FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2000
OR
[ ] 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 33-48432
Layne Christensen Company
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 48-0920712
- ------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 Shawnee Mission Parkway, Mission Woods, Kansas 66205
- --------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(913) 362-0510
(Registrant's telephone number, including area code)
Not Applicable
- -----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
-----------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
--- ---
There were 11,707,694 shares of common stock, $.01 par value
per share, outstanding on November 14, 2000.
PART I
ITEM 1. Financial Statements
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
October 31, January 31,
2000 2000
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 5,007 $ 3,751
Customer receivables, less allowance
of $3,161 and $3,437, respectively 57,415 44,785
Costs and estimated earnings in excess of
billings on uncompleted contracts 12,396 11,086
Inventories 31,631 29,974
Deferred income taxes 12,798 10,324
Other 6,571 5,303
--------- ---------
Total current assets 125,818 105,223
--------- ---------
Property and equipment:
Land 9,236 9,435
Buildings 18,360 16,668
Machinery and equipment 164,060 167,579
--------- ---------
191,656 193,682
Less - Accumulated depreciation (114,505) (110,687)
--------- ---------
Net property and equipment 77,151 82,995
--------- ---------
Other assets:
Investment in foreign affiliates 18,945 19,381
Goodwill and other intangible assets,
at cost less accumulated amortization 26,604 33,570
Other 3,334 4,166
--------- ---------
Total other assets 48,883 57,117
--------- ---------
$ 251,852 $ 245,335
========= =========
See Notes to Consolidated Financial Statements.
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
(in thousands, except share and per share data)
October 31, January 31,
2000 2000
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,944 $ 16,762
Current maturities of long-term debt 3,571 3,571
Accrued compensation 13,740 12,068
Accrued insurance expense 7,204 7,357
Other accrued expenses 10,823 10,119
Billings in excess of costs and estimated
earnings on uncompleted contracts 11,591 10,101
--------- ---------
Total current liabilities 69,873 59,978
--------- ---------
Noncurrent and deferred liabilities:
Long-term debt 67,857 59,929
Deferred income taxes - 1,380
Accrued insurance expense 4,947 5,000
Other 1,815 2,052
Minority interest 10,148 10,156
--------- ---------
Total noncurrent and deferred liabilities 84,767 78,517
--------- ---------
Contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share,
5,000,000 shares authorized, none issued and
outstanding - -
Common stock, par value $.01 per share, 30,000,000
shares authorized, 11,707,694 and 11,691,129
shares issued and outstanding, respectively 117 117
Capital in excess of par value 83,613 83,463
Retained earnings 24,856 29,150
Accumulated other comprehensive loss (11,222) (5,738)
Notes receivable from management stockholders (152) (152)
--------- ---------
Total stockholders' equity 97,212 106,840
--------- ---------
$ 251,852 $ 245,335
========= =========
See Notes to Consolidated Financial Statements.
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
Three Months Nine Months
Ended October 31, Ended October 31,
---------------------- ---------------------
2000 1999 2000 1999
---------- ---------- ---------- ---------
Revenues:
Net service revenues $ 78,338 $ 66,825 $ 221,451 $ 202,395
Net product sales 4,137 4,146 13,370 11,847
---------- ---------- ---------- ----------
Total 82,475 70,971 234,821 214,242
---------- ---------- ---------- ----------
Cost of revenues (exclusive of
depreciation shown below):
Cost of service revenues 58,703 48,774 165,963 147,051
Cost of product sales 2,969 3,281 10,303 9,256
---------- ---------- ---------- ----------
Total 61,672 52,055 176,266 156,307
---------- ---------- ---------- ----------
Gross profit 20,803 18,916 58,555 57,935
Selling, general and
administrative expenses 14,189 13,327 43,692 40,265
Depreciation and amortization 5,247 5,861 16,198 17,494
---------- ---------- ---------- ----------
Operating income (loss) 1,367 (272) (1,335) 176
Other income (expense):
Equity in earnings (losses)
of foreign affiliates 112 (35) 550 (90)
Interest (1,602) (1,190) (4,646) (3,558)
Other, net 161 150 997 627
---------- ---------- ---------- ----------
Income (loss) before income
taxes and minority interest 38 (1,347) (4,434) (2,845)
Income tax expense - 128 - 640
Minority interest, net of
income taxes 118 121 140 (259)
---------- ---------- ---------- ----------
Net income (loss) $ 156 $ (1,354) $ (4,294) $ (3,744)
========== ========== ========== ==========
