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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
LAYNE CHRISTENSEN COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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LAYNE CHRISTENSEN COMPANY
April 26, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Layne Christensen Company, to be held at the Corporate Headquarters of Layne
Christensen Company, located at 1900 Shawnee Mission Parkway, Mission Woods,
Kansas, on Thursday, May 31, 2001, commencing at 10:00 a.m., local time. The
business to be conducted at the meeting is described in the attached Notice of
Annual Meeting and Proxy Statement. In addition, there will be an opportunity to
meet with members of senior management and review the business and operations of
the Company.
Your Board of Directors joins with me in urging you to attend the
meeting. Whether or not you plan to attend the meeting, however, please sign,
date and return the enclosed proxy card promptly. A prepaid return envelope is
provided for this purpose. You may revoke your proxy at any time before it is
exercised and it will not be used if you attend the meeting and prefer to vote
in person.
Sincerely yours,
/s/ A. B. Schmitt
A. B. Schmitt
President and Chief Executive Officer
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LAYNE CHRISTENSEN COMPANY
1900 SHAWNEE MISSION PARKWAY
MISSION WOODS, KANSAS 66205
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 2001
The Annual Meeting of Stockholders of Layne Christensen Company, a
Delaware corporation ("Layne Christensen"), will be held at the Corporate
Headquarters of Layne Christensen, located at 1900 Shawnee Mission Parkway,
Mission Woods, Kansas, on Thursday, May 31, 2001, commencing at 10:00 a.m.,
local time, and thereafter as it may from time to time be adjourned, for the
following purposes:
1. To elect two Class III directors to hold office for terms
expiring at the 2004 Annual Meeting of the Stockholders of
Layne Christensen and until their successors are duly elected
and qualified or until their earlier death, retirement,
resignation or removal;
2. To consider and act upon ratification and approval of the
selection of the accounting firm of Deloitte & Touche LLP as
the independent auditors of Layne Christensen for the fiscal
year ending January 31, 2002; and
3. To transact such other business as may properly come before
the meeting and any adjournment or adjournments thereof.
The Board of Directors of Layne Christensen has fixed the close of
business on April 2, 2001, as the record date for determination of the
stockholders entitled to notice of, and to vote at, the Annual Meeting and any
adjournment or adjournments thereof.
All stockholders are cordially invited to attend the meeting. Whether
or not you intend to be present at the meeting, the Board of Directors of Layne
Christensen solicits you to sign, date and return the enclosed proxy card
promptly. A prepaid return envelope is provided for this purpose. You may revoke
your proxy at any time before it is exercised and it will not be used if you
attend the meeting and prefer to vote in person. Your vote is important and all
stockholders are urged to be present in person or by proxy.
By Order of the Board of Directors
A. B. Schmitt
President and Chief Executive Officer
April 26, 2001
Mission Woods, Kansas
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LAYNE CHRISTENSEN COMPANY
1900 SHAWNEE MISSION PARKWAY
MISSION WOODS, KANSAS 66205
-------------------------
PROXY STATEMENT
-------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 31, 2001
-------------------------
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Layne
Christensen Company, a Delaware corporation ("Layne Christensen" or the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Annual Meeting of Stockholders to be
held on Thursday, May 31, 2001, and at any adjournment or adjournments thereof
(the "Annual Meeting"). The Annual Meeting will commence at 10:00 a.m., local
time, and will be held at the Corporate Headquarters of Layne Christensen,
located at 1900 Shawnee Mission Parkway, Mission Woods, Kansas 66205.
This Proxy Statement and the enclosed form of proxy were first mailed
to the Company's stockholders on or about April 26, 2001.
PROXIES
You are requested to complete, date and sign the enclosed form of proxy
and return it promptly to the Company in the enclosed postage prepaid envelope.
Shares represented by properly executed proxies will, unless such proxies
previously have been revoked, be voted in accordance with the stockholders'
instructions indicated in the proxies. If no instructions are indicated, such
shares will be voted in favor of the election of the nominees for directors
named in this Proxy Statement, in favor of ratifying the selection of the
accounting firm of Deloitte & Touche LLP as the Company's independent auditors
for the current fiscal year, and, as to any other matter that properly may be
brought before the Annual Meeting, in accordance with the discretion and
judgment of the appointed proxies. A stockholder who has given a proxy may
revoke it at any time before it is exercised at the Annual Meeting by filing
written notice of revocation with the Assistant Secretary of the Company, by
executing and delivering to the Assistant Secretary of the Company a proxy
bearing a later date, or by appearing at the Annual Meeting and voting in
person.
VOTING AT THE MEETING
For purposes of voting on the proposals described herein, the presence
in person or by proxy of stockholders holding a majority of the total
outstanding shares of the Company's common stock, $0.01 par value, shall
constitute a quorum at the Annual Meeting. Only holders of record of shares of
the Company's common stock as of the close of business on April 2, 2001 (the
"Record Date"), are entitled to notice of, and to vote at, the Annual Meeting or
any adjournment or adjournments thereof. As of the Record Date, 11,707,694
shares of the Company's common stock were outstanding and entitled to be voted
at the Annual Meeting. Each share of common stock is entitled to one vote on
each matter properly to come before the Annual Meeting.
Directors are elected by a plurality (a number greater than those cast
for any other candidates) of the votes cast, in person or by proxy, of
stockholders entitled to vote at the Annual Meeting for that purpose. The
affirmative vote of the holders of a majority of the shares of the Company's
common stock, represented in person or by proxy and entitled to vote at the
Annual Meeting, is required for (i) the ratification of the selection of
Deloitte & Touche
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LLP as the Company's independent auditors and (ii) the approval of such other
matters as properly may come before the Annual Meeting or any adjournment
thereof.
In accordance with Delaware law, a stockholder entitled to vote in the
election of directors can withhold authority to vote for all nominees for
directors or can withhold authority to vote for certain nominees for directors.
Votes withheld in connection with the election of one or more nominees for
director will not be counted as votes cast for such nominees. Abstentions from
the proposal to approve the ratification of the selection of the Company's
independent auditors are treated as votes against the proposal. Broker non-votes
on a proposal are treated as shares of Layne Christensen common stock as to
which voting power has been withheld by the respective beneficial holders and,
therefore, as shares not entitled to vote on the proposal as to which there is
the broker non-vote. Accordingly, broker non-votes are not counted for purposes
of determining whether a proposal has been approved.
SOLICITATION OF PROXIES
This solicitation of proxies for the Annual Meeting is being made by
the Company's Board of Directors. The Company will bear all costs of such
solicitation, including the cost of preparing and mailing this Proxy Statement
and the enclosed form of proxy. After the initial mailing of this Proxy
Statement, proxies may be solicited by mail, telephone, telegram, facsimile
transmission or personally by directors, officers, employees or agents of the
Company. Brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward soliciting materials to beneficial owners of shares held of
record by them, and their reasonable out-of-pocket expenses, together with those
of the Company's transfer agent, will be paid by Layne Christensen.
A list of stockholders entitled to vote at the Annual Meeting will be
available for examination at least ten days prior to the date of the Annual
Meeting during normal business hours at the Company's Corporate Headquarters,
1900 Shawnee Mission Parkway, Mission Woods, Kansas, 66205. The list also will
be available at the Annual Meeting.
ITEM 1
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of six directors.
The Certificate of Incorporation of Layne Christensen divides the Board of
Directors into three classes of directors, with the directors serving staggered
terms of three years and until their respective successors are duly elected and
qualified or until their respective earlier death, retirement, resignation or
removal. The present terms of Todd A. Fisher and Edward A. Gilhuly, Class III
directors, expire at this Annual Meeting. Directors in Class I (Donald K. Miller
and Andrew B. Schmitt) and Class II (Robert J. Dineen and Sheldon R. Erikson)
have been elected to terms expiring at the time of the annual meetings of
stockholders in 2002 and 2003, respectively.
One of the purposes of this Annual Meeting is to elect two directors in
Class III to serve for three-year terms expiring at the Annual Meeting of
Stockholders in 2004 and until their successors are duly elected and qualified
or until their earlier death, retirement, resignation or removal. The Board of
Directors has designated Todd A. Fisher and Edward A. Gilhuly as the nominees
proposed for election at the Annual Meeting. Unless authority to vote for the
nominees is withheld, it is intended that the shares represented by properly
executed proxies in the form enclosed will be voted for the election as
directors of the nominees. In the event that one or both of the nominees should
become unavailable for election, it is intended that the shares represented by
the proxies will be voted for the election of such substitute nominee as may be
designated by the Board of Directors, unless the authority to vote for the
nominee who has ceased to be a candidate has been withheld. The nominees have
indicated their willingness to serve as directors if elected, and the Board of
Directors has no reason to believe that the nominees will be unavailable for
election.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
TODD A. FISHER AND EDWARD A. GILHULY AS CLASS III DIRECTORS OF THE COMPANY.
