
1997, and has been President of the Company since 1996. Prior to 1996, Mr.
Hooper was Senior Vice President-Marketing and Technology of the Company.
Robert W. Affholder has been Senior Executive Vice President of the
Company since 1996. From 1995 to 1996, Mr. Affholder was Senior Vice
President-Chief Operating Officer of North American Contracting Operations of
the Company. From 1994 until its acquisition by the Company in 1995, Mr.
Affholder was President of Insituform Mid-America, Inc. ("IMA"), and was Vice
Chairman of IMA from 1993 to 1995.
Joseph A. White has been Vice President and Chief Financial Officer of
the Company since August 1999. From 1998 until joining the Company, Mr. White
was Vice President and Chief Financial Officer of Key Plastics, an automotive
parts manufacturer that filed for bankruptcy reorganization in March 2000. From
1997 until 1998, Mr. White was Vice President- Finance (North America) for the
Becker Group, a manufacturer of automotive interiors. From 1996 until 1997, Mr.
White was Director of Finance in Asia of the Vickers Division of Aeroquip
Vickers, a hydraulics supplier, where he held several other senior finance
positions before 1996.
Carroll W. Slusher has been Vice President-North America of the Company
since February 1999, having served as the Company's Divisional Vice
President-North American Operations from 1998 until February 1999 and Director
of North American Pipe Rehabilitation from 1997 to 1998. From prior to
1996 until joining the Company, Mr. Slusher was a regional manager with General
Electric Company.
Antoine Menard has been Vice President-Europe of the Company since
February 1999, having served as the Company's Managing Director-Europe from 1995
until that date. Prior to joining the Company, Mr. Menard was a general manager
with the French oil group TOTAL.
Thomas A. A. Cook has been Vice President and General Counsel of the
Company since September 2000. Prior to joining the Company, Mr. Cook was a
partner in the Corporate/Securities Department at the law firm of Blackwell
Sanders Peper Martin LLP, and before June 1998, was with a predecessor firm
(Peper Martin Jensen Maichel and Hetlage) in the Corporate/Securities
Department.
Item 2. Properties
The Company's executive offices, located in Chesterfield, Missouri, a
suburb of St. Louis, at 702 Spirit 40 Park Drive, are leased from an
unaffiliated party through May 31, 2002. The Company owns its research and
development facility in Chesterfield.
10
<PAGE> 13
The Company maintains a liner fabrication facility and contiguous felt
manufacturing facility in Batesville, Mississippi. The Company owns its
Batesville facilities. The Company's manufacturing facilities in Memphis,
Tennessee are located on land sub-leased from an unaffiliated entity for an
initial term of 40 years expiring on December 31, 2020. Linings (a
majority-owned subsidiary) owns certain premises comprising its liner
manufacturing facility, located in Wellingborough, England. The Company leases
additional manufacturing space in Matsubuse, Japan.
In support of its direct installation operations, the Company owns or
leases facilities in the United States, Europe and Latin America.
The foregoing facilities are regarded by management as adequate for the
current requirements of the Company's business.
Item 3. Legal Proceedings
The Company is involved in certain litigation incidental to the conduct
of its business and affairs. Management does not believe that the outcome of any
such litigation will have a material adverse effect on the financial condition
or results of operations of the Company. See "Item 1. Business - Rehabilitation
Activities."
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Certain information required by this item is incorporated by
reference from the table "Selected Quarterly Financial Data (Unaudited)"
contained in Note 16 of the "Notes to Consolidated Financial Statements" on page
37 of the 2000 Annual Report to Stockholders (the "2000 Annual Report") and from
"Price Range of Securities" on page 40 of the 2000 Annual Report.
Holders of Common Stock are entitled to receive dividends as and when
they may be declared by the Company's Board of Directors. The Company has never
paid a cash dividend on the Common Stock. The Company's present policy is to
retain earnings to provide for the operation and expansion of its business.
However, the Company's Board of Directors will review the Company's dividend
policy from time to time and will consider the Company's earnings, financial
condition, cash flows, financing agreements and other relevant factors in making
determinations regarding future dividends, if any. Under the terms of certain
debt arrangements to which the Company is a party, the Company is subject to
certain limitations in paying dividends.
(b) Not applicable.
Item 6. Selected Financial Data
Historical financial information is incorporated by reference from
"Financial Highlights - Five Year Review" on page 2 of the 2000 Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
11
<PAGE> 14
Information required by this item is incorporated by reference from
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 21 through 24 of the 2000 Annual Report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Information required by this item is incorporated by reference from the
discussion under the heading "Market Risk" on page 24 of the 2000 Annual Report.
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated by reference from
"Consolidated Financial Statements" and "Notes to Consolidated Financial
Statements" on pages 25 through 37 and from "Report of Independent Public
Accountants" on page 38 of the 2000 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
For information concerning this item, see "Item 1. Business-Executive
Officers" and the Proxy Statement to be filed with respect to the 2001 Annual
Meeting of Stockholders (the "2001 Proxy Statement"), which information is
incorporated herein by reference.
Item 11. Executive Compensation
For information concerning this item, see the 2001 Proxy Statement,
which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
For information concerning this item, see the 2001 Proxy Statement,
which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
For information concerning this item, see the 2001 Proxy Statement,
which information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements:
12
<PAGE> 15
The following consolidated financial statements, related notes and
independent auditors' report, contained in the 2000 Annual Report, are
incorporated by reference into Item 8 of Part II of this report:
<TABLE>
<CAPTION>
PAGE(S) IN THE 2000
ANNUAL REPORT
<S> <C>
Consolidated Statements of Income 25
Consolidated Balance Sheets 26
Consolidated Statements of Stockholders' Equity 27
Consolidated Statements of Cash Flows 28
Notes to Consolidated Financial Statements 29
Segment Information 36-37
Geographic Data 36-37
Selected Quarterly Consolidated Financial Data (Unaudited) 37
Report of Independent Public Accountants 38
</TABLE>
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 are listed in the attached Index to Exhibits.
(b) Current Reports on Form 8-K: None
13
<PAGE> 16
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
appoint Anthony W. Hooper and Joseph A. White as attorneys-in-fact with full
power of substitution, severally, to execute in the name and on behalf of the
registrant and each such person, individually and in each capacity stated below,
one or more amendments to the annual report which amendments may make such
changes in the report as the attorney-in-fact acting deems appropriate and to
file any such amendment to the report with the Securities and Exchange
Commission.
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: March 28, 2001 INSITUFORM TECHNOLOGIES, INC.
By: /s/ Anthony W. Hooper
----------------------------------------
President and Chief Executive 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:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Anthony W. Hooper March 28, 2001
- --------------------------------------------
Anthony W. Hooper Principal Executive Officer and
Director
/s/ Joseph A. White March 28, 2001
- --------------------------------------------
Joseph A. White Principal Financial and Accounting
Officer
/s/ Robert W. Affholder March 28, 2001
- --------------------------------------------
Robert W. Affholder Director
/s/ Paul A. Biddelman March 28, 2001
- --------------------------------------------
Paul A. Biddelman Director
/s/ Stephen P. Cortinovis March 28, 2001
- ------------------------------------
Stephen P. Cortinovis Director
</TABLE>
<PAGE> 17
<TABLE>
<S> <C> <C>
/s/ Juanita H. Hinshaw March 28, 2001
- --------------------------------------------
Juanita H. Hinshaw Director
/s/ Thomas Kalishman March 28, 2001
- --------------------------------------------
Thomas Kalishman Director
/s/ Sheldon Weinig March 28, 2001
- --------------------------------------------
Sheldon Weinig Director
/s/ Alfred L. Woods March 28, 2001
- --------------------------------------------
Alfred L. Woods Director
</TABLE>
<PAGE> 18
INDEX TO EXHIBITS(1),(2)
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).
3.2 By-Laws of the Company, as amended.
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)
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).(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)
- ----------------------
(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.
<PAGE> 19
10.8 Severance Agreement dated as of March 14, 1999 between the Company and
Robert L. Kelley (Incorporated by reference to Exhibit 10.14 to the
Annual Report on Form 10-K for the year ended December 31, 1998).(3)
10.9 Employment letter dated February 10, 1997 between the Company and
Carroll Slusher (Incorporated by reference to Exhibit 10.9 to the
Annual Report on Form 10-K for the year ended December 31, 1999).(3)
10.10 Employment Agreement dated February 1, 2001 between Insituform Europe
and Antoine Menard.(3)
10.11 Equipment Lease dated as of October 10, 1989 between A-Y-K-E
Partnership and Affholder, Inc. (Incorporated by reference to Exhibit
10.20 to the Annual Report on Form 10-K for the year ended December 31,
1995).
10.12 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)
10.13 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)
10.14 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)
10.15 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)
10.16 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)
13(a) Portions of the Registrant's 2000 Annual Report to Stockholders
incorporated by reference in this Annual Report on Form 10-K.
21 Subsidiaries of the Company.
23 Consent of Arthur Andersen LLP.
24 Power of Attorney (See "Power of Attorney" in the Annual Report on
Form 10-K).
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>2
<FILENAME>c60563ex3-2.txt
<DESCRIPTION>BY-LAWS OF THE COMPANY, AS AMENDED
<TEXT>
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
INSITUFORM TECHNOLOGIES, INC.
