Layne Christensen Management Discusses Q1 2013 Results - Earnings Call Transcript

Layne Christensen (LAYN)

Q1 2013 Earnings Call

June 05, 2012 11:00 am ET

Executives

Devin Sullivan - Senior Vice President

Rene J. Robichaud - Chief Executive Officer, President and Director

Jerry W. Fanska - Principal Financial Officer, Principal Accounting Officer, Senior Vice President of Finance and Treasurer

Analysts

Brandon Verblow - UBS Investment Bank, Research Division

John Rogers - D.A. Davidson & Co., Research Division

Gerard J. Sweeney - Boenning and Scattergood, Inc., Research Division

Timothy Feron - Janney Montgomery Scott LLC, Research Division

Jonathan P. Braatz - Kansas City Capital Associates

Presentation

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Layne Christensen Co. First Quarter Fiscal 2013 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce our host for today, Mr. Devin Sullivan of the Equity Group. Sir, please go ahead.

Devin Sullivan

Thank you very much. Good morning, everyone, and thank you for joining us today for Layne Christensen's Fiscal 2013 First Quarter Financial Results Conference Call. Our speakers for today will be Rene Robichaud, President and Chief Executive Officer of Layne Christensen, and Jerry Fanska, Senior Vice President of Finance.

Before we get started, I'd like to remind everyone that statements made during today's call 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. These 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 terminologies such as should, intended, 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, the outcome of the ongoing internal investigation and to among other things, the legality under the FCPA and local laws of certain payments to agents and other third parties interacting with government officials in certain countries in Africa relating to the payment of taxes in the importing of equipment, including any government enforcement action, which could arise out of the matters under review, or that the matters under review may have resulted in any higher dollar amount of payments or may have a greater financial or business impact than the management currently anticipates; 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 and 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 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 call, 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.

I'd now like to turn the call over to Rene Robichaud. Rene, please go ahead

Rene J. Robichaud

Thanks, Devin, and good morning, everyone. Thank you all for joining us today. Hopefully, you've had the opportunity to review our results. Many of the trends, both positive and negative, that impacted our results last year, continued to manifest themselves in the first quarter. Although we're pleased to have returned to profitability in the fiscal 2013 first quarter and equally as happy to have maintained a very strong financial position during a challenging period, quite frankly we're not satisfied with our performance. We can and we will do better as a company, especially at our Heavy Civil division. The culture we are implementing and the expectations we have placed on our people demand it. Although a number of challenges remain, some out of our control, we believe that the worst is behind us in terms of project problems and that the just ended first quarter of fiscal 2013 will mark the beginning of a new era of growth and progress at Layne.

Now onto a review of our results by division. For our Water Resources division, it posted higher revenues across a number of operations, most notably, specialty drilling, which included projects such as dewatering, well drilling in Arizona, and injection well drilling in California, Texas and Florida. Water Resources returned to profitability when compared to the fourth quarter despite lingering margin pressures on municipal hard-bid projects and the lower margin work that replaced our Afghan drilling project. As we look ahead, our municipal hard-bid business will likely remain soft for at least the next year. We're encouraged, however, by the large projects coming to market that have some private funding. We believe that public-private partnerships in building and repairing our Water Infrastructure will have multiple benefits.

Our focus on higher margin negotiated business from industrial and energy clients, as opposed to hard-bid municipal projects, will continue. We are on track to generate $50 million of revenue this year from industrial clients.

Regarding our international expansion. We've generated profitable work in Mexico, booked good business in Canada and Ethiopia, and are pursuing work in Italy on the salvage of the Costa Concordia. We expect Water Resources performance in the fiscal year 2013 to be similar of that of last year, excluding any gains this year from equipment sales.

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