FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-----------------
Commission File Number 33-48432
LAYNE CHRISTENSEN COMPANY
(Exact name of registrant as specified in its charter)
Delaware 48-0920712
- -------------------------------- -------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1900 SHAWNEE MISSION PARKWAY, MISSION WOODS, KANSAS 66205
(Address of principal executive offices) (Zip Code)
(913) 362-0510
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report.)
--------------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
There were 11,700,522 shares of common stock, $.01 par value
per share, outstanding on September 12, 1997.
<PAGE>
PART I
ITEM 1. Financial Statements
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
July 31, January 31,
1997 1997
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,366 $ 1,697
Customer receivables, less allowance
of $2,717 and $1,002, respectively 50,444 32,031
Costs and estimated earnings in
excess of billings on uncompleted contracts 10,627 10,284
Inventories 22,378 17,739
Deferred income taxes 10,570 6,356
Other 2,894 1,675
--------- ---------
Total current assets 102,279 69,782
--------- ---------
Property and equipment:
Land 8,958 7,922
Buildings 14,538 13,555
Machinery and equipment 133,202 101,945
--------- ---------
156,698 123,422
Less - Accumulated depreciation (73,820) (69,015)
--------- ---------
Net property and equipment 82,878 54,407
--------- ---------
Other assets:
Investment in foreign affiliates 18,457 17,172
Goodwill and other intangible assets,
at cost less accumulated amortization 33,477 521
Property and equipment held for sale 313 713
Other 1,900 1,055
--------- ---------
Total other assets 54,147 19,461
--------- ---------
$ 239,304 $ 143,650
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
(in thousands, except share and per share data)
<CAPTION>
July 31, January 31,
1997 1997
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 19,801 $ 12,550
Current maturities of long-term debt 119 114
Accrued compensation 10,368 8,348
Accrued insurance expense 7,174 5,410
Other accrued expenses 11,787 7,663
Billings in excess of costs and estimated
earnings on uncompleted contracts 11,254 6,054
Acquisition related obligation 7,814 -
--------- ---------
Total current liabilities 68,317 40,139
--------- ---------
Noncurrent and deferred liabilities:
Long-term debt 88,962 30,314
Deferred income taxes 5,416 3,307
Accrued insurance expense 5,576 5,775
Other 1,488 1,451
--------- ---------
Total noncurrent and deferred
liabilities 101,442 40,847
--------- ---------
Contingencies
Stockholders' equity:
Preferred stock, par value $.01 per
share, 5,000,000 shares authorized,
none issued and outstanding - -
Common stock, par value $.01 per
share, 30,000,000 shares authorized,
8,943,957 and 8,871,467 shares issued
and outstanding, respectively 89 89
Capital in excess of par value 40,906 39,293
Retained earnings 29,053 24,187
Notes receivable from management
stockholders (175) (199)
Unrecognized pension cost (575) (624)
Cumulative translation adjustment 247 (82)
--------- ---------
Total stockholders' equity 69,545 62,664
--------- ---------
$ 239,304 $ 143,650
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
<CAPTION>
Three Months Six Months
Ended July 31, Ended July 31,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Net service revenues $ 59,636 $ 50,538 $ 109,107 $ 97,794
Net product sales 8,047 5,774 16,326 12,291
--------- -------- --------- ---------
Total 67,683 56,312 125,433 110,085
--------- -------- --------- ---------
Cost of revenues
(exclusive of depre-
ciation shown below):
Cost of service revenues 42,813 36,250 79,015 71,226
Cost of product sales 5,865 4,087 11,808 8,814
--------- --------- --------- ---------
Total 48,678 40,337 90,823 80,040
--------- --------- --------- ---------
Gross profit 19,005 15,975 34,610 30,045
Selling, general and
administrative expenses 11,120 9,852 21,447 19,589
Depreciation 2,869 2,611 5,701 5,452
--------- --------- --------- ---------
Operating income 5,016 3,512 7,462 5,004
Other income (expense):
Equity earnings of
foreign affiliates 978 726 1,798 1,828
Interest (732) (609) (1,346) (1,288)
Other, net (127) 458 (65) 548
--------- --------- --------- ---------
Income before income taxes 5,135 4,087 7,849 6,092
Income tax expense 1,952 1,535 2,983 2,437
--------- --------- --------- ---------
Net income $ 3,183 $ 2,552 $ 4,866 $ 3,655
========= ========= ========= =========
Net income per common and
dilutive equivalent share $ .34 $ .28 $ .52 $ .40
========= ========= ========= =========
