The following is management's discussion and analysis of certain significant factors that have affected our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited consolidated financial statements. This discussion should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2008.

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (see Note 2 to consolidated financial statements included in this report).

We believe that certain accounting policies could potentially have a more significant impact on our consolidated financial statements, either because of the significance of the consolidated financial statements to which they relate or because they involve a higher degree of judgment and complexity. A summary of such critical accounting policies can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended December 31, 2008.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. The Company makes forward-looking statements in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this Quarterly Report on Form 10-Q 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 and projections and are not guarantees of future events or results. When used in this report, 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, 2008, as filed with the Securities and Exchange Commission on March 2, 2009, and in our subsequent Quarterly Reports on Form 10-Q, including this report. In light of these risks, uncertainties and assumptions, the forward-looking events discussed 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 a 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 Form 10-Q are qualified by these cautionary statements.

Executive Summary

We are a leading vertically integrated global provider of proprietary technologies and services for the rehabilitation of municipal sewer and water and other underground piping systems without digging or disruption and the corrosion protection of mineral, oil and gas and other industrial piping systems. Our operations are organized based on differences in products and services, as well as by geographic areas. We operate in three distinct markets:
sewer rehabilitation, water rehabilitation and energy and mining services. Within the sewer and water rehabilitation markets, we operate in three distinct geographies: North America, Europe and internationally outside of North America and Europe. While we use a variety of technologies in many different locations, the majority of our revenues are derived from the InsituformŪ cured-in-place-pipe ("CIPP") process in the United States.

We are organized into five reportable segments: North American Sewer Rehabilitation, European Sewer Rehabilitation, Asia-Pacific Sewer Rehabilitation, Water Rehabilitation and Energy and Mining. We believe that this segment disclosure provides a high level of transparency into our businesses and insight into our results. We also believe that this segmentation is helpful in articulating our strategic direction to our investors.

Our long-term strategy consists of: first, streamlining our rehabilitation and energy and mining operations in North America and in Europe by improving project execution, cost management practices, including the reduction of redundant fixed costs, and product mix and by identifying opportunities to streamline key management functions and processes to improve our profitability; second, growing our water rehabilitation business by leveraging our premier brand and experience of successfully innovating and delivering technologies and services; third, expanding all of our businesses in key emerging markets such as Eastern Europe, India and Asia; and fourth, expanding our position in the growing and profitable energy and mining and water rehabilitation sectors through organic growth, selective acquisitions of companies, which may be significant in size, and by conducting complimentary product and technology acquisitions.

On February 20, 2009, we acquired the business of The Bayou Companies, L.L.C. and its related entities, referred to herein as "Bayou," and the noncontrolling interests of certain subsidiaries of Bayou pursuant to certain agreements dated January 31, 2009. Bayou provides cost-effective solutions to energy and infrastructure companies primarily in the Gulf of Mexico and North America. Bayou's products and services include internal and external pipeline coating, lining, weighting and insulation. Bayou also provides specialty fabrication services for offshore deepwater installations, including project management and logistics. The purchase price for Bayou consisted of $127.9 million in cash. We may be required to pay up to an additional $7.5 million plus 50% of Bayou's excess earnings if the Bayou business achieves certain financial performance targets. The aggregate purchase price for the noncontrolling interests was $8.5 million and consisted of cash, a promissory note and shares of our common stock. We used proceeds from our equity offering completed in February 2009 to fund the purchase price for Bayou and a portion of the cash purchase price for the noncontrolling interests. The financial results of Bayou for the 39-day period that we owned Bayou in the first quarter and the complete second quarter are included in the results of our Energy and Mining segment.

On March 31, 2009, we acquired Corrpro Companies, Inc., referred to herein as "Corrpro," pursuant to an agreement dated February 1, 2009. Corrpro is a premier provider of corrosion protection and pipeline maintenance services in North America and the United Kingdom. Corrpro's comprehensive line of fully-integrated corrosion protection products and services includes: (i) engineering;
(ii) product and material sales; (iii) construction and installation;
(iv) inspection, monitoring and maintenance; and (v) coatings. The purchase price for Corrpro consisted of cash consideration paid to the Corrpro shareholders of $65.2 million. In addition, we repaid $26.3 million of indebtedness of Corrpro. The total acquisition cost for Corrpro was approximately $91.5 million. We paid the purchase price for Corrpro with borrowings under our credit facility entered into in March 2009 and existing cash. The financial results of Corrpro for the second quarter are included in the Energy and Mining segment.

