Insituform Technologies, Inc. (Nasdaq Global Select Market: INSU) revised its 2011 outlook for diluted earnings per share to $0.90-$1.00 (non-GAAP), excluding acquisition-related transaction expenses and restructuring charges associated with a company-wide cost reduction program.
Joe Burgess, President and Chief Executive Officer, stated, “2011 continues to be a very challenging year for our sewer contracting businesses in the United States and India. We also have been hampered this year by delays in the release and the loss of certain projects in our coatings businesses. However, these challenges do not diminish the opportunities we expect for our entire company as we focus on 2012.”
The North American Sewer Rehabilitation business continued to be hard hit in the third quarter because of project delays and smaller projects, both in diameter and transaction size, despite an improving bid table and better discipline in the organization. “Given current market conditions and lower than expected performance, we have taken actions to realign our North American Sewer Rehabilitation organization further so it can operate much more profitably in this environment. We have reduced the number of work crews, completed unprofitable work acquired earlier in the year, implemented improved bidding discipline, reduced overhead costs and removed underperforming management while also selectively adding personnel to focus on improved project management and logistics to achieve increased and sustainable margins in our contracting business. While market conditions have remained challenging, recent project acquisitions have been at higher margins compared to earlier in the year giving us confidence for improved performance in the fourth quarter and next year,” said Burgess.
The Company also has continued to experience delays in getting the release of new projects in India, which were anticipated to be awarded in 2011. These project delays not only impact the contracting business but also manufacturing operations. Those projects are still expected to begin in early 2012, slipping from the fourth quarter of 2011.
Burgess stated, “Most aspects of our Energy and Mining segment have performed well this year, and we have high expectations for strong growth in 2012. As we entered the second half of 2011, we were confident our coatings businesses, both in Louisiana and Canada, would receive a number of larger projects. Due to a variety of reasons, we did not receive those projects, resulting in a significant impact to our expectations for the latter part of the year. The good news is our backlog continues to build for 2012, and we anticipate our coatings businesses will have a nice improvement in revenue and profitability next year, particularly with a return of the Gulf of Mexico offshore market.”
Cost reduction efforts extend beyond North American Sewer Rehabilitation as the Company pursues greater cost discipline. An approximate $1.9 million pre-tax restructuring charge will be recognized in the third quarter resulting in approximately $2.0 million of pre-tax savings for the remainder of the year and $8.0 to $9.0 million in annualized pre-tax savings in 2012. These savings relate to reduction in field, management and corporate personnel and tighter expense control, mainly related to the sewer rehabilitation businesses.
Based on the revised expectation for the sewer contracting and coatings businesses and an intensive review of the forecast for the other segments, full year diluted earnings per share are expected to be in the range of $0.90 to $1.00 (non-GAAP). This includes approximately $0.04 per share accretion from this year’s acquisitions but excludes an approximately $14.0 million pre-tax charge, or $0.24 per share (after-tax), for one-time expenses related to the acquisitions of CRTS, Hockway and Fyfe, the redemption of the Company’s $65 million, 6.54% Senior Notes (including associated $5.7 million make-whole payment), and severance costs related to the restructuring effort. Diluted earnings per share are expected to be in the range of $0.66 to $0.77 (GAAP), inclusive of acquisition-related transaction expenses and restructuring charges.
For the third quarter, diluted earnings per share are expected to be in the range of $0.25 to $0.27, excluding one-time items (non-GAAP), or approximately $0.02 to $0.04 per share, including one-time items (GAAP). The Company expects significantly improved performance in the fourth quarter, particularly from the North American Sewer Rehabilitation and Energy and Mining segments.
“Certainly our current guidance is disappointing in terms of the high expectations with which we entered the year. However, the Company remains profitable, financially strong, and focused on continuing its drive to create a higher return mix of product and services in its end markets. I am confident we are taking the right steps to reposition our sewer contracting businesses in the United States and India to quickly improve, but also provide sustainable profitability. Our coatings businesses have underperformed expectations this year but I believe these businesses will see a significant rebound in 2012. 2011 should be another record year for United Pipeline Systems and Corrpro remains on pace with our expectations. I also expect they will continue to see growth in 2012. The acquisitions of CRTS, Hockway and Fyfe enhance our position in key markets and broaden our capabilities into broader commercial and structural infrastructure markets, and I anticipate they will be significantly accretive to our 2012 diluted earnings per share. I am steadfast in my belief that we will successfully position the Company as a leader in key high-growth segments of a larger, aging infrastructure market and, in doing so, increase profitability and deliver higher returns for our stockholders.”
The Company will release third quarter results on October 25, 2011.
About Insituform Technologies, Inc.
Insituform Technologies, Inc. is a global leader in infrastructure protection. Insituform provides proprietary technologies and services for the corrosion protection of industrial pipelines and the rehabilitation and strengthening of sewer, water, energy and mining piping systems, buildings, bridges, tunnels and waterfront structures. More information about the Company can be found on its internet site at www.insituform.com.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. The Company makes forward-looking statements in this news release that represent the Company’s beliefs or expectations about future events or financial performance. These forward-looking statements are based on information currently available to the Company and on management’s beliefs, assumptions, estimates or projections and are not guarantees of future events or results. When used in this document, the words “anticipate,” “estimate,” “believe,” “plan,” “intend,” “may,” “will” 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 known and unknown risks, uncertainties and assumptions, including those referred to in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the Securities and Exchange Commission on February 28, 2011 and in our subsequent quarterly reports on Form 10-Q. In light of these risks, uncertainties and assumptions, the forward-looking events may not occur. In addition, our actual results may vary materially from those anticipated, estimated, suggested or projected. Except as required by law, we do not assume any duty to update forward-looking statements, whether as a result of new information, future events or otherwise. Investors should, however, review additional disclosures made by the Company from time to time in its periodic filings with the Securities and Exchange Commission. Please use caution and do not place reliance on forward-looking statements. All forward looking-statements made by the Company in this news release are qualified by these cautionary statements.
Regulation G Statement
Insituform has presented certain information in this release excluding certain items that impacted income and diluted earnings per share. The (non-GAAP) earnings per share exclude the earnings impact of acquisition-related transaction expenses and restructuring charges. Insituform management uses such non-GAAP information internally to evaluate financial performance for its operations, as the Company believes it allows the Company to more accurately compare the Company’s ongoing performance across periods.
Insituform® and the Insituform® logo are the registered trademarks of Insituform Technologies, Inc. and its affiliates.
Ruben Mella, Vice President Investor Relations and Corporate Communications