|
þ QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
¨ TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
PART
I—FINANCIAL INFORMATION
|
|||
Item
1.
|
Financial
Statements:
|
||
Consolidated
Statements of Operations for the Three Months Ended March 31, 2008 and
2007
|
3
|
||
Consolidated
Balance Sheets as of March 31, 2008 and December 31, 2007
|
4
|
||
Consolidated
Statements of Cash Flows for the Three Months Ended March 31, 2008 and
2007
|
5
|
||
Notes
to Consolidated Financial Statements
|
6
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
17
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
24
|
|
Item
4.
|
Controls
and Procedures
|
25
|
|
PART
II—OTHER INFORMATION
|
|||
Item
1.
|
Legal
Proceedings
|
26
|
|
Item
1A.
|
Risk
Factors
|
26
|
|
Item
6.
|
Exhibits
|
26
|
|
SIGNATURE
|
27
|
||
INDEX
TO EXHIBITS
|
28
|
For
the Three Months
Ended
March 31,
|
||
2008
|
2007
|
|
Revenues
|
$ 125,927
|
$ 114,982
|
Cost
of revenues
|
99,041
|
94,599
|
Gross
profit
|
26,886
|
20,383
|
Operating
expenses
|
23,631
|
24,185
|
Operating
income (loss)
|
3,255
|
(3,802)
|
Other
income (expense):
|
||
Interest
expense
|
(1,227)
|
(1,493)
|
Interest
income
|
848
|
949
|
Other
|
767
|
702
|
Total
other income
|
388
|
158
|
Income
(loss) before taxes on income (tax benefits)
|
3,643
|
(3,644)
|
Taxes
on income (tax benefits)
|
1,074
|
(710)
|
Income
(loss) before minority interests and equity in losses of affiliated
companies
|
2,569
|
(2,934)
|
Minority
interests
|
(156)
|
(48)
|
Equity
in losses of affiliated companies
|
(383)
|
(306)
|
Income
(loss) from continuing operations
|
2,030
|
(3,288)
|
Loss
from discontinued operations, net of tax
|
(87)
|
(11,988)
|
Net
income (loss)
|
$ 1,943
|
$ (15,276)
|
Earnings
(loss) per share:
|
||
Basic:
|
||
Income
(loss) from continuing operations
|
$ 0.07
|
$ (0.12)
|
Loss
from discontinued operations
|
(0.00)
|
(0.44)
|
Net
income (loss)
|
$ 0.07
|
$ (0.56)
|
Diluted:
|
||
Income
(loss) from continuing operations
|
$ 0.07
|
$ (0.12)
|
Loss
from discontinued operations
|
(0.00)
|
(0.44)
|
Net
income (loss)
|
$ 0.07
|
$ (0.56)
|
March
31,
2008
|
December
31,
2007
|
|
Assets
|
||
Current
assets
|
||
Cash
and cash equivalents
|
$ 88,783
|
$ 78,961
|
Restricted
cash
|
2,781
|
2,487
|
Receivables,
net
|
90,638
|
85,774
|
Retainage
|
22,425
|
23,444
|
Costs
and estimated earnings in excess of billings
|
37,639
|
40,590
|
Inventories
|
17,849
|
17,789
|
Prepaid
expenses and other assets
|
28,991
|
28,975
|
Current
assets of discontinued operations
|
23,130
|
31,269
|
Total
current assets
|
312,236
|
309,289
|
Property, plant and
equipment, less accumulated depreciation
|
72,813
|
73,368
|
Other
assets
|
||
Goodwill
|
122,566
|
122,560
|
Other
assets
|
26,284
|
26,532
|
Total
other assets
|
148,850
|
149,092
|
Non-current
assets of discontinued operations
|
9,287
|
9,391
|
Total
Assets
|
$ 543,186
|
$ 541,140
|
Liabilities and
Stockholders’ Equity
|
||
Current
liabilities
|
||
Current
maturities of long-term debt and line of credit
|
$ 365
|