Weighted average number of
common and dilutive equiva-
lent shares outstanding:
Weighted average shares
outstanding 8,876,000 8,872,000 8,874,000 8,858,000
Dilutive stock options 448,000 279,000 406,000 258,000
--------- --------- --------- ---------
9,324,000 9,151,000 9,280,000 9,116,000
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
<CAPTION> Six Months Ended July 31,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 4,866 $ 3,655
Adjustments to reconcile net income to cash
from operations:
Depreciation and amortization 5,794 5,512
Deferred income taxes 739 634
Equity earnings in foreign affiliates (1,798) (1,828)
Dividends received from foreign affiliates 532 792
(Gain) loss from disposal of property and
equipment 86 (351)
Changes in current assets and liabilities
(exclusive of effects of acquisitions):
Increase in customer receivables (8,052) (102)
Increase in cost and estimated earnings in
excess of billings on uncompleted contracts (801) (3,505)
Increase in inventories (446) (301)
Increase in other current assets (125) (419)
Increase in accounts payable and accrued
expenses 853 (580)
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts 5,200 1,132
Other, net 354 109
--------- ---------
Cash from operating activities 7,202 4,748
--------- ---------
Cash flow from investing activities:
Additions to property and equipment (8,482) (6,453)
Investment in foreign affiliates (19) -
Proceeds from disposal of property and equipment 467 796
Investment in domestic affiliate - 26
Acquisition of businesses, net of cash acquired (50,242) -
--------- ---------
Cash from investing activities (58,276) (5,631)
--------- ---------
Cash flow from financing activities:
Net borrowings under revolving facility 54,000 1,000
Repayments of long-term debt (56) (52)
Payments on notes receivable from management
stockholders 24 114
Issuance of common stock 1,500 -
Debt issuance costs (725) (272)
--------- ---------
Cash from financing activities 54,743 790
--------- ---------
Net increase (decrease) in cash and cash
equivalents 3,669 (93)
Cash and cash equivalents at beginning of period 1,697 382
--------- ---------
Cash and cash equivalents at end of period $ 5,366 $ 289
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
LAYNE CHRISTENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies and Basis of Presentation
The consolidated financial statements include the accounts of
Layne Christensen Company and its subsidiaries (together, the
Company), all of which are wholly owned. All significant
intercompany transactions have been eliminated. Investments in
affiliates (33% to 50% owned) in which the Company exercises
influence over operating and financial policies are accounted for
on the equity method. The unaudited consolidated financial
statements should be read in conjunction with the consolidated
financial statements of the Company for the year ended January
31, 1997 as filed in its Annual Report on Form 10-K.
The accompanying unaudited consolidated financial statements
include all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary for
a fair presentation of financial position, results of operations
and cash flows. Results of operations for interim periods are
not necessarily indicative of results to be expected for a full
year.
Net income per common and dilutive equivalent share was
calculated by dividing net income by the weighted average number
of common and dilutive equivalent shares outstanding. Options to
purchase common stock are included except when their effect is
antidilutive.
Effective for the Company's financial statements as of January
31, 1998, Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share," specifies the computation,
presentation, and disclosure requirements for earnings per share.
At the effective date, all prior-period earnings per share data
presented will be restated to conform with the provisions of the
Statement.
The amounts paid for income taxes and interest are as follows (in
thousands):
Six Months Ended July 31,
--------------------------
1997 1996
--------- --------
Income taxes $ 1,671 $ 1,357
Interest 1,250 640
During the first quarter of fiscal 1998, the Company issued 3,524
shares of common stock and 15,727 stock options to employees
related to fiscal 1997 compensation awards. The total value of
these awards were approximately $114,000, which was accrued at
January 31, 1997. On July 31, 1997, the Company issued 206,897
stock options in connection with the Stanley Acquisition (see
Note 2).
Certain amounts for prior periods have been reclassified to
conform with the current presentation.