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NOMINEES AND DIRECTORS CONTINUING IN OFFICE
The following table sets forth certain information with respect to the
persons nominated by the Board of Directors for election as Class III directors
at the Annual Meeting and each director whose term of office will continue after
the Annual Meeting.
PRESENT POSITION DIRECTOR
NAME AGE WITH THE COMPANY SINCE
---- --- ---------------- -----
NOMINEES
CLASS III: TERM TO EXPIRE IN 2004
Todd A. Fisher ..................... 35 Director 1997
Edward A. Gilhuly .................. 41 Director 1992
DIRECTORS CONTINUING IN OFFICE
CLASS I: TERM TO EXPIRE IN 2002
Donald K. Miller ................... 69 Director 1996
Andrew B. Schmitt................... 52 President, Chief Executive 1993
Officer and Director
CLASS II: TERM TO EXPIRE IN 2003
Robert J. Dineen ................... 71 Chairman of the Board 1983
and Director
Sheldon R. Erikson ................. 59 Director 1997
The business experience during the last five fiscal years of the
persons nominated by the Board of Directors for election as Class III directors
at the Annual Meeting and each director whose term of office will continue after
the Annual Meeting is as follows:
ROBERT J. DINEEN has served as Chairman of the Board of the Company
since August 1992. From May 1986 until his retirement in August 1993, Mr. Dineen
was President and Chief Executive Officer of The Marley Company, a manufacturer
and supplier of engineered equipment and services for heating, fluid handling,
control and treatment and heat exchange. Mr. Dineen served as a director of
Kansas City Power & Light Company from 1987 to 2000. Mr. Dineen is currently a
director of Owens-Illinois, Inc.
SHELDON R. ERIKSON has been Chairman of the Board of Cooper Cameron
Corporation, a manufacturer of oil and gas pressure control equipment,
centrifugal air compressors, integral gas compressors and turbochargers, since
May 1996 and President and Chief Executive Officer since January 1995. He was
Chairman of the Board from 1988 to April 1995 and President and Chief Executive
Officer from 1987 to April 1995 of The Western Company of North America, an
international petroleum service company engaged in pressure pumping, well
stimulating and cementing and offshore drilling. Mr. Erikson is a director of
Triton Energy Corporation, Spinnaker Exploration Company and NCI Building
Systems, Inc.
TODD A. FISHER has been an executive of Kohlberg Kravis Roberts & Co.,
L.P. ("KKR") since June 1993 and a member of KKR & Co., L.L.C., the general
partner of KKR, since January of 2001. From July 1992 to June 1993, Mr. Fisher
was an associate at Goldman, Sachs & Co. Mr. Fisher is also a member of the
board of directors of Accuride Corporation and TAI Limited (the ultimate parent
company of Willis Group plc).
EDWARD A. GILHULY is a managing director of Kohlberg Kravis Roberts &
Co. Ltd. and has been a member of KKR & Co. L.L.C. since 1996 and a general
partner of KKR Associates, L.P. ("KKR Associates") since 1995. During 1995, Mr.
Gilhuly was a general partner of KKR. Prior to 1995, he was an executive of KKR
and a limited partner of KKR Associates for more than five years. Mr. Gilhuly is
a director of Owens-Illinois, Inc.
DONALD K. MILLER has been Chairman of Axiom International Investors,
LLC, a company engaged in international equity asset management, since 1999. He
has also been President of Presbar Corporation, a private firm
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engaged in private equity investing and investment banking, since 1986, and was
formerly Chairman of Greylock Financial, Inc., an affiliate of Greylock
Management Corporation, from 1986 to 1996. In addition, Mr. Miller served as
Chairman and Chief Executive Officer of Thomson Advisory Group L.P. (now PIMCO
Advisors Holdings L.P.), an asset management company, from 1990 to 1993 and as
Vice Chairman from 1993 to 1994. Mr. Miller also served as Chairman of the Board
of Directors of Christensen Boyles Corporation ("CBC") from 1986 to December
1995 and was involved in the formation of CBC and in the acquisition of Boyles
Bros. Drilling Company and Christensen Mining Products. He currently is on the
Board of Directors of Huffy Corporation and RPM, Inc. and has spent the majority
of his career in investment banking or as an investor focusing on a variety of
industries.
ANDREW B. SCHMITT has served as President and Chief Executive Officer
of the Company since October 1993. For approximately two years prior to joining
the Company, Mr. Schmitt was a partner in two privately owned hydrostatic pump
and motor manufacturing companies and an oil and gas service company. He served
as President of the Tri-State Oil Tools Division of Baker Hughes Incorporated
from February 1988 to October 1991.
There is no arrangement or understanding between any director and any
other person pursuant to which such director was selected as a director of the
Company.
COMPENSATION OF DIRECTORS
Each director of the Company who is not also an employee of the Company
receives an annual fee of $17,500, payable in quarterly installments, except
that the director may elect to defer receipt of the compensation in accordance
with the terms of the Company's Deferred Compensation Plan for Directors.
Directors of the Company who are also employees of the Company receive no
compensation for service to Layne Christensen as directors.
Under the Company's Deferred Compensation Plan for Directors, directors
of the Company can elect to receive deferred compensation in three forms--a cash
credit, a stock credit or a combination of the two. The value of deferrals made
in the form of a stock credit track the value of the Company's common stock.
Deferrals made in the form of a cash credit will accumulate interest at a rate
based on the annual yield of the longest term United States Treasury Bond
outstanding at the end of the preceding year. All payments made under the plan
will be made in cash. As of January 1, 2001, Mr. Erikson had accumulated the
equivalent of 8,924.3 shares of common stock in his stock credit account, Mr.
Fisher had accumulated the equivalent of 2,610.3 shares of common stock in his
stock credit account, Mr. Gilhuly had accumulated the equivalent of 9,126.4
shares of common stock in his stock credit account, and Mr. Miller had
accumulated the equivalent of 6,292.6 shares of common stock in his stock credit
account.
MEETINGS OF THE BOARD AND COMMITTEES
During the fiscal year ended January 31, 2001, the Board of Directors
of Layne Christensen held three meetings. The Board of Directors' fourth
quarterly meeting was held on March 6, 2001, shortly after the commencement of
fiscal year 2002. All directors attended at least 75% of the meetings of the
Board of Directors and the committees of the Board of Directors on which they
served which were held during such fiscal year. It should be noted that the
Company's directors discharge their responsibilities throughout the year, not
only at such Board of Directors and committee meetings, but through personal
meetings and other communications with members of management and others
regarding matters of interest and concern to the Company.
Pursuant to the Company's Bylaws, the Board of Directors has
established Audit and Compensation Committees of the Board of Directors. There
currently is no Nominating Committee or committee performing similar functions
of the Board of Directors.
The Audit Committee assists the Board of Directors in fulfilling its
responsibilities with respect to the Company's accounting and financial
reporting practices and in addressing the scope and expense of audit and related
services provided by the Company's independent auditors. The Audit Committee is
responsible for recommending the appointment of the Company's independent
auditors and reviewing the terms of their engagement, reviewing the Company's
policies and procedures with respect to internal auditing, accounting and
financial controls and reviewing the scope and results of audits and any auditor
recommendations. At its May 2000 meeting, the Audit Committee approved a formal
Audit Committee Charter. The complete text of the Charter is included in
Appendix A to this
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Proxy Statement. The current members of the Audit Committee are Donald K.
Miller, Sheldon R. Erikson and Todd A. Fisher. The Report of the Audit Committee
for fiscal year 2001 appears on page 13 below.
The Compensation Committee reviews management compensation, evaluates
the performance of management, considers management succession and makes
recommendations to the Board of Directors regarding the compensation and
benefits of the Company's executive officers and the members of the Board of
Directors. The Compensation Committee also administers certain of the Company's
incentive plans, including the Company's Executive Incentive Compensation Plan.
