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, 1998.
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 11,641,192 shares of common stock, $.01 par value
per share, outstanding on August 31, 1998.
<PAGE>
PART I
ITEM 1. Financial Statements
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
July 31, January 31,
1998 1998
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,461 $ 2,954
Customer receivables, less allowance
of $2,682 and $2,583, respectively 50,340 49,595
Costs and estimated earnings in excess
of billings on uncompleted contracts 7,819 6,777
Inventories 27,620 27,812
Deferred income taxes 10,008 9,610
Other 3,206 2,346
--------- ---------
Total current assets 102,454 99,094
--------- ---------
Property and equipment:
Land 8,512 8,851
Buildings 14,727 14,678
Machinery and equipment 152,669 143,338
--------- ---------
175,908 166,867
Less - Accumulated depreciation (86,214) (79,948)
--------- ---------
Net property and equipment 89,694 86,919
--------- ---------
Other assets:
Investment in foreign affiliates 20,753 19,456
Goodwill and other intangible assets,
at cost less accumulated amortization 30,788 32,836
Other 5,364 5,594
--------- ---------
Total other assets 56,905 57,886
--------- ---------
$ 249,053 $ 243,899
========= =========
</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,
1998 1998
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 16,497 $ 20,365
Accrued compensation 10,478 10,924
Accrued insurance expense 9,742 9,059
Other accrued expenses 8,017 9,626
Billings in excess of costs and estimated
earnings on uncompleted contracts 9,824 9,459
--------- ---------
Total current liabilities 54,558 59,433
--------- ---------
Noncurrent and deferred liabilities:
Long-term debt 67,500 57,500
Deferred income taxes 3,778 5,228
Accrued insurance expense 5,548 6,019
Other 1,621 1,460
--------- ---------
Total noncurrent and
deferred liabilities 78,447 70,207
--------- ---------
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,
11,641,192 and 11,631,556 shares
issued and outstanding, respectively 116 116
Capital in excess of par value 83,099 82,889
Retained earnings 39,625 35,614
Unrealized gain (loss) on investments (214) 250
Notes receivable from management
stockholders (152) (175)
Unrecognized pension cost (478) (527)
Cumulative translation adjustment (5,948) (3,908)
--------- ---------
Total stockholders' equity 116,048 114,259
--------- ---------
$ 249,053 $ 243,899
========= =========
</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,
1998 1997 1998 1997
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Revenues:
Net service revenues $ 72,042 $ 59,636 $ 134,534 $ 109,107
Net product sales 6,644 8,047 12,493 16,326
--------- -------- -------- --------
Total 78,686 67,683 147,027 125,433
--------- -------- -------- --------
Cost of revenues (exclusive of
depreciation shown below):
Cost of service revenues 50,120 42,813 95,376 79,015
Cost of product sales 5,080 5,865 9,582 11,808
--------- -------- -------- --------
Total 55,200 48,678 104,958 90,823
--------- -------- -------- --------
Gross profit 23,486 19,005 42,069 34,610
Selling, general and
administrative expenses 12,135 11,120 23,939 21,447
Depreciation and amortization 5,674 2,869 10,754 5,701
--------- -------- -------- -------
Operating income 5,677 5,016 7,376 7,462
Other income (expense):
Equity in earnings of foreign
affiliates 482 978 1,784 1,798
Interest (1,306) (732) (2,503) (1,346)
Other, net 121 (127) 27 (65)
-------- ------- -------- -------
Income before income taxes 4,974 5,135 6,684 7,849
Income tax expense 1,989 1,952 2,673 2,983
-------- -------- -------- -------
Net income $ 2,985 $ 3,183 $ 4,011 $ 4,866
======== ======== ======== =======
Basic earnings per share $ .26 $ .36 $ .34 $ .55
======== ======== ======== =======
Diluted earnings per share $ .25 $ .34 $ .34 $ .52
======== ======== ======== =======
Weighted average number of
common and dilutive equivalent
shares outstanding:
Weighted average shares
outstanding 11,641,000 8,876,000 11,637,000 8,874,000
Dilutive stock options 291,000 448,000 327,000 406,000
----------- --------- ---------- ---------
11,932,000 9,324,000 11,964,000 9,280,000
========== ========= ========== =========
</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,