(as amended through October 25, 2000)
ARTICLE I - OFFICES
The principal offices of the corporation in the State of Delaware shall
be located in the City of Dover, County of Kent. The Corporation may have such
other offices, either within or without the State of incorporation as the board
of directors may designate or as the business of the corporation may from time
to time require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held at such time and
upon such date during the month of June in each year as the Board of Directors
may determine, for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the day fixed for the
annual meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute, may be called by either the chairman of
the board, the president or by the directors, and shall be called by the
president at the request of the holders of not less than fifty per cent of all
the outstanding shares of the Corporation entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or without the
State unless otherwise prescribed by statute, as the place of meeting for any
annual meeting or for any special meeting called by the directors. A waiver of
notice signed by all stockholders entitled to vote at a meeting may designate
any place, either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal office of the corporation.
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than fifty
days before the date of the meeting, either personally or by mail,
<PAGE> 2
by or at the direction of either the chairman of the board, the president, the
secretary, or the officer or persons calling the meeting, to each stockholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail, addressed to the
stockholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon pre-paid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend, or in order to make a determination
of stockholders for any other proper purpose, the directors may fix in advance a
date as the record date for any such determination of stockholders, such date in
any case to be not more than sixty days and, in case of a meeting of
stockholders, not less than ten days prior to the date on which the particular
action requiring such determination of stockholders is to be taken. If the stock
transfer books are not closed and no record date is fixed for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders,
or stockholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of stockholders. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for
shares of the corporation shall make, at least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the principal office of
the corporation and shall be subject to inspection by any stockholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder during the whole time of the meeting. The original stock
transfer book shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer books or to vote at the meeting of
stockholders.
7. QUORUM.
At any meeting of stockholders a majority of the outstanding shares of
the corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than said number of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
2
<PAGE> 3
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy
executed in writing by the stockholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders. Upon the demand of any stockholder, the vote for
directors and upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of this State.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as
follows:
1. Roll call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officer.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. BUSINESS AT MEETINGS.
Subsequent to the 1999 annual meeting of stockholders, no business
shall be transacted at an annual meeting of stockholders other than business
that is (i) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (ii) otherwise properly brought before the annual meeting by
or at the direction of the Board of Directors (or any duly authorized committee
thereof), or (iii) otherwise properly brought before the annual meeting by a
stockholder who (x) is a stockholder of record on the record date for the
determination of stockholders entitled to vote at such annual meeting and on the
date of the giving of the notice provided for in this Section 11 and (y)
complies with the procedures set forth in this Section 11 and any other
applicable
3
<PAGE> 4
requirements. No business shall be conducted at a special meeting of
stockholders other than business that is specified in the corporation's notice
of meeting (or any supplement thereto). In addition, subsequent to the 1999
annual meeting of stockholders only persons who are nominated in accordance with
the procedures set forth in this Section 11 (and any other applicable
requirements) shall be eligible for election as directors of the corporation. If
business is not properly brought before any meeting of stockholders in
accordance with the procedures set forth in this Section 11, or if a nomination
at any meeting was not made in accordance with the requirements of this Section
11, the chairman shall declare to the meeting that the business was not properly
brought before the meeting, and such business shall not be transacted, or the
nomination was defective, and such defective nomination shall be disregarded.
Subsequent to the 1999 annual meeting of stockholders, nominations of
persons for election to the Board of Directors may be made at any annual meeting
of stockholders, or at any special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting: (i) by or at
the direction of the Board of Directors (or any duly authorized committee
thereof), subject to the requirements of these By-laws, or (ii) by any
stockholder who (x) is a stockholder of record on the record date for the
determination of stockholders entitled to vote at such annual meeting and on the
date of the giving of the notice provided for in this Section 11 and (y) has
complied with the procedures set forth in this Section 11.
For a stockholder to be entitled to properly bring business before an
annual meeting of stockholders subsequent to the 1999 annual meeting of
stockholders, a proper Stockholder's Notice (as defined below) must have been
received by the secretary of the corporation at the principal executive offices
of the corporation, and for any nomination of a person or persons for election
to the Board of Directors by a stockholder (a "Stockholder Nomination") to be
made at any annual meeting of stockholders subsequent to the 1999 annual meeting
of stockholders, written notice thereof meeting the requirements set forth below
must have been received by the secretary of the corporation at the principal
executive offices of the corporation, in each case not less than 90 days nor
more than 120 days prior to the first anniversary of the date of the preceding
year's annual meeting of stockholders; provided, however, that in the event that
the date of the annual meeting is advanced or delayed by more than 30 days
compared to the preceding year's annual meeting, notice by the stockholder to be
timely must be so received not later than the close of business on the later of
(i) the ninetieth (90th) day prior to such annual meeting or (ii) the tenth
(10th) day following the day on which public disclosure (as defined below) of
the date of the annual meeting is first made.
For a Stockholder Nomination to be made at any special meeting of
stockholders as aforesaid, written notice thereof meeting the requirements set
forth below must have been received by the secretary of the corporation at the
principal executive offices of the corporation, in each case not later than the
close of business on the later of (i) the ninetieth (90th) day prior to such
special meeting or (ii) the tenth (10th) day following the day on which public
disclosure of the date of the special meeting is made.
A Stockholder's Notice shall mean a written notice to the secretary of
the corporation which sets forth as to each matter such stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting (including the form of the proposal) and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of such stockholder, (iii) the class or series and number of
shares of
4
<PAGE> 5
capital stock of the corporation that are owned beneficially or of record by
such stockholder, indicating the name and address of any beneficial owner of
such shares, (iv) a description of all arrangements or understandings between
such stockholder (and any person acting on behalf of the stockholder) and any
other person or persons (including their names) in connection with the proposal
of such business by such stockholder and any material interest of such
stockholder in such business, and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
Any notice of a Stockholder Nomination must set forth (a) as to each
person whom the stockholder proposes to nominate for election as a director (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class or series and
number of shares of capital stock of the corporation that are owned beneficially
or of record by the person and (iv) any other information relating to the person
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of 1934, as then
in effect (the "Exchange Act"), and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice (i) the name and
record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the corporation that are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
For purposes of this Section 11, "public disclosure" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its
board of directors. The directors shall in all cases act as a board, and they
may adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of this State.
2. NUMBER OF DIRECTORS, TENURE AND QUALIFICATIONS.
The Board of Directors shall consist of eight (8) directors, provided
that the size of the Board of Directors shall increase automatically, without
any further amendment to this Section 2,
5
<PAGE> 6
to nine (9) directors upon the election or appointment of the Additional Nominee
(as defined in that certain Agreement, dated July 25, 1997, among the
corporation, Jerome Kalishman, Nancy F. Kalishman, The Jerome and Nancy
Kalishman Family Fund, Robert W. Affholder, Xanadu Investments, L.P., Paul A.
Biddelman, Stephen P. Cortinovis, Anthony W. Hooper, Silas Spengler, Sheldon
Weinig and Russell B. Wight, Jr., as it may be amended from time to time (the
"Agreement")) contemplated by, and selected in accordance with, the provisions
of the Agreement. Such directors (except as hereinafter provided for the filling
of vacancies) shall be elected in accordance with the Corporation's Certificate
of Incorporation by the stockholders by a plurality vote of the number of shares
voting at the meeting at which such election shall take place.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without other notice
than this by-law immediately after, and at the same place as, the annual meeting
of stockholders. The directors may provide, by resolution, the time and place
for the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of
the president, the Chairman of the Board, or any two directors. The person or
persons authorized to call special meetings of the directors may fix the place
either within or without the state or country, for holding any special meeting
of the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 24 hours
previously thereto by written notice delivered personally, or by telegram or
telecopy or mailed to each director at his residence or business address. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail so addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
6. QUORUM.
At any meeting of the directors a majority shall constitute a quorum
for the transaction of business, but if less than said number is present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
7. MANNER OF ACTING.
The act of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the directors.
6
<PAGE> 7
8. NEWLY-CREATED DIRECTORSHIPS AND VACANCIES.
Any vacancy on the board of directors and any newly-created
directorship resulting from an increase in the number of directors may be filled
by the directors in accordance with the Corporation's Certificate of
Incorporation.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed only for cause by vote of
the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written notice to the
board, the president or the secretary of the corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
11. COMPENSATION.
The Board of Directors shall have the authority to fix the compensation
of directors. Nothing herein shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed compensation for attending
committee meetings.
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of the
directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
13. EXECUTIVE AND OTHER COMMITTEES.
The board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of one or more
directors. Each such committee shall serve at the pleasure of the board.
14. NOTICE AND APPROVAL OF CERTAIN ACTIONS
Notwithstanding any other provision of these By-laws (and except for
the implementation of Sections 2(a), (b), (c) and (e) and Section 6 of the
Agreement): (a) in the event that any director proposes to bring before any
regular or special meeting of the Board of Directors any proposal relating to
any amendment of the Corporation's Certificate of Incorporation or these By-laws
or the Agreement (as defined in Article III, Section 2), or any change in the
structure,
7
<PAGE> 8
composition (other than such director's resignation) or governance of the Board
of Directors (any such action being referred to herein as a "Special Action"),
such director must provide written notice thereof (including a reasonably
detailed description of such proposal) to each member of the Board of Directors
at least seven days prior to the date of the directors' meeting at which the
Special Action is to be proposed; and (b) the taking of any Special Action by
the Board of Directors must be approved by a majority of all directors then
serving; provided, however, that no Special Action which would have any effect
prior to the 1999 annual meeting of the stockholders may be taken if such
Special Action would conflict with, have the effect of modifying or otherwise
frustrating any provision of the Agreement, including, without limitation, any
amendment to Article SIXTH of the Corporation's Certificate of Incorporation or
Section 2 of this Article III, as such provisions will be in effect pursuant to
the Agreement following the 1997 annual meeting of the stockholders.
