INSITUFORM TECHNOLOGIES INC - 10-K Annual Report

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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, 2001

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.
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(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
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Securities registered pursuant to Section 12(g) of the Act:

CLASS A COMMON SHARES, $.01 PAR VALUE
-------------------------------------
(Title of class)

PREFERRED STOCK PURCHASE RIGHTS
-------------------------------
(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. [ ]

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, 2002 . . . . . .$ 573,500,807(1)

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, 2002 . . . . . . . . . . . . . . . 26,521,997 shares

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(1) The aggregate market value as of March 15, 2002 was calculated in accordance
with the provisions of Form 10-K, and excludes stock held by affiliates of the
registrant (i.e., executive officers and directors of the registrant and persons
holding 10% or more of the registrant's stock). The aggregate market value
without these exclusions, as reported as of March 15, 2002, was $712,380,839.

2

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 2002 Annual
Meeting of Stockholders-Part III.

PART I

Item 1. Business

GENERAL

Insituform Technologies, Inc. (the "Company" or "Insituform
Technologies") 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 CIPP Process") contributed
approximately 69.8% of the Company's revenues during the Company's most recent
fiscal year.

The Company was incorporated in Delaware in 1980, under the name
Insituform of North America, Inc. The Company was originally formed to act as
the exclusive licensee of the Insituform CIPP Process in most of the United
States. When the Company acquired its licensor in 1992, the name of the Company
was changed to Insituform Technologies, Inc. As a result of its successive
licensee acquisitions, the Company's business model has evolved from licensing
technology and manufacturing materials to performing the entire Insituform CIPP
Process itself.

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 total revenues of approximately
$100 million, which included approximately $18 million from its wastewater
treatment plant operations, approximately $32 million from trenchless pipe
rehabilitation services and some open-cut pipe construction, and approximately
$50 million from highway, bridge, airport and commercial construction. During
the fourth quarter of 2001, the Company determined that, while valuable and
profitable, the Kinsel wastewater treatment plant operations and the Kinsel
highway construction and maintenance operations did not fit the Company's
business strategy. In February 2002 (with a January 2002 effective date), the
Company closed the sale of Kinsel's wastewater treatment plant operations for
slightly less than its book value. The Company is currently marketing the
Kinsel's highway construction and maintenance operations.

As used in this Annual Report on Form 10-K, the terms "Company" and
"Insituform Technologies" refer to the Company and, unless the context otherwise
requires, its direct and indirect wholly-owned subsidiaries. For certain
information concerning each of the Company's industry segments and each of its
domestic and foreign operations, see Note 16 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.

TECHNOLOGIES

Pipeline System Rehabilitation
------------------------------

The INSITUFORM CIPP 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

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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.

PIPEBURSTING is a trenchless method for replacing deteriorated
or undersized pipelines. A bursting head is propelled through
the existing pipeline, fracturing the host pipe and displacing
the fragments outward, allowing a new pipe to be pulled in to
replace the old line. Pipes can be replaced size-for-size or
upsized.

MICROTUNNELING is a trenchless method of drilling a new tunnel
from surface operated equipment. Microtunneling is typically
used 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 is a method used to push or pull 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.

See "Patents and Licenses" below for information concerning
the Company's NuPipe(R) process (the "NuPipe Process") and
Thermopipe(R) process (the "Thermopipe Process"), which were
not material to the Company's results of operations during the
year ended December 31, 2001.

Tunneling
---------

Tunneling typically encompasses the construction of man-entry sized
pipelines with access through vertical shafts. From the vertical shaft, a tunnel
is constructed using a steerable, locally-controlled tunnel boring machine. Pipe
is installed after the tunnel is constructed.

TiteLiner(R) Process
--------------------

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.

REHABILITATION ACTIVITIES

The Company's rehabilitation activities are conducted principally
through installation and other construction operations performed directly by the
Company or through wholly-owned and, in some cases, majority-owned,
subsidiaries. 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, and in a portion of the United States, 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 exploit its trenchless rehabilitation processes.

The Company's principal rehabilitation activities are conducted in
North America directly by the Company or through subsidiaries using the
Insituform CIPP Process. The Company holds the Insituform CIPP Process rights
for the United States and Canada. In North America, the Company practices the
Insituform CIPP Process in substantially all of 44 of the 50 states and in
Canada. Significant pipebursting rehabilitation activities are also conducted in
the Southeastern region of the United States by the Company and its subsidiary,
Kinsel.

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North American rehabilitation operations, including research and
development, engineering, training and financial support systems, are
headquartered in Chesterfield, Missouri. Insituform CIPP Process tube
manufacturing and installation facilities are maintained in approximately 11
locations geographically dispersed throughout the United States and Canada.

Outside of North America, the Company conducts Insituform CIPP Process
rehabilitation operations through subsidiaries in the United Kingdom, France,
Spain, the Netherlands and Belgium. Through 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.

European operations are headquartered in Rueil Malmaison, France, a
suburb of Paris, with principal regional facilities located in the United
Kingdom, the Netherlands, Spain, Belgium and Mitry Mory, France.

TiteLiner Process operations (which offer corrosion and abrasion
protection work) are conducted in the United States through the Company's United
Pipeline Systems division. Worldwide TiteLiner Process operations are
headquartered in the United States. Outside the United States, TiteLiner Process
installation activities are conducted through various operating subsidiaries.

The Company conducts tunneling, microtunneling and a range of pipe
system rehabilitation services throughout the United States through its
wholly-owned subsidiary, Affholder, Inc.

Most of the Company's installation operations are project-oriented
contracts for governmental entities. The contracts are usually obtained through
competitive bidding or negotiations and require performance at a fixed price.
The profitability of these contracts depends heavily upon the competitive
bidding environment, the Company's ability to estimate costs accurately and the
Company's ability to effectively manage and execute project performance. Project
estimates may prove to be inaccurate due to unforeseen conditions or events. A
substantial portion of the work on any given project may be subcontracted out to
third parties at a significantly lower profitability level to the Company than
work conducted directly by it. Also, proper trenchless installation requires
expertise that is acquired on the job and through training. The Company,
therefore, provides ongoing training and appropriate equipment to its field
installation crews.

The overall profitability of the Company's installation operations is
influenced not only by the profitability of specific project contracts, but also
by the volume and timing of projects so that the installation operations are
loaded at an appropriate level.

The Company is required to carry insurance and provide bonding in
connection with certain installation projects and, therefore, 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 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 generally invoices its customers as work is completed.
Under ordinary circumstances, collection from governmental agencies in the
United States is made within 60 to 90 days of billing. In most cases, 5% to 15%
of the contract value is withheld by the owner until testing is completed or the
warranty period has expired.

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The Company's principal rehabilitation activities are also conducted
through the following majority-owned subsidiaries:

- -----------------

(1) The remaining interest is held by a subsidiary of Produtos y Servicios
Miller de Mexico, S.A. de C.V.

(2) The remaining interest is held by certain of the subsidiary's principal
employees (or their affiliates) from whom the subsidiary was purchased,
and is subject to purchase by the Company in September 2003 (or earlier
upon specified events), and by certain of the Company's principal
employees to comply with specific legal requirements.

(3) The remaining interest is held by Per Aarsleff A/S.

LICENSEES

The Company has granted licenses for the Insituform CIPP 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. At present, the Insituform CIPP Process
is licensed to 11 unaffiliated licensees and sublicensees, and the NuPipe
Process is licensed to three unaffiliated licensees. The licenses generally
grant to the licensee the right to utilize the know-how and the patent rights
(where they exist) relating to the subject process, and to use the Company's
copyrights and trademarks.

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. An
unaffiliated domestic licensee is obligated to pay specified royalty surcharges
on its sales and contracts outside of its licensed territories. 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 the United Kingdom and elsewhere on a non-exclusive
basis.

Insituform East, Incorporated ("East") holds six sub-licenses to the
Insituform CIPP Process to operate in the states of Virginia, Delaware,
Maryland, Pennsylvania, Ohio, a portion of Kentucky, West Virginia and the
District of Columbia under the Company's exclusive license to the Insituform
CIPP Process for the entire United States. (The United States rights to the
Insituform CIPP 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 CIPP Process and technology in the condition and state as
commercially practiced on the date of settlement.

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As previously reported by the Company, the Company and Insituform
Netherlands initiated litigation against 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. The court issued a
preliminary bench ruling on February 22, 2002 in favor of the Company on point
(ii), except with respect to Midsouth Partners, and in favor of the Company on
point (iii). The court ruled against the Company on point (i), finding that
Midsouth Partners had not committed a material breach of the Settlement
Agreement, nor had Midsouth Partners committed violations permitting
termination. A final ruling from the court affirming the preliminary findings is
expected shortly.

OWNERSHIP INTERESTS IN OPERATING LICENSEES AND PROJECT JOINT VENTURES

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 CIPP Process and the NuPipe
Process 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 CIPP 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 49% joint venture interest in Ka-Te Insituform
A.G., the Company's licensee of the Insituform CIPP Process in Switzerland,
Liechtenstein and Voralberg, Austria. The remaining interest is held by Ka-Te
Holding A.G., an employee of Ka-Te Holding, and an employee of the joint
venture.

The Company has entered into several contractual joint ventures in
order to develop joint bids on contracts for its pipeline rehabilitation
business, and for tunneling operations. Typically, the joint venture entity
holds the contract with the owner and subcontracts portions of the work to the
joint venture partners. As part of the subcontracts, the partners usually
provide bonds to the joint venture. The Company could be required to complete
its joint venture partner's portion of the contract if the partner is unable to
complete its portion and a bond is not available. The Company continues to
investigate opportunities for expanding its business through such arrangements.

MARKETING

The marketing of the Company's rehabilitation technologies is focused
primarily on the municipal wastewater markets worldwide, which the Company
expects to remain the largest part of its business for the foreseeable future.
To help shape decision-making at every step, the Company uses a multi-level
sales force structured around target markets and key accounts, focusing on
engineers, consultants, administrators, technical staff and elected officials.
The Company also 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's unaffiliated licensees are responsible for marketing and sales
activities in their respective territories. See

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"Licensees" above for a description of the Company's licensing operations and
for a description of investments in licensees.