On June 30, 2009, we acquired the shares of our joint venture partner, VSL International Limited, referred to herein as VSL, in Insituform Asia Limited, referred to herein as "IAL," and Insituform Pacific Pty Limited, referred to herein as "IPPL," its Hong Kong and Australia joint venture operations, respectively, in order to expand our operations in both Hong Kong and Australia. Prior to these acquisitions, we owned 50% of the shares in each entity and VSL owned the other 50% interest in each entity. The aggregate purchase price for VSL's 50% interests in both companies was approximately $0.3 million. We recorded $3.2 million of goodwill in its Asia-Pacific Sewer Rehabilitation segment as a result of the transactions. The preliminary goodwill amount exceeds the aggregate purchase price because our investment in IAL and IPPL prior to the acquisitions was a deficit. We also further invested capital into these entities resulting in IAL and IPPL making further payments to VSL in relation to intercompany debts owing of an aggregate of approximately $1.5 million. In addition, we took responsibility to provide support under its credit facility for IAL and IPPL's existing working capital and performance bonding needs. We have not completed the final purchase price accounting of the acquisitions due to the timing of the acquisitions. As we complete the final accounting for these acquisitions, there may be changes, some of which may be material, to its initial accounting. In accordance with SFAS No. 141(R), we expensed all costs related to these acquisitions in the second quarter of 2009. As a result of the acquisitions, the balance sheets of IAL and IPPL are included in our consolidated balance sheet at June 30, 2009. Previously, we accounted for these entities using the equity method of accounting.

Overview - Consolidated Results

Key financial data for our consolidated operations was as follows (dollars in
thousands):


                                                                                   Increase (Decrease)
                                                 2009              2008               $               %
Three Months Ended June 30,
Revenues                                     $    183,196       $   135,585       $   47,611          35.1 %
Gross profit                                       47,916            31,130           16,786          53.9
Gross margin                                         26.2 %            23.0 %                          3.2
Operating expenses                                 34,446            24,914            9,532          38.3
Operating income                                   13,470             6,216            7,254         116.7
Operating margin                                      7.4 %             4.6 %                          2.8
Net income from continuing operations
 attributable to common stockholders                7,738             3,914            3,824          97.7

Six Months Ended June 30,
Revenues                                      $   311,208       $   261,512       $   49,696          19.0 %
Gross profit                                       78,589            58,016           20,573          35.5
Gross margin                                         25.3 %            22.2 %                          3.1
Operating expenses                                 65,040            48,546           16,494          34.0
Operating income                                   13,549             9,470            4,079          43.1
Operating margin                                      4.4 %             3.6 %                          0.8
Net income from continuing operations
 attributable to common stockholders                6,632             5,944              688          11.6

Consolidated net income from continuing operations attributable to common stockholders was $3.8 million, or 97.7%, higher in the second quarter of 2009 than in the second quarter of 2008, and $0.7 million, or 11.6%, higher in the first six months of 2009 compared to the prior year period. Revenues during the second quarter of 2009 increased by $47.6 million, or 35.1%, due the inclusion of Bayou and Corrpro revenues in the quarter. The increase in revenues was offset by declines in revenues in North American Sewer Rehabilitation and our United Pipeline Systems business. Also, the increase in revenues was partially offset by a negative impact of $7.5 million relating to foreign currencies on a consolidated basis. The increase in net income from continuing operations attributable to common stockholders for the second quarter and first six months of 2009 was principally due to improved gross profit results in our North American Sewer Rehabilitation and European Rehabilitation segments. Our gross margins improvement in both segments, coupled with growth in our Asia-Pacific Sewer Rehabilitation segment also helped to drive the improved results. In the first six months of 2009, consolidated income from continuing operations included $8.2 million in transaction and severance costs associated with the acquisitions of Bayou and Corrpro.

