LAYN

Layne Christensen Company (LAYN)

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Layne Christensen (LAYN)

Q1 2014 Earnings Call

June 05, 2013 11:00 am ET

Executives

Devin Sullivan - Senior Vice President

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

James R. Easter - Chief Financial Officer

Analysts

Cory Mitchell - D.A. Davidson & Co., Research Division

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

William Richard Nasgovitz - Heartland Advisors, Inc.

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Layne Christensen Company Reports Fiscal Year 2014 First Quarter Financial Results. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to introduce our host for today, Mr. Devin Sullivan from The Equity Group. Sir, please go ahead.

Devin Sullivan

Thank you, Karen. Good morning, everyone, and thank you for joining us today for Layne Christensen's Fiscal 2014 First Quarter Conference Call. Our speakers for today will be Rene Robichaud, President and Chief Executive Officer of Layne Christensen; and Jim Easter, Chief Financial Officer. Also participating on the call is Jerry Fanska, Layne's 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. Such 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 terminology 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 into, 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 and 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 a higher dollar amount of payments or may have a greater financial or business impact than 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; 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 the 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 filing, 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.

With that said, I'd now like to turn to go over to Rene Robichaud. Rene, please go ahead.

Rene J. Robichaud

Thank you, Devin, and good morning, everyone. Thank you, all, for joining us today. I'd like to begin by welcoming Jim Easter as Layne's new Chief Financial Officer. We announced Jim's appointment in early May and are very excited that he has joined our company. Jim has had a varied and successful career in finance, mergers and acquisitions, and energy services, as well as managing global companies throughout distinct life cycles. We expect Jim's experience, vision and counsel will be vital components of our continuing evolution. I would also like to share with you that, myself, Jim and several other of Layne's senior executives and other personnel, have relocated to temporary space in The Woodlands, Texas. We expect the rest of our team to move into our new headquarters, in stages, by October of this year.

Our results for Q1 were disappointing and reflected many of the same challenges that we encountered in the fourth quarter of fiscal 2013. As we discussed last quarter, our overall profitability in Q1 was, in fact, impacted by temporary weakness at Geoconstruction; corporate overhead costs, primarily costs associated with the consolidation of our headquarters in the Houston area; and unfavorable comparisons at Mineral Exploration.

To add some perspective, of the $24.2 million pretax loss in Q1, approximately $5.4 million was attributable to Geoconstruction, as that division struggled through low utilization caused by project cancellations and delays in the United States related to economic uncertainty, as well as temporary work stoppages in Brazil, which have since been resolved. Also, $3.7 million of the pretax loss was associated with the move to The Woodlands. $1.7 million was associated with overhead expenses at Diberil, which was not consolidated in last year's first quarter. And another $1 million was associated with higher legal and other fees related to FCPA. Some of these challenges persist and could linger through fiscal year 2014, impacting our overall results for the year. We expect to record an additional $9 million in costs associated with our headquarter consolidation in the Houston area during the remainder of fiscal year 2014. And results at Geoconstruction will likely remain soft for at least another quarter until more of our book business starts up.

Read the rest of this transcript for free on seekingalpha.com