The Company offers its TiteLiner Process worldwide to line new and
existing steel pipelines.

The Company bids on tunneling projects in selected geographical markets
in the United States.

No customer accounted for more than 10% of the Company's consolidated
revenues during the years ended December 31, 2001, 2000 and 1999, respectively.

BACKLOG

Contract backlog is management's expectation of revenues to be
generated from received, signed, uncompleted contracts whose cancellation is not
anticipated at the time of reporting. Reported contract backlog excludes any
term contract amounts for which there is not specific and determinable work
released. At December 31, 2001, the Company's 2002 contract backlog (excluding
projects where the Company has been advised that it is the low bidder, but not
formally awarded the contract) was approximately $164.3 million, which
represents an increase of $49.5 million from the 2001 contract backlog reported
at December 31, 2000. The Company anticipates that substantially all 2002
contract backlog recorded at December 31, 2001 and an additional $98.0 million
of unreleased term contracts and jobs on which the Company is the apparent low
bidder will be completed in 2002. An additional $210.8 million of unreleased
term contract work and work on which the Company is the apparent low bidder is
anticipated for completion in 2003 and beyond. All backlog values are the
estimate of management based on contracts outstanding December 31, 2001 and are
subject to change due to factors beyond the control of the Company.

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, 2001, 2000 and 1999, the Company spent approximately $2.3 million, $2.4
million and $2.4 million, respectively, on research and development activities.

MANUFACTURING AND SUPPLIERS

The Company maintains its principal North American Insituform CIPP
Process liner manufacturing facility in Batesville, Mississippi, with an
additional facility located in Memphis, Tennessee. In Europe,

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Insituform Linings Plc ("Linings"), a majority-owned subsidiary, manufactures
and sells Insituform CIPP Process liners 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.

Although raw materials used in the Company's Insituform CIPP Process
products are typically available from multiple sources, the Company's historical
practice has been to purchase materials from a limited number of suppliers. The
Company maintains its own felt manufacturing facility at its Insitutube(R)
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 the Company 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 companies should there be a need for
alternative resin sourcing. The Company believes that the sources of supply in
connection with its Insituform CIPP Process operations are adequate for its
needs.

The Company has investigated various alternatives, but does not
currently have, a manufacturing source for its NuPipe Process thermoplastic
pipe. Because of its inventory level of NuPipe Process thermoplastic pipe and
because the Company has not recently entered into NuPipe Process installation
contracts and it is not required to supply thermoplastic pipe to its NuPipe
licensees, the Company has not been materially adversely affected by not having
a manufacturing source for thermoplastic pipe. If the demand for NuPipe Process
products increases, the Company will qualify a new manufacturing source or
manufacture NuPipe Process thermoplastic pipe itself.

Under its arrangements for the acquisition of the Thermopipe Process,
the seller will continue to manufacture and supply Thermopipe Process products
to the Company through 2004.

The Company sells Insituform CIPP Process liners and related products
to certain licensees pursuant to fixed-term supply contracts. Under the
arrangements assumed in connection with the acquisition of the Thermopipe
Process, the Company also furnishes Thermopipe Process 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

As of December 31, 2001, the Company held 65 patents in the United
States relating to the Insituform CIPP Process, the last of which to expire will
remain in effect until 2011. Two of the Company's 65 United States patents
relating to the Insituform CIPP Process expired early in 2002. As of December
31, 2001, the Company had seven patents pending in the United States that relate
to the Insituform CIPP Process.

The Company has obtained patent protection in its principal overseas
markets covering various aspects of the Insituform CIPP Process. 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.

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There can be no assurance that the validity of the Company's patents
will not be successfully challenged. The Company's business could be adversely
affected by increased competition upon expiration of the patents or if one or
more of its Insituform CIPP Process patents were adjudicated to be invalid or
inadequate in scope to protect the Company's operations. The Company believes,
however, that, in either case, its long experience with the Insituform CIPP
Process, its continued commitment to support and develop the Insituform CIPP
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.

The Company holds 12 patents issued in the United States covering
either the NuPipe Process or materials used in connection with the NuPipe
Process. The Company also holds similar NuPipe Process (or related material)
patents in 14 other countries. The NuPipe Process entails the manufacture of a
folded thermoplastic replacement pipe that is stored on a reel in a reduced
shape. The pipe is heated at the installation site to make it flexible enough to
be inserted into an existing conduit. It is then pulled into place and
sequentially expanded to match the existing conduit by internal heat and
pressure and by progressive rounding, creating a tight fit against the conduit
being repaired.

The Company holds two patents issued in the United States and 10
patents outside of the United States relating to the Thermopipe Process for
rehabilitating potable water and other aqueous fluid pipes.

Even though the Company holds a few patents relating to its corrosion
and abrasion protection business, the Company believes that the success of its
TiteLiner Process business, operated through its United Pipeline Systems
division, depends primarily upon its proprietary know-how and its marketing and
sales skills.

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. 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, 2001, the Company did not have any material
operations under this license.

The Company's pipebursting operations are performed under a
royalty-bearing, non-exclusive license from BG Plc. The license terminates upon
expiration of the underlying patent, which expires on April 19, 2005. In
addition, either party may terminate the license upon six months' notice and
under certain other circumstances.

COMPETITION

The pipeline reconstruction, rehabilitation and repair business is
highly competitive. In each of its rehabilitation markets, the Company's
trenchless processes currently face 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.

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In addition, the Company's trenchless processes encounter competition
from non-cured-in-place process trenchless approaches such as pipebursting and
other methods. Kinsel employs the pipebursting, microtunneling and sliplining
methods.

The Company also 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 similar
to the NuPipe Process. Several companies offer in-place polyethylene lining
systems which compete with the Company's TiteLiner Process abrasion and
corrosion protection technologies.

The Company's tunneling operation competes with utility contracting
firms throughout North America.

Most of the Company's installation operations are project-oriented
contracts for governmental entities that are obtained through competitive
bidding or negotiations. Most competitors are local or regional companies, and
may be either specialty trenchless contractors or general contractors. A few
competitors have far greater financial resources than the Company and, with
regard to products other than the cured-in-place process, greater experience
than the Company. Therefore, there can be no assurance as to the success of the
Company's trenchless processes in competition with these companies and
alternative technologies for pipeline rehabilitation.

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, 2001, the Company employed 2,322 individuals.
Certain of the Company's contracting operations are parties to collective
bargaining agreements covering an aggregate of 132 employees. The Company
generally considers its relations with its employees to be good.

GOVERNMENT REGULATION

The Company is required to comply with all applicable United States
federal, state and local, and all foreign, statutes, regulations and ordinances.
In addition, the Company's installation and other operations have to comply with
various relevant occupational safety and health regulations, transportation
regulations, 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 installation operations, 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 installation operations have established monitoring programs and
safety procedures relating to its installation activities and to the use of
solvents, further restrictions could be imposed on the manner in which
installation activities are conducted, on equipment used in installation
activities and on the use of solvents or the thermosetting resins used in the
Insituform CIPP Process. The Company believes that it is in material compliance
with environmental and safety laws and regulations applicable to it.

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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. Dedicated
equipment is needed in connection with use of these products in drinking water
applications. The Company does not expect meaningful revenues from drinking
water rehabilitation at least through 2002.

EXECUTIVE OFFICERS

The executive officers of the Company, and their respective ages and
positions with the Company, are as follows:

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. Until its acquisition by the Company in 1995, Mr. Affholder was
Vice Chairman and President of Insituform Mid-America, Inc.

Joseph A. White has been Vice President and Chief Financial Officer of
the Company since 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.

Carroll W. Slusher has been Vice President-North America of the Company
since 1999, having served as the Company's Divisional Vice President-North
American Operations from 1998 until 1999 and Director of North American Pipe
Rehabilitation from 1997 to 1998. Prior to joining the Company, Mr. Slusher was
a regional manager with General Electric Company.

10

Antoine Menard has been Vice President-Europe of the Company since
1999, having served as the Company's Managing Director-Europe from 1995 until
1999. 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-General Counsel of the
Company since 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 are located in Chesterfield, Missouri,
a suburb of St. Louis, at 702 Spirit 40 Park Drive. The executive offices are
leased from an unaffiliated party through May 31, 2003. The Company owns its
research and development facility and its training facility in Chesterfield.

The Company owns a liner fabrication facility and a contiguous felt
manufacturing facility in Batesville, Mississippi. 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 in
Wellingborough, England, where its liner manufacturing facility is located.

The Company owns or leases various operational facilities in the United
States, Canada, 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) The Company's class A common shares, $.01 par value ("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, 1999, as reported on The Nasdaq Stock Market.
Quotations represent prices between dealers and do not include retail mark-ups,
mark-downs or commissions.

11

Period High Low
--------------- -------- --------

2001
First Quarter $41.06 $26.88
Second Quarter 37.50 26.48
Third Quarter 43.20 12.60
Fourth Quarter 26.80 16.39
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

As of March 25, 2002, the number of record holders of the Company's
Common Stock was 1,141.

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

The selected financial data set forth below have been derived from the
Company's consolidated financial statements referred to under "Item 14.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K" of this Annual
Report on Form 10-K, and previously published historical financial statements
not included in this Annual Report on Form 10-K. The selected financial data set
forth below should be read in connection with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements, including the footnotes.