The current members of the Compensation Committee are Robert J. Dineen, Edward
A. Gilhuly and Sheldon R. Erikson. The Compensation Committee met once during
the fiscal year ended January 31, 2001, in addition to personal meetings and
other communications conducted throughout the year with members of management
and each other regarding compensation issues within the committee's area of
responsibility.
COMPOSITION OF THE AUDIT COMMITTEE
The Board of Directors has determined that, as a result of a recent
change in the ownership of the Company's common stock which resulted in KKR
and/or its affiliates once again becoming the largest shareholder of the
Company, Mr. Todd A. Fisher no longer meets the definition of an "independent
director," as that term is defined in Nasdaq Marketplace Rule 4200(a)(14). Mr.
Fisher no longer qualifies as an independent director because he is currently
employed by KKR, and, as the largest shareholder of the Company with a 17.7%
ownership interest, KKR could be deemed to be an affiliate of the Company.
However, on April 6, 2001, the Board of Directors decided to allow Mr.
Fisher to remain a member of the Audit Committee pursuant to the exception
provided in Nasdaq Marketplace Rule 4350(d)(2)(B), which allows a company to
have one director on it's Audit Committee who is not independent as defined in
Nasdaq Marketplace Rule 4200(a)(14). The Board of Directors determined that Mr.
Fisher's continued membership on the Audit Committee would be in the best
interests of the Company and its shareholders because, even though Mr. Fisher is
employed by KKR and as a result does not meet the technical definition of an
"independent director," both Mr. Fisher's interests as an employee of KKR and
KKR's interests as the largest shareholder of the Company are almost perfectly
aligned with the other shareholders of the Company. Furthermore, the Board
explained that Mr. Fisher has extensive employment experience in finance and
accounting which has resulted in his financial sophistication, and his
contributions to the Audit Committee have been very valuable to the Company.
Finally, the Board noted that it has become extremely difficult to find
qualified individuals who are willing to serve on the Audit Committee of the
Board of Directors of a public company and the current size of the Company does
not warrant the cost of adding an additional director to the Board.
The other two members of the Audit Committee qualify as independent
directors under Nasdaq Marketplace Rule 4200(a)(14).
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended January 31,
2001, January 31, 2000, and January 31, 1999, respectively, the compensation of
the Company's chief executive officer and of each of the Company's four other
most highly compensated executive officers whose remuneration for the fiscal
year ended January 31, 2001, exceeded $100,000 (collectively, the "Named
Executive Officers") for services to the Company and its subsidiaries in all
capacities:
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SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
--------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------------- ---------------------- ---------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS(1) COMPENSATION(2)(3) AWARDS SARS PAYOUTS COMPENSATION(4)
POSITION YEAR ($) ($) ($) ($) # ($) ($)
- ------------------------- ---- ---------- ---------- ------------------ ---------- --------- --------- ---------------
Andrew B. Schmitt 2001 325,000 163,321 0 0 75,000 0 8,656
President, Chief Executive 2000 325,000 0 0 0 87,500 0 6,456
Officer and Director 1999 314,423 0 0 0 50,000 0 7,514
H. Edward Coleman 2001 191,154 69,726 1,531 0 0 0 12,020
Senior Vice President 2000 185,000 0 1,212 0 32,250 0 10,935
1999 181,538 0 1,453 0 15,000 0 14,319
Norman E. Mehlhorn 2001 189,615 69,726 0 0 0 0 8,469
Senior Vice President 2000 185,000 0 0 0 32,250 0 7,116
1999 181,538 0 0 0 15,000 0 7,200
Eric R. Despain 2001 174,615 0 0 0 0 0 7,813
Senior Vice President 2000 170,000 0 0 0 25,000 0 4,931
1999 156,308 0 0 0 25,000 0 6,220
Jerry W. Fanska 2001 166,615 61,057 1,337 0 0 0 9,610
Vice President--Finance 2000 166,800 0 1,059 0 42,250 0 7,893
and Treasurer 1999 150,000 0 1,273 0 25,000 0 8,737
________________________
(1) Reflects bonuses earned for the fiscal years ended January 31,
2001, 2000 and 1999, respectively.
(2) Excludes perquisites and other benefits, unless the aggregate
amount of such compensation exceeds the lesser of either
$50,000 or 10% of the total of annual salary and bonus
reported for the Named Executive Officer.
(3) Reflects additional compensation paid to the Named Executive
Officer for taxes incurred on the imputed income resulting
from interest-free loans from the Company.
(4) All Other Compensation for the fiscal year ended January 31,
2001, includes Layne Christensen contributions in the amounts
of $7,000, $6,069, $6,538, $6,985 and $6,501, which accrued
during such fiscal year for the accounts of Messrs. Schmitt,
Coleman, Mehlhorn, Despain and Fanska, respectively, under the
Company's Capital Accumulation Plan; the cost of term life
insurance paid by the Company for the benefit of Messrs.
Schmitt, Coleman, Mehlhorn, Despain and Fanska, in the amounts
of $1,656, $2,614, $1,931, $828 and $777, respectively; and
imputed income from interest-free loans from the Company for
the benefit of Messrs. Coleman and Fanska pursuant to the
Company's 1992 Stock Option Plan in the amounts of $3,337 and
$2,332, respectively.
All Other Compensation for the fiscal year ended January 31,
2000, includes Layne Christensen contributions in the amounts
of $4,050, $4,943, $4,953, $3,792, and $4,953 which accrued
during such fiscal year for the accounts of Messrs. Schmitt,
Coleman, Mehlhorn, Despain and Fanska, respectively, under the
Company's Capital Accumulation Plan; the cost of term life
insurance paid by the Company for the benefit of Messrs.
Schmitt, Coleman, Mehlhorn, Despain and Fanska, in the amounts
of $2,406, $3,350, $2,163, $1,139 and $1,094, respectively;
and imputed income from interest-free loans from the Company
for the benefit of Messrs. Coleman and Fanska pursuant to the
Company's 1992 Stock Option Plan in the amounts of $2,642 and
$1,846, respectively.
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All Other Compensation for the fiscal year ended January 31,
1999, includes Layne Christensen contributions in the amounts
of $5,036, $4,320, $4,320, $4,038 and $4,286, which accrued
during such fiscal year for the accounts of Messrs. Schmitt,
Coleman, Mehlhorn, Despain and Fanska, respectively, under the
Company's Capital Accumulation Plan; the cost of term life
insurance paid by the Company for the benefit of Messrs.
Schmitt, Coleman, Mehlhorn, Despain and Fanska, in the amounts
of $2,478, $6,832, $2,880, $2,182 and $2,232, respectively;
and imputed income from interest-free loans from the Company
for the benefit of Messrs. Coleman and Fanska, pursuant to the
Company's 1992 Stock Option Plan in the amounts of $3,167 and
$2,219, respectively.
OPTION GRANTS DURING FISCAL 2001
The following table sets forth information with respect to each Named
Executive Officer concerning grants during the fiscal year ended January 31,
2001, of stock options under the Company's 1992 Stock Option Plan (the "1992
Option Plan"), the Company's 1996 District Stock Option Plan (the "1996 Option
Plan") and stock appreciation rights ("SARS").
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM (2)
---------------------------------------------------------------------- ------------------------------------
% of Total
Options/ Options/SARs
SARs Granted to Exercise or
Granted (3) Employees in Base Price 0% 5% 10%
Name # Fiscal Year ($/Per Share) Expiration Date (4) $ $ $
- ----------------- ---------- ----------- ------------- ------------------- -------- -------- --------
Andrew B. Schmitt 75,000 44.8 4.00 September 22, 2005 0 188,668 478,123
__________________________________
(1) No stock appreciation rights were granted by the Company during the
fiscal year ended January 31, 2001.
(2) The potential realizable value portion of the foregoing table
illustrates value that might be realized upon exercise of the options
immediately prior to the expiration of their term, assuming the
specified compounded rates of appreciation on the Company's common
stock over the term of the options.
(3) The options granted to Mr. Schmitt during the fiscal year ended
January 31, 2001, are exercisable beginning on the day immediately
following the first anniversary of the grant date, with 25% of such
options becoming exercisable at that time and with an additional 25%
of such options becoming exercisable on the day immediately following
each successive anniversary date. Full vesting occurs on the day
immediately following the fourth anniversary of the grant date. In
the event of a "change in control" (as defined in the optionees'
stock option agreements), the options become fully vested.
(4) The options were granted for a term of ten years, subject to earlier
termination in certain events related to termination of employment.
