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Layne Christensen Co. (NASDAQ:LAYN)

F2Q10 Earnings Call

September 3, 2009 11.00 am ET

Executives

Andrew Schmitt - President & Chief Executive Officer

Jerry Fanska - Senior Vice President of Finance & Treasurer

Analysts

Richard Paget - Morgan Joseph

Steve Ferazani - Sidoti & Co.

John Rogers - D A. Davidson & Co.

Jonathan Ellis - Merrill Lynch

Michael Smith - Kansas City Capital

Steven Fisher - UBS

Debra Coy - Janney

Bill Doyle - Columbia Wanger

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the fiscal 2010 second quarter earnings call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions)

I would now like to turn the conference over to our host, President and Chief Executive Officer, Mr. Andrew Schmitt. Please go ahead sir.

Andrew Schmitt

Thank you, Christina. Good morning everyone. I’m here with Jerry Fanska, our Chief Financial Officer and we would like to welcome you to Layne Christensen’s second quarter conference call. Earlier today, we issued a press release outlining the results for the second quarter ended July 31, 2009.

Before we discuss the financials, I would like to remind the participants that the call may contain forward-looking statements that are subject to the Safe Harbor statement found in today’s press release. Jerry will take you through the financial results and I’ll give you an overview of division operating performance and how we see things going forward.

Okay Jerry, you want to take us through the numbers?

Jerry Fanska

Thank you, Andy. Good morning everyone. Revenues for the second quarter decreased $52.4 million or 19.4%, that’s $217.2 million from $269.6 million in the prior year. Water infrastructure revenues decreased 11.2% for the quarter to $174.1 million, from a $196 million in the prior year. The decrease is driven mainly by decreased water supply demand and the weak housing construction markets and two municipal budget constraints.

Mineral Exploration revenues decreased 49.2% to $30.3 million from $59.6 million in the prior year, driven by tighten credit and economic uncertainty for our customers in this market sector. Layne energy revenues were slightly down for the quarter to $12 million, attributable mainly to lower production, as the company tries to manage production at levels close to our forward sales contracts.

In the second quarter the energy division recorded an impairment of its oil and gas properties, primarily as a result of a lower natural gas price at quarter end, and its effects on the evaluation of oil and gas reserves.

Under SEC regulations, the carrying value of oil and gas assets is limited based on the present value of future gas sales using other than for gas sold under forward sales contracts, the price of natural gas at the company’s quarter end. In our case the quarter end gas price was $2.89 per Mcf compared to $7.60 per Mcf last year. The total non-cash charge for this write down was $13 million after income taxes or $0.68 per share.

Selling, general and administrative expenses decreased to $30.3 million for the quarter from $36.5 million in the prior year, primarily the result of decreased compensation related expenses from lower profits, as well as headcount reductions offset by increased non-income tax related expenses of $2.2 million, a large part of which value-added tax accruals in the MinEx division, determined unrecoverable in certain foreign jurisdictions.

Depreciation, depletion and amortization increased $1.3 million for the quarter to $14.3 million, primarily due to higher depletion in the energy division resulting from the impact of lower gas prices on the estimated lives of our proven oil and gas reserves. Equity earnings of affiliates in Latin America decreased to $2.4 million for the quarter from $3.8 million in the prior year, mainly due to the impact of softening exploration demand for commodities in Latin America.

Interest expense decreased to $812,000 for the quarter, as a result of scheduled debt reductions this quarter. Income taxes were a benefit of $4.4 million for the quarter, as a result of the impairment charge for oil and gas properties. Excluding this charge the company would have reported income tax expenses of $4.2 million, or an affective rate of 49% compared to $9.7 million or 39.2% last year. The increase in the affective rate was primarily attributable to the impact of nondeductible expense as our pretax income declined.

The net result for the quarter, including the oil and gas impairment charge was $0.45 per share loss. Excluding this charge the net result for the quarter would have been $0.23 per share, compared to $0.78 per share last year. The company’s balance sheet at July 31 continues to be very sound, reflecting total assets of $689.6 million, stockholders equity of $454.6 million, long term debt of $13.3 million excluding current maturities and cash-and-cash equivalents of $64.8 million.

The company provided $26.6 million in cash from operating activities in the quarter. Investing activities totaled $11.6 million for the quarter, net of proceeds from equipment sales. The investing activities for the quarter included $750,000 in unconventional gas activities, $9.1 million for property additions and other divisions and the remainder for acquisition related expenditures. The company had $13.4 million in financing activities for the quarter, primarily a $13.3 million payment on principle on our long term loans.

With that I’ll turn it back over to Andy to talk about the operations.