Unaudited
Year Ended December 31,
---------------------------------------------------------

2001(1) 2000(1) 1999(1) 1998(1) 1997
--------- --------- --------- --------- ---------
(in thousands, except per share amounts)

INCOME STATEMENT DATA:
Revenues $ 445,310 $ 409,434 $ 339,883 $ 300,958 $ 320,640
Operating income 46,765 62,966 50,669 38,688 25,030
Income from continuing
operations 24,940 34,906 25,983 17,887 9,644
Net income 24,868 34,906 25,983 17,887 9,419
Basic earnings per share:
Income from continuing operations 0.94 1.41 1.02 .67 .36
Net income 0.94 1.41 1.02 .67 .35
Dilutive earnings per share:
Income from continuing operations 0.93 1.37 1.00 .66 .36
Net income 0.92 1.37 1.00 .66 .35

12

- ----------

(1) The Company has completed various acquisitions that have been accounted
for under the purchase method of accounting, including Video Injection
in 1998, Insituform Rioolrenovatietechnieken in 1999, Insituform
Metropolitan, Inc. in 2000, Insituform Belgium N.V. in 2000, and Kinsel
in 2001.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

GENERAL

Insituform Technologies' revenues are derived primarily from
installation of pipeline liners, replacement pipes and other contracting
activities. Revenues are generated by the Company and its subsidiaries operating
in the United States, Canada, France, the United Kingdom, the Netherlands,
Belgium, Spain, Chile, Argentina and Mexico, and include royalties from
unaffiliated Insituform licensees and sub-licensees and its unaffiliated NuPipe
licensees. During the three years ended December 31, 2001, 2000 and 1999,
approximately 69.8%, 74.0% and 76.4%, respectively, of the Company's
consolidated revenues related to the Insituform CIPP Process.

RESULTS OF OPERATIONS

Revenues increased 8.8% to $445.3 million in 2001 from $409.4 million
in 2000 primarily due to the current year acquisition of Kinsel. Gross profit
decreased both in total and as a percentage of revenues in 2001 compared to 2000
as a result of lower gross profit margins on Kinsel revenues and a reduction in
North American rehabilitation gross profit margin. Selling, general and
administrative expenses decreased by 2.7% to $67.0 million in 2001 compared to
$68.8 million in 2000 due mainly to a significant reduction in incentive
compensation and profit sharing expense. Operating income decreased 25.7% to
$46.8 million in 2001 compared to $63.0 million in 2000.

Revenues of $409.4 million in 2000 was an increase of 20.5% from $339.9
million in 1999. Gross profit grew by 15.5% to $137.1 million in 2000 from
$118.7 million in 1999. Gross profit margin declined modestly as revenue
growth outpaced margin growth. Selling, general and administrative expenses
increased 10.3% in 2000 to $68.8 million from $62.4 million in 1999. Operating
income increased 24.3% to $63.0 million in 2000 from $50.7 million in 1999.

13

Rehabilitation
- --------------

Rehabilitation revenues for 2001 increased 13.3% over 2000 primarily as
a result of incremental revenues of $47.0 million related to the Kinsel
acquisition. Excluding the Kinsel acquisition, revenues in North America
decreased $11.6 million or 4.1% to $269.9 million. The decrease in North America
is a result of delays in job releases, price pressures and increased competition
in several North American markets. Revenues in Europe increased $9.4 million or
24.1% to $48.4 million in 2001 compared to 2000 revenues of $39.0 million as a
result of growth and improvement in market conditions in Europe.

Rehabilitation revenues for 2000 increased 17.8% over 1999 primarily as
a result of growth in North America. Revenues for North America increased $53.4
million or 23.4% to $281.5 million as a result of increased penetration in
existing markets combined with entrance into new markets. The increase in North
America in 2000 was offset somewhat by fluctuations in currency exchange rates
which had an adverse effect of $3.2 million on total European revenues for the
year.

Gross profit margin for rehabilitation was 29.2% in 2001 versus 35.5%
in 2000. The decrease in gross profit margins is primarily a result of lower
utilization rates for work crews in North American operations, combined with
more aggressive pricing as a result of increased competition in the marketplace.
Also, operational capacity had been expanded in anticipation of revenue growth
that did not materialize in 2001. Finally, the operations acquired from Kinsel
contributed 22.1% of gross profit margin, which represents a lower margin base
than typically achieved in the historical rehabilitation segment.

Gross profit margin for rehabilitation in 2000 declined to 35.5% versus
39.0% in 1999. The decrease in gross profit margin is primarily attributable to
a change in the mix of contracts toward smaller diameter tubes in 2000 and to
weaker margins in European operations caused by underutilization related to a
decrease in revenues in Europe.

Selling, general and administrative expenses for the Company's
rehabilitation operations decreased 1.2% in 2001 from 2000 and to 16.5% of
revenues in 2001 from 18.9% in 2000 primarily due to a significant reduction in
incentive compensation and profit sharing expense, offset by the inclusion of
selling, general and administrative expenses related to the operations acquired
in the Kinsel acquisition. In addition, the operations acquired in the Kinsel
acquisition have a lower cost structure than typical for the rehabilitation
segment.

Selling, general and administrative expenses for rehabilitation
increased 10.9% in 2000 mainly as a result of 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. Selling, general and administrative expenses were slightly
lower as a percent of revenues in 2000 at 18.9% compared to 20.1% in 1999 due
primarily to targeted management cost control measures in North American
operations.

Rehabilitation operating income for 2001 decreased 26.1% from 2000. The
decrease in operating income is a result of the decrease in gross profit margin
discussed above, increased amortization of goodwill related to the Kinsel
acquisition and the restructuring charge recorded in 2001. The Company's

14

current efforts to control direct and overhead costs should effect a positive
change in operating income in 2002.

Rehabilitation operating income for 2000 increased 3.9% over 1999
primarily as a result of the increase in revenues offset by the decrease in
gross profit margin.

The Company anticipates increased revenue and profitability growth in
rehabilitation starting in the first quarter of 2002 and continuing throughout
the year, and the realization of better margins for the year ended December 31,
2002. The Company continues to focus much of its research and development
efforts on identifying new and cost-effective ways to remain competitive in the
market.

Tunneling
- ---------

Tunneling revenues for 2001 increased 4.6% compared to 2000 as a result
of the continued growth in the tunneling market.

Tunneling revenues for 2000 increased 17.0% compared to 1999 as a
result of an improvement in the tunneling market which led to an increase in new
projects which were begun in 2000. In addition, the Company finished work on a
$40 million contract which had started in late 1999.

Gross profit margin for tunneling was 18.1% in 2001 versus 19.7% in
2000 despite slightly stronger revenues. Gross profit margin decreased during
the year due to a change in mix to smaller lower margin projects from larger
higher margin projects.

Gross profit for tunneling increased 15.3% to $9.2 million in 2000
from $8.0 million in 1999 due primarily to increased revenues. Gross profit
margin did not change significantly compared to 1999.

Selling, general and administrative expenses for tunneling decreased
7.2% in 2001 from 2000. Selling, general and administrative expenses decreased
to 6.4% of revenues from 7.2% in 2000. The decline in selling, general and
administrative expenses and selling, general and administrative expenses as a
percent of revenues is due to a reduction in incentive compensation and profit
sharing expense and targeted cost reduction initiatives.

Selling, general and administrative expenses for tunneling increased
11.0% in 2000 over 1999. Selling, general and administrative expenses decreased
slightly to 7.2% of revenues in 2000 from 7.6% of revenues in 1999. The increase
in selling, general and administrative expenses primarily relates to increased
administrative costs related to the increased volume of business in 2000.

Tunneling operating income decreased slightly in 2001 compared to 2000,
primarily as a result of the decrease in gross profit margins discussed above.
Operating income in 2000 increased 18.0% over 1999 primarily as a result of the
increase in revenues.

The Company expects the tunneling unit to continue its trend of
increasing revenue growth in 2002, but at an increased rate, which is likely to
outpace growth in other business segments. Though gross

15

profit margins are expected to remain similar to those realized in 2001, the
resulting mix change should yield lower consolidated profit margins for the
Company on a consolidated basis as margins in this business are traditionally
lower than margins in the Company's other activities. Tunneling will continue to
grow in significance to the Company's overall financial results through
increased traditional work volumes, expanded product offerings and development
of new markets for its products.

TiteLiner
- ---------

TiteLiner revenues for 2001 decreased 26.4% from 2000 primarily as a
result of the completion of a large contract in South America in early 2001
which added $13 million to revenues in 2000 versus $1 million in 2001. In
addition, the United States and South American markets are geared towards large
projects related to mining and thus fluctuate in tandem with mineral prices,
especially copper. The price of copper and palladium are depressed, which has
resulted in a substantial decrease in projects relating to mining.

TiteLiner revenues in 2000 increased 57.3% from 1999 primarily due to
revenues recorded related to the South American contract discussed above. In
addition, the Canadian market is geared toward smaller projects in the oil and
gas industry. Accordingly, increases in oil prices in 2000 led to a more
favorable market for oil pipeline repairs.

Gross profit margin for TiteLiner was 30.1% in 2001 versus 33.6% in
2000. Lower mineral prices led to decreased revenues during 2001 placing
pressure on overall unit capacity costs yielding lower gross profit margins.

Gross profit margin for TiteLiner increased to 33.6% in 2000 from 11.8%
in 1999. The principal reason for the higher gross profit margin was a more
favorable market for pipeline repairs as a result of the increase in oil prices.
In addition, gross profit margin in 1999 was unfavorably impacted by
difficulties with a major project in Chile.

Selling, general and administrative expenses for TiteLiner decreased
22.9% in 2001 from 2000 primarily as a result of a reduction in incentive
compensation and profit sharing expense and targeted cost reduction initiatives.
Selling, general and administrative expenses increased to 11.2% of revenues from
10.7% in 2000 due to decreased leverage of fixed costs over a lower revenue
base.

Selling, general and administrative expenses for TiteLiner remained
relatively unchanged in 2000 compared to 1999. Selling, general and
administrative expenses were lower as a percent of revenues in 2000 at 10.7%
compared to 16.6% in 1999 primarily as a result of increased leverage of fixed
costs over a higher revenue base.

TiteLiner's operating income for 2001 declined 40.6% compared to 2000,
as a result of the decreases in revenues and gross profit margins discussed
above. Operating income for 2000 increased $9.6 million over 1999 as a result of
the increases in revenues and gross profit margins discussed above.