Basic income (loss)
per share $ .01 $ (.12) $ (.37) (.32)
========== ========== ========== ==========
Diluted income (loss)
per share $ .01 $ (.12) $ (.37) $ (.32)
========== ========== ========== ==========
Weighted average number of
common and dilutive equivalent
shares outstanding:
Weighted average shares
outstanding 11,758,000 11,691,000 11,758,000 11,667,000
Dilutive stock options 70,000 - - -
---------- ---------- ---------- ---------
11,828,000 11,691,000 11,758,000 11,667,000
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
Nine Months
Ended October 31,
---------------------
2000 1999
--------- ---------
Cash flow from operating activities:
Net loss $ (4,294) $ (3,744)
Adjustments to reconcile net loss to cash
from operations:
Depreciation and amortization 16,198 17,494
Deferred income taxes (2,991) (71)
Equity in (earnings) losses of foreign affiliates (550) 90
Dividends received from foreign affiliates 1,033 271
Minority interest (191) 399
Gain from disposal of property and equipment (443) (638)
Changes in current assets and liabilities
(exclusive of effects of acquisitions):
Increase in customer receivables (12,912) (5,132)
Increase in costs and estimated earnings in
excess of billings on uncompleted contracts (899) (1,760)
(Increase) decrease in inventories (1,867) 30
(Increase) decrease in other current assets (1,472) 297
Increase (decrease) in accounts payable and
accrued expenses 8,338 (272)
Increase in billings in excess of costs
and estimated earnings on uncompleted
contracts 1,498 923
Other, net (798) 209
------- --------
Cash from operating activities 650 8,096
-------- --------
Cash flow used in investing activities:
Additions to property and equipment (12,896) (7,296)
Proceeds from disposal of property and equipment 1,516 1,563
Acquisitions of businesses, net of cash acquired - (889)
Investment in joint ventures - (293)
-------- --------
Cash used in investing activities (11,380) (6,915)
-------- --------
Cash flow from financing activities:
Net borrowings under revolving facility 11,500 500
Repayment of long-term debt (3,572) -
-------- --------
Cash from financing activities 7,928 500
-------- --------
Effects of exchange rate changes on cash 4,058 (75)
-------- --------
Net increase in cash and cash equivalents 1,256 1,606
Cash and cash equivalents at beginning of period 3,751 2,094
-------- --------
Cash and cash equivalents at end of period $ 5,007 $ 3,700
======== ========
See Notes to Consolidated Financial Statements.
LAYNE CHRISTENSEN COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies and Basis of Presentation
The consolidated financial statements include the accounts of
Layne Christensen Company and its subsidiaries (together the
"Company"). All significant intercompany transactions have been
eliminated. Investments in affiliates (33% to 50% owned) in
which the Company exercises influence over operating and
financial policies are accounted for on the equity method. The
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements of the
Company for the year ended January 31, 2000 as filed in its
Annual Report on Form 10-K.
The accompanying unaudited consolidated financial statements
include all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary for
a fair presentation of financial position, results of operations
and cash flows. Results of operations for interim periods are
not necessarily indicative of results to be expected for a full
year.
Revenue is recognized on large, long-term contracts using the
percentage of completion method based upon materials installed
and labor costs incurred. Changes in job performance, job
conditions, and estimated profitability, including those arising
from contract penalty provisions, and final contract settlements
may result in revisions to costs and income and are recognized in
the period in which the revisions are determined. Revenue is
recognized on smaller, short-term contracts using the completed
contract method. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are
determined.
Earnings per share are based upon the weighted average number of
common and dilutive equivalent shares outstanding. Options to
purchase common stock are included based on the treasury stock
method for dilutive earnings per share, except when their effect
is antidilutive.
The amounts paid for income taxes and interest are as follows (in
thousands):
Nine Months Ended October 31,
-----------------------------
2000 1999
-------- --------
Income taxes $ 832 $ -
Interest 4,439 4,147
During the first quarter of fiscal 2001, the Company issued 1,182
shares of common stock and 42,532 stock options to employees
related to fiscal 2000 compensation awards. The total value of
these awards was approximately $55,000, which was accrued at
January 31, 2000.
