MISSION WOODS, KANSAS, Thursday, August 28, 2008 – Layne Christensen Company (Nasdaq: LAYN), today announced net income for the second quarter ended July 31, 2008 of $15,096,000, or $0.78 per diluted share, compared to net income of $9,568,000, or $0.60 per diluted share, last year. For the six months ended July 31, 2008, net income increased to $25,658,000, or $1.32 per share, compared to $17,721,000, or $1.12 per share, last year.
Revenues increased $51,794,000, or 23.8%, to $269,638,000 for the three months ended July 31, 2008, and $94,723,000, or 22.6%, to $514,182,000 for the six months ended July 31, 2008, as compared to the same periods last year. Revenues were up across all divisions. A further discussion of results of operations by division is presented below.
Selling, general and administrative expenses were $36,529,000 and $69,573,000 for the three and six months ended July 31, 2008, respectively, compared to $29,112,000 and $58,520,000 for the same periods last year. The increases for the three and six months, respectively, were primarily the result of $1,772,000 and $3,624,000 in expenses added from acquisitions and start up operations, compensation related expense increases of $2,135,000 and $4,212,000 with the remainder spread in both periods across various categories.
Equity in earnings of affiliates were $3,812,000 and $6,309,000 for the three and six months ended July 31, 2008, respectively, compared to $2,379,000 and $3,870,000 for the same periods last year. The increases reflect continued strong performance in mineral exploration by the Company’s affiliates in Latin America, particularly in Chile.
Depreciation, depletion and amortization were $12,955,000 and $25,396,000 for the three and six months ended July 31, 2008, respectively, compared to $10,361,000 and $20,699,000 for the same periods last year. The increases were primarily the result of increased depletion expense of $1,095,000 and $1,674,000 resulting from the increase in production of unconventional gas from the Company’s energy operations and additional depreciation from property additions in the other divisions.
Interest expense decreased to $1,019,000 and $1,960,000 for the three and six months ended July 31, 2008, respectively, compared to $2,797,000 and $5,227,000 for the same periods last year. The decrease resulted from the retirement of debt with proceeds of the company’s stock offering in October 2007.
Income tax expense was $9,749,000 (an effective rate of 39.2%) and $17,716,000 (an effective rate of 40.8%) for the three and six months ended July 31, 2008, respectively, compared to $8,486,000 (an effective rate of 47.0%) and $14,152,000 (an effective rate of 44.4%) for the same periods last year. The improvements in the effective rate primarily result from the favorable resolution of certain tax audits during the current year. The effective rates in excess of statutory federal rates for the periods were due primarily to the impact of non-deductible expenses and the tax treatment of certain foreign operations.
Water Infrastructure Division
(in thousands)
| | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | July 31, | | July 31, |
| | | 2008 | | 2007 | | 2008 | | 2007 |
| Revenues | | $ | 196,005 | | | $ | 159,840 | | | $ | 376,578 | | | $ | 313,349 | |
| Income before income taxes | | | 13,150 | | | | 11,941 | | | | 22,339 | | | | 23,775 | |
Water infrastructure revenues increased 22.6% to $196,005,000 and 20.2% to $376,578,000 for the three and six months ended July 31, 2008, respectively, as compared to $159,840,000 and $313,349,000 for the same periods last year. The increases in revenues for the three and six months ended, respectively, were primarily attributed to $6,157,000 and $12,505,000 from acquisitions, $11,592,000 and $15,975,000 from increases in water and wastewater treatment plant construction primarily in the southeastern United States, and $4,805,000 and $11,434,000 from sewer rehabilitation.
Income before income taxes for the water infrastructure division increased 10.1% to $13,150,000 and decreased 6.0% to $22,339,000 for the three and six months ended July 31, 2008, respectively, compared to $11,941,000 and $23,775,000 for the same periods last year. Included in last year’s income before income taxes for the six months was $1,626,000 in non-recurring recovery of previously written off costs associated with a ground water transfer project in Texas. Excluding this item, the increases in income before income taxes for the three and six months ended, respectively, were primarily attributable to increases of $1,804,000 and $1,739,000 in earnings from water and wastewater treatment plant construction and $900,000 and $1,692,000 from sewer rehabilitation, reduced earnings from pipeline construction primarily joint venture projects in the Atlanta area which were substantially completed in prior periods.
The backlog for the water infrastructure division at July 31, 2008 was $477,675,000 compared to $364,248,000 at July 31, 2007.
