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 April 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 33-48432
LAYNE CHRISTENSEN COMPANY
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 48-0920712
- -------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
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 11,647,037 shares of common stock, $.01 par value
per share, outstanding on May 31, 1999.
<PAGE>
PART I
ITEM 1. Financial Statements
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
April 30, January 31,
1999 1999
---------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,213 $ 2,094
Customer receivables, less allowance
of $3,367 and $3,064, respectively 45,521 42,057
Costs and estimated earnings in excess of
billings on uncompleted contracts 8,980 7,854
Inventories 31,276 31,286
Deferred income taxes 9,777 9,571
Other 7,796 8,991
--------- ---------
Total current assets 105,563 101,853
--------- ---------
Property and equipment:
Land 9,439 9,340
Buildings 16,626 16,490
Machinery and equipment 164,580 163,227
--------- ---------
190,645 189,057
Less - Accumulated depreciation (100,921) (96,217)
--------- ---------
Net property and equipment 89,724 92,840
--------- ---------
Other assets:
Investment in foreign affiliates 19,727 19,732
Goodwill and other intangible assets,
at cost less accumulated amortization 33,184 32,755
Other 4,865 4,323
--------- ---------
Total other assets 57,776 56,810
--------- ---------
$ 253,063 $ 251,503
========= =========
</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>
April 30, January 31,
1999 1999
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 16,954 $ 17,202
Current maturities of long-term debt 3,571 -
Accrued compensation 10,356 11,223
Accrued insurance expense 7,827 7,298
Other accrued expenses 9,243 11,519
Billings in excess of costs and estimated
earnings on uncompleted contracts 8,152 8,400
--------- ---------
Total current liabilities 56,103 55,642
--------- ---------
Noncurrent and deferred liabilities:
Long-term debt 63,929 63,500
Deferred income taxes 2,546 2,283
Accrued insurance expense 5,454 5,454
Other 2,384 2,439
Minority interest 9,587 8,915
--------- ---------
Total noncurrent and deferred liabilities 83,900 82,591
--------- ---------
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, 11,647,037 and 11,641,192
shares issued and outstanding, respectively 116 116
Capital in excess of par value 83,182 83,095
Retained earnings 35,601 36,815
Accumulated other comprehensive loss (5,687) (6,604)
Notes receivable from management stockholders (152) (152)
--------- ---------
Total stockholders' equity 113,060 113,270
--------- ---------
$ 253,063 $ 251,503
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<CAPTION>
Three Months
Ended April 30,
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
Net service revenues $ 66,193 $ 62,492
Net product sales 3,840 5,849
--------- ---------
Total 70,033 68,341
--------- ---------
Cost of revenues (exclusive of depreciation
shown below):
Cost of service revenues 48,611 45,256
Cost of product sales 2,914 4,502
--------- ---------
Total 51,525 49,758
--------- ---------
Gross profit 18,508 18,583
Selling, general and administrative expenses 13,621 11,804
Depreciation and amortization 5,839 5,080
--------- ---------
Operating income (loss) (952) 1,699
Other income (expense):
Equity in earnings of foreign affiliates 101 1,302
Interest (1,170) (1,197)
Other, net 197 (94)
--------- ---------
Income (loss) before income taxes (1,824) 1,710
Income tax expense (benefit) (839) 684
Minority interest, net of income taxes of $195 (229) -
--------- ---------
Net income (loss) $ (1,214) $ 1,026
========= =========
Basic earnings (loss) per share $ (0.10) $ 0.09
========= =========
Diluted earnings (loss) per share $ (0.10) $ 0.09
========= =========
Weighted average number of common and dilutive
equivalent shares outstanding:
Weighted average shares outstanding 11,642,000 11,633,000
Dilutive stock options - 360,000
---------- ----------
11,642,000 11,993,000
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
<CAPTION>
Three Months
Ended April 30,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ (1,214) $ 1,026
Adjustments to reconcile net income (loss) to
cash used in operations:
Depreciation and amortization 5,839 5,080
Deferred income taxes (27) (509)
Equity in earnings of foreign affiliates (101) (1,302)
Dividends received from foreign affiliates 106 150
Minority interest 424 -
Gain from disposal of property and equipment (165) (80)
Changes in current assets and liabilities
(exclusive of effects of acquisitions):
Increase in customer receivables (3,291) (54)
Increase in costs and estimated earnings in
excess of billings on uncompleted contracts (1,260) (953)
(Increase) decrease in inventories 63 (1,387)
Decrease in other current assets 1,207 286
Decrease in accounts payable and accrued
expenses (2,886) (6,460)
Increase (decrease)in billings in excess of
costs and estimated earnings on uncompleted
contracts (409) 1,980
Other, net 487 1,611
------- -------
Cash used in operating activities (1,227) (612)
------- -------
Cash flow from investing activities:
Additions to property and equipment (2,157) (5,640)
Proceeds from disposal of property and equipment 306 152
Acquisitions of businesses, net of cash acquired - (6,293)
------- -------
Cash used in investing activities (1,851) (11,781)
------- -------
Cash flow from financing activities:
Net borrowings under revolving facility 4,000 15,000
Payments on notes receivable from management
stockholders - 23
------- -------
Cash from financing activities 4,000 15,023
------- -------
Effects of exchange rate changes on cash (803) 220
------- -------
Net increase in cash and cash equivalents 119 2,850
Cash and cash equivalents at beginning of period 2,094 2,954
------- -------
Cash and cash equivalents at end of period $ 2,213 $ 5,804
======= =======
</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 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, 1999 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 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):
Three Months Ended April 30,
----------------------------
1999 1998
----------- -----------
Income taxes $ 138 $2,498
Interest 1,561 1,536
During the first quarter of fiscal 2000, the Company issued 5,845
shares of common stock and 39,812 stock options to employees
related to fiscal 1999 compensation awards. The total value of
these awards was approximately $87,000, which was accrued at
January 31, 1999.
2. Inventories
The Company values inventories at the lower of cost (first-in,
first-out) or market (in thousands):
<TABLE>
<CAPTION>
As of
---------------------------
April 30, January 31,
1999 1999
----------- -----------
<S> <C> <C>
Raw materials $ 1,561 $ 1,627
Work in process 764 1,788
Finished products, parts and supplies 28,951 27,871
----------- ----------
Total $ 31,276 $ 31,286
=========== ===========
</TABLE>
<PAGE>
3. Comprehensive Income
Components of comprehensive income (loss) are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
April 30,
---------------------
1999 1998
-------- --------
<S> <C> <C>
Net income (loss) $(1,214) $ 1,026
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments 874 772
Unrealized gain (loss) on available for sale
investments 19 (318)
Change in unrecognized pension liability 24 24
------- -------
Comprehensive income (loss) $ (297) $ 1,504
======= =======
</TABLE>
The components of accumulated other comprehensive loss for the
three months ended April 30, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
Unrealized Accumulated
Cumulative Gain (Loss) Unrecognized Other
Translation On Pension Comprehensive
Adjustment Investments Liability Income (Loss)
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, February 1, 1999 $ (5,202) $ (822) $ (580) $ (6,604)
Period Change 874 19 24 917
---------- ---------- ----------- ------------
Balance, April 30, 1999 $ (4,328) $ (803) $ (556) $ (5,687)
========== ========== ========== ============
</TABLE>
4. Operating Segments
The Company is a multi-national company operating predominantly
in two operating segments. The first operating segment includes
the Company's drilling operations with wholly owned operations in
the United States, Australia, East Africa, Mexico, Canada,
Indonesia and Thailand, as well as a 50%-owned joint venture in
West Africa, which are consolidated into the Company's April 30,
1999 financial statements. The drilling operation segment
derives its revenues from water well drilling and maintenance,
mineral exploration drilling, geotechnical drilling and
environmental drilling and services. The second operating
segment includes the manufacturing and supply of drilling
equipment, parts and supplies. The manufacturing and supply
operations are primarily in the United States.