2. Inventories
The Company values inventories at the lower of cost (first-in,
first-out) or market (in thousands):
As of
-------------------------
October 31, January 31,
2000 2000
----------- -----------
Raw materials $ 1,260 $ 1,422
Work in process 863 547
Finished products, parts and supplies 29,508 28,005
----------- -----------
Total $ 31,631 $ 29,974
=========== ===========
3. Comprehensive Loss
Components of comprehensive loss are summarized as follows (in
thousands):
Three Months Nine Months
Ended October 31, Ended October,31,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
Net income (loss) $ 156 $(1,354) $(4,294) $(3,744)
Other comprehensive loss,
net of taxes:
Foreign currency translation
Adjustments (2,324) (136) (5,491) 646
Unrealized gain (loss) on
available for sale investments (48) 131 7 (209)
Change in unrecognized pension
liability - 24 - 73
------- ------- ------- -------
Comprehensive loss $(2,216) $(1,335) $(9,778) $(3,234)
======= ======= ======= =======
The components of accumulated other comprehensive loss for the
nine months ended October 31, 2000 are as follows (in thousands):
Accumulated
Cumulative Unrealized Other
Translation Gain (Loss) On Comprehensive
Adjustment Investments Loss
----------- -------------- -------------
Balance, February 1, 2000 $ (4,561) $ (1,177) $ (5,738)
Period Change (5,491) 7 (5,484)
---------- ------------ ------------
Balance, October 31, 2000 $ (10,052) $ (1,170) $ (11,222)
========== ============ ============
4. Operating Segments
The Company is a multi-national company operating predominantly
in two operating segments. The first operating segment includes
the Company's service operations with wholly owned operations in
the United States, Australia, East Africa, Mexico, Canada, Italy,
Indonesia and Thailand, as well as a 50%-owned joint venture in
West Africa, which are consolidated into the Company's October
31, 2000 financial statements. The service segment primarily
derives its revenues
from the following service lines: water-related products and
services, mineral exploration drilling services, geotechnical
construction services and oil and gas services and exploration.
The second operating segment, products, includes the
manufacturing and supply of drilling equipment, parts and
supplies. The products operations are primarily in the United
States.
Revenues and operating income pertaining to the Company's
operating segments are presented below. Total revenues of
foreign subsidiaries are those revenues related to the operations
of those subsidiaries. Intersegment sales are accounted for
based on the estimated fair market value of the products sold.
In computing operating income for foreign operations, no
allocations of general corporate expenses have been made.
Operating segment revenues and operating income are summarized as
follows (in thousands):
Nine Months Ended
October 31,
--------------------------
2000 1999
--------- ---------
REVENUES
Services
United States $ 173,979 $ 163,170
Foreign:
Canada 10,398 3,814
Australia 5,643 7,257
Africa 22,898 21,090
Other foreign 8,533 7,064
--------- ---------
Total foreign 47,472 39,225
--------- ---------
Total services 221,451 202,395
--------- ---------
Products 20,507 19,674
Intersegment revenues (7,137) (7,827)
--------- ---------
Total products 13,370 11,847
--------- ---------
Total revenues $ 234,821 $ 214,242
========= =========
OPERATING INCOME (LOSS)
Services
United States $ 13,371 $ 12,282
Foreign:
Canada 361 (107)
Australia (765) (1,103)
Africa (5,685) (2,750)
Other foreign (345) (1,185)
--------- ---------
Total foreign (6,434) (5,145)
--------- ---------
Total services 6,937 7,137
--------- ---------
Products (590) (1,972)
Corporate (7,682) (4,989)
--------- ---------
Total operating income (loss) $ (1,335) $ 176
========= =========
5. Contingencies
The Company's drilling activities involve certain operating
hazards that can result in personal injury or loss of life,
damage and destruction of property and equipment, damage to the
surrounding areas, release of hazardous substances or wastes and
other damage to the environment, interruption or suspension of
drill site operations and loss of revenues and future business.
The magnitude of these operating risks is amplified when the
Company, as is frequently the case, conducts a project on a fixed-
price, "turnkey" basis where the Company delegates certain
functions to subcontractors but remains responsible to the
customer for the subcontracted work. In addition, the Company is
exposed to potential liability under foreign, federal, state and
local laws and regulations, contractual indemnification
agreements or otherwise in connection with its provision of
services and products. Litigation arising from any such
occurrences may result in the Company being named as a defendant
in lawsuits asserting large claims. Although the Company
maintains insurance protection that it considers economically
prudent, there can be no assurance that any such insurance will
be sufficient or effective under all circumstances or against all
claims or hazards to which the Company may be subject or that the
Company will be able to continue to obtain such insurance
protection. A successful claim for damage resulting from a
hazard for which the Company is not fully insured could have a
material adverse effect on the Company. In addition, the Company
does not maintain political risk insurance or business
interruption insurance with respect to its foreign operations.
