Similar to 2010, the third quarter of 2011 includes a $1.7 million pre-tax reversal of an earnout liability that was not earned by the former owners of Bayou.

Contract backlog in our Energy and Mining segment at September 30, 2011 was $225.6 million, an increase of $57.5 million, or 34.2 percent, compared to June 30, 2011 and an increase of $69.3 million, or 44.3 percent, compared to September 30, 2010. The increase over the previous quarter was primarily driven by an increase at CRTS, which added a $48.4 million contract during the quarter for work to be performed in Saudi Arabia over the next three years. Additionally, our pipe coating operations backlog increased due to a recovery of offshore pipeline development activity. Since December 31, 2010, our pipe coating and cathodic protection operations have increased backlog levels. We continue to believe that high commodity prices as a result of healthy global energy demand will result in significant continued opportunities for our Energy and Mining segment for future periods, particularly as it relates to new spending in the sector. We expect backlog for this segment to grow through the final quarter of 2011 and into 2012, particularly with the addition of the $67.3 million project in Morocco awarded to our United Pipeline System joint venture in October 2011.
       

North American Sewer and Water Rehabilitation Segment
Increase (Decrease)
(in thousands, except %) 2011   2010 $   %
Three Months Ended September 30,
Revenues $ 95,200 $ 111,560 $ (16,360 ) (14.7 )%
Gross profit 15,882 24,336 (8,454 ) (34.7 )
Gross margin 16.7 % 21.8 % n/a (5.1 )
Operating expenses 10,966 12,392 (1,426 ) (11.5 )
Restructuring charges 503 503 n/m
Operating income 4,413 11,944 (7,531 ) (63.1 )
Operating margin 4.6 % 10.7 % n/a (6.1 )
 
Nine Months Ended September 30,
Revenues $ 266,606 $ 306,856 $ (40,250 ) (13.1 )%
Gross profit 40,292 68,957 (28,665 ) (41.6 )
Gross margin 15.1 % 22.5 % n/a (7.4 )
Operating expenses 37,226 40,093 (2,867 ) (7.2 )
Restructuring charges 503 503 n/m
Operating income 2,563 28,864 (26,301 ) (91.1 )
Operating margin 0.1 % 9.4 % n/a (9.3 )
  September 30, 2011   June 30, 2011   March 31, 2011   December 31, 2010   September 30, 2010
Backlog (in millions) $157.5   $169.5   $152.6   $159.5   $191.0

In the third quarter of 2011, our North American Sewer and Water Rehabilitation segment operating income decreased by $7.5 million, or 63.1 percent, compared to the third quarter of 2010. The principal contributors to the 2011 third quarter results were the 14.7 percent decline in revenues and compressed gross margins resulting from project execution challenges, magnified by project release delays impacting crew utilization. In addition, there was a significant shift to lower margin small diameter project, pressuring project management and crew operations, which further negatively impacted performance. Contracting margins for the eastern and western regions improved from the second quarter of 2011 as we began to see the effects of our efforts to improve our project management organizational structure.

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