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, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 19347
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 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 11,692,310 shares of common stock, $.01
par value per share, outstanding on May 19, 2000.
<PAGE>
PART I
ITEM 1. Financial Statements
<TABLE>
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
April 30, January 31,
2000 2000
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,053 $ 3,751
Customer receivables, less allowance
of $3,462 and $3,437, respectively 50,517 44,785
Costs and estimated earnings in excess of
billings on uncompleted contracts 13,783 11,086
Inventories 28,986 29,974
Deferred income taxes 10,134 10,324
Other 7,550 5,303
--------- ---------
Total current assets 114,023 105,223
--------- ---------
Property and equipment:
Land 9,485 9,435
Buildings 17,314 16,668
Machinery and equipment 165,941 167,579
--------- ---------
192,740 193,682
Less - Accumulated depreciation (112,474) (110,687)
--------- ---------
Net property and equipment 80,266 82,995
--------- ---------
Other assets:
Investment in foreign affiliates 19,278 19,381
Goodwill and other intangible assets,
at cost less accumulated amortization 30,562 33,570
Other 4,130 4,166
--------- ---------
Total other assets 53,970 57,117
--------- ---------
$ 248,259 $ 245,335
========= =========
</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,
2000 2000
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 21,468 $ 16,762
Current maturities of long-term debt 3,571 3,571
Accrued compensation 10,041 12,068
Accrued insurance expense 7,184 7,357
Other accrued expenses 10,008 10,119
Billings in excess of costs and estimated
earnings on uncompleted contracts 9,350 10,101
--------- ---------
Total current liabilities 61,622 59,978
--------- ---------
Noncurrent and deferred liabilities:
Long-term debt 67,857 59,929
Deferred income taxes 322 1,380
Accrued insurance expense 5,088 5,000
Other 1,983 2,052
Minority interest 10,024 10,156
--------- ---------
Total noncurrent and deferred liabilities 85,274 78,517
--------- ---------
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, 11,692,310 and 11,691,129
shares issued and outstanding, respectively 117 117
Capital in excess of par value 83,519 83,463
Retained earnings 26,208 29,150
Accumulated other comprehensive loss (8,329) (5,738)
Notes receivable from management stockholders (152) (152)
--------- ---------
Total stockholders' equity 101,363 106,840
--------- ---------
$ 248,259 $ 245,335
========= =========
</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,
2000 1999
---------- ----------
<S> <C> <C>
Revenues:
Net service revenues $ 70,785 $ 66,193
Net product sales 4,761 3,840
---------- ----------
Total 75,546 70,033
---------- ----------
Cost of revenues (exclusive of depreciation
shown below):
Cost of service revenues 53,617 48,611
Cost of product sales 3,837 2,914
---------- ----------
Total 57,454 51,525
---------- ----------
Gross profit 18,092 18,508
Selling, general and administrative expenses 14,431 13,621
Depreciation and amortization 5,538 5,839
---------- ----------
Operating loss (1,877) (952)
Other income (expense):
Equity in earnings of foreign affiliates 113 101
Interest (1,435) (1,170)
Other, net 262 197
---------- ----------
Loss before income taxes (2,937) (1,824)
Income tax benefit - (839)
Minority interest, net of income taxes (5) (229)
---------- ----------
Net loss $ (2,942) $ (1,214)
========== ==========
Basic and diluted loss per share $ (0.25) $ (0.10)
========== ==========
Weighted average number of common and dilutive
equivalent shares outstanding 11,757,000 11,642,000
========== ==========
</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,
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (2,942) $ (1,214)
Adjustments to reconcile net loss to
cash used in operations:
Depreciation and amortization 5,538 5,839
Deferred income taxes (85) (27)
Equity in earnings of foreign affiliates (113) (101)
Dividends received from foreign affiliates 212 106
Minority interest 8 424
Gain from disposal of property and equipment (190) (165)
Changes in current assets and liabilities:
Increase in customer receivables (5,860) (3,291)
Increase in costs and estimated earnings in
excess of billings on uncompleted contracts (2,474) (1,260)
Decrease in inventories 893 63
(Increase) decrease in other current assets (2,208) 1,207
Increase (decrease) in accounts payable and
accrued expenses 2,763 (2,886)
Decrease in billings in excess of costs and
estimated earnings on uncompleted contracts (753) (409)
Other, net (985) 487
-------- --------
Cash used in operating activities (6,196) (1,227)
-------- --------
Cash flow from investing activities:
Additions to property and equipment (3,399) (2,157)
Proceeds from disposal of property and equipment 335 306
-------- --------
Cash used in investing activities (3,064) (1,851)
-------- --------
Cash flow from financing activities:
Net borrowings under revolving facility 11,500 4,000
Repayment of long-term debt (3,572) -
-------- --------
Cash from financing activities 7,928 4,000
-------- --------
Effects of exchange rate changes on cash 634 (803)
-------- --------
Net increase (decrease) in cash and cash equivalents (698) 119
Cash and cash equivalents at beginning of period 3,751 2,094
-------- --------
Cash and cash equivalents at end of period $ 3,053 $ 2,213
======== ========
</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, 2000 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,
----------------------------
2000 1999
------------ ------------
Income taxes $ - $ (138)
Interest 1,463 1,561
During the first quarter of fiscal 2001, the Company
issued 1,182 shares of common stock and 42,532 stock
options to employees related to fiscal 2000 compensation
awards. The total value of these awards was approximately
$55,000, which was accrued at January 31, 2000.
