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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
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Commission file number 0-10786
INSITUFORM TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3032158
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
702 SPIRIT 40 PARK DRIVE
CHESTERFIELD, MISSOURI 63005
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 636-530-8000
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(g) of the Act:
CLASS A COMMON SHARES, $.01 PAR VALUE
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(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. [ ]
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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.
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
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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
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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.
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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
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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:
Subsidiary Interest
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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)
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(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.
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(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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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
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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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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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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:
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Age at
Name March 15, 2001 Position with the Company
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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
(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
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
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
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:
PAGE(S) IN THE 2000
ANNUAL REPORT
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
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
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:
Signature Title Date
/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
17
/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
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.
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).