Andrew Schmitt

Thanks Jerry. In all our divisions we have seen modest improvement in earnings from the very weak first quarter. I don’t want to read too much into the sequential improvement, as some of it is seasonal and normally occurs as a matter of course. However, there is a part of the improvement which is specific, either to general improvement in economic activity and our operational efficiencies.

In our water segment, the rentals, more infrastructure intensive product lines had another very solid quarter, both sequentially and compared to the prior year. Revenue was up 3.8%, with division operating EBIT improving by 10.9% in the year-over-year period. Within that group of company, our collective well business was very strong; in line are our cured-in-place business and the rentals pipeline business, also show decent sequential and year-over-year improvement.

The backlog ending July 31 for just the rentals part of our water business was about $333 million, which is very close to our backlog of a year ago in July, while EBITDA margins for this group for the quarter was slightly better than last year. So the rental business continues to put a real solid foundation underline criticism, and in the second quarter amounted to almost half of the companies’ total revenue.

Delaying the legacy segment of our water business, which comprises of our water well drilling, pump and repair business and ground water treatment product line continued to struggle. On our basically flat sales, compared to the first quarter of this year, the division earnings improved due mainly to cost-cutting. However, division operating EBIT was down 66% or $4.5 million from the prior years second quarter, on a 23% decline in revenue.

We had to layoff about 14% of our employees from employment levels at this time last year, and if the business does not pickup in the second half, that number will likely grow. Backlog in July is 24% below July a year ago, and job margins are lower by 3.3% year-over-year.

The product lines, which are suffering the most continue to be those which were driven in the past by demand for additional water supply. Tied to population growth, as Jerry mentioned a lot of the housing development, the movement of that population, the water challenged areas and industrial expansion.

Our mineral exploration segment continues to bounce along on what we hope is the bottom. Sequentially from what was a very, very weak first quarter, the business was up 22% revenue and a 100% in division EBIT. Before we breakout the champagne, those results are down 50% from prior year’s revenue and division EBIT as you saw in the segment breakout is down $11.7 million or 77% below last year.

Most of the sequential improvement revenue is coming from increased activity by small to mid-size mining companies who are focused on gold. We have yet to see the major companies open up their spending, except for a couple of large mine served by our Latin American affiliate. In any event we’ll gladly take the additional revenue and it felt good to rehire about 70 former employees that have been laid off in the first quarter.

Layne energy spans the SEC ceiling test write-down at a very good quarter. Revenue was flat with prior year second quarter, but division operating EBIT was up 17%. A combination of a full quarter at higher, forward sold contracts for natural gas, and cost reduction efforts to lower our lease operating expenses, produced one of the best quarters that we’ve had. Division EBITDA in the second quarter was 70.6%, up from prior years 60%, as our Energy Division continues to provide an oversized contribution to Layne Christensen’s bottom line and cash flow.

Our general construction business which is included in our water infrastructure segment, also had a weak quarter compared to a year ago; with revenue down 44% and division operating EBIT down 74%, but likely other divisions was up sequentially, and in their case are said to have a very strong last six months of the year. Stabilization work which had delayed on the levees in New Orleans is now in full swing and that will improve the overall infrastructure prospects for the next two quarters.

We’ve also experienced and this is very recent, an increased level of coating activity in Layne legacy’s water business, much of which we feel is related to stimulus money finally, working its way through government, city, state channels, and some improvement in the municipal bond market. Also rentals secured in place bidding activity has picked up very nicely despite a weak market in Florida and Arizona in the first half of this year.

However, we do have some major pipeline collector well and treatment work, and the rest of rentals that is finishing up this quarter that will need to be replaced going forward; but in total I’d say overall an improving picture, with the carryout that we have a long way to go to approach the total water infrastructure earning levels we were achieving a year ago.

On the mineral side we are getting calls from major companies about budget numbers to use for their next year’s drilling program. While it’s encouraging that this activity starting early, it probably signals we’re not going to see much major mining company movement from here and we’ll likely experience another early and extended year end shutdown.

Fortunately both our wholly owned minerals exploration business and our Latin American affiliates, have their costs in mining levels well inline with current activity levels, and we will not experience the excruciating 50% reduction in worldwide expiration drilling that occurred over a 10 week period of time, beginning in mid-December last year.

Layne energy is one of the businesses which has our most attention going forward. As I said, all those small end revenue is becoming increasingly important to Layne Christensen’s total earnings during this great recession. Unfortunately for first 2010, all our current forward sold natural gas contracts expire. With current natural gas prices at eight year lows, it will take a bit of a miracle to extend those contracts at close to the expiring price, which is roughly $8.70 per Mcf.