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a chairman of the board, a
vice chairman of the board, a president, one or more senior vice presidents, one
or more vice presidents, a secretary and a treasurer, each of whom shall be
elected by the directors. Such other officers and assistant officers as may be
deemed necessary may be elected or appointed by the directors. In addition, the
President may from time to time appoint such officers of operating divisions,
and such contracting and attesting officers, of the corporation as he may deem
proper, who shall have such authority, subject to the control of the directors,
as the President may from time to time prescribe.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the directors shall be
elected annually at the first meeting of the directors held after each annual
meeting of the stockholders. Each officer elected by the directors shall hold
office until his successor shall have been duly elected and shall have qualified
or, if earlier, until his death or until he shall resign or shall have been
removed in the manner hereinafter provided. Each officer of the corporation
appointed by the President shall hold office for such period as the President
may from time to time prescribe or, if earlier, until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
3. REMOVAL.
Any officer elected or appointed by the directors, or any officer
appointed by the President, may be removed by the directors whenever in their
judgment the best interests of the corporation would be served thereby, but such
removal shall be without prejudice to the contract, if any, of the person so
removed. Any officer appointed by the President may be removed by the President
whenever in his judgment the best interests of the corporation would be served
thereby, but such removal shall be without prejudice to the contract, if any, of
the person so removed.
8
<PAGE> 9
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise of an officer elected or appointed by the
directors may be filled by the directors for the unexpired portion of the term.
A vacancy in any office because of death, resignation, removal, disqualification
or otherwise of any officer appointed by the President may be filled by the
President for the unexpired portion of the term.
4A. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside, when present, at all meetings
of the Board of Directors and at all meetings of the stockholders and will
perform such other duties as may be prescribed from time to time by the Board or
these By-laws.
4B. VICE CHAIRMAN OF THE BOARD.
In the absence of the Chairman of the Board or in the event of his
death, inability or refusal to act, the Vice Chairman of the Board shall perform
the duties of the Chairman of the Board and, when so acting, shall have all the
powers of and be subject to all the restrictions on the Chairman of the Board.
The Vice Chairman of the Board shall perform such other duties as may be
prescribed from time to time by the Board or these by-laws. Notwithstanding any
other provisions of these By-laws, the Vice Chairman of the Board, acting in any
capacity, shall not have the power to call any special meeting of the
Stockholders.
5. PRESIDENT.
The President shall be the chief executive officer of the corporation
and, subject to the control of the Board of Directors, shall have general and
active management of the business of the corporation, and shall see that all
orders and resolutions of the Board and stockholders are carried into effect. He
shall have the general authority to execute bonds, deeds and contracts, in the
name of the corporation and affix the corporate seal thereto; to sign stock
certificates; to cause the employment or appointment of such employees and
agents of the corporation as the proper conduct of operations may require, and
to fix their compensation, subject to the provisions of these By-laws; to remove
or suspend any employee or agent who shall have been employed or appointed under
his authority or under authority of an officer subordinate to him; and, in
general, to exercise all the powers and authority usually appertaining to the
chief executive officer of a corporation.
6. VICE-PRESIDENT.
In the absence of the president or in the event of his death, inability
or refusal to act, one of the vice-presidents designated by the directors shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The
vice-president shall perform such other duties as from time to time may be
assigned to him by the president or by the directors.
9
<PAGE> 10
7. SECRETARY.
The secretary shall keep the minutes of the stockholders' and of the
directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or, as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to him by the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety or sureties as
the directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for monies due and payable to the corporation from any source,
whatsoever, and deposit all such monies in the name of corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the directors.
9. SALARIES.
The salaries of those officers elected or appointed by the directors
shall be fixed from time to time by the directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers, agent or agents,
to enter into any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authority may be general or confined
to specific instances. The President may authorize any contracting officer
appointed by him pursuant to Section 1 of Article IV to enter into any pipeline
rehabilitation contract in the ordinary course of business of the corporation,
or execute and deliver any instrument in connection therewith, in the name and
on behalf of the corporation.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the directors. Such authority may be general or confined to
specific instances.
10
<PAGE> 11
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the
directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as the directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such
form as shall be determined by the directors. Such certificates shall be signed
by any of the chairman of the board, or the president, as authorized by the
directors and the secretary, or such other officers authorized by law and by the
directors. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the stockholders, the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the corporation as the
directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of
any share as the holder in fact thereof, and, accordingly, shall not be bound to
recognized any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January in each year.
11
<PAGE> 12
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI - AMENDMENTS
Except as otherwise provided by law, the Board of Directors may adopt,
alter, amend or repeal the by-laws of the Corporation, provided, however, that
the stockholders, representing a majority of all the shares issued and
outstanding at any annual stock holders' meeting or at any special stockholders'
meeting, may repeal, alter or amend by-laws adopted by the Board or Directors
and may adopt new by-laws; provided, further, however, that the size of the
Board of Directors, as set forth in Section 2 of Article III, may only be
amended by a vote of at least 80% of the members of the Board of Directors or by
a vote of the stockholders, representing a majority of all of the shares issued
and outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting.
12
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.10
<SEQUENCE>3
<FILENAME>c60563ex10-10.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT DATED FEBRUARY 1, 2001
<TEXT>
<PAGE> 1
EXHIBIT 10.10
Translation from French
EMPLOYMENT CONTRACT
BETWEEN THE UNDERSIGNED:
Insituform Europe, a French societe par actions simplifiee with
sole shareholder with a capital of 38,200 euros, having its registered office
located at 30 boulevard de Bellerive - 92500 Rueil Malmaison, registered with
the Registry of Commerce and Companies of Nanterre under number 433 960 242
(hereinafter referred to as "Insituform Europe"), represented by Mr. Robert
Kelley, duly empowered for the purpose hereof,
on the one hand,
AND:
Mr. Antoine Menard, residing at 15 rue Charles-Rhone - 78100
Saint-Germain-en-Laye,
on other hand,
IT HAS BEEN AGREED AS FOLLOWS:
ARTICLE 1
HIRING
1.1 Subject to the results of the hiring medical check-up,
Insituform Europe shall hire Mr. Menard, who accepts it, as Manager (Directeur)
as from February 1, 2001. This employment is governed by the terms hereof, by
the collective bargaining agreement of public works - engineers and executives
(convention collective nationale des travaux publics - ingenieurs et cadres)
(n(Degree) 3005) of August 31, 1955, including its annexes and amendments
(hereinafter the "Collective Bargaining Agreement"), as well as all other
current or future provisions, instructions, or any regulations of Insituform
Europe.
<PAGE> 2
Mr. Menard, who accepts this hiring, formally represents that as
from the above-mentioned date, he will not be bound to any other company and
will be free of any commitment with any company whatsoever.
1.2 The seniority of Mr. Menard within Insituform Europe will
be calculated as from May 1, 1995.
1.3 For the purpose of this employment contract, the term
"Affiliated Company" shall mean any company which, directly or indirectly,
through one or more intermediaries, controls Insituform Europe or is under the
same control as Insituform Europe. A company shall be deemed to control another
when it meets one of the criteria referred to in Article L. 233-3 of the French
Commercial Code.
ARTICLE 2
DUTIES
2.1 Mr. Menard shall exercise the duties as Manager
(Directeur), hierarchic coefficient 162, reference position C, 2nd grade, of the
Collective Bargaining Agreement.
2.2 In his capacity as Manager (Directeur), Mr. Menard shall
exercise the following duties:
- Supervision and follow-up of all European subsidiaries
of Insituform Technologies, Inc. (hereinafter referred
to as "ITI"), in particular setting-up and follow-up of
the productivity enhancement and costs reduction plans
in these subsidiaries, setting-up and follow-up of the
sales policies targeted per country, creation and
analysis of the various reports and management charts
of the various subsidiaries, possible recruitment of
senior managers of these subsidiaries and their career
management.
He will exercise his duties under the authority and in the
context of the instructions given by the Chairman of Insituform Europe to whom
he will report on his activity.
2
<PAGE> 3
2.3 Mr. Menard will exercise his duties at the registered
office of Insituform Europe, it being however specified that he will have to
frequently travel in the context of his duties.
2.4 Mr. Menard undertakes to devote the time, efforts, and
attention appropriate to his position at Insituform Europe, and may not exercise
any other position, on his behalf or on behalf of a third party, except in
respect of the activities to be exercised for another company affiliated to ITI.
ARTICLE 3
COMPENSATION
3.1 Mr. Menard shall receive (i) a gross annual salary of
eight hundred and fifty four thousand (854,000) francs, payable in thirteen (13)
equal installments, the thirteenth installment being fully paid in December of
the corresponding year. Insituform Europe shall proceed with an annual review of
this salary (anniversary date March).
3.2 In addition to this gross salary, Mr. Menard shall be
entitled to receive a non-guaranteed annual bonus of a target amount of 50% of
the salary referred to in Article 3.1 above. The actual amount of the bonus, if
any, shall be calculated according to the allocation rules provided for by ITI.
3.3 A company car (type Safrane or equivalent) shall be made
available to Mr. Menard who may use it for professional and personal purposes,
under the conditions in force within Insituform Europe and specified by
memorandum. The portion corresponding to the use of the car for personal
purposes, assessed at the gross amount of eight hundred and fifty (850) francs,
shall be considered as a benefit in kind and in this respect shall be subject to
social contributions. The transport expenses incurred by Mr. Menard for
professional purposes will be reimbursed to him pursuant to the rules applicable
within Insituform Europe.
ARTICLE 4
TERM AND TERMINATION
4.1 This contract will come into force on February 1, 2001 for
an indefinite term. It shall not be subject to a trial period.
4.2 This contract may be terminated by either party, by
registered mail with return receipt requested indicating the prior notice
period, which shall be three (3) months.
3
<PAGE> 4
There will be no prior notice period in case of dismissal for gross or willful
misconduct (faute grave ou lourde).
