THE WOODLANDS, Texas,
Sept. 8, 2015 /PRNewswire/
-- Layne Christensen Company (NASDAQ: LAYN) ("Layne" or
the "Company") today announced financial and operating results for
the fiscal 2016 second quarter ended July
31, 2015 (Q2 FY 2016).
Overview
- On August 17, 2015, Layne sold
its Geoconstruction business segment for total consideration of
approximately $43.0 million, which
included an estimate of the business segment's working capital at
closing. Financial results for Layne reflect Geoconstruction as
discontinued operations for both current and historical
periods.
- Revenues declined 4.2% to $176.3
million in Q2 FY 2016 from $184.1
million in Q2 FY 2015, driven mainly by lower revenues at
Mineral Services and Heavy Civil, partially offset by revenue
increases at Water Resources and Inliner.
- Water Resources and Inliner continued to post strong
performance while losses narrowed at Heavy Civil.
- Reported net loss attributable to Layne was $18.2 million in Q2 FY 2016, or $(0.93) per diluted share, compared to a net loss
of $55.0 million, or $(2.81) per diluted share, in Q2 FY 2015.
- Q2 FY 2016 results included a $5.4
million profit, or $0.26 per
diluted share, from the discontinued Geoconstruction operations
while Q2 FY 2015 results included a net loss of $42.3 million or $(2.16) per share from discontinued
operations.
- Included in Q2 FY 2016 results from continuing operations were
$16.5 million in costs, or
$(0.84) per diluted
share, related to asset impairments within Energy Services and
restructuring costs including Mineral Services' plan to exit its
Africa business. Excluding the
impact of these costs, the loss from continuing operations was
$7.0 million, or $(0.35) per diluted share.
- Total backlog of $380.9 million
at July 31, 2015 compared to
$380.4 million at April 30, 2015, and $421.5
million at July 31, 2014.
- As of July 31, 2015, cash and
cash equivalents were $38.1 million,
total debt was $162.4 million, and
equity was $148.4 million
($7.00 per share). Total liquidity,
including availability under Layne's credit facility and total cash
and cash equivalents, was $97.1
million at July 31, 2015,
compared to $118.3 million at
April 30, 2015. With the pro forma
effects for the closing of the sale of the Geoconstruction business
and related amendments to Layne's credit facility, total liquidity
at July 31, 2015 would have been
approximately $144.7 million.
CEO Commentary
Michael J. Caliel, President and
Chief Executive Officer of Layne, commented, "We remain pleased
with the performance of our core water-related platforms, in
particular Water Resources and Inliner, which continue to generate
strong revenue and improving margins. There was sequential
progress in narrowing the operating losses at our Heavy Civil
division, where we delivered close to a break-even quarter as our
risk management initiatives and our commercial discipline are
taking hold. We continue to expect that commodity- and
energy-related headwinds will impact our Mineral Services and
Energy Services businesses during FY 2016, although we expect those
segments to operate on a cash neutral basis for the year.
With the sale of our Geoconstruction division complete, we have
dramatically improved our credit and liquidity position and will
continue our strategic focus to reshape our operating portfolio and
concentrate on Layne's core competencies.
"The strategic transformation of our operating portfolio is an
important step in our quest to create a more profitable entity for
our shareholders. During our fiscal 2016 second quarter, we
incurred restructuring costs as part of a plan to exit and monetize
our mining services operations in Africa and eliminate our losses in the
region.
"Further, during the quarter, we launched a company-wide
business performance improvement initiative designed to reduce our
overall cost structure, enhance our efficiencies, and optimize our
commercial strategy with a focus on improving profitability and
cash flow. While we still have much work to do to strengthen
Layne's operating performance and overall financial position, we
are encouraged with the progress thus far, and we anticipate
continued improvement going forward," added Caliel.