2. Inventories
The Company values inventories at the lower of cost
(first-in, first-out) or market (in thousands):
As of
-----------------------
April 30, January 31,
2000 2000
---------- -----------
Raw materials $ 1,338 $ 1,422
Work in process 573 547
Finished products, parts and supplies 27,075 28,005
---------- ----------
Total $ 28,986 $ 29,974
========== ==========
<PAGE>
3. Comprehensive Loss
<TABLE>
Components of comprehensive loss are summarized as
follows (in thousands):
<CAPTION>
Three Months Ended
April 30,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Net loss $(2,942) $(1,214)
Other comprehensive loss, net of taxes:
Foreign currency translation adjustments (2,663) 874
Unrealized gain on available for sale
investments 72 19
Change in unrecognized pension liability - 24
------- -------
Comprehensive loss $(5,533) (297)
======= =======
</TABLE>
<TABLE>
The components of accumulated other comprehensive loss
for the three months ended April 30, 2000 are as follows
(in thousands):
<CAPTION>
Unrealized Accumulated
Cumulative Gain (Loss) Unrecognized Other
Translation On Pension Comprehensive
Adjustment Investments Liability Loss
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Balance, February 1, 2000 $ (4,561) $ (1,177) $ - $ (5,738)
Period Change (2,663) 72 - (2,591)
---------- ---------- ------------ ------------
Balance, April 30, 2000 $ (7,224) $ (1,105) $ - (8,329)
========== ========== ============ ============
</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 service
operations with wholly owned operations in the United
States, Australia, East Africa, Mexico, Canada, Italy,
Indonesia and Thailand, as well as a 50%-owned joint
venture in West Africa, which is consolidated into
the Company's April 30, 2000 financial statements.
The service segment primarily derives its revenues
from the following service lines: water-related
products and services, mineral exploration drilling
services, geotechnical construction services and oil
and gas services and exploration. The second
operating segment, products, includes the manufacturing
and supply of drilling equipment, parts and supplies.
The products' 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,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
REVENUES
Services
United States $ 54,683 $ 53,673
--------- ---------
Foreign:
Canada 3,692 1,560
Australia 2,474 2,754
Africa 7,334 6,125
Other foreign 2,602 2,081
--------- ---------
Total foreign 16,102 12,520
--------- ---------
Total services 70,785 66,193
--------- ---------
Products 6,916 5,821
Intersegment revenues (2,155) (1,981)
--------- ---------
Total products 4,761 3,840
--------- ---------
Total revenues $ 75,546 $ 70,033
========= =========
OPERATING LOSS
Services
United States $ 2,956 $ 3,519
--------- ---------
Foreign:
Canada 119 (36)
Australia (332) (147)
Africa (1,140) (1,521)
Other foreign (57) (441)
--------- ---------
Total foreign (1,410) (2,145)
--------- ---------
Total services 1,546 1,374
--------- ---------
Products (607) (918)
Corporate (2,816) (1,408)
--------- ---------
Total operating loss $ (1,877) $ (952)
========= =========
</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 considers economically prudent, there can be
no assurance that any such insurance
<PAGE>
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.
========================================================
<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
<TABLE>
The following table presents, for the periods indicated,
the percentage relationship which certain items reflected
in the Company's consolidated statements of operations
bear to revenues and the percentage increase or decrease
in the dollar amount of such items period to period.
<PAGE>
<CAPTION>
Three Months Period-to-Period
Ended April 30, Change
2000 1999 Three Months
------ ------ -----------------
<S> <C> <C> <C>
Revenues:
Water-related products and services 52.9% 59.2% (3.5)%
Mineral exploration drilling 25.8 20.7 34.2
Geotechnical construction 14.3 14.6 5.5
Oil and gas services .7 - *
----- -----
Total net service revenues 93.7 94.5 6.9
Product sales 6.3 5.5 24.0
----- -----
Total net revenues 100.0% 100.0% 7.9
===== =====
Cost of revenues:
Cost of service revenues 75.7% 73.4% 10.3
Cost of product sales 80.6 75.9 31.7
----- -----
Total cost of revenues 76.0 73.6 11.5
----- -----
Gross profit 24.0 26.4 (2.2)
Selling, general and administrative
expenses 19.1 19.4 5.9
Depreciation and amortization 7.3 8.4 (5.2)
----- -----
Operating loss (2.4) (1.4) *
Other income (expense):
Equity in earnings of foreign
affiliates .1 0.2 11.9
Interest (1.9) (1.7) 22.6
Other, net 0.3 0.3 *
----- -----
Loss before income taxes (3.9) (2.6) *
Net income tax benefit - (1.2) *
Minority interest, net of income taxes - (0.3) *
----- -----
Net loss (3.9)% (1.7)% *
===== =====
_______________
* Not meaningful.
