e10vq
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 31, 2010
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-34195
Layne Christensen Company
(Exact name of registrant as specified in its charter)
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Delaware
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48-0920712 |
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.) |
incorporation or organization) |
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1900 Shawnee Mission Parkway, Mission Woods, Kansas
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66205 |
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(Address of principal executive offices)
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(Zip Code) |
(Registrants telephone number, including area code) (913) 362-0510
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
(Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
There were 19,505,383 shares of common stock, $.01 par value per share, outstanding on August
31, 2010.
TABLE OF CONTENTS
PART I
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Item 1. |
|
Financial Statements |
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
|
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|
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|
July 31, |
|
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January 31, |
|
|
|
2010 |
|
|
2010 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
ASSETS |
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Current assets: |
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Cash and cash equivalents |
|
$ |
49,184 |
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$ |
84,450 |
|
Customer receivables, less allowance of
$8,481 and $7,425, respectively |
|
|
144,241 |
|
|
|
106,056 |
|
Costs and estimated earnings in excess of billings on
uncompleted contracts |
|
|
83,123 |
|
|
|
83,712 |
|
Inventories |
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|
25,572 |
|
|
|
25,637 |
|
Deferred income taxes |
|
|
19,337 |
|
|
|
18,324 |
|
Income taxes receivable |
|
|
1,638 |
|
|
|
3,761 |
|
Restricted deposits-current |
|
|
1,113 |
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|
|
1,415 |
|
Other |
|
|
9,361 |
|
|
|
6,996 |
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|
|
|
|
|
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|
Total current assets |
|
|
333,569 |
|
|
|
330,351 |
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|
|
|
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|
|
|
|
|
|
|
|
|
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Property and equipment: |
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Land |
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11,982 |
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12,056 |
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Buildings |
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34,924 |
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34,539 |
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Machinery and equipment |
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400,175 |
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378,868 |
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Gas transportation facilities and equipment |
|
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40,795 |
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|
40,748 |
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Oil and gas properties |
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|
96,091 |
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|
95,252 |
|
Mineral interests in oil and gas properties |
|
|
22,193 |
|
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|
21,939 |
|
|
|
|
|
|
|
|
|
|
|
606,160 |
|
|
|
583,402 |
|
Less Accumulated depreciation and depletion |
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|
(369,969 |
) |
|
|
(350,630 |
) |
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|
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Net property and equipment |
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|
236,191 |
|
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|
232,772 |
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Other assets: |
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Investment in affiliates |
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61,947 |
|
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|
44,073 |
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Goodwill |
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93,758 |
|
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|
92,532 |
|
Other intangible assets, net |
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26,180 |
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19,649 |
|
Restricted deposits-long term |
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3,704 |
|
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|
3,151 |
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Other |
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8,789 |
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|
8,427 |
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|
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Total other assets |
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194,378 |
|
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|
167,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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$ |
764,138 |
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|
$ |
730,955 |
|
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|
|
|
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|
See Notes to Consolidated Financial Statements.
Continued
2
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(in thousands, except per share data)
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July 31, |
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January 31, |
|
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|
2010 |
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2010 |
|
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|
(unaudited) |
|
|
(unaudited) |
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
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Current liabilities: |
|
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Accounts payable |
|
$ |
90,627 |
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$ |
87,818 |
|
Current maturities of long term debt |
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20,000 |
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20,000 |
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Accrued compensation |
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31,671 |
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33,572 |
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Accrued insurance expense |
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9,235 |
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9,255 |
|
Other accrued expenses |
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20,812 |
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16,779 |
|
Acquisition escrow obligation-current |
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|
1,113 |
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|
1,415 |
|
Income taxes payable |
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|
8,380 |
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|
4,219 |
|
Billings in excess of costs and estimated
earnings on uncompleted contracts |
|
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46,100 |
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37,644 |
|
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|
|
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Total current liabilities |
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|
227,938 |
|
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210,702 |
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Noncurrent and deferred liabilities: |
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Long-term debt |
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6,667 |
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6,667 |
|
Accrued insurance expense |
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11,638 |
|
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|
10,759 |
|
Deferred income taxes |
|
|
14,072 |
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17,761 |
|
Acquisition escrow obligation-long term |
|
|
3,704 |
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3,151 |
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Other |
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19,274 |
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15,042 |
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Total noncurrent and deferred liabilities |
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55,355 |
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|
53,380 |
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Common stock, par value $.01 per share, 30,000
shares authorized, 19,505 and 19,435
shares issued and outstanding, respectively |
|
|
195 |
|
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|
194 |
|
Capital in excess of par value |
|
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345,154 |
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342,952 |
|
Retained earnings |
|
|
142,739 |
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|
129,718 |
|
Accumulated other comprehensive loss |
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|
(7,318 |
) |
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(6,066 |
) |
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|
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|
Total Layne Christensen Company stockholders equity |
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|
480,770 |
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|
466,798 |
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Noncontrolling interest |
|
|
75 |
|
|
|
75 |
|
|
|
|
|
|
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|
Total equity |
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|
480,845 |
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|
466,873 |
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|
|
|
|
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|
|
|
|
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$ |
764,138 |
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|
$ |
730,955 |
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|
|
|
|
|
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|
See Notes to Consolidated Financial Statements.
3
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
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Three Months |
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Six Months |
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Ended July 31, |
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Ended July 31, |
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|
(unaudited) |
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|
(unaudited) |
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2010 |
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2009 |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
$ |
253,300 |
|
|
$ |
217,227 |
|
|
$ |
484,015 |
|
|
$ |
421,419 |
|
Cost of revenues (exclusive of depreciation, depletion
and amortization shown below) |
|
|
(197,746 |
) |
|
|
(165,549 |
) |
|
|
(369,658 |
) |
|
|
(325,453 |
) |
Selling, general and administrative expenses |
|
|
(31,698 |
) |
|
|
(30,304 |
) |
|
|
(65,213 |
) |
|
|
(62,004 |
) |
Depreciation, depletion and amortization |
|
|
(12,131 |
) |
|
|
(14,278 |
) |
|
|
(26,256 |
) |
|
|
(28,611 |
) |
Impairment of oil and gas properties |
|
|
|
|
|
|
(21,642 |
) |
|
|
|
|
|
|
(21,642 |
) |
Litigation settlement gains |
|
|
|
|
|
|
|
|
|
|
|
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|
|
3,161 |
|
Equity in earnings of affiliates |
|
|
1,614 |
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|
|
2,351 |
|
|
|
3,487 |
|
|
|
4,286 |
|
Interest expense |
|
|
(517 |
) |
|
|
(812 |
) |
|
|
(1,043 |
) |
|
|
(1,622 |
) |
Other income (expense), net |
|
|
189 |
|
|
|
(13 |
) |
|
|
76 |
|
|
|
(638 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
13,011 |
|
|
|
(13,020 |
) |
|
|
25,408 |
|
|
|
(11,104 |
) |
Income tax benefit (expense) |
|
|
(6,561 |
) |
|
|
4,380 |
|
|
|
(12,387 |
) |
|
|
3,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income
(loss) attributable to Layne Christensen Company |
|
$ |
6,450 |
|
|
$ |
(8,640 |
) |
|
$ |
13,021 |
|
|
$ |
(7,644 |
) |
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
Basic income (loss) per share |
|
$ |
0.33 |
|
|
$ |
(0.45 |
) |
|
$ |
0.67 |
|
|
$ |
(0.40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Diluted income (loss) per share |
|
$ |
0.33 |
|
|
$ |
(0.45 |
) |
|
$ |
0.67 |
|
|
$ |
(0.40 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding-basic |
|
|
19,386 |
|
|
|
19,316 |
|
|
|
19,378 |
|
|
|
19,307 |
|
Dilutive stock options |
|
|
136 |
|
|
|
|
|
|
|
148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding-diluted |
|
|
19,522 |
|
|
|
19,316 |
|
|
|
19,526 |
|
|
|
19,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
4
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
Total Layne |
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Accumulated |
|
|
Christensen |
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Capital In |
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Other |
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|
Company |
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|
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|
Common Stock |
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|
Excess of |
|
|
Retained |
|
|
Comprehensive |
|
|
Stockholders |
|
|
Noncontrolling |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Par Value |
|
|
Earnings |
|
|
Income (Loss) |
|
|
Equity |
|
|
Interest |
|
|
Total |
|
Balance, January 31, 2009 |
|
|
19,382,976 |
|
|
$ |
194 |
|
|
$ |
337,528 |
|
|
$ |
128,353 |
|
|
$ |
(10,053 |
) |
|
$ |
456,022 |
|
|
$ |
75 |
|
|
$ |
456,097 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,644 |
) |
|
|
|
|
|
|
(7,644 |
) |
|
|
|
|
|
|
(7,644 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments,
net of income tax
expense of $680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,803 |
|
|
|
1,803 |
|
|
|
|
|
|
|
1,803 |
|
Change in unrealized loss on foreign
exchange contracts, net of income tax
benefit of $372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
581 |
|
|
|
581 |
|
|
|
|
|
|
|
581 |
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,260 |
) |
|
|
|
|
|
|
(5,260 |
) |
|
Issuance of unvested shares |
|
|
12,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock purchased and subsequently
cancelled |
|
|
(5,217 |
) |
|
|
|
|
|
|
(109 |
) |
|
|
|
|
|
|
|
|
|
|
(109 |
) |
|
|
|
|
|
|
(109 |
) |
Issuance of stock upon exercise of options |
|
|
7,741 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
32 |
|
Income tax benefit on exercise of options |
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
46 |
|
Income tax deficiency upon vesting of
restricted shares |
|
|
|
|
|
|
|
|
|
|
(177 |
) |
|
|
|
|
|
|
|
|
|
|
(177 |
) |
|
|
|
|
|
|
(177 |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
3,753 |
|
|
|
|
|
|
|
|
|
|
|
3,753 |
|
|
|
|
|
|
|
3,753 |
|
Issuance of stock upon acquisition
of business |
|
|
12,677 |
|
|
|
|
|
|
|
280 |
|
|
|
|
|
|
|
|
|
|
|
280 |
|
|
|
|
|
|
|
280 |
|
|
Balance, July 31, 2009 |
|
|
19,410,948 |
|
|
$ |
194 |
|
|
$ |
341,353 |
|
|
$ |
120,709 |
|
|
$ |
(7,669 |
) |
|
$ |
454,587 |
|
|
$ |
75 |
|
|
$ |
454,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2010 |
|
|
19,435,209 |
|
|
$ |
194 |
|
|
$ |
342,952 |
|
|
$ |
129,718 |
|
|
$ |
(6,066 |
) |
|
$ |
466,798 |
|
|
$ |
75 |
|
|
$ |
466,873 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,021 |
|
|
|
|
|
|
|
13,021 |
|
|
|
|
|
|
|
13,021 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments,
net of income tax
benefit of $315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,288 |
) |
|
|
(1,288 |
) |
|
|
|
|
|
|
(1,288 |
) |
Change in unrealized loss on foreign
exchange contracts, net of income tax
expense of $23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
36 |
|
|
|
|
|
|
|
36 |
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,769 |
|
|
|
|
|
|
|
11,769 |
|
|
Issuance of unvested shares |
|
|
58,709 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock purchased and subsequently cancelled |
|
|
(5,279 |
) |
|
|
|
|
|
|
(132 |
) |
|
|
|
|
|
|
|
|
|
|
(132 |
) |
|
|
|
|
|
|
(132 |
) |
Issuance of stock upon exercise of options |
|
|
16,744 |
|
|
|
|
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
99 |
|
|
|
|
|
|
|
99 |
|
Income tax benefit on exercise of options |
|
|
|
|
|
|
|
|
|
|
158 |
|
|
|
|
|
|
|
|
|
|
|
158 |
|
|
|
|
|
|
|
158 |
|
Income tax deficiency upon vesting of restricted shares |
|
|
|
|
|
|
|
|
|
|
(112 |
) |
|
|
|
|
|
|
|
|
|
|
(112 |
) |
|
|
|
|
|
|
(112 |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
2,190 |
|
|
|
|
|
|
|
|
|
|
|
2,190 |
|
|
|
|
|
|
|
2,190 |
|
|
Balance, July 31, 2010 |
|
|
19,505,383 |
|
|
$ |
195 |
|
|
$ |
345,154 |
|
|
$ |
142,739 |
|
|
$ |
(7,318 |
) |
|
$ |
480,770 |
|
|
$ |
75 |
|
|
$ |
480,845 |
|
|
See Notes to Consolidated Financial Statements.