<PAGE>
2. Acquisitions
On May 20, 1997, the Company, through its wholly-owned subsidiary
Layne Christensen Australia Pty Limited ("Layne Australia"),
made a tender offer to the security holders of Stanley Mining
Services Limited ("Stanley"), a company listed on the Australian
Stock Exchange (the "Stanley Acquisition"). Stanley is an
Australian mineral exploration drilling company that provides
services predominantly to gold mining companies in Australia and
West Africa, principally Ghana. As of October 1, 1996, Stanley
purchased 51% of Glindemann & Kitching Pty Ltd. ("G&K"), a
drilling contractor based and operating in Western Australia that
specializes in diamond core exploration drilling for gold
projects. The remaining 49% of G&K was acquired by Stanley as of
July 1, 1997 for a purchase price of $7,814,000. The purchase
price was paid on September 5, 1997, and is included in the
consolidated balance sheet as of July 31, 1997 as an "Acquisition
related obligation."
The Stanley Acquisition was substantially consummated on July 25,
1997 for a purchase price of approximately $50,070,000 consisting
of a cash purchase price for the tender offer of $48,337,000 and
$1,733,000 of transaction costs. The Company also assumed
approximately $12,523,000 of Stanley's existing indebtedness.
The Company has accounted for the acquisition using the purchase
method of accounting. Stanley will be reflected in Layne's
results of operations beginning August 1, 1997. The purchase
price has been allocated based on estimated fair values of assets
and liabilities as of July 31, 1997. This allocation was based
on preliminary estimates and may be revised at a later date. The
following unaudited pro forma information presents a summary of
consolidated results of operations of the Company as if the
acquisition of Stanley and G&K had occurred at the beginning of
fiscal year 1997, with proforma adjustments to give effect to
interest expense on acquisition debt, amortization of goodwill
and certain other adjustments, together with related income tax
effects:
Six Months Ended July 31,
---------------------------
(in thousands, except per share data) 1997 1996
- ------------------------------------- ---------- ----------
Revenues $154,398 $136,875
Net income 5,204 3,588
Net income per share $.56 $.39
The pro forma financial information is not necessarily indicative
of the operating results that would have occurred had the
acquisition been consummated as of February 1, 1997, nor are they
necessarily indicative of future operating results.
In July 1997, the Company also acquired all of the outstanding
stock of Stamm-Scheele, Inc., ("Stamm-Scheele") a water well
drilling and maintenance company in Louisiana, for approximately
$2,574,000 in cash. The acquisition has been accounted for
using the purchase method of accounting. Had this acquisition
taken place as of February 1, 1997, pro forma operating results
would not have been significantly different from those reported.
<PAGE>
3. Inventories
The Company values inventories at the lower of cost (first-in,
first-out) or market (in thousands):
As of
-------------------------
July 31, January 31,
1997 1997
----------- -----------
Raw materials $ 1,817 $ 1,790
Work in process 1,247 1,568
Finished products,
parts and supplies 19,314 14,381
----------- -----------
Total $ 22,378 $ 17,739
=========== ===========
4. Indebtedness
During July 1997, contemporaneously with the consummation of the
Stanley Acquisition (see Note 2), the Company amended its
existing credit agreement to provide a $100,000,000 reducing
revolving credit facility ("New Credit Agreement"). The New
Credit Agreement was used to finance the Stanley Acquisition and
refinance the Company's existing indebtedness under a $30,000,000
credit facility, and is available for working capital and capital
expenditures and for other general corporate purposes. The New
Credit Agreement provides a reducing revolving cash borrowing
facility of up to $100,000,000, less any outstanding letter of
credit commitments ($20,000,000 sublimit). The New Credit
Agreement will terminate in July 2002 and any borrowings
thereunder will mature at that time. Layne Australia will be
eligible to draw down $30,000,000 under the New Credit Agreement.
The New Credit Agreement provides for guarantees by certain of
the Company's domestic subsidiaries. The New Credit Agreement
contains certain covenants including restrictions on the
incurrence of additional indebtedness and liens, sale of assets
or other dispositions, limits on annual capital expenditures,
transactions with affiliates, mandatory prepayments based on the
proceeds from the sale of assets and debt and equity securities
and certain financial maintenance covenants, including among
others, minimum interest coverage and maximum leverage ratios.
