Insituform CEO Joe Burgess: Q&A

Insituform Technologies CEO Joe Burgess spoke with TheStreet reporter Debra Borchardt ahead of the company's first-quarter report.
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CHESTERFIELD, Mo. (

TheStreet

) --

Insituform Technologies

(INSU) - Get Report

saw its annual revenue grow more than 35% to $727 million in 2009 as countries around the world look to repair crumbing infrastructures.

Mostly known for rebuilding sewers. the company's domestic business has benefited from stimulus projects, and even added jobs during the financial crisis. The stock was up 19% year-to-date through Friday's close, but it was off 2% to $26.51 on Monday with its first-quarter report due after the closing bell.

Canaccord Adams analyst John Quealy is one of six analysts that follow the stock. He has a hold rating and recently lifted his 12-month price target on the shares to $24.50 from $22, although the stock has traded above even that higher level since the beginning of March. Quealy has concerns that wet weather may have negatively impacted projects for the March quarter. The current average estimate of analysts polled by

Thomson Reuters

is for a profit of 28 cents a share in the first three months of 2010 on revenue of $202.6 million.

Insituform specializes in trenchless repairs on pipelines. That's made it a favorite with states and municipalities because it can fix pipes without digging up streets, keeping disruption to the roads over the pipes and sewers to a minimum. Most of the company's business was insulated from the recession, since its projects are funded years in advance. I recently spoke with CEO Joe Burgess about where the company is focusing its future investments and where it's seeing its most growth globally.

Insituform Adds Stimulus Jobs

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TheStreet: Joe, how is your company benefiting from the stimulus money to help rebuild our infrastructure?

Burgess

: Of the total $6 billion that was in the stimulus package that was focused on water and wastewater, we've seen about $400 million will be focused on underground pipeline remediation both across wastewater and drinking water. In the U.S. market we have about a 45% share so we picked up about $85 million last year and we think we'll do about the same in 2010 which is a pretty significant increase for our business.

With state and local budgets we're seeing them get hit hard with the loss of tax revenues. Are you seeing any decreases in that area?

Burgess

: We saw a slowdown early in 2010, I think as communities were waiting to evaluate the stimulus and what form it would take - whether it would be grants or interest free loans etc. Most of our work is actually funded through long-term consent decrees, where communities are reacting to an environmental mandate and then they tend to go out with a long-term bond financing to package that so we're not as exposed to current period budget pressure as maybe some areas for infrastructure spending.

You brought up bonds, credit markets have been in disarray as you know for the last couple of years, has that affected your clients ability to fund these projects?

Burgess

: Not in the near term again because we tend to be working in bonds that were sold a couple of years ago. I would think that if credit continues to stay tight as they need new financings. It could certainly have an impact.

Oil, that's been rising are you seeing an increase in oil-related projects?

Burgess

: We are. The businesses we acquired last year Bayou and Corrpro, of course are in the space, energy and mining. We've seen as oil rose through most of last year and has continued to be at a pricing that supports capital spending we've seen an increase in pipeline project development in that area.

You're not just a domestic company, you are global. Wich country are you seeing the most strength in these days?

Burgess

: I think the fastest pace of growth is in our Asian markets. We went from $10 million in 2008 to about $35 million last year. We think we'll get close to doubling that. We have significant project activity in Australia, where there is a big capital spend sponsored by the federal government. Singapore has some aggressive infrastructure spending programs and of course we've been in India for a number of years and we're seeing growth in that market as well.

Do you foresee any hiring with the company? Do you expect to have more employees at the end of the year?

Burgess

: Certainly in our North American market because of the stimulus which we talked about and a general strengthening in that market. We're adding crews. Last year we started with 60 crews and ended with 68. This year we'll end up somewhere in the 70's. We're certainly adding some folks as well in our E&M - our energy and mining segment to support project development activity.

What area of your company are you spending the most money in, investing the most in?

Burgess

:The drinking water side. Our core business of course has been on the wastewater side, but we've been spending a lot of time, energy, R&D spending bringing our technologies to the drinking water side so that we can operate pressure systems. We think that's going to be a big market for us as we bring or products to help control leakage and water loss.

Edited for length and clarity.

-- Written by Debra Borchardt in New York.