Revenues and operating income pertaining to the Company's
operating segments are presented below. Total revenues of
foreign subsidiaries are those revenues related to the operations
of those subsidiaries. Intersegment sales are accounted for
based on the estimated fair market value of the products sold.
In computing operating income for foreign operations, no
allocations of general corporate expenses have been made.
Operating segment revenues and operating income are summarized as
follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
April 30,
-----------------------
1999 1998
-------- --------
<S> <C> <C>
REVENUES
Drilling
United States $53,673 $40,253
------- -------
Foreign:
Canada 1,560 6,506
Australia 2,754 3,745
Africa 6,125 9,596
Other foreign 2,081 2,392
------- -------
Total foreign 12,520 22,239
------- -------
Total drilling 66,193 62,492
------- -------
Manufacturing and Supply 5,821 9,697
Intersegment revenues (1,981) (3,848)
------- -------
Total Manufacturing and Supply 3,840 5,849
------- -------
Total Revenues $70,033 $68,341
======= =======
OPERATING INCOME
Drilling
United States $ 3,519 $ 2,198
------- -------
Foreign:
Canada (36) 1,422
Australia (147) 244
Africa (1,521) (252)
Other foreign (441) (43)
------- -------
Total foreign (2,145) 1,371
------- -------
Total drilling 1,374 3,569
------- -------
Manufacturing and Supply (918) (97)
Corporate (1,408) (1,773)
------- -------
Total Operating Income (Loss) $ (952) $ 1,699
======= =======
</TABLE>
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 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
<PAGE>
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
for 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.
6. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This
statement requires companies to record derivatives on the balance
sheet as assets and liabilities, measured at fair value. Gains
and losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. This
statement, effective for fiscal years beginning after June 15,
1999, is not expected to have a material impact on the Company's
consolidated financial statements.
========================================================
<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.
Demand for the Company's mineral exploration drilling services
and products depends upon the level of mineral exploration and
development activities conducted by mining companies,
particularly with respect to gold and copper. Mineral
exploration is highly speculative and is influenced by a variety
of factors, including the prevailing prices for various metals
that often fluctuate widely. In this connection, the decline in
the prices of various metals has continued to adversely impact
the level of mineral exploration and development activities
conducted by mining companies and has had, and could continue to
have, a material adverse effect on the Company.
Results of Operations
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>
Three Months Period-to-Period
Ended April 30, Change
1999 1998 Three Months
---- ---- ----------------
<S> <C> <C> <C>
Revenues:
Water well drilling and maintenance 52.8% 44.1% 22.5%
Mineral exploration drilling 20.7 32.2 (33.9)
Geotechnical drilling 14.6 9.1 63.3
Environmental drilling 6.4 6.0 9.6
----- -----
Total net service revenues 94.5 91.4 5.9
Product sales 5.5 8.6 (34.3)
----- -----
Total net revenues 100.0% 100.0% 2.5
===== =====
Cost of revenues:
Cost of service revenues 73.4% 72.4% 7.4
Cost of product sales 75.9 77.0 (35.3)
----- -----
Total cost of revenues 73.6 72.8 3.6
----- -----
Gross profit 26.4 27.2 (0.4)
Selling, general and administrative
expenses 19.4 17.3 15.4
Depreciation and amortization 8.4 7.4 14.9
----- -----
Operating income (loss) (1.4) 2.5 *
Other income (expense):
Equity in earnings of foreign
affiliates 0.2 1.9 (92.2)
Interest (1.7) (1.8) (2.3)
Other, net 0.3 (.1) *
----- -----
Income (loss) before income taxes (2.6) 2.5 *
Net income tax expense (benefit) (1.2) 1.0 *
Minority interest, net of income taxes (0.3) 0.0 *
----- -----
Net income (loss) (1.7)% 1.5% *
===== =====
_______________
* Not meaningful.
</TABLE>
RESULTS OF OPERATIONS
Revenues for the three months ended April 30, 1999 increased
$1,692,000 or 2.5% to $70,033,000, compared to $68,341,000 for
the three months ended April 30, 1998. Water well drilling and
maintenance revenues increased 22.5% to $36,954,000 for the three
months ended April 30, 1999, compared to revenues of $30,155,000
for the three months ended April 30, 1998. The increase in water
well drilling and maintenance revenues was primarily the result
of the acquisition of certain assets of Hydro Group, Inc., a New
Jersey based drilling contractor, in March, 1998 (the Hydro
Acquisition ). Mineral exploration drilling revenues decreased
33.9% to $14,515,000 for the three months ended April 30, 1999,
from $21,967,000 for the three months ended April 30, 1998. The
decrease was primarily a result of continued lower demand for the
Company's services as a result of the decrease in exploration and
development activities conducted by mining companies. This was
partially offset by the increased
<PAGE>
revenue from the previously announced joint venture in West
Africa with an Australian mineral exploration company.
Geotechnical drilling revenues increased 63.3% to $10,209,000 for
the three months ended April 30, 1999, compared to revenues of
$6,250,000 for the three months ended April 30, 1998. Exclusive
of the Company's ground freeze project in Timmins, Ontario,
Canada ( Timmins Project ), which was substantially completed in
the first quarter of fiscal 1999, geotechnical drilling revenues
increased 173.5% for the three months ended April 30, 1999. The
increase in the base geotechnical business revenues was primarily
a result of the Company's development of recently purchased
technologies to serve this market. Environmental drilling
revenues increased 9.6% to $4,515,000 for the three months ended
April 30, 1999, from $4,120,000 for the three months ended April
30, 1998. The Company believes the increase in revenue was
primarily the result of increased activity at certain regulatory
and industrial environmental projects. Product sales decreased
34.3% to $3,840,000 for the three months ended April 30, 1999,
from $5,849,000 for the three months ended April 30, 1998. The
decrease was a result of the continued lower demand for the
Company's services in the mining industry as previously
discussed.
Gross profit as a percentage of revenues was 26.4% for the three
months ended April 30, 1999, compared to 27.2% for the same
period last year. Exclusive of the Timmins Project, gross profit
as a percentage of revenue remained constant at 26.4% in both
quarters.