The New Credit Agreement provides for interest at variable rates
equal to (i) for loans in Australian dollars, an Australian Bill
rate plus .50% to .875% (depending upon debt to capitalization
ratios) or (ii) for loans in United States dollars, at the
Company's option, a Eurodollar rate plus .50% to .875% (depending
upon debt to capitalization ratios) or an alternate reference
rate as defined in the New Credit Agreement. As of July 31,
1997, there was $58,000,000 of outstanding borrowings under the
New Credit Agreement, at an interest rate of 6.2625%.
5. Contingencies
The Company's drilling activities involve certain operating
hazards that can result in personal injury or loss of life,
damage and destruction of property and equipment, damage to the
surrounding areas, release of hazardous substances or wastes and
other damage to the environment, interruption or suspension of
drill site operations and loss of revenues and future business.
The magnitude of these
<PAGE>
operating risks is amplified when the Company, as is frequently
the case, conducts a project on a fixed-price, "turnkey" basis
where the Company delegates certain functions to subcontractors
but remains responsible to the customer for the subcontracted
work. In addition, the Company is exposed to potential liability
under foreign, federal, state and local laws and regulations,
contractual indemnification agreements or otherwise in connection
with its provision of services and products. Litigation arising
from any such occurrences may result in the Company's being named
as a defendant in lawsuits asserting large claims. Although the
Company maintains insurance protection that it considers
economically prudent, there can be no assurance that any such
insurance will be sufficient or effective under all circumstances
or against all claims or hazards to which the Company may be
subject or that the Company will be able to continue to obtain
such insurance protection. A successful claim or damage
resulting from a hazard for which the Company is not fully
insured could have a material adverse effect on the Company. In
addition, the Company does not maintain political risk insurance
or business interruption insurance with respect to its foreign
operations.
The Company's former parent corporation, The Marley Company
("Marley"), maintains insurance reserves for the Company on its
financial statements to cover expected losses under various
casualty insurance policies for occurrences prior to April 30,
1992. Those reserves were funded through intercompany charges to
the Company, which were calculated on the basis of the estimated
insured losses incurred by the Company. The Company has
indemnified Marley for claims or retroactive insurance premiums
on those policies that exceed the amount of reserves attributable
to the Company's estimated losses through April 30, 1992. The
Company believes that the amount of such reserves will be
sufficient to cover its reasonably anticipated insured losses
under past insurance policies.
The Company is involved in various matters of litigation, claims
and disputes which have arisen in the ordinary course of the
Company's business. While the resolution of any of these matters
may have an impact on the financial results for the period in
which the matter is resolved, the Company believes that the
ultimate disposition of these matters will not, in the aggregate,
have a material adverse effect upon its business or consolidated
financial position, results of operations or cash flows.
===================================
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Cautionary Language Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Exchange Act of 1934. Such statements are indicated
by words or phrases such as "anticipate," "estimate," "project,"
"believe," "intend," "expect," "plan" and similar words or phrases.
Such statements are based on current expectations and are subject
to certain risks, uncertainties and assumptions, including but
not limited to unanticipated slowdowns in the Company's major
markets, the impact of competition, the effectiveness of
operational changes expected to increase efficiency and
productivity, worldwide economic and political conditions and
foreign currency fluctuations that may affect worldwide results
of operations. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially and adversely from
those anticipated, estimated or projected. These forward-looking
statements are made as of the date of this filing, and the
Company assumes no obligation to update such forward-looking
statements or to update the reasons why actual results could
differ materially from those anticipated in such forward-looking
statements.
RESULTS OF OPERATIONS
The Company substantially consummated the Stanley Acquisition at
the end of July 1997. Stanley will be reflected in Layne's
results of operations beginning in the third quarter ending
October 31, 1997. The Stanley Acquisition has been accounted for
using the purchase method of accounting, and will have a
significant effect on Layne Christensen's future operations and
on comparisons of income and expense items in future periods in
relation to fiscal 1997 and the first six months of fiscal 1998.
Among other things, the Company has incurred a substantial
increase in long-term debt and goodwill and will incur a
substantial increase in interest expense and goodwill
amortization in future periods.