So our modest green shoots growing in the other divisions could be overwhelmed next year, depending on how, when and if the natural gas market recovers. If you’re interested, the spot price on our main trunk line opened this morning at $2.10 per Mcf, our cash cost is probably about $2.60 per Mcf.

However, my belief is a combination of modest improvement in demand and the power in industrial sectors next year, coupled with the impact of the U.S. drilling recount for gas drilling, which is down about 50% from last year, and when you dial in the very, very steep decline curves in the emerging large gas unconventional plays, we feel that will lead eventually to improved natural gas prospects.

The timing of such is very difficult to predict as you know. As a result, our plan in this low price environment will be to cutback on production as best we can, and to forward sell in a way that minimizes P&L damage, but not so much production as to close the door on any upside.

It’s very difficult, how our act to pull off, but not unlike a number of EMP producers are facing today. Given the unknowns and the importance of Layne Energy to Layne Christensen’s, already one has to be very careful in judging our near term prospects, until this issue can be better clarified.

From a longer term perspective we remain committed to our three business segments. As we have said repeatedly, we are commodity, company and energy producing buyers, property buyers, at or near the bottom of this cycle, and as such have been very active as we begin looking at opportunity in both minerals and energy.

So I would suggest not letting my short term negative comments on natural gas fool anyone. The largest acquisitions which we have made proposals to buy companies or properties have been in the commodity segment of our business, and I would suggest that would be true again. In addition we will also continue to be buyers of water related infrastructure companies, mainly both owns to our existing business lines, and we do that in almost any economic environment that is certainly true today.

Last night we had about $66 million in cash in the bank. We also have a $200 million revolving credit facility and are working to renew our $100 million shale with the current lender. So we have a lot of dry powder to take advantage of opportunities in our industry sectors and hopefully, if there’s a silver lining in this economic downturn, we’ll get some opportunities that give us a nice lift, coming into a recovery in the economy, whenever that begins to take place.

Now, Christina we have some time for some questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Richard Paget - Morgan Joseph.

Richard Paget - Morgan Joseph

I’m wondering if we can get a little more information about pricing on the mineral side. I know in some cases you had longer term contracts and I’m wondering if you’re renegotiating the pricing on some of those and then, with the bids going out now, how are they looking?

Andrew Schmitt

Well, that’s a big debate right now in terms of the current pricing we’re using to quote customers owned. My guess is, that probably our guys will probably try to move them up a little bit from here, because they’ve really been down about 10% to 15%; what do you Jerry?

Jerry Fanska

I think that’s right.

Andrew Schmitt

If you look at the activity decline in earnings Richard, you got about a 50% decline in revenue; were down about 77% where you see a combination of utilization and then typically the amount you see over and above the utilization is going to reflect the margin erosion there, offset somewhat by efficiency.

So I think we’ll try to push them up a little bit. It’ll certainly depend on the number of companies that call and what size programs they ask us to quote, but these prices are too low at this level. We’re not going to make a lot of money if we’re going to stay at these prices for an extended period of time.

Richard Paget - Morgan Joseph

So with your current cost structure, I mean sequential margin improvement, is pricing going to erode that further or this is kind of a good level to think about here?

Andrew Schmitt

I think this is a pretty good level to sit at. We’d like to move them up, but I don’t know that that’s possible at this point. If you look at the EBITDA margins in the mineral exploration business is 23%, it was 31% last year. So I wouldn’t bake anything into those numbers, given the fact that we don’t expect it to take off like a rocket next year.

Our Latin American affiliate prices are probably locked with the longer term contract. We tend to have shorter term in our wholly-owned contract, but I’m sure if the gas “and have an opportunity to grow business for year” that’ll be the number they will given them.

Richard Paget - Morgan Joseph

Then along a similar line on the water side, you mentioned more competitors coming into the market. Is that particularly for the legacy businesses on the smaller projects or you are seeing some contractors getting into some of the larger treatment plant that rentals bids.

Andrew Schmitt

We’ve seen more contractors, particularly early on what we call refugees from the residential construction market, that we wouldn’t typically see bidding on these larger municipal jobs. I would say that that number, from that initial rush has shrunk a little bit. They are typically not the type of jobs that they are going to be successfully owned and they are difficult for smaller GC’s to bond.

If you look at rentals margins, just and the mix will matter of course, what the mix of business, but if you would look at the rentals business, again EBITDA margin is flat for the quarter compare to the quarter a year ago. We really didn’t see any change up a little bit actually. Whereas if you look at the Layne legacy margins, they’re down a little over 3% as I mentioned in my remarks. So most of the pricing pressure seems to be in Layne legacy.

Rentals sort of holding their own again; mix could make a difference. You’ve got higher margins in the inliner business than you do in the pipeline business, but if we stay at the same level of business activity proportionally, I think rentals probably at the bottom.