5
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
Ended July 31, |
|
|
|
(unaudited) |
|
|
|
2010 |
|
|
2009 |
|
Cash flow from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
13,021 |
|
|
$ |
(7,644 |
) |
Adjustments to reconcile net income (loss) to cash from operations: |
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
26,256 |
|
|
|
28,611 |
|
Deferred income taxes |
|
|
(4,671 |
) |
|
|
(10,156 |
) |
Share-based compensation |
|
|
2,190 |
|
|
|
3,753 |
|
Share-based compensation excess tax benefits |
|
|
(158 |
) |
|
|
(46 |
) |
Equity in earnings of affiliates |
|
|
(3,487 |
) |
|
|
(4,286 |
) |
Dividends received from affiliates |
|
|
1,763 |
|
|
|
1,556 |
|
Gain from disposal of property and equipment |
|
|
(409 |
) |
|
|
(7 |
) |
Impairment of oil and gas properties |
|
|
|
|
|
|
21,642 |
|
Non-cash litigation settlement gain |
|
|
|
|
|
|
(2,868 |
) |
Changes in current assets and liabilities,
net of effects of acquisitions: |
|
|
|
|
|
|
|
|
(Increase) decrease in customer receivables |
|
|
(41,327 |
) |
|
|
3,176 |
|
Decrease (increase) in costs and
estimated earnings in excess
of billings on uncompleted contracts |
|
|
2,261 |
|
|
|
(1,450 |
) |
(Increase) decrease in inventories |
|
|
(1,434 |
) |
|
|
2,148 |
|
(Increase) decrease in other current assets |
|
|
(2,036 |
) |
|
|
6,364 |
|
Increase (decrease) in accounts payable and accrued expenses |
|
|
11,124 |
|
|
|
(16,776 |
) |
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts |
|
|
9,606 |
|
|
|
12,144 |
|
Other, net |
|
|
(122 |
) |
|
|
(386 |
) |
|
|
|
|
|
|
|
Cash provided by operating activities |
|
|
12,577 |
|
|
|
35,775 |
|
|
|
|
|
|
|
|
Cash flow from investing activities: |
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
|
(29,036 |
) |
|
|
(19,188 |
) |
Additions to gas transportation
facilities and equipment |
|
|
(46 |
) |
|
|
(783 |
) |
Additions to oil and gas properties |
|
|
(839 |
) |
|
|
(2,375 |
) |
Additions to mineral interests in oil and gas properties |
|
|
(254 |
) |
|
|
(401 |
) |
Acquisition of business, net of cash acquired |
|
|
(5,500 |
) |
|
|
(600 |
) |
Investment in foreign affiliate |
|
|
(16,150 |
) |
|
|
|
|
Payment of cash purchase price adjustment on prior year acquisition |
|
|
(226 |
) |
|
|
(1,349 |
) |
Proceeds from sale of business |
|
|
4,800 |
|
|
|
|
|
Proceeds from disposal of property and equipment |
|
|
970 |
|
|
|
277 |
|
Release of cash from restricted accounts |
|
|
302 |
|
|
|
515 |
|
Distribution of restricted cash for prior year acquisitions |
|
|
(302 |
) |
|
|
(515 |
) |
|
|
|
|
|
|
|
Cash used in investing activities |
|
|
(46,281 |
) |
|
|
(24,419 |
) |
|
|
|
|
|
|
|
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
Repayments of long term debt |
|
|
|
|
|
|
(13,333 |
) |
Issuance of common stock upon exercise of stock options |
|
|
99 |
|
|
|
32 |
|
Excess tax benefit on exercise of share-based instruments |
|
|
158 |
|
|
|
46 |
|
Purchases and retirement of treasury stock |
|
|
(132 |
) |
|
|
(109 |
) |
|
|
|
|
|
|
|
Cash provided by (used in) financing activities |
|
|
125 |
|
|
|
(13,364 |
) |
|
|
|
|
|
|
|
Effects of exchange rate changes on cash |
|
|
(1,687 |
) |
|
|
(318 |
) |
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(35,266 |
) |
|
|
(2,326 |
) |
Cash and cash equivalents at beginning of period |
|
|
84,450 |
|
|
|
67,165 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
49,184 |
|
|
$ |
64,839 |
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
6
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Accounting Policies and Basis of Presentation
Principles of Consolidation The consolidated financial statements include the accounts of
Layne Christensen Company and its subsidiaries (together, the Company). Intercompany
transactions have been eliminated. Investments in affiliates (20% to 50% owned) in which the
Company exercises influence over operating and financial policies are accounted for by 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, 2010, 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. The
Company has evaluated subsequent events through the time of the filing of these Consolidated
Financial Statements.
Use of Estimates in Preparing Financial Statements The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue Recognition Revenues are recognized on large, long-term construction contracts using the
percentage-of-completion method based upon the ratio of costs incurred to total estimated costs at
completion. Contract price and cost estimates are reviewed periodically as work progresses and
adjustments proportionate to the percentage of completion are reflected in contract revenues in the
reporting period when such estimates are revised. Changes in job performance, job conditions and
estimated profitability, including those arising from contract penalty provisions, change orders
and final contract settlements may result in revisions to costs and income and are recognized in
the period in which the revisions are determined. Contracts for the Companys mineral exploration
drilling services are billable based on the quantity of drilling performed and revenues for these
drilling contracts are recognized on the basis of actual footage or meterage drilled. Revenue is
recognized on smaller, short-term construction contracts using the completed contract method.
Provisions for estimated losses on uncompleted construction contracts are made in the period in
which such losses are determined.
Revenues for direct sales of equipment and other ancillary products not provided in conjunction
with the performance of construction contracts are recognized at the date of delivery to, and
acceptance by, the customer. Provisions for estimated warranty obligations are made in the period
in which the sales occur.
Revenues for the sale of oil and gas by the Companys energy division are recognized on the basis
of volumes sold at the time of delivery to an end user or an interstate pipeline, net of amounts
attributable to royalty or working interest holders.
The Companys revenues are presented net of taxes imposed on revenue-producing transactions with
its customers, such as, but not limited to, sales, use, value-added, and some excise taxes.
Oil and Gas Properties and Mineral Interests The Company follows the full-cost method of
accounting for oil and gas properties. Under this method, all productive and nonproductive costs
incurred in connection with the exploration for and development of oil and gas reserves are
capitalized. Such capitalized costs include lease acquisition, geological and geophysical work,
delay rentals, drilling, completing and equipping oil and gas wells, and salaries, benefits and
other internal salary-related costs directly attributable to these activities. Costs associated
with production and general corporate activities are expensed in the period incurred. Normal
dispositions of oil and gas properties are accounted for as adjustments of capitalized costs, with
no gain or loss recognized. Depletion expense was $3,717,000 and $7,148,000 for the six months
ended July 31, 2010 and 2009, respectively.
The Company is required to review the carrying value of its oil and gas properties under the full
cost accounting rules of the SEC (the Ceiling Test). The ceiling limitation is the estimated
after-tax future net revenues from proved oil and gas properties discounted at 10%, plus the cost
of properties not subject to amortization. If our net book value of oil and gas properties, less
related deferred income taxes, is in excess of the calculated ceiling, the excess must be written
off as an expense. Beginning with our fiscal 2010 year end, application of the Ceiling Test
requires pricing future revenues at the unweighted arithmetic average of the first-day-of-the-month
price for each month within the 12-month period prior to the end
7
of reporting period, unless prices are defined by contractual arrangements, such as fixed-price
physical delivery forward sales contracts, when held. Application of the Ceiling Test requires a
write-down for accounting purposes if the ceiling is exceeded. Considerations of the Ceiling Test
prior to fiscal 2010 year end used the period end prices as adjusted for contractual arrangements.
Unproved oil and gas properties are not amortized, but are assessed for impairment either
individually or on an aggregated basis using a comparison of the carrying values of the unproved
properties to net future cash flows.
Reserve Estimates The Companys estimates of natural gas reserves, by necessity, are projections
based on geologic and engineering data, and there are uncertainties inherent in the interpretation
of such data as well as the projection of future rates of production and the timing of development
expenditures. Reserve engineering is a subjective process of estimating underground accumulations
of gas that are difficult to measure. The accuracy of any reserve estimate is a function of the
quality of available data, engineering and geological interpretation and judgment. Estimates of
economically recoverable gas reserves and future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area compared with
production from other producing areas, the assumed effects of regulations by governmental agencies
and assumptions governing natural gas prices, future operating costs, severance, ad valorem and
excise taxes, development costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. For these reasons, estimates of the economically recoverable
quantities of gas attributable to any particular group of properties, classifications of such
reserves based on risk of recovery, and estimates of the future net cash flows expected there from
may vary substantially. Any significant variance in the assumptions could materially affect the
estimated quantity and value of the reserves, which could affect the carrying value of the
Companys oil and gas properties and the rate of depletion of the oil and gas properties. Actual
production, revenues and expenditures with respect to the Companys reserves will likely vary from
estimates, and such variances may be material.
Goodwill and Other Intangibles Goodwill and other intangible assets with indefinite useful lives
are not amortized, and instead are periodically tested for impairment. The Company performs its
annual impairment as of December 31, or more frequently if events or changes in circumstances
indicate that an asset might be impaired. The process of evaluating goodwill for impairment
involves the determination of the fair value of the Companys reporting units. Inherent in such
fair value determinations are certain judgments and estimates, including the interpretation of
current economic indicators and market valuations, and assumptions about the Companys strategic
plans with regard to its operations. The Company believes at this time that the carrying value of
the remaining goodwill is appropriate, although to the extent additional information arises or the
Companys strategies change, it is possible that the Companys conclusions regarding impairment of
the remaining goodwill could change and result in a material effect on its financial position or
results of operations.
Other Long-lived Assets In the event of an indication of possible impairment, the Company
evaluates the fair value and future benefits of long-lived assets, including the Companys gas
transportation facilities and equipment, by performing an analysis of the anticipated, undiscounted
future net cash flows to the carrying value of the related long-lived assets. If the carrying value
of the long-lived assets exceeds the anticipated undiscounted cash flows the carrying value is
written down to the fair value. The Company believes at this time that the carrying values and
useful lives of its long-lived assets continue to be appropriate.
Cash and Cash Equivalents The Company considers investments with an original maturity of three
months or less when purchased to be cash equivalents. The Companys cash equivalents are subject to
potential credit risk. The Companys cash management and investment policies restrict investments
to investment grade, highly liquid securities. The carrying value of cash and cash equivalents
approximates fair value.
Restricted Deposits Restricted deposits consist of escrow funds associated with various
acquisitions as described in Note 2 of the Notes to Consolidated Financial Statements.
Accrued Insurance Expense The Company maintains insurance programs where it is responsible for a
certain amount of each claim up to a self-insured limit. Estimates are recorded for health and
welfare, property and casualty insurance costs that are associated with these programs. These
costs are estimated based on actuarially determined projections of future payments under these
programs. Should a greater amount of claims occur compared to what was estimated or costs of the
medical profession increase beyond what was anticipated, reserves recorded may not be sufficient
and additional costs to the consolidated financial statements could be required.
Costs estimated to be incurred in the future for employee medical benefits, property, workers
compensation and casualty insurance programs resulting from claims which have occurred are accrued
currently. Under the terms of the Companys agreement with the various insurance carriers
administering these claims, the Company is not required to remit the total premium until the claims
are actually paid by the insurance companies. These costs are not expected to significantly impact
liquidity in future periods.
8
Income Taxes Income taxes are provided using the asset/liability method, in which deferred taxes
are recognized for the tax consequences of temporary differences between the financial statement
carrying amounts and tax bases of existing assets and liabilities. Deferred tax assets are
reviewed for recoverability and valuation allowances are provided as necessary. Provision for U.S.
income taxes on undistributed earnings of foreign subsidiaries and affiliates is made only on those
amounts in excess of funds considered to be invested indefinitely. In general, the Company records
income tax expense during interim periods based on its best estimate of the full years effective
tax rate. However, income tax expense relating to adjustments to the Companys liabilities for
uncertainty in income tax positions is accounted for discretely in the interim period in which it
occurs.
As of July 31 and January 31, 2010, the total amount of unrecognized tax benefits recorded was
$10,007,000 and $9,312,000, respectively, of which substantially all would affect the effective tax
rate if recognized. The Company does not expect the unrecognized tax benefits to change materially
within the next 12 months. The Company classifies uncertain tax positions as non-current income tax
liabilities unless expected to be paid in one year. The Company reports income tax-related interest
and penalties as a component of income tax expense. As of July 31 and January 31, 2010, the total
amount of accrued income tax-related interest and penalties included in the balance sheet was
$4,334,000 and $3,686,000, respectively.
Litigation and Other Contingencies The Company is involved in litigation incidental to its
business, the disposition of which is not expected to have a material effect on the Companys
business, financial position, results of operations or cash flows. It is possible, however, that
future results of operations for any particular quarterly or annual period could be materially
affected by changes in the Companys assumptions related to these proceedings. The Company accrues
its best estimate of the probable cost for the resolution of legal claims. Such estimates are
developed in consultation with outside counsel handling these matters and are based upon a
combination of litigation and settlement strategies. To the extent additional information arises or
the Companys strategies change, it is possible that the Companys estimate of its probable
liability in these matters may change.