$ 1,097
|
Accounts
payable and accrued expenses
|
91,630
|
87,935
|
Billings
in excess of costs and estimated earnings
|
9,813
|
8,602
|
Current
liabilities of discontinued operations
|
8,918
|
14,830
|
Total
current liabilities
|
110,726
|
112,464
|
Long-term debt,
less current maturities
|
65,000
|
65,000
|
Other
liabilities
|
6,483
|
7,465
|
Non-current
liabilities of discontinued operations
|
1,048
|
953
|
Total
liabilities
|
183,257
|
185,882
|
Minority
interests
|
2,895
|
2,717
|
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 and outstanding
27,750,677 and 27,470,623
|
278
|
275
|
Additional
paid-in capital
|
105,220
|
104,332
|
Retained
earnings
|
240,919
|
238,976
|
Accumulated
other comprehensive income
|
10,617
|
8,958
|
Total
stockholders’ equity
|
357,034
|
352,541
|
Total
Liabilities and Stockholders’ Equity
|
$ 543,186
|
$ 541,140
|
For
the Three Months
Ended
March 31,
|
||
2008
|
2007
|
|
Cash flows from
operating activities:
|
||
Net
income (loss)
|
$ 1,943
|
$ (15,276)
|
Loss
from discontinued operations
|
(87)
|
(11,988)
|
Income
(loss) from continuing operations
|
2,030
|
(3,288)
|
Adjustments
to reconcile to net cash provided by operating activities:
|
||
Depreciation
and amortization
|
3,968
|
4,152
|
Gain
on sale of fixed assets
|
(1,118)
|
(471)
|
Equity-based
compensation expense
|
901
|
1,664
|
Deferred
income taxes
|
(2,021)
|
(2,280)
|
Other
|
(300)
|
(282)
|
Changes
in operating assets and liabilities:
|
||
Restricted
cash
|
(294)
|
(354)
|
Receivables
net, retainage and costs and estimated earnings in excess of
billings
|
2,228
|
7,224
|
Inventories
|
1
|
(391)
|
Prepaid
expenses and other assets
|
(1,496)
|
710
|
Accounts
payable and accrued expenses
|
4,281
|
(10,358)
|
Net
cash provided by (used in) operating activities of continuing
operations
|
8,180
|
(3,674)
|
Net
cash provided by operating activities of discontinued
operations
|
3
|
244
|
Net
cash provided by (used in) operating activities
|
8,183
|
(3,430)
|
Cash flows from
investing activities:
|
||
Capital
expenditures
|
(3,151)
|
(4,199)
|
Proceeds
from sale of fixed assets
|
644
|
78
|
Net
cash used in investing activities of continuing operations
|
(2,507)
|
(4,121)
|
Net
cash used in investing activities of discontinued
operations
|
(5)
|
(246)
|
Net
cash used in investing activities
|
(2,512)
|
(4,367)
|
Cash flows from
financing activities:
|
||
Proceeds
from issuance of common stock
|
–
|
637
|
Additional
tax benefit from stock option exercises recorded in additional paid-in
capital
|
–
|
45
|
Principal
payments on notes payable
|
(732)
|
(727)
|
Principal
payments on long-term debt
|
–
|
(15,713)
|
Proceeds
from lines of credit
|
–
|
5,000
|
Net
cash used in financing activities
|
(732)
|
(10,758)
|
Effect
of exchange rate changes on cash
|
4,883
|
1,838
|
Net
increase (decrease) in cash and cash equivalents for the
period
|
9,822
|
(16,717)
|
Cash
and cash equivalents, beginning of period
|
78,961
|
96,393
|
Cash
and cash equivalents, end of period
|
$ 88,783
|
$ 79,676
|
1.