16

The Company expects continuing deterioration of revenues for TiteLiner
in 2002, but by maintaining profit margins and trimming operating costs where
possible, the overall impact to consolidated net income should be minimal.

RESTRUCTURING

In the fourth quarter of 2001, the Company recorded a restructuring
charge of $4.1 million, $0.9 million of which related to the elimination of 112
company-wide positions specifically identified as of December 31, 2001. An
additional $3.2 million of the charge relates to asset write-downs, lease
cancellations and other costs associated with the closure and consolidation of
eight facilities in the United States and the disposal of the associated assets.
See Note 5 to the Consolidated Financial Statements regarding restructuring
costs. The Company expects the annualized benefit from the restructuring actions
to be approximately $9.0 million before tax.

OTHER INCOME/EXPENSE

Interest expense for 2001 was relatively unchanged at $9.3 million.
Although the Company made a scheduled $15.7 million payment on its Senior Notes,
Series A (the "Senior Notes") in February 2001, the Company acquired additional
debt of $12.2 million in the first quarter of 2001 as part of its acquisition of
Kinsel.

Interest expense in 2000 increased 3.5% to $9.3 million from $9.0
million in 1999. This increase was primarily 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.

Other income decreased 38.1%, or $1.4 million, to $2.3 million during
2001. This was primarily due to a 400 basis point decline in market rates of
return on the Company's short-term investments. Other income in 2000 decreased
1.7% to $3.7 million from $3.8 million in 1999. The relatively flat income was
due to lower invested cash balances in the fourth quarter of 2000 versus 1999.

INCOME TAXES

The Company's effective tax rate for 2001 decreased only slightly to
39.4% compared to 39.5% in 2000. Although there is a relatively minor change to
the effective tax rate, the components of the effective tax rate changed more
significantly. There was an increased effect of non-deductible goodwill as a
result of the Kinsel acquisition, which was offset by a reduction due to the
favorable conclusion of outstanding exams. 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 14 of the Notes to Consolidated Financial
Statements, the 2001, 2000 and 1999 effective tax rates were higher than the
United States federal statutory rate, primarily due to non-deductibility of
goodwill amortization associated with acquisitions, which is generally not
deductible for tax purposes.

MINORITY INTEREST AND EQUITY IN EARNINGS OF AFFILIATED COMPANIES

Minority interest in net income decreased in 2001 to $0.3 million from
$0.6 million in 2000. The decrease was due to the acquisition in 2001 of an
additional 10% interest in Video Injection, and, in late 2000, the purchase of
an additional 35% interest in Insituform France. Equity in earnings of
affiliated

17

companies increased 39.2% to $1.1 million in 2001 compared to $0.8 million in
2000. The increase is a result of an additional $0.2 million in contributions
from the Company's European rehabilitation joint ventures and an additional $0.1
million from joint ventures acquired in the Kinsel acquisition.

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 Linings, 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 Partners partnership from which the
Company withdrew in the third quarter of 1999.

DISCONTINUED OPERATIONS

In the fourth quarter, the Company made the decision to sell certain
operations related to the Kinsel acquisition. Accordingly, the Company has
classified as discontinued the wastewater treatment plant, commercial
construction and highway operations acquired as part of the Kinsel acquisition.
These operations are not consistent with the Company's operating strategy of
providing differentiated trenchless rehabilitation and tunneling services. The
net loss for the discontinued operations for the year ended December 31, 2001
was $0.1 million on $56.9 million in revenues. In February 2002, the Company
closed the sale of Kinsel's wastewater treatment plant operations for slightly
less than the book value of the assets sold. The Company is currently marketing
Kinsel's highway construction and maintenance operations. See Note 4 to the
Consolidated Financial Statements regarding discontinued operations.

NET INCOME/EARNINGS PER SHARE

As a result of operations, net income in 2001 decreased 28.8% to $24.9
million, representing a 5.6% return on revenue, compared to $34.9 million,
representing an 8.5% return on revenue in 2000 and $26.0 million in 1999,
representing a 7.6% return on revenue. Return on average stockholders' equity
was 12.0%, 23.0%, and 18.7% in 2001, 2000, and 1999, respectively.

Earnings per share-dilutive decreased 32.8% from $1.37 per share in
2000 to $0.92 per share in 2001. The restructuring charge and the effect of
discontinued operations discussed above impacted earnings per share-dilutive by
$0.10 per share. Earnings per share-dilutive increased 37.0% 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-dilutive was also favorably
impacted by the repurchase of 500,165 shares of common stock in 2000.

OUTLOOK

Responding to the disappointing performance of 2001, management
analyzed the cost structure supporting the Company's operations and began making
reductions. The Company anticipates better performance in the 2002 fiscal year
than in 2001. Backlog in most business units is the strongest it has ever been,
and the Company has won several contracts with significant revenue dollars
attached to them.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of our financial statements. Actual results may
differ from these estimates under different assumptions or conditions.

18

Some of our accounting policies require the application of significant
judgment by management in selecting the appropriate assumptions for calculating
financial estimates. By their nature, these judgments are subject to an inherent
degree of uncertainty. We believe that our critical accounting policies are
limited to those described below. For a detailed discussion on the application
of these and other accounting policies, see Note 2 in the notes to the
consolidated financial statements.

REVENUE RECOGNITION - PERCENTAGE-OF-COMPLETION METHOD

The Company recognizes revenues and profit as construction and
installation contracts progress using the percentage-of-completion method of
accounting, which relies on estimates of total expected contract revenues and
costs. Under this method, estimated contract revenues and resulting gross profit
margin are recognized based on costs incurred to date as a percentage of total
estimated costs. The Company follows this method since reasonably dependable
estimates of the revenues and costs applicable to various elements of a contract
can be made. Since the financial reporting of these contracts depends on
estimates, which are assessed continually during the term of these contracts,
recognized revenues and profit are subject to revisions as the contract
progresses to completion. Total estimated costs, and thus contract margin, are
impacted by changes in productivity, scheduling, and the unit cost of labor,
subcontracts, materials and equipment. Additionally, external factors such as
weather, customer needs, customer delays in providing approvals, labor
availability, governmental regulation and politics, may also affect the progress
and estimated cost of a project's completion and thus the timing of margin and
revenue recognition. Revisions in profit estimates are reflected in the period
in which the facts that give rise to the revision become known. Accordingly,
favorable changes in estimates result in additional revenues and profit
recognition, and unfavorable changes in estimates result in a reduction of
recognized revenues and profits. When current estimates of total contract costs
indicate that the contract will result in a loss, the projected loss is
recognized in full in the period in which the loss becomes evident. Revenues
from change orders, extra work, variations in the scope of work and claims are
recognized when realization is reasonably assured.

Many of our contracts provide for termination of the contract at the
convenience of the customer. In the event a contract would be terminated at the
convenience of the customer prior to completion, we will typically be
compensated for progress up to the time of termination and any termination
costs. In addition, many contracts are subject to certain completion schedule
requirements with liquidated damages in the event schedules are not met as the
result of circumstances that are within our control. Losses on terminated
contracts and liquidated damages have historically not been significant.

LONG-LIVED ASSETS

Property, plant and equipment, goodwill and other intangibles are
recorded at cost and are amortized on a straight-line basis over their estimated
useful lives. Changes in circumstances such as technological advances, changes
to the Company's business model or changes in the Company's capital strategy can
result in the actual useful lives differing from the Company's estimates. In
those cases where the Company determines that the useful life of property, plant
and equipment should be shortened, the Company would depreciate the net book
value in excess of the salvage value over its revised remaining useful life,
thereby increasing depreciation expense.

Long-lived assets, including property, plant and equipment, goodwill
and other intangibles, are reviewed by the Company for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Factors we consider important which could trigger an
impairment review include the following:

19

o significant underperformance in a region relative to expected
historical or projected future operating results;

o significant changes in the use of the assets of a region or the
strategy for the region;

o significant negative industry or economic trends;

o significant decline in our stock price for a sustained period; and

o our market capitalization is significantly less than net book value.

Such impairment tests are based on a comparison of undiscounted cash
flows to the recorded value of the asset. The estimate of cash flow is based
upon, among other things, certain assumptions about expected future operating
performance. The Company's estimates of undiscounted cash flow may differ from
actual cash flow due to, among other things, technological changes, economic
conditions, changes to its business model or changes in its operating
performance. If the sum of the undiscounted cash flows (excluding interest) is
less than the carrying value, the Company recognizes an impairment loss,
measured as the amount by which the carrying value exceeds the fair value of the
asset.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Management makes estimates of the uncollectibility of our accounts
receivable. Management evaluates specific accounts where the Company has
information that the customer may be unwilling or unable to pay the receivable
in full. In these cases, the Company uses its judgment, based on the best
available facts and circumstances, and records a specific reserve for that
customer against amounts due in order to reduce the receivable to the amount
that is expected to be collected. The specific reserves are reevaluated and
adjusted as additional information is received that impacts the amount reserved.
After all attempts to collect the receivable have failed, the receivable is
written off against the reserve. Based on the information available, the Company
believes that the allowance for doubtful accounts as of December 31, 2001 is
adequate. However, no assurances can be given that actual write-offs will not
exceed the recorded reserve.

LIQUIDITY AND CAPITAL RESOURCES

The balance of cash and cash equivalents increased $10.5 million to
$74.6 million at December 31, 2001 compared to $64.1 million at December 31,
2000. The cash balance at the end of 2001 includes $4.3 million of cash and cash
equivalents restricted in various escrow accounts. Operating cash flow from
continuing operations of $44.7 million provided a significant majority of the
Company's cash flow in the year ended December 31, 2001, an amount 179.3% of net
income from continuing operations. Net operating cash flow for the year was
$34.8 million. Historically, operating cash flow has been the largest source of
available capital, by comparison providing $42.6 million and $34.4 million in
the years ended December 31, 2000 and 1999, respectively. Working capital was
$138.7 million at December 31, 2001 compared to $114.5 million at December 31,
2000. The Company anticipates that operating cash flow will remain a significant
portion of operational funding in the foreseeable future.