LAYNE CHRISTENSEN
COMPANY AND SUBSIDIARIES
CONDENSED
CONSOLIDATED FINANCIAL DATA
|
|
|
Three
Months
|
|
Six Months
|
|
Ended July
31,
|
|
Ended July
31,
|
|
(unaudited)
|
|
(unaudited)
|
(in thousands, except
per share data)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
$ 176,317
|
|
$ 184,100
|
|
$ 350,588
|
|
$ 342,745
|
Cost of revenues
(exclusive of depreciation and amortization, and impairment charges
shown below)
|
(151,249)
|
|
(155,218)
|
|
(294,480)
|
|
(293,012)
|
Selling, general and
administrative expenses (exclusive of depreciation and amortization
shown below)
|
(28,829)
|
|
(26,097)
|
|
(58,075)
|
|
(57,253)
|
Depreciation and
amortization
|
(8,254)
|
|
(11,437)
|
|
(16,989)
|
|
(22,256)
|
Impairment
charges
|
(4,598)
|
|
—
|
|
(4,598)
|
|
—
|
Restructuring
costs
|
(4,361)
|
|
(1,328)
|
|
(4,551)
|
|
(1,328)
|
Equity in losses of
affiliates
|
(1,486)
|
|
(212)
|
|
(1,593)
|
|
(278)
|
Gain on
extinguishment of debt
|
—
|
|
—
|
|
4,236
|
|
—
|
Interest
expense
|
(4,295)
|
|
(3,025)
|
|
(8,147)
|
|
(7,074)
|
Other income,
net
|
252
|
|
751
|
|
1,293
|
|
611
|
Loss from continuing
operations before income taxes
|
(26,503)
|
|
(12,466)
|
|
(32,316)
|
|
(37,845)
|
Income tax benefit
(expense)
|
2,993
|
|
(213)
|
|
2,232
|
|
(1,969)
|
Net loss from
continuing operations
|
(23,510)
|
|
(12,679)
|
|
(30,084)
|
|
(39,814)
|
Net income (loss)
from discontinued operations
|
5,356
|
|
(42,280)
|
|
5,372
|
|
(41,897)
|
Net loss
|
(18,154)
|
|
(54,959)
|
|
(24,712)
|
|
(81,711)
|
Net income
attributable to noncontrolling interests
|
-
|
|
(69)
|
|
-
|
|
(1,045)
|
Net loss attributable
to Layne Christensen
|
$ (18,154)
|
|
$ (55,028)
|
|
$ (24,712)
|
|
$ (82,756)
|
Earnings per share
information attributable to Layne Christensen
shareholders:
|
|
|
|
|
|
|
|
Loss per share from
continuing operations - basic and diluted
|
$ (1.19)
|
|
$ (0.65)
|
|
$ (1.53)
|
|
$ (2.08)
|
Earnings (loss) per
share from discontinued operations - basic and diluted
|
0.26
|
|
(2.16)
|
|
0.27
|
|
(2.14)
|
Loss per share
attributable to Layne Christensen - basic and diluted
|
$ (0.93)
|
|
$ (2.81)
|
|
$ (1.26)
|
|
$ (4.22)
|
Weighted average
shares outstanding - basic and dilutive
|
19,744
|
|
19,629
|
|
19,690
|
|
19,627
|
Q2 FY 2016 Results Overview
Revenues for Q2 FY 2016 decreased $7.8
million, or 4.2%, to $176.3
million from $184.1 million in
Q2 FY 2015. Lower revenues at Mineral Services, Heavy Civil
and Energy Services were partially offset by increases in Inliner
and Water Resources.
Cost of revenues for Q2 FY 2016 decreased $4.0 million, or 2.6%, to $151.2 million from $155.2
million in Q2 FY 2015. As a percentage of
revenues, these costs increased to 85.8% in Q2 FY 2016 from 84.3%
in Q2 FY 2015. Cost of revenues in Q2 FY 2016 included a
$7.6 million write-down of inventory
as part of restructuring in Africa. Excluding the
Africa inventory write-down, Q2 FY
2016 cost of revenues was $143.6
million or 81.5% of revenues.
Selling, general and administrative expenses in Q2 FY 2016
increased by $2.7 million to
$28.8 million, or 16.4% of revenues,
from $26.1 million, or 14.2% of
revenues, in Q2 FY 2015. Prior year expenses benefited from a
$5.2 million accrual reversal related
to Layne's settlement of an FCPA investigation. Absent this
reversal, Q2 FY 2015 selling, general and administrative expense
would have been $31.3 million.
The reduction from this adjusted prior year amount to Q2 FY2016
levels was primarily due to lower consulting costs and compensation
expenses.