Consolidated operating expenses in the second quarter of 2009 increased by $9.5 million, or 38.3%, compared to the corresponding prior year period primarily due to the inclusion of operating expenses from Bayou and Corrpro. The second quarter 2009 consolidated operating expenses included $3.3 million and $10.0 million of expenses for Bayou and Corrpro, respectively. Excluding the operating expenses of Bayou and Corrpro, consolidated operating expenses for the quarter would have decreased by $3.8 million, or 15.1%, due primarily to cost savings generated by our reorganization activities in 2008. In the first six months of 2008, we incurred approximately $1.7 million in expenses related to a proxy contest. In the first six months of 2009, operating expenses increased by $16.5 million due to the operating expenses of Bayou and Corrpro as well as the transaction and severance costs of $8.2 million related to the acquisitions of Bayou and Corrpro.

We experienced a $3.2 million, or 20.2%, and a $5.7 million, or 18.5%, decrease in operating expenses in our North American Sewer Rehabilitation business in the second quarter and first six months of 2009, respectively, compared to the corresponding prior year periods, which partially offset the increase in consolidated operating expenses. We have been focused on cost reduction and realignment efforts, particularly in our North American Sewer Rehabilitation business and corporate support group, over the last twelve months. Our efforts to further reduce our fixed overhead costs will continue as we progress through 2009.

Total contract backlog improved to $462.4 million at June 30, 2009 compared to $289.8 million at June 30, 2008. The June 30, 2009 level of backlog was significantly higher than total contract backlog of $249.1 million at December 31, 2008 due to the addition of $131.3 million total contract backlog of Bayou and Corrpro at June 30, 2009. Excluding the backlog from Bayou and Corrpro, consolidated backlog for the quarter increased by $82.1 million, or 32.9%, and $41.3 million, or 14.3%, compared to December 31, 2008 and June 30, 2008, respectively, due to the record level of backlog in our North American Sewer Rehabilitation segment as a result of improved win-rate and slightly increased market activity.

North American Sewer Rehabilitation Segment

Key financial data for our North American Sewer Rehabilitation segment was as
follows (dollars in thousands):

                                                                     Increase (Decrease)
                                   2009              2008                $              %
 Three Months Ended June 30,
  Revenues                       $    83,687       $    87,095       $   (3,408 )      (3.9 )%
  Gross profit                        22,383            19,830            2,553        12.9
  Gross margin                          26.7 %            22.8 %                        3.9
  Operating expenses                  12,682            15,900           (3,218 )     (20.2 )
  Operating income                     9,701             3,930            5,771       146.9
  Operating margin                      11.6 %             4.5 %                        7.1

 Six Months Ended June 30,
  Revenues                       $   164,192       $   168,149       $   (3,957 )      (2.4 )%
  Gross profit                        40,832            36,219            4,613        12.7
  Gross margin                          24.9 %            21.5 %                        3.4
  Operating expenses                  25,312            31,057           (5,745 )     (18.5 )
  Operating income                    15,520             5,162           10,358       200.7
  Operating margin                       9.5 %             3.1 %                        6.4

Revenues
Revenues decreased by $3.4 million, or 3.9%, in our North American Sewer Rehabilitation segment in the second quarter of 2009 compared to the second quarter of 2008. The decrease in revenues was due primarily to the weaker foreign exchange rate of the Canadian dollar compared to the U.S. dollar and the delayed release of certain projects anticipated for the second quarter. Third-party product sales in this segment were $2.5 million and $2.1 million in the second quarter of 2009 and 2008, respectively. Revenues decreased 2.4% in our North American Sewer Rehabilitation segment in the first six months of 2009 compared to the first six months of 2008 for the reasons mentioned above.