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Mineral Exploration Division
(in thousands)
| | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | July 31, | | July 31, |
| | | 2008 | | 2007 | | 2008 | | 2007 |
| Revenues | | $ | 59,575 | | | $ | 46,408 | | | $ | 110,669 | | | $ | 83,505 | |
| Income before income taxes | | | 15,279 | | | | 11,291 | | | | 26,915 | | | | 17,042 | |
Mineral exploration revenues increased 28.4% to $59,575,000 and 32.5% to $110,669,000 for the three and six months ended July 31, 2008, respectively, compared to $46,408,000 and $83,505,000 for the same periods last year. The increases were primarily attributable to continued strength in the Company’s markets due to relatively high gold and base metal prices.
Income before income taxes for the mineral exploration division increased 35.3% to $15,279,000 and 57.9% to $26,915,000 for the three and six months ended July 31, 2008, respectively, compared to $11,291,000 and $17,042,000 for the same periods last year. The improved earnings in the division were primarily attributable to the impact of strong incremental earnings from exploration activities in the Company’s markets and an increase of $1,433,000 and $2,439,000 in equity earnings of affiliates in Latin America for the three and six month periods, respectively.
Energy Division
(in thousands)
| | | | | | | | | | | | | | | | | |
| | | Three months ended | | Six months ended |
| | | July 31, | | July 31, |
| | | 2008 | | 2007 | | 2008 | | 2007 |
| Revenues | | $ | 12,086 | | | $ | 9,401 | | | $ | 23,965 | | | $ | 18,953 | |
| Income before income taxes | | | 3,566 | | | | 2,752 | | | | 8,042 | | | | 6,571 | |
Energy revenues increased 28.6% to $12,086,000 and 26.4% to $23,965,000 for the three and six months ended July 31, 2008, respectively, compared to $9,401,000 and $18,953,000 for the same periods last year. The increases in revenues were attributable to both increased production from the Company’s unconventional gas properties and higher gas pricing in the Company’s market.
Income before income taxes for the energy division increased 29.6% to $3,566,000 and 22.4% to $8,042,000 for the three and six months ended July 31, 2008, respectively, compared to $2,752,000 and $6,571,000 for the same periods last year. The increases in income before income taxes were due to the increases in production and pricing noted above.
Unallocated Corporate Expenses
Corporate expenses not allocated to individual divisions, primarily included in selling, general and administrative expenses, were $6,970,000 and $12,821,000 for the three and six months ended July 31, 2008, respectively, compared to $5,505,000 and $10,824,000 for the same periods last year. The increases for the periods were primarily due to compensation related expenses.
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Summary of Operating Segment Reconciliation Data
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | July 31, | | | July 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Revenues | | | | | | | | | | | | | | | | |
| Water infrastructure | | $ | 196,005 | | | $ | 159,840 | | | $ | 376,578 | | | $ | 313,349 | |
| Mineral exploration | | | 59,575 | | | | 46,408 | | | | 110,669 | | | | 83,505 | |
| Energy | | | 12,086 | | | | 9,401 | | | | 23,965 | | | | 18,953 | |
| Other | | | 1,972 | | | | 2,195 | | | | 2,970 | | | | 3,652 | |
| | | | | | | | | | | | | |
| Total revenues | | $ | 269,638 | | | $ | 217,844 | | | $ | 514,182 | | | $ | 419,459 | |
| | | | | | | | | | | | | |
| Equity in earnings of affiliates | | | | | | | | | | | | | | | | |
| Mineral exploration | | $ | 3,812 | | | $ | 2,379 | | | $ | 6,309 | | | $ | 3,870 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | | | | | | | | | | | | | | |
| Water infrastructure | | $ | 13,150 | | | $ | 11,941 | | | $ | 22,339 | | | $ | 23,775 | |
| Mineral exploration | | | 15,279 | | | | 11,291 | | | | 26,915 | | | | 17,042 | |
| Energy | | | 3,566 | | | | 2,752 | | | | 8,042 | | | | 6,571 | |
| Other | | | 839 | | | | 372 | | | | 859 | | | | 596 | |
| Unallocated corporate expenses | | | (6,970 | ) | | | (5,505 | ) | | | (12,821 | ) | | | (10,884 | ) |
| Interest | | | (1,019 | ) | | | (2,797 | ) | | | (1,960 | ) | | | (5,227 | ) |
| | | | | | | | | | | | | |
| Total income before income taxes | | $ | 24,845 | | | $ | 18,054 | | | $ | 43,374 | | | $ | 31,873 | |
| | | | | | | | | | | | | |
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. Such statements 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 management’s 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 Company’s major markets, the risks and uncertainties normally incident to the construction industry and to the 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 release, 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.
Layne Christensen Company provides sophisticated services and related products for the water, mineral and energy markets.
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