|
GENERAL
|
Three
Months Ended
|
||
March
31,
|
||
2008
|
2007
|
|
Weighted
average number of common shares used for basic EPS
|
27,470,623
|
27,254,380
|
Effect
of dilutive stock options and restricted stock
|
463,346
|
–
|
Weighted
average number of common shares and dilutive potential common stock used
in
dilutive
EPS
|
27,933,969
|
27,254,380
|
2008
|
2007
|
|
Revenues
|
$ 5,608
|
$ 15,966
|
Gross
profit (loss)
|
(34)
|
187
|
Operating
expenses
|
513
|
1,043
|
Closure
charges (reversals) of tunneling business
|
(477)
|
16,843
|
Operating
loss
|
(70)
|
(17,699)
|
Loss
before tax benefits
|
(132)
|
(17,660)
|
Tax
benefits
|
(45)
|
(5,672)
|
Net
loss
|
(87)
|
(11,988)
|
March
31,
2008
|
December
31,
2007
|
|
Receivables,
net
|
$ 4,963
|
$ 9,001
|
Retainage
|
8,262
|
9,122
|
Costs
and estimated earnings in excess of billings
|
8,084
|
9,063
|
Property,
plant and equipment, less accumulated depreciation
|
6,298
|
6,434
|
Total
assets
|
32,417
|
40,660
|
Billings
in excess of costs and estimated earnings
|
387
|
2,768
|
Total
liabilities
|
9,966
|
15,783
|
As
of March 31, 2008
|
As
of December 31, 2007
|
|||||||
Weighted
Average
Useful
Lives
(Years)
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
||
License
agreements
|
23
|
$ 3,894
|
$ (2,017)
|
$ 1,877
|
$ 3,894
|
$ (1,976)
|
$ 1,918
|
|
Customer
relationships
|
15
|
1,797
|
(541)
|
1,256
|
1,797
|
(512)
|
1,285
|
|
Patents
and trademarks
|
13
|
18,414
|
(13,688)
|
4,726
|
17,942
|
(13,613)
|
4,329
|
|
Total
|
$ 24,105
|
$ (16,246)
|
$ 7,859
|
$ 23,633
|
$ (16,101)
|
$ 7,532
|
2008
|
2007
|
|
For
the three months ended March 31:
|
||
Aggregate
amortization expense:
|
$ 63
|
$ 70
|
Estimated
amortization expense:
|
||
For year ending December 31,
2008
|
708
|
|
For year ending December 31,
2009
|
860
|
|
For year ending December 31,
2010
|
804
|
|
For year ending December 31,
2011
|
748
|
|
For year ending December 31,
2012
|
705
|
Stock
Awards
|
Weighted
Average
Award
Date
Fair
Value
|
|
Outstanding
at January 1, 2008
|
102,089
|
$ 19.39
|
Awarded
|
286,677
|
12.78
|
Vested
|
–
|
–
|
Forfeited
|
–
|
–
|
Outstanding
at March 31, 2008
|
388,766
|
$ 14.50
|
Deferred
Stock
Units
|
Weighted
Average
Award
Date
Fair
Value
|
|
Outstanding
at January 1, 2008
|
155,098
|
$ 18.51
|
Awarded
|
26,236(1)
|
13.34
|
Shares
distributed
|
(17,382)
|
20.78
|
Outstanding
at March 31, 2008
|
163,952
|
$ 17.44
|
|
(1)
|
Mr.
Woods was awarded 26,236 deferred stock units on March 3, 2008 as
compensation for his service as Interim Chief Executive Officer for the
period from February 13, 2008 through August 12, 2008. Pursuant to the
terms of the award agreement, however, the amount of deferred stock units
vested on April 14, 2008 was adjusted downward to 8,745 deferred stock
units to reflect his actual period of
service.
|
Shares
|
Weighted
Average
Exercise
Price
|
|
Outstanding
at January 1, 2008
|
909,987
|
$ 21.27
|
Granted
|
305,624
|
12.99
|
Exercised
|
–
|
–
|
Forfeited/Expired
|
(22,494)
|
23.16
|
Outstanding
at March 31, 2008
|
1,193,117
|
$ 19.12
|
Exercisable
at March 31, 2008
|
738,244
|
$ 21.67
|
Range
of
Exercise
Price
|
Number
Outstanding
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
Weighted
Average
Remaining
Contractual
Term
(Yrs)
|
$10.00
- $15.00
|
488,751
|
$ 13.41
|
$ 300,599
|
5.5
|
15.01
- 20.00
|
275,480
|
17.86
|
–
|
4.7
|
20.01
- 25.00
|
173,404
|
23.92