Derivatives The Company follows current accounting guidance which requires derivative financial
instruments to be recorded on the balance sheet at fair value and establishes criteria for
designation and effectiveness of hedging relationships. The Company accounts for its unrealized
hedges of forecasted costs as cash flow hedges, such that changes in fair value for the effective
portion of hedge contracts, are recorded in accumulated other comprehensive income in stockholders
equity. Changes in the fair value of the effective portion of hedge contracts are recognized in
accumulated other comprehensive income until the hedged item is recognized in operations. The
ineffective portion of the derivatives change in fair value, if any, is immediately recognized in
operations. In addition, the Company periodically enters into natural gas contracts to manage
fluctuations in the price of natural gas. These contracts result in the Company physically
delivering gas, and as a result, are exempt from fair value accounting under the normal purchases
and sales exception. When in place, the contracts are not reflected in the balance sheet at fair
value and revenues from the contracts are recognized as the natural gas is delivered under the
terms of the contracts. The Company does not enter into derivative financial instruments for
speculative or trading purposes.
Earnings per share Earnings per share are based upon the weighted average number of common and
dilutive equivalent shares outstanding. Options to purchase common stock and unvested restricted
shares are included based on the treasury stock method for dilutive earnings per share, except when
their effect is antidilutive. Options to purchase 586,063 and 588,784 shares have been excluded
from weighted average shares in the three and six months ending July 31, 2010, respectively, as
their effect was antidilutive. A total of 100,873 and 110,109 nonvested shares have been excluded
from weighted average shares in the three and six month ending July 31, 2010, respectively, as
their effect was antidilutive. Options to purchase 1,050,645 shares and 79,836 nonvested shares
were excluded from weighted average shares in both the three and six months ending July 31, 2009 as
their effect was antidilutive.
Share-based compensation The Company recognizes all share-based instruments in the financial
statements and utilizes a fair-value measurement of the associated costs. The Company elected to
adopt the original accounting standard using the Modified Prospective Method which required
recognition of all unvested share-based instruments as of the effective date over the remaining
term of the instrument. As of July 31, 2010, the Company had unrecognized compensation expense of
$3,082,000 to be recognized over a weighted average period of 1.48 years. The Company determines
the fair value of share-based compensation granted in the form of stock options using the
Black-Scholes model.
9
Supplemental Cash Flow Information The amounts paid for income taxes and interest are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
Ended July 31, |
|
|
|
2010 |
|
|
2009 |
|
Income taxes |
|
$ |
8,722 |
|
|
$ |
6,075 |
|
Interest |
|
|
978 |
|
|
|
1,948 |
|
The Company had earnings on restricted deposits of $3,000 and $1,000 for the six months ended July
31, 2010 and 2009, respectively, which were treated as non-cash items as the earnings were
restricted for the account of the escrow beneficiaries. For the six months ended July 31, 2009, the
Company received land and buildings valued at $2,828,000 in a non-cash settlement of a legal
dispute in Australia, and made a non-cash distribution of $280,000 of common stock for a prior year
acquisition. See Note 2 for a discussion of acquisition activity.
During fiscal year 2009, the Company entered into financing obligations for software licenses
amounting to $1,298,000, payable over three years. The associated assets are recorded as Other
Intangible Assets in the balance sheet.
New Accounting Pronouncements In January 2010, the FASB issued guidance amending Accounting
Standards Codification (ASC) Topic 820 to require new disclosures concerning transfers into and
out of Levels 1 and 2 of the fair value measurement hierarchy, and activity in Level 3
measurements. In addition, the guidance clarifies certain existing disclosure requirements
regarding the level of disaggregation and inputs and valuation techniques and makes conforming
amendments to the guidance on employers disclosures about postretirement benefit plans assets.
The Company adopted this guidance as of February 1, 2010, which did not have a material impact on
its financial position, results of operations or cash flows.
In December 2009, the FASB issued guidance amending the consolidation guidance applicable to
variable interest entities. The amendments affect the overall consolidation analysis under ASC
Topic 810, Consolidation. The Company adopted this guidance as of February 1, 2010, which did not
have a material impact on its financial position, results of operations or cash flows.
2. Acquisitions
Fiscal Year 2011
On July 27, 2010, the Company acquired certain assets of Intevras Technologies, LLC (Intevras), a
Texas based company focused on the treatment, filtration, handling and evaporative crystallization
and disposal of industrial wastewaters.
The purchase price of $8,824,000 was comprised of cash of $5,500,000, $550,000 of which was placed
in escrow to secure certain representations, warranties and idemnifications, and contingent
consideration of $3,324,000.
In accordance with accounting guidance, acquisition related costs were recorded as an expense in
the periods in which the costs were incurred. The purchase price has been allocated based on a
preliminary assessment of the fair value of the assets acquired and the fair value of contingent
consideration to be paid, determined based on the Companys internal operational assessments and
other analyses. Such amounts may be subject to revision as valuations of intangible assets are
finalized. Revisions will be recorded by the Company as further adjustments to the purchase price
allocation.
In addition to the cash purchase price, there is contingent consideration up to a maximum of
$10,000,000 (the Intevras Earnout Amount), which is based on a percentage of revenues earned on
Intevras products and fixed amounts per barrel of water treated by Intevras products during the 60
months following the acquisition. In accordance with accounting guidance the Company treated the
Intevras Earnout Amount as contigent consideration and estimated the liability at fair value as of
the acquistion date and included such consideration as a component of total purchase price as noted
above. The potential undiscounted amount of all future payments that the Company could be required
to make under the agreement is between $0 and $10,000,000. The fair value of the contingent
consideration arrangement of $3,324,000 was estimated by applying a market approach. That measure
is based on significant inputs that are not observable in the market, also referred to as Level 3
inputs. Key assumptions include a discount rate range of 0.3% to 1.82% and an estimated level of
annual revenues of Intevras ranging from $8,000,000 to $27,000,000.
10
Based on the Companys preliminary allocations of the purchase price, the acquisition had the
following effect on the Companys consolidated financial position as of the closing date:
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Property and equipment |
|
$ |
500 |
|
Goodwill |
|
|
1,000 |
|
Other intangible assets |
|
|
7,324 |
|
|
Total purchase price |
|
$ |
8,824 |
|
|
The intangible assets consist of patents valued on a preliminary basis at $7,324,000, and have a
weighted-average life of 15 years. The $1,000,000 of aggregate goodwill was assigned to the water
infrastructure segment and is expected to be deductible for tax purposes.
The results of operations of Intevras have been included in the Companys consolidated statements
of income commencing on the closing date. Pro forma amounts for prior periods have not been
presented since the acquisition would not have had a significant effect on the Companys
consolidated revenues or net income.
On July 15, 2010, the Company acquired 50% interest in Diberil Sociedad Anónima (Diberil), a
Uruguayan company and parent company to Costa Fortuna (Brazil and Uruguay). Diberil, with
operations in Sao Paulo, Brazil, and Montevideo, Uruguay, is one of the largest providers of
specialty foundation and specialized marine geotechnical services in South America. The Company
will account for Diberil as an equity method investment (see Note 13).
In addition to the above acquisitions, the Company paid $226,000 as contingent earnout
consideration on prior year acquisitions.
Fiscal Year 2010
The Company completed three acquisitions during fiscal 2010 as described below:
|
|
On December 9, 2009, the Company acquired certain assets of MCL Technology Corporation
(MCL), an Arizona-based provider of commercial and industrial reverse osmosis, deionization
and filtration services. |
|
|
|
On October 30, 2009, the Company acquired 100% of the stock of W.L. Hailey & Company, Inc.
(Hailey), a water and wastewater solutions firm in Tennessee. The operation was combined
with similar service lines and serves to foster the Companys further expansion of these
product lines into the southeast. |
|
|
|
On May 1, 2009, the Company acquired equipment and other assets of Meadow Equipment Sales &
Service, Inc. (Meadow), a construction company operating primarily in the Midwestern United
States. |
The aggregate cash purchase price of $16,961,000, comprised of cash ($3,150,000 of which was placed
in escrow to secure certain representations, warranties and idemnifications), was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
MCL |
|
|
Hailey |
|
|
Meadow |
|
|
Total |
|
|
Cash purchase price |
|
$ |
1,500 |
|
|
$ |
14,861 |
|
|
$ |
600 |
|
|
$ |
16,961 |
|
Escrow deposits |
|
|
150 |
|
|
|
3,000 |
|
|
|
|
|
|
|
3,150 |
|
In accordance with new accounting guidance, beginning in fiscal 2010 acquisition related costs were
recorded as an expense in the periods in which the costs were incurred. The purchase price for each
acquisition has been allocated based on the fair value of the assets and liabilities acquired,
determined based on the Companys internal operational assessments and other analyses. Based on the
Companys allocations of the purchase price, the acquisitions had the following effect on the
Companys consolidated financial position as of their respective closing dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
MCL |
|
|
Hailey |
|
|
Meadow |
|
|
Total |
|
|
Working capital |
|
$ |
80 |
|
|
$ |
4,861 |
|
|
$ |
|
|
|
$ |
4,941 |
|
Property and equipment |
|
|
983 |
|
|
|
9,515 |
|
|
|
575 |
|
|
|
11,073 |
|
Goodwill |
|
|
273 |
|
|
|
585 |
|
|
|
|
|
|
|
858 |
|
Other intangible assets |
|
|
164 |
|
|
|
|
|
|
|
25 |
|
|
|
189 |
|
Deferred taxes |
|
|
|
|
|
|
(100 |
) |
|
|
|
|
|
|
(100 |
) |
|
Total purchase price |
|
$ |
1,500 |
|
|
$ |
14,861 |
|
|
$ |
600 |
|
|
$ |
16,961 |
|
|
11
The identifiable intangible assets associated with Meadow consist of non-compete agreements valued
at $25,000 and have a weighted-average life of three years. The identifiable intangible assets
associated with MCL consist of design efficiencies that provide a margin advantage over competitors
valued at $164,000 and have a weighted-average life of five years. The $858,000 of aggregate
goodwill was assigned to the water infrastructure segment and is expected to be deductible for tax
purposes.
The results of operations of the acquired entities have been included in the Companys consolidated
statements of income commencing with the respective closing dates. Pro forma amounts related to
Meadow and MCL for prior periods have not been presented since the acquisitions would not have had
a significant effect on the Companys consolidated revenues or net income. Assuming Hailey had been
acquired as of the beginning of fiscal 2010, the unaudited pro forma consolidated revenues, net
income and net income per share of the Company would be as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
(in thousands, except per share data) |
|
July 31, 2009 |
|
|
July 31, 2009 |
|
|
Revenues |
|
$ |
242,379 |
|
|
$ |
467,575 |
|
Net income attributable to Layne Christensen Company |
|
|
(7,863 |
) |
|
|
(6,258 |
) |
Basic income per share |
|
$ |
(0.41 |
) |
|
$ |
(0.32 |
) |
Diluted income per share |
|
$ |
(0.41 |
) |
|
$ |
(0.32 |
) |
The pro forma information provided above is not necessarily indicative of the results of
operations that would actually have resulted if the acquisition was made as of those dates or of
results that may occur in the future.
In addition to the above acquisitions, the company paid $1,349,000 in cash and issued 12,677 shares
of Layne common stock (valued at $280,000) as contingent earnout consideration on prior year
acquisitions.
3. Goodwill and Other Intangible Assets
Goodwill and other intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2010 |
|
|
January 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
Gross |
|
|
|
|
|
|
Amortization |
|
|
Gross |
|
|
|
|
|
|
Amortization |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Period in |
|
|
Carrying |
|
|
Accumulated |
|
|
Period in |
|
|
|
Amount |
|
|
Amortization |
|
|
years |
|
|
Amount |
|
|
Amortization |
|
|
years |
|
Goodwill |
|
$ |
93,758 |
|
|
$ |
|
|
|
|
|
|
|
$ |
92,532 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames |
|
$ |
18,962 |
|
|
$ |
(3,491 |
) |
|
|
29 |
|
|
$ |
18,962 |
|
|
$ |
(3,086 |
) |
|
|
29 |
|
Customer-related |
|
|
332 |
|
|
|
(332 |
) |
|
|
|
|
|
|
332 |
|
|
|
(332 |
) |
|
|
|
|
Patents |
|
|
10,476 |
|
|
|
(849 |
) |
|
|
15 |
|
|
|
3,152 |
|
|
|
(755 |
) |
|
|
15 |
|
Non-competition agreements |
|
|
464 |
|
|
|
(442 |
) |
|
|
2 |
|
|
|
464 |
|
|
|
(423 |
) |
|
|
2 |
|
Other |
|
|
2,754 |
|
|
|
(1,694 |
) |
|
|
12 |
|
|
|
2,754 |
|
|
|
(1,419 |
) |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortizable intangible assets |
|
$ |
32,988 |
|
|
$ |
(6,808 |
) |
|
|
|
|
|
$ |
25,664 |
|
|
$ |
(6,015 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable intangible assets are being amortized over their estimated useful lives of two to 40
years with a weighted average amortization period of 23 years. Total amortization expense for
other intangible assets was $394,000 and $386,000 for the three months ended July 31, 2010 and
2009, respectively, and $794,000 and $770,000 for the six months ended July 31, 2010 and 2009,
respectively.