Other significant sources of cash during 2001 were proceeds from
short-term borrowings against the line of credit of $15.0 million and proceeds
of $9.0 million from the sale of fixed assets, including a building sold due to
the closure of an operating site and two tunneling machines. An additional $6.1
million was contributed from the issuance of common stock upon the exercise of
options in 2001.

Cash was used in nearly equal amounts for investing and financing
activities during 2001. Of the $16.6 million expended on capital, $6.6 million
related to two tunneling machines for which the Company initially funded
construction and were later leased back under an operating lease. The Company's
investing activities in 2001 included $20.6 million of repayments on debt
agreements, the largest of which

20

was a $15.7 million scheduled principal payment on the Company's Senior Notes.
These payments are scheduled in equal amounts through 2007. Repurchases under
the Company's previously reported stock repurchase program were $12.2 million
for the year to acquire 563,109 shares. The net effect of the Company's stock
issuance and repurchases during 2001 did not have a significant impact on
earnings per share in 2001.

Trade receivables, together with costs and estimated earnings in excess
of billings and retainage under construction contracts, increased 15.4%, to
$131.2 million, from $113.7 million at the end of 2000, primarily a result of
the acquisition of Kinsel, which added $13.7 million to receivables at the end
of 2001. 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. The slow review processes often
employed by the Company's municipal customers also sometimes further prolong
collections. In the United States, retainage receivables are generally received
within 60 to 90 days after the completion of a contract.

The Company has entered into several contractual joint ventures in
order to develop joint bids on contracts for its installation business, and for
tunneling operations. In these cases, the Company could be required to complete
the partner's portion of the contract if the partner is unable to complete its
portion. The Company continues to investigate opportunities for expanding its
business through such arrangements.

At December 31, 2001, the Company had unused committed bank credit
facilities under a credit agreement (the "Credit Agreement") totaling $34.1
million. The commitment fee paid per annum by the Company is 0.2% on the
unborrowed balance. The interest rates under this facility vary and are based on
the prime rate. As of December 31, 2001, the rate was 4.75%.

The Company's Senior Notes, due February 14, 2007, bear interest,
payable semi-annually in August and February of each year, at the rate per annum
of 7.88%. Each year, from February 2002 to February 2006, inclusive, the Company
will be required to make principal payments of $15.7 million, together with an
equivalent payment at maturity. On December 31, 2001, the principal amount of
Senior Notes outstanding was $94.3 million. 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. Upon specified change in control events each holder has the
right to require the Company to purchase its Senior Note 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, 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.

The Company believes it has adequate resources and liquidity to fund
future cash requirements for working capital, capital expenditures and debt
repayments with cash generated from operations, existing cash balances,
additional short- and long-term borrowing and the sale of assets. For additional
discussion of assets financed through operating leases and the capital
commitments thereon, see Note 15 in the Notes to Consolidated Financial
Statements.

In February 2001, the Company acquired Kinsel, a trans-regional
provider of pipebursting and other sewer rehabilitation services for
approximately $80.0 million. The acquisition was funded primarily

21

through issuance of 1,847,165 shares of the Company's common stock from
treasury, cash and the issuance of a $5.4 million note to the seller.

In February 2000, the Company acquired the rights to the Insituform
CIPP 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 CIPP 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.

MARKET RISK

The Company is exposed to the effect of interest rate changes and
foreign currency fluctuations.

INTEREST RATE RISK

The fair value of the Company's cash and short-term investment
portfolio and the fair value of the line of credit facility at December 31, 2001
approximated carrying value. Given the short-term nature of these instruments,
market risk, as measured by the change in fair value resulting from a
hypothetical 10% change in interest rates, is not material.

The Company's objectives in managing exposure to interest rate changes
are to limit the impact of interest rate changes on earnings and cash flows and
to lower overall borrowing costs. To achieve these objectives, the Company
maintains fixed rate debt as a percentage of its net debt in a percentage range
set by policy. The fair value of the Company's long-term debt, including current
maturities and the amount outstanding on the line of credit facility, was
estimated to be $124.4 million at December 31, 2001, and exceeded carrying value
by $347 thousand. Market risk was estimated as the potential increase in fair
value resulting from a hypothetical 10% decrease in the Company's debt specific
borrowing rates at December 31, 2001, or $1.9 million.

FOREIGN EXCHANGE RISK

The Company operates subsidiaries, and is associated with licensees and
affiliates operating solely in countries outside of the United States, and in
currencies other than the U.S. dollar. Consequently, these operations are
inherently exposed to risks associated with fluctuation in the value of the
local currencies of these countries compared to the U.S. dollar. At December 31,
2001, approximately $3.8 million of financial instruments, primarily long-term
debt, were denominated principally in Euros. The effect of a hypothetical
adverse change of 10% in year-end exchange rates (a weakening of the U.S.
dollar) is immaterial.

EFFECTS OF TRANSACTIONS WITH RELATED AND CERTAIN OTHER PARTIES

Affholder, Inc., the Company's wholly-owned subsidiary that comprises
the tunneling segment, leased four cranes from A-Y-K-E Partnership as of March
15, 2002. A-Y-K-E is a partnership that is controlled by Robert W. Affholder,
the Company's Senior Executive Vice President and a member of the Company's
board of directors. During the year ended December 31, 2001, Affholder paid
A-Y-K-E $453,500 pursuant to equipment leases. This amount represents 31.9% of
all lease payments made by

22

Affholder during 2001 and 2.1% of all lease payments made by the Company in
2001. Affholder owns, or leases under long-term operating leases with third
party leasing companies, several pieces of tunneling equipment, including cranes
and tunnel boring machines. From time to time for specific projects, Affholder
will lease additional equipment from a variety of sources, including A-Y-K-E.
A-Y-K-E owns various pieces of equipment that are used in the tunneling
industry, including cranes and tunnel boring machines. The cranes that are
currently under lease are leased under separate lease agreements on terms that
are substantially similar to, or better than, those otherwise available to
Affholder in the market. The leases are terminable upon 30 days' prior notice by
either party. During 2001, A-Y-K-E leased equipment only to Affholder. At
Affholder's discretion, Affholder may sublease the cranes to third parties and
retain any profit generated from the sublease.

FORWARD-LOOKING INFORMATION

This Annual Report contains various forward-looking statements that are
based on information currently available to management and on 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. The Company's actual results may vary materially from those
anticipated, estimated or projected due to a number of factors, such as the
competitive environment for the Company's products and services, the
geographical distribution and mix of the Company's work, the timely award or
cancellation of projects, political circumstances impeding the progress of 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. The Company does
not assume a duty to update forward-looking statements. Please use caution and
do not place reliance on forward-looking statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

For information concerning this item, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations-Market
Risk," which information is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

For information concerning this item, see "Item 14. Exhibits, Financial
Statement Schedules, and Reports on Form 8-K," which information is incorporated
herein by reference.

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 2002 Annual
Meeting of Stockholders (the "2002 Proxy Statement"), which information is
incorporated herein by reference.

23

Item 11. Executive Compensation

For information concerning this item, see the 2002 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 2002 Proxy Statement,
which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

For information concerning this item, see the 2002 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:

The consolidated financial statements filed in this Annual Report on
Form 10-K are listed in the attached Index to Consolidated Financial Statements
and Schedules.

2. Financial Statement Schedules:

No financial statement schedules are included herein because they are
not required or are not applicable or the required information is contained in
the consolidated financial statements or notes thereto.

3. Exhibits:

The exhibits required to be filed as part of this Annual Report on Form
10-K are listed in the attached Index to Exhibits.

(b) Current Reports on Form 8-K: None

24

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, 2002 INSITUFORM TECHNOLOGIES, INC.

By: /s/ Joseph A. White
------------------------------------------
Joseph A. White
Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

INDEX TO FINANCIAL STATEMENTS

Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . F-2

Report of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3

Consolidated Statements of Income for each of the three years
in the period ended December 31, 2001 . . . . . . . . . . . . . . . . . F-4

Consolidated Balance Sheets, December 31, 2001 and 2000 . . . . . . . . . . . . F-5

Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended December 31, 2001 . . . . . . . . . . . . . . . . . F-6

Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 2001 . . . . . . . . . . . . . . . . . F-7

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . F-8

No Financial Statement Schedules are included herein because they are
not required or not applicable or the required information is contained in the
consolidated financial statements or notes thereto.

F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and the Shareholders of
Insituform Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Insituform
Technologies, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Insituform Technologies, Inc.
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

ARTHUR ANDERSEN LLP

St. Louis, Missouri,
February 1, 2002

F-2

REPORT OF MANAGEMENT

Management is responsible for the preparation, integrity and objectivity of
financial information included in this annual report. The financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts. Although the financial
statements reflect all available information and management's judgment and
estimates of current conditions and circumstances, and are prepared with the
assistance of specialists within and outside the Company, actual results could
differ from those estimates.

Management has established and maintains an internal control structure to
provide reasonable assurance that assets are safeguarded against loss from
unauthorized use or disposition, that the accounting records provide a reliable
basis for the preparation of financial statements and that such financial
statements are not misstated due to material fraud or error. Internal controls
include the careful selection of associates, the proper segregation of duties
and the communication and application of formal policies and procedures that are
consistent with high standards of accounting and administrative practices. An
important element of this system is an internal audit program.

Management continually reviews, modifies and improves its systems of accounting
and controls in response to changes in business conditions and operations and in
response to recommendations in the reports prepared by the independent public
accountants and internal auditors.

Management believes that it is essential for the Company to conduct its business
affairs in accordance with the highest ethical standards and in conformity with
the law. This standard is described in the Company's policies on business
conduct, which are publicized throughout the Company.

F-3

INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands, except per share amounts)

The accompanying notes are an integral part of the financial statements.