Selling, general and administrative expenses increased to
$13,621,000 or 19.4% of revenues for the three months ended April
30, 1999, compared to $11,804,000 or 17.3% of revenues for the
three months ended April 30, 1998. The period-to-period dollar
increase was primarily a result of increased selling expenses
arising from the Hydro Acquisition and various other smaller
acquisitions. The increase as a percentage of revenue was due to
the relatively higher levels of fixed and semi-variable costs
related to the Company's remote international mineral exploration
operations.
Depreciation and amortization increased to $5,839,000 for the
three months ended April 30, 1999, compared to $5,080,000 for the
same period last year. The increase in depreciation and
amortization was a result of the Hydro Acquisition and additions
to property and equipment since last year.
Equity in earnings of foreign affiliates was $101,000 for the
three months ended April 30, 1999, compared to $1,302,000 for the
same period last year. The decrease from the previous period was
primarily a result of lower exploration and development
activities conducted by mining companies in Latin America.
An income tax benefit of $644,000 was recorded for the three
months ended April 30, 1999, compared to income tax expense of
$684,000 in the same period last year. The effective tax rate
for the quarter ended April 30, 1999 was 46%, compared to 40% for
the same quarter last year.
<PAGE>
CHANGES IN FINANCIAL CONDITION
Cash used in operations was $1,227,000 for the three months ended
April 30, 1999 compared to $612,000 used for the same period last
year. The change in cash used in operations was primarily a
result of reduced earnings during the period and a decrease in
accrued expenses resulting from various accrued compensation
payments during the quarter. Borrowings under the Company's
available credit agreement, were primarily used for additions to
property and equipment of $2,157,000 and various compensation
payments, as noted above, during the three months ended April 30,
1999.
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.
YEAR 2000 DISCUSSION
The Year 2000 ("Y2K") problem relates to the fact that many
computer programs use only two digits to refer to a year. As a
result, many computer programs do not properly recognize a year
that begins with "20" instead of "19" (the "Y2K Issue"). The
Company believes that issues related to Y2K compliance of its
information technology ("IT") and non-information technology
("non-IT") systems should not have a material adverse impact on
its business operations or financial results. Further, the
Company believes that the estimated costs of Y2K compliance will
not be material. Other than the Company's financial reporting
systems, the nature of the Company's business is such that it is
generally not reliant upon date sensitive IT and non-IT systems.
Readiness
In the fall of 1995, the Company initiated efforts to become Y2K
compliant. These efforts included, in part, a review of six
types of IT and non-IT systems that the Company believed might be
subject to the Y2K Issue. The identified systems included
personal computers, networks, mainframes, telecommunication
equipment, automated control/manufacturing equipment and facility
security/environmental control equipment. The review conducted
by the Company evaluated the operating systems, application
software and IT and non-IT hardware used in each of the six types
of identified systems. The Company estimates that approximately
90% of its Y2K testing and remediation plan has been completed.
The Company expects to substantially complete its Y2K testing and
remediation plan by the end of July 1999.
In conducting its business, the Company does not rely upon a
limited number of third party vendors or customers. No single
vendor or customer accounts for more than 10% of the Company's
purchases or sales, respectively. In addition, there are
generally a number of alternative vendors from which the Company
can obtain its supplies and services. As a result, the Company
does not believe that Y2K problems experienced by third parties
will have a material adverse impact on the
<PAGE>
Company's business operations or financial results.
Nevertheless, the Company is in the process of conducting a
review of the Y2K readiness of its major vendors (both of
products and services) and customers. The Company's belief that
it will not be adversely impacted by the Y2K readiness of third
parties with which it conducts business is based not only upon
the number and diversity of its customer and vendor base but also
upon the Y2K compliance that is anticipated to be achieved by the
majority of its customers and vendors. In light of the fact that
the Company's position is based, in part, upon information
supplied by third parties, there is of necessity an element of
uncertainty in the Company's assessment.
Costs
The Company is primarily relying upon internal resources to
implement its Y2K readiness plan and to upgrade and/or replace IT
and non-IT systems that the Company believes might be subject to
the Y2K Issue. Accordingly, much of the cost associated with its
Y2K efforts have been incurred through the reallocation of the
Company's internal resources. Over approximately the past three
fiscal years and through the end of the first quarter of calendar
1999, the Company estimates that it has expended approximately
$1.5 million in allocated internal resources and incremental
costs for routine IT and non-IT hardware and software
replacements. All of these hardware and software replacements
have been Y2K compliant. The Company will continue its routine
upgrading of IT and non-IT hardware and software during calendar
1999, all of which will also be Y2K compliant. The estimated
costs of allocated internal resources and routine systems
upgrades during the remainder of the year ending January 31, 2000
will be less than $500,000. The Company believes that the
prospective costs of Y2K compliance will not have a material
adverse impact on its financial position or results of
operations. This conclusion is based, in part, upon the
Company's belief that it will not incur significant Y2K related
costs on behalf of third parties with which the Company conducts
business. The Company expects cash flows from operations to be
sufficient to fund the costs associated with Y2K compliance.
Risks
As the nature of the Company's business is such that it is not
generally dependent upon date sensitive data for the production
of its goods and services, the Company believes that any problems
associated with the Y2K Issue will not have a material adverse
impact on the Company's business operations or financial results.
In spite of these presumptions, the inherent uncertainty
associated with the Y2K Issue makes it impossible for the Company
to reach a definitive conclusion as to the actual impact of the
Y2K Issue on its business operations and financial results. This
is particularly true with respect to the Company's foreign
operations, such as in Africa and South America, where the state
of overall Y2K readiness throughout such countries is unclear.
Any significant problems associated with the Y2K Issue in one or
more of those countries in critical services or industries, such
as financial services or utilities and petroleum industries,
could have a material adverse impact on the Company's operations
in those countries and on its overall financial results. As a
result,
<PAGE>
the Company will continue to review and update, where necessary,
its Y2K strategy and to develop Y2K contingency plans. Further,
the costs and timetables in which the Company plans to complete
the Y2K readiness activities, as well as potential outcomes of
non-compliance, are based on management's best estimates. These
estimates were derived using numerous assumptions as to the
occurrence of future events, including actions by third parties
over which the Company has no control.
Contingency Plans
The Company's Y2K efforts are ongoing and its overall plan, as
well as consideration of contingency plans where applicable, will
continue to evolve as new information becomes available.
Currently, the Company believes that internal Y2K problems,
should any occur, could be addressed through the use of
alternative resources and manual processes without a significant
interruption in the Company's business operations. Further, the
Company believes that the nature of its business does not make it
exclusively reliant upon a limited number of third party vendors
or customers. In addition, the Company believes that third party
vendor Y2K problems, should any occur, could be mitigated by
utilizing alternative third party resources without adversely
impacting the Company's business operations or financial results.