4.3 For any dismissal other than for gross or willful
misconduct, Mr. Menard shall receive, with respect to all indemnities to which
he may be entitled, an indemnity amounting to:
(i) one year of gross salary, within the meaning of Article
3.1 hereof only, or
(ii) the amount that is due to him under the provisions
falling within either the regulations regarding labor law, or the Collective
Bargaining Agreement, if this amount is higher than the amount referred to in
(i) above,
it being however understood that Mr. Menard shall bear all
social contributions that could be payable due to the payment of the indemnity
referred to in this Article.
ARTICLE 5
WORKING HOURS
The parties remind that the nature of the duties entrusted to
Mr. Menard and his level of responsibility imply a large degree of independence
in the organization of his work schedule excluding any fixed standard working
hours. Therefore, due to the responsibilities that Mr. Menard assumes in the
context hereof and the freedom he has in the organization of his work, he will
not be submitted to the rules on overtime hours and compensating day-off.
ARTICLE 6
PROFESSIONAL EXPENSES
Upon evidence of supporting documents, Insituform Europe will
reimburse to Mr. Menard all reasonable expenses incurred in the context of his
professional activity. This reimbursement shall be made in accordance with the
rules and procedures applicable within Insituform Europe.
4
<PAGE> 5
ARTICLE 7
PAID VACATION AND BENEFITS
7.1 Mr. Menard shall be entitled each year to paid vacation
calculated in accordance with the law and the Collective Bargaining Agreement.
The dates of this vacation shall be mutually agreed with Insituform Europe
considering the needs of Insituform Europe.
7.2 Mr. Menard will be entitled to the benefits provided for
by the law in force and the rules and procedures applicable within Insituform
Europe.
ARTICLE 8
CONFIDENTIAL INFORMATION
Mr. Menard hereby undertakes to scrupulously comply with,
during the term of this contract and for a five-year period following its
termination, the rules applicable regarding confidentiality and inventions set
forth in Annex A attached hereto.
ARTICLE 9
NON-COMPETITION
For two years following the termination of Mr. Menard's
employment contract, for any reason whatsoever, the latter undertakes not to,
directly or indirectly, as principal, agent, employee, distributor,
representative, partner, shareholder or other, compete with, in any way
whatsoever, Insituform Europe, or any Affiliated Company for which Mr. Menard
will have been in charge of the follow-up and supervision in respect hereof, as
far as the activities of cleaning and renovating of pipes on the territory of
the French Republic are concerned.
ARTICLE 10
GOVERNING LAW OF THE CONTRACT
10.1 This contract shall be construed according to, and
governed by, French law, and any dispute arising out of the performance hereof
shall be governed by French law. The French courts will have exclusive
jurisdiction.
10.2 The clauses of Insituform Europe's internal rules
(reglement interieur), that Mr. Menard will comply with when such regulations
will be adopted, will be applied to determine the rights and obligations of Mr.
Menard and Insituform Europe that will not be specifically contemplated in this
contract.
5
<PAGE> 6
ARTICLE 11
ENTIRETY OF THE CONTRACT
This contract, with its Annex A, constitutes the entirety of
the contract entered into between Mr. Menard and Insituform Europe, and cancels
all uses and practices, arrangements, conventions, undertakings or statements of
intent (whether written or oral) that have occurred between Mr. Menard and
Insituform Europe in connection with the conditions of employment of Mr. Menard
by Insituform Europe or any Affiliated Company. In particular, this contract
cancels and supersedes the employment contract entered into between Mr. Menard
and Insituform France on March 24, 1995 as well as any amendment thereto.
A FRENCH VERSION OF THIS CONTRACT WILL SUPERSEDE THIS ENGLISH VERSION.
The parties entered into this contract in two original
counterparts in Rueil Malmaison, on January 31, 2001.
Insituform Europe
by * *
----------------- -----------------
Robert Kelley Antoine Menard
* THIS DOCUMENT WAS EXECUTED IN FRENCH.
This document is a fair and accurate English translation of the Employment
Agreement executed by Robert Kelley, on behalf of Insituform Europe, and Antoine
Menard.
/s/ Thomas A. A. Cook
-------------------------------
Thomas A. A. Cook
Vice President - General Counsel
6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>4
<FILENAME>c60563ex10-15.txt
<DESCRIPTION>SENIOR MANAGEMENT VOLUNTARY DEFERRED COMPENSATION
<TEXT>
<PAGE> 1
EXHIBIT 10.15
INSITUFORM TECHNOLOGIES, INC.
FIRST AMENDMENT TO THE
SENIOR MANAGEMENT VOLUNTARY DEFERRED COMPENSATION PLAN
Pursuant to the Resolution of the Board of Directors and as provided by Section
9.1 of the Plan, the Senior Management Voluntary Deferred Compensation Plan is
hereby amended as provided below:
Section 3.3(a) is amended to read as follows:
MAXIMUM. The maximum amount of each payment of base salary that may be
deferred into this Plan and the 401(k) Plan shall be fifteen percent (15%)
of base salary, and the maximum amount of each payment of bonus or
incentive compensation that may be deferred into this Plan shall be fifty
percent (50%) of bonus or incentive compensation.
This amendment is effective as of October 25, 2000.
INSITUFORM TECHNOLOGIES, INC.
By: /s/ Anthony W. Hooper
----------------------------
Anthony W. Hooper
Chairman, President and CEO
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.(A)
<SEQUENCE>5
<FILENAME>c60563ex13-a.txt
<DESCRIPTION>2000 ANNUAL REPORT TO STOCKHOLDERS
<TEXT>
<PAGE> 1
EXHIBIT 13(a)
The Company's Class A Common Stock is traded in the over-the-counter
market under the symbol "INSUA." The following table sets forth the range of
quarterly high and low sales prices commencing after December 31, 1998, as
reported on the NASDAQ Stock Market(R). Quotations represent prices between
dealers and do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
Period High Low
------ ---- ---
<S> <C> <C> <C>
2000
First Quarter $31.50 $22.94
Second Quarter 38.00 24.13
Third Quarter 35.00 22.50
Fourth Quarter 41.50 29.50
1999
First Quarter $17.50 $14.00
Second Quarter 21.63 16.00
Third Quarter 25.25 19.13
Fourth Quarter 32.44 20.63
</TABLE>
As of February 28, 2001, the number of record holders of the Company's
Common Stock was 1,100.
<PAGE> 2
FINANCIAL HIGHLIGHTS - FIVE YEAR REVIEW For the years ended December 31,
In thousands, except per share amounts
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 409,434 $339,883 $ 300,958 $320,640 $289,933
Operating income 62,966 50,669 38,688 25,030 14,346
Income from continuing operations 34,906 25,983 17,887 9,644 4,492
Net income 34,906 25,983 17,887 9,419 4,492
Dilutive earnings per share:
Income from continuing
operations $ 1.37 $ 1.00 $ .66 $ .36 $ .17
Net Income $ 1.37 $ 1.00 $ .66 $ .35 $ .17
Total assets $ 354,974 $311,625 $ 304,608 $297,852 $265,502
Long-term debt, excluding current
maturities 98,217 114,954 112,131 111,440 82,384
Stockholders' equity 165,290 138,603 139,505 131,502 123,203
</TABLE>
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
The Company's rehabilitation revenues are derived primarily from direct
installation and other contracting activities, generated by the Company and its
subsidiaries operating in the United States, Canada, France, the United Kingdom,
the Netherlands, Belgium, Japan, Spain, Chile, Argentina and Mexico, and include
product sales to, and royalties and license fees paid by, the Company's
unaffiliated Insituform licensees and sub-licensees and its unaffiliated NuPipe
licensees. During the three years ended December 31, 2000, 1999 and 1998,
approximately 74.0%, 76.4% and 63.8%, respectively, of the Company's
consolidated revenues related to the Insituform Process.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000, COMPARED TO YEAR ENDED DECEMBER 31, 1999
Total revenues increased 20.5% to $409.4 million in 2000 from $339.9
million in 1999. The principal reason for the increased revenues was growth in
the Company's Rehabilitation segment. Rehabilitation revenues increased 17.8% or
$49.3 million due to growth in North America. This increase was offset somewhat
by fluctuation in currency exchange rates which had an adverse effect of $3.2
million on total European revenue for the year. In addition, Tite Liner revenues
increased 57.3% or $13.4 million due to a more favorable market for pipeline
repairs as a result of the increase in oil prices.
The Company's gross profit increased 15.5% to $137.1 million in 2000
from $118.7 million in 1999, primarily due to the increase in revenues as well
as improved profitability from the TiteLiner operations. The overall gross
profit margin was 33.5% in 2000 compared to 34.9% in 1999. The principal reason
for the lower gross profit margin was weaker margins in Europe, as well as an
increased contribution from the tunneling operations which traditionally achieve
a lower margin base. The gross profit margin for the Company's Rehabilitation
segment decreased slightly during 2000 from 1999. The decrease in gross profit
margin for the Rehabilitation segment is primarily attributable to a change in
the mix of contracts to more small diameter tubes in 2000 and to weaker margins
in Europe due to underutilization related to the decrease in revenues. The gross
profit margin for the Company's Tite Liner segment increased from 1999 to 2000
due to a more favorable market for pipeline repairs as a result of the increase
in oil prices. In 1999 gross profit margin was unfavorably impacted by
difficulties with a major project in Chile.
In 2000, selling, administrative and general expenses increased 9.0% to
$74.1 million from $68.0 million in 1999. The increase was due mainly to ongoing
costs related to the Company's improvements in management information systems,
along with increases in compensation due to an increase in field personnel in
North America and to additional operating costs related to the New York, Spanish
and Belgium operations in 2000. As a percentage of revenues, selling,
administrative and general expenses decreased to 18.1% from 20.0% in 1999,
primarily due to management cost control measures.