Contract backlog in our North American Sewer Rehabilitation segment at June 30, 2009 was $206.8 million. This represented a $46.4 million, or 28.9%, increase from backlog at March 31, 2009. As compared to June 30, 2008, North American Sewer Rehabilitation experienced an increase in contract backlog of $21.4 million, or 11.5%. Certain large project wins that we expected to be awarded in the first quarter were awarded during the second quarter leading to the increased level of backlog at June 30, 2009 compared to March 31, 2009 and June 30, 2008. The increased backlog levels are a result of improved win-rate and slightly increased market activity. We also anticipate bidding opportunities to increase in this market as the impact of the federal stimulus dollars flow into the system.

Gross Profit and Gross Margin
Despite the decrease in revenues, gross profit in our North American Sewer Rehabilitation segment increased $2.6 million, or 12.9%, in the second quarter of 2009 compared to the prior year quarter, primarily due to improved project execution and lower resin and fuel costs. In addition, cost management practices continue to drive a lower overall cost structure. Our gross profit and gross margin for our North American Sewer Rehabilitation segment were also boosted by increased third-party product sales in North America.

We will continue driving improvements in productivity through enhanced project management and crew training, continued implementation of technologies and improved logistics management. We continue to seek avenues for taking advantage of our vertical integration and manufacturing capabilities by expanding our third-party product sales efforts on a global basis. In the second quarter of 2009, our gross margin increased to 26.7% from 22.8% in the second quarter of 2008 as a result of the factors mentioned above.

In the first six months of 2009, gross profit increased by $4.6 million, or 12.7%, over the prior year period, despite the $4.0 million decrease in revenues. In the first six months of 2009, our gross margin increased to 24.9% from 21.5%, a 340 basis point increase.

Operating Expenses
Operating expenses in our North American Sewer Rehabilitation segment decreased by $3.2 million, or 20.2%, during the second quarter of 2009 compared to the second quarter of 2008, primarily due to the cost-cutting and performance improvement initiatives described above. We have been focused on cost reduction and realignment efforts, particularly within this segment. Operating expenses as a percentage of revenues were 15.2% in the second quarter of 2009 compared to 18.3% in the second quarter of 2008.

Operating expenses decreased by $5.7 million, or 18.5%, in the first six months of 2009 compared to the first six months of 2008, primarily due to the cost-cutting and performance improvement initiatives described above. Operating expenses as a percentage of revenues were 15.4% in the first six months of 2009 compared to 18.5% in the first six months of 2008.

Operating Income and Operating Margin
Improved gross profit, as well as lower operating expenses, led to a $5.8 million, or 146.9%, increase in operating income in our North American Sewer Rehabilitation segment in the second quarter of 2009 compared to the second quarter of 2008. The North American Sewer Rehabilitation operating margin, which is operating income as a percentage of revenues, improved to 11.6% in the second quarter of 2009 compared to 4.5% in the second quarter of 2008, an increase of 710 basis points.

Operating income in this segment in the first six months of 2009 increased to $15.5 million compared to $5.2 million in the first six months of 2008, a 200.7% increase. The North American Sewer Rehabilitation operating margin improved to 9.5%, an increase of 640 basis points, in the first six months of 2009 compared to 3.1% in the first six months of 2008.

European Sewer Rehabilitation Segment

Key financial data for our European Sewer Rehabilitation segment was as follows
(dollars in thousands):

                                                                      Increase (Decrease)
                                  2009              2008                 $               %
Three Months Ended June 30,
 Revenues                       $    20,708       $    26,647        $    (5,939 )     (22.3 )%
 Gross profit                         5,644             5,276                368         7.0
 Gross margin                          27.3 %            19.8 %                          7.5
 Operating expenses                   4,476             5,763             (1,287 )     (22.3 )
 Operating income (loss)              1,168              (487 )            1,655       340.0
 Operating margin                       5.6 %            (1.8 )%                         7.4

Six Months Ended June 30,
 Revenues                       $    38,915       $    52,257        $   (13,342 )     (25.5 )%
 Gross profit                        10,142             9,996                146         1.5
 Gross margin                          26.1 %            19.1 %                          7.0
 Operating expenses                   9,117            11,433             (2,316 )     (20.3 )
 Operating income (loss)              1,025            (1,437 )            2,462       171.3
 Operating margin                       2.6 %            (2.7 )%                         5.3

Revenues
Revenues in our European Sewer Rehabilitation segment decreased by $5.9 million, or 22.3%, during the second quarter of 2009 compared to the second quarter of 2008, primarily due to a $3.9 million impact of weak European currencies versus the U.S. dollar and continued softness in the United Kingdom market.