The Company is involved in various matters of litigation, claims
and disputes which have arisen in the ordinary course of the
Company's business. While the resolution of any of these matters
may have an impact on the financial results for the period in
which the matter is resolved, the Company believes that the
ultimate disposition of these matters will not, in the aggregate,
have a material adverse effect upon its business or consolidated
financial position, results of operations or cash flows.
6. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities."
This statement requires companies to record derivatives on the
balance sheet as assets and liabilities, measured at fair value.
Gains and losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. This
statement, effective for all fiscal quarters of fiscal years
beginning after June 15, 2000, is not expected to have a material
impact on the Company's consolidated financial statements.
=====================================================
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Cautionary Language Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Exchange Act of 1934. Such statements are indicated by
words or phrases such as "anticipate," "estimate," "project,"
"believe," "intend," "expect," "plan" and similar words or
phrases. Such statements are based on current expectations and
are subject to certain risks, uncertainties and assumptions,
including but not limited to prevailing prices for various
metals, unanticipated slowdowns in the Company's major markets,
the impact of competition, the effectiveness of operational
changes expected to increase efficiency and productivity,
worldwide economic and political conditions and foreign currency
fluctuations that may affect worldwide results of operations.
Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results
may vary materially and adversely from those anticipated,
estimated or projected. These forward-looking statements are made
as of the date of this filing, and the Company assumes no
obligation to update such forward-looking statements or to update
the reasons why actual results could differ materially from those
anticipated in such forward-looking statements.
Demand for the Company's mineral exploration drilling services
and products depends upon the level of mineral exploration and
development activities conducted by mining companies,
particularly with respect to gold and copper. Mineral
exploration is highly speculative and is influenced by a variety
of factors, including the prevailing prices for various metals
that often fluctuate widely. In this connection, the decline in
the prices of various metals has continued to adversely impact
the level of mineral exploration and development activities
conducted by mining companies and has had, and could continue to
have, a material adverse effect on the Company.
Results of Operations
The following table presents, for the periods indicated, the
percentage relationship which certain items reflected in the
Company's consolidated statements of income bear to revenues and
the percentage increase or decrease in the dollar amount of such
items period to period.
Period
Three Months Nine Months -to-
Ended Ended Period
October 31, October 31, Change
------------- ------------ --------------
2000 1999 2000 1999 Three Nine
----- ----- ----- ----- Months Months
------ ------
Revenues:
Water-related products and
services 55.2% 59.7% 56.0% 60.0% 7.5% 2.1%
Mineral exploration drilling 25.1 22.4 24.0 22.2 30.6 18.7
Geotechnical construction 12.8 12.0 13.0 12.2 24.2 17.4
Oil and gas services 1.8 0.1 1.3 0.1 * *
----- ----- ----- -----
Total net service revenues 94.9 94.2 94.3 94.5 17.2 9.4
Product sales 5.1 5.8 5.7 5.5 (0.2) 12.9
----- ----- ----- -----
Total net revenues 100.0% 100.0% 100.0% 100.0% 16.2 9.6
===== ===== ===== =====
Cost of revenues:
Cost of service revenues 74.9% 73.0% 74.9% 72.7% 20.4 12.9
Cost of product sales 71.8 79.1 77.1 78.1 (9.5) 11.3
----- ----- ----- -----
Total cost of revenues 74.8 73.3 75.1 73.0 18.5 12.8
----- ----- ----- -----
Gross profit 25.2 26.7 24.9 27.0 10.0 1.1
Selling, general and
administrative expenses 17.2 18.8 18.6 18.8 6.5 8.5
Depreciation and amortization 6.3 8.3 6.9 8.1 (10.5) (7.4)
----- ----- ----- -----
Operating income (loss) 1.7 (0.4) (0.6) 0.1 * *
Other income (expense):
Equity in earnings (losses)
of foreign affiliates 0.1 - 0.2 - * *
Interest (2.0) (1.7) (2.0) (1.7) 34.6 30.6
Other, net 0.2 0.2 0.5 0.3 7.3 59.0
----- ----- ----- -----
Income (loss) before income taxes
and minority interest - (1.9) (1.9) (1.3) * *
Income tax expense - 0.2 - 0.3 * *
Minority interest (net of taxes) 0.2 0.2 0.1 (0.1) * *
----- ----- ----- -----
Net income (loss) 0.2% (1.9)% (1.8)% (1.7)% 111.5 (14.7)
===== ===== ===== =====
__________________
* Not meaningful.