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to each Named
Executive Officer concerning the exercise of options and stock appreciation
rights ("SARs") during the fiscal year ended January 31, 2001, and unexercised
options and SARs held as of January 31, 2001.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND JANUARY 31, 2001 OPTION/SAR VALUES (1)
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
SHARES UNEXERCISED UNEXERCISED
ACQUIRED SHARES OPTIONS/ IN-THE-MONEY
ON VALUE SARS AT OPTIONS/SARS AT
EXERCISE REALIZED JANUARY 31, 2001 JANUARY 31, 2001 (2)
NAME # ($) # ($)
- ------------------ --------- -------- ---------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Andrew B. Schmitt 0 0 291,875 170,625 0 51,600
H. Edward Coleman 0 0 95,379 33,188 0 0
Norman E. Mehlhorn 0 0 95,379 33,188 0 0
Eric R. Despain 0 0 16,250 33,750 0 0
Jerry W. Fanska 0 0 82,562 46,688 0 0
- -------------------------------
(1) No stock appreciation rights have ever been granted by the Company.
(2) As of January 31, 2001, the last reported sale price of the Company's
Common Stock, which was reported on the NASDAQ National Market System
on January 31, 2001, was $4.688 per share. Value is calculated by
determining the difference between the option exercise price and
$4.688, multiplied by the number of shares of Common Stock underlying
the options.
INCENTIVE COMPENSATION PLAN
The Company adopted an Executive Incentive Compensation Plan (the "IC
Plan") in fiscal 1993. Each of the Company's executive officers, including the
Named Executive Officers, is eligible to participate in the IC Plan. Under the
IC Plan, each participant will be eligible for an annual cash bonus in a target
amount (the "Target Bonus") equal to a percentage (approximately 50% in the case
of Mr. Schmitt and approximately 37.5% in the case of Messrs. Coleman, Mehlhorn,
Despain and Fanska) of such participant's base compensation. The Target Bonus
will be adjusted (up or down) based upon the performance of the Company as
compared to certain financial goals included in the business plan adopted and
approved by the Board of Directors. In no event, however, can a participant's
annual cash bonus under the IC Plan exceed 100% of such participant's base
compensation for the relevant year. No bonus will be payable should performance
be equal to or below 80% of the relevant goals established by the business plan.
In addition, the formula bonus derived as described in the preceding sentences
can be further adjusted (up or down) at the discretion of the Board of Directors
by one-third of the Target Bonus. All or part of an employee's incentive
compensation under the IC Plan may, at the discretion of the Board of Directors,
be paid in the form of shares of the Company's common stock which may consist of
authorized but unissued shares of common stock or shares of common stock
reacquired by the Company on the open market. Messrs. Schmitt, Coleman, Mehlhorn
and Fanska received payments under the IC Plan for services rendered to the
Company in the fiscal year ended January 31, 2001, in the amounts of $163,321,
$69,726, $69,726 and $61,057, respectively. See "Executive Compensation and
Other Information--Executive Compensation."
CAPITAL ACCUMULATION PLAN
The Company has adopted a capital accumulation plan (the "Capital
Accumulation Plan"). Each of the Company's executive officers, including the
Named Executive Officers, and substantially all other salaried employees of the
Company are eligible to participate in the Capital Accumulation Plan. The
Capital Accumulation Plan is a defined contribution plan qualified under Section
401, including Section 401(k), of the Internal Revenue Code of 1986, as amended
(the "Code"). The Capital Accumulation Plan provides for two methods of Company
contributions, a Company matching contribution tied to and contingent upon
participant deferrals and a Company profit sharing contribution which is not
contingent upon participant deferrals. The amount, if any, of Company paid
contributions, both matching and profit sharing, for each fiscal year under the
Capital Accumulation Plan is determined by the Board of Directors in its
discretion. Each eligible employee meeting certain service requirements
8
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participates in Company profit sharing contributions to the Capital Accumulation
Plan in the proportion his or her eligible compensation bears to the aggregate
compensation of the group participating in the Capital Accumulation Plan. In
addition, each eligible employee meeting certain service requirements and
electing to defer a portion of his or her compensation under the Capital
Accumulation Plan participates in the Company's matching contribution program
pursuant to a formula as designated by the Board of Directors. At the option of
the Board of Directors of the Company, all or any portion of such Company
contributions may be made in the Company's common stock. In addition, each
participant can voluntarily contribute, on a pre-tax basis, a portion of his or
her compensation (which in no event can exceed $10,500 for the calendar year
2001) under the Capital Accumulation Plan. A participant's account will be
placed in a trust and invested at the participant's direction in any one or more
of a number of available investment options. Each participant may receive the
funds in his or her Capital Accumulation Plan account upon termination of
employment. For services rendered in fiscal 2001, total Company contributions
under the Capital Accumulation Plan of $7,000, $6,069, $6,538, $6,985 and $6,501
accrued for the accounts of Messrs. Schmitt, Coleman, Mehlhorn, Despain and
Fanska, respectively.
RETIREMENT, DISABILITY AND DEATH PLANS
The Company has agreed to pay Mr. Schmitt an annual retirement benefit
beginning at age 65 equal to 40% of the average of his total compensation (as
defined in the agreement) received during the highest five consecutive years out
of his last ten years of employment, less 60% of his annual primary Social
Security benefit (the "Annual Benefit"). The Annual Benefit is to be reduced,
however, by the annual annuity equivalent of the value of all funds, including
earnings, in the Company funded portion of Mr. Schmitt's Capital Accumulation
Plan account as of the date of his retirement (the "Annuity Equivalent"). As of
January 31, 2001, the Company funded balance in Mr. Schmitt's account under the
Capital Accumulation Plan was $27,900. To the extent the Annual Benefit is not
satisfied by the Annuity Equivalent, payments will be made out of the general
funds of the Company. The agreement includes certain provisions, exercisable at
Mr. Schmitt's election, for early retirement and joint and survivor benefits if
he is married at the time payment commences. Upon termination of Mr. Schmitt's
service for any reason other than disability or death, and subject to special
provisions in the event of a "change in control" as discussed below, his Annual
Benefit will vest in the percentage determined under the following schedule:
YEARS OF SERVICE VESTING PERCENTAGE
---------------- ------------------
6 20%
7 40%
8 60%
9 80%
10 100%
Mr. Schmitt currently has seven years of service credited towards his annual
retirement benefit.
Mr. Schmitt is entitled to a disability benefit determined in the same
manner as the Annual Benefit as of the date of termination of his service
resulting from total and permanent disability (the "Disability Benefit"). The
Disability Benefit will also be reduced by the Annuity Equivalent. Disability is
to be determined by an administrative committee of the Board of Directors to be
appointed at the time of any claim of disability.
Mr. Schmitt's surviving spouse, if any, will be entitled to receive a
death benefit (the "Death Benefit") upon Mr. Schmitt's death which will be equal
to the Annual Benefit his surviving spouse would have received if (i) he had
retired at the date of his death and had received an Annual Benefit in the form
of a monthly joint and survivor benefit and (ii) he subsequently died. The Death
Benefit will be reduced by the Annuity Equivalent.
In the event of Mr. Schmitt's death or involuntary termination within
two years following a "change in control" (as defined in the agreement), Mr.
Schmitt's benefits under his retirement plan become fully vested effective upon
such death or involuntary termination. A "change in control" is deemed to occur
if (i) during any 24-month period, individuals who at the beginning of such
period constituted the Company's Board of Directors or whose nomination for
election by the Company's stockholders was approved by a vote of a majority of
the directors who either were directors at the beginning of such period or whose
election or nomination was previously so approved
9
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cease for any reason to constitute a majority of the Board of Directors of the
Company, or (ii) the beneficial ownership of the Company's common stock changes
resulting in KKR having less beneficial ownership than any person or group of
persons if that person or group of persons holds 20% or more of the outstanding
common stock of the Company. Based upon the beneficial ownership of the
Company's common stock reported by third parties in filings with the Securities
and Exchange Commission, a "change in control", as defined above, did occur
during fiscal year 2000.
CERTAIN CHANGE-IN-CONTROL AGREEMENTS
The benefits which Mr. Schmitt will receive under his annual retirement
benefit program may be adjusted and, in addition, he will be entitled to a
lump-sum payment equal to 24 month's salary in the event of a change in control.