12
The carrying amount of goodwill attributed to each operating segment was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water |
|
|
|
|
|
|
Energy |
|
|
Infrastructure |
|
|
Total |
|
Balance February 1, 2010 |
|
$ |
950 |
|
|
$ |
91,582 |
|
|
$ |
92,532 |
|
Additions |
|
|
|
|
|
|
1,226 |
|
|
|
1,226 |
|
|
|
|
|
|
|
|
|
|
|
Balance, July 31, 2010 |
|
$ |
950 |
|
|
$ |
92,808 |
|
|
$ |
93,758 |
|
|
|
|
|
|
|
|
|
|
|
4. Indebtedness
The Company maintains an agreement (Master Shelf Agreement) whereby it can issue an
additional $50,000,000 in unsecured notes before September 15, 2012. On July 31, 2003, the Company
issued $40,000,000 of notes (Series A Senior Notes) under the Master Shelf Agreement. The Series
A Senior Notes bear a fixed interest rate of 6.05%, with annual principal payments of $13,333,000.
Final payment on the Series A Senior Notes was made on August 2, 2010. The Company issued an
additional $20,000,000 of notes under the Master Shelf Agreement in October 2004 (Series B Senior
Notes). The Series B Senior Notes bear a fixed interest rate of 5.40% and are due on September
29, 2011, with annual principal payments of $6,667,000.
The Company also maintains a revolving credit facility under an Amended and Restated Loan Agreement
(the Credit Agreement) with Bank of America, N.A., as Administrative Agent and as Lender (the
Administrative Agent), and the other Lenders listed therein (the Lenders), which contains a
revolving loan commitment of $200,000,000, less any outstanding letter of credit commitments (which
are subject to a $30,000,000 sublimit).
The Credit Agreement provides for interest at variable rates equal to, at the Companys option, a
LIBOR rate plus 0.75% to 2.00%, or a base rate, as defined in the Credit Agreement, plus up to
0.50%, depending upon the Companys leverage ratio. The Credit Agreement is unsecured and is due
and payable November 15, 2011. On July 31, 2010, there were letters of credit of $23,851,000 and
no borrowings outstanding on the Credit Agreement resulting in available capacity of $176,149,000.
The Master Shelf Agreement and the Credit Agreement contain certain covenants including
restrictions on the incurrence of additional indebtedness and liens, investments, acquisitions,
transfer or sale of assets, transactions with affiliates, payment of dividends and certain
financial maintenance covenants, including among others, fixed charge coverage, leverage and
minimum tangible net worth. The Company was in compliance with its covenants as of July 31, 2010.
Debt outstanding as of July 31, 2010, and January 31, 2010, whose carrying value approximates fair
value, was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
July 31, |
|
|
January 31, |
|
|
|
2010 |
|
|
2010 |
|
Long-term debt: |
|
|
|
|
|
|
|
|
Credit Agreement |
|
$ |
|
|
|
$ |
|
|
Senior Notes |
|
|
26,667 |
|
|
|
26,667 |
|
|
|
|
|
|
|
|
Total debt |
|
|
26,667 |
|
|
|
26,667 |
|
Less current maturities |
|
|
(20,000 |
) |
|
|
(20,000 |
) |
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
6,667 |
|
|
$ |
6,667 |
|
|
|
|
|
|
|
|
5. Derivatives
The Company has foreign operations that have significant costs denominated in foreign
currencies, and thus is exposed to risks associated with changes in foreign currency exchange
rates. At any point in time, the Company might use various hedge instruments, primarily foreign
currency option contracts, to manage the exposures associated with forecasted expatriate labor
costs and purchases of operating supplies. As of July 31, 2010, the Company held option contracts
with an aggregate U.S. dollar notional value of $3,580,000 which are intended to hedge exposure to
Australian dollar fluctuations over a period to January 31, 2011. As of July 31, 2010 and January
31, 2010, the fair values of outstanding derivatives were losses of $42,000 and $102,000,
respectively, recorded in other accrued expenses on the consolidated balance sheets. The fair value
of foreign currency contracts is estimated based on comparable quotes from brokers. The Company
does not enter into foreign currency derivative financial instruments for speculative or trading
purposes.
13
The Companys energy division is exposed to fluctuations in the price of natural gas and enters
into fixed-price physical delivery contracts to manage natural gas price risk for a portion of its
production, if available at attractive prices. As of July 31, 2010 the Company held no such
contracts.
Additionally, the Company has entered into physical delivery contracts in order to facilitate
normal recurring sales with our natural gas purchasing counterparty. As of July 31, 2010, the
Company had committed to deliver a total of 1,426,000 million British Thermal Units (MMBtu) of
natural gas through October 2010. For 1,104,000 MMBtu the contract price resets monthly, on the
first day of the month, based on a weighted average price of the trades reported during the last
week of the previous month for gas deliveries in the current month. For 322,000 million MMBtu the
contract price resets daily based on a weighted average price of the reported trades for deliveries
on the following day.
6. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) for the six months ended July
31, 2010 and 2009 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Accumulated |
|
|
|
Cumulative |
|
|
Unrecognized |
|
|
Loss on |
|
|
Other |
|
|
|
Translation |
|
|
Pension |
|
|
Exchange |
|
|
Comprehensive |
|
|
|
Adjustment |
|
|
Liability |
|
|
Contracts |
|
|
Loss |
|
Balance, February 1, 2010 |
|
$ |
(6,004 |
) |
|
$ |
|
|
|
$ |
(62 |
) |
|
$ |
(6,066 |
) |
Period change |
|
|
(1,288 |
) |
|
|
|
|
|
|
36 |
|
|
|
(1,252 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 31, 2010 |
|
$ |
(7,292 |
) |
|
$ |
|
|
|
$ |
(26 |
) |
|
$ |
(7,318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Accumulated |
|
|
|
Cumulative |
|
|
Unrecognized |
|
|
Loss on |
|
|
Other |
|
|
|
Translation |
|
|
Pension |
|
|
Exchange |
|
|
Comprehensive |
|
|
|
Adjustment |
|
|
Liability |
|
|
Contracts |
|
|
Loss |
|
Balance, February 1, 2009 |
|
$ |
(8,940 |
) |
|
$ |
(1,017 |
) |
|
$ |
(96 |
) |
|
$ |
(10,053 |
) |
Period change |
|
|
1,803 |
|
|
|
|
|
|
|
581 |
|
|
|
2,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 31, 2009 |
|
$ |
(7,137 |
) |
|
$ |
(1,017 |
) |
|
$ |
485 |
|
|
$ |
(7,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Impairment of Oil and Gas Properties
As of July 31, 2010, the Company evaluated its oil and gas reserves and recoverability of
capitalized cost of the energy division. This determination was made according to SEC guidelines
and used average gas prices for July 31, 2010, of $3.91 per Mcf, compared to a price of $3.24 per
Mcf for the evaluation for January 31, 2010 and $2.89 per Mcf for July 31, 2009. Based on the
reserve determination, no Ceiling Test impairment was required for the three or six months ended
July 31, 2010. For the three months ended July 31, 2009, the Company recorded a non-cash Ceiling
Test impairment charge of $21,642,000, or $13,039,000 after income tax, for the carrying value of
the assets in excess of future net cash flows. If gas pricing falls, additional impairments could
occur. As of July 31, 2010, the remaining net book value of assets subject to Ceiling Test
impairment was $24,074,000.
8. Litigation Settlement Gains
In fiscal 2000, the Company initiated litigation against a former owner of a subsidiary and
associated partners. The action stemmed from alleged competition in violation of non-competition
agreements, and sought damages for lost profits and recovery of legal expenses. During the six
months ended July 31, 2009, the Company entered into an agreement whereby it received certain land
and buildings in settlement of these claims. The settlement was valued at $2,828,000, based on
managements estimate of the fair market value of the land and buildings received considering
current market conditions and information provided by a third party appraisal.
In fiscal 2008, the Company initiated litigation against former officers of a subsidiary and
associated energy production companies. During September 2008, the Company entered into a
settlement agreement whereby it received certain payments over a period through September 2009.
Payments were received during the six months ended July 31, 2009, of $333,000, net of contingent
attorney fees. There were no litigation settlement gains recorded in the six months ended July 31,
2010.
14
9. Other Income (Expense)
Other income (expense) consisted of the following for the three and six months ended July 31,
2010 and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Gain (loss) from disposal of property and equipment |
|
$ |
345 |
|
|
$ |
(39 |
) |
|
$ |
409 |
|
|
$ |
7 |
|
Interest income |
|
|
51 |
|
|
|
165 |
|
|
|
124 |
|
|
|
221 |
|
Currency exchange loss |
|
|
(59 |
) |
|
|
(64 |
) |
|
|
(192 |
) |
|
|
(569 |
) |
Other |
|
|
(148 |
) |
|
|
(75 |
) |
|
|
(265 |
) |
|
|
(297 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
189 |
|
|
$ |
(13 |
) |
|
$ |
76 |
|
|
$ |
(638 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Employee Benefit Plans
The Company sponsored a pension plan covering certain hourly employees not covered by
union-sponsored, multi-employer plans. Benefits were computed based mainly on years of service. On
January 29, 2010, the Company terminated the plan and distributed $10,054,000 to an annuity
provider and fulfilled the remaining obligations for approximately $300,000 in cash. These
distributions triggered a settlement and resulted in a recognized settlement loss of $4,980,000 in
fiscal 2010. Net periodic pension cost for the three and six months ended July 31, 2009 was
$100,000 and $200,000, respectively.
The Company provides supplemental retirement benefits to its chief executive officer. Benefits are
computed based on the compensation earned during the highest five consecutive years of employment
reduced for a portion of Social Security benefits and an annuity equivalent of the chief
executives defined contribution plan balance. The Company does not contribute to the plan or
maintain any investment assets related to the expected benefit obligation. The Company has
recognized the full amount of its actuarially determined pension liability. Net periodic pension
cost of the supplemental retirement benefits for the three and six months ended July 31, 2010 and
2009 include the following components (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Service cost |
|
$ |
87 |
|
|
$ |
73 |
|
|
$ |
174 |
|
|
$ |
146 |
|
Interest cost |
|
|
43 |
|
|
|
44 |
|
|
|
86 |
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
130 |
|
|
$ |
117 |
|
|
$ |
260 |
|
|
$ |
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. Fair Value Measurements
The Company follows reporting guidance which defines fair value, establishes a three-level
fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities, and
expands disclosures about fair value measurements. The hierarchy requires the Company to maximize
the use of observable inputs and minimize the use of unobservable inputs. The three levels of
inputs used to measure fair value are listed below:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than those included in Level 1, such as quoted market
prices for similar assets and liabilities in active markets or quoted prices for identical
assets in inactive markets.
Level 3 Unobservable inputs reflecting the Companys own assumptions and best estimate of
what inputs market participants would use in pricing an asset or liability.
The Companys assessment of the significance of a particular input to the fair value in its
entirety requires judgment and considers factors specific to the asset or liability. The Companys
financial instruments held at fair value, which include restrictive deposits held in acquisition
escrow accounts and foreign currency option contracts, are presented as of the periods ended July
31, 2010 and January 31, 2010 (in thousands):
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying |
|
|
Fair Value Measurements |
|
|
|
Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
July 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted deposits held
at fair value |
|
$ |
4,817 |
|
|
$ |
4,817 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency contracts |
|
$ |
(42 |
) |
|
$ |
|
|
|
$ |
(42 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted deposits held
at fair value |
|
$ |
4,566 |
|
|
$ |
4,566 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency contracts |
|
$ |
(102 |
) |
|
$ |
|
|
|
$ |
(102 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had no Level 3 fair value measurements at July 31, 2010 or January 31, 2010.
12. Stock and Stock Option Plans
In October 2008, the Company amended the Rights Agreement signed October 1998 whereby the
Company has authorized and declared a dividend of one preferred share purchase right (Right) for
each outstanding common share of the Company. Subject to limited exceptions, the Rights are
exercisable if a person or group acquires or announces a tender offer for 20% or more of the
Companys common stock. Each Right will entitle shareholders to buy one one-hundredth of a share
of a newly created Series A Junior Participating Preferred Stock of the Company at an exercise
price of $75.00. The Company is entitled to redeem the Right at $0.01 per Right at any time before
a person has acquired 20% or more of the Companys outstanding common stock. The Rights expire
three years from the date of grant.