F-4

INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AS OF DECEMBER 31, 2001 AND 2000
(In thousands, except share information)

ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of long-term debt and line of credit $ 35,218 $ 18,023
Accounts payable and accrued expenses 68,302 63,829
Billings in excess of costs and estimated earnings 8,057 4,688
Liabilities related to discontinued operations 9,471 --
--------- ---------
Total current liabilities 121,048 86,540

LONG-TERM DEBT, less current maturities 88,853 98,217

OTHER LIABILITIES 2,039 2,570
--------- ---------
Total liabilities 211,940 187,327
--------- ---------
MINORITY INTERESTS 1,555 2,357
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, undesignated, $.10 par - shares authorized 2,000,000; none outstanding -- --
Common stock, $.01 par - shares authorized 60,000,000; shares issued 28,571,158 and
28,152,570, shares outstanding 26,602,385 and 24,908,304 286 282
Additional paid-in capital 129,651 81,934
Retained earnings 172,112 147,244
Treasury stock - 1,968,773 and 3,244,266 shares (44,563) (58,478)
Cumulative foreign currency translation adjustments (7,359) (5,692)
--------- ---------
Total stockholders' equity 250,127 165,290
--------- ---------
Total liabilities and stockholders' equity $ 463,622 $ 354,974
========= =========

The accompanying notes are an integral part of the financial statements.

F-5

INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands, except number of shares)

The accompanying notes are an integral part of the financial statements.

F-6

INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands)

The accompanying notes are an integral part of the financial statements.

F-7

INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

Insituform Technologies, Inc. (a Delaware corporation) and subsidiaries
(collectively, the "Company") is a worldwide provider of proprietary trenchless
technologies for the rehabilitation and improvement of sewer, water, gas and
industrial pipes. The Company's primary technology is the Insituform(R) process,
a "cured-in-place" pipeline rehabilitation process (the "Insituform CIPP
Process"). Pipebursting is a trenchless method of dilating and replacing an old
pipeline with a new plastic pipe. The microtunneling process is a method of
drilling a new tunnel from surface operated equipment. Sliplining is a method
used to push or pull a new pipeline into an old one. The Company's TiteLiner
("TiteLiner") process is a method of lining steel lines with a corrosion and
abrasion resistant pipe. The Company is engaged in trenchless tunneling used in
the installation of new underground services.

2. SUMMARY OF ACCOUNTING POLICIES

Principles of Consolidation
- ---------------------------

The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries, including a 75%-owned United Kingdom
subsidiary, Insituform Linings Plc.; a 55%-owned Mexican subsidiary, United
Pipeline de Mexico, S.A.; and a 89.6%-owned French subsidiary, Video Injection,
S.A. For contractual joint ventures, the Company recognizes revenue and profits
on its portion of the contract. All intercompany transactions and balances have
been eliminated.

Accounting Estimates
- --------------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassifications
- -----------------

Certain previously reported amounts have been restated to conform to
classifications adopted in 2001 or to reflect the Company's wastewater
treatment, commercial construction and highway operations as discontinued
operations.

Revenues
- --------

Revenues include construction and installation revenues which are recognized
using the percentage-of-completion method of accounting in the ratio of costs
incurred to estimated final costs. Contract costs include all direct material
and labor costs and those indirect costs related to contract performance, such
as indirect labor, supplies, tools and equipment costs. Since the financial
reporting of these contracts depends on estimates, which are assessed
continually during the term of these contracts, recognized revenues and profit
are subject to revisions as the contract progresses to completion. Revisions in
profit estimates are reflected in the period in which the facts that give rise
to the revision become known. When estimates indicate that a loss will be
incurred on a contract on completion, a provision for the expected loss is
recorded in the period in which the loss becomes evident. At December 31, 2001,
there are no significant provisions for expected losses on contracts. Revenue
from change orders, extra work, variations in the scope of work and claims is
recognized when realization is reasonably assured.

Research and Development
- ------------------------

The Company expenses research and development costs as incurred. Research and
development costs of $2.3 million, $2.4 million, and $2.4 million for the years
ended December 31, 2001, 2000 and 1999, respectively, are included in selling,
general and administrative expenses in the accompanying consolidated statements
of income.

F-8

Taxes on Income
- ---------------

The Company provides for estimated income taxes payable or refundable on current
year income tax returns as well as the estimated future tax effects attributable
to temporary differences and carryforwards, based upon enacted tax laws and tax
rates.

Earnings Per Share
- ------------------

Earnings per share have been calculated using the following share information:

Cash and Cash Equivalents
- -------------------------

The Company classifies highly liquid investments with original maturities of 90
days or less as cash equivalents. Recorded book values are reasonable estimates
of fair value for cash and cash equivalents.

Allowance for Doubtful Accounts
- -------------------------------

Management makes estimates of the uncollectibility of accounts receivable. The
Company records a reserve for specific accounts to reduce receivables to the
amount that is expected to be collected. The specific reserves are reevaluated
and adjusted as additional information is received. After all attempts to
collect the receivable have failed, the receivable is written off against the
reserve.

Inventories
- -----------

Inventories are stated at the lower of cost (first-in, first-out) or market.
Actual cost is used to value raw materials and supplies. Standard cost, which
approximates actual cost, is used to value work-in-process, finished goods and
construction materials. Standard cost includes direct labor, raw materials, and
manufacturing overhead based on practical capacity.

Long-Lived Assets
- -----------------

Property, plant and equipment, goodwill and other intangibles are recorded at
cost and are amortized on a straight-line basis over their estimated useful
lives. Intangible assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Such impairment tests are based on a comparison of undiscounted
cash flows to the recorded value of the asset. If impairment is indicated, the
asset value is written down to its fair value.

Goodwill
- --------

The Company amortizes goodwill over periods of 15 to 25 years on the
straight-line basis. Amortization expense related to goodwill for the years
ended December 31, 2001, 2000 and 1999 was $6.2 million, $3.8 million and $3.3
million, respectively.

New Accounting Pronouncements
- -----------------------------

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations,"
and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." SFAS No. 141
requires that all business combinations be accounted for using the purchase
method

F-9

of accounting and requires separate recognition of intangible assets that meet
certain criteria. This statement applies to all business combinations completed
after June 30, 2001. The adoption of SFAS 141 did not have a significant impact
on the Company's financial statements.

SFAS 142 requires that an intangible asset that is acquired shall be initially
recognized and measured based on its fair value. This statement also provides
that goodwill should not be amortized, but shall be tested for impairment
annually, or more frequently if circumstances indicate potential impairment,
through a comparison of fair value to its carrying amount. SFAS No. 142 is
effective for fiscal periods beginning after December 15, 2001. As a result of
this new standard, the Company continued to amortize goodwill which existed
prior to June 30, 2001, through December 31, 2001, at which time amortization
ceased and a transitional impairment test will be performed. Management is
currently reviewing the new standard and evaluating the impact on its future
consolidated financial statements and accounting policies and practices.
Amortization of goodwill for 2001 totaled $6.2 million.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This standard will be adopted by the Company on January 1, 2003.
Management believes that the adoption of SFAS No. 143 will not have a material
impact on its future consolidated financial statements.

Foreign Currency Translation
- ----------------------------

Results of operations for foreign entities are translated using the average
exchange rates during the period. Current assets and liabilities are translated
to U.S. dollars using the exchange rates in effect at the balance sheet date,
and the related translation adjustments are reported as a separate component of
stockholders' equity.

3. BUSINESS ACQUISITIONS

On February 28, 2001, the Company acquired 100% of the stock of Kinsel
Industries, Inc. ("Kinsel") and an affiliated company, Tracks of Texas, Inc.
("Tracks"). Kinsel has operations in pipebursting, microtunneling, wastewater
treatment plant construction, commercial construction and highway construction
and maintenance. Tracks is a real estate and construction equipment leasing
company that primarily leases equipment to Kinsel. The purchase price was
approximately $80 million, paid in a combination of cash, notes and 1,847,165
shares of the Company's common stock valued at $35.51 per share. The transaction
was accounted for by the purchase method of accounting, and accordingly, their
results are included in the Company's consolidated income statement from the
date of acquisition. The purchase price was allocated to assets and liabilities
based on their respective fair value at the date of acquisition and resulted in
goodwill of $61.2 million, which is being amortized over 20 years. There are no
contingent payments, options, or commitments in connection with the acquisition.
The Company subsequently decided to sell off portions of Kinsel that did not fit
the Company's overall business strategy. (See Note 4.)

The following unaudited pro forma summary presents information as if Kinsel and
Tracks had been acquired as of January 1, 2000. The pro forma amounts include
certain adjustments, primarily to recognize depreciation and amortization,
including amortization of goodwill, based on the allocated purchase price of
Kinsel and Tracks assets, and do not reflect any benefits from economies which
might be achieved from combining operations. The unaudited pro forma information
has been presented for comparative purposes and does not necessarily reflect the
actual results that would have occurred nor is it necessarily indicative of
future results of operations of the combined companies (in thousands, except per
share amounts):

F-10

Diluted
Income from continuing operations 0.94 1.29
Loss from discontinued operations (0.03) (0.02)
Net income 0.91 1.27

During the third quarter of 2000, the Company acquired the remaining 50%
ownership of Insituform Belgium N.V. (formerly known as K-Insituform N.V.), its
joint venture in Belgium, for approximately $0.3 million, along with the
remaining 33% ownership in Insituform France, S.A., for approximately $0.8
million. In addition, in July 2000, the Company completed its acquisition of 50%
of Italcontrolli-Insituform S.r.l. (formerly known as Italcontrolli Nord
S.r.l.), its licensee in Italy, for approximately $1.2 million. There was no
material goodwill resulting from these acquisitions.