In addition, all of the executive officers who have been granted stock options
have a "change in control" provision in their respective Incentive Stock Option
Agreements ("ISO Agreements") issued in accordance with the terms of the
Company's 1992 Option Plan and the Company's 1996 Option Plan. See "Stock Option
Plans - Report of Board of Directors and Compensation Committee on Executive
Compensation." Under the terms of the ISO Agreements, the options vest at the
rate of either 20% or 25% per year beginning on the first day following the
first anniversary of the option grant date. In the event of a change in control,
however, the options become 100% vested.
Under the terms of the ISO Agreements of the executive officers
executed during or after fiscal 1999, a "change in control" is deemed to occur
if: (i) there is a change in the composition of the Board of Directors of the
Company; (ii) any person, except for certain interested parties, acquires 35% or
more of the voting power of the Company's outstanding securities; or (iii) there
is a substantial change in the Company's business structure through merger, sale
of assets or other event. No ISO Agreements were entered into during fiscal
1998. Under the terms of the ISO Agreements of the executive officers executed
in fiscal 1997, a "change in control" is deemed to occur if, during any 24-month
period, individuals who at the beginning of such period constituted the
Company's Board of Directors or whose nomination for election by the Company's
stockholders was approved by a vote of a majority of the directors who either
were directors at the beginning of such period or whose election or nomination
was previously so approved cease for any reason to constitute a majority of the
Board of Directors of the Company. A "change in control" will not be deemed to
have occurred, however, if such a change in the composition of the Board of
Directors occurs in connection with any public offering by the Company, KKR or
their affiliates.
REPORT OF BOARD OF DIRECTORS AND COMPENSATION COMMITTEE ON EXECUTIVE
COMPENSATION
The Company's executive compensation program currently is administered
by the Compensation Committee of the Board of Directors which is comprised of
Messrs. Dineen, Gilhuly and Erikson. It is the Compensation Committee's duty to
review the compensation levels of management, evaluate performance of management
and consider management succession and related matters. The Company's incentive
plans, including the Company's 1992 Option Plan, the Company's 1996 Option Plan
(collectively, the "Option Plans") and the Company's Executive Incentive
Compensation Plan ("Incentive Plan"), are administered by the Board of Directors
with respect to grants made to officers of the Company.
Compensation Policy. The Company's overall compensation policy is
designed to attract, retain and motivate qualified individuals who are expected
to contribute to the Company's long-term growth and success. The Company has
adopted an annual incentive compensation program which is designed to reinforce
its strategic long and short term goals and to provide executive officers with
the opportunity to receive greater compensation in those years in which the
Company achieves its financial goals than in those years in which it does not.
In addition, the Company's Option Plans are designed to promote a mutuality of
interest between executive officers and stockholders through stock purchases and
options allowing the executive officers and stockholders to share in the risks
and rewards associated with stock ownership.
Compensation Components. The Company's executive compensation program
is reviewed periodically to ensure that pay levels and incentive opportunities
are competitive and reflect the performance of the Company and the individual
executive officer. The principal components of the Company's executive
compensation package are salary, annual incentive compensation and stock
options.
10
14
Base Salary. Base pay levels largely are determined through an
assessment of the executive officer's performance during the relevant period
based upon objective and subjective criteria and, to a lesser extent, through an
informal comparison with similarly sized public companies engaged primarily in
related industries. The Company does not know of any direct competitors which
are public companies. Accordingly, the Compensation Committee has had to look at
companies outside of its industry to identify companies for which a comparison
of pay levels would be deemed by the committee to be relevant. These companies
are not necessarily the same companies which comprise the index of companies
with similar market capitalizations utilized for purposes of Company shareholder
returns in the performance graph included elsewhere in the Proxy Statement.
Actual salaries are based upon subjective assessments of individual factors such
as the responsibilities of the position and the skill, knowledge and experience
of each individual executive officer. Each executive officer's individual
performance is considered from the previous year and takes into account an
assessment of the executive officer's growth and effectiveness in the
performance of his duties.
Incentive Compensation. Under the Company's Incentive Plan, bonuses are
paid based on the officer's performance and the performance of the entire
Company. The Incentive Plan is administered by the Board of Directors. The
target bonus is 50% of base salary in the case of Mr. Schmitt and, in the case
of the remaining executive officers, 37.5% of base salary, subject to adjustment
up or down by one-third in the case of extraordinary circumstances. The
Company's performance for purposes of incentive compensation decisions is
measured against goals established for the Incentive Plan at the beginning of
the fiscal year by the Board of Directors. The maximum bonus payable is 100% of
salary, and no bonus is payable if the Company does not attain at least 80% of
the established goals. For fiscal 2001, two goals were established by the Board
in order to qualify for payment of incentive compensation: earnings before
interest, taxes, depreciation and amortization (as adjusted by the Board)
("EBITDA"), and return on adjusted employed capital ("ROEC"). These two targets
were weighted 75% for adjusted EBITDA and 25% for adjusted ROEC.
Stock Option Plans. Under the Company's Option Plans, each Named
Executive Officer and certain other key employees are eligible to receive
options to purchase shares of the Company's common stock. The Option Plans are
administered by the Board of Directors. Under the Option Plans, the Board is
authorized from time to time to grant to executive officers and other employees
of the Company options to purchase up to an aggregate of 1,900,000 shares (as
amended) of the common stock at a price fixed by the Board. Such options may be
either incentive stock options or non-qualified stock options. The price for
incentive stock options cannot be less than the fair market value of the
Company's common stock on the date of grant while the price for non-qualified
options may be set at any price. Individual grant sizes are determined after
considering the Company's performance and the competitiveness of the Named
Executive Officer's long-term compensation package. The Board also takes into
account the number of shares of the Company's common stock and stock options
held by or previously granted to each Named Executive Officer. The grant of
stock options is intended to strengthen the linkage between executive
compensation and stockholder return.
No option granted under the Option Plans are exercisable more than ten
years after the date of grant. All options granted under the Option Plans are
evidenced by and subject to option agreements entered into by the Company and
the individual receiving the options.
Discussion of 2001 Compensation for the Chief Executive Officer. In the
Compensation Committee's review of executive compensation, it took into
consideration the impact that developments in the markets for gold, copper and
other metals had on the Company's earnings for fiscal 2001 and the corresponding
negative impact on the Company's stock price. Although the committee believed
that the executive team, including Mr. Schmitt, had performed well under very
difficult market conditions, it also believed that the company's earnings
performance should be taken into consideration when considering adjustments to
executive compensation.
The committee concluded that in the fiscal 2001 earnings environment it
would be more appropriate to focus on long-term incentives, rather than salary,
for Mr. Schmitt. The committee noted that the depressed minerals markets had
continued to adversely impact the Company's stock price and, as a result, all of
the options previously granted to Mr. Schmitt were well below the current market
price. After consideration of these factors, the committee elected not to
increase Mr. Schmitt's salary but to approve a grant of additional stock options
on shares of the
11
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Company's stock. Mr. Schmitt received a non-qualified five-year grant for 75,000
shares of the Company's common stock at an exercise price of $4.00 per share,
the market price on the date of the grant.
Mr. Schmitt is a participant under the Incentive Plan. The Company met
the performance criteria established by the Board for fiscal 2001 under the
Incentive Plan. As a result, Mr. Schmitt received an incentive compensation
award for fiscal 2001 in the amount of $163,321.
Tax Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code of 1986, as amended, places a limit of $1 million on the
amount of annual compensation that may be deducted by the Company in any year
with respect to the Company's Chief Executive Officer and its other four most
highly compensated executive officers. Certain performance-based compensation
approved by stockholders is not subject to this deduction limitation, and is,
therefore, deductible.
The Company intends to maximize the deductibility of executive
compensation while retaining the discretion necessary to compensate executive
officers in a manner commensurate with performance and the competitive market
for executive talent, and, therefore, the Committee and/or the Board may from
time to time, in circumstances it deems appropriate, award compensation in
addition to these option grants and bonus payments that may not be deductible.
COMPENSATION COMMITTEE
BOARD OF DIRECTORS OF THE BOARD OF DIRECTORS
Robert J. Dineen Donald K. Miller Robert J. Dineen
Edward A. Gilhuly Sheldon R. Erikson Edward A. Gilhuly
Todd A. Fisher Andrew B. Schmitt Sheldon R. Erikson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 31, 2001, the members of the
Compensation Committee were Messrs. Dineen, Gilhuly and Erikson. As discussed
above under "Report of Board of Directors and Compensation Committee on
Executive Compensation," all decisions relating to the compensation of executive
officers for fiscal 2001 were made by the Board or the Compensation Committee.