For the first six months of 2009, revenues decreased by $13.3 million, or 25.5%, compared to the first six months of 2008, primarily due to a $7.8 million impact of weak European currencies versus the U.S. dollar as well a sharp decline in revenues from our United Kingdom operations.

Contract backlog in our European Sewer Rehabilitation segment was $40.9 million at June 30, 2009. This represented an increase of $14.8 million, or 56.7%, compared to March 31, 2009. The increase was principally due to higher backlog in Switzerland and The Netherlands as a result of improved market conditions and win-rate. As compared to June 30, 2008, European Sewer Rehabilitation experienced an increase in contract backlog of $6.0 million, or 17.0%. This increase in backlog was tempered by a $5.7 million negative impact of European currencies against the U.S. dollar that prevailed at June 30, 2009. European orders and backlog have been fairly steady for the past several quarters, with the exception of the United Kingdom, and we believe this trend will continue through 2009.

As part of the continued efforts that started in 2008 to improve our European financial performance, certain operational and management changes have been made. We have also restructured a number of country-based operations to reduce fixed costs and improve execution. We continue to anticipate only modest growth in revenues (not accounting for foreign currency weakness) for this segment in 2009; however, we expect profitability to improve year over year due to recent organizational changes and other restructuring efforts.

Gross Profit and Gross Margin
Gross profit in our European Sewer Rehabilitation segment increased by $0.4 million, or 7.0%, during the second quarter of 2009 compared to the second quarter of 2008, despite the 22.3% decline in revenues. Our European Sewer Rehabilitation segment experienced an increase in gross margin year over year of 750 basis points. Improved margins in Poland due to improved project execution performance and in Switzerland from cost reductions helped produce the increase in gross profit quarter over quarter.

Gross profit in our European Sewer Rehabilitation segment increased by $0.1 million during the first six months of 2009 compared to the first six months of 2008. We experienced an improvement in both Switzerland and France after the restructurings that we implemented during 2008. We also improved operationally in Poland. During the first six months of 2008, gross profit for this segment was negatively impacted by several large project execution issues in Eastern Europe.

While our profitability in Europe does not meet our long-term expectations, we are implementing changes in this business unit that we expect to result in significantly improved performance. We are mainly focusing on bottom-line improvements that will bring this unit closer to achieving our expected financial returns. With dramatically improved contract backlog, we expect to see significant profitability improvements in the second half of 2009.

Operating Expenses
Operating expenses in our European Sewer Rehabilitation segment decreased by $1.3 million, or 22.3%, during the second quarter of 2009 compared to the second quarter of 2008, primarily due a reduction of operating expenses in France and Switzerland due to cost reduction efforts. Operating expenses as a percentage of revenues remained constant at 21.6% for the second quarters of 2009 and 2008.

Operating expenses in our European Sewer Rehabilitation segments decreased by $2.3 million, or 20.3% during the first six months of 2009 compared to the first six months of 2008. Operating expenses as a percentage of revenues increased to 23.4% in the first six months of 2009 compared to 21.9% in the first six months of 2008, primarily due to the decline in revenues.

Operating Income (loss) and Operating Margin Lower operating expenses and higher gross profit led to a $1.7 million improvement in operating income in the second quarter of 2009 compared to the second quarter of 2008. The European Sewer Rehabilitation operating margin, which is operating income as a percentage of revenues, improved to 5.6% in the second quarter of 2009 compared to (1.8)% in the second quarter of 2008.

Lower operating expenses and higher gross profits led to a $2.5 million improvement in operating income in the first six months of 2009 compared to the first six months of 2008. The European Sewer Rehabilitation operating margin, which is operating income (loss) as a percentage of revenues, improved to 2.6% in the first six months of 2009 compared to (2.7)% in the first six months of 2008.

. . .