The Company has stock option and employee incentive plans that provide for the granting of options
to purchase or the issuance of shares of common stock at a price fixed by the Board of Directors or
a committee. As of July 31, 2010, there were an aggregate of 2,850,000 shares registered under the
plans, 1,390,343 of which remain available to be granted under the plans. Of
this amount, 250,000 shares may only be granted as stock in payment of bonuses, and 1,140,343 may
be issued as stock or options. The Company has the ability to issue shares under the plans either
from new issuances or from treasury, although it has previously issued only new shares and expects
to continue to issue new shares in the future. For the six months ended July 31, 2010, the Company
granted approximately 59,000 restricted shares which generally ratably vest over periods of one to
four years from the grant date.
The Company recognized $2,190,000 and $3,753,000 of compensation cost for these share-based plans
during the six months ended July 31, 2010 and 2009, respectively. Of these amounts, $559,000 and
$739,000, respectively, related to nonvested stock. The total income tax benefit recognized for
share-based compensation arrangements was $854,000 and $1,464,000 for the six months ended July 31,
2010 and 2009, respectively.
A summary of nonvested share activity for the six months ended July 31, 2010, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Aggregate |
|
|
|
|
|
|
|
Average |
|
|
Intrinsic |
|
|
|
Number of |
|
|
Grant Date |
|
|
Value (in |
|
|
|
Shares |
|
|
Fair Value |
|
|
thousands) |
|
|
Nonvested stock at January 31, 2010 |
|
|
79,336 |
|
|
$ |
36.23 |
|
|
|
|
|
|
Granted |
|
|
58,709 |
|
|
|
27.42 |
|
|
|
|
|
Vested |
|
|
(27,936 |
) |
|
|
32.51 |
|
|
|
|
|
|
Nonvested stock at July 31, 2010 |
|
|
110,109 |
|
|
$ |
32.48 |
|
|
$ |
2,776 |
|
|
16
Significant option groups outstanding at July 31, 2010, related exercise price and remaining
contractual term follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual |
|
Grant |
|
Options |
|
|
Options |
|
|
Exercise |
|
|
Term |
|
Date |
|
Outstanding |
|
|
Exercisable |
|
|
Price |
|
|
(Months) |
|
|
6/04 |
|
|
20,000 |
|
|
|
20,000 |
|
|
$ |
16.600 |
|
|
|
47 |
|
6/04 |
|
|
68,576 |
|
|
|
68,576 |
|
|
|
16.650 |
|
|
|
47 |
|
6/05 |
|
|
10,000 |
|
|
|
10,000 |
|
|
|
17.540 |
|
|
|
59 |
|
9/05 |
|
|
140,332 |
|
|
|
140,332 |
|
|
|
23.050 |
|
|
|
62 |
|
1/06 |
|
|
191,481 |
|
|
|
191,481 |
|
|
|
27.870 |
|
|
|
66 |
|
6/06 |
|
|
10,000 |
|
|
|
10,000 |
|
|
|
29.290 |
|
|
|
71 |
|
6/06 |
|
|
70,000 |
|
|
|
70,000 |
|
|
|
29.290 |
|
|
|
71 |
|
6/07 |
|
|
65,625 |
|
|
|
48,125 |
|
|
|
42.260 |
|
|
|
83 |
|
7/07 |
|
|
33,000 |
|
|
|
24,750 |
|
|
|
42.760 |
|
|
|
84 |
|
9/07 |
|
|
3,000 |
|
|
|
1,500 |
|
|
|
55.480 |
|
|
|
86 |
|
2/08 |
|
|
74,524 |
|
|
|
49,675 |
|
|
|
35.710 |
|
|
|
90 |
|
1/09 |
|
|
6,000 |
|
|
|
6,000 |
|
|
|
24.100 |
|
|
|
101 |
|
2/09 |
|
|
201,311 |
|
|
|
67,102 |
|
|
|
15.780 |
|
|
|
102 |
|
2/09 |
|
|
4,580 |
|
|
|
4,580 |
|
|
|
15.780 |
|
|
|
102 |
|
6/09 |
|
|
108,582 |
|
|
|
36,190 |
|
|
|
21.990 |
|
|
|
106 |
|
6/09 |
|
|
2,472 |
|
|
|
2,472 |
|
|
|
21.990 |
|
|
|
106 |
|
2/10 |
|
|
85,290 |
|
|
|
|
|
|
|
27.790 |
|
|
|
114 |
|
2/10 |
|
|
2,721 |
|
|
|
2,721 |
|
|
|
25.440 |
|
|
|
114 |
|
|
|
|
|
1,097,494 |
|
|
|
753,504 |
|
|
|
|
|
|
|
|
|
|
All options were granted at an exercise price equal to the fair market value of the Companys
common stock at the date of grant. The weighted average fair value at the date of grant for the
options granted was $16.08 and $9.92 for the six months ended July 31, 2010 and 2009, respectively.
The options have terms of ten years from the date of grant and generally vest ratably over periods
of one month to five years. Transactions for stock options for the six months ended July 31, 2010,
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options |
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Remaining |
|
|
Intrinsic |
|
|
|
Number of |
|
|
Average |
|
|
Contractual Term |
|
|
Value |
|
|
|
Shares |
|
Exercise Price |
|
(years) |
|
(in thousands) |
|
Stock Option Activity Summary: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at February 1, 2010 |
|
|
1,026,227 |
|
|
$ |
24.856 |
|
|
|
7.02 |
|
|
$ |
3,840 |
|
Granted |
|
|
88,011 |
|
|
|
27.717 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(16,744 |
) |
|
|
5.813 |
|
|
|
|
|
|
|
373 |
|
Canceled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at July 31, 2010 |
|
|
1,097,494 |
|
|
$ |
25.376 |
|
|
|
6.86 |
|
|
|
3,445 |
|
|
|
|
Shares Exercisable |
|
|
753,504 |
|
|
$ |
26.154 |
|
|
|
6.04 |
|
|
$ |
1,947 |
|
|
|
|
The aggregate intrinsic value was calculated using the difference between the current market price
and the exercise price for only those options that have an exercise price less than the current
market price.
13. Investment in Affiliates
The Companys investments in affiliates are carried at the fair value of the investment
consideration paid, adjusted for the Companys equity in undistributed earnings or losses from the
investment date and dividends declared by the investee.
On July 15, 2010, the Company acquired a 50% interest in Diberil Sociedad Anónima (Diberil), a
Uruguayan company and parent company to Costa Fortuna (Brazil and Uruguay). Diberil, with operations
in Sao Paulo, Brazil, and Montevideo, Uruguay, is one of the largest providers of specialty
foundation and marine geotechnical services in South America. The interest was acquired for a total
cash consideration of $14,900,000, of which $10,100,000 was paid to Diberil shareholders and
$4,800,000
17
was paid to Diberil to purchase newly issued Diberil stock. Concurrent with the investment, Diberil
purchased Layne GeoBrazil, an equipment leasing company in Brazil wholly owned by the Company, for
a cash payment of $4,800,000. Subsequent to the acquisition, the Company invested an additional
$1,250,000 in Diberil as its proportionate share of a capital contribution.
The Companys other affiliates are generally engaged in mineral exploration drilling and the
manufacture and supply of drilling equipment, parts and supplies.
A summary of affiliates and percentages owned are as follows as of July 31, 2010:
|
|
|
|
|
|
|
Percentage |
|
|
|
Owned |
|
Christensen Chile, S.A. (Chile) |
|
|
50.00 |
% |
Christensen Commercial, S.A. (Chile) |
|
|
50.00 |
|
Geotec Boyles Bros., S.A. (Chile) |
|
|
50.00 |
|
Boyles Bros. Diamantina, S.A. (Peru) |
|
|
29.49 |
|
Christensen Commercial, S.A. (Peru) |
|
|
35.38 |
|
Geotec, S.A. (Peru) |
|
|
35.38 |
|
Boytec, S.A. (Panama) |
|
|
50.00 |
|
Plantel Industrial S.A. (Chile) |
|
|
50.00 |
|
Boytec Sondajes de Mexico, S.A. de C.V. (Mexico) |
|
|
50.00 |
|
Geoductos Chile, S.A. (Chile) |
|
|
50.00 |
|
Mining Drilling Fluids (Panama) |
|
|
25.00 |
|
Diamantina Christensen Trading (Panama) |
|
|
42.69 |
|
Boyles Bros. do Brasil Ltd. (Brazil) |
|
|
40.00 |
|
Boytec, S.A. (Columbia) |
|
|
50.00 |
|
Centro Internacional de Formacion S.A. (Chile) |
|
|
50.00 |
|
Geoestrella S.A.(Chile) |
|
|
25.00 |
|
Diberil Sociedad Anónima (Uruguay) |
|
|
50.00 |
|
Financial information of the affiliates is reported with a one-month lag in the reporting period.
Summarized financial information of the affiliates was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
$ |
70,592 |
|
|
$ |
54,105 |
|
|
$ |
135,515 |
|
|
$ |
105,540 |
|
Income before income taxes |
|
|
11,429 |
|
|
|
10,472 |
|
|
|
22,717 |
|
|
|
20,499 |
|
Operating income |
|
|
5,875 |
|
|
|
6,407 |
|
|
|
11,962 |
|
|
|
12,391 |
|
Net income |
|
|
4,176 |
|
|
|
4,838 |
|
|
|
8,696 |
|
|
|
8,574 |
|
14. Operating Segments
The Company is a multinational company that provides sophisticated services and related
products to a variety of markets, as well as being a producer of unconventional natural gas for the
energy market. Management defines the Companys operational organizational structure into discrete
divisions based on its primary product lines. Each division comprises a combination of individual
district offices, which primarily offer similar types of services and serve similar types of
markets. The Companys reportable segments are defined as follows:
Water Infrastructure Division
This division provides a full line of water-related services and products including soil
stabilization, hydrological studies, site selection, well design, drilling and development, pump
installation, and well rehabilitation. The divisions offerings include the design and
construction of water and wastewater treatment facilities, the provision of filter media and
membranes to treat volatile organics and other contaminants such as nitrates, iron, manganese,
arsenic, radium and radon in groundwater, Ranney collector wells, sewer rehabilitation and water
and wastewater transmission lines. The division also offers environmental services to assess and
monitor groundwater contaminants.
18
Mineral Exploration Division
This division provides a complete range of drilling services for the mineral exploration
industry. Its aboveground and underground drilling activities include all phases of core drilling,
diamond, reverse circulation, dual tube, hammer and rotary air-blast methods.
Energy Division
This division focuses on exploration and production of unconventional gas properties,
primarily concentrating on projects in the mid-continent region of the United States.
Other
Other includes two small specialty energy service companies and any other specialty operations
not included in one of the other divisions.
Financial information (in thousands) for the Companys operating segments is presented below.
Unallocated corporate expenses primarily consist of general and administrative functions performed
on a company-wide basis and benefiting all operating segments. These costs include accounting,
financial reporting, internal audit, treasury, corporate and securities law, tax compliance,
certain executive management (chief executive officer, chief financial officer and general counsel)
and board of directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water infrastructure |
|
$ |
193,990 |
|
|
$ |
174,141 |
|
|
$ |
366,895 |
|
|
$ |
342,228 |
|
Mineral exploration |
|
|
50,785 |
|
|
|
30,257 |
|
|
|
96,663 |
|
|
|
55,051 |
|
Energy |
|
|
5,843 |
|
|
|
11,988 |
|
|
|
15,392 |
|
|
|
22,309 |
|
Other |
|
|
2,682 |
|
|
|
841 |
|
|
|
5,065 |
|
|
|
1,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
253,300 |
|
|
$ |
217,227 |
|
|
$ |
484,015 |
|
|
$ |
421,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of affiliates
Mineral exploration |
|
$ |
1,614 |
|
|
$ |
2,351 |
|
|
$ |
3,487 |
|
|
$ |
4,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water infrastructure |
|
$ |
10,285 |
|
|
$ |
8,253 |
|
|
$ |
18,925 |
|
|
$ |
12,780 |
|
Mineral exploration |
|
|
8,956 |
|
|
|
3,543 |
|
|
|
17,543 |
|
|
|
5,310 |
|
Energy |
|
|
480 |
|
|
|
(17,473 |
) |
|
|
2,997 |
|
|
|
(14,885 |
) |
Other |
|
|
544 |
|
|
|
(11 |
) |
|
|
792 |
|
|
|
137 |
|
Unallocated corporate expenses |
|
|
(6,737 |
) |
|
|
(6,520 |
) |
|
|
(13,806 |
) |
|
|
(12,824 |
) |
Interest expense |
|
|
(517 |
) |
|
|
(812 |
) |
|
|
(1,043 |
) |
|
|
(1,622 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss) before income taxes |
|
$ |
13,011 |
|
|
$ |
(13,020 |
) |
|
$ |
25,408 |
|
|
$ |
(11,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
210,548 |
|
|
$ |
190,863 |
|
|
$ |
402,752 |
|
|
$ |
373,269 |
|
Africa/Australia |
|
|
19,860 |
|
|
|
14,141 |
|
|
|
38,306 |
|
|
|
24,516 |
|
Mexico |
|
|
12,909 |
|
|
|
5,988 |
|
|
|
23,564 |
|
|
|
10,996 |
|
Other foreign |
|
|
9,983 |
|
|
|
6,235 |
|
|
|
19,393 |
|
|
|
12,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
253,300 |
|
|
$ |
217,227 |
|
|
$ |
484,015 |
|
|
$ |
421,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15. Contingencies
The Companys service 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 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 services
and products. Litigation arising from any such occurrences may result in the Company being named
as a defendant in lawsuits asserting large claims. Although
19
the Company maintains insurance protection that it considers economically prudent, there can be no
assurance that any such insurance will be sufficient or effective under all circumstances or
against all claims or hazards to which the Company may be subject or that the Company will be able
to continue to obtain such insurance protection. A successful claim or damage resulting from a
hazard for which the Company is not fully insured could have a material adverse effect on the
Company. In addition, the Company does not maintain political risk insurance 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 Companys business. The Company believes that the ultimate disposition
of these matters will not, individually and in the aggregate, have a material adverse effect upon
its business or consolidated financial position, results of operations or cash flows.