Among the members of the Compensation Committee, Mr. Dineen is the only employee
or current or former officer of the Company or any of its subsidiaries. KKR has
agreed to render management consulting and financial services to the Company for
an annual fee. The annual fee for the fiscal year ended January 31, 1999 was
$125,000. Beginning with fiscal year 2000, the Company and KKR agreed to suspend
the fee until such time as the Company's earnings prospects have improved. Such
services include, but are not necessarily limited to, advice and assistance
concerning any and all aspects of the operations, planning and financing of the
Company, as required from time to time by the Company. KKR Associates, the
general partners of which are the general partners of KKR, owns approximately
17.7% of the Company's common stock.
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE DOES NOT CONSTITUE SOLICITING
MATERIAL AND SHOULD NOT BE DEEMED FILED OR INCORPORATED BY REFERENCE INTO ANY
OTHER COMPANY FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE
ACT OF 1934, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES THIS
REPORT BY REFERENCE THEREIN.
REPORT OF THE AUDIT COMMITTEE
On May 18, 2000, the Board of Directors adopted a written charter for
the Audit Committee. The complete text of the charter, which reflects standards
set forth in new SEC regulations and Nasdaq rules, is reproduced in the appendix
to this proxy statement.
As set forth in more detail in the charter, the Audit Committee's
primary responsibilities fall into three broad categories:
12
16
1. First, the Committee is to serve as an independent and
objective party to monitor the Company's financial reporting
process and internal control systems;
2. Second, the Committee is charged with reviewing and appraising
the audit efforts of the Company's independent accountants;
and
3. Third, the Committee is to provide an open avenue of
communication among the independent accountants, financial and
senior management and the Board of Directors.
The Committee meets periodically to ensure that during the course of
each fiscal year it devotes the attention that it deems necessary or appropriate
to each of the matters assigned to it under the Committee's charter. To carry
out its responsibilities, the Committee met three times during fiscal 2001.
In monitoring the Company's financial reporting process, the Committee
met with both management and the Company's outside auditors to review and
discuss all financial statements prior to their issuance and to discuss
significant accounting issues. Management advised the Committee that all
financial statements were prepared in accordance with generally accepted
accounting principles, and the Committee discussed the statements with both
management and the outside auditors. The Committee's discussions with the
outside auditors took place both with and without management present. The
Committee's review included discussion with the outside auditors of matters
required to be discussed pursuant to Statement on Auditing Standards No. 61
(Communication with Audit Committees).
With respect to the Company's outside auditors, the Committee, among
other things, discussed with Deloitte & Touche LLP matters relating to its
independence, including the written disclosures made to the Committee as
required by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees).
In reliance on the reviews and discussions outlined above, the
Committee recommended to the Board of Directors that the Board approve the
inclusion of the Company's audited financial statements in the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 2001, for filing with
the Securities and Exchange Commission. The Committee has also recommended to
the Board, subject to shareholder ratification, the selection of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending
January 31, 2002.
Respectfully submitted on March 8, 2001, by the members of the Audit
Committee of the Board of Directors:
Donald K. Miller, Chairman
Sheldon R. Erikson
Todd A. Fisher
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COMPANY PERFORMANCE
The following performance graph shows a comparison of cumulative total
returns for the Company, the NASDAQ Market Value index and an index of companies
selected by the Company having market capitalization similar to that of the
Company (the "SMC Group") for the period from January 31, 1996 through January
31, 2001.
[GRAPH INSERTED HERE]
COMPARISON OF CUMULATIVE TOTAL RETURNS
(Layne Christensen, NASDAQ Market Value, SMC Group)
The cumulative total return on investment for the Company, the NASDAQ
Market Value index and an index of the SMC Group are based on the stock price or
index at January 31, 1996. The performance graph assumes that the value of an
investment in the Company's common stock and each index was $100 at January 31,
1996, and that all dividends were reinvested. The information presented in the
performance graph is historical in nature and is not necessarily indicative of
future performance.
The comparison of cumulative total returns presented in the above graph
was plotted using the following index values and common stock price value:
1/31/96 1/31/97 1/31/98 1/31/99 1/31/00 1/31/01
------- ------- ------- ------- ------- -------
Layne Christensen Company $ 100.00 $ 133.33 $ 124.44 $ 61.11 $ 51.67 $ 41.67
NASDAQ Market Value $ 100.00 $ 131.11 $ 154.69 $ 242.14 $ 378.43 $ 265.46
SMC Group $ 100.00 $ 68.04 $ 47.10 $ 36.79 $ 24.50 $ 18.72
SOURCE: Research Data Group, Inc.
The performance graph compares the performance of the Company with that
of the NASDAQ Market Value index and an index of the SMC Group. The Company is
not aware of any published industry or line-of-business index in which its
common stock is included and was not able to reasonably identify a peer group of
issuers on an industry, line-of-business or other basis. The Company believes
that it is one of the largest water well drilling, well repair and maintenance
and mineral exploration drilling companies in the United States. The Company's
competitors primarily are local and regional firms and the Company is not aware
of any other publicly held company principally engaged in the Company's
line-of-business. Accordingly, in order to provide a more meaningful comparison
of cumulative total returns for the Company in the above performance graph, the
Company used an index of the SMC Group; companies having market capitalization
similar to that of the Company. Companies in the index of the SMC Group are
Ashanti Goldfields, Ltd., Cadiz, Inc., Calgon Carbon Corporation, Coeur d' Alene
Mines, Echo Bay Mines, Ltd., Hecla Mining Company, Osmonics, Inc., Perini
Corporation and Waterlink, Inc.
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OWNERSHIP OF LAYNE CHRISTENSEN COMMON STOCK
The following table sets forth certain information as of February 28,
2001, except as otherwise provided, regarding the beneficial ownership of Layne
Christensen common stock by each person known to the Board of Directors to own
beneficially 5% or more of the Company's common stock, by each director of the
Company, by each Named Executive Officer and by all directors and executive
officers of the Company as a group. All information with respect to beneficial
ownership has been furnished by the respective directors, officers or 5% or more
stockholders, as the case may be.
AMOUNT AND
NATURE OF PERCENTAGE OF
BENEFICIAL SHARES
NAME OWNERSHIP(1) OUTSTANDING(1)
- ---- ------------ --------------
KKR Associates, L.P. (2) ......................................... 2,067,000 17.7%
Marley G.P., Inc. (2) ............................................ 53,436 *
T. Rowe Price Associates, Inc. (3) ............................... 1,415,000 12.1%
Dimensional Fund Advisors, Inc. (4)............................... 1,001,000(4) 8.5%
State of Wisconsin Investment Board (5) .......................... 925,000 7.9%
Wynnefield Partners Small Cap Value Funds (6)..................... 700,000 6.0%
Robert J. Dineen ................................................. 152,683(7) 1.3%
Andrew B. Schmitt ................................................ 401,750(7) 3.3%
Donald K. Miller ................................................. 112,860(8) *
Edward A. Gilhuly (2) ............................................ -- --
Todd A. Fisher (2) ............................................... -- --
Sheldon R. Erikson ............................................... -- --
H. Edward Coleman ................................................ 170,488(7) 1.4%
Norman E. Mehlhorn ............................................... 129,483(7) 1.1%
Jerry W. Fanska .................................................. 113,725(7) *
Eric R. Despain .................................................. 95,993(7) *
All directors and officers as a group (11 persons) ............... 1,239,893(9) 9.9%
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting
power and/or investment power with respect to those securities and
includes shares of common stock issuable pursuant to the exercise of
immediately exercisable stock options. Unless otherwise indicated, the
persons or entities identified in this table have sole voting and
investment power with respect to all shares shown as beneficially owned
by them. Percentage ownership calculations are based on 11,707,694
shares of common stock outstanding plus 789,744 options exercisable
within 60 days of February 28, 2001, where said options are considered
deemed shares attributed to a given beneficial owner.
