EX-99 2 l10927aexv99.txt EX-99 NEWS RELEASE EXHIBIT 99 NEWS RELEASE (LAYNE LOGO) CONTACTS: LAYNE CHRISTENSEN COMPANY JERRY W. FANSKA VICE PRESIDENT FINANCE 913-677-6858 www.laynechristensen.com TUESDAY, DECEMBER 7, 2004 LAYNE CHRISTENSEN REPORTS FISCAL 2005 THIRD QUARTER RESULTS o Net income was $0.27 per share versus $0.04 per share last year. o Total revenues increased 30.9% for the quarter and 27.1% year-to-date, up across all product lines. o Acquisition of Beylik Drilling and Pump Services, Inc. completed during the period. o Issuance of $20 million in unsecured notes during the quarter at 5.4% over 7 years. o Layne Energy total proved natural gas reserves and infrastructure independently estimated at a PV10 of $44 million.
Financial Data Three Months ended Nine Months ended -------------------------- % ---------------------------- % (in 000's, except per share data) 10/31/04 10/31/03 Change 10/31/04 10/31/03 Change ------------------------------------------------ ------------ -------------- ---------- -------------- ------------- ----------- Net Revenues --Water Resources $51,852 $ 43,818 18.3 $145,058 $127,191 14.0 --Mineral Exploration 27,448 18,353 49.6 77,690 49,245 57.8 --Geoconstruction 10,475 6,921 51.4 27,514 21,273 29.3 --Energy 1,705 768 122.0 3,613 2,084 73.4 Gross Profit 25,279 19,048 32.7 69,352 56,718 22.3 Net Income 3,458 541 539.2 8,583 710 1108.9 Dilutive EPS $0.27 $0.04 575.0 $0.66 $0.06 1000.0
"We had another strong quarter as all divisions experienced year-over-year growth. We anticipated more of a slowdown given the strength of the second quarter but it clearly did not occur with revenue up 6.1% sequentially. With its water, minerals and energy businesses, the Company is positioned in sectors of the economy that are currently very attractive."-- ANDREW B. SCHMITT, PRESIDENT AND CHIEF EXECUTIVE OFFICER -more- MISSION WOODS, KANSAS, December 7, 2004 - Layne Christensen Company (Nasdaq: LAYN), today announced net income for the third quarter ended October 31, 2004 of $3,458,000, or $0.27 per share, compared to net income of $541,000 or $0.04 per share, in the same period last year. Revenues for the three months ended October 31, 2004 increased $21,620,000, or 30.9%, to $91,480,000 compared to $69,860,000 the same period last year. "We had another strong quarter as all divisions experienced year-over-year growth," said Andrew B. Schmitt, President and Chief Executive Officer. "We anticipated more of a slowdown given the strength of the second quarter but it clearly did not occur with revenue up 6.1% sequentially. With its water, minerals and energy businesses, the Company is positioned in sectors of the economy that are currently very attractive." Gross profit as a percentage of revenues was 27.6% and 27.3% for the three and nine months ended October 31, 2004 compared to 27.3% and 28.4% for the three and nine months ended October 31, 2003. The decrease in gross profit percentage for the nine-month period was primarily attributable to continued pricing pressures in the water resources division along with reduced margins associated with the promotion of certain new water treatment products. The decrease in the water resources division margins was partially offset by increased margins in the mineral exploration division due to increased activity as a result of higher gold and base metal prices. Selling, general and administrative expenses were $15,048,000 for the three months ended October 31, 2004 and $43,444,000 for the nine months ended October 31, 2004 (16.4% and 17.1% of revenues, respectively) compared to $13,066,000 and $40,689,000 for the three and nine months ended October 31, 2003 (18.7% and 20.4% of revenues, respectively). The increase in selling, general and administrative expenses for the periods was primarily related to the Company's expansion of its water treatment capabilities, increased expenses associated with the Company's coalbed methane ("CBM") development efforts and incremental costs of approximately $275,000 for the three months and $925,000 for the nine months associated with the implementation of Sarbanes-Oxley requirements. Depreciation, depletion and amortization increased to $3,592,000 and $10,115,000 for the three and nine months ended October 31, 2004 compared to $2,788,000 and $8,799,000 for the same periods last year. The increases were primarily a result of increased depletion associated with the expansion of the Company's CBM operations and increased depreciation from new asset additions in the mineral exploration division due to increased demand and the water resources division to expand its water treatment capabilities. Other income (expense), net was income of $86,000 for the three months ended October 31, 2004, compared to an expense of $42,000 in the prior year, and income of $1,235,000 for the nine months ended October 31, 2004, compared to income of $445,000 