-----------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 4,011 $ 4,866
Adjustments to reconcile net income to cash
from operations:
Depreciation and amortization 10,754 5,701
Deferred income taxes (1,862) 739
Equity in earnings in foreign affiliates (1,784) (1,798)
Dividends received from foreign affiliates 487 532
(Gain) loss from disposal of property and
equipment (244) 86
Changes in current assets and liabilities
(exclusive of effects of acquisitions):
(Increase) decrease in customer receivables 3,021 (8,052)
Increase in cost and estimated earnings in
excess of billings on uncompleted contracts (855) (801)
(Increase) decrease in inventories 147 (446)
Increase in other current assets (1,162) (125)
(Decrease) increase in accounts payable and
accrued expenses (9,477) 853
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts 434 5,200
Other, net 61 447
------- -------
Cash from operating activities 3,531 7,202
------- -------
Cash flow from investing activities:
Additions to property and equipment (8,210) (8,482)
Proceeds from disposal of property and equipment 1,454 467
Acquisitions of businesses, net of cash acquired (6,293) (50,242)
Purchase of available for sale investments (324) -
Investment in foreign affiliates - (19)
------- -------
Cash used in investing activities (13,373) (58,276)
------- -------
Cash flow from financing activities:
Net borrowings under revolving facility 10,000 54,000
Repayments of long-term debt - (56)
Payments on notes receivable from management
stockholders 23 24
Issuance of common stock - 1,500
Debt issuance costs - (725)
------- -------
Cash from financing activities 10,023 54,743
------- -------
Effects of exchange rate changes on cash 326 -
------- -------
Net increase in cash and cash equivalents 507 3,669
Cash and cash equivalents at beginning of period 2,954 1,697
------- -------
Cash and cash equivalents at end of period $ 3,461 $ 5,366
======= =======
</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, 1998 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.
Earnings per common share are based upon the weighted average
number of common and dilutive equivalent shares outstanding.
Options to purchase common stock are included based on the
treasury stock method for dilutive earnings per share, except
when their effect is antidilutive.
The amounts paid for income taxes and interest are as follows (in
thousands):
Six Months Ended July 31,
--------------------------
1998 1997
---------- ----------
Income taxes $4,025 $1,671
Interest 2,048 1,250
During the first quarter of fiscal 1999, the Company issued 9,636
shares of common stock and 22,688 stock options to employees
related to fiscal 1998 compensation awards. The total value of
these awards was approximately $210,000, which was accrued at
January 31, 1998.
2. Acquisitions
On March 26, 1998, the Company completed a transaction to
purchase certain assets of Hydro Group, Inc., a New Jersey based
drilling contractor (the "Hydro Acquisition") for approximately
$6,293,000 in cash. The acquisition has been accounted for using
the purchase method of accounting and accordingly, the operations
of Hydro Group, Inc. have been included from the date of
acquisition. Had this acquisition taken place as of February 1,
1998, pro forma operating results would not have been
significantly different from those reported.
<PAGE>
The purchase price was allocated as follows (in thousands of
dollars):
Property and equipment $7,167
Working capital (874)
------
Total purchase price, net of cash acquired $6,293
======
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,
1998 1998
--------- ----------
Raw materials $ 1,854 $ 1,552
Work in process 2,071 1,673
Finished products, parts and supplies 23,695 24,587
--------- ----------
Total $ 27,620 $ 27,812
========= ==========
4. Debt
During May, 1998, the Company entered into an interest rate swap
agreement (the "Swap Agreement") with Bank of America National
Trust and Savings Association. The Swap Agreement, which
effectively fixes the interest rate at 5.965%, plus the margin
(currently .5%) as defined in the Company's credit agreement, on
$25,000,000 of the Company's outstanding indebtedness under its
credit agreement, calls for quarterly interest payments
commencing on August 15, 1998. The Swap Agreement will terminate
in May, 2002.