RESULTS OF OPERATIONS
Revenues for the three months ended October 31, 2000 increased
$11,504,000, or 16.2%, to $82,475,000 while revenues for the nine
months ended October 31, 2000 increased $20,579,000, or 9.6%, to
$234,821,000 from the same periods for the prior year.
Water-related products and service revenues increased 7.5%, to
$45,527,000 from $42,356,000 for the three months ended October
31, 2000 and 1999, respectively, and increased 2.1%, to
$131,386,000 from $128,627,000 for the nine months ended October
31, 2000 and 1999, respectively. The increase in revenues for
the third quarter was primarily the result of an increase in
demand for the Company's water-related services in the central
United States and southern California and dry conditions in
Florida. The increase in water-related services for the year was
partially offset by a lower demand for drilling services related
to groundwater contamination in the first half of the year.
Mineral exploration drilling revenues increased 30.6%, to
$20,722,000, and increased 18.7%, to $56,409,000, for the three
and nine months ended October 31, 2000, from $15,865,000 and
$47,536,000 for the three and nine months ended October 31, 1999.
The increase for the three and nine months ended October 31, 2000
was primarily a result of increased demand in Canada and East
Africa, partially offset by lower demand for the Company's
services in the U.S. and Australia combined with the decision to
discontinue drill and blast operations in West Africa.
Geotechnical construction revenues increased 24.2%, to
$10,578,000, and 17.4%, to $30,514,000, for the three and nine
months ended October 31, 2000 compared to revenues of $8,517,000
and $25,989,000 for the three and nine months ended October 31,
1999. The increase in geotechnical revenues for the three months
ended October 31, 2000 was primarily a result of two large
projects in the northeast United States. The increase in revenues
for the nine months ended October 31, 2000 was a result of the
projects mentioned above and the Company's ground freezing
project for Noranda, Inc. in Quebec, Canada, combined with
increased market penetration in certain areas of the United
States.
Oil and gas service revenues were $1,511,000 and $3,142,000 for
the three and nine months ended October 31, 2000 compared to
revenues of $87,000 and $243,000 for this division in the three
and nine months ended October 31, 1999. The Company continues to
develop its domestic service operations to serve this market.
Product sales decreased 0.2%, to $4,137,000, and increased 12.9%,
to $13,370,000, for the three and nine months ended October 31,
2000 from $4,146,000 and $11,847,000 for the three and nine
months ended October 31, 1999. The increase for the nine months
ended October 31, 2000 was attributed to increased demand for
drilling products within the mineral and water markets.
Gross profit was 25.2% and 24.9% of revenues for the three and
nine months ended October 31, 2000 compared to 26.7% and 27.0%
for the same periods last year. The decrease in gross profit as
a percentage of revenues for the three months ended October 31,
2000 was due to reduced margins in the domestic water business
and pricing pressure in the international minerals and products
markets, offset by higher margin work obtained in the
geotechnical construction business. In addition to the above,
the decrease for the nine months ended October 31, 2000 was also
attributable to expenses associated with the expansion of the
Company's domestic oil and gas services and exploration
activities.
Selling, general and administrative expenses increased to
$14,189,000 and $43,692,000 (or 17.2% and 18.6%, respectively, of
revenues) for the three and nine months ended October 31, 2000
compared to $13,327,000 and $40,265,000 (or 18.8% and 18.8%,
respectively, of revenues) for the three and nine months ended
October 31, 1999. The increases were primarily a result of
expenses associated with the expansion of the Company's domestic
oil and gas services and exploration activities, the Company's
Integrated Groundwater Services division, and certain incentive-
related accruals.
Depreciation and amortization decreased to $5,247,000 and
$16,198,000 for the three and nine months ended October 31, 2000
compared to $5,861,000 and $17,494,000 for the same periods last
year. The decrease in depreciation was primarily a result of
certain mineral exploration assets becoming fully depreciated in
the fourth quarter of last year.