|
–
|
3.9
|
25.01
- 30.00
|
255,482
|
28.12
|
–
|
3.6
|
Total
Outstanding
|
1,193,117
|
$ 19.12
|
$ 300,599
|
4.7
|
Range
of
Exercise
Price
|
Number
Outstanding
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
Weighted
Average
Remaining
Contractual
Term
(Yrs)
|
$10.00
- $15.00
|
146,533
|
$ 13.98
|
$ 40,494
|
2.8
|
15.01
- 20.00
|
200,651
|
17.90
|
–
|
4.5
|
20.01
- 25.00
|
171,404
|
23.91
|
–
|
3.9
|
25.01
- 30.00
|
219,656
|
28.48
|
–
|
3.3
|
Total
Exercisable
|
738,244
|
$ 21.67
|
$ 40,494
|
3.6
|
For
the Three Months Ended March 31,
|
|||||
2008
|
2007
|
||||
Range
|
Weighted
Average
|
Range
|
Weighted
Average
|
||
Volatility
|
37.3%
– 41.9%
|
37.9%
|
45.0%
|
45.0%
|
|
Expected
term (years)
|
5.0
|
5.0
|
4.5
|
4.5
|
|
Dividend
yield
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
|
Risk-free
rate
|
4.0%
|
4.0%
|
4.4%
|
4.4%
|
Documented
Remediation
Costs
|
Pre-Judgment
Interest
|
Total
|
|
(in
thousands)
|
|||
Claim
recorded June 30, 2005
|
$ 5,872
|
$ 275
|
$ 6,147
|
Interest
recorded July through December 31, 2005
|
–
|
165
|
165
|
Additional
documented remediation costs recorded in the second quarter of
2006
|
526
|
–
|
526
|
Adjustment
based on subsequent developments(1)
|
(343)
|
–
|
(343)
|
Interest
recorded(2)
|
–
|
1,189
|
1,189
|
Claim
receivable balance, March 31, 2008
|
$ 6,055
|
$ 1,629
|
$ 7,684
|
(1)
|
During
the second quarter of 2007, the claim was adjusted down by $0.3 million as
a result of subsequent developments in the matter. Interest was adjusted
accordingly.
|
(2)
|
During
the first quarter of 2008, the Company recorded in other income $0.1
million of pre-judgment interest. The remaining $7.6 million, which
include documented remediation costs, was recorded in prior
periods.
|
Weighted
|
||||
Average
|
||||
Remaining
|
Average
|
|||
Notional
|
Maturity
|
Exchange
|
||
Position
|
Amount
|
in
Months
|
Rate
|
|
Canadian
Dollar
|
Sell
|
$
20,000,000
|
1.0
|
1.001
|
Canadian
Dollar
|
Buy
|
$ 7,500,000
|
1.0
|
1.028
|
Euro
|
Sell
|
€ 5,000,000
|
1.0
|
1.426
|
Pound
Sterling
|
Sell
|
£ 5,000,000
|
1.0
|
2.033
|
Derivatives,
net
|
|
Beginning
balance, January 1, 2008
|
$ (55)
|
Gains
included in other comprehensive income
|
164
|
Ending
balance, March 31, 2008
|
$ 109
|
Three
Months Ended
March
31,
|
||
2008
|
2007
|
|
Revenues:
|
||
Rehabilitation
|
$ 110,075
|
$ 103,321
|
Tite
Liner
|
15,852
|
11,661
|
Total
revenues
|
$ 125,927
|
$ 114,982
|
Gross
profit:
|
||
Rehabilitation
|
$ 21,652
|
$ 15,417
|
Tite
Liner
|
5,234
|
4,966
|
Total
gross profit
|
$ 26,886
|
$ 20,383
|
Operating
income (loss):
|
||
Rehabilitation
|
$ (130)
|
$ (7,095)
|
Tite
Liner
|
3,385
|
3,293
|
Total
operating income (loss)
|
$ 3,255
|
$ (3,802)
|
Three
Months Ended
March
31,
|
||
2008
|
2007
|
|
Revenues:
|
||
United
States
|
$
78,634
|
$ 81,015
|
Canada
|
12,204
|
10,831
|
Europe
|
26,542
|
20,448
|
Other
foreign
|
8,547
|
2,688
|
Total
revenues
|
$ 125,927
|
$ 114,982
|
Gross
profit:
|
||
United
States
|
$ 15,983
|
$ 11,908
|
Canada
|
3,922
|
3,517
|
Europe
|
4,784
|
3,684
|
Other
foreign
|
2,197
|
1,274
|
Total
gross profit
|
$ 26,886
|
$ 20,383
|
Operating
income (loss):
|
||
United
States
|
$ 1,250
|
$ (4,596)
|
Canada
|
2,190
|
1,524
|
Europe
|
(1,571)
|
(1,722)
|
Other
foreign
|
1,386
|
992
|
Total
operating income (loss)
|
$ 3,255
|
$ (3,802)
|
Three
Months Ended March 31,
|
|||||
2008
|
2007
|
Increase