5. Comprehensive Income
Effective February 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" which requires prominent disclosure of comprehensive
income. Comprehensive income for the six months ended July 31,
1998 and 1997 was $1,556,000 and $5,244,000, respectively.
Comprehensive income includes net income, unrealized gains or
losses on the Company's available for sale securities, minimum
pension liability adjustments and foreign currency cumulative
translation adjustment for the periods presented.
6. 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 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
<PAGE>
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 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 prevailing prices for various
metals, 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 acquisition of Stanley
Mining Services Pty Limited (the "Stanley Acquisition"), a
mineral exploration drilling company with operations in Australia
and Africa, at the end of July, 1997. Stanley has been reflected
in Layne Christensen's results of operations beginning in the
third quarter ending October 31, 1997. The Stanley Acquisition
was 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
relation to 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.
<PAGE>
<TABLE>
<CAPTION>
Period
-to-
Three Months Six Months Period
Ended July 31, Ended July 31, Change
--------------- -------------- --------------
Three Six
1998 1997 1998 1997 Months Months
Revenues: ------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Water well drilling
and maintenance 48.0% 49.0% 46.2% 48.5% 13.8 11.9
Mineral exploration drilling 27.2 16.9 29.5 21.6 87.2 59.7
Geotechnical construction 8.5 15.3 8.8 10.4 (35.5) (1.1)
Environmental drilling 7.9 6.9 7.0 6.5 33.0 25.8
----- ----- ----- -----
Total service revenue 91.6 88.1 91.5 87.0 20.8 23.3
Product sales 8.4 11.9 8.5 13.0 (17.4) (23.5)
------ ----- ----- -----
Total revenues 100.0% 100.0% 100.0% 100.0% 16.3 17.2
====== ===== ===== =====
Cost of revenues:
Cost of service revenues 69.6% 71.8% 70.9% 72.4% 17.1 20.7
Cost of product sales 76.5 72.9 76.7 72.3 (13.4) (18.9)
------ ----- ----- -----
Total cost of revenues 70.2 71.9 71.4 72.4 13.4 15.6
------ ----- ----- -----
Gross profit 29.8 28.1 28.6 27.6 23.6 21.6
Selling, general and
administrative expenses 15.4 16.4 16.3 17.2 9.1 11.6
Depreciation and amortization 7.2 4.3 7.3 4.5 97.8 88.6
------ ----- ----- -----
Operating income 7.2 7.4 5.0 5.9 13.2 (1.2)
Other income (expense):
Equity in earnings of
foreign affiliates .6 1.4 1.2 1.4 (50.7) (.8)
Interest (1.7) (1.1) (1.6) (1.1) 78.4 86.0
Other, net .2 (.1) (.1) .1 * *
------ ----- ----- -----
Income before income taxes 6.3 7.6 4.5 6.3 (3.1) (14.8)
Income tax expense 2.5 2.9 1.8 2.4 1.9 (10.4)
------ ----- ----- -----
Net income 3.8% 4.7% 2.7% 3.9% (6.2) (17.6)
====== ===== ===== =====
________________
* Not meaningful.
</TABLE>
RESULTS OF OPERATIONS
Revenues for the three months ended July 31, 1998 increased
$11,003,000 or 16.3% to $78,686,000 while revenues for the six
months ended July 31, 1998 increased $21,594,000 or 17.2% to
$147,027,000 from the three and six months ended July 31, 1997.
Water well drilling and maintenance revenues increased 13.8% to
$37,793,000 and 11.9% to $67,948,000 for the three and six
months ended July 31, 1998, respectively, compared to revenues of
$33,207,000 and $60,702,000 for the three and six months ended
July 31, 1997, respectively. The increases were primarily the
result of the Hydro Acquisition and the previously announced
acquisition of a Louisiana drilling company.