When you look at where rentals was running the company years ago, we’re probably down about 2%, probably from where we’re bottomed. When you say year end, about 2% and that most of that would be in I think the CIPP business which has come back. It had fallen to as low as like 6.5% last year, its up about 8.2% EBITDA this year, but it was higher than that when we bought rental, it was in the 11%,12% range. That would have been in late 2005 Richard; so that’s sort of been the progression.

Richard Paget - Morgan Joseph

Then a quick housekeeping for Jerry; is 48% good to keep the tax rate?

Jerry Fanska

I’d say yes.

Operator

Your next question comes from Steve Ferazani - Sidoti & Co.

Steve Ferazani - Sidoti & Co.

On the MinEx side, obviously we’ve seen a nice rally in copper prices, with expectations of maybe you start getting US, European demand recovery at some point in 2010. You’ve been doing this a while, what’s you’re take, where do we need to be when we start seeing the big guys pick up activity again in exploration?

Jerry Fanska

I think for the major mining companies, we have a couple that really haven’t slowed down; BHP with the Escondido mine in Chili. For the most part, everyone else has pulled back, reduced their programs. We’re still seeing on the iron ore, Vale fairly active in Brazil, but again for the most part the other iron ore producers have pulled back as well, but we are in that range now; we’ve moved towards that $3 price in copper. There should be more and more majors that are interested in cranking up their production at those levels of prices.

The inventories, I’m sure they’ll keep a close own. Inventories are in a position right now; I would say it’s unduly high. Clearly they are not going to react to China replenishing immediately, but the fact that we are beginning to get calls from customers that have been fairly slow and recently one of the major copper producers give me some encouragement that they are pulling together number for next years budget for a reason.

Now we get more color from our people as to how much, what level of activity, how many rigs did they need, what do they think they will need, we’ll probably get a little bit better view next quarter and the following quarter relative to what type of volume, but its good to see both the goal, as well as the base metals major companies call; because really outside of probably the coalesce project in Chili and Escondido in Chili, we really haven’t seen much activity from the major that all , but we should be in a range.

Clearly we should be in goal, pushing close to $1000, but I think we started moving above $3 in copper, we should get some movement that as well. I think at current iron ore prices and demand from China, if you believe lot of the base metal demand is going to be iron ore based on the stimulus plan, and we saw a big load up in the last couple of months. I think iron ore would be the too myself.

Steve Ferazani - Sidoti & Co.

Just on the water side. You mentioned that you are starting to see at least some bidding activity that could be related to the stimulus spending--?

Andrew Schmitt

I will give you an example, we’ve bid about three or four water relative, drilling projects in our North Eastern regions centered our of Milwaukee in probably the last year, that’s about all, and we have 15 bids to turn in course to turn in this week. So 15 projects to bid on have got to be in, they got to be in I think probably, before the end of September.

So I think the dead line on getting projects on the stimulus money is going to be the only thing in our view that could push that forward, is the money that’s now it’s been allocated and allows those projects to move forward, because the industrial northeast is not were you would expect to have a rush of bidding, quoting activity like that.

So our view is the stimulus money is finally started to working its way through and since you got a date in which those funds are supposed to be earmarked, projects tied next to their name. Our assumption was, this is very recent, this only happen the last couple of weeks. Our economy is not that good, so it has to be the outside stimulus that’s may be working its way through.

Steve Ferazani - Sidoti & Co.

So fair to assume, when we saw that July backlog you had no stimulus. So even, if you are wrapping up a couple of big projects this quarter, by the end of the year we could start seeing a lot more that stimulus type projects…

Andrew Schmitt

I think its fare right now, because most of the legacy and rentals when you looked the backlog numbers that we quoted, there really was nothing in there due to any stimulus that we’ve seen in that point. So those backlogs move up, you expect that some stimulus money is certainly staring to move us followed a little bit.

Steve Ferazani - Sidoti & Co.

Last question was just, SG&A. I think you mentioned that was about $2 million in there that sounded like it was going to be one-time; does that mean we can expect SG&A assuming that the incentive accruals don’t move up hear, that SG&A should actually be down in the next couple of quarters?

Jerry Fanska

It definitely will not include that $2 million that for sure, should say that at least.

Andrew Schmitt

On the incentive incruels, we have clips right now at the rate we’re running at, we’re not going to hit those cliffs.

Operator

Your next question comes from John Rogers - D A. Davidson & Co.

John Rogers - D A. Davidson & Co.

Just relative to the energy side of the business, just so I understand the schedule roughly the role off of your forward sales. Is it the same levels of volume in pricing over the next couple of quarter’s right up until that April 1 level?