in the prior year. The increase in income for both periods was primarily due to gains on sales of property, plant and equipment in fiscal 2005. Income tax expense for continuing operations of $2,827,000 and $8,116,000 was recorded for the three and nine months ended October 31, 2004 compared to $1,488,000 and $3,015,000 for the same periods last year. The expense for the three months ended October 31, 2004, was impacted by a reduction in the Company's estimate of its effective tax rate for the year from 50.0% to 48.0%. The effective rate was 48.0% for the nine months ended October 31, 2004 compared to 72.5% for the same period last year. The improvement in the effective rate was primarily attributable to improved earnings, especially in international operations, and the treatment of debt extinguishment costs as discrete period items in the second quarter of fiscal 2004. The remaining difference between the effective rate of 48.0% and the statutory federal rate of 34.0% was a result of the impact of nondeductible expenses and the tax treatment of certain foreign operations. 2 WATER RESOURCES DIVISION (in thousands)
Three Months Ended Nine Months Ended October 31, October 31, ----------------------------- ----------------------------- 2004 2003 2004 2003 ------------- ------------- ------------- ------------- Revenues $ 51,852 $ 43,818 $ 145,058 $ 127,191 Income from continuing operations 7,167 5,128 17,497 14,642
Water resources revenue increased 18.3% to $51,852,000 for the three months ended October 31, 2004 and 14.0% to $145,058,000 for the nine months ended October 31, 2004 compared to $43,818,000 and $127,191,000 for the three and nine months ended October 31, 2003. The increases were primarily attributable to improvements in municipal spending, results from the Company's water treatment initiatives and increased infrastructure needs in metropolitan areas, primarily in the western United States. Income from continuing operations for the water resources division was $7,167,000 and $17,497,000 for the three and nine months ended October 31, 2004 compared to $5,128,000 and $14,642,000 for the three and nine months ended October 31, 2003. The increase in income from continuing operations for the three and nine months ended October 31, 2004 was primarily the combination of increased gross profit associated with the increase in revenues and essentially flat selling, general and administrative expenses. The impact of the relatively fixed selling, general and administrative expenses was a higher income from continuing operations as a percentage of revenues in both the three and nine month periods. MINERAL EXPLORATION DIVISION (in thousands)
Three Months Ended Nine Months Ended October 31, October 31, ----------------------------- ----------------------------- 2004 2003 2004 2003 ------------- ------------- ------------- ------------- Revenues $ 27,448 $ 18,353 $ 77,690 $ 49,245 Income from continuing operations 3,027 754 10,254 1,798
Mineral exploration revenues increased 49.6% to $27,448,000 and 57.8% to $77,690,000 for the three and nine months ended October 31, 2004 compared to revenues of $18,353,000 and $49,245,000 for the three and nine months ended October 31, 2003. The increases for the periods were primarily the result of increased exploration activity in the Company's markets due to higher gold and base metal prices. Income from continuing operations for the mineral exploration division was $3,027,000 and $10,524,000 for the three and nine months ended October 31, 2004, compared to $754,000 and $1,798,000 for the three and nine months ended October 31, 2003. The improved earnings in the division were primarily attributable to the increased activity levels noted above and increased earnings by the Company's Latin American affiliates. The improvements in earnings were partially offset by increased incentive compensation costs and additional depreciation on new asset additions. GEOCONSTRUCTION DIVISION (in thousands)
Three Months Ended Nine Months Ended October 31, October 31, ----------------------------- ----------------------------- 2004 2003 2004 2003 ------------- ------------- ------------- ------------- Revenues $ 10,475 $ 6,921 $ 27,514 $ 21,273 Income from continuing operations 918 167 2,437 1,440
3 Geoconstruction revenues increased 51.4% to $10,475,000 and 29.3% to $27,514,000 for the three and nine months ended October 31, 2004 compared to $6,921,000 and $21,273,000 for the three and nine months ended October 31, 2003. The increases in revenues were primarily attributable to certain larger than normal domestic projects and increased product sales by the Company's manufacturing unit in Italy. The geoconstruction division had income from continuing operations of $918,000 and $2,437,000 for the three and nine months ended October 31, 2004 compared to $167,000 and $1,440,000 for the three and nine months ended October 31, 2003. The increases were primarily a result of the income from the larger domestic projects noted above, improved gross profit margins and increased income from the product sales of the manufacturing unit in Italy. ENERGY DIVISION (in thousands)