Depreciation and amortization decreased 27.8% to $8.3 million for Q2 FY 2016 from $11.4 million for the same period last year, due
to reduced capital expenditures and disposals of underutilized
assets.
Layne had $16.5 million of
impairment and restructuring charges during Q2 FY 2016, consisting
primarily of $4.6 million in asset
impairments related to Energy Services and $11.7 million of restructuring costs related to
Mineral Services' plan to exit its Africa operations.
Equity in losses of affiliates increased to $1.5 million for Q2 FY 2016 from $0.2 million for the same period last year.
Layne's international affiliates generated higher losses due to
continuing depressed conditions in the minerals market.
Interest expense increased to $4.3
million for Q2 FY 2016 from $3.0
million for the same period last year. The increase was
mainly due to a higher debt balance and higher interest rate
related to the issuance of the 8.0% Convertible Notes during the
first quarter of FY 2016.
Income tax benefit for continuing operations of $3.0 million was recorded for Q2 FY 2016,
compared to a $(0.2) million expense
for the same period last year. The tax benefit recorded during Q2
FY 2016 includes the use of tax benefits to offset the estimated
gain that will be recognized during the third quarter on the sale
of Geoconstruction. Layne recorded no tax benefit on domestic
deferred tax assets and certain foreign deferred tax assets
generated during Q2 FY 2016.
Summary of Operating Segment Data
The following table summarizes financial information for the
Company's operating segments. A discussion of the results for Q2 FY
2016 for each segment versus the prior year period follows
the table.
|
|
Three
Months
|
|
Six Months
|
|
|
Ended July
31,
|
|
Ended July
31,
|
(in
thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
|
|
|
|
|
|
|
Water
Resources
|
|
$ 53,852
|
|
$ 53,431
|
|
$ 105,667
|
|
$ 96,557
|
Inliner
|
|
41,790
|
|
39,837
|
|
89,810
|
|
73,320
|
Heavy Civil
|
|
51,195
|
|
53,170
|
|
98,522
|
|
102,588
|
Mineral
Services
|
|
25,821
|
|
31,971
|
|
49,127
|
|
61,459
|
Energy
Services
|
|
3,620
|
|
4,717
|
|
7,411
|
|
7,545
|
Other
|
|
4,197
|
|
4,957
|
|
8,450
|
|
8,900
|
Intersegment
eliminations
|
|
(4,158)
|
|
(3,983)
|
|
(8,399)
|
|
(7,624)
|
Total
revenues
|
|
$ 176,317
|
|
$ 184,100
|
|
$ 350,588
|
|
$ 342,745
|
Equity in (losses)
earnings of affiliates
|
|
|
|
|
|
|
|
|
Mineral
Services
|
|
$
(1,486)
|
|
$
(212)
|
|
$
(1,593)
|
|
$
(278)
|
Income (loss) from
continuing operations before income taxes
|
|
|
|
|
|
|
|
|
Water
Resources
|
|
$
4,554
|
|
$
5,134
|
|
$
8,338
|
|
$
6,959
|
Inliner
|
|
5,040
|
|
3,726
|
|
10,402
|
|
8,569
|
Heavy Civil
|
|
(961)
|
|
(4,637)
|
|
(2,543)
|
|
(13,217)
|
Mineral
Services
|
|
(14,137)
|
|
(1,144)
|
|
(16,458)
|
|
(4,943)
|
Energy
Services
|
|
(5,416)
|
|
(836)
|
|
(6,384)
|
|
(1,562)
|
Other
|
|
(137)
|
|
41
|
|
228
|
|
161
|
Unallocated corporate
expenses
|
|
(11,151)
|
|
(11,725)
|
|
(21,988)
|
|
(26,738)
|
Gain on extinguishment
of debt
|
|
—
|
|
—
|
|
4,236
|
|
—
|
Interest
expense
|
|
(4,295)
|
|
(3,025)
|
|
(8,147)
|
|
(7,074)
|
Total loss from
continuing operations before income taxes
|
|
$ (26,503)
|
|
$ (12,466)
|
|
$ (32,316)
|
|
$ (37,845)
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
July 31,
|
|
January
31,
|
(in
thousands)
|
|
2015
|
|
2015
|
|
|
(unaudited)
|
|
(unaudited)
|
Balance Sheet
Data
|
|
|
|
|
Cash and cash
equivalents
|
|
$ 38,143
|
|
$ 21,661
|
Working
capital, including current maturities of long term debt
|
|
127,286
|
|
104,832
|
Total
assets
|
|
514,208
|
|
545,513
|
Total long
term debt, excluding current maturities
|
|
162,258
|
|
132,137
|
Total Layne
Christensen equity
|
|
148,444
|
|
181,215
|
Common shares issued
and outstanding
|
|
21,213
|
|
20,121
|
Water
Resources
|
|
|
|
Three
Months
|
|
Six Months
|
|
|
Ended July
31,
|
|
Ended July
31,
|
(in
thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
$ 53,852
|
|
$ 53,431
|
|
$ 105,667
|
|
$ 96,557
|
Income before income
taxes
|
|
4,554
|
|
5,134
|
|
8,338
|
|
6,959
|
Higher revenues at Water Resources in Q2 FY 2016 reflected
overall market strength and high asset utilization rates and
benefitted from the impact of drought and agribusiness-related
water management projects in the western United States.
