In 1986, the Metropolitan St. Louis Sewer District accounted for more than a quarter of Insituform Mid-America's revenue. Last year, MSD made up less than one percent, as the company — now named Insituform Technologies — has taken its work across the globe, from Singapore to Chile — and done so quite successfully.

This year is shaping up to be the best in the company's history. Its $24 million in profits for the first half of 2010 is almost as much as it earned in all of 2009. The second half of the year is generally stronger for Insituform, and the company is predicting earnings per share of $1.50 to $1.55, almost 20 cents higher than the company's record in 2000 of $1.37.

Last year, Insituform expanded heavily into industrial piping services, purchasing Louisiana-based Bayou and Houston-based Corrpro to complement its existing energy and mining business. The company is nearly twice its former size, and its energy and mining business makes up more than 40 percent of its revenue and profits. Its traditional sewer rehab business has fallen from 90 percent of the company's work to just under 60 percent.

And the recession has been more than generous to Insituform. In the U.S., the company has landed a little more than $100 million in stimulus contracts. Stricter environmental regulations are pressuring municipalities to spend more money to revamp their sewer systems, and federal money given to states for water treatment work has increased by nearly 50 percent under President Barack Obama's administration.

In developing economies such as India, Insituform is positioning itself to take advantage of growing infrastructure demand. In the past two years, it has expanded into Singapore, Hong Kong and Australia, and the company is exploring work in China and Southeast Asia.

bread and butter

Insituform began as a technology company that licensed its "cured-in-place pipe," or CIPP process. CIPP, which is still the company's bread and butter, is usually used to repair sewer pipes without tearing up the ground. A tube is inserted into the old pipe and then expands and forms within it. Insituform Mid-America was one of the largest licensees until 1995, when it was acquired by the larger Insituform Technologies Inc., based in Memphis. Two years later, the company moved its headquarters to Insituform Mid-America's in Chesterfield.

The company has come a long way in only a couple of years. In 2007, its CEO abruptly resigned, and it barely eked out a profit. Then it spent months fending off shareholders' efforts to get it to sell itself to a better-managed company.

While environmental regulations and government spending helped the firm perform strongly during the recession, many analysts give credit to CEO Joe Burgess, who took the reins in April 2008.

"He's really done a phenomenal job in taking an organization that was not living up to its potential and turning it around," said Ryan Connors, an analyst with Janney Montgomery Scott who follows the company.

Jeffrey Beach, an analyst with Stifel Nicolaus, pointed to a six percentage point improvement in Insituform's operating profit margin since 2007 as evidence that management is working more efficiently.

"I credit the whole thing to Joe Burgess, the CEO," Beach said.

Beach has been following the company for 13 years, and he has never been more bullish on the company's prospects.

"When you put all the pieces together and do a lot of work on this, I think the earnings estimates are too low, particularly for next year," he said.

Turning it around

Burgess started at Insituform after the company had relied on an interim CEO for eight months and the board was trying to fend off dissident investors. But soon after Burgess started, the problems cited by the angry investors began disappearing.

There were execution errors in the field. The company wasn't getting the best deals it could with subcontractors. Bid estimates were off. So Burgess shook up management throughout the company.

"If we had 50 or 60 people with a business card that said 'project manager' on it, probably a third to 40 percent of them are new," Burgess said in an interview.

Another issue: The company didn't operate its manufacturing units like independent businesses. Rather, they would make pipes and give it to the company's teams in the field "at cost plus a little," Burgess said. That shielded them from market competition.

Burgess changed that. He made his manufacturing businesses sell to his service units at market prices, and he also allowed them to sell to competitors. Optimize each business unit of the company, "and obviously the company will optimize," Burgess said. "It just wasn't the way we were set up."

Meanwhile, he looked to get away from being almost entirely dependent on municipal spending.

"People fix sewer pipes because they have to, it's not because they want to," Burgess said. "There's not a lot of economic incentive other than avoiding a fine."

Insituform's anti-corrosion pipe-lining business, while small, had consistently posted some of the highest profit margins and was much less reliant on government spending. Insituform decided to expand in that sector, and in the first quarter of 2009 bought two other anti-corrosion companies: Bayou and Corrpro. The segment with the two new companies now makes up nearly half of Insituform's gross profit.

"It was a bold move in terms of size and change of business mix for the company, but it was the right thing to do," Burgess said. "We could control our destiny a little more in that space."

The company has also accelerated its move into Asia. Because labor is so cheap there, Insituform has had to aggressively pitch its products. But Burgess is confident the effort is a necessary long-term investment. Eventually, the company will probably look at moving into China as well, he said.

"When you look at those markets over the long term, there's no reason why our Asia-Pacific business shouldn't be as large as our North American business," he said.

Will it last?

When asked whether his North American success might be short-lived as governments rein in spending, Burgess expressed some worry tempered with his business strategy.

"The stimulus could have been bigger for us, but we've tried to be selective about where we went after the stimulus dollars," he said.

The company has tried to target projects where the municipality had raised rates to pay back federal loans from the stimulus, Burgess said. That way, there was a reasonable expectation the area would keep doing more capital projects in the future.

There's more than just stimulus money, too. Beach at Stifel Nicolaus said the higher amount of money in the federal budget for wastewater projects would negate the loss of stimulus funds.

"As the stimulus is spent and goes away, the underlying increase could hold this market very well," he said.

And the need for water infrastructure repairs is likely to remain high for years. In 2008, the Environmental Protection Agency estimated the U.S. needed $298 billion of water infrastructure work. Spending on wastewater renovation and other water infrastructure is likely to remain relatively steady, said Carolyn Berndt, who studies sustainability and infrastructure for the National League of Cities. Almost every city has outdated pipes, and the EPA has been strengthening its water protection rules, she said.

When the stimulus ends, it probably will slow the number of renovation projects getting done at one time, Berndt said, "but the projects will get done one way or another."

Brian Hoelscher, the director of engineering at MSD, said the products and services Insituform provided would only rise in demand. Environmental regulations are increasingly focused on "asset management," or maintenance of existing infrastructure, a task Insituform's products fit perfectly, he said.

The EPA is also cracking down on sewer overflows, including at MSD's facilities. Insituform's products address that by relining storm water pipes to reduce overflows, Hoelscher said.

If business continues to be strong, the company could hit $1 billion in annual revenue in the next year or two. That could very well translate into more jobs at its Chesterfield offices, especially if the company eventually consolidates the Bayou and Corrpro headquarters here, a possibility, Burgess said.

Insituform has no plans to move as it expands, and Burgess has no complaints about St. Louis. Well, almost none.

"It'd be nice if you could fly somewhere from St. Louis other than Chicago," he said.