Three Months Ended Nine Months Ended October 31, October 31, ------------------------------ ------------------------------ 2004 2003 2004 2003 ------------- ------------- ------------- ------------- Revenues $ 1,705 $ 768 $ 3,613 $ 2,084 Loss from continuing operations (625) (270) (1,644) (978)
Energy revenues increased 122.0% to $1,705,000 and 73.4% to $3,613,000 for the three and nine months ended October 31, 2004 compared to revenues of $768,000 and $2,084,000 for the three and nine months ended October 31, 2003. Increased production from the Company's CBM projects resulted in the increases in revenues compared to the same periods last year. Losses from continuing operations for the energy division were $625,000 and $1,644,000 for the three and nine months ended October 31, 2004 compared to $270,000 and $978,000 for the three and nine months ended October 31, 2003. The increase in the loss from continuing operations for each period was primarily a result of increased expenses associated with exploration and development activities for the Company's CBM properties. The loss for the nine-month period ended October 31, 2004 was partially offset by a gain on the sale of exploration equipment of approximately $906,000. As of November 1, 2004, the oil and gas reserves of Layne Energy, a wholly owned subsidiary of Layne, were independently evaluated by Cawley, Gillespie & Associates, Inc., a Fort Worth based oil and gas engineering firm. The evaluation resulted in a present value of future net revenues, discounted at 10% ("PV10"), including gas transportation facilities, of $44,000,000. The evaluation indicated proved reserves of approximately 22.3 billion cubic feet of natural gas and a PV10 of approximately $33,000,000. The estimate is based on an unescalated gas price of $5.71 per thousand cubic feet and was in accordance with guidelines established by the Securities and Exchange Commission. Layne Energy's reserves are located in the Cherokee Basin of Kansas and Oklahoma. Of the total estimated reserves, 55.0% were classified as proved developed and the remaining 45.0% as proved undeveloped. The Company has leased approximately 105,000 gross acres in the basin, with 110 producing wells on approximately 15,000 acres. In addition to its proved reserves, the Company has approximately 120 miles of gas transportation facilities. The Cawley, Gillespie & Associates evaluation estimated the future net revenues from the gas transportation facilities, discounted at 10%, at approximately $11,000,000. As of October 31, 2004, the net book value of Layne Energy's oil and gas properties was $22,100,000 with an additional $5,600,000 of gas transportation facilities and equipment. Gross gas production for Layne Energy's most recent fiscal quarter ended October 31, 2004 was approximately 253 million cubic feet, an increase of approximately 65% from the second quarter. 4 UNALLOCATED CORPORATE EXPENSES Unallocated corporate expenses were $3,313,000 and $9,378,000 for the three and nine months ended October 31, 2004 compared to $2,604,000 and $8,504,000 for the three and nine months ended October 31, 2003. The increase in the three month period was primarily due to increased costs of approximately $275,000 associated with the implementation of Sarbanes-Oxley requirements and other increases in professional fees. The increase for the nine months was primarily due to increased costs of approximately $925,000 associated with the Sarbanes-Oxley implementation and higher travel expenses. DIVISION SUMMARY (IN THOUSANDS)
Three Months Ended Nine Months Ended October 31, October 31, ---------------------------- ---------------------------- 2004 2003 2004 2003 ------------ ------------ ------------ ------------ Revenues Water resources $ 51,852 $ 43,818 $ 145,058 $ 127,191 Mineral exploration 27,448 18,353 77,690 49,245 Geoconstruction 10,475 6,921 27,514 21,273 Energy 1,705 768 3,613 2,084 ------------ ------------ ------------ ------------ Total revenues $ 91,480 $ 69,860 $ 253,875 $ 199,793 ============ ============ ============ ============ Income (loss) from continuing operations Water resources $ 7,167 $ 5,128 $ 17,497 $ 14,642 Mineral exploration 3,027 754 10,254 1,798 Geoconstruction 918 167 2,437 1,440 Energy (625) (270) (1,644) (978) Unallocated corporate expenses (3,313) (2,604) (9,378) (8,504) Debt extinguishment costs -- -- -- (2,320) Interest (841) (687) (2,257) (1,918) ------------ ------------ ------------ ------------ Total income from continuing operations $ 6,333 $ 2,488 $ 16,909 $ 4,160 ============ ============ ============ ============