Income before income taxes was $4.6
million, or 8.5% of revenues compared to $5.1 million, or 9.6% of revenues, in Q2 FY 2015
due to higher operating and SG&A costs. Income before
income tax during the quarter increased sequentially from
$3.8 million or 7.3% of revenues in
Q1 FY 2016.
Backlog at Water Resources remained strong at $97.5 million as of July
31, 2015 compared to $103.1
million at April 30, 2015.
Inliner
|
|
|
|
Three
Months
|
|
Six Months
|
|
|
Ended July
31,
|
|
Ended July
31,
|
(in
thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
$ 41,790
|
|
$ 39,837
|
|
$ 89,810
|
|
$ 73,320
|
Income before income
taxes
|
|
5,040
|
|
3,726
|
|
10,402
|
|
8,569
|
Higher revenues at Inliner were primarily due to the increase in
work orders under existing contracts. Inliner continues to
incrementally increase its workforce and equipment capacity to
address market growth opportunities.
Income before income taxes rose to $5.0
million from $3.7 million in
Q2 FY 2015. As a percentage of revenues, income before income
taxes increased to 12.1% from 9.4% in Q2 FY 2015, primarily due to
higher margin projects and good project
execution.
Backlog at Inliner was $118.9
million as of July 31, 2015,
compared to $120.1 million as of
April 30, 2015.
Heavy
Civil
|
|
|
|
Three
Months
|
|
Six Months
|
|
|
Ended July
31,
|
|
Ended July
31,
|
(in
thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
$ 51,195
|
|
$ 53,170
|
|
$ 98,522
|
|
$ 102,588
|
Loss before income
taxes
|
|
(961)
|
|
(4,637)
|
|
(2,543)
|
|
(13,217)
|
The decline in revenues at Heavy Civil is due to the continuing
strategic shift towards more selective opportunities including
negotiated and alternative delivery contracts and less emphasis on
traditional fixed-price contracts. These negotiated and
alternative delivery contracts are typically lower risk and are
contributing to improved margins.
Loss before income taxes narrowed to $1.0
million in Q2 FY 2016 from $4.6
million in Q2 FY 2015 due to the margin improvements,
reduced depreciation expense as Heavy Civil continues to limit its
capital expenditures, and gains on the sale of underutilized
equipment.
Backlog at Heavy Civil was $164.1
million as of July 31, 2015
compared to $155.5 million as of
April 30, 2015.
Mineral
Services
|
|
|
|
Three
Months
|
|
Six Months
|
|
|
Ended July
31,
|
|
Ended July
31,
|
(in
thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
$ 25,821
|
|
$ 31,971
|
|
$ 49,127
|
|
$ 61,459
|
Loss before income
taxes
|
|
(14,137)
|
|
(1,144)
|
|
(16,458)
|
|
(4,943)
|
|
|
|
|
|
|
|
|
|
Restructuring costs,
included above
|
|
(11,675)
|
|
(1,102)
|
|
(11,696)
|
|
(1,102)
|
|
|
|
|
|
|
|
|
|
Equity in losses of
affiliates, included
above
|
|
(1,486)
|
|
(212)
|
|
(1,593)
|
|
(278)
|
Although revenues in the U.S. operations were up slightly over
last year, Mineral Services revenues outside the U.S. continued to
decline as mining exploration spending remains depressed.