</TABLE>
RESULTS OF OPERATIONS
Revenues for the three months ended April 30, 2000
increased $5,513,000, or 7.9%, to $75,546,000, compared
to $70,033,000 for the three months ended April 30, 1999.
Water-related products and services revenues decreased
3.5% to $40,010,000 for the three months ended April 30,
2000, compared to revenues of $41,469,000 for the three
months ended April 30, 1999. The decrease was mainly
attributable to lower demand during the quarter for
drilling services related to groundwater contamination.
Mineral exploration drilling revenues increased 34.2%
to $19,482,000 for the three months ended April 30, 2000,
from $14,515,000 for the three months ended April 30,
1999. The increase in revenue for the first quarter
reflects increased activity in East Africa and North
America. Geotechnical construction revenues increased
5.5% to $10,770,000 for the three months ended April 30,
2000, compared to revenues of $10,209,000 for the three
months ended April 30, 1999. The increase was mainly
a result of increased market penetration
<PAGE>
in certain areas of the country. Product sales
increased 24.0% to $4,761,000 for the three months
ended April 30, 2000, from $3,840,000 for the three
months ended April 30, 1999. The increase was
primarily a result of increased demand for drills
and accessories in the mineral exploration market.
Gross profit as a percentage of revenues was 24.0%
for the three months ended April 30, 2000, compared
to 26.4% for the same period last year. The decrease
in gross profit was primarily attributable to expenses
associated with the expansion of the Company's
domestic oil and gas services and exploration.
Additionally, the Company experienced reduced margins
at its mineral exploration locations in Australia
and West Africa.
Selling, general and administrative expenses increased
to $14,431,000 for the three months ended April 30,
2000, compared to $13,621,000 for the three months
ended April 30, 1999. The increase for the quarter
was mainly the result of expenses related to the
Company's expansion of domestic oil and gas services
and exploration after the first quarter of fiscal 2000,
combined with the continued expansion of the Company's
Integrated Groundwater Services division.
Depreciation and amortization decreased to $5,538,000
for the three months ended April 30, 2000, compared
to $5,839,000 for the same period last year. The
decrease in depreciation and amortization for the
first quarter is primarily attributable to certain
mineral exploration assets becoming fully depreciated
during the fourth quarter of last year.
Equity in earnings of foreign affiliates was $113,000
for the three months ended April 30, 2000, compared to
$101,000 for the same period last year.
No benefit for income taxes was recorded for the three
months ended April 30, 2000, compared to recording a
benefit of $839,000 for the same period last year.
No benefit was recorded during this quarter as the
Company's ability to realize the benefit over the
entire fiscal year is uncertain due to the impact
of non-deductible expenses which partially offset
any tax benefit attributable to lower taxable earnings.
CHANGES IN FINANCIAL CONDITION
Cash used in operations was $6,196,000 for the three
months ended April 30, 2000 compared to $1,227,000
used for the same period last year. Borrowings under
the Company's available credit agreement were
primarily used for additions to property and equipment
of $3,399,000 and various incentive compensation payments
during the three months ended April 30, 2000.
The Company believes that borrowings from its available
credit agreement and cash from operations will be
sufficient for the Company's seasonal cash requirements
and to fund its budgeted capital expenditures for at
least the balance of the fiscal year.
<PAGE>
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"). 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. The Company
believes that issues related to Y2K compliance of its
IT and non-IT systems did not have a material adverse
impact on its 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.
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: May 26, 2000 /s/ A. B. Schmitt
-------------------------------
A.B. Schmitt, President
and Chief Executive Officer
DATE: May 26, 2000 /s/ Jerry W. Fanska
-------------------------------
Jerry W. Fanska, Vice President
Finance and Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
27(1) Financial Data Schedule.
<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-31-2001
<PERIOD-END> APR-30-2000
<CASH> 3,053
<SECURITIES> 0
<RECEIVABLES> 67,762
<ALLOWANCES> 3,462
<INVENTORY> 28,986
<CURRENT-ASSETS> 114,023
<PP&E> 192,740
<DEPRECIATION> 112,474
<TOTAL-ASSETS> 248,259
<CURRENT-LIABILITIES> 61,622
<BONDS> 67,857
0
0
<COMMON> 117
<OTHER-SE> 101,246
<TOTAL-LIABILITY-AND-EQUITY> 248,259
<SALES> 4,761
<TOTAL-REVENUES> 75,546
<CGS> 57,454
<TOTAL-COSTS> 62,992
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,435
<INCOME-PRETAX> (2,937)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,942)
<EPS-BASIC> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