In February 2000, the Company acquired the rights to the Insituform CIPP Process
and NuPipe(R) process for the states of New York and New Jersey, through the
purchase of all of the shares of the capital stock in Insituform(R)
Metropolitan, Inc. and the operating assets of certain of its affiliates. The
Company paid the sellers or delivered into escrow an aggregate of $5.0 million
in cash, in addition to assuming operating liabilities of the acquired business.
The acquisition was accounted for by the purchase method and resulted in
goodwill of $4.8 million.

On June 1, 1999, the Company completed its acquisition of all of the shares of
its exclusive licensee of the Insituform CIPP Process in the Netherlands now
named Insituform Rioolrenovatietechnieken B.V. from BFI Holdings B.V. The
purchase price was NLG 25 million (approximately U.S. $11.7 million), which was
paid in cash at closing. The acquisition was accounted for by the purchase
method and resulted in goodwill of $10.8 million.

4. DISCONTINUED OPERATIONS

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." The Company has elected to early adopt the
provisions of SFAS No. 144 for the year ended December 31, 2001. SFAS No. 144
supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets to
Be Disposed Of" and provides a single accounting model for long-lived assets to
be disposed of by sale. SFAS No. 144 clarifies certain provisions related to
SFAS No. 121 and expands the use of discontinued operations to all components of
a business for which separate results of operations can be identified.

In the fourth quarter of 2001, the Company made the decision to sell certain
operations acquired in the Kinsel transaction. Accordingly, the Company has
classified as discontinued the wastewater treatment plant, commercial
construction and highway operations acquired as part of the Kinsel acquisition.
These operations are not consistent with the Company's operating strategy of
providing differentiated trenchless rehabilitation and tunneling services. In
February 2002, the Company completed the sale of the wastewater treatment plant
effective January 1, 2002. The Company received $1.5 million in cash and a $2.0
million note for a total sale price of $3.5 million, resulting in a slight loss
on the sale. The Company is currently marketing Kinsel's commercial construction
and highway operations. As of December 31, 2001, assets held for disposal
totaled $32.0 million, which included $7.6 million of unbilled receivables,
while liabilities related to discontinued operations totaled $9.5 million. The
results of operations for the discontinued operations are as follows (in
thousands):

F-11

5. RESTRUCTURING

In the fourth quarter of 2001, the Company recorded a restructuring charge of
$4.1 million, $0.9 million of which is severance costs associated with the
elimination of 112 company-wide positions specifically identified as of December
31, 2001. An additional $3.2 million of the charge relates to asset write-downs,
lease cancellations and other costs associated with the closure of eight
facilities in the United States and the disposal of the associated assets. As of
December 31, 2001, the remaining liability is $1.4 million.

6. ALLOWANCE FOR DOUBTFUL ACCOUNTS

Activity in the allowance for doubtful accounts is summarized as follows for the
years ended December 31 (in thousands):

7. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings on uncompleted contracts consist of the following
at December 31 (in thousands):

Costs and estimated earnings in excess of billings represent work performed
which either due to contract stipulations or lacking contractual documentation
needed, could not be billed. Substantially all unbilled amounts are expected to
be billed and collected within one year. Retainage due after one year is
approximately $5.5 million at December 31, 2001.

F-12

8. INVENTORIES

Inventories are summarized as follows at December 31 (in thousands):

9. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at December 31 (in
thousands):

10. LONG-TERM DEBT AND LINE OF CREDIT

Long-term debt and line of credit consists of the following at December 31 (in
thousands):

The 7.88% Senior Notes may be prepaid at the Company's option, in whole or in
part, at any time, together with a make-whole premium, and upon specified change
in control events each holder has the right to require the Company to purchase
its Senior Notes without any premium thereon. The agreements obligate the
Company to comply with certain financial ratios and restrictive covenants that,
among other things, place limitations on operations and sales of assets by the
Company or its subsidiaries, and limit the ability of the Company to incur
further secured indebtedness and liens. Such agreements also obligate the
Company's subsidiaries to provide guarantees to the holders of the Senior Notes
if guarantees are given by them to certain other lenders.

F-13

During 2000, the Company obtained a line of credit facility with the capacity to
borrow up to $50 million. The commitment fee paid per annum by the Company is
0.2% on the unborrowed balance. The Company is obligated to comply with certain
financial ratios, and restrictive covenants, which mirror the Senior Note
agreements. This line of credit facility expires March 31, 2003. The interest
rates under this facility vary and are based on the prime rate. As of December
31, 2001, the rate was 4.75%. The unused availability on the line of credit
facility as of December 31, 2001 was $34.1 million. There was no outstanding
balance on the line of credit at the end of 2000.

At December 31, 2001 and 2000, the estimated fair value of the Company's
long-term debt was approximately $124.4 million and $111.0 million,
respectively. Fair value was estimated using discounted market rates for debt of
similar risk and maturity.

Principal payments required to be made for each of the next five years and
thereafter are summarized as follows (in thousands):

11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at December 31
(in thousands):

12. STOCKHOLDERS' EQUITY

Stock Option Plans
- ------------------

The 2001 Employee Equity Incentive Plan (the "Employee Incentive Plan") provides
for the granting to employees of stock-based awards, including (a) stock
appreciation rights, (b) restricted shares of common stock, (c) performance
awards, (d) stock options and (e) stock units. The maximum number of shares of
common stock which currently may be issued under the Employee Incentive Plan is
1,000,000. The Employee Incentive Plan is administered by the Board of
Directors, which determines the eligibility, timing, pricing, amount, vesting
and other terms and conditions of awards, including stock option awards. The
Company accounts for options granted under this plan in accordance with APB 25.
The exercise price of each option issued under the 2001 Employee Incentive Plan,
equals the closing market price of the Company's stock on the date of grant and,
therefore, the Company makes no charge to earnings with respect to these
options. Stock options, issued under the 2001 Employee Incentive Plan, generally
vest over three years and have an expiration date of up to five to ten years
after the date of grant.

The 2001 Non-Employee Director Equity Incentive Plan (the "Non-Employee Director
Incentive Plan"), provides for the granting of stock options to non-employee
directors. The total number of shares of common stock available for

F-14

issuance under the Non-Employee Director Incentive Plan is 200,000. The
Non-Employee Director Incentive Plan is administered by the Board of Directors.
Under the terms of the Non-Employee Director Incentive Plan, each non-employee
director receives a stock option to purchase shares of common stock each year on
the date of the Annual Meeting of Stockholders (or promptly thereafter, as
determined by the Board), provided, that such director continues to be a
non-employee director following such Annual Meeting. The purchase price per
share of common stock for which each option is exercisable is the fair market
value per share of common stock on the date the option is granted. Each option
granted under the Non-Employee Director Incentive Plan is fully vested and
exercisable immediately, and expires not later than ten years from the date of
the grant.

Under the 1992 Employee Stock Option Plan (the "Employee Plan") and Director
Stock Option Plan (the "Director Plan"), the Company may grant options to its
employees and directors not to exceed 2,850,000 and 1,500,000 shares of common
stock, respectively. No options are to be granted under the Employee Plan or the
Director Plan since the adoption of the Employee Incentive Plan and the
Non-Employee Director Incentive Plan. The plans are administered by the Board of
Directors, which determines the timing of awards, individuals to be granted
awards, the number of options to be awarded and the price, vesting schedule and
other conditions of the options. The exercise price of each option equals the
closing market price of the Company's stock on the date of grant and, therefore,
the Company makes no charge to earnings with respect to these options. Options
generally vest over three years and have an expiration date of up to five or ten
years after the date of grant.

In accordance with SFAS No. 123, the Company has estimated the fair value of
each option grant using the Black-Scholes option-pricing model. The following
weighted average assumptions were used for the grants in 2001, 2000, and 1999,
respectively: expected volatility of 75%, 62%, and 41%; risk-free interest rates
of 4.8%, 5.1%, and 6.4%; expected lives of seven, five and five years and no
dividends. Had compensation cost for the stock options granted been determined
based on their fair value at the grant dates, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below (in thousands, except per share amounts):

The following tables summarize information about options outstanding at December
31, 2001:

F-15

At December 31, 2001, 4,077,584 shares of common stock were reserved pursuant to
stock option plans.

13. OTHER INCOME (EXPENSE)

Other income (expense) is comprised of the following at December 31 (in
thousands):

14. TAXES ON INCOME

Income from continuing operations before taxes on income is as follows for the
years ended December 31 (in thousands):

Provisions for taxes on income from continuing operations consist of the
following components for the years ended December 31 (in thousands):

F-16

A reconciliation between the U.S. federal statutory tax rate and the effective
tax rate follows:

Net deferred taxes consist of the following at December 31 (in thousands):

Subject to the future taxable income on certain of the Company's subsidiaries,
the Company's various foreign tax credits and net operating loss carryforwards
have varying expiration dates, some ranging from 2006-2016, while $197,300 of
net operating loss carryforwards have indefinite lives.

15. COMMITMENTS AND CONTINGENCIES

Leases
- ------

The Company leases a number of its administrative operations facilities under
noncancellable operating leases expiring at various dates through 2020. In
addition, the Company leases certain construction, automotive and computer
equipment on a multiyear, monthly or daily basis. Rent expense under all
operating leases for 2001, 2000 and 1999 was $22.3 million, $17.7 million and
$11.3 million, respectively. Rental expense paid to related parties was
$453,500, $392,750 and $288,000 for the years ended December 31, 2001, 2000 and
1999, respectively. At December 31, 2001, the Company had under lease equipment
with an original market value of approximately $57.8 million.

F-17

At December 31, 2001, the future minimum lease payments required under the
noncancellable operating leases were as follows (in thousands):

Litigation
- ----------

The Company is involved in certain litigation incidental to the conduct of its
business. In the Company's opinion, none of these proceedings will have a
material adverse effect on the Company's financial position, results of
operations and liquidity. The financial statements include the estimated amounts
of liabilities that are likely to be incurred from these and various other
pending litigation and claims.

Retirement Plans
- ----------------

Substantially all of the Company's employees are eligible to participate in
Company sponsored defined contribution savings plans, which are qualified plans
under the requirements of Section 401(k) of the Internal Revenue Code. Total
contributions to the domestic plans were $1.5 million, $4.4 million and $3.5
million for the years ended December 31, 2001, 2000 and 1999, respectively.