Interest expense in 2000 increased 3.5% to $9.3 million from $9.0
million in 1999. This increase was due to additional debt from the June 1999
acquisition of the Company's Dutch licensee, offset somewhat by payments of
interest-bearing deferred consideration attributable to the Company's 1998
acquisition of Video Injection, S.A.
Other income in 2000 decreased slightly to $3.7 million from $3.8
million in 1999. The modest decrease was due to lower invested cash balances in
the fourth quarter of 2000 versus one year ago.
<PAGE> 4
The Company's effective tax rate was 39.5% in 2000 compared to 41.6% in
1999, primarily due to more effective management over worldwide taxes, along
with the reduced effect of non-deductible goodwill amortization. As indicated in
Note 12 of the Notes to Consolidated Financial Statements included in response
to "Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K",
the 2000 and 1999 effective tax rates were higher than the United States federal
statutory rate, primarily due to state income taxes and the non-deductibility of
goodwill amortization associated with acquisitions, which is generally not
deductible for tax purposes.
Minority interest in net income decreased 27.1% in 2000 to $0.6 million
from $0.8 million in 1999. This change was due predominantly to the Company's
increased ownership in Insituform Linings Plc, the Company's manufacturing
operation in Europe. Equity earnings of affiliated companies increased $0.5
million in 2000 to $0.8 million from $0.3 million in 1999. This increase was due
primarily to the elimination of losses from the Midsouth partnership from which
the Company withdrew in the third quarter of 1999.
As a result of the foregoing, net income for 2000 increased 34.3% to
$34.9 million, representing an 8.5% return on revenue, compared to $26.0 million
for 1999, when a 7.6% return on revenue was achieved. Also, return on average
stockholders' equity increased to 23.0% compared to 18.7% in 1999.
Earnings per share-dilutive increased 37% from $1.00 per share in 1999
to $1.37 per share in 2000. The increase is primarily related to the increase in
net income. Earnings per share was also favorably impacted by the repurchase of
500,165 shares of common stock.
YEAR ENDED DECEMBER 31, 1999, COMPARED TO YEAR ENDED DECEMBER 31, 1998
Total revenues increased 12.9% to $339.9 million from $301.0 million in
1998. The principal reason for the growth was increased volume from the
Company's rehabilitation operations within North America and Europe and its
tunneling operations. The majority of growth in Europe came from the June 1999
acquisition of the Company's Dutch licensee. Revenues of the Company's TiteLiner
operations decreased $20.0 million, or 46.1%, compared to 1998, primarily due to
realigning the business to its core lining work and exiting from lower margin
steel contracting work. Fluctuations in currency exchange rates did not have a
material impact on revenues in 1999.
The Company's gross profit increased 18.8% to $118.7 million from $99.9
million in 1998, primarily due to increased revenues as well as increased
profitability from the Company's North American and European rehabilitation
operations and the Company's tunneling operations. The overall gross profit
margin for 1999 was 34.9% compared to 33.2% in 1998. This improved profitability
was due to improved productivity and efficiencies in the North American
rehabilitation and tunneling operations, offset partially by a decrease in gross
profit from the Company's TiteLiner operations, due to the revenue volume
decrease, together with decreased profitability caused by difficulties in Chile
on a major project.
In 1999, selling, administrative and general expenses increased 11.1%
to $68.0 million from $61.2 million in 1998. The change was primarily due to
increased North American rehabilitation administration costs to meet current and
future growth demands, increased legal costs and ongoing costs related to the
Company's information systems improvements. As a percentage of revenues,
selling, administrative and general expenses decreased slightly compared to the
prior year, to 20.0% in 1999 compared to 20.3% in 1998, primarily as a result of
the increase in revenues at a higher rate than operating expenses.
<PAGE> 5
Interest expense in 1999 decreased 0.7% to $9.0 million from $9.1
million in 1998. The relatively flat interest expense is due to the fixed rate
on the Company's principal long-term debt, with a slight decrease in interest
rates on revolving credit borrowings in the Company's subsidiaries.
Other income increased in 1999 to $3.8 million from $2.3 million in
1998. The change was due to increased investment income resulting from the
higher average invested cash balances and improved returns compared to 1998, and
gains from selling excess equipment that related to steel contracting work in
North American TiteLiner operations.
In 1999, taxes on income increased 44.3% to $18.9 million from $13.1
million in 1998, due principally to a $13.6 million increase in income before
taxes. The Company's effective tax rate was 41.6% in 1999 compared to 41.1% in
1998, primarily due to the higher state income taxes in resulting from larger
United States income.
Since July 1999, the Company ceased recording losses on its equity
position in Midsouth as a result of the withdrawal from Midsouth.
As a result of the foregoing, net income for 1999 increased 45.3% to
$26.0 million, representing a 7.6% return on revenue, compared to $17.9 million
for 1998, when a 5.9% return on revenue was achieved. Also, return on average
stockholders' equity increased to 18.7% compared to 13.2% in 1998.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2000, the balance of cash and cash equivalents was
$64.1 million, compared to $68.2 million at December 31, 1999. The decrease in
cash and cash equivalents resulted primarily from capital expenditures of $30.2
million, along with operation of the Company's previously reported stock
repurchase program, which used cash in the amount of $13.4 million in 2000. In
addition, $7.0 million was used to acquire the Company's licensee in New York
and New Jersey, one-half of the interest in the Company's Italian licensee, and
the entire equity interest held by unaffiliated parties in the Company's French
licensee (33%) and its Belgian licensee (50%). These cash outlays were partially
offset by a positive generation of cash from operating activities of $42.6
million and proceeds from the issuance of common stock upon exercise of stock
options of $4.8 million. Working capital was $114.5 million at December 31,
2000, compared to $120.2 million at December 31, 1999.
Trade receivables, together with costs and estimated earnings in excess
of billings and retainage under construction contracts, increased 35.1%, to
$113.7 million, from $84.2 million at December 1999. This increase was primarily
attributable to growth and the volume of contracts processed in the Company's
North American rehabilitation and tunneling business in 2000 over 1999. The
collection of installation receivables involves contractual provisions for
retainage by the project owner, often 5% to 15% of the contract amount, which
extends the collection process. Collections are also sometimes further prolonged
by the slow review processes often employed by the Company's municipal
customers. In the United States, retainage receivables are generally received
within 60 to 90 days after the completion of a contract.
During 2000, the Company reduced its allowance for doubtful accounts to
$2.1 million from $3.1 million. This primarily resulted from write-offs related
to quality issues in manufacturing, write-offs for old royalty receivables
internationally and old trade receivables for a product line no longer being
supported by the Company. There were no material write-offs related to the
Company's core business during 1999 or 2000.
<PAGE> 6
Capital expenditures were $30.2 million in 2000, compared to $11.7
million in 1999. In 2000, capital expenditures also reflect approximately $8.7
million related to the acquisition of real estate, including properties adjacent
to the Company's Chesterfield campus, as part of the Company's growth
strategies, as well as additional installation equipment to support the growth
and productivity improvements in North America.
In February 2000, the Company acquired the rights to the Insituform
Process and NuPipe Process for the states of New York and New Jersey, through
the purchase of all of the shares of the capital stock of Insituform
Metropolitan, Inc. and the operating assets of certain of its affiliates. At
closing, 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. In July 2000, Insituform Italia s.r.l, a newly formed joint
venture of the Company and Per Aarsleff A/S, acquired Italcontrolli Nord s.r.l.,
the Insituform Process licensee in Italy, for $1.2 million. During the third
quarter, the Company acquired the remaining 50% ownership of K-Insituform, N.V.,
its joint venture in Belgium, for approximately $0.3 million, along with the
remaining 33% ownership of Insituform France, S.A., for approximately $0.8
million. In January 2000, the Company acquired the rights to the Thermopipe
Process not previously licensed to it for approximately $0.7 million.
In June 1999, the Company completed its acquisition of all the shares
of its exclusive licensee of the Insituform Process in the Netherlands, now
named Insituform Rioolrenovatietechnieken B.V. The purchase price was NGL 25
million (approximately US $11.7 million), which was paid in cash at closing.
Included in the acquisition was a 10% stockholding owned by the licensee in
Linings. In November 1999, the Company's share of Linings increased to 75% as a
result of share redemptions effectuated by Linings, for an approximate
redemption price of $1.5 million.
During 1999, the Company paid an installment of $0.6 million on the
purchase price of the minority interest in the Company's Chilean subsidiary
acquired in 1998, and paid the remaining installment of $0.5 million during
2000. During 1999, the Company paid an installment of $1.3 million on the
purchase price of the majority interest in Video Injection acquired in 1998, and
paid the remaining installment of $1.3 million in 2000. The Company remains
obligated to purchase the remaining 20% of the shares of Video Injection
pursuant to a formula based on Video Injection's results of operations. In
connection with its settlement relating to Midsouth, during 1999 the Company
also received an aggregate of $1.7 million, consisting of the book value of its
investment in Midsouth and repayments of amounts advanced.
Financing activities used $10.3 million in 2000, as compared to cash
used of $23.6 million in 1999. In mid-1998, the Company authorized the
repurchase of up to 2,700,000 shares of the Company's Common Stock to be made
from time to time over five years in open market transactions. The amount and
timing of purchases are dependent upon a number of factors, including the price
and availability of the Company's shares, general market conditions and
competing alternative uses of funds, and may be discontinued at any time. In
October 1999, the Company increased the original authorization by an additional
2,000,000 shares of Common Stock through the period ending June 2003. During
2000, the Company used cash in the amount of $13.4 million for the repurchase of
500,165 shares. The Company has used cash in the cumulative amount of $54.9
million for the repurchase of 2,988,465 shares through December 31, 2000, since
inception of the stock repurchase program. The repurchased shares are held as
treasury stock.