Andrew Schmitt

It really will be, because we are producing John right at very, very close to the forward sole production number that we’ve forward sole. We will maintain that production, we start easing back on production some more. We will have to be careful on that regard, because the coalbed methane wells are really [finically], so it’s not lit conventional gas, were we could shut the valve off with little risk and save the reserves. So we’ll move the pressure. We’ll increase the pressure enough to try to pull it back as low as we can.

But we’re going to be at that production level right at it, until those forward contracts roll off and if we push forward, maybe a 90 day increments, 126 month increments. We’ll try to maintain that production. My comment was, typically we’re going to go our and we tend to push out for almost a year, haven’t done that consistently.

Right, now my inflammation is even if that contract is lower by going three or six months, we might be more inclined to do that just because of the market is so volatile that you don’t want miss an opportunity to average up, if the spot prices them self move up.

As you know, there is a lot of financial analysis, gas analysis out there by lots of firms, and I mean they go from one extreme to the other, in very short periods of time is where these gas prices may end up. So, in that kind of environment, we’ll just do the best we can, but my comment is you really have to look at the earnings in Layne energy, when you’re talking about 70% of EBITDA business and recognize that current spot price is below our cash costs right now.

So it’s a pretty big issue and that’s why I caution investors until we or you form an opinion on where that’s going to be, you got to be careful when you look into our near term prospectus, but that’s not an issue until April 1, of next year.

John Rogers - D A. Davidson & Co.

You gave us the spot price; I assume that somewhat of a shorter period. What would forward prices look like right now, if you did want to go out?

Andrew Schmitt

We want to out say a year for the different quantity of gas pushed it up. For a year, just like April 1, 2011, that price would be in the $4 to $4.50 range.

John Rogers - D A. Davidson & Co.

So that would be above your cash cost productions?

Andrew Schmitt

Right and so that price was probably 550 wouldn’t say Jerry, a month ago.

Jerry Fanska

Yes.

Andrew Schmitt

So I mean, we’re getting that kind of movement, it’s pretty dramatic in the forward market. When you look at 30 days as move to the dollar, so we may look back at that 550 price with great regret, I didn’t expect it to be quite like this, because we’ve always really conservative in our hedges. I’ve had questions as wide then you even go further out, when you have the opportunity around June of last year, all the gas runs through one pipeline.

We’re not going through multiple pipelines in the multiple fields, so that changes the dynamics a bit for you. When you look at the last hedges that are rolling out, we were almost out 18 to 20 month on the last hedge, plus if there particular time that Contango moves down sharply. So it’s been just going forward, you lost that, you earned more of a backwardation period.

So pushing out even further, not only was there more risk in terms of having to deliver the gas, but it started to move towards backwardation. So that’s why we didn’t push out even further, we sort of took a deep breath and we went out as much as we did for 100% of the production.

John Rogers - D A. Davidson & Co.

In terms of the acquisition opportunities in the gas area, generally you’re looking the Midwest areas or…

Andrew Schmitt

The last two properties we looked at, actually the last we looked it for really closely, two of them very closely. Two in West Texas, Permian Basin where oil and gas and two in Oklahoma; one mainly gas, one 50/50 and the last one is about 2,500 barrels of oil about 80 cubic feet of gas, but in each case, two we bid, we two just decided not to bid.

As many opportunities you see, it’s a difficult environment to really zero in on. We almost have been on one that we’ve looked at, not value in the gas asset at all. Just literally other than the current cash gas, put in really not in the forward contract put in the bank deck and I don’t give any value, virtually little value on the first and nothing on the two or three fee, and where we’ve seen pricing that’s where its going on the gas side, pretty amazing.

John Rogers - D A. Davidson & Co.

It sounds that your thoughts are that’s the pretty good time to be buying reserves.

Andrew Schmitt

Yes, I would think so, I think more people are comfortable with oil and we are seeing more competition on the oilier place, but somebody is going to be right on gas. I think those of us who have been in the energy business for a while had along memories about how long these gas bubbles can last.

I think when everybody dials up the various factors, there’s a general feeling with these decline curves being so steep and with the rig count falling so dramatically, that at some point we are going to cross over, where we really start to not replacing reserves in a great way, so we’ll see. It’s an interesting market right now; one of the most interesting ones I can remember in a long time.

Operator

Your next question comes from Jonathan Ellis - Merrill Lynch.

Jonathan Ellis - Merrill Lynch

Maybe I can start with the energy business since you’re just talking about that. Do you have at your finger tips there, just gross and net production this quarter?