Loss before income taxes widened compared to the prior year
primarily as a result of the decision to exit operations in
Africa. Layne incurred restructuring costs of approximately
$11.7 million, consisting primarily
of $7.6 million due to a write-down
of inventory, $2.9 million related to
the write-down of fixed assets in the region to reflect estimated
realizable values and $1.2 million
related to severance and other costs.
Equity in losses from affiliates in South America widened during Q2 FY 2016, when
compared to the same period in FY 2015, as Layne's affiliates
continue to be impacted by depressed minerals markets.
Energy
Services
|
|
|
|
Three
Months
|
|
Six Months
|
|
|
Ended July
31,
|
|
Ended July
31,
|
(in
thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
$ 3,620
|
|
$ 4,717
|
|
$
7,411
|
|
$
7,545
|
Loss before income
taxes
|
|
(5,416)
|
|
(836)
|
|
(6,384)
|
|
(1,562)
|
|
|
|
|
|
|
|
|
|
Impairment charges,
included above
|
|
(4,598)
|
|
—
|
|
(4,598)
|
|
—
|
Energy Services continues to face a challenging marketplace,
with many projects being deferred as a result of the global decline
in oil prices and its impact on clients' capital budgets.
Loss before income taxes was worse than the prior year period as
Energy Services continued to reduce operating costs but also
incurred an asset impairment charge of $4.6
million related to reduced expectations of oil and gas
drilling that drives demand for Layne's energy-related water
services.
Backlog at Energy Services was $0.4
million as of July 31, 2015
compared to $1.7 million at
April 30, 2015.
Unallocated Corporate Expenses
Corporate expenses not allocated to individual segments,
primarily included in selling, general and administrative expenses,
were $11.2 million for Q2 FY 2016
compared to $11.7 million for the
same period last year. The $0.5
million decrease was primarily due to reductions in
compensation expenses due to workforce reductions. While
Layne expects corporate expenses to decline in future periods,
on-going strategic review efforts and costs related to business
performance improvement will require additional investment in the
near term.
Conference Call
Layne Christensen will conduct a
conference call at 9:00 AM ET /
8:00 AM CT Wednesday, September 9,
2015, to discuss these results and related matters.
Interested parties may participate in the call by dialing
1-877-407-0672 (Domestic) or 1-412-902-0003 (International). The
conference call will also be broadcast live via the Investor
Relations section of Layne's website at www.layne.com. To listen to
the live call, please go to the website at least 15 minutes early
to register, download and install any necessary audio
software. If you are unable to listen live, the conference
call will be archived on the website for approximately 90 days. A
telephonic replay of the conference call will be available through
September 16, 2015 and may be
accessed by calling 1-877-660-6853 (Domestic) or 1-201-612-7415
(International) and using passcode 13617657#.
Forward-Looking Statements
This press release may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Exchange Act of 1934. Such statements may
include, but are not limited to, statements of plans and
objectives, statements of future economic performance and
statements of assumptions underlying such statements, and
statements of management's intentions, hopes, beliefs, expectations
or predictions of the future. Forward-looking statements can
often be identified by the use of forward-looking terminology, such
as "should," "intend," "continue," "believe," "may," "hope,"
"anticipate," "goal," "forecast," "plan," "estimate" and similar
words or phrases. Such statements are based on current expectations
and are subject to certain risks, uncertainties and assumptions,
including but not limited to: prevailing prices for various
commodities, unanticipated slowdowns in the Company's major
markets, the availability of credit, the risks and uncertainties
normally incident to the construction industry, 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.
About Layne
Layne is a global solutions provider to the world of essential
natural resources—water, mineral and energy. We offer
innovative, sustainable products and services with an enduring
commitment to safety, excellence and integrity.
Contacts
J. Michael Anderson
Chief Financial Officer
281-475-2694
michael.anderson@layne.com
Dennard Lascar Associates
Ken Dennard/Jack Lascar
713-529-6600
ken@dennardlascar.com
jlascar@dennardlascar.com
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SOURCE Layne Christensen Company