There have been no significant changes to the risk factors disclosed under Item 1A in our
Annual Report on form 10-K for the year ended January 31, 2010.
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Results of Operations and Financial Condition |
Cautionary Language Regarding Forward-Looking Statements
This Form 10-Q may contain 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 may include,
but are not limited to, statements of plans and objectives, statements of future economic
performance and statements of assumptions underlying such statements, and statements of
managements intentions, hopes, beliefs, expectations or predictions of the future. Forward-looking
statements can often be identified by the use of forward-looking terminology, such as should,
intended, continue, believe, may, hope, anticipate, goal, forecast, plan,
estimate 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 commodities, unanticipated slowdowns in the Companys major markets, the
availability of credit, the risks and uncertainties normally incident to the construction industry
and exploration for and development and production of oil and gas, 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.
20
Results of Operations
The following table presents, for the periods indicated, the percentage relationship which
certain items reflected in the Companys consolidated statements of income bear to revenues and the
percentage increase or decrease in the dollar amount of such items period to period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-to-Period |
|
|
|
Three Months |
|
|
Six Months |
|
|
Change |
|
|
|
Ended July 31, |
|
|
Ended July 31, |
|
|
Three |
|
|
Six |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Months |
|
|
Months |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water infrastructure |
|
|
76.6 |
% |
|
|
80.2 |
% |
|
|
75.8 |
% |
|
|
81.2 |
% |
|
|
11.4 |
% |
|
|
7.2 |
% |
Mineral exploration |
|
|
20.0 |
|
|
|
13.9 |
|
|
|
20.0 |
|
|
|
13.1 |
|
|
|
67.8 |
|
|
|
75.6 |
|
Energy |
|
|
2.3 |
|
|
|
5.5 |
|
|
|
3.2 |
|
|
|
5.3 |
|
|
|
(51.3 |
) |
|
|
(31.0 |
) |
Other |
|
|
1.1 |
|
|
|
0.4 |
|
|
|
1.0 |
|
|
|
0.4 |
|
|
|
218.9 |
|
|
|
176.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
16.6 |
|
|
|
14.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
(78.1) |
% |
|
|
(76.2 |
)% |
|
|
(76.4) |
% |
|
|
(77.2 |
)% |
|
|
19.4 |
|
|
|
13.6 |
|
Selling, general and administrative expenses |
|
|
(12.5 |
) |
|
|
(13.9 |
) |
|
|
(13.5 |
) |
|
|
(14.7 |
) |
|
|
4.6 |
|
|
|
5.2 |
|
Depreciation, depletion and amortization |
|
|
(4.8 |
) |
|
|
(6.6 |
) |
|
|
(5.4 |
) |
|
|
(6.8 |
) |
|
|
(15.0 |
) |
|
|
(8.2 |
) |
Impairment of oil and gas properties |
|
|
|
|
|
|
(10.0 |
) |
|
|
|
|
|
|
(5.1 |
) |
|
|
(100.0 |
) |
|
|
(100.0 |
) |
Litigation settlement gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8 |
|
|
|
|
|
|
|
(100.0 |
) |
Equity in earnings of affiliates |
|
|
0.6 |
|
|
|
1.1 |
|
|
|
0.7 |
|
|
|
1.0 |
|
|
|
(31.3 |
) |
|
|
(18.6 |
) |
Interest expense |
|
|
(0.2 |
) |
|
|
(0.4 |
) |
|
|
(0.2 |
) |
|
|
(0.4 |
) |
|
|
(36.3 |
) |
|
|
(35.7 |
) |
Other, net |
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
(0.2 |
) |
|
|
* |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
5.1 |
|
|
|
(6.0 |
) |
|
|
5.2 |
|
|
|
(2.6 |
) |
|
|
(199.9 |
) |
|
|
(328.8 |
) |
Income tax benefit (expense) |
|
|
(2.6 |
) |
|
|
2.0 |
|
|
|
(2.6 |
) |
|
|
0.8 |
|
|
|
(249.8 |
) |
|
|
(458.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
2.5 |
% |
|
|
(4.0 |
)% |
|
|
2.6 |
% |
|
|
(1.8 |
)% |
|
|
(174.7 |
) |
|
|
(270.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, equity in earnings of affiliates and income (loss) before income taxes pertaining to
the Companys operating segments are presented below. Unallocated corporate expenses primarily
consist of general and administrative functions performed on a company-wide basis and benefiting
all operating segments. These costs include accounting, financial reporting, internal audit,
treasury, corporate and securities law, tax compliance, certain executive management (chief
executive officer, chief financial officer and general counsel), and board of directors. Operating
segment revenues and income (loss) before income taxes are summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water infrastructure |
|
$ |
193,990 |
|
|
$ |
174,141 |
|
|
$ |
366,895 |
|
|
$ |
342,228 |
|
Mineral exploration |
|
|
50,785 |
|
|
|
30,257 |
|
|
|
96,663 |
|
|
|
55,051 |
|
Energy |
|
|
5,843 |
|
|
|
11,988 |
|
|
|
15,392 |
|
|
|
22,309 |
|
Other |
|
|
2,682 |
|
|
|
841 |
|
|
|
5,065 |
|
|
|
1,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
253,300 |
|
|
$ |
217,227 |
|
|
$ |
484,015 |
|
|
$ |
421,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mineral exploration |
|
$ |
1,614 |
|
|
$ |
2,351 |
|
|
$ |
3,487 |
|
|
$ |
4,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water infrastructure |
|
$ |
10,285 |
|
|
$ |
8,253 |
|
|
$ |
18,925 |
|
|
$ |
12,780 |
|
Mineral exploration |
|
|
8,956 |
|
|
|
3,543 |
|
|
|
17,543 |
|
|
|
5,310 |
|
Energy |
|
|
480 |
|
|
|
(17,473 |
) |
|
|
2,997 |
|
|
|
(14,885 |
) |
Other |
|
|
544 |
|
|
|
(11 |
) |
|
|
792 |
|
|
|
137 |
|
Unallocated corporate expenses |
|
|
(6,737 |
) |
|
|
(6,520 |
) |
|
|
(13,806 |
) |
|
|
(12,824 |
) |
Interest expense |
|
|
(517 |
) |
|
|
(812 |
) |
|
|
(1,043 |
) |
|
|
(1,622 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income (loss) before income taxes |
|
$ |
13,011 |
|
|
$ |
(13,020 |
) |
|
$ |
25,408 |
|
|
$ |
(11,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Revenues increased $36,073,000, or 16.6% to $253,300,000, for the three months ended July 31, 2010,
and $62,596,000, or 14.9%, to $484,015,000 for the six months ended July 31, 2010, as compared to
the same periods last year. A further discussion of results of operations by division is presented
below.
Cost of revenues increased $32,197,000, or 19.4% to $197,746,000 (78.1% of revenues) and
$44,205,000, or 13.6% to $369,658,000 (76.4% of revenues) for the three and six months ended July
31, 2010, compared to $165,549,000 (76.2% of revenues) and $325,453,000 (77.2% of revenues) for the
same periods last year. The increase as a percentage of revenues for the three months was
primarily focused in the energy division as a result of nearly flat production costs combined with
lower revenues due to the expiration of favorably priced forward sales contracts in the first
quarter of fiscal 2011. The decrease as a percentage of revenues for the six months was focused in
both the mineral exploration division as a result of increasing activity as well as the water
infrastructure division as the result of higher profit margins during the first three months of the
fiscal year on geoconstruction and specialty drilling work.
Selling, general and administrative expenses were $31,698,000 and $65,213,000 for the three and six
months ended July 31, 2010, compared to $30,304,000 and $62,004,000 for the same periods last year.
The increases were primarily the result of increased compensation expenses of $1,874,000 and
$4,182,000 due to higher earnings and $1,108,000 and $2,530,000 in added expenses from acquired
operations for the three and six months, respectively, offset by reduction in various other expense
categories.
Depreciation, depletion and amortization were $12,131,000 and $26,256,000 for the three and six
months ended July 31, 2010, compared to $14,278,000 and $28,611,000 for the same periods last year.
The decreases were primarily due to lower depletion in the energy division as a result of updated
estimates of economically recoverable gas reserves.
The Company recorded a non-cash Ceiling Test impairment of oil and gas properties of $21,642,000
for the three months ended July 31, 2009, primarily as a result of a significant continued decline
in natural gas prices and the expiration of higher priced forward sales contracts. There were no
impairments recorded for the six months ending July 31, 2010.
During the six months ended July 31, 2009, the Company received litigation settlements valued at
$3,161,000. The settlements included receipt of land and buildings valued at $2,828,000, and cash
receipts of $333,000, net of contingent attorney fees. There were no litigation settlement gains in
the six months ended July 31, 2010.
Equity in earnings of affiliates was $1,614,000 and $3,487,000 for the three and six months ended
July 31, 2010, compared to $2,351,000 and $4,286,000 for the same periods last year. The decreased
earnings are primarily a result of a customer-driven project delay at a large South American mine
site.
Interest expense decreased to $517,000 and $1,043,000 for the three and six months ended July 31,
2010, compared to $812,000 and $1,622,000 for the same periods last year. The decreases were a
result of scheduled debt reductions.
Income tax expenses of $6,561,000 (an effective rate of 50.4%) and $12,387,000 (an effective rate
of 48.8%) were recorded for the three and six months ended July 31, 2010, respectively, compared to
income tax benefits of $4,380,000 (an effective rate of 33.6%) and $3,460,000 (an effective rate of
31.2%) for the same periods last year, including an $8,603,000 benefit related to the non-cash
impairment charge of proved oil and gas properties recorded as a discrete item in the three months
ended July 31, 2009. Excluding the impairment and related tax benefit, the Company would have
recorded income tax expense of $4,223,000 (an effective rate of 49.0%) and $5,143,000 (an effective
rate of 48.8%) for the three and six months ended July 31, 2009. The effective rate in excess of
the statutory federal rate for the periods was due primarily to the impact of nondeductible
expenses and the tax treatment of certain foreign operations.
Water Infrastructure Division
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Revenues |
|
$ |
193,990 |
|
|
$ |
174,141 |
|
|
$ |
366,895 |
|
|
$ |
342,228 |
|
Income before income taxes |
|
|
10,285 |
|
|
|
8,253 |
|
|
|
18,925 |
|
|
|
12,780 |
|
Water infrastructure revenues increased 11.4% to $193,990,000 and 7.2% to $366,895,000 for the
three and six months ended July 31, 2010, respectively, compared to $174,141,000 and $342,228,000
for the same periods last year. The increases were primarily attributable to additional revenues
from acquired operations and specialty drilling projects including
work in Afghanistan. The increases were partially offset by a reduction in revenue from a large
utility contract in Colorado
22
that was substantially completed last year.
Income before income taxes for the water infrastructure division increased 24.6% to $10,285,000 and
48.1% to $18,925,000 for the three and six months ended July 31, 2010, respectively, compared to
$8,253,000 and $12,780,000 for the same periods last year. The increases in income before income
taxes were primarily from the New Orleans geoconstruction and Afghanistan projects.
The backlog in the water infrastructure division was $526,972,000 as of July 31, 2010, compared to
$553,034,000 as of April 30, 2010, and $453,384,000 as of July 31, 2009.
Mineral Exploration Division
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
50,785 |
|
|
$ |
30,257 |
|
|
$ |
96,663 |
|
|
$ |
55,051 |
|
Income before income taxes |
|
|
8,956 |
|
|
|
3,543 |
|
|
|
17,543 |
|
|
|
5,310 |
|
Mineral exploration revenues increased 67.8% to $50,785,000 and 75.6% to $96,663,000 for the three
and six months ended July 31, 2010, respectively, compared to $30,257,000 and $55,051,000 for the
same periods last year. The increased activity levels which began in the fourth quarter of last
year continued across most locations with the largest increases in Africa and Mexico.