In addition, certain foreign subsidiaries maintain various other defined
contribution retirement plans. Company contributions to such plans for the years
ended December 31, 2001, 2000 and 1999, were $214,552, $352,000 and $138,000,
respectively.

16. SEGMENT AND GEOGRAPHIC INFORMATION

The Company has principally three operating segments: rehabilitation, tunneling
and TiteLiner. The rehabilitation segment provides trenchless methods of
rehabilitating sewers, pipelines and other conduits using a variety of
technologies including the Insituform CIPP Process, pipebursting,
microtunneling, and sliplining. The tunneling segment engages in trenchless
tunneling used in the installation of new underground services, and the
TiteLiner segment provides a method of lining steel lines with a corrosion and
abrasion resistant pipe. These operating units represent strategic business
units that offer distinct products and services and serve different markets.

The following disaggregated financial results have been prepared using a
management approach, which is consistent with the basis and manner with which
management internally disaggregates financial information for the purpose of
assisting in making internal operating decisions. The Company evaluates
performance based on standalone operating income.

There were no customers which accounted for more than 10% of the Company's
revenues during each of the three years ended December 31, 2001.

Financial information by segment is as follows at December 31 (in thousands):

F-18

Deferred:
Federal 580 727 1,682
Foreign 247 249 (180)
State 64 81 187
-------- -------- --------
$ 891 $ 1,057 $ 1,689
-------- -------- --------
Total Tax Provision $ 15,653 $ 22,647 $ 18,879
======== ======== ========

Financial information by geographic area is as follows at December 31 (in
thousands):

F-19

Operating income:
United States $ 39,003 $ 55,326 $ 46,446
Canada 3,714 3,674 316
Other Foreign 4,048 3,966 3,907
--------- --------- ---------
Total operating income $ 46,765 $ 62,966 $ 50,669
========= ========= =========
Long-lived assets:
United States $ 66,805 $ 67,224 $ 55,448
Canada 2,969 4,942 2,546
Other Foreign 20,168 15,692 15,182
--------- --------- ---------
Total long-lived assets $ 89,942 $ 87,858 $ 73,176
========= ========= =========

17. SUBSEQUENT EVENTS

In February 2002, the Company's Board of Directors adopted a Shareholder Rights
Plan. Pursuant to the Shareholder Rights Plan, the Board of Directors declared a
dividend distribution of one preferred stock purchase right ("Right") for each
outstanding share of the Company's common stock, $.01 par value ("Common
Stock"), payable to the Company's stockholders of record as of March 13, 2002.
Each Right, when exercisable, entitles the holder to purchase from the Company
one one-hundredth of a share of a new series of voting preferred stock,
designated as Series A Junior Participating Preferred Stock, $0.10 par value, at
an exercise price of $116.00 per one one-hundredth of a share.

The Rights will trade in tandem with the Common Stock until ten days after a
"distribution event" (i.e., the announcement of an intention to acquire or the
actual acquisition of 20% or more of the outstanding shares of Common Stock), at
which time the Rights would become exercisable. Upon exercise, the holders of
the Rights (other than the person who triggered the distribution event) will be
able to purchase for the exercise price shares of Common Stock having the then
market value of two times the aggregate exercise price of the rights. The rights
expire on March 12, 2012, unless redeemed, exchanged or otherwise terminated at
an earlier date.

18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

(In thousands, except per share data)

F-20

INDEX TO EXHIBITS(1),(2)

2 Agreement and Plan of Merger dated January 13, 2001 by and among the
Company, K Acquisition Corp. and TRX Acquisition Corp., Kinsel
Industries, Inc. and Tracks of Texas, Inc. and the Kinsel/Tracks
Shareholders (Incorporated by reference to Exhibit 2 to the Current
Report on Form 8-K dated February 28, 2001 and filed March 14, 2001).

3.1 Restated Certificate of Incorporation, as amended, of the Company
(Incorporated by reference to Exhibit 3.1 to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000), and Certificate of
Designation, Preferences and Rights of Series A Junior Participating
Preferred Stock.

3.2 By-Laws of the Company, as amended (Incorporated by reference to
Exhibit 3.2 to the Annual Report on Form 10-K for the year ended
December 31, 2000).

4 Rights Agreement dated as of February 26, 2002 between Insituform
Technologies, Inc. and American Stock Transfer & Trust Company
(Incorporated by reference to Exhibit 1 to the Registration Statement
on Form 8-A dated March 8, 2002).

10.1 Multicurrency Credit Agreement dated as of March 30, 2000 between the
Company and Bank of America, N.A. (Incorporated by reference to Exhibit
10.1 to the Quarterly Report on Form 10-Q for the quarter ended March
31, 2000).

10.2 Note Purchase Agreements (the "Note Purchase Agreements") dated as of
February 14, 1997 among the Company and, respectively, each of the
lenders (the "Noteholders") listed therein (Incorporated by reference
to Exhibit 10.6 to the Annual Report on Form 10-K for the year ended
December 31, 1996), as amended by First Amendment to the Note Purchase
Agreements dated as of August 20, 1997 (Incorporated by reference to
Exhibit 10(a) to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997), as further amended by Second Amendment dated
as of March 30, 2000 to Note Purchase Agreements (Incorporated by
reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).

10.3 Master Guaranty dated as of March 30, 2000 by the Company and those
subsidiaries of the Company named therein (Incorporated by reference to
Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000).

10.4 Amended and Restated Intercreditor Agreement dated as of March 30, 2000
among Bank of America, N.A. and the Noteholders (Incorporated by
reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000)

10.5 Employment Letter dated July 15, 1998 between the Company and Anthony
W. Hooper (Incorporated by reference to Exhibit 10.1 to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998).(3)

- --------
(1) The Company's current, quarterly and annual reports are filed with the
Securities and Exchange Commission under file no. 0-10786.
(2) Pursuant to Reg. Section 229.601, does not include certain instruments with
respect to long-term debt of the Company and its consolidated subsidiaries not
exceeding 10% of the total assets of the Company and its subsidiaries on a
consolidated basis. The Company undertakes to furnish to the Securities and
Exchange Commission, upon request, a copy of all long-term debt instruments not
filed herewith.
(3) Management contract or compensatory plan or arrangement.

10.6 Employment Agreement dated October 25, 1995 between the Company and
Robert W. Affholder (Incorporated by reference to Exhibit 2(d) to the
Current Report on Form 8-K dated October 25, 1995), as amended by
Amendment No. 1 dated as of October 25, 1998 to Employment Agreement
(Incorporated by reference to Exhibit 10.9 to the Annual Report on Form
10-K for the year ended December 31, 1998), and as amended by Amendment
No. 2 dated as of December 31, 1999 to Employment Agreement, and as
amended by Amendment No. 3 dated as of December 31, 2000 to Employment
Agreement (Incorporated by reference to Exhibit 10.1 to the Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001), and as
amended by Amendment No. 4 dated as of December 31, 2001 to Employment
Agreement.(3)

10.7 Letter agreement dated as of February 9, 1999 between the Company and
Thomas N. Kalishman (Incorporated by reference to Exhibit 10.10 to the
Annual Report on Form 10-K for the year ended December 31, 1998).(3)

10.8 Employment Agreement dated February 1, 2001 between Insituform Europe
and Antoine Menard. (Incorporated by reference to Exhibit 10.10 to the
Annual Report on Form 10-K for the year ended December 31, 2000).(3)

10.9 Equipment Lease for 125 Ton American Crane (1) dated as of July 1, 2001
between A-Y-K-E Partnership and Affholder, Inc.

10.10 Equipment Lease for 90 Ton Link Belt Crane dated as of January 1, 2002
between A-Y-K-E Partnership and Affholder, Inc.

10.11 Equipment Lease for 125 Ton American Crane (2) dated as of January 1,
2002 between A-Y-K-E Partnership and Affholder, Inc.

10.12 Equipment Lease for 110 Ton American Crane dated as of January 1, 2002
between A-Y-K-E Partnership and Affholder, Inc.

10.13 1992 Employee Stock Option Plan of the Company (Incorporated by
reference to Exhibit 10.11 to the Annual Report on Form 10-K for the
year ended December 31, 1999).(3)

10.14 1992 Director Stock Option Plan of the Company (Incorporated by
reference to Exhibit 10.12 to the Annual Report on Form 10-K for the
year ended December 31, 1999).(3)

10.15 2001 Employee Equity Incentive Plan (Incorporated by reference to
Exhibit 99.1 to the Registration Statement on Form S-8 No.
33-66714).(3)

10.16 2001 Non-Employee Director Equity Incentive Plan (Incorporated by
reference to Exhibit 99.1 to the Registration Statement on Form S-8 No.
33-66712).(3)

10.17 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to
the Quarterly Report on Form 10-Q for the quarter ended June 30,
2001).(3)

10.18 Insituform Mid-America, Inc. Stock Option Plan, as amended
(Incorporated by reference to Exhibit 4(i) to the Registration
Statement on Form S-8 No. 33-63953).(3)

10.19 Senior Management Voluntary Deferred Compensation Plan of the Company
(Incorporated by reference to Exhibit 10.19 to the Annual Report on
Form 10-K for the year ended December 31, 1998), as amended by First
Amendment thereto dated as of October 25, 2000.(3)

10.20 Form of Directors' Indemnification Agreement (Incorporated by reference
to Exhibit 10.47 to the Annual Report on Form 10-K for the year ended
December 31, 1988).(3)

21 Subsidiaries of the Company.

23 Consent of Arthur Andersen LLP.

24 Power of Attorney (See "Power of Attorney" in the Annual Report on Form
10-K).

99.1 Letter of the Company, addressed to the Securities and Exchange
Commission, regarding representations to the Company by Arthur Andersen
LLP pursuant to Temporary Note 3T to Article 3 of Regulation S-X.