<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
NONE
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
4(1) Fourth Amendment dated as of April 20,
1999 to the Amended and Restated Credit
Agreement, dated as of July 25, 1997, among
the Company, Layne Christensen Australia Pty
Limited, National Trust and Savings
Association, various financial institutions,
Bank of America, as Letter of Credit Issuer,
and Bank of America National Trust and Savings
Association, as Agent ("Credit Agreement")
10(1) Fourth Amendment dated as of April
20, 1999 to the Credit Agreement.
10(2) Form of Incentive Stock Option
Agreement between the Company and Management
of the Company effective April 20, 1999.
<PAGE>
10(3) Form of Non-Qualified Stock Option
Agreement between the Company and Management
of the Company effective as of April 20, 1999.
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: June 11, 1999 /s/ A. B. Schmitt
--------------------------------
A.B. Schmitt, President
and Chief Executive Officer
DATE: June 11, 1999 /s/ Jerry W. Fanska
--------------------------------
Jerry W. Fanska, Vice President
Finance and Treasurer
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4(1) Fourth Amendment dated as of April 20, 20
1999 to the Amended and Restated Credit
Agreement, dated as of July 25, 1997,
among the Company, Layne Christensen
Australia Pty Limited, National Trust
and Savings Association, various financial
institutions, Bank of America, as Letter
of Credit Issuer, and Bank of America
National Trust and Savings Association,
as Agent ("Credit Agreement").
10(1) Fourth Amendment dated as of April 20, 28
1999 to the Credit Agreement.
10(2) Form of Incentive Stock Option Agreement 36
between the Company and Management of
the Company effective April 20, 1999.
10(3) Form of Non-Qualified Stock Option 40
Agreement beteween the Company and
Management of the Company effective
as of April 20, 1999.
27(1) Financial Data Schedule.
EXHIBIT 4 (1)
FOURTH AMENDMENT
THIS FOURTH AMENDMENT (this "Fourth Amendment") dated as of
April 20, 1999 is to the Amended and Restated Credit Agreement
(as previously amended, the "Credit Agreement") dated as of July
25, 1997 among LAYNE CHRISTENSEN COMPANY (the "Company"), LAYNE
CHRISTENSEN AUSTRALIA PTY LIMITED ("Layne Australia"), various
financial institutions and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent (in such capacity, the "Agent").
Unless otherwise defined herein, terms defined in the Credit
Agreement are used herein as defined therein.
WHEREAS, the parties hereto have entered into the Credit
Agreement which provides for (i) the Banks to make U.S. Loans to
the Company from time to time, (ii) the Australian Banks to make
Australian Loans to Layne Australia from time to time, and (iii)
the Issuer to issue Letters of Credit for the account of the
Company (or jointly for the account of the Company and any
Subsidiary) from time to time and for the Banks to purchase
participations therein; and
WHEREAS, the parties hereto desire to amend the Credit
Agreement in certain respects as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
SECTION 1. AMENDMENT. Effective on (and subject to the
occurrence of) the Fourth Amendment Effective Date (as defined
below), the Credit Agreement shall be amended as set forth below.
SECTION 1.1 ADDITION OF DEFINITION. The following
definition is added to Section 1.1 in appropriate alphabetical
sequence:
"OPERATING CONTROL means control sufficient to allow
consolidation of the controlled Person in accordance with
GAAP."
SECTION 1.2 AMENDMENT OF DEFINITIONS. The definitions of
"Adjusted EBITA" and "Subsidiary" are amended in their entirety
to read as follows, respectively:
"ADJUSTED EBITA means, for any Computation Period,
EBITA for such Computation Period LESS affiliate equity
earnings, PLUS affiliate dividends (limited to the amount of
affiliate equity earnings) PLUS, for any Computation Period
which includes the Fiscal Quarter ending January 31, 1999,
$5,340,000."
<PAGE>
"SUBSIDIARY means, with respect to any Person, a corporation
or limited liability company (a) of which such Person and/or
its other Subsidiaries own, directly or indirectly, (i) such
number of outstanding shares as have more than 50% of the
ordinary voting power for the election of directors in the
case of a corporation or (ii) in excess of 50% of the
membership interests (including voting control) in the case
of a limited liability company, (b) organized under the laws
of Australia or a state or territory thereof and which is
otherwise a subsidiary of such Person within the meaning of
Section 9 of the Corporations Law of Australia or (c) of
which such Person and/or its other Subsidiaries has
Operating Control. Unless the context otherwise requires,
each reference to Subsidiaries herein shall be a reference
to Subsidiaries of the Company."
SECTION 1.3 AMENDMENT TO INTEREST COVERAGE COVENANT.
Section 10.6.1 is amended in its entirety to read as follows:
"10.6.1 MINIMUM INTEREST COVERAGE. Not permit
the Interest Coverage Ratio for any Computation
Period set forth below to be less than the
applicable ratio set forth below for such
Computation Period:
Computation
Period Ending Ratio
------------- -----
4/30/99 - 1/31/00 1.15 to 1
4/30/00 - 7/31/00 1.35 to 1
10/31/00 - 1/31/01 1.50 to 1
4/30/01 - 7/31/01 1.75 to 1
10/31/01 - 1/31/02 2.25 to 1
Thereafter 2.50 to l."
SECTION 1.4 AMENDMENT TO SECTION 10.11(g). Clause (g) of
Section 10.11 is amended in its entirety to read as follows:
"(g) any loan to a Person to finance the
purchase of real property, personal property,
services or equipment from the Company or any
Subsidiary; PROVIDED that (i) if such loan exceeds a
Dollar Equivalent amount of U.S.$200,000, the Company
or such Subsidiary shall retain a first Lien on any
property or equipment sold to the extent permitted
under applicable law, (ii) the aggregate principal
amount of all such loans to any Person and its
affiliates outstanding at any time shall not exceed a
Dollar Equivalent amount of U.S.$5,000,000 and (iii)
the aggregate principal amount
<PAGE>
of all such loans outstanding at any time shall not
exceed a Dollar Equivalent amount of U.S.$10,000,000;"
SECTION 1.5 AMENDMENT TO SECTION 10.11(j). Clause (j) of
Section 10.11 is amended by (i) deleting the amount "U.S.$15,000,000"
therein and (ii) substituting "U.S.$20,000,000" therefor.
SECTION 1.6 AMENDMENT TO PRICING SCHEDULE. Schedule 1.1(b)
is amended in its entirety by substituting SCHEDULE 1.1(b) hereto
therefor.
SECTION 2. EFFECTIVENESS. The amendments set forth in
SECTION 1 above shall become effective, as of the day and year
first above written, on the date (the "Fourth Amendment Effective
Date") that the Agent shall have received counterparts of this
Fourth Amendment executed by the Company and the Required Banks
and the Company shall have paid to the Agent for the respective
accounts of the applicable Banks an amendment fee of 0.15% of the
Commitment of each Bank approving this Fourth Amendment on or
prior to the Fourth Amendment Effective Date.
SECTION 3. MISCELLANEOUS.