Income before income taxes for the mineral exploration division increased 152.8% to $8,956,000 and
230.4% to $17,543,000 for the three and six months ended July 31, 2010, respectively, compared to
$3,543,000 and $5,310,000 for the same periods last year. The increases were primarily attributable
to stronger earnings in Africa, Mexico and the western U.S. During the six month period in the
prior year, the Company had two unusual items, receipt of a litigation settlement in Australia of
$2,828,000 and increased non-income tax expense of $2,244,000 due to a reassessment of the
recoverability of value added taxes and accruals for certain other non-income tax expenses in
certain foreign jurisdictions.
Energy Division
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
5,843 |
|
|
$ |
11,988 |
|
|
$ |
15,392 |
|
|
$ |
22,309 |
|
Income (loss) before income taxes |
|
|
480 |
|
|
|
(17,473 |
) |
|
|
2,997 |
|
|
|
(14,885 |
) |
Energy revenues decreased 51.3% to $5,843,000 and 31.0% to $15,392,000 for the three and six months
ended July 31, 2010, respectively, compared to revenues of $11,988,000 and $22,309,000 for the same
periods last year. The decreases were primarily attributable to the expiration of favorably priced
forward sales contracts.
For the three months ended July 31, 2009, the Company recorded a non-cash Ceiling Test impairment
charge of $21,642,000, or $13,039,000 after income tax, for the carrying value of the assets in
excess of future net cash flows.
Excluding the non-cash impairment charge, income before income taxes for the energy division
decreased to $480,000 and $2,997,000 for the three and six months ended July 31, 2010,
respectively, compared to $4,169,000 and $6,757,000 for the same periods last year. The decreases
in income before income taxes were due to the impact on revenues from the expiration of forward
sales contracts as noted above, partially offset by lower depletion.
For the three and six months ended July 31, 2010, net gas production was 1,143 Mmcf and 2,285
Mmcf, compared to 1,151 Mmcf and 2,359 Mmcf for the same periods last year. The average net sales
price on production for the three and six months ended July 31, 2010, was $4.12 and $5.67 per Mcf,
respectively, compared to $8.85 and $8.08 per Mcf for the same periods last year. The net sales
price excludes revenues generated from third party gas.
23
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
2,682 |
|
|
$ |
841 |
|
|
$ |
5,065 |
|
|
$ |
1,831 |
|
Income (loss) before income tax |
|
|
544 |
|
|
|
(11 |
) |
|
|
792 |
|
|
|
137 |
|
Other revenues increased primarily as a result of machining and fabrication operations.
Unallocated Corporate Expenses
Corporate expenses not allocated to individual divisions, primarily included in selling,
general and administrative expenses, were $6,737,000 and $13,806,000 for the three and six months
ended July 31, 2010, compared to $6,520,000 and $12,824,000 for the same periods last year. The
increases were primarily due to increased incentive compensation based on increased earnings and
increased professional fees, partially offset by decreased compensation costs on share-based plans.
Liquidity and Capital Resources
Management exercises discretion regarding the liquidity and capital resource needs of its
business segments. This includes the ability to prioritize the use of capital and debt capacity, to
determine cash management policies and to make decisions regarding capital expenditures. The
Companys primary sources of liquidity have historically been cash from operations, supplemented by
borrowings under its credit facilities.
The Company maintains an agreement (the Master Shelf Agreement) under which it may issue
unsecured notes. Under the Master Shelf Agreement, the Company has an additional $50,000,000 of
unsecured notes available to be issued before September 15, 2012. At July 31, 2010, the Company has
$26,667,000 in notes outstanding under the Master Shelf Agreement.
The Company maintains an unsecured $200,000,000 revolving credit facility (the Credit Agreement)
which extends to November 15, 2011. At July 31, 2010, the Company had letters of credit of
$23,851,000 and no borrowings outstanding under the Credit Agreement resulting in available
capacity of $176,149,000.
The Companys Master Shelf Agreement and Credit Agreement each contain certain covenants including
restrictions on the incurrence of additional indebtedness and liens, investments, acquisitions,
transfer or sale of assets, transactions with affiliates and payment of dividends. These
provisions generally allow such activity to occur, subject to specific limitations and continued
compliance with financial maintenance covenants. Significant financial maintenance covenants are
fixed charge coverage ratio, maximum leverage ratio and minimum tangible net worth. Covenant levels
and definitions are consistent between the two agreements. The Company was in compliance with its
covenants as of July 31, 2010, and expects to be in compliance in fiscal 2011.
Compliance with the financial covenants is required on a quarterly basis, using the most recent
four fiscal quarters. The Companys fixed charge coverage ratio and leverage ratio covenants are
based on ratios utilizing adjusted EBITDA and adjusted EBITDAR, as defined in the agreements.
Adjusted EBITDA is generally defined as consolidated net income excluding net interest expense,
provision for income taxes, gains or losses from extraordinary items, gains or losses from the sale
of capital assets, non-cash items including depreciation and amortization, and share-based
compensation. Equity in earnings of affiliates is included only to the extent of dividends or
distributions received. Adjusted EBITDAR is defined as adjusted EBITDA, plus rent expense. The
Companys tangible net worth covenant is based on stockholders equity less intangible assets. All
of these measures are considered non-GAAP financial measures and are not intended to be in
accordance with accounting principles generally accepted in the United States.
The Companys minimum fixed charge coverage ratio covenant is the ratio of adjusted EBITDAR to the
sum of fixed charges. Fixed charges consist of rent expense, interest expense, and principal
payments of long-term debt. The Companys leverage ratio covenant is the ratio of total funded
indebtedness to adjusted EBITDA. Total funded indebtedness generally consists of outstanding debt,
capital leases, unfunded pension liabilities, asset retirement obligations and escrow liabilities.
The Companys tangible net worth covenant is measured based on stockholders equity, less
intangible assets, as compared to a threshold amount defined in the agreements. The threshold is
adjusted over time based on a percentage of net income and the proceeds from the issuance of equity
securities.
24
As of July 31, 2010 and 2009, the Companys actual and required covenant levels were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
Required |
|
|
Actual |
|
|
Required |
|
(in thousands, except for ratio data) |
|
July 31,2010 |
|
|
July 31,2010 |
|
|
July 31,2009 |
|
|
July 31,2009 |
|
|
|
Minimum fixed charge
coverage ratio |
|
|
3.71 |
|
|
|
1.50 |
|
|
|
2.57 |
|
|
|
1.50 |
|
Maximum leverage ratio |
|
|
0.37 |
|
|
|
3.00 |
|
|
|
0.42 |
|
|
|
3.00 |
|
Minimum tangible net worth |
|
$ |
350,020 |
|
|
$ |
302,875 |
|
|
$ |
337,303 |
|
|
$ |
291,269 |
|
The Companys working capital as of July 31, 2010, and July 31, 2009, was $105,631,000 and
$122,012,000, respectively. The Companys cash and cash equivalents as of July 31, 2010, were
$49,184,000, compared to $84,450,000 as of January 31, 2010 and $64,839,000 as of July 31, 2009.
The decreased amount of cash and cash equivalents as of July 31, 2010 is primarily due to cash
spent on acquisitions and other investing activities as described below. During the upcoming
quarter ending October 31, 2010, the Company will make payments on existing Senior Notes totaling
$20,000,000. The Company also intends to continue to evaluate acquisition opportunities to enhance
our existing service offerings and to expand our geographic market. The Company believes it will
have sufficient cash from operations to access to credit facilities to meet its operating cash
requirements, make required debt payments and fund its capital expenditures. Funding for potential
acquisitions will be evaluated based on the particular facts and circumstances of the opportunity.
Operating Activities
Cash provided by operating activities was $12,577,000 for the six months ended July 31, 2010
as compared to $35,775,000 for the same period last year. The change was primarily attributed to
additional working capital needs due to increased business volume.
Investing Activities
The Companys capital expenditures, net of disposals, of $29,205,000 for the six months ended
July 31, 2010, were split between $28,066,000 to maintain and upgrade its equipment and facilities
and $1,139,000 toward the Companys expansion into unconventional gas exploration and production,
including the construction of gas pipeline infrastructure near the Companys development projects.
This compares to equipment spending of $18,911,000 and gas exploration and production spending of
$3,559,000 in the same period last year. Over the course of fiscal 2011, we expect equipment and
facilities spending to be at or near last years level, however unless gas pricing improves, we
expect to hold gas exploration and production spending below last years level.
For the six months ended July 31, 2010, the Company invested $21,650,000 for acquired businesses,
$16,150,000 of which was to acquire a 50% interest in Diberil
Sociedad Anónima (see Note 13),
$5,500,000 for Intevras Technologies, LLC, and $226,000 for prior
acquisitions (see Note 2). These
investments were offset in part by the sale of Layne GeoBrazil, a wholly owned subsidiary, for a
cash payment of $4,800,000 (see Note 13). This compares to acquisition related spending of
$1,949,000 in the same period last year.
Financing Activities
For the six months ended July 31, 2010, the Company had no incremental borrowings under its
credit facilities. The Company will make scheduled principal payments on the Senior Notes of
$13,333,000 in August 2010, and $6,667,000 in September 2010.
25
The Companys contractual obligations and commercial commitments as of July 31, 2010, are
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments/Expiration by Period |
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
|
More than |
|
|
|
Total |
|
|
1 year |
|
|
1-3 years |
|
|
4-5 years |
|
|
5 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual obligations and other
commercial commitments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Notes |
|
$ |
26,667 |
|
|
$ |
20,000 |
|
|
$ |
6,667 |
|
|
$ |
|
|
|
$ |
|
|
Credit Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments |
|
|
1,261 |
|
|
|
1,081 |
|
|
|
180 |
|
|
|
|
|
|
|
|
|
Software financing obligations |
|
|
403 |
|
|
|
403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
27,297 |
|
|
|
11,732 |
|
|
|
12,782 |
|
|
|
2,764 |
|
|
|
19 |
|
Mineral interest obligations |
|
|
352 |
|
|
|
44 |
|
|
|
174 |
|
|
|
89 |
|
|
|
45 |
|
Income tax uncertainties |
|
|
2,494 |
|
|
|
2,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations |
|
|
58,474 |
|
|
|
35,754 |
|
|
|
19,803 |
|
|
|
2,853 |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standby letters of credit |
|
|
23,851 |
|
|
|
23,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
1,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
and commercial commitments |
|
$ |
83,870 |
|
|
$ |
59,605 |
|
|
$ |
19,803 |
|
|
$ |
2,853 |
|
|
$ |
1,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company expects to meet its contractual cash obligations in the ordinary course of operations,
and that the standby letters of credit will be renewed in connection with its annual insurance
renewal process. Interest is payable on the Senior Notes at fixed interest rates of 6.05% and
5.40%. Interest is payable on the Credit Agreement at variable interest rates equal to, at the
Companys option, a LIBOR rate plus 0.75% to 2.00%, or a base rate, as defined in the Credit
Agreement plus up to 0.50%, depending on the Companys leverage ratio (See Note 4 of the Notes to
Consolidated Financial Statements). Interest payments have been included in the table above based
only on outstanding balances and interest rates as of July 31, 2010.
The Company has income tax uncertainties of $11,085,000 at July 31, 2010, that are classified as
non-current on the Companys balance sheet as resolution of these matters is expected to take more
than a year. The ultimate timing of resolutions of these items is uncertain, and accordingly the
amounts have not been included in the table above.
The
Company incurs additional obligations in the ordinary course of operations. These obligations,
including but not limited to income tax payments and pension fundings, are expected to be met in
the normal course of operations.
Critical Accounting Policies and Estimates
Managements Discussion and Analysis of Financial Condition and Results of Operations discuss
the Companys consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting
period. On an on-going basis, management evaluates its estimates and judgments, which are based on
historical experience and on various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
Our accounting policies are more fully described in Note 1 of the Notes to Consolidated Financial
Statements, located in Item 1 of this Form 10-Q. We believe that the following represent our more
critical estimates and assumptions used in the preparation of our consolidated financial
statements, although not all inclusive.
Revenue
Recognition Revenues are recognized on large, long-term construction
contracts using the percentage-of-completion method based upon the ratio of costs incurred to total
estimated costs at completion. Contract price and cost estimates are reviewed periodically as work
progresses and adjustments proportionate to the percentage of completion are reflected in contract
revenues in the reporting period when such estimates are revised. Changes in job performance, job
conditions and estimated profitability, including those arising from contract penalty provisions,
change orders and final contract settlements may result in revisions to costs and income and are
recognized in the period in which the revisions are determined.
Contracts for the Companys mineral exploration drilling services are billable based on the
quantity of drilling performed and
26
revenues for these drilling contracts are recognized on the basis of actual footage or
meterage drilled. Revenue is recognized on smaller, short-term construction contracts using the
completed contract method. Provisions for estimated losses on uncompleted construction contracts
are made in the period in which such losses are determined.