The following table presents, for the periods indicated, the
percentage relationship which certain items reflected in the
Company's consolidated statements of income bear to revenues and
the percentage increase or decrease in the dollar amount of such
items period to period.
<TABLE>
<CAPTION>
Period
Three Six -to-
Months Months Period
Ended July 31, Ended July 31, Change
-------------- -------------- -------------
1997 1996 1997 1996 Three Six
------ ------ ------ ------ Months Months
------ ------
Revenues:
<S> <C> <C> <C> <C> <C> <C>
Water well drilling and
maintenance 47.2% 51.2% 46.8% 50.3% 11.0% 5.9%
Mineral exploration drilling 16.8 21.8 21.4 22.8 (7.5) 6.6
Geotechnical construction 15.0 4.0 10.3 3.9 347.5 200.1
Environmental drilling 6.9 10.9 6.5 10.8 (24.1) (30.6)
Other services 2.2 1.8 2.0 1.0 45.3 123.8
----- ----- ----- -----
Total service revenues 88.1 89.7 87.0 88.8 18.0 11.6
Product sales 11.9 10.3 13.0 11.2 39.4 32.8
----- ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0% 20.2 13.9
===== ===== ===== =====
Cost of revenues:
Cost of service revenues 71.8% 71.7% 72.4% 72.8% 18.1 10.9
Cost of product sales 72.9 70.8 72.3 71.7 43.5 34.0
----- ----- ----- -----
Total cost of revenues 71.9 71.6 72.4 72.7 20.7 13.5
----- ----- ----- -----
Gross profit 28.1 28.4 27.6 27.3 19.0 15.2
Selling, general and
administrative expenses 16.4 17.5 17.2 17.8 12.9 9.5
Depreciation 4.3 4.7 4.5 5.0 9.9 4.6
----- ----- ----- -----
Operating income 7.4 6.2 5.9 4.5 42.8 49.1
Other income (expense):
Equity earnings of foreign
affiliates 1.4 1.3 1.4 1.7 34.7 (1.6)
Interest (1.1) (1.1) (1.1) (1.2) 20.2 4.5
Other, net (.1) .8 .1 .5 * *
----- ----- ----- -----
Income before income taxes 7.6 7.2 6.3 5.5 25.6 28.8
Income tax expense 2.9 2.7 2.4 2.2 27.2 22.4
----- ----- ----- -----
Net income 4.7% 4.5% 3.9% 3.3% 24.7 33.1
===== ===== ===== =====
________________
* Not meaningful.
</TABLE>
Revenues for the three months ended July 31, 1997 increased
$11,371,000, or 20.2%, to $67,683,000 while revenues for the six
months ended July 31, 1997 increased $15,348,000, or 13.9%, to
$125,433,000 from the three and six months ended July 31, 1996,
respectively.
Water well drilling and maintenance revenues increased 11.0%, to
$32,000,000, and 5.9%, to $58,678,000, for the three and six
months ended July 31, 1997, respectively, compared to revenues of
$28,836,000 and $55,403,000 for the three and six months ended
July 31, 1996, respectively. The increases in water well
drilling and maintenance revenues were primarily the result of a
large international water project associated with mining
activities which began in the second quarter and increased demand
in certain central and southern areas of the United States.
Geotechnical construction revenues increased 347.5%, to
$10,141,000, and 200.1%, to $12,858,000, for the three and six
months ended July 31, 1997, respectively, compared to revenues of
$2,266,000 and $4,284,000 for the three and six months ended July
31, 1996, respectively. This increase was primarily a result of
the Company's previously announced ground freeze project in
Timmins, Ontario, Canada for Echo Bay Mines, Ltd. (the "Timmins
Project") which began in April 1997. It is anticipated that the
contract will be substantially completed within one year of
inception and will generate geotechnical construction revenues of
approximately $27,000,000. In light of the size of this
contract, there can be no assurance that this level of revenues
will be sustained in the geotechnical construction product line.