SECTION 3.1 CONTINUING EFFECTIVENESS, ETC. As herein
amended, the Credit Agreement shall remain in full force and
effect and is hereby ratified and confirmed in all respects.
SECTION 3.2 COUNTERPARTS. This Fourth Amendment may be
executed in any number of counterparts and by the different
parties on separate counterparts, and each such counterpart shall
be deemed to be an original but all such counterparts shall
together constitute one and the same Fourth Amendment.
SECTION 3.3 GOVERNING LAW. This Fourth Amendment shall be
a contract made under and governed by the internal laws of the
State of Illinois.
SECTION 3.4 SUCCESSORS AND ASSIGNS. This Fourth Amendment
shall be binding upon the Company, Layne Australia, the Banks and
the Agent and their respective successors and assigns, and shall
inure to the benefit of the Company, Layne Australia, the Banks
and the Agent and the successors and assigns of the Banks and the
Agent.
SECTION 3.5 CONFIRMATION OF COMMITMENT REDUCTION SCHEDULE.
The Company and the Banks acknowledge and agree that, after
giving effect to the voluntary reduction of the Aggregate
Commitment to $80,000,000 by the Company on April 15, 1999, the
remaining scheduled reductions of the Aggregate Commitment are as
set forth on ATTACHMENT 1 hereto.
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first
above written.
LAYNE CHRISTENSEN COMPANY
By: /s/ Jerry W. Fanska
-----------------------------------
Title: Vice President-Finance
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Valerie C. Mills
-----------------------------------
Managing Director
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: /s/ Valerie C. Mills
-----------------------------------
Managing Director
MERCANTILE BANK, as Co-Agent and
as a Bank
By: /s/ Roger A. Lumley
-----------------------------------
Title: Senior Vice President
--------------------------------
MICHIGAN NATIONAL BANK, as Co-Agent
and as a Bank
By: /s/ Christopher J. Mayone
-----------------------------------
Title: Commercial Relationship Manager
--------------------------------
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. Ashby
-----------------------------------
Title: Senior Manager Loan Operations
--------------------------------
SOCIETE GENERALE - CHICAGO BRANCH
By:
-----------------------------------
Title:
--------------------------------
<PAGE>
SCHEDULE 1.1(b)
PRICING SCHEDULE
The Margin, the Facility Fee Rate and the LC Fee Rate (for
the applicable type of Letter of Credit) shall be determined
based on the applicable Debt to Capitalization Ratio as set forth
below.
<TABLE>
<CAPTION>
LC Fee Rate - LC Fee Rate -
Debt to Facility Financial Non-Financial
Capitalization Ratio Margin Fee Rate Letters of Credit Letters of Credit
- -------------------- ------ -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Less than or equal 0.500% 0.250% 0.500% 0.125%
to 0.3 to 1
Greater than 0.30 0.700% 0.300% 0.700% 0.200%
to 1 but less than
0.45 to 1
Equal to or greater 0.875% 0.375% 0.875% 0.250%
than 0.45 to 1
</TABLE>
Effective on the Fourth Amendment Effective Date (as defined
in the Fourth Amendment to this Agreement), the Margin shall be
0.7%, the Facility Fee Rate shall be 0.3%, the LC Fee Rate for
Financial Letters of Credit shall be 0.7% and the LC Fee Rate for
Non-Financial Letters of Credit shall be 0.2% (it being
understood that prior to such date the Margin shall be based on
this SCHEDULE 1.1(b) as in effect prior to the effectiveness of
such Fourth Amendment). Each of the foregoing shall be adjusted,
to the extent applicable, 45 days (or, in the case of the last
Fiscal Quarter of any Fiscal Year, 90 days) after the end of each
Fiscal Quarter beginning with the Fiscal Quarter ending April 30,
1999 based on the Debt to Capitalization Ratio as of the last day
of such Fiscal Quarter; PROVIDED that if the Company fails to
deliver the financial statements required by SECTION 10.1.1 or
10.1.2, as applicable, by the due date therefor, the Margin, the
Facility Fee Rate and the LC Fee Rate (for each type of Letter of
Credit) that would apply if the Debt to Capitalization Ratio were
greater than 0.45 to 1 shall apply from such due date until such
financial statements are delivered.
<PAGE>
REMAINING SCHEDULED COMMITMENT REDUCTIONS
Commitment Aggregate
Reduction Commitment
Date Reduced to:
---------- -----------
July 31, 2000 $78,000,000
October 31, 2000 $74,500,000
January 31, 2001 $71,000,000
April 30, 2001 $67,500,000
July 31, 2001 $64,000,000
October 31, 2001 $60,500,000
January 31, 2002 $57,000,000
April 30, 2002 $53,500,000
July 31, 2002 $ 0
EXHIBIT 10 (1)
FOURTH AMENDMENT
THIS FOURTH AMENDMENT (this "Fourth Amendment") dated as of
April 20, 1999 is to the Amended and Restated Credit Agreement
(as previously amended, the "Credit Agreement") dated as of July
25, 1997 among LAYNE CHRISTENSEN COMPANY (the "Company"), LAYNE
CHRISTENSEN AUSTRALIA PTY LIMITED ("Layne Australia"), various
financial institutions and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent (in such capacity, the "Agent").
Unless otherwise defined herein, terms defined in the Credit
Agreement are used herein as defined therein.
WHEREAS, the parties hereto have entered into the Credit
Agreement which provides for (i) the Banks to make U.S. Loans to
the Company from time to time, (ii) the Australian Banks to make
Australian Loans to Layne Australia from time to time, and (iii)
the Issuer to issue Letters of Credit for the account of the
Company (or jointly for the account of the Company and any
Subsidiary) from time to time and for the Banks to purchase
participations therein; and
WHEREAS, the parties hereto desire to amend the Credit
Agreement in certain respects as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and for
other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties hereto
agree as follows:
SECTION 1. AMENDMENT. Effective on (and subject to the
occurrence of) the Fourth Amendment Effective Date (as defined
below), the Credit Agreement shall be amended as set forth below.
SECTION 1.1 ADDITION OF DEFINITION. The following
definition is added to Section 1.1 in appropriate alphabetical
sequence:
"OPERATING CONTROL means control sufficient to allow
consolidation of the controlled Person in accordance with
GAAP."
SECTION 1.2 AMENDMENT OF DEFINITIONS. The definitions of
"Adjusted EBITA" and "Subsidiary" are amended in their entirety
to read as follows, respectively:
"ADJUSTED EBITA means, for any Computation Period,
EBITA for such Computation Period LESS affiliate equity
earnings, PLUS affiliate dividends (limited to the amount of
affiliate equity earnings) PLUS, for any Computation Period
which includes the Fiscal Quarter ending January 31, 1999,
$5,340,000."