Revenues for direct sales of equipment and other ancillary products not provided in conjunction
with the performance of construction contracts are recognized at the date of delivery to, and
acceptance by, the customer. Provisions for estimated warranty obligations are made in the period
in which the sales occur.
Revenues for the sale of oil and gas by the Companys energy division are recognized on the basis
of volumes sold at the time of delivery to an end user or an interstate pipeline, net of amounts
attributable to royalty or working interest holders.
The Companys revenues are presented net of taxes imposed on revenue-producing transactions with
its customers, such as, but not limited to, sales, use, value-added, and some excise taxes.
Oil and Gas Properties and Mineral Interests The Company follows the full-cost method
of accounting for oil and gas properties. Under this method, all productive and nonproductive
costs incurred in connection with the exploration for and development of oil and gas reserves are
capitalized. Such capitalized costs include lease acquisition, geological and geophysical work,
delay rentals, drilling, completing and equipping oil and gas wells, and salaries, benefits and
other internal salary-related costs directly attributable to these activities. Costs associated
with production and general corporate activities are expensed in the period incurred. Normal
dispositions of oil and gas properties are accounted for as adjustments of capitalized costs, with
no gain or loss recognized.
The Company is required to review the carrying value of its oil and gas properties under the full
cost accounting rules of the SEC (the Ceiling Test). The ceiling limitation is the estimated
after-tax future net revenues from proved oil and gas properties discounted at 10%, plus the cost
of properties not subject to amortization. If our net book value of oil and gas properties, less
related deferred income taxes, is in excess of the calculated ceiling, the excess must be written
off. Beginning with our fiscal 2010, application of the Ceiling Test requires pricing future
revenues at the unweighted arithmetic average of the first-day-of-the-month price for each month
within the 12-month period prior to the end of reporting period, unless prices are defined by
contractual arrangements such as fixed-price physical delivery forward sales contracts, when held.
Application of the ceiling test requires a write-down for accounting purposes if the ceiling is
exceeded. Considerations of the Ceiling Test prior to fiscal 2010 year end used the period end
prices, as adjusted for contractual arrangements. Unproved oil and gas properties are not
amortized, but are assessed for impairment either individually or on an aggregated basis using a
comparison of the carrying values of the unproved properties to net future cash flows.
No Ceiling Test impairment was required in the period ended July 31, 2010, but we did record a
Ceiling Test impairment in the second quarter of fiscal 2010. If gas pricing falls, additional
impairments could occur. As of July 31, 2010, the net book value of assets subject to the Ceiling
Test limitation was $24,074,000.
Reserve Estimates The Companys estimates of natural gas reserves, by necessity, are
projections based on geologic and engineering data, and there are uncertainties inherent in the
interpretation of such data as well as the projection of future rates of production and the timing
of development expenditures. Reserve engineering is a subjective process of estimating underground
accumulations of gas that are difficult to measure. The accuracy of any reserve estimate is a
function of the quality of available data, engineering and geological interpretation and judgment.
Estimates of economically recoverable gas reserves and future net cash flows necessarily depend
upon a number of variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of regulations by
governmental agencies and assumptions governing natural gas prices, future operating costs,
severance, ad valorem and excise taxes, development costs and workover and remedial costs, all of
which may in fact vary considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of gas attributable to any particular group of properties,
classifications of such reserves based on risk of recovery, and estimates of the future net cash
flows expected there from may vary substantially. Any significant variance in the assumptions could
materially affect the estimated quantity and value of the reserves, which could affect the carrying
value of the Companys oil and gas properties and the rate of depletion of the oil and gas
properties. Actual production, revenues and expenditures with respect to the Companys reserves
will likely vary from estimates, and such variances may be material.
Goodwill and Other Intangibles The Company accounts for goodwill and other intangible
assets in accordance with current accounting guidance. Other intangible assets primarily consist of
trademarks, customer-related intangible assets and patents obtained through business acquisitions.
Amortizable intangible assets are being amortized over their estimated useful lives, which range
from two to 40 years.
27
The impairment evaluation for goodwill is conducted annually, or more frequently, if events or
changes in circumstances indicate that an asset might be impaired. The evaluation is performed by
using a two-step process. In the first step, the fair value of each reporting unit is compared with
the carrying amount of the reporting unit, including goodwill. The estimated fair value of the
reporting unit is generally determined on the basis of discounted future cash flows. If the
estimated fair value of the reporting unit is less than the carrying amount of the reporting unit,
then a second step must be completed in order to determine the amount of the goodwill impairment
that should be recorded. In the second step, the implied fair value of the reporting units
goodwill is determined by allocating the reporting units fair value to all of its assets and
liabilities other than goodwill (including any unrecognized intangible assets) in a manner similar
to a purchase price allocation. The resulting implied fair value of the goodwill that results from
the application of this second step is then compared to the carrying amount of the goodwill and an
impairment charge is recorded for the difference.
The impairment evaluation of the carrying amount of intangible assets with indefinite lives is
conducted annually or more frequently if events or changes in circumstances indicate that an asset
might be impaired. The evaluation is performed by comparing the carrying amount of these assets to
their estimated fair value. If the estimated fair value is less than the carrying amount of the
intangible assets with indefinite lives, then an impairment charge is recorded to reduce the asset
to its estimated fair value. The estimated fair value is generally determined on the basis of
discounted future cash flows.
The assumptions used in the estimate of fair value are generally consistent with the past
performance of each reporting unit and are also consistent with the projections and assumptions
that are used in current operating plans. Such assumptions are subject to change as a result of
changing economic and competitive conditions.
Other Long-lived Assets In the event of an indication of possible impairment, the
Company evaluates the fair value and future benefits of long-lived assets, including the Companys
gas transportation facilities and equipment, by performing an analysis of the anticipated,
undiscounted future net cash flows to the carrying value of the related long-lived assets. If the
carrying value of the long-lived assets exceeds the anticipated undiscounted cash flows the
carrying value is written down to the fair value. The Company believes at this time that the
carrying values and useful lives of its long-lived assets continue to be appropriate.
Accrued Insurance Expense The Company maintains insurance programs where it is
responsible for a certain amount of each claim up to a self-insured limit. Estimates are recorded
for health and welfare, property and casualty insurance costs that are associated with these
programs. These costs are estimated based on actuarially determined projections of future payments
under these programs. Should a greater amount of claims occur compared to what was estimated or
medical costs increase beyond what was anticipated, reserves recorded may not be sufficient and
additional costs to the consolidated financial statements could be required.
Costs estimated to be incurred in the future for employee medical benefits, property, workers
compensation and casualty insurance programs resulting from claims which have occurred are accrued
currently. Under the terms of the Companys agreement with the various insurance carriers
administering these claims, the Company is not required to remit the total premium until the claims
are actually paid by the insurance companies. These costs are not expected to significantly impact
liquidity in future periods.
Income Taxes Income taxes are provided using the asset/liability method, in which
deferred taxes are recognized for the tax consequences of temporary differences between the
financial statement carrying amounts and tax bases of existing assets and liabilities. Deferred
tax assets are reviewed for recoverability and valuation allowances are provided as necessary.
Provision for U.S. income taxes on undistributed earnings of foreign subsidiaries and affiliates is
made only on those amounts in excess of funds considered to be invested indefinitely. In general,
the Company records income tax expense during interim periods based on its best estimate of the
full years effective tax rate. However, income tax expense relating to adjustments to the
Companys liabilities for uncertainty in income tax positions is accounted for discretely in the
interim period in which it occurs.
Litigation and Other Contingencies The Company is involved in litigation incidental to
its business, the disposition of which is not expected to have a material effect on the Companys
financial position or results of operations. It is possible, however, that future results of
operations for any particular quarterly or annual period could be materially affected by changes in
the Companys assumptions related to these proceedings. The Company accrues its best estimate of
the probable cost for the resolution of legal claims. Such estimates are developed in consultation
with outside counsel handling these matters and are based upon a combination of litigation and
settlement strategies. To the extent additional information arises or the Companys strategies
change, it is possible that the Companys estimate of its probable liability in these matters may
change.
New Accounting Pronouncements See Note 1 of the Notes to Consolidated Financial
Statements for a discussion of new accounting pronouncements and their impact on the Company.
28
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The principal market risks to which the Company is exposed are interest rates on variable rate
debt, foreign exchange rates giving rise to translation and transaction gains and losses and
fluctuations in the price of natural gas.
The Company centrally manages its debt portfolio considering overall financing strategies and tax
consequences. A description of the Companys debt is in Note 12 of the Notes to Consolidated
Financial Statements appearing in the Companys January 31, 2010 Form 10-K and Note 4 of this Form
10-Q. As of July 31, 2010, an instantaneous change in interest rates of one percentage point would
not change the Companys annual interest expense, as we have no variable rate debt outstanding.
Operating in international markets involves exposure to possible volatile movements in currency
exchange rates. Currently, the Companys primary international operations are in Australia, Africa,
Mexico and Italy. The Companys affiliates also operate in South America and Mexico. The operations
are described in Notes l and 3 of the Notes to Consolidated Financial Statements appearing in the
Companys January 31, 2010, Form 10-K and Notes 13 and 14 of this Form 10-Q. The majority of the
Companys contracts in Africa and Mexico are U.S. dollar based, providing a natural reduction in
exposure to currency fluctuations. The Company also may utilize various hedge instruments,
primarily foreign currency option contracts, to manage the exposures associated with fluctuating
currency exchange rates. As of July 31, 2010, the Company held option contracts with an aggregate
U.S. dollar notional value of $3,580,000 which are intended to hedge exposure to Australian dollar
fluctuations over a period to January 31, 2011.
As currency exchange rates change, translation of the income statements of the Companys
international operations into U.S. dollars may affect year-to-year comparability of operating
results. We estimate that a ten percent change in foreign exchange rates would not have
significantly impacted income before income taxes for the six months ended July 31, 2010. This
quantitative measure has inherent limitations, as it does not take into account any governmental
actions, changes in customer purchasing patterns or changes in the Companys financing and
operating strategies.
The Company is also exposed to fluctuations in the price of natural gas, which result from the sale
of the energy divisions unconventional gas production. The price of natural gas is volatile and
the Company enters into fixed-price physical contracts, if available at attractive prices, to cover
a portion of its production to manage price fluctuations and to achieve a more predictable cash
flow. The Company generally intends to maintain contracts in place to cover 50% to 75% of its
production, although at July 31, 2010, did not have any contracts in place. We estimate that a ten
percent change in the price of natural gas would have impacted income before income taxes by
approximately $146,000 for the six months ended July 31, 2010.
ITEM 4. Controls and Procedures
Based on an evaluation of disclosure controls and procedures for the period ended July 31,
2010, conducted under the supervision and with the participation of the Companys management,
including the Principal Executive Officer and the Principal Financial Officer, the Company
concluded that its disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in reports that it files or submits under the Securities
Exchange Act of 1934 is accumulated and communicated to the Companys management (including the
Principal Executive Officer and the Principal Financial Officer) to allow timely decisions
regarding required disclosure, and is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
Based on an evaluation of internal controls over financial reporting conducted under the
supervision and the participation of the Companys management, including the Principal Executive
Officer and the Principal Financial Officer, for the period ended July 31, 2010, the Company
concluded that its internal control over financial reporting is effective as of July 31, 2010. The
Company has not made any significant changes in internal controls or in other factors that could
significantly affect internal controls since such evaluation.
29
PART II
ITEM 1 Legal Proceedings
NONE
ITEM 2 Changes in Securities
NOT APPLICABLE
ITEM 3 Defaults Upon Senior Securities
NOT APPLICABLE
ITEM 4 Removed and Reserved
ITEM 5 Other Information
NONE
ITEM 6 Exhibits and Reports on Form 8-K
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31 |
(1) |
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-
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Section 302 Certification of Chief Executive Officer of the Company. |
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31 |
(2) |
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-
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Section 302 Certification of Chief Financial Officer of the Company. |
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32 |
(1) |
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-
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Section 906 Certification of Chief Executive Officer of the Company. |
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32 |
(2) |
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-
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Section 906 Certification of Chief Financial Officer of the Company. |
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** |
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Management contracts or compensatory plans or arrangements required to be identified by
Item 14 (a) (3). |
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Form 8-K filed on June 2, 2010, related to the Companys earnings press release for the three
months ended April 30, 2010. |
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Form 8-K filed on June 7, 2010, reporting the results of the proposals voted on by the
Companys stockholders at its annual meeting of stockholders held on June 3, 2010. |
30
* * * * * * * * * *
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.
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Layne Christensen Company
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(Registrant)
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DATE: September 2, 2010 |
/s/ A.B. Schmitt
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A.B. Schmitt, President |
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and Chief Executive Officer |
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DATE: September 2, 2010 |
/s/ Jerry W. Fanska
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Jerry W. Fanska, Sr. Vice President |
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Finance and Treasurer |
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31