Highlights include:
-- Net income from continuing operations was $0.29 per share versus a loss of $0.03 per share last year.
-- Revenues increase 22.8% for the quarter up across all product lines.
-- Water Resources revenues and earnings up 7.4% and 31.0%, respectively.
-- Mineral Exploration earnings triple from prior year on a 55.3% increase in revenues.
-- Geoconstruction revenues up 33.2% and earnings up 54.9% from prior year.
-- Energy Division continues to expand coalbed methane development in mid-continent basin.
MISSION WOODS, KA, Aug. 31, 2004 (BUSINESS WIRE) -- Layne Christensen Co. reported net income from continuing operations for the second quarter ended July 31 of $3,749,000, or $0.29 per share, compared to a loss from continuing operations of $377,000 or $0.03 per share, in the same period last year. Revenues for the three-month period increased $15,998,000, or 22.8%, to $86,186,000, compared to $70,188,000 a year ago.
"A very strong quarter as all our divisions were up at the same time," said Andrew B. Schmitt, president and CEO. "Given our mix of business, we are benefiting from a number of positive drivers impacting natural resource demand and an improving economy. Normally, we would experience a few bumps along the way. This quarter we were hitting on all cylinders."
Gross profit as a percentage of revenues was 27.9% and 27.1% for the three and six months ended July 31 compared to 29.1% and 29.0% for the same periods a year earlier. The decreases in gross profit percentage were primarily attributable to continued pricing pressures from municipal customers in the water resources division along with reduced margins associated with the promotion of certain new water treatment products. The decreases in the water resources division margins were partially offset by increased margins in the mineral exploration division due to increased exploration activity because of higher gold and base metal prices.
Selling, general and administrative expenses decreased to $14,471,000 for the three months and increased to $28,396,000 for the six months ended July 31 compared to $15,124,000 and $27,623,000 for the same periods a year earlier. Excluding severance-related benefits of $1,244,000 accrued in the second quarter of fiscal 2004, the increase for both the three and six month 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 $650,000 for the implementation of Sarbanes-Oxley requirements.
Depreciation, depletion and amortization increased to $3,338,000 and $6,523,000 for the three and six months ended July 31 compared to $2,951,000 and $6,011,000 for the same periods last year. The increase was primarily a result of increased depreciation in the mineral exploration division and depletion associated with the company's CBM projects.
The company recorded a loss on extinguishment of debt of $2,320,000 for the three and six months ended July 31, 2003. The loss represents prepayment penalties and the write-off of associated deferred fees in connection with refinancing of the company's credit facilities in July 2003.
Income tax expense of $3,751,000 and $5,289,000 were recorded for the three and six months ended July 31 compared to $663,000 and $1,527,000 for the same periods last year. The debt extinguishment costs recorded in the second quarter of fiscal 2004 were treated as discrete period items for interim tax accounting purposes, which resulted in the recording of a tax benefit at the statutory tax rate. Exclusive of the impact of the tax treatment of the debt extinguishment costs in July 2003, the effective rate was 50% for the six months ended July 31 compared to 60.7% for the same period last year. The improvement in the effective rate is primarily attributable to improved earnings in international operations. The effective rate in excess of the statutory federal rate was a result of the impact of nondeductible expenses and the tax treatment of certain foreign operations.
Water resources revenues increased 7.4% to $47,918,000, and 11.8% to $93,201,000, for the three and six months ended July 31, 2004, respectively. The increases were primarily attributable to the company's continued efforts to maintain market share, results from the company's water treatment initiatives and increased infrastructure needs in metropolitan areas of California and Illinois.
Income from continuing operations for the water resources division increased 31.0% to $6,299,000 for the three months and 8.6% to $10,330,000 for the six months ended July 31 compared to $4,807,000 and $9,510,000 for the same periods a year earlier. The increases in income from continuing operations were primarily the result of the incremental earnings impact from increases in revenues.
Mineral exploration revenues increased 55.3% to $26,153,000 and 62.6% to $50,242,000 for the three and six months ended July 31 compared to revenues of $16,836,000 and $30,892,000 for the same periods a year earlier. The increase for the periods was primarily the result of increased exploration activity in the company's markets due to higher gold and base metal prices. Additionally, increases in Africa were partially the result of capacity from the purchase of DrillCorp assets late in fiscal 2004.
Income from continuing operations for the mineral exploration division was $3,705,000 for the three months and $7,227,000 for the six months ended July 31 compared to $1,213,000 and $1,003,000 for the same periods a year earlier. The improved earnings in the division were primarily attributable to the increased activity levels noted above and improved earnings by the company's Latin American affiliates. In addition, in the prior year, the company incurred increased expenses in Australia to bring equipment into compliance with changes to local transportation regulations.
Geoconstruction revenues increased 33.2% to $10,949,000 and 18.7% to $17,039,000 for the three and six months ended July 31compared to $8,221,000 and $14,352,000 for the same periods a year earlier. The increases in revenues were primarily attributable to certain large domestic projects and increased product sales by the company's manufacturing unit in Italy.
Income from continuing operations for the geoconstruction division increased 54.9% to $1,654,000 for the three months and 19.4% to $1,519,000 for the six months ended July 31 compared to $1,068,000 and $1,272,000 for the same periods a year earlier. The increases in income from continuing operations were primarily the result of the incremental earnings impact from increases in revenues.
Energy revenues increased 122.5% to $1,166,000 and 45.7% to 1,913,000 for the three and six months ended July 31 compared to revenues of $524,000 and $1,313,000 for the same periods a year earlier. Increased production from the company's CBM projects resulted in the increases in revenues for the three and six months ended July 31 compared to the same periods last year.
Losses from continuing operations for the energy division were $1,000 and $1,019,000 for the three and six months ended July 31 compared to $176,000 and $546,000 for the same periods a year earlier. The loss for the three months ended July 31 included a gain on the sale of exploration equipment of approximately $906,000. Excluding the gain, the loss from continuing operations would have been $907,000 and $1,925,000 for the three and six months ended July 31, respectively, and was primarily a result of increased expenses associated with exploration and development activity and a slow first half of the year in the division's energy service businesses.
Layne Christensen Company provides sophisticated services and related products for the water, mineral, construction and energy markets.
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