In 2000, the Company made principal payments on debt totaling $2.8
million, compared to $2.3 million in 1999. The Company, in 2000, generated $4.8
million from the issuance of common stock from stock options granted to
employees, as compared to $5.0 million in 1999.
<PAGE> 7
The Company's $110.0 million principal amount of Senior Notes, Series
A, due February 14, 2007 (the "Senior Notes"), bear interest, payable
semi-annually in August and February of each year, at the rate per annum of
7.88%. Each year, from February 2001 to February 2006, inclusive, the Company
will be required to make principal payments of $15.7 million, together with an
equivalent payment at maturity. The 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 Note without any premium thereon.
In March 2000, the Company entered into a new credit agreement (the
"Credit Agreement") whereby the lender will make available to the Company up to
$50 million aggregate principal amount for working capital and permitted
acquisitions, including $30 million available for standby and commercial letters
of credit, on a revolving basis through March 20, 2003, at which time principal
will be repayable. Interest on outstanding advances accrues, at the election of
the Company, at either the lender's prime rate, the federal funds rate plus .5%
or the lender's offshore rate plus a margin ranging from .5% to 1.5% depending
on the maintenance of certain financial ratios, as is payable quarterly. Upon
specified change in control events, the lender has the right to require the
Company to repay outstanding amounts without any premium thereon.
The note purchase agreements pursuant to which the Senior Notes were
acquired, and the Credit Agreement, 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 and of subsidiaries to incur indebtedness, and, in the
event of default, limit the ability of the Company to pay cash dividends or make
other distributions to the holders of its capital stock or to redeem such stock.
The Credit Agreement also obligates certain of the Company's domestic
subsidiaries to guaranty the Company's obligations, as a result of which the
same subsidiaries have also delivered their guaranty with respect to the Senior
Notes.
In July 1999, the Company borrowed EUR 5,672,000 in order to refinance
a portion of the purchase price for its Dutch licensee. Such amount is repayable
in seven equal installments annually on each July 31, and accrues interest,
payable quarterly, at the rate of 5.5% per annum.
Management believes its current working capital and additional credit
facilities will be adequate to meet its requirements for the foreseeable future.
MARKET RISK
The Company conducts its rehabilitation activities on a worldwide
basis, giving rise to exposures related to changes in foreign currency exchange
rates. For example, foreign currency exchange rate movements may create a degree
of risk to the Company's operations by affecting: (i) the U.S. dollar value of
sales made in foreign currencies, and (ii) the U.S. dollar value of costs
incurred in foreign currencies. In addition, the Company is exposed to market
risks related to changes in interest rates. The Company's objective is to
minimize the volatility in earnings and cash flow from these risks.
The Company has selectively used, and will continue to use, forward
exchange contracts in order to manage its currency exposure. Forward exchange
contracts are executed by the Company only with large, reputable banks and
financial institutions and are denominated in currencies of major industrial
countries. Given its assessment of such risk, the Company has not deemed it
necessary to offset any interest rate exposure. Furthermore, the Company does
not enter into transactions involving derivative financial instruments for
speculative trading purposes. There were no outstanding forward exchange
contracts at December 31, 2000.
<PAGE> 8
Based on the Company's overall currency exchange rate and interest rate exposure
at December 31, 2000, a 10% weakening in the U.S. dollar across all currencies
or 10% increase in interest rates would not have a material impact on the
financial position, results of operations or cash flows of the Company. These
effects of hypothetical changes in currency exchange rates and in interest
rates, however, ignore other effects the same movement may have arising from
other variables, and actual results could differ from the sensitivity
calculations of the Company. The Company regularly assesses these variables,
establishes policies and business practices to protect against the adverse
effects of foreign currency and interest rate fluctuations and does not
anticipate any material losses generated by these risks.
<PAGE> 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Stockholders of
Insituform Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Insituform
Technologies, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 2000. 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, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
January 25, 2001 (except with respect to the matter
discussed in Note 15, as to which the date is February 28, 2001)
<PAGE> 10
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 a comprehensive 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.
<PAGE> 11
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
REVENUES $ 409,434 $ 339,883 $ 300,958
COST OF REVENUES 272,361 221,232 201,056
------------ ------------ ------------
GROSS PROFIT 137,073 118,651 99,902
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES 74,107 67,982 61,214
------------ ------------ ------------
OPERATING INCOME 62,966 50,669 38,688
------------ ------------ ------------
OTHER (EXPENSE) INCOME:
Interest expense (9,347) (9,031) (9,099)
Other 3,732 3,797 2,270
------------ ------------ ------------
TOTAL OTHER EXPENSE (5,615) (5,234) (6,829)
------------ ------------ ------------
INCOME BEFORE TAXES ON INCOME 57,351 45,435 31,859
TAXES ON INCOME 22,647 18,879 13,079
------------ ------------ ------------
INCOME BEFORE MINORITY INTERESTS AND EQUITY IN EARNINGS 34,704 26,556 18,780
MINORITY INTERESTS (610) (837) (849)
EQUITY IN EARNINGS (LOSSES) OF AFFILIATED COMPANIES 812 264 (44)
------------ ------------ ------------
NET INCOME $ 34,906 $ 25,983 $ 17,887
============ ============ ============
EARNINGS PER SHARE OF COMMON STOCK AND COMMON STOCK EQUIVALENTS:
Net income per common share -- basic $ 1.41 $ 1.02 $ .67
============ ============ ============
Net income per common share -- dilutive $ 1.37 $ 1.00 $ .66
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 12
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- AS OF DECEMBER 31, 2000 AND 1999
(In thousands, except share information)
<TABLE>
<CAPTION>
ASSETS
------
2000 1999
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 64,107 $ 68,183
Receivables, net 78,607 58,546
Retainage 15,976 13,253
Costs and estimated earnings in excess of billings 19,151 12,372
Inventories 18,121 12,525
Prepaid expenses and other 5,046 9,493
---------- ----------
Total current assets 201,008 174,372
---------- ----------
PROPERTY AND EQUIPMENT, less accumulated depreciation 70,226 54,188
---------- -----------
OTHER ASSETS:
Goodwill, less accumulated amortization of $22,171 and $18,417, respectively 66,108 64,077
Other assets 17,632 18,988
---------- -----------
Total other assets 83,740 83,065
---------- -----------
Total assets $ 354,974 $ 311,625
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt and notes payable $ 18,023 $ 3,188
Accounts payable and accrued expenses 68,517 51,004
---------- ----------
Total current liabilities 86,540 54,192
LONG-TERM DEBT, less current maturities 98,217 114,954
OTHER LIABILITIES 2,570 1,168
---------- ----------
Total liabilities 187,327 170,314
---------- ----------
MINORITY INTERESTS 2,357 2,708
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock, undesignated, $.10 par -- shares authorized 2,000,000; none outstanding - -
Common stock, $.01 par -- shares authorized 60,000,000; shares outstanding 28,152,570 and
27,787,862 282 278
Additional paid-in capital 81,934 74,809
Retained earnings 147,244 112,338
Treasury stock -- 3,244,266 and 2,744,101 shares (58,478) (45,118)
Cumulative foreign currency translation adjustments (5,692) (3,704)
---------- ----------
Total stockholders' equity 165,290 138,603
---------- ----------
Total liabilities and stockholders' equity $ 354,974 $ 311,625
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 13
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(In thousands, except number of shares)
<TABLE>
<CAPTION>
Cumulative
Foreign
Common Stock Additional Currency Total
------------------- Paid-In Retained Treasury Translation Stockholders' Comprehensive
Shares Amount Capital Earnings Stock Adjustments Equity Income
------ ------ ------- -------- ----- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997 27,214,718 $ 272 $ 68,119 $ 68,468 $ (3,269) $(2,088) $ 131,502 $ 8,003
===========
Net income - - - 17,887 - - 17,887 $ 17,887
Issuance of common stock
upon exercise of options 87,586 1 812 - - - 813 -
Common stock repurchased - - - - (9,828) - (9,828) -
Foreign currency
translation adjustment - - - - - (869) (869) (869)
----------- ------ ----------- ---------- ----------- --------- ------------ -----------
BALANCE, December 31, 1998 27,302,304 273 68,931 86,355 (13,097) (2,957) 139,505 $ 17,018
===========
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)
----------- ------ ----------- ---------- ----------- --------- ------------ -----------
BALANCE, December 31, 1999 27,787,862 278 74,809 112,338 (45,118) (3,704) 138,603 $ 25,236
===========
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)
----------- ------ ----------- ---------- ----------- --------- ------------ -----------
BALANCE, December 31, 2000 28,152,570 $ 282 $ 81,934 $147,244 $ (58,478) $(5,692) $ 165,290 $ 32,918
=========== ====== =========== ========== =========== ========= ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 14
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(In thousands)
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,906 $ 25,983 $ 17,887
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation 13,398 12,655 13,870
Amortization 5,282 5,589 5,225
Other (2,417) (475) 266
Deferred income taxes 1,057 1,689 1,174
Changes in operating assets and liabilities, net of effects of
businesses purchased-
Receivables (27,439) (9,718) 13,247
Inventories (5,727) (1,125) 1,049
Prepaid expenses and other assets 5,383 (3,703) 2,769
Accounts payable accrued expenses 18,180 3,484 69
------------ ----------- -----------
Net cash provided by operating activities 42,623 34,379 55,556
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (30,208) (11,746) (13,416)
Purchases of businesses, net of cash acquired (7,032) (11,325) (1,451)
Other investing activities 1,476 3,304 1,549
------------ ----------- -----------
Net cash used in investing activities (35,764) (19,767) (13,318)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 4,834 4,976 813
Purchases of treasury stock (13,360) (32,021) (9,828)
Proceeds from long-term debt 660 6,050 124
Principal payments on long-term debt (2,765) (2,288) (1,776)
Increase (decrease) in notes payable 542 (276) (565)
------------ ----------- -----------
Net cash used in financing activities (10,089) (23,559) (11,232)
------------ ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (846) 226 164
------------ ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,076) (8,721) 31,170
CASH AND CASH EQUIVALENTS, beginning of year 68,183 76,904 45,734
------------ ----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 64,107 $ 68,183 $ 76,904
============ =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 9,217 $ 8,852 $ 9,115
Income taxes 18,512 17,593 13,223
NONCASH INVESTING AND FINANCING ACTIVITIES:
Deferred consideration for businesses acquired $ - $ - $ 3,671
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 15
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" or "ITI") 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 Company's
TiteLiner(R) (TiteLiner) process is a method of lining steel lines with a
corrosion and abrasion resistant pipe. Through its Affholder(SM), Inc.