Mineral exploration drilling revenues decreased 7.5%, to
$11,363,000, and increased 6.6%, to $26,798,000, for the three
and six months ended July 31, 1997, respectively, from
$12,281,000 and $25,128,000 for the three and six months
<PAGE>
ended July 31, 1996, respectively. The decrease for the three
months ended July 31, 1997 was a result of the temporary
reallocation of resources from mineral exploration services to
geotechnical construction services in connection with the Timmins
Project. For the six months ended July 31, 1997, the decrease in
mineral exploration revenues was offset by strong mining demand
in Mexico and the increased utilization of the Company's other
mineral exploration resources.
Environmental drilling revenues decreased 24.1%, to $4,664,000,
and 30.6%, to $8,206,000, for the three and six months ended July
31, 1997, respectively, from $6,144,000 and $11,832,000 for the
three and six months ended July 31, 1996, respectively. The
Company believes the market for environmental services offered by
the Company, primarily in the southwest region of the United
States, continues to be soft due to decreased demand for
underground storage tank projects and environmental cleanup work
generally. In addition, the Company has continued its strategy
of not pursuing lower margin, less technically demanding
environmental projects.
Product sales increased 39.4%, to $8,047,000, and 32.8%, to
$16,326,000, for the three and six months ended July 31, 1997,
respectively, from $5,774,000 and $12,291,000 for the three and
six months ended July 31, 1996, respectively, as a result of
strong export sales and strong sales to the mining industry.
Gross profit as a percentage of revenues remained relatively
constant at 28.1% and 27.6% for the three and six months ended
July 31, 1997, respectively, compared to 28.4% and 27.3% for the
same periods last year.
Selling, general and administrative expenses increased to
$11,120,000 and $21,447,000 (or 16.4% and 17.2% of revenues,
respectively) for the three and six months ended July 31, 1997
compared to $9,852,000 and $19,589,000 (or 17.5% and 17.8% of
revenues, respectively) for the three and six months ended July
31, 1996. Selling, general and administrative expenses as a
percent of revenue decreased period-to-period principally because
of the increase in revenues noted above and the non-variable
nature of certain components of these expenses.
Depreciation increased to $2,869,000 and $5,701,000 for the three
and six months ended July 31, 1997, respectively, compared to
$2,611,000 and $5,452,000, respectively, for the same periods
last year. The increase in depreciation was primarily a result
of increased capital expenditures during the year.
Equity in earnings of foreign affiliates was $978,000 and
$1,798,000 for the three and six months ended July 31, 1997,
respectively, compared to $726,000 and $1,828,000, respectively,
for the same periods last year. The increase for the three
months ended July 31, 1997 was primarily a result of improved
margins on the Mexican affiliate operations and increased
drilling activity in Peru on certain projects which had been
delayed in the first quarter by inclement weather.
<PAGE>
Interest expense increased $123,000 and $58,000 for the three and
six months ended July 31, 1997, respectively, as compared to the
three and six months ended July 31, 1996. The increase was
primarily a result of additional borrowings made in July 1997 to
finance the Stanley Acquisition.
Income taxes of $1,952,000 and $2,983,000 for the three and six
months ended July 31, 1997, respectively, increased from
$1,535,000 and $2,437,000, respectively, in the same periods last
year as a result of higher income before taxes compared to the
prior year. The effective tax rate for the three and six months
ended July 31, 1997 was 38% compared to 37.6% and 40%,
respectively, for the same periods last year. The effective tax
rate was reduced in the second quarter of fiscal 1997 primarily
as a result of the tax treatment of the Company's foreign
affiliates.
CHANGES IN FINANCIAL CONDITION
Cash from operations was $6,116,000 for the six months ended July
31, 1997 compared to $4,748,000 for the same period last year.
The change in cash from operations was primarily a result of more
profitable operations for the period compared to the same period
last year. Cash from operations, and borrowings under the
Company's available credit agreement, were primarily used for
additions to property and equipment of $8,482,000 during the six
months ended July 31, 1997, and the acquisition of Stamm-Scheele.
The Company obtained an investment in limited gold mining
concessions as a result of the Stanley Acquisition. In
connection with the concessions, the Company expects to make
capital contributions of approximately $415,000 through December
31, 1997 and to make further capital contributions thereafter.