Mineral exploration drilling revenues increased 87.2% to
$21,375,000 and 59.7% to $43,342,000 for the three and six months
ended July 31, 1998, respectively, from $11,420,000 and
$27,135,000 for the three and six month periods ended July 31,
1997, respectively. The increases were the result of the Stanley
Acquisition in July, 1997 and other smaller acquisitions since
that time. Exclusive of these acquisitions, mineral exploration
revenues were down 31.4% and 41.8% for the three and six month
periods ended July 31, 1998, respectively, due to lower demand
for the Company's services as a result of the decrease in
exploration and development activities conducted by mining
companies. Mineral exploration is
<PAGE>
highly speculative and is influenced by a variety of factors,
including the prevailing prices for various metals which often
fluctuate widely. In this connection, the recent decline in the
price of various metals could continue to impact the level of
mineral exploration and development activities conducted by
mining companies and could have a material adverse effect on the
Company.
Geotechnical drilling revenues decreased 35.5% to $6,667,000 and
1.1% to $12,917,000 for the three and six months ended July 31,
1998, respectively, compared to revenues of $10,343,000 and
$13,064,000 for the three and six months ended July 31, 1997,
respectively. Exclusive of the Company's previously announced
ground freeze project in Timmins, Ontario, Canada which was
substantially completed during the first quarter of fiscal 1999,
geotechnical drilling revenues increased 33.4% and 34.9% for the
three and six months ended July 31, 1998, respectively, as a
result of growing demand for the Company's services in these
markets.
Environmental drilling revenues increased 33.0% to $6,207,000 and
25.8% to $10,327,000 for the three and six months ended July 31,
1998, respectively, from $4,666,000 and $8,206,000 for the three
and six months ended July 31, 1997, respectively. The Company
believes the increases were largely attributable to an increase
in the number of larger and more technically demanding projects.
Product sales decreased 17.4% to $6,644,000 and 23.5% to
$12,493,000 for the three and six months ended July 31, 1998,
respectively, from $8,047,000 and $16,326,000 for the three and
six months ended July 31, 1997, respectively. The decreases were
primarily a result of lower levels of activity in the mining
industry as previously discussed.
Gross profit as a percentage of revenues was 29.8% and 28.6% for
the three and six months ended July 31, 1998, respectively,
compared to 28.1% and 27.6% for the same periods last year. The
increase in gross profit as a percentage of revenues was
primarily attributed to the Company realizing better than
previously expected gross profit margins on certain complex
international projects which were finalized in the current
quarter.
Selling, general and administrative expenses increased to
$12,135,000 and $23,939,000 (or 15.4% and 16.3% of revenues) for
the three and six months ended July 31, 1998, respectively,
compared to $11,120,000 and $21,447,000 (or 16.4% and 17.2% of
revenues) for the three and six months ended July 31, 1997,
respectively. The period-to-period dollar increases were
primarily a result of the Stanley and Hydro Acquisitions.
Depreciation and amortization increased to $5,674,000 and
$10,754,000 for the three and six months ended July 31, 1998,
respectively, compared to $2,869,000 and $5,701,000 for the same
periods last year. The increases in depreciation and
amortization were primarily a result of the Stanley and Hydro
Acquisitions in addition to capital expenditures made during the
year.
<PAGE>
Equity in earnings of foreign affiliates was $482,000 and
$1,784,000 for the three and six months ended July 31, 1998,
respectively, compared to $978,000 and $1,798,000 for the same
periods last year. The decrease for the three months ended July
31, 1998 was a result of lower exploration and development
activities conducted by mining companies in Latin America. The
decrease offset an increase in the three months ended April 30,
1998 which occurred as a result of improved weather conditions
from the prior period when projects were delayed as a result of
heavy rains and flooding.
Interest expense increased $574,000 and $1,157,000 for the three
and six months ended July 31, 1998, respectively, as compared to
the three and six months ended July 31, 1997. The increases were
primarily a result of additional borrowings made to finance
acquisitions and capital expenditures during the periods.
Income taxes were $1,989,000 and $2,673,000 for the three and six
months ended July 31, 1998, respectively, compared to $1,952,000
and $2,983,000 for the same periods last year. The changes from
the prior period were a result of lower income before taxes
compared to the prior year offset by an increase in the effective
tax rate to 40% from 38% last year. The effective tax rate
increased primarily as a result of the change in the Company's
international operations and their expected effect on the
Company's consolidated operating results.