(2) Mr. Gilhuly, Henry R. Kravis, George R. Roberts, Paul E. Raether,
Robert I. MacDonnell, Michael W. Michelson, James H. Greene, Jr.,
Michael T. Tokarz, Perry Golkin, Clifton S. Robbins and Scott Stuart
are the general partners of KKR Associates and Messrs. Kravis and
Roberts are also the members of the Executive Committee of KKR
Associates, and in such capacity may be deemed to share beneficial
ownership of the shares of Common Stock that KKR Associates may
beneficially own or be deemed to beneficially own. Mr. Fisher is a
limited partner of KKR Associates. Messrs. Gilhuly and Fisher are
directors of the Company. Messrs. Roberts and Gilhuly are the directors
and are officers of Marley G.P., Inc. Marley G.P., Inc. is a
corporation the stockholders of which are (i) certain past and present
general and limited partners of KKR Associates, (ii) certain past and
present employees of KKR and (iii) partnerships and trusts for the
benefit of the families of such partners and employees. Marley G.P.,
Inc. and KKR Associates may be deemed to be a group in relation to
their respective investment in the Company, but do not affirm the
existence of a group. The foregoing individuals disclaim beneficial
ownership of the shares
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owned by KKR Associates and Marley G.P., Inc. The business address of
KKR Associates and Marley G.P., Inc. is 9 West 57th Street, New York,
New York 10019.
(3) According to its most recent Schedule 13G filing with the Securities
and Exchange Commission dated February 14, 2001, these securities are
owned by various individual and institutional investors including T.
Rowe Price Small Cap Value Fund, Inc. (which owns 600,000 shares,
representing 5.1% of the shares outstanding), which T. Rowe Price
Associates, Inc. ("Price Associates") serves as investment adviser with
power to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Securities Exchange
Act of 1934, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it
is, in fact, the beneficial owner of such securities. The business
address of Price Associates is 100 East Pratt Street, Baltimore,
Maryland 21202.
(4) The ownership reported is based upon the most recent Schedule 13G of
Dimensional Fund Advisors, Inc. ("Dimensional") filed with the
Securities and Exchange Commission on February 2, 2001. Dimensional is
an investment advisor registered under Section 203 of the Investment
Advisors Act of 1940. Dimensional furnishes investment advice to four
investment companies registered under the Investment Company Act of
1940 and serves as investment manager to certain other commingled group
trusts and separate accounts. These investment companies, trusts and
accounts are the "Funds". In its role as investment adviser or manager,
Dimensional possesses voting and/or investment power over the
securities of the Company owned by the Funds. For the purposes of
reporting requirements of the Securities Exchange Act of 1934,
Dimensional is deemed to be a beneficial owner of such securities;
however, Dimensional expressly disclaims that it is, in fact, the
beneficial owner of such securities. The business address of
Dimensional is 1299 Ocean Avenue, 11th Floor, Santa Monica, California
90401.
(5) The ownership reported is based upon the most recent Schedule 13G of
the State of Wisconsin Investment Board as filed with the Securities
and Exchange Commission dated February 14, 2001. The business address
for the State of Wisconsin Investment Board is Post Office Box 7842,
Madison, Wisconsin 53707.
(6) The ownership reported is based upon the most recent Schedule 13G of
Wynnefield Partners Small Cap Value, L.P. ("Partners"), Wynnefield
Partners Small Cap Value, L.P. I ("Partners I") and Wynnefield Small
Cap Value Offshore Fund, Ltd. ("Offshore Fund") filed with the
Securities and Exchange Commission on January 25, 2001. Partners,
Partners I and the Offshore Fund are collectively referred to herein as
the "Wynnefield Partners Small Cap Value Funds." The Schedule 13G
reports that as of December 21, 2000, Partners beneficially owned
261,300 shares of the Company's common stock, Partners I beneficially
owned 308,500 shares of the Company's common stock, and the Offshore
Fund beneficially owned 130,200 shares of the Company's common stock,
for a total of 700,000 shares. The business address for the Wynnefield
Partners Small Cap Value Funds is 450 Seventh Avenue, Suite 509, New
York, New York 10123
(7) Includes options for the purchase of 72,164 shares, 323,750 shares,
106,442 shares, 106,442 shares, 27,500 shares and 98,125 shares of the
Company's common stock exercisable within 60 days granted to Messrs.
Dineen, Schmitt, Coleman, Mehlhorn, Despain and Fanska, respectively.
(8) Includes 2,626 shares owned by Mr. Miller's two sons. Mr. Miller has
sole voting and investment power with respect to 110,234 shares. Mr.
Miller has shared voting and investment power with respect to 2,626
shares.
(9) Includes options for the purchase of 789,744 shares of the Company's
common stock exercisable within 60 days granted to all directors and
officers of the Company as a group.
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CERTAIN TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company, through a wholly owned subsidiary, leases a facility in
Phoenix, Arizona for its parts and material supply business from Air Park
Investments L.L.C., an Arizona limited liability company. The members of Air
Park Investments L.L.C. are Mr. Mehlhorn and two of his brothers. The lease term
is for three years through October 31, 2003. Total payments to the lessor under
the lease in fiscal 2001 were $70,301.
ITEM 2
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the independent certified public
accounting firm of Deloitte & Touche LLP as the Company's independent auditors
to audit the books, records and accounts of the Company for the year ending
January 31, 2002. Stockholders will have an opportunity to vote at the Annual
Meeting on whether to ratify the Board's decision in this regard.
Deloitte & Touche LLP has served as the Company's independent auditors
since fiscal 1990. A representative of Deloitte & Touche LLP is expected to be
present at the Annual Meeting. Such representative will have an opportunity to
make a statement if he or she desires to do so and will be available to respond
to appropriate questions.
During fiscal 2001, Deloitte & Touche LLP provided various audit and
non-audit services to the Company as follows:
(a) AUDIT FEES: Aggregate fees billed for professional services
rendered for the audit of the Company's fiscal 2001 annual
financial statements and review of financial statements
included in the Company's Form 10-Q reports for fiscal 2001:
$221,575.
(b) FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES:
None.
(c) ALL OTHER FEES:
(i) Benefit plan audits: $45,000.
(ii) Income tax and other consultation: $65,093.
The Audit Committee of the Board of Directors has considered whether
provision of the services described in sections (b) and (c) above is compatible
with maintaining the independent accountant's independence and has determined
that such services have not adversely affected Deloitte & Touche LLP's
independence.
Submission of the selection of the independent auditors to the
stockholders for ratification will not limit the authority of the Board of
Directors to appoint another independent certified public accounting firm to
serve as independent auditors if the present auditors resign or their engagement
otherwise is terminated. If the stockholders do not ratify the selection of
Deloitte & Touche LLP at the Annual Meeting, the Company intends to call a
special meeting of stockholders to be held as soon as practicable after the
Annual Meeting to ratify the selection of another independent certified public
accounting firm as independent auditors for the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
SELECTION OF DELOITTE & TOUCHE LLP.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, and certain
persons who own more than 10% of the Company's outstanding common stock, to file
with the Securities and Exchange Commission ("SEC") initial reports of ownership
and reports of changes in ownership in Layne Christensen common stock and other
equity securities. SEC regulations require directors, executive officers and
certain greater than 10% stockholders to furnish Layne Christensen with copies
of all Section 16(a) reports they file.
Except as provided hereafter, to the Company's knowledge, based solely
on review of the copies of such reports furnished to Layne Christensen and
written representations that no other reports were required, during the fiscal
year ended January 31, 2001, all Section 16(a) filing requirements applicable to
its directors, executive officers and greater than 10% stockholders were met.
OTHER BUSINESS OF THE MEETING
The Board of Directors is not aware of, and does not intend to present,
any matter for action at the Annual Meeting other than those referred to in this
Proxy Statement. If, however, any other matter properly comes before the Annual
Meeting or any adjournment, it is intended that the holders of the proxies
solicited by the Board of Directors will vote on such matters in their
discretion in accordance with their best judgment.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders, containing
financial statements for the fiscal year ended January 31, 2001, is being mailed
with this Proxy Statement to all stockholders entitled to vote at the Annual
Meeting. Such Annual Report is not to be regarded as proxy solicitation
material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JANUARY 31, 2001 (THE "FORM 10-K"), EXCLUDING EXHIBITS, WILL BE FURNISHED
WITHOUT CHARGE TO ANY STOCKHOLDER OF RECORD AS OF APRIL 2, 2001, AS SOON AS IT
IS AVAILABLE, UPON WRITTEN REQUEST ADDRESSED TO THE ATTENTION OF THE ASSISTANT
SECRETARY OF LAYNE CHRISTENSEN AT 1900 SHAWNEE MISSION PARKWAY, MISSION WOODS,
KANSAS 66205. Layne Christensen will provide a copy of any exhibit to the Form
10-K to any such person upon written request and the payment of the Company's
reasonable expenses in furnishing such exhibits.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
It is presently anticipated that the 2002 Annual Meeting of
Stockholders will be held on May 23, 2002. Stockholder proposals intended for
inclusion in the proxy statement for the 2002 Annual Meeting of Stockholders
must be received at the Company's offices, located at 1900 Shawnee Mission
Parkway, Mission Woods, Kansas 66205, within a reasonable time before the
solicitation with respect to the meeting is made, but in no event later than
December 25, 2001. Such proposals must also comply with the other requirements
of the proxy solicitation rules of the Securities and Exchange Commission.