subsidiary, 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(R) Linings Plc.; a 55%-owned Mexican subsidiary, United
Pipeline de Mexico, S.A.; and a 79.8%-owned French subsidiary, Video Injection,
S.A. 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.
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.
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.
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.
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 and raw materials,
and manufacturing overhead based on practical capacity.
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation on property and
equipment is computed using the straight-line method over the following
estimated useful lives:
<PAGE> 16
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Land improvements 15-20
Buildings and improvements 5-40
Machinery and equipment 4-10
Furniture and fixtures 3-10
Autos and trucks 3-10
</TABLE>
Intangibles
The Company amortizes goodwill over periods of 15 to 25 years on the
straight-line basis. Amortization expense for the years ended December 31, 2000,
1999 and 1998 was $3.8 million, $3.3 million, and $2.3 million, respectively.
Long-Lived Assets
Long-lived assets, including goodwill and other intangibles, are reviewed for
impairment whenever conditions indicate that the carrying value of the assets
may not be fully 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 market value.
Revenues
Revenues include construction and installation revenues which are recognized
using the percentage-of-completion method in the ratio of costs incurred
compared 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. Changes in estimated
total contract revenues and costs are recognized in the period they are
determined. Factors that contribute to changes in estimates of contract
profitability include, without limitation, site conditions that differ from
those assumed in the original bid or proposal, weather and timing and
coordination issues inherent in construction and installation projects. Where a
contract loss is forecasted, the full amount of the anticipated loss is
recognized in the period the loss is determined.
Earnings Per Share
Earnings per share has been calculated using the following share information:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Weighted average number of common shares used for
basic EPS 24,834,413 25,460,287 26,777,879
Effect of dilutive stock options and warrants 705,751 619,245 280,180
------------- ------------- -------------
Weighted average number of common shares and dilutive
potential common stock used in dilutive EPS 25,540,164 26,079,532 27,058,059
============= ============= =============
</TABLE>
New Accounting Pronouncements
On January 1, 2000, the Company adopted SFAS 133, "Accounting for Derivative
Instrument and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. Implementation of
SFAS 133 had no impact on its results of operations or financial position.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101 (SAB 101),
Revenue Recognition in Financial Statements, which summarizes certain of the SEC
staff's views on applying generally accepted accounting principles to revenue
recognition in financial statements. The Company adopted the accounting
provisions of SAB 101 in the fourth quarter of 2000. The implementation of SAB
101 had no significant effect on the Company's financial condition or results of
operations.
<PAGE> 17
Reclassifications
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform to the current year presentation.
3. BUSINESS ACQUISITIONS:
During the third quarter of 2000, the Company acquired the remaining 50%
ownership of 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(R) 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 of 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 Process in the Netherlands now named
Insituform(R) Rioolrenovatietechnieken B.V. from BFI Holdings B.V. The purchase
price was NLG 25 million (approximately US $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.
During the year ended December 31, 1998, the Company made acquisitions, which
have been accounted for as purchases. The purchase prices totaling $7.1 million
were allocated to tangible assets and goodwill.
Pro forma results of the above acquisitions would not differ significantly from
historical results.
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Activity in the allowance for doubtful accounts is summarized as follows for the
years ended December 31 (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- ------
<S> <C> <C> <C>
Balance, at beginning of year $ 3,096 $ 2,909 $ 2,587
Charged to expense 442 590 1,679
Write-offs and adjustments (1,471) (403) (1,357)
-------- -------- --------
Balance, at end of year $ 2,067 $ 3,096 $ 2,909
======== ======== ========
</TABLE>
5. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
Costs and estimated earnings on uncompleted contracts consist of the following
at December 31 (in thousands):
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 172,529 $ 125,167
Estimated earnings 54,499 46,861
----------- -----------
227,028 172,028
Less- Billings to date (212,565) (166,904)
----------- -----------
$ 14,463 $ 5,124
=========== ===========
Included in the accompanying balance sheets:
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C>
Costs and estimated earnings in excess of billings $ 19,151 $ 12,372
Billings in excess of costs and estimated earnings (Note 9) (4,688) (7,248)
----------- -----------
$ 14,463 $ 5,124
=========== ===========
</TABLE>
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.
6. INVENTORIES:
Inventories are summarized as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Raw materials and supplies $ 1,376 $ 1,827
Work-in-process 4,522 3,750
Finished products 1,872 1,594
Construction materials 10,351 5,354
---------- ----------
$ 18,121 $ 12,525
========== ==========
</TABLE>
7. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Land and land improvements $ 11,485 $ 2,800
Buildings and improvements 24,474 22,679
Machinery and equipment 89,360 83,143
Furniture and fixtures 10,927 8,126
Autos and trucks 5,728 5,925
Construction in progress 7,183 4,997
----------- ----------
149,157 127,670
Less- Accumulated depreciation (78,931) (73,482)
----------- ----------
$ 70,226 $ 54,188
=========== ==========
</TABLE>
<PAGE> 19
8. LONG-TERM DEBT AND NOTES PAYABLE:
Long-term debt and notes payable consists of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
7.88% senior notes, payable in $15,715 annual installments beginning
February 2001 through 2007, with interest payable semiannually $ 110,000 $ 110,000
5.5% bank term loan, EUR5.7 million, payable in seven equal annual
installments through July 2006, with interest payable quarterly 4,582 5,711
Other notes, interest rates from 8.5% to 9.6% 1,658 2,431
----------- -----------
116,240 118,142
Less- Current maturities (18,023) (3,188)
----------- -----------
$ 98,217 $ 114,954
=========== ===========
</TABLE>
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.
At December 31, 2000 and 1999, the estimated fair value of the Company's
long-term debt was approximately $111.0 million and $112.4 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):
<TABLE>
<CAPTION>
Years ending December 31 Amount
------------------------ ------
<S> <C>
2001 $ 18,023
2002 16,593
2003 16,479
2004 16,479
2005 16,479
After 2005 32,187
--------
Total $116,240
========
</TABLE>
During 2000, the Company obtained a line of credit facility with the capacity to
borrow up to $50 million. This facility replaced a previous $20 million domestic
line of credit facility. 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. There were no
amounts outstanding on the line of credit at the end of 2000 or 1999.
<PAGE> 20
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following at December 31
(in thousands):
<TABLE>
<CAPTION>
2000 1999
------ ------
<S> <C> <C>
Accounts payable - trade $ 34,271 $ 13,902
Compensation and profit sharing 14,158 12,288
Billings in excess of costs and estimated earnings 4,688 7,248
Interest 3,632 3,318
Other 11,768 14,248
---------- ---------
$ 68,517 $ 51,004
========== ========
</TABLE>
10. STOCKHOLDERS' EQUITY:
Stock Option Plan
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. 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 to five years and have an expiration date of up to five or ten years after
the date of grant.
The Company applies APB Opinion No. 25, in accounting for stock option grants.
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 2000, 1999 and 1998,
respectively: expected volatility of 62%, 41% and 46%; risk-free interest rates
of 5.1%, 6.4% and 5.1%; expected lives of 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):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Net income:
As reported $34,906 $25,983 $17,887
Pro forma 32,298 24,404 16,833
Basic earnings per share:
As reported 1.41 1.02 .67
Pro forma 1.30 .96 .63
Dilutive earnings per share:
As reported 1.37 1.00 .66
Pro forma 1.26 .94 .62
</TABLE>
The following tables summarize information about options outstanding at December
31, 2000:
<TABLE>
<CAPTION>
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
-------------- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$4.00 to $10.00 433,506 5.3 years $ 8.39 357,026 $ 8.32
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C> <C>
$10.00 to $20.00 671,453 4.2 years $14.32 350,881 $14.17
$20.00 and above 638,043 4.1 years $28.64 205,917 $28.45
------------ ----------
1,743,002 4.5 years $18.09 913,824 $15.10
============ ==========
</TABLE>
<TABLE>
<CAPTION>
2000 1999 1998
----------------------- ---------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of
year 1,478,829 $12.14 1,508,998 $10.51 1,864,265 $11.59
Granted 630,100 28.99 493,000 15.16 306,000 13.68
Exercised (364,708) 12.83 (485,558) 10.18 (87,586) 9.28
Forfeited (1,219) 10.84 (37,611) 11.56 (573,681) 15.90
------------ ------------ ------------
Options outstanding, end of
year 1,743,002 $18.09 1,478,829 $12.14 1,508,998 $10.51
============ ============ ============
Options exercisable, end of year 913,824 $15.10 775,783 $11.32 983,362 $10.48
============ ============ ============
Weighted average fair value of
options granted $16.58 $6.98 $6.47
</TABLE>
At December 31, 2000, 3,667,569 shares of common stock were reserved pursuant to
stock option plans.