During July 1997, the Company amended its existing credit
agreement to provide a reducing revolving cash borrowing facility
of up to $100,000,000 (the "New Credit Agreement"). Borrowings
under the New Credit Agreement were used to complete the Stanley
Acquisition (see Note 2 to the Consolidated Financial Statements)
and refinance indebtedness under the Company's existing credit
agreement. The Company's borrowings and outstanding letter of
credit commitments under the New Credit Agreement were
$58,000,000 and $5,118,000, respectively, at July 31, 1997,
leaving approximately $36,882,000 of unused availability.
On August 19, 1997, the Company completed the sale of 2,756,565
shares of Common Stock in a public offering with net proceeds of
approximately $43,500,000 which were used to reduce the debt
incurred under the New Credit Agreement in connection with the
Stanley Acquisition.
The Company believes that borrowings from its available credit
agreement and cash from operations will be sufficient for the
Company's seasonal cash requirements and to fund its budgeted
capital expenditures for at least the balance of the fiscal year.
<PAGE>
PART II
ITEM 1 - Legal Proceedings
NONE
ITEM 2 - Changes in Securities
NOT APPLICABLE
ITEM 3 - Defaults Upon Senior Securities
NOT APPLICABLE
ITEM 4 - Submission of Matters to a Vote of Security Holders
An annual meeting of stockholders was held on May 22, 1997.
Set forth below is a brief description of each matter voted upon
at the meeting and the results of the balloting:
a) Election of Robert J. Dineen as a Class II Director
to hold office for a term expiring at the 2000 Annual
Meeting of the Stockholders of the Company and until
his successor is duly elected and qualified or until
his earlier death, retirement, resignation or removal:
For Against Withheld Authority
---------- -------- ------------------
7,767,230 -0- 152,916
b) Ratification and approval of the selection of the
accounting firm of Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal
year ended January 31, 1998:
For Against Withheld Authority
---------- -------- ------------------
7,919,243 303 600
c) Ratification and approval of the amendment of the
Layne Christensen Company 1992 Stock Option Plan
increasing the number of shares authorized for
issuance under the Plan from 750,000 to 1,250,000:
For Against Withheld Authority
---------- -------- ------------------
6,669,693 406,687 2,150
<PAGE>
ITEM 5 - Other Information
NONE
ITEM 6 - Exhibits and Reports on Form 8-K
On August 6, 1997, the Company filed a Form 8-K relating to
its acquisition of all of the outstanding capital stock of
Stanley Mining Services Limited ("Stanley"), a publicly traded
Australian company. The report included the consolidated
financial statements of Stanley as of June 30, 1996 and 1995, as
of March 31, 1997 and 1996, for the years ended June 30, 1996 and
1995 and for the nine months ended March 31, 1997 and 1996, as
well as the financial statements of Glindemann & Kitching Pty
Ltd. as of June 30, 1996, as of March 31, 1997 and 1996, for the
year ended June 30, 1996 and for the nine months ended March 31,
1997 and 1996.
On August 12, 1997, the Company filed a Form 8-K/A which
amended the Company's Form 8-K filed April 9, 1997 which
announced the tender offer for Stanley.
The exhibits filed with or incorporated by reference in this
report are listed below:
Exhibit No. Description
27(1) Financial Data Schedule
<PAGE>
* * * * * * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LAYNE CHRISTENSEN COMPANY
(Registrant)
DATE: September 15, 1997 /S/ A.B. Schmitt
---------------------------
A.B. Schmitt, President
and Chief Executive
Officer
DATE: September 15, 1997 /s/ Jerry W. Fanska
---------------------------
Jerry W. Fanska,
Vice President
Finance and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JUL-31-1997
<CASH> 5,366
<SECURITIES> 0
<RECEIVABLES> 61,071
<ALLOWANCES> 2,717
<INVENTORY> 22,378
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<PP&E> 156,698
<DEPRECIATION> 73,820
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<BONDS> 88,962
0
0
<COMMON> 89
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<TOTAL-LIABILITY-AND-EQUITY> 239,304
<SALES> 16,326
<TOTAL-REVENUES> 125,433
<CGS> 90,823
<TOTAL-COSTS> 96,524
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<INTEREST-EXPENSE> 1,346
<INCOME-PRETAX> 7,849
<INCOME-TAX> 2,983
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