(Decrease)
|
|||
Consolidated
|
|||||
Revenues
|
$ 125,927
|
$ 114,982
|
$ 10,945
|
9.5%
|
|
Gross
profit
|
26,886
|
20,383
|
6,503
|
31.9
|
|
Gross
margin
|
21.4%
|
17.7%
|
3.7(1)
|
|
|
Operating
expenses
|
23,631
|
24,185
|
(554)
|
(2.3)
|
|
Operating
income (loss)
|
3,255
|
(3,802)
|
7,057
|
185.6
|
|
Operating
margin
|
2.6%
|
(3.3)%
|
5.9(1)
|
||
Net
income (loss) from continuing operations
|
2,030
|
(3,288)
|
5,318
|
161.7
|
|
Rehabilitation
|
|||||
Revenues
|
110,075
|
103,321
|
6,754
|
6.5
|
|
Gross
profit
|
21,652
|
15,417
|
6,235
|
40.4
|
|
Gross
margin
|
19.7%
|
14.9%
|
4.8(1)
|
||
Operating
expenses
|
21,782
|
22,512
|
(730)
|
(3.2)
|
|
Operating
loss
|
(130)
|
(7,095)
|
6,965
|
98.2
|
|
Operating
margin
|
(0.1)%
|
(6.9)%
|
6.8(1)
|
||
Tite
Liner
|
|||||
Revenues
|
15,852
|
11,661
|
4,191
|
35.9
|
|
Gross
profit
|
5,234
|
4,966
|
268
|
5.4
|
|
Gross
margin
|
33.0%
|
42.6%
|
(9.6)
(1)
|
||
Operating
expenses
|
1,849
|
1,673
|
176
|
10.5
|
|
Operating
income
|
3,385
|
3,293
|
92
|
2.8
|
|
Operating
margin
|
21.4%
|
28.2%
|
(6.8)
(1)
|
Backlog
|
March
31,
2008
|
December
31,
2007
|
September
30,
2007
|
June
30,
2007
|
March
31,
2007
|
(in
millions)
|
|||||
Rehabilitation
|
$ 253.4
|
$ 232.8
|
$ 208.3
|
$ 193.1
|
$ 187.2
|
Tite
Liner
|
32.2
|
26.2
|
16.3
|
12.5
|
14.5
|
Total
|
$ 285.6
|
$ 259.0
|
$ 224.6
|
$ 205.6
|
$ 201.7
|
March
31,
2008
|
December
31,
2007
|
|
(in
thousands)
|
||
Cash
and cash equivalents
|
$ 88,783
|
$ 78,961
|
Restricted
cash
|
2,781
|
2,487
|
Payments
Due by Period
|
|||||||
Cash
Obligations(1)(2)(3)(4)
|
Total
|
2008
|
2009
|
2010
|
2011
|
2012
|
Thereafter
|
Long-term
debt
|
$ 65,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
$ 65,000
|
Interest
on long-term debt
|
23,380
|
4,251
|
4,251
|
4,251
|
4,251
|
4,251
|
2,125
|
Operating
leases
|
22,854
|
7,510
|
6,278
|
3,618
|
2,155
|
1,395
|
1,898
|
Total
contractual cash obligations
|
$ 111,234
|
$ 11,761
|
$ 10,529
|
$ 7,869
|
$ 6,406
|
$ 5,646
|
$ 69,023
|
(1)
|
Cash
obligations are not discounted. See Notes 6 and 9 to the consolidated
financial statements contained in this report regarding our long-term debt
and credit facility, commitments and contingencies and financings,
respectively.
|
(2)
|
Resin
supply contracts are excluded from this table. See “Commodity Risk” under
Part I, Item 3 of this report for further
discussion.
|
(3)
|
As
of March 31, 2008, we had no outstanding borrowings on our $35.0 million
credit facility. The available balance was $19.6 million,
and the commitment fee was 0.2%. The remaining $15.4 million was used for
non-interest bearing letters of credit, $14.5 million of which was
collateral for insurance and $0.9 million of which was collateral for work
performance.
|
(4)
|
Liabilities
related to Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, have not been included in the table above because we
are uncertain as to if or when such amounts may be
settled.
|
31.1
|
Certification
of J. Joseph Burgess pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, filed herewith.
|
31.2
|
Certification
of David A. Martin pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, filed herewith.
|
32.1
|
Certification
of J. Joseph Burgess pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
|
32.2
|
Certification
of David A. Martin pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, filed
herewith.
|