Layne Christensen (LAYN) Q2 2012 Earnings Call September 07, 2011 11:00 am ET Executives Andrew Schmitt - Chief Executive officer and Director
Jerry FanskaThank you, Andy. Good morning, everyone. Revenues for the second quarter increased $41.8 million or 16.5% to $295.1 million from $253.3 million in the prior year. Water Infrastructure revenues increased $23.7 million or 12.2% for the quarter to $217.7 million. Revenues from previously acquired and startup operations increased $16.5 million, and water supply and treatment technologies increased $9.3 million, accounting for most of the Water Infrastructure increase. These increases were offset by decreases of more than $4.1 million in heavy construction. Mineral Exploration revenues increased 34 -- 35.9% to a record $69 million, with increased activity across all regions. Layne Energy revenues decreased 1.7% to $5.7 million, due to the current lower natural gas price environment. Cost of revenues increased $33.7 million to $231.4 million or 78.4% of revenues for the quarter, compared to $197.7 million or 78.1% of revenues for the same period last year. Margin pressures, especially in the Water Infrastructure's heavy construction unit, were substantially offset by other product lines and divisions. Selling, general and administrative expenses increased to $38.1 million in the quarter from $31.7 million in the prior year, primarily the result of $2.8 million in expenses from acquired operations, $2.8 million of increased compensation and related expenses, and $1.9 million in legal and professional costs. Depreciation, depletion and amortization increased in the quarter to $14.7 million from $12.1 million, primarily due to acquisitions and property additions. Equity in earnings of affiliates increased 385.5% to a record $7.8 million in the quarter, due to improved Mineral Exploration markets in Latin America. Interest expense increased to $717,000 from $517,000 for the quarter as a result of additional working capital borrowings during the quarter. And Other income and expense for the quarter of $1.3 million included primarily gains of $2.3 million on equipment sales and a loss on currency exchange of $793,000.
The income tax rate for the quarter was 41.9% compared to 50.4% in the prior year. The decrease in the effective rate is primarily attributable to a lesser tax impact of certain foreign operations and foreign affiliates as income before taxes increases. The net result for the quarter was $0.54 per diluted share in earnings compared to $0.33 for last year.The company's balance sheet at July 31 reflects total assets of $886.7 million; stockholders' equity of $529 million; total long-term debt of $47.5 million, excluding current maturities of $6.7 million; and cash and cash equivalents of $33.3 million. The company used $14.8 million in cash from operating activities in the quarter. Investing activities totaled $11.6 million, net of proceeds from equipment sales. The investing activities included $904,000 in energy expenditures, with the remainder primarily for PP&E additions to other divisions. With that, I'll turn it back over to Andy to talk about the operations. Andrew Schmitt Thanks, Jerry. We have said from time to time in this weaker economy we were having to generate a lot more revenue to achieve a continued stream of earnings improvement. Certainly, that was true this quarter, as we reported an all-time company record for quarterly revenue, and we needed it. In our Water Infrastructure group, we had a number of job-related problems in our heavy construction division that adversely affected the quarter. There were several weather events in the Midwest, but most of the damage were self-inflicted, as we were plagued with cost overruns and performance issues. Year-over-year revenue was down only about 2%, but the aforementioned problems resulted in negative operating EBIT swing of $6 million. Now we've owned Reynolds since late 2005, and except for our record wet spring a couple of years ago, have never had a quarter that was impaled year-over-year like this one, and certainly not on job execution. We have resolved those operating and job management issues and do not expect a recurrence going forward. Naturally, these performance events occur when you can least afford them, as we are experiencing declining heavy construction backlog and tight margins. In the past, at least until this quarter, our job execution has always been the positive offset that allowed us to still show progress, and for once that didn't happen. Read the rest of this transcript for free on seekingalpha.com