<PAGE>
"SUBSIDIARY means, with respect to any Person, a corporation
or limited liability company (a) of which such Person and/or
its other Subsidiaries own, directly or indirectly, (i) such
number of outstanding shares as have more than 50% of the
ordinary voting power for the election of directors in the
case of a corporation or (ii) in excess of 50% of the
membership interests (including voting control) in the case
of a limited liability company, (b) organized under the laws
of Australia or a state or territory thereof and which is
otherwise a subsidiary of such Person within the meaning of
Section 9 of the Corporations Law of Australia or (c) of
which such Person and/or its other Subsidiaries has
Operating Control. Unless the context otherwise requires,
each reference to Subsidiaries herein shall be a reference
to Subsidiaries of the Company."
SECTION 1.3 AMENDMENT TO INTEREST COVERAGE COVENANT.
Section 10.6.1 is amended in its entirety to read as follows:
"10.6.1 MINIMUM INTEREST COVERAGE. Not permit
the Interest Coverage Ratio for any Computation
Period set forth below to be less than the
applicable ratio set forth below for such
Computation Period:
Computation
Period Ending Ratio
------------- -----
4/30/99 - 1/31/00 1.15 to 1
4/30/00 - 7/31/00 1.35 to 1
10/31/00 - 1/31/01 1.50 to 1
4/30/01 - 7/31/01 1.75 to 1
10/31/01 - 1/31/02 2.25 to 1
Thereafter 2.50 to l."
SECTION 1.4 AMENDMENT TO SECTION 10.11(g). Clause (g) of
Section 10.11 is amended in its entirety to read as follows:
"(g) any loan to a Person to finance the
purchase of real property, personal property,
services or equipment from the Company or any
Subsidiary; PROVIDED that (i) if such loan exceeds a
Dollar Equivalent amount of U.S.$200,000, the Company
or such Subsidiary shall retain a first Lien on any
property or equipment sold to the extent permitted
under applicable law, (ii) the aggregate principal
amount of all such loans to any Person and its
affiliates outstanding at any time shall not exceed a
Dollar Equivalent amount of U.S.$5,000,000 and (iii)
the aggregate principal amount
<PAGE>
of all such loans outstanding at any time shall not
exceed a Dollar Equivalent amount of U.S.$10,000,000;"
SECTION 1.5 AMENDMENT TO SECTION 10.11(j). Clause (j) of
Section 10.11 is amended by (i) deleting the amount "U.S.$15,000,000"
therein and (ii) substituting "U.S.$20,000,000" therefor.
SECTION 1.6 AMENDMENT TO PRICING SCHEDULE. Schedule 1.1(b)
is amended in its entirety by substituting SCHEDULE 1.1(b) hereto
therefor.
SECTION 2. EFFECTIVENESS. The amendments set forth in
SECTION 1 above shall become effective, as of the day and year
first above written, on the date (the "Fourth Amendment Effective
Date") that the Agent shall have received counterparts of this
Fourth Amendment executed by the Company and the Required Banks
and the Company shall have paid to the Agent for the respective
accounts of the applicable Banks an amendment fee of 0.15% of the
Commitment of each Bank approving this Fourth Amendment on or
prior to the Fourth Amendment Effective Date.
SECTION 3. MISCELLANEOUS.
SECTION 3.1 CONTINUING EFFECTIVENESS, ETC. As herein
amended, the Credit Agreement shall remain in full force and
effect and is hereby ratified and confirmed in all respects.
SECTION 3.2 COUNTERPARTS. This Fourth Amendment may be
executed in any number of counterparts and by the different
parties on separate counterparts, and each such counterpart shall
be deemed to be an original but all such counterparts shall
together constitute one and the same Fourth Amendment.
SECTION 3.3 GOVERNING LAW. This Fourth Amendment shall be
a contract made under and governed by the internal laws of the
State of Illinois.
SECTION 3.4 SUCCESSORS AND ASSIGNS. This Fourth Amendment
shall be binding upon the Company, Layne Australia, the Banks and
the Agent and their respective successors and assigns, and shall
inure to the benefit of the Company, Layne Australia, the Banks
and the Agent and the successors and assigns of the Banks and the
Agent.
SECTION 3.5 CONFIRMATION OF COMMITMENT REDUCTION SCHEDULE.
The Company and the Banks acknowledge and agree that, after
giving effect to the voluntary reduction of the Aggregate
Commitment to $80,000,000 by the Company on April 15, 1999, the
remaining scheduled reductions of the Aggregate Commitment are as
set forth on ATTACHMENT 1 hereto.
<PAGE>
Delivered at Chicago, Illinois, as of the day and year first
above written.
LAYNE CHRISTENSEN COMPANY
By: /s/ Jerry W. Fanska
-----------------------------------
Title: Vice President-Finance
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Valerie C. Mills
-----------------------------------
Managing Director
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: /s/ Valerie C. Mills
-----------------------------------
Managing Director
MERCANTILE BANK, as Co-Agent and
as a Bank
By: /s/ Roger A. Lumley
-----------------------------------
Title: Senior Vice President
--------------------------------
MICHIGAN NATIONAL BANK, as Co-Agent
and as a Bank
By: /s/ Christopher J. Mayone
-----------------------------------
Title: Commercial Relationship Manager
--------------------------------
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. Ashby
-----------------------------------
Title: Senior Manager Loan Operations
--------------------------------
SOCIETE GENERALE - CHICAGO BRANCH
By:
-----------------------------------
Title:
--------------------------------
<PAGE>
SCHEDULE 1.1(b)
PRICING SCHEDULE
The Margin, the Facility Fee Rate and the LC Fee Rate (for
the applicable type of Letter of Credit) shall be determined
based on the applicable Debt to Capitalization Ratio as set forth
below.
<TABLE>
<CAPTION>
LC Fee Rate - LC Fee Rate -
Debt to Facility Financial Non-Financial
Capitalization Ratio Margin Fee Rate Letters of Credit Letters of Credit
- -------------------- ------ -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Less than or equal 0.500% 0.250% 0.500% 0.125%
to 0.3 to 1
Greater than 0.30 0.700% 0.300% 0.700% 0.200%
to 1 but less than
0.45 to 1
Equal to or greater 0.875% 0.375% 0.875% 0.250%
than 0.45 to 1
</TABLE>
Effective on the Fourth Amendment Effective Date (as defined
in the Fourth Amendment to this Agreement), the Margin shall be
0.7%, the Facility Fee Rate shall be 0.3%, the LC Fee Rate for
Financial Letters of Credit shall be 0.7% and the LC Fee Rate for
Non-Financial Letters of Credit shall be 0.2% (it being
understood that prior to such date the Margin shall be based on
this SCHEDULE 1.1(b) as in effect prior to the effectiveness of
such Fourth Amendment). Each of the foregoing shall be adjusted,
to the extent applicable, 45 days (or, in the case of the last
Fiscal Quarter of any Fiscal Year, 90 days) after the end of each
Fiscal Quarter beginning with the Fiscal Quarter ending April 30,
1999 based on the Debt to Capitalization Ratio as of the last day
of such Fiscal Quarter; PROVIDED that if the Company fails to
deliver the financial statements required by SECTION 10.1.1 or
10.1.2, as applicable, by the due date therefor, the Margin, the
Facility Fee Rate and the LC Fee Rate (for each type of Letter of
Credit) that would apply if the Debt to Capitalization Ratio were
greater than 0.45 to 1 shall apply from such due date until such
financial statements are delivered.