CHANGES IN FINANCIAL CONDITION
Cash from operations was $3,531,000 for the six months ended July
31, 1998 compared to $7,202,000 for the same period last year.
The change in cash from operations was primarily a result of
increases in working capital required for acquired operations and
continued expansion into Africa. Cash from operations and
borrowings under the Company's available credit agreement were
used for additions to property and equipment of $8,210,000 and an
acquisition during the six months ended July 31, 1998.
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.
The Company has undergone an internal assessment of the impact of
the year 2000 issue and is in the process of modifying systems as
necessary. Based on this review, the Company presently believes
the year 2000 issue will not pose significant operational
problems for its computer systems. However, the Company intends
to continue to use internal resources to test its systems for
year 2000 compliance and believes the compliance process will be
completed timely and modification costs will be insignificant.
<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 21, 1998.
Set forth below is a brief description of each matter voted upon
at the meeting and the results of the balloting:
a) Election of Todd A. Fisher as a Class III Director to
hold office for a term expiring at the 2001 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
--------- ------- ------------------
9,098,365 -0- 403,302
b) Election of Edward A. Gilhuly as a Class III Director to
hold office for a term expiring at the 2001 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
--------- ------- ------------------
9,329,465 -0- 172,202
c) Ratification and approval of the selection of the
accounting firm of Deloitte and Touche LLP as the
independent auditors of the Company for the fiscal year
ended January 31, 1998:
For Against Withheld Authority
--------- ------- ------------------
9,481,034 3,015 17,618
<PAGE>
ITEM 5 - Other Information
NONE
ITEM 6 - Exhibits and Reports on Form 8-K
The exhibits filed with or incorporated by reference in this
report are listed below:
Exhibit No. Description
10(1) Letter agreement between the Company and Bank
of America National Trust and Savings
Association dated May 8, 1998, confirming the
terms and conditions of an interest rate swap
agreement.
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 8, 1998 /s/ A.B. Schmitt
-------------------------------
A.B. Schmitt, President
and Chief Executive Officer
DATE: September 8, 1998 /s/ Jerry W. Fanska
--------------------------------
Jerry W. Fanska, Vice President
Finance and Treasurer
TO: Layne Inc ("Counterparty")
ATTN: Jerry Fanska
FAX: 001 913 362 8823
FROM: Bank of America National Trust and Savings Association
("BofA"),
26 Elmfield Road,
Bromley,
Kent,
BR1 1WA,
England
Attn: Global Derivative Operations
U.S.A. TOLL FREE NUMBER U.K. LOCAL NUMBER
Tel No: 1 (888) 624-0164 0181-313-2659
Fax No: 1 (888) 624-0166 0181-313-2694
DATE: May 8,1998
RE: USD 25,000,000.00 Swap Transaction commencing May 15,
1998
Our Confirmation Reference No. SW37455
Dear Sir/Madam:
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between us on the
Trade Date specified below (the "Swap Transaction"). This letter
agreement constitutes a "Confirmation" under the ISDA Agreement
defined below.
The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swaps and
Derivatives Association, Inc. ("ISDA")) are incorporated into
this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this
Confirmation will govern.
1. This Confirmation supplements, forms part of, and is subject
to, the Interest Rate and Currency Exchange Agreement dated
as of June 14, 1993 as amended and supplemented from time to
time (the "Agreement"), between you and us. All provisions
contained in the Agreement govern this Confirmation except as
expressly modified below.
<PAGE>
THIS FACSIMILE TRANSMISSION WILL BE THE ONLY WRITTEN
COMMUNICATION REGARDING THIS SWAP TRANSACTION. Pursuant to
ISDA guidelines, this facsimile transmission will be
sufficient for all purposes to evidence a binding supplement
to the Agreement. However, should you have an internal
requirement for confirmations with an original signature, we
request that you sign and return this Confirmation by
facsimile, whereupon, we will add an original signature to
the fully executed Confirmation, and forward it to you by
mail.
2. The terms of the particular Swap Transaction to which this
Confirmation relates are as follows:
Notional Amount: USD 25,000,000.00
Trade Date: May 7,1998
Effective Date: May 15,1998
Termination Date: May 15, 2002 subject to adjustment
in accordance with the Modified
Following Business Day Convention.
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Rate
Payer Payment
Dates: Each 15th of February, May, August
and November, commencing on August
15, 1998 up to and including the
Termination Date.
Fixed Amount: Calculation x Fixed x Fixed Rate Day
Amount Rate Count Fraction
Fixed Rate: 5.96500 percent per annum
Fixed Rate Day Count
Fraction: Actual/360
Floating Amounts:
Floating Rate Payer: BofA
Floating Rate
Payer Payment
Dates: Each 15th of February, May, August
and November, commencing August 15,
1998 up to and including the
Termination Date.
Floating Rate for
Initial Calculation
Period: To be determined
<PAGE>
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 3 months
Spread: None
Floating Rate Day Count
Fraction: Actual/360
Reset Dates: First Day of each Calculation Period
Compounding: Inapplicable
Business Days: New York & London
Business Day Convention: Modified Following
Calculation Agent: Bank of America
3. Account Details:
Payments to BofA: Fed Funds to Bank of America NT and
SA San Francisco ABA NO. 1210-0035-8
BISD Acct No. 33006-83980 Attn:
Interest Rate Swap Operations
4. Offices:
Office of BofA: San Francisco
Office of Counterparty: Mission Woods
Variations to the
Agreement for this
Swap Transaction: None
Please confirm your agreement to be bound by the terms stated
herein by executing the copy of this Confirmation enclosed for
that purpose and returning it to us or by sending to us a telex
or letter, within 24 hours of receipt of this Confirmation to
Bank of America NT & SA San Francisco Telex No. 249839 Answer
Back OPRST UR or U.S.A. Toll Free Fax No: 1 (888) 624-
0166 or U.K. Local Fax No: 0181-313-2694 Attention: Global
Derivatives Operations, substantially in the form below:
<PAGE>
Quote
We acknowledge receipt of your rapidfax dated May 8, 1998 with
respect to the Swap Transaction entered into on May 7, 1998
between Layne Inc and Bank of America National Trust and
Savings Association with a Notional Amount of USD
25,000,000.00 and a Termination Date of May 15, 2002, and
confirm our agreement to be bound by the terms specified in
such rapidfax.
Unquote
This Confirmation shall be conclusively deemed accurate and
complete by Counterparty if not objected to within two (2)
Business Days from the date of receipt.
Yours sincerely,
For and on behalf of:
Bank of America National
Trust and Savings Association
By: /s/ Steven A. Saratore
--------------------------
Name: Steven A. Saratore
--------------------------
Title: Senior Authorized Officer
--------------------------
Confirmed as of the
date first above written:
Layne lnc
By: /s/ Jerry W. Fanska
---------------------
Name: Jerry W. Fanska
---------------------
Title: V.P. Finance
---------------------
<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-31-1999
<PERIOD-END> JUL-31-1998
<CASH> 3,461
<SECURITIES> 0
<RECEIVABLES> 60,841
<ALLOWANCES> 2,682
<INVENTORY> 27,620
<CURRENT-ASSETS> 102,454
<PP&E> 175,908
<DEPRECIATION> 86,214
<TOTAL-ASSETS> 249,053
<CURRENT-LIABILITIES> 54,558
<BONDS> 67,500
0
0
<COMMON> 116
<OTHER-SE> 115,932
<TOTAL-LIABILITY-AND-EQUITY> 249,053
<SALES> 12,493
<TOTAL-REVENUES> 147,027
<CGS> 104,958
<TOTAL-COSTS> 115,712
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,503
<INCOME-PRETAX> 6,684
<INCOME-TAX> 2,673
<INCOME-CONTINUING> 4,011
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,011
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
