Shares of Layne Christensen (NASDAQ: 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.
• 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.
• 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.
• 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.
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