<PAGE>
REMAINING SCHEDULED COMMITMENT REDUCTIONS
Commitment Aggregate
Reduction Commitment
Date Reduced to:
---------- -----------
July 31, 2000 $78,000,000
October 31, 2000 $74,500,000
January 31, 2001 $71,000,000
April 30, 2001 $67,500,000
July 31, 2001 $64,000,000
October 31, 2001 $60,500,000
January 31, 2002 $57,000,000
April 30, 2002 $53,500,000
July 31, 2002 $ 0
EXHIBIT 10 (2)
LAYNE CHRISTENSEN COMPANY
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT dated __________________ (the "Granting
Date"), is made by and between Layne Christensen Company, a
Delaware corporation (the "Company"), and _________________ (the
"Optionee").
WHEREAS, the Company has adopted the Layne Christensen
Company 1992 Stock Option Plan (the "Plan") pursuant to which the
Company may, from time to time, grant options to Key Employees to
purchase shares of the Company's common stock;
WHEREAS, the Board of Directors has determined that the
Optionee is a Key Employee of the Company or a Subsidiary who has
made or is expected to make a significant contribution to the
Company or a Subsidiary; and
WHEREAS, the Company desires to grant to the Optionee
an incentive stock option (under Section 422 of the Internal
Revenue Code of 1986, as amended) to purchase shares of the
Company's common stock on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual
covenants contained herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. INCORPORATION OF PLAN. The Plan is attached
hereto as EXHIBIT A and incorporated herein by this reference,
and all of the terms and conditions therein shall be deemed to be
included as part of the terms and conditions of this Agreement.
In the event of a conflict, the terms and conditions of the Plan
shall control. All terms used herein which are defined in the
Plan shall have the meanings given them in the Plan.
2. GRANT OF STOCK OPTION. The Company hereby grants
the Optionee an option (the "Option") to purchase at the times
hereinafter set forth, in one or more exercises, all or any part
of an aggregate of ___________ shares of the Company's common
stock (the "Shares") for an exercise price of $______ per share.
3. CONSIDERATION TO THE COMPANY. In consideration of
the granting of this Option by the Company, the Optionee agrees
to render faithful and efficient services to the Company or a
Subsidiary, with such duties and responsibilities as the Company
shall from time to time prescribe. Nothing in this Agreement or
in the Plan shall confer upon the Optionee any right to continue
in the employ of the Company or any Subsidiary or shall interfere
with or restrict in any way the rights of the Company and its
Subsidiaries, which are hereby expressly reserved, to discharge
the Optionee at any time for any reason whatsoever, with or
without cause. In addition, nothing in this Agreement or in the
Plan shall require the Optionee to continue in the employ of the
Company or any Subsidiary.
4. TIMING AND MANNER OF EXERCISE. The Option shall
be and become exercisable as follows: 25% on the day after the
first anniversary of the Granting Date, 50% on the day after the
second anniversary of the Granting Date, 75% on the day after the
third
<PAGE>
anniversary of the Granting Date, and 100% on the day after the
fourth anniversary of the Granting Date.
Provided, however, that the Option shall be 100%
exercisable upon and after a "Change in Control." A Change in
Control shall be deemed to exist if:
(i) less than a majority of the Directors are
persons who were either nominated or selected by the Board; or
(ii) any "person," as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than KKR
Associates, L.P. and/or any of its affiliates, a Director
nominated or selected by the Board or an Officer elected by the
Board, the Company, a subsidiary, an affiliate, or a Company
employee benefit plan, including any trustee of such plan acting
as trustee) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (or a successor to the Company)
representing 35% or more of the combined voting power of the then
outstanding securities of the Company or such successor; or
(iii) (A) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would
result in the Voting Securities (as defined below) of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 80 percent of
the total voting power represented by the Voting Securities of
the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (B) the stockholders of
the Company approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets, or (C) any other
event which the Board determines, in its discretion, would
materially alter the structure of the Company or its ownership.
As used in this paragraph, "Voting Securities" shall mean any
securities of the Company which vote generally in the election of
Directors.
No additional portion of the Option shall become
exercisable after the Optionee's Termination of Employment.
The Option shall expire as to all of the Shares ten
(10) years after the Granting Date except the Option (or a
portion thereof) shall terminate earlier as provided in Section
4.3(a) of the Plan.
The Optionee may exercise the Option for all or any
part of the Shares subject to each installment listed above on or
after the respective exercise date listed above by delivering to
the Company a written notice in accordance with Section 4.3(d) of
the Plan.
5. NOTICES. Any notice to be given under the terms
of this Agreement to the Company shall be addressed to the
Secretary of the Company at Layne Christensen Company, 1900
Shawnee Mission Parkway, Mission Woods, Kansas 66205, and any
notice to be given to the Optionee shall be addressed to him at
the address given beneath his signature hereto. By a notice
given pursuant to this Section 5, either party may hereafter
designate a different address for notices to be given to him.
Any notice which is required to be given to the Optionee shall,
if
<PAGE>
the Optionee is then deceased, be given to the Optionee's
personal representative if such representative has previously
informed the Company of his status and address by written notice
under this Section 5. Any notice shall be deemed duly given when
enclosed in a properly sealed envelope or wrapper addressed as
aforesaid, deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States
Postal Service.
6. NOTIFICATION OF DISPOSITION. The Optionee shall
give prompt notice to the Company of any disposition or other
transfer of any shares of stock acquired under this Agreement if
such disposition or transfer is made (a) within two (2) years
from the Granting Date of the Option with respect to such shares
or (b) within one (1) year after the transfer of such shares to
him. Such notice shall specify the date of such disposition or
other transfer and the amount realized, in cash, other property,
assumption of indebtedness or other consideration, by the
Optionee in such disposition or other transfer.
7. TITLES. Titles are provided herein for
convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.
8. AMENDMENT. This Agreement may be amended only by
a writing executed by the parties hereto which specifically
states that it is amending this Agreement.
9. GOVERNING LAW. The laws of the State of Kansas
shall govern the interpretation, validity and performance of the
terms of this Agreement regardless of the law that might be
applied under principles of conflicts of laws.
10. NON-ASSIGNABILITY. Except as otherwise provided
herein or in the Plan, the Option and the rights and privileges
conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or
similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of the Option, or of any right
or privilege conferred hereby, or upon the levy of any attachment
or similar process upon the rights and privileges conferred
hereby, contrary to the provisions hereby, this Option and the
rights and privileges conferred hereby shall immediately become
null and void.
11. BINDING EFFECT. Except as expressly stated herein
to the contrary, the Agreement shall be binding upon and inure to
the benefit of the respective heirs, legal representatives,
successors and assigns of the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed
and delivered by the parties hereto.
The Company: The Optionee:
LAYNE CHRISTENSEN COMPANY
By:
-------------------------- ---------------------------
Name: Andrew B. Schmitt
Title: President, Chief Address of the Optionee:
Executive Officer
---------------------------
---------------------------
EXHIBIT 10 (3)
LAYNE CHRISTENSEN COMPANY
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated ___________________ (the "Granting
Date"), is made by and between Layne Christensen Company, a
Delaware corporation (the "Company"), and _________________ (the
"Optionee").
WHEREAS, the Company has adopted the Layne Christensen
Company 1996 District Stock Option Plan (the "Plan") pursuant to
which the Company may, from time to time, grant options to Key
Employees to purchase shares of the Company's common stock;
WHEREAS, the Administrative Committee has determined
that the Optionee is a Key Employee of the Company or a
Subsidiary who has made or is expected to make a significant
contribution to the Company or a Subsidiary; and
WHEREAS, the Company desires to grant to the Optionee a
Non-Qualified stock option to purchase shares of the Company's
common stock on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. INCORPORATION OF PLAN. The Plan is attached
hereto as EXHIBIT A and incorporated herein by this reference,
and all of the terms and conditions therein shall be deemed to be
included as part of the terms and conditions of this Agreement.
In the event of a conflict, the terms and conditions of the Plan
shall control. All terms used herein which are defined in the
Plan shall have the meanings given them in the Plan.
2. GRANT OF STOCK OPTION. The Company hereby grants
the Optionee an option (the "Option") to purchase at the times
hereinafter set forth, in one or more exercises, all or any part
of an aggregate of ___________ shares of the Company's common
stock (the "Shares") for an exercise price of $______ per share.
3. CONSIDERATION TO THE COMPANY. In consideration of
the granting of this Option by the Company, the Optionee agrees
to render faithful and efficient services to the Company or a
Subsidiary, with such duties and responsibilities as the Company
shall from time to time prescribe. Nothing in this Agreement or
in the Plan shall confer upon the Optionee any right to continue
in the employ of the Company or any Subsidiary or shall interfere
with or restrict in any way the rights of the Company and its
Subsidiaries, which are hereby expressly reserved, to discharge
the Optionee at any time for any reason whatsoever, with or
without cause. In addition, nothing in this Agreement or in the
Plan shall require the Optionee to continue in the employ of the
Company or any Subsidiary.
4. TIMING AND MANNER OF EXERCISE. The Option shall
be and become exercisable as follows: 25% on the day after the
first anniversary of the Granting Date, 50% on
<PAGE>
the day after the second anniversary of the Granting Date, 75%
on the day after the third anniversary of the Granting Date,
and 100% on the day after the fourth anniversary of the
Granting Date.
Provided, however, that the Option shall be 100%
exercisable upon and after a "Change in Control." A Change in
Control shall be deemed to exist if:
(i) less than a majority of the Directors are
persons who were either nominated or selected by the Board; or
(ii) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than KKR Associates,
L.P. and/or any of its affiliates, a Director nominated or
selected by the Board or an Officer elected by the Board, the
Company, a subsidiary, an affiliate, or a Company employee
benefit plan, including any trustee of such plan acting as
trustee) becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
the Company (or a successor to the Company) representing 35% or
more of the combined voting power of the then outstanding
securities of the Company or such successor; or
(iii) (A) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would
result in the Voting Securities (as defined below) of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
Voting Securities of the surviving entity) at least 80 percent of
the total voting power represented by the Voting Securities of
the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (B) the stockholders of
the Company approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets, or (C) any other
event which the Board determines, in its discretion, would
materially alter the structure of the Company or its ownership.
As used in this paragraph, "Voting Securities" shall mean any
securities of the Company which vote generally in the election of
Directors.
No additional portion of the Option shall become
exercisable after the Optionee's Termination of Employment.
The Option shall expire as to all of the Shares ten
(10) years after the Granting Date except the Option (or a
portion thereof) shall terminate earlier as provided in Section
4.3(a) of the Plan.
The Optionee may exercise the Option for all or any
part of the Shares subject to each installment listed above on or
after the respective exercise date listed above by delivering to
the Company a written notice in accordance with Section 4.3(d) of
the Plan.
5. NOTICES. Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Secretary
of the Company at Layne Christensen Company, 1900 Shawnee Mission
Parkway, Mission Woods, Kansas 66205, and any notice to be given
to the Optionee shall be addressed to him at the address given
beneath his signature hereto. By a
<PAGE>
notice given pursuant to this Section 5, either party may
hereafter designate a different address for notices to be given
to him. Any notice which is required to be given to the Optionee
shall, if the Optionee is then deceased, be given to the
Optionee's personal representative if such representative has
previously informed the Company of his or her status and
address by written notice under this Section 5. Any notice
shall be deemed duly given when enclosed in a properly sealed
envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
6. TITLES. Titles are provided herein for
convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.
7. AMENDMENT. This Agreement may be amended only by
a writing executed by the parties hereto which specifically
states that it is amending this Agreement.
8. GOVERNING LAW. The laws of the State of Kansas
shall govern the interpretation, validity and performance of the
terms of this Agreement regardless of the law that might be
applied under principles of conflicts of laws.
9. NON-ASSIGNABILITY. Except as otherwise provided
herein or in the Plan, the Option and the rights and privileges
conferred hereby shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or
similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of the Option, or of any right
or privilege conferred hereby, or upon the levy of any attachment
or similar process upon the rights and privileges conferred
hereby, contrary to the provisions hereby, this Option and the
rights and privileges conferred hereby shall immediately become
null and void.
10. BINDING EFFECT. Except as expressly stated herein
to the contrary, the Agreement shall be binding upon and inure to
the benefit of the respective heirs, legal representatives,
successors and assigns of the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed
and delivered by the parties hereto.
The Company: LAYNE CHRISTENSEN COMPANY
By:
--------------------------------
Name: Andrew B. Schmitt
Title: President and Chief
Executive Officer
The Optionee:
-------------------------------------
Address of the Optionee:
-------------------------------------
-------------------------------------
-------------------------------------
<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> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-END> APR-30-1999
<CASH> 2,213
<SECURITIES> 0
<RECEIVABLES> 57,868
<ALLOWANCES> 3,367
<INVENTORY> 31,276
<CURRENT-ASSETS> 105,563
<PP&E> 190,645
<DEPRECIATION> 100,921
<TOTAL-ASSETS> 253,063
<CURRENT-LIABILITIES> 56,103
<BONDS> 63,929
0
0
<COMMON> 116
<OTHER-SE> 112,944
<TOTAL-LIABILITY-AND-EQUITY> 253,063
<SALES> 3,840
<TOTAL-REVENUES> 70,033
<CGS> 51,525
<TOTAL-COSTS> 57,364
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,170
<INCOME-PRETAX> (1,824)
<INCOME-TAX> (839)
<INCOME-CONTINUING> (1,214)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,214)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