Stockholder proposals should be addressed to the attention of the Secretary or
Assistant Secretary of Layne Christensen.
By Order of the Board of Directors.
A. B. Schmitt
President and Chief Executive Officer
April 26, 2001
Mission Woods, Kansas
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APPENDIX A
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CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
LAYNE CHRISTENSEN COMPANY
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing: (i) the financial
reports and other financial information provided by the Corporation to any
governmental body or the public; (ii) the Corporation's systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and (iii) the Corporation's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Corporation's policies, procedures and practices
at all levels. The Audit Committee's primary duties and responsibilities are to:
1. Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
2. Review and appraise the audit efforts of the Corporation's
independent accountants.
3. Provide an open avenue of communication among the independent
accountants, financial and senior management and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter. These
responsibilities are in addition to those duties set out for a member of the
Board of Directors.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors. Members of the Audit
Committee shall be considered independent if they have no relationship to the
Corporation that may interfere with the exercise of their independence from
management and the Corporation. Examples of such relationships include:
1. a director being employed by the Corporation or any of its
affiliates for the current year or any of the past three
years;
2. a director who accepts any compensation from the Corporation
or any of its affiliates in excess of $60,000 during the
previous fiscal year, other than compensation for Board
service or benefits under a tax-qualified retirement plan or
non-discretionary compensation;
3. a director being a member of the immediate family of an
individual who is, or has been in any of the past three years,
employed by the Corporation or any of its affiliates as an
executive officer. "Immediate family member" includes a
person's spouse, parents, children, siblings, mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in such person's home;
4. a director who is a partner in, or a controlling shareholder
or an executive officer of, any for-profit business
organization to which the Corporation made, or from which the
Corporation received, payments (other than those arising
solely from investments in the Corporation's securities) that
exceed 5% of the Corporation's consolidated gross revenues for
that year, or $200,000, whichever is more, in any of the past
three years; or
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5. a director being employed as an executive of another entity
where any of the Corporation's executives serve on that
entity's compensation committee.
One director who is not an independent director (as defined above) and is not a
current employee or an immediate family member of such employee may be appointed
to the Audit Committee, if the Board, under exceptional and limited
circumstances, determines that membership on the Committee by the individual is
required by the best interests of the Corporation and its shareholders, and the
Board discloses, in the next annual proxy statement subsequent to such
determination, the nature of the relationship and the reasons for that
determination.
All members of the Committee shall be capable of reading and understanding
fundamental financial statements, including a company's balance sheet, income
statement and cash flow statement or will be able to do so within a reasonable
period of time after his or her appointment to the Committee. At least one
member of the Committee shall have past employment experience in accounting or
finance, requisite professional certification in accounting or any comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities. Committee members may enhance their familiarity with finance
and accounting by participating in educational programs conducted by the
Corporation or an outside consultant. The members of the Committee shall be
elected by the Board at the annual organizational meeting of the Board or until
their successors shall be duly elected and qualified. Unless a Chair is elected
by the full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
III. MEETINGS
The Chairperson and/or the Committee shall hold meetings at least four times
annually, or more frequently as circumstances dictate. As part of its job to
foster open communication, the Committee should meet at least annually with
management and the independent accountants in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should be
discussed privately. In addition, the Committee or at least its Chair should
meet with the independent accountants and management quarterly to review the
Corporation's financials consistent with Section IV.2 below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and if necessary, update this Charter at least
annually.
2. Review the Corporation's annual financial statements submitted
to the Securities and Exchange Commission ("SEC"), including
any certification, report, opinion or review rendered by the
independent accountants thereunder.
3. The Chairperson of the Audit Committee or designee Committee
member, and other members as deemed appropriate by the
Chairperson, shall review the quarterly financial reports with
management and the independent auditors to determine that they
are satisfied with the content and quality of the quarterly
financial information presented to shareholders and others.
4. Review any reports from the Corporation's independent
accountants regarding internal controls.
INDEPENDENT ACCOUNTANTS
1. Recommend to the Board of Directors the selection of the
independent accountants, considering independence and
effectiveness and approve the fees and other compensation to
be paid to the independent accountants. On an annual basis,
the Committee should review and discuss with the
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accountants all significant relationships the accountants have
with the Corporation to determine the accountants'
independence.
2. Review the performance of the independent accountants and
approve any proposed discharge of the independent accountants
when circumstances warrant.
3. Annually consult with the independent accountants out of the
presence of management about internal controls and the
fullness and accuracy of the Corporation's financial
statements.
FINANCIAL REPORTING PROCESSES
1. In consultation with the independent accountants, review the
integrity of the Corporation's financial reporting processes,
both internal and external.
2. Consider the independent accountants' judgments about the
quality and appropriateness of the Corporation's accounting
principles as applied to its financial reporting.
3. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices
as suggested by the independent accountants or management.
PROCESS IMPROVEMENT
1. In conjunction with the Audit Committee's review of quarterly
financial reports, the Audit Committee shall, at its request,
be provided information from each of management and/or the
independent accountants regarding any significant management
judgments or significant adjustments made in preparation of
the financial statements and the view of each as to
appropriateness of such judgments and adjustments.
2. Following completion of the annual audit, review separately
with each of management and the independent accountants any
significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or
access to required information.
3. Review any significant disagreement among management and the
independent accountants related to the preparation of the
financial statements.
4. Review with the independent accountants and management the
extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have
been implemented. (This review should be conducted at an
appropriate time subsequent to implementation of changes or
improvements, as decided by the Committee.)
5. Review or authorize the review of any matters within the Audit
Committee's scope of responsibilities. The Committee shall
have the power to retain independent counsel, accountants, or
others to assist it in the conduct of any such review.
ETHICAL AND LEGAL COMPLIANCE
1. Review, with the Corporation's counsel, legal compliance
matters including corporate securities trading policies.
2. Review, with the Corporation's counsel, any legal matter that
could have a significant impact on the Corporation's financial
statements.
3. Perform any other activities consistent with this Charter, the
Corporation's Bylaws and governing law, as the Committee or
the Board deems necessary or appropriate.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
2001 ANNUAL MEETING OF STOCKHOLDERS OF LAYNE CHRISTENSEN COMPANY
The undersigned hereby appoints Robert J. Dineen, Andrew B. Schmitt and
Jerry W. Fanska, and each of them, each with the power to act alone and
with full power of substitution and revocation, as attorneys and proxies of
the undersigned to attend the 2001 Annual Meeting of Stockholders of Layne
Christensen Company ("Layne Christensen") to be held at the Corporate
Headquarters of Layne Christensen, located at 1900 Shawnee Mission Parkway,
Mission Woods, Kansas, on Thursday, May 31, 2001, commencing at 10:00 a.m.,
local time, and at all adjournments thereof, and to vote all shares of
capital stock of Layne Christensen which the undersigned is entitled to
vote with respect to the following matters, all as set forth in the Notice
of Annual Meeting of Stockholders and Proxy Statement, dated April 26,
2001:
THE BOARD OF DIRECTORS OF LAYNE CHRISTENSEN RECOMMENDS A VOTE "FOR" EACH
ITEM.
Item 1: Election of two Class III directors to hold office for terms
expiring at the 2004 annual meeting of stockholders.
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to
vote for the nominees listed
below
NOMINEES: Todd A. Fisher
Edward A. Gilhuly
Item 2: Proposal to ratify the selection of the accounting firm of Deloitte
& Touche LLP as Layne Christensen's independent auditors for the
fiscal year ending January 31, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed, on other side)
(CONTINUED FROM OTHER SIDE)
In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the Annual Meeting.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder(s). IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2.
Dated: _________________ , 2001
---------------------------
Signature
---------------------------
Signature (if held
jointly)
Please sign exactly as
name appears hereon.
When shares are held by
joint tenants, both
should sign. When
signing as an attorney,
executor, administrator,
trustee or guardian,
please give full title
as such. If a
corporation, please sign
in full corporate name
by President or other
authorized officer. If a
partnership, please
sign in partnership name
by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED POSTAGE PREPAID ENVELOPE.