OUTLOOK Andrew B. Schmitt, President and Chief Executive Officer, stated, "Looking forward, we expect the fourth quarter will be lower than the third due to the normal seasonal year-end slowdown coupled with the usual weather related issues. At this point, we expect the biggest quarter-over-quarter improvements to be in mineral exploration and energy with water and geoconstruction fairly close to prior year. Expenses should be in line with the exception of costs for Sarbanes-Oxley." This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. Such statements are those concerning the strategic plans, expectations and objectives for future operations and are generally indicated by words or phrases such as "anticipate," "estimate," "project," "believe," "intend", "expect," "plan" and similar words or phrases. Such statements are based on current expectations and are subject to certain risks, uncertainties and assumptions, including but not limited to prevailing prices for various commodities, unanticipated slowdowns in the Company's major markets, the risks and uncertainties normally incident to the exploration for and development and production of oil and gas, the impact of competition, the effectiveness of operational changes expected to increase efficiency and productivity, worldwide economic and political conditions and foreign currency fluctuations that may affect worldwide results of operations. Should one or more of these 5 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 report, and the Company assumes no obligation to update such forward-looking statements or to update the reasons why actual results could differ materially from those anticipated in such forward-looking statements. Layne Christensen Company provides sophisticated services and related products for the water, mineral, construction and energy markets. 6 LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share and per share data)
Three Months Nine Months Ended October 31, Ended October 31, (unaudited) (unaudited) ---------------------------------- ---------------------------------- 2004 2003 2004 2003 --------------- --------------- --------------- --------------- Revenues $ 91,480 $ 69,860 $ 253,875 $ 199,793 Cost of revenues (exclusive of depreciation shown below) 66,201 50,812 184,523 143,075 --------------- --------------- --------------- --------------- Gross profit 25,279 19,048 69,352 56,718 Selling, general and administrative expenses 15,048 13,066 43,444 40,689 Depreciation, depletion and amortization 3,592 2,788 10,115 8,799 Other income (expense): Equity in earnings of affiliates 449 23 2,138 723 Interest (841) (687) (2,257) (1,918) Debt extinguishment costs -- -- -- (2,320) Other income (expense), net 86 (42) 1,235 445 --------------- --------------- --------------- --------------- Income from continuing operations before income taxes and minority interest 6,333 2,488 16,909 4,160 Income tax expense 2,827 1,488 8,116 3,015 Minority interest 1 (163) 1 -- --------------- --------------- --------------- --------------- Net income from continuing operations before discontinued operations 3,507 837 8,794 1,145 Loss from discontinued operations, net of income tax benefit of $29 and $194 for the three months ended October 31, 2004 and 2003, respectively, and $125 and $301 for the nine months ended October 31, 2004 and 2003, respectively (49) (333) (211) (472) Gain on sale of discontinued operations, net of income taxes of $23 -- 37 -- 37 --------------- --------------- --------------- --------------- Net income $ 3,458 $ 541 $ 8,583 $ 710 =============== =============== =============== =============== Basic income (loss) per share: Net income from continuing operations $ 0.28 $ 0.07 $ 0.70 $ 0.10 Loss from discontinued Operations, net of income taxes -- (0.03) (0.02) (0.04) --------------- --------------- --------------- --------------- Net income per share $ 0.28 $ 0.04 $ 0.68 $ 0.06 =============== =============== =============== =============== Diluted income (loss) per share: Net income from continuing operations $ 0.27 $ 0.07 $ 0.68 $ 0.09 Loss from discontinued operations, net of income taxes -- (0.03) (0.02) (0.03) --------------- --------------- --------------- --------------- Net income per share $ 0.27 $ 0.04 $ 0.66 $ 0.06 =============== =============== =============== =============== Weighted average shares outstanding 12,574,000 12,039,000 12,556,000 11,957,000 Dilutive stock options 335,000 266,000 352,000 230,000 --------------- --------------- --------------- --------------- 12,909,000 12,305,000 12,908,000 12,187,000 =============== =============== =============== =============== October 31, January 31, October 31, 2004 2004 2003 --------------- --------------- --------------- Balance sheet data: Total assets $ 246,977 $ 217,327 $ 195,148 Total debt 60,000 42,000 40,000 Stockholders' equity 102,452 93,685 88,406
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