11. OTHER INCOME (EXPENSE):
Other income (expense) is comprised of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------ ------
<S> <C> <C> <C>
Investment income $ 3,493 $ 3,464 $ 3,130
Other 239 333 (860)
--------- --------- ---------
$ 3,732 $ 3,797 $ 2,270
========= ========= =========
</TABLE>
12. TAXES ON INCOME:
Income from continuing operations before taxes on income is as follows for the
years ended December 31 (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------ ------
<S> <C> <C> <C>
Domestic $ 46,801 $ 39,463 $ 25,803
Foreign 10,550 5,972 6,056
---------- ---------- ----------
Total $ 57,351 $ 45,435 $ 31,859
========== ========= ==========
</TABLE>
Provisions for taxes on income from continuing operations consist of the
following components for the years ended December 31 (in thousands):
<PAGE> 22
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ 14,844 $ 12,670 $ 6,730
Foreign 4,454 2,491 3,848
State 2,292 2,029 1,327
--------- ---------- ----------
21,590 17,190 11,905
--------- ---------- ----------
Deferred:
Federal 727 1,682 1,031
Foreign 249 (180) (76)
State 81 187 219
--------- ---------- ----------
1,057 1,689 1,174
--------- ---------- ----------
Total taxes on income $ 22,647 $ 18,879 $ 13,079
========= ========== ==========
</TABLE>
A reconciliation between the U.S. federal statutory tax rate and the effective
tax rate follows:
<TABLE>
<CAPTION>
2000 1999 1998
------- ------ ------
<S> <C> <C> <C>
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 3.6 3.6 3.2
Goodwill amortization 1.3 1.6 2.3
Effect of foreign income taxed at foreign rates .3 .2 .3
Other (0.7) 1.2 0.3
------- ------- -------
Total taxes on income 39.5% 41.6% 41.1%
======= ======= =======
</TABLE>
Net deferred taxes consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Deferred income tax assets:
Foreign tax credits and net operating loss carryforwards $ 2,511 $ 2,986
Accrued expenses 2,937 3,040
Other 690 1,852
--------- ---------
Total deferred income tax assets 6,138 7,878
--------- ---------
Deferred income tax liabilities:
Property and equipment (2,818) (3,121)
Other (5,058) (5,438)
--------- ---------
Total deferred income tax liabilities (7,876) (8,559)
--------- ---------
Net deferred income tax liabilities $(1,738) $ (681)
========= =========
</TABLE>
Subject to the future taxable income on certain of the Company's subsidiaries,
the Company's various foreign tax credits and tax operating loss carryforwards
have varying expiration dates, some ranging from 2004-2010 while others have
indefinite lives.
13. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases a number of its administrative operations facilities under
noncancellable operating leases
<PAGE> 23
expiring at various dates through 2020. In addition, the Company leases certain
construction and automotive equipment on a multiyear, monthly or daily basis.
Rent expense under all operating leases for 2000, 1999 and 1998 was $9.1
million, $6.4 million, and $6.1 million, respectively.
At December 31, 2000, the future minimum lease payments required under the
noncancellable operating leases were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending December 31 Minimum Lease Payments
----------------------- ----------------------
<S> <C>
2001 $ 7,751
2002 6,933
2003 5,657
2004 4,064
2005 1,535
After 2005 477
---------
Total $ 26,417
=========
</TABLE>
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
The Company maintains profit sharing/401(k) plans, which cover substantially all
eligible domestic employees. Company profit sharing contributions are
discretionary. Under the terms of its 401(k) features, the plan also provides
for the Company to contribute 100% of the participating employee's contribution
up to 3% of the employee's salary, and 50% of the next 2% of the employee's
salary. Total contributions to the domestic plans were $4.4 million, $3.5
million and $2.9 million for the years ended December 31, 2000, 1999 and 1998,
respectively.
In addition, certain foreign subsidiaries maintain various other defined
contribution retirement plans. Company contributions to such plans for the years
ended December 31, 2000, 1999 and 1998, were $352,000, $138,000 and $103,000,
respectively.
14. SEGMENT AND GEOGRAPHIC INFORMATION:
The Company has principally three operating segments: rehabilitation, tunneling
and corrosion and abrasion operations (TiteLiner). 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, 2000.
Financial information by segment is as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Rehabilitation $ 325,773 $ 276,438 $ 225,192
Tunneling 46,866 40,049 32,336
Tite Liner 36,795 23,396 43,430
--------- --------- ---------
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C> <C>
Total revenues $ 409,434 $ 339,883 $ 300,958
========= ========= =========
Operating income (loss):
Rehabilitation $ 48,997 $ 47,178 $ 33,439
Tunneling 5,858 4,965 3,068
Tite Liner 8,111 (1,474) 2,181
--------- --------- ---------
Total operating income $ 62,966 $ 50,669 $ 38,688
========= ========= =========
Total assets:
Rehabilitation $ 244,383 $ 197,670 $ 170,289
Tunneling 18,422 14,112 15,914
Tite Liner 16,531 15,185 25,566
Corporate 75,638 84,658 92,839
--------- --------- ---------
Total assets $ 354,974 $ 311,625 $ 304,608
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Capital expenditures:
Rehabilitation $ 17,053 $ 7,583 $ 4,914
Tunneling 2,564 588 3,158
Tite Liner 1,381 274 1,831
Corporate 9,210 3,301 3,513
--------- --------- ---------
Total capital expenditures $ 30,208 $ 11,746 $ 13,416
========= ========= =========
Depreciation and amortization:
Rehabilitation $ 12,482 $ 12,131 $ 14,401
Tunneling 1,498 1,270 1,213
Tite Liner 2,034 2,234 2,303
Corporate 2,666 2,609 1,178
--------- --------- ---------
Total depreciation and amortization $ 18,680 $ 18,244 $ 19,095
========= ========= =========
</TABLE>
Financial information by geographic area is as follows at December 31 (in
thousands):
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
United States $ 333,246 $ 266,113 $ 220,090
Canada 22,199 12,856 17,850
Other Foreign 53,989 60,914 63,018
--------- --------- ---------
Total revenues $ 409,434 $ 339,883 $ 300,958
========= ========= =========
Operating income:
United States $ 55,326 $ 46,446 $ 30,155
Canada 3,674 316 1,294
Other Foreign 3,966 3,907 7,239
--------- --------- ---------
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
Total operating income $ 62,966 $ 50,669 $ 38,688
========= ========= =========
Long-lived assets:
United States $ 61,326 $ 55,448 $ 57,090
Canada 4,942 2,546 8,056
Other Foreign 21,590 15,182 12,853
--------- --------- ---------
Total long-lived assets $ 87,858 $ 73,176 $ 77,999
========= ========= =========
</TABLE>
15. SUBSEQUENT EVENTS
On February 28, 2001, the Company acquired 100% of the stock of Kinsel
Industries, Inc. and an affiliated company, Tracks of Texas, Inc. The purchase
price was approximately $80 million to be paid in a combination of cash, notes
and the Company's common stock.
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
(In thousands, except per share data)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
--- --- --- ---
<S> <C> <C> <C> <C>
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 .25 .34 .45 .37
Dilutive earnings per share .24 .33 .44 .36
Year ended December 31, 1999:
Revenues $ 71,162 $ 85,640 $ 93,251 $ 89,830
Operating income 8,928 12,833 15,634 13,274
Net income 4,250 6,393 7,986 7,354
Basic and dilutive earnings per share .16 .25 .31 .29
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>6
<FILENAME>c60563ex21.txt
<DESCRIPTION>SUBSIDIARIES OF THE COMPANY
<TEXT>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF INSITUFORM TECHNOLOGIES, INC.
The following table sets forth certain information as of December 31,
2000 concerning the Company and its subsidiaries. Unless otherwise indicated,
all securities of such subsidiaries are owned by the Company:
<TABLE>
<CAPTION>
Name Place of % of Voting
---- Incorporation Securities
------------- ----------
<S> <C> <C>
Affholder, Inc. Missouri 100
INA Acquisition Corp. Delaware 100
Insituform France, S.A. France 99.9(1)
Insituform Holdings (UK) Limited United Kingdom 100(1)
Insituform Japan K.K. Japan 100(1)
Insituform Linings Plc United Kingdom 75(2)
Insituform (Netherlands) B.V. Netherlands and Delaware 100(1)
Insituform Rioolrenovatietechnieken B.V. Netherlands 100(3)
Insituform Technologies USA, Inc. Delaware 100
Insituform Technologies, Ltd. Alberta 100
Insituform Technologies, Ltd. United Kingdom 100(2)
Tite Liner NRO Corp. Alberta 100
United Sistema de Tuberias Limitada Chile 100(4)
Video Injection S.A. France 79.8(1)
</TABLE>
Other subsidiaries of the Company are not named in the table above.
Such unnamed subsidiaries considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary.
- ---------
(1) Securities are owned by INA Acquisition Corp.
(2) Securities are owned by Insituform Holdings (UK) Limited.
(3) Securities are owned by Insituform (Netherlands) B.V.
(4) Securities are owned 60% by Insituform Technologies, Inc. and 40% by
INA Acquisition Corp.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>7
<FILENAME>c60563ex23.txt
<DESCRIPTION>CONSENT OF ARTHUR ANDERSEN LLP.
<TEXT>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements on Form S-8 Nos. 33-82486,
33-82488 and 33-63953.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
March 23, 2001
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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