Equity in earnings (losses) of foreign affiliates was $112,000
and $550,000 for the three and nine months, respectively, ended
October 31, 2000, compared to $(35,000) and $(90,000) for the
same periods last year. The increase in earnings for the periods
is attributable to an increase in exploration and development
activity in Chile and Peru.
Interest expense increased $412,000 and $1,088,000 for the three
and nine months ended October 31, 2000 as compared to the same
periods in the prior year. The increases were primarily a result
of an increase in the Company's average borrowings during the
periods combined with an increase in interest rates for the
periods.
No benefit for income taxes was recorded for the three and nine
months ended October 31, 2000, compared to recording an expense
of $195,000 and $500,000 for the same periods last year. No
benefit was recorded during the periods as the Company's ability
to realize the benefit over the entire fiscal year is uncertain
due to the impact of non-deductible expenses which partially
offset any tax benefit attributable to lower taxable earnings.
CHANGES IN FINANCIAL CONDITION
Cash from operations was $650,000 for the nine months ended
October 31, 2000 compared to $8,096,000 for the same period last
year. The decrease in cash from operations is primarily
attributable to increased expenditures related to the Company's
continued expansion of its domestic oil and gas services and
exploration activities and increased working capital needs.
Borrowings under the Company's available credit agreement were
primarily used for additions to property and equipment which were
$12,896,000 for the nine-month period ended October 31, 2000.
The Company believes that borrowings from its available credit
agreement and cash from operations will be sufficient for the
Company's seasonal cash requirements and to fund its budgeted
capital expenditures for at least the balance of the fiscal year.
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, equity risk on investments,
and foreign exchange rates giving rise to translation and
transaction gains and losses.
The Company centrally manages its debt and investment portfolios
considering overall financing strategies and tax consequences. A
description of the Company's variable rate debt is in Note 8 to
the Notes to Consolidated Financial Statements appearing on page
46 of the Company's January 31, 2000 Form 10-K. Assuming then
existing debt levels, an instantaneous change in interest rates
of one percentage point would impact the Company's interest
expense by $500,000 and $385,000 at October 31, 2000 and January
31, 2000, respectively. The Company's investments are described
in Note 1 to the Consolidated Financial Statements appearing in
the Company's January 31, 2000 Form 10-K. The investments are
carried at market value and are held for long-term investing
purposes rather than trading purposes.
Operating in international markets involves exposure to possible
volatile movements in currency exchange rates. Currently, the
Company's primary international operations are in Australia,
Africa, Mexico, Canada, Indonesia, Italy and Thailand. The
operations are described in Note 1 to the Consolidated Financial
Statements appearing in the Company's January 31, 2000 Form 10-K
and Note 4 of this Form 10-Q. The majority of the Company's
contracts in Africa and Mexico are U.S. dollar based, providing a
natural reduction in exposure to currency fluctuations.
As currency exchange rates change, translation of the income
statements of the Company's 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 have impacted operating income for the nine
months ended October 31, 2000 and 1999 by approximately $255,000
and $358,000, respectively. This represents approximately ten
percent of the international segment operating income after
adjusting for primarily U.S. dollar-based operations. 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 Company's financing and
operating strategies.
Foreign exchange gains and losses in the Company's Consolidated
Statements of Income reflect transaction gains and losses and
translation gains and losses from the Company's Mexican and
African operations which use the U.S. dollar as their functional
currency. Net foreign exchange gains and losses for 2000, 1999
and 1998 were not significant.
PART II
ITEM 1 - Legal Proceedings
NONE
ITEM 2 - Changes in Securities
NOT APPLICABLE
ITEM 3 - Defaults Upon Senior Securities
NOT APPLICABLE
ITEM 4 - Submission of Matters to a Vote of Security Holders
NONE
ITEM 5 - Other Information
NONE
ITEM 6 - Exhibits and Reports on Form 8-K
The exhibits filed with or incorporated by reference in this
report are listed below:
Exhibit No. Description
----------- -----------
27(1) Financial Data Schedule
* * * * * * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Layne Christensen Company
-------------------------------
(Registrant)
DATE: November 28, 2000 /s/ A.B. Schmitt
-------------------------------
A.B. Schmitt, President
and Chief Executive Officer
DATE: November 28, 2000 /s/ Jerry W. Fanska
-------------------------------
Jerry W. Fanska, Vice President
Finance and Treasurer
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
27(1) Financial Data Schedule.