Andrew Schmitt

Let’s see, I do, let see Jonathan. 1,657 million cubic feet is gross. New was 1,150 cubic feet. The prior quarter just for point of reference was 1,839 gross and 1,208. The last year and the second quarter gross was 1,832 and net was 1,224. So we’re easing it down as you can see, and have been for sometime.

Jonathan Ellis - Merrill Lynch

Should we assume average price was right around the 870 levels?

Andrew Schmitt

Yes, that’s about right. A year ago, that net price was not too much different. It was about 830 or less. Yes, about 830.

Jonathan Ellis - Merrill Lynch

Just in terms of the impairment that you recognize now, I want to make sure that I’m clear about this. What is actually going to be the trigger if you have to further impair it? I think you noted 33 million of additional assets that could be reviewed.

Is it when the four contracts you have in place actually roll off and if market prices are still where they are today, is at that point do you have to take the impairment or could you consume ably have to take an impairment prior to the four contracts terminating?

Jerry Fanska

Basically there are two factors that drive that mainly and that’s the price of gas on the spot and then obviously the hedge contracts that we have. If we do nothing in the way of forward selling the gas, then the way these present value calculations work is, whatever you have in production over the next 10 years or wherever the life of the wells are would be price that the spot. Which obviously at 289 would did not lead to a good result.

So as these hedges roll off and if we don’t replace those, then we have some exposure there. You have to evaluate it every quarter obviously, so we have to do that same calculation each and every quarter end just to see where we’re at now.

Andrew Schmitt

I think the difference Jonathan would be when you look at the value that remains the asset value. You’ve got a third of that infrastructure related, that carries our gas and third party gas, that’s subject to a little different test, that’s not in the 32 million.

Then on the reserves you’ve got probably a third of a third. If you were to do the test of the next, we’ll call it three quarters, even though April would be our first quarter in terms of those hedges. If you stayed at the same price, as Jerry said we didn’t forward sell anymore, and we just let them roll off. That would be the way you could probably take a third, a third, a third if the prices were spot price or that range about and do it that way by quarter.

Jonathan Ellis - Merrill Lynch

So potentially as much as a $11 million impairment charge in each of the next three quarters if the market pricing doesn’t move it all?

Andrew Schmitt

Yes would that be pre-tax year your after?

Jonathan Ellis - Merrill Lynch

That would be pre tax.

Andrew Schmitt

Then you have this weird thing that happens with these kind of mark-to-market rules. It’s beyond me why they don’t take the EIEs pricing over the...

Jonathan Ellis - Merrill Lynch

The average price goes to the quarter end?

Andrew Schmitt

I’ll tell you its sort of crazy, because then now your EBITDA becomes you EBIT. So I don’t know how that provides any clarity or transparency to an investor. So in theory it could conceivably happen that all a sudden, about the time you finished this, you still have all of these reserves in the ground that are long lives, that run to13 to 15 years, and gas prices picks up, and then you all of a sudden have this virtually no depletion left.

You just got a little bit of depreciation on that infrastructure asset that Jerry spoke of, which are again spread over a long life, so it’s not a lot of depreciation. Then you’ll end up with this weird thing where all of a sudden the 70% will be returned back to this $7 or $8 gas, that’s 70% EBITDA becomes your EBIT number.

Its bad rules are just bad rules. They are coming into them and the bad going out. It doesn’t show much transparency or clarity to anybody, but beyond me I’ve given up quite honestly. I know you guys on the financial sector had a belly full of it too so.

Jonathan Ellis - Merrill Lynch

On your cash cost and my impression was that your cash cost used to be higher, somewhere between $3 and $4 per Mcf, is the lower cash cost that you quoted a function of renegotiating leases?

Andrew Schmitt

It’s more a function of bringing that LOE cost down and the guys have worked extremely hard in bringing that cost down, both LOE cost and transportation cost, and then obviously taxes are a little less than they were before as well with production being down, but mainly its LOE cost, because that’s your biggest component.

Jonathan Ellis - Merrill Lynch

If we could turn our attention, just going to the mining business; first off, I think North America was profitable, while Africa and Australia were not. Based on what you know right now, are your expectation that should continue for the balance of the year, that North America remains in the green and then Africa and Australia in the red?

Jerry Fanska

I think North America will. I think we’ll see some pick up in Australia in the second half of the year. Africa, we got a lot of rain in West Africa, so we are entering the rainy season in the third quarter. That really doesn’t clear up until about November, and that’s where most of our activity is in West Africa, a little bit more in Zambia.

So the rainy season is going to hurt the third quarter, so any pick up we have in Australia might be offset. North America ends up still about where it is. So to me the third quarter looks a lot like this quarter. It might pick up in one place and then loose it on the rainy season in the third.

Jonathan Ellis - Merrill Lynch

And why has North America remained profitable?

Jerry Fanska

We’ve had some pretty good contracts in North America. We’ve got pretty good work in both Nevada, a little bit on the gold side and on the copper side, and the business in Mexico, which is mainly gold and mainly junior driven, a lot more junior companies. That business has come back.

It was really hit hard in the first quarter, but we’ve had pick up in Mexico again, because that’s where most of our small to mid-sized mining companies, and Arizona is more major, Nevada is more major, and then you pick up the smaller companies in Mexico and that’s been the difference there. We’ve come back in the second quarter, somewhat Mexico.

You can imagine, sliver is a big by product there of the gold expiration and slivers performed extremely well, so I’ll tell you it’s one of the more active junior market that we have and you are probably right now Mexico.

Jonathan Ellis - Merrill Lynch

So really it’s more volume driven that the difference in contract structures, relatives to other parts of the world.

Andrew Schmitt

Yes, it strictly volume, prices are pretty lousy.

Jonathan Ellis - Merrill Lynch

Then just if we could talk briefly about the water business; first one is just on the contract. I know you had specifically mentioned the pipeline contract in Colorado, but you also talked about a couple of other projects in the rentals business. Can you quantify for us, how much revenue exactly is rolling off, that was contributing to this quarters results, that won’t be contributing next quarter or even on an annualized basis.

Andrew Schmitt

$11 million on the project in the quarter in Colorado, and so that project was $55 million originally; wasn’t it Jerry? It’s still about $11 million this quarter, it’s winding up.

Jonathan Ellis - Merrill Lynch

That is the bulk of the projects that you mentioned earlier that are rolling off, that $11 million.

Andrew Schmitt

Yes, and we had about, and I’m not sure this won’t be replaced, but we had about a similar amount on the collector well business too. I think if you probably double it. If you look at what we call integrated services, that’s a similar amount and I don’t know. Colorado is going to be tougher to replace on the integrated services. Probably we may have some backlog there. I just don’t see the visibility to the backlog on that particular item, but I can see the revenue.

Jonathan Ellis - Merrill Lynch

So just to be clear, in a worst case scenario, if you don’t replace any of the collector well business, you could see a $22 million sequential decline in revenue in the water business?

Andrew Schmitt

Yes, we didn’t replace that or the pipeline business, those two, the big pipeline job and some of the collector well business, probably $20 million will be a good number.

Jonathan Ellis - Merrill Lynch

Just finally on the legacy quotes that you mentioned; I’m curious and maybe you’re not far enough along in the process to know yet, but are you seeing potentially the same kind of competitive pressures on those bids that you’re seeing on the rental side?

Andrew Schmitt

Not really at this point. I don’t that I can say who all was quoting. I would imagine it will be in the lane legacy group. You don’t really have people come in say from the oil and gas business, to the water business, so it will be the normal regional players we do, and they are not affected by house well drillers, these wells are too big for residential well drillers. So it will be the same cast or characters that normally bid on it.

Margin gets a little bit skinny there, because everybody’s backlog tends to dry up. So the pencils are all sharp, but it will be the same usual suspects. We will get our share or normal hit rate more than likely. We tend to be a little bit higher than most coming in, but the smaller competitors once they fill up, they tend to pull away from the bidding table.

So my guess is that that activity will improve margins just from the number of bidding opportunities, but we won’t get in an anymore competition than normal. Typically it’s not that competitive when everybody has a decent book of business and we may go back today pretty soon just from the stimulus round, and who know how much that’s going to be or how long its going to last.

On an absolute basis it’s not a huge number when you look at the amount for the water supplier side, but there is little water, we are big in the rural areas as well. So we will get our share of whatever is there, but it is just nice to be quoting. Our guys felt like if we’re going to see something, we’ll have to start pretty soon. If the government holds its pledge then we won’t project next to this money by sometime in February I think they told me.

Operator

Your next question comes from Michael Smith - Kansas City Capital.

Michael Smith - Kansas City Capital

You guys have been nice to answer most questions and probably I’ll get my answers from the transcript, but did I hear you say Jerry, that if oil prices were staying or if natural gas prices stay at this level, we could look for a similar impairment for the next three months?

Jerry Fanska

I think what I said was, we do have risk of that. I mean in essence, gas prices in this range with the forward sales contract is actually rolling off over the next three quarters. We have a fairly sizable impact on that present value test that goes into the impairment calculation. So the answer to that is yes, there could be.

Andrew Schmitt

Yes I think Mike, when you look at the impact of what has the biggest impact in the current pricing environment on the impairment test, the hedge is expiring. It’s really the 800 pound gorilla, with the caveat that we don’t see really any short term moment in gas prices, such that it would change those dynamics.

So the real issue there is if we don’t forward sale in gas, and we just let those contracts roll out as they expire, the bigger piece of that, in a steady price environment will be those hedges rolling off. So it wouldn’t be any different from quarter-to-quarter-to-quarter as you’ve got six, seven, eight roughly about nine months left, about eight months left. So just sort of it’ll be a three months, three months and then two months impact.

Now at some point along the way this head will probably forward itself for gas and of course if the spot price picks up enough, it could change that calculation, but that’s the way it will roll-off. I mean if I was planning, I’d just say, let me be conservative. Usually they roll off; the guys end up staying on spot going forward as well. That should give you a scenario that wouldn’t be any difference than that, it wouldn’t be any worse than that. That’s the way I model it.

Michael Smith - Kansas City Capital

Let me make sure that I heard you correctly earlier. If I had to take away here, it would be that the legacy business looks like it’s getting a little bit better, but the rentals business don’t have a lot of new work to bid there?

Andrew Schmitt

We just happen to be finishing up quite a few large jobs that were very profitable jobs and we still have plenty of backlog and work to perform, typically the weather is real good as you move into the late summer and early fall. So we’ll go through the backlog we have there. I was speaking more longer term. We’re going to have to keep replacing the business at the rate that we’re chewing through the backlog.

If you were to look at the rentals backlog sequentially, if you were to look at it in the graph, not compared to year-over-year, because it’s flat year-over-year, but it’s typically out and it was at about $393 million in March. We chewed down to about $370 million by April, then about $364 million May, down to $134.5 million June, down to $333 million July. So when you look at it sequentially, we generally get a lot; that generally happens trend wise, because you’ve got good weather.

When you start seeing something come down like that sequentially, even though it’s seasonally driven, it typically happens that you start to realize that you’ll have to start booking business sometime later this quarter, to have that similar trend continuing. That’s the only thing I give everybody a little heads-up is, we’re going to have replace that business, no reason to think we won’t, but it just has to be done.

So if that stalls, then yes, you could see that part of the rentals business be weaker than a year ago. Something that which has not happened to us since we bought the company, but if we pick up a couple of big jobs, late this fall or towards winner, it’ll be fine. That’s the way it looks. So starts high beginning of the year, works its way down, starts built its way back up, so you come into the spring with a good backlog.

Operator

Your next question comes from Steven Fisher - UBS.

Steven Fisher - UBS

It sounds like you guys have done a pretty job of taking the costs down on the energy side of things. How much runway do you think you still have on that 260 cash cost?

Andrew Schmitt

I don’t think it’s much movement. Some of that is our doing, some of it is the service cost coming down, some of it is the pumps and rods coming down in price. Steal price is coming down. The little bit of activity we’ve down, the drilling rate is coming down.

So we’d probably I think reached the saturation point. I’m sure if you were to talk to chemical suppliers in oil and gas service companies, they’d tell you, they would say “we’re at about all we can do.” So, my sense is we’ve done about all we can, there’s not a hole left to do there.

Steven Fisher - UBS

Andy, you thought there was a chance that the energy results could end up overwhelming the rest of the business. I think you were talking about in the period post the contracts drilling off. Did I get that right and what scenario would that happen, just from ongoing margins on production?

Andrew Schmitt

What would happen is, and you’re right; it is post, the hedge is expiring. Then you’ve got to look at being on the spot price if you will. Lets say we’ll be making it on the spot price and if that happens, if that spot price is in the current level today, you certainly lose Layne Energy’s EBIT.

So if you look at that segment reporting line and you look at that EBIT on a quarterly basis that Layne Energy was throwing off, that piece would disappear; and if you’re below the fully loaded cost for Layne Energy, if you drop down even further than that, you can conceivably lose money.

We would probably sell to the point where we save the EBITDA and we try to keep the P&L impact as little as we can, but we may not have that opportunity. So are you following me down, when I say look at the segment earnings? Those segment earnings are at 870. So I think 12 million cubic feet net and move down to the current spot price. You’re at our cash costs right now.

Steven Fisher - UBS

So it sounds like you’re going to try and keep it at least being breakeven or neutral?

Andrew Schmitt

Yes breakeven. At this point we couldn’t buy the prices breakeven, it’ll be $1 per Mcf below that. Hopefully we’ll see some improvement between now and the time we have to lock it in, but you never know. So you’ve got to take that into consideration, and that was my over whelming comment; meaning that we could pickup in the rest of these business with some green shoots and Layne Energy could nullify that pickup.

Steven Fisher - UBS

Then on the water side of things, can you give any color on the magnitude of expectations you have for the overall stimulus benefit and how broad across the water business could the stimulus be beneