Layne Christensen Company Q1 Conference Call Higlights, Sheds Light On Loss From Projects

Shares of Layne Christensen LAYN traded down 11 percent following its first quarter earnings release on Monday. Shares are down 22 percent year-to-date.

Below are some highlights and key takeaways from its conference call:
• A combination of severe weather and the way that previously discussed unprofitable contracts resulted in loss of nearly $8.6 million.

Projects:

• Approximately one third of the loss was generated from projects

• Less than 10 percent of our project portfolio is comprised of these unprofitable contracts and we expect to complete all of them by the end of this fiscal year.

• We also expect to commence work on two new projects this quarter with a total value of $24 million.

• The first of these projects involves the construction
of a new state-of-the-art water treatment plant for the City of Roswell

• Georgia replacing an 80-year-old facility that can no longer efficiently or cost effectively supply water for its citizens.

• Expected to expand the city's water capacity to three million gallons a day
• Also protected to save the City of Roswell approximately $11.6 million over a 20-year period

• For the second project, Layne's Heavy Civil and Inliner divisions are collaborating to construct a new waste water treatment system for the Skyview Utilities System serving Lakeland, Florida.

• The project is expected to eliminate unpermitted discharge.

Heavy Civil

• We're taking a number of steps to improve the performance at Heavy Civil.

• We continue to manage our cost and pursue higher margin

• Negotiated work while moving away from lower margin

• Hard bid municipal project

• These projects should enhance profitability beginning in Q2
• Implementing additional big controls to make sure we have proper contingencies in our bids

• Appropriate margins to adequately compensate us for the risks in these contracts.

Water Resources Sector:

• Poised for a better fiscal 2015.

• Seventh consecutive year of record profits.

• Eleven percent increase in revenues produced more than 100 percent rise in pre-tax profits as work under existing contracts delivered very favorable margins.

• Our SorTech fiberglass product sales are ramping up as expected.

• For our outlook, we believe that Inliner is poised to have another record year in fiscal year 2015.

CFO Comments:

• Higher revenues at Inliner, Geo and Energy Services were more than offset by revenue declines at Mineral Services, Heavy Civil, and to a lesser extent Water Resources.

• SG&A expenses decreased $34.9 billion from $41.9 million in last year's first quarter.

• Interest expense increased to 4.9 million for the first quarter of fiscal 2015 and $1.3 million in the first quarter of fiscal 2014

• Cost of revenues in the first quarter declined to $162.2 million.

• Long-term debt less current maturities at the end of the first quarter was $147.9 million.

• Our cash position at April 31 was $21.2 million compared to $35 million at the end of the fourth quarter of fiscal 2014.

• The decrease in cash was due to our investment in working capital

• We have working capital of $129.5 million, and equity was $265 million or $13.31 per share.