September 6, 2017
Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Attention: Mr. John Cash
Re: | Layne Christensen Company |
Form 10-K for the Fiscal Year Ended January 31, 2017
Filed April 10, 2017
File No. 1-34195
Ladies and Gentlemen:
The following are the responses to the comments received from the staff of the United States Securities and Exchange Commission in its letter dated August 23, 2017, in connection with the filings of Layne Christensen Company (“the Company”, “our”, “we” or “us”) on the above referenced document. To facilitate your review, we have included your numbered comments along with the related responses.
Management’s Discussion and Analysis of Financial Conditions and Results of Operations
Non-GAAP Financial Measures, page 34
1. | Please revise to reconcile Adjusted EBITDA to net income (loss), rather than income (loss) from continuing operations which would not be considered the most directly comparable GAAP financial measure. We refer you to Question 103.02 of the Staff’s Compliance & Disclosure Interpretations issued on May 17, 2016. |
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Management’s response: In future filings, beginning with our Form 10-Q for the quarter ended July 31, 2017, the Company will include a reconciliation of net income (loss) to Total Adjusted EBITDA, in accordance with Question 103.02 of the Staff’s Compliance & Disclosure Interpretations issued on May 17, 2016. For the year ended January 31, 2017, the reconciliation of net income (loss) to Total Adjusted EBITDA would have appeared as follows:
1800 Hughes Landing Blvd., Ste. 800, The Woodlands, TX 77380 | Office: 281.475.2600 | layne.com
| Total Adjusted EBITDA |
| Years Ended January 31, |
| |||||||||
| (in thousands) |
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
| Water Resources |
| $ | (2,410 | ) |
| $ | 23,870 |
|
| $ | 22,740 |
|
| Inliner |
|
| 32,036 |
|
|
| 27,949 |
|
|
| 27,881 |
|
| Heavy Civil |
|
| (3,226 | ) |
|
| (4,031 | ) |
|
| (20,570 | ) |
| Mineral Services |
|
| 8,635 |
|
|
| 1,878 |
|
|
| 10,205 |
|
| Unallocated Corporate Expenses |
|
| (23,830 | ) |
|
| (29,319 | ) |
|
| (41,798 | ) |
| Total Adjusted EBITDA |
| $ | 11,205 |
|
| $ | 20,347 |
|
| $ | (1,542 | ) |
|
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| Reconciliation of Net Loss to Total Adjusted EBITDA |
| Years Ended January 31, |
| |||||||||
| (in thousands) |
| 2017 |
|
| 2016 |
|
| 2015 |
| |||
| Net loss |
| $ | (52,236 | ) |
| $ | (44,777 | ) |
| $ | (110,151 | ) |
| Items not included in Total Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
| Net (loss) income attributable to noncontrolling interests |
|
| — |
|
|
| (28 | ) |
|
| 824 |
|
| Net loss (income) from discontinued operations |
|
| — |
|
|
| (8,057 | ) |
|
| 46,878 |
|
| Income tax expense (benefit) |
|
| 1,420 |
|
|
| (1,635 | ) |
|
| (3,945 | ) |
| Interest expense |
|
| 16,883 |
|
|
| 18,011 |
|
|
| 13,707 |
|
| Depreciation expense and amortization |
|
| 26,911 |
|
|
| 32,685 |
|
|
| 41,978 |
|
| Non-cash equity-based compensation |
|
| 3,544 |
|
|
| 3,817 |
|
|
| 2,492 |
|
| Equity in (earnings) losses of affiliates |
|
| (2,655 | ) |
|
| 612 |
|
|
| 2,002 |
|
| Impairment charges |
|
| — |
|
|
| 4,598 |
|
|
| — |
|
| Restructuring costs |
|
| 17,348 |
|
|
| 17,859 |
|
|
| 2,698 |
|
| Gain on extinguishment of debt |
|
| — |
|
|
| (4,236 | ) |
|
| — |
|
| Other income, net |
|
| (4,951 | ) |
|
| (2,354 | ) |
|
| (1,352 | ) |
| Dividends received from affiliates |
|
| 4,941 |
|
|
| 3,852 |
|
|
| 3,327 |
|
| Total Adjusted EBITDA |
| $ | 11,205 |
|
| $ | 20,347 |
|
| $ | (1,542 | ) |
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Liquidity and Capital Resources, page 41
2. | To enhance your presentation, please provide a more informative analysis and discussion of the reasons for changes in your operating assets and liabilities, for each period presented. Refer to Item 303(a) of Regulation S-K and SEC Release No. 33-8350. |
|
Management’s response: In future filings, beginning with our Form 10-Q for the quarter ended July 31, 2017, the Company will include a more informative analysis and discussion of the reasons for changes in our operating assets and liabilities. For the year ended January 31, 2017, the analysis would have appeared as follows:
Cash provided by (used in) operating activities was $13.0 million, ($0.3) million and ($23.1) million for the fiscal years ended January 31, 2017, 2016 and 2015, respectively.
The cash provided by (used in) operating activities primarily reflected our net loss, adjusted for non-cash items and changes in components of our working capital, primarily related to customer receivables, costs and estimated earnings in excess of billings on uncompleted contracts and accounts payable and accrued expenses. Fluctuations in working capital are normal in our business. Working capital is impacted by the size of our projects, timing of project start dates and completion dates and the achievement of billing milestones on
backlog as we complete certain phases of the project.
Cash provided by operating activities increased $13.0 million for the fiscal year ended January 31, 2017 compared to the prior year. This increase was primarily due to higher cash inflows from changes in customer receivables and costs and estimated earnings in excess of billings on uncompleted contracts of $35.8 million due to improved working capital management combined with lower activity levels and the completion of projects. These increases were partially offset by a higher use of cash on accounts payable and accrued expenses of ($6.2) million primarily from changes in payment terms with our vendors combined with a higher net loss, excluding non-cash items, of ($15.2) million compared to the prior year.
Cash used in operating activities decreased by $22.8 million for the fiscal year ended January 31, 2016 compared to the prior year. The decrease was primarily due to a lower net loss, excluding non-cash items, of $15.4 million combined with higher cash inflows from our customer receivables of $27.6 million due to improved working capital management and higher drilling activity levels in the western U.S. The decrease in cash inflows on accounts payable and accrued expenses of ($18.3) million resulted primarily from changes in payment terms with our vendors.
All disclosure changes in response to the staff comments will be addressed in future fillings made pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.
We believe this letter fully responds to your questions and/or comments. However, if there are any further questions or comments please contact me at (281) 475-2694 or at the address on record for
Layne Christensen Company.
Sincerely,
By: /s/ J. Michael Anderson _
J. Michael Anderson
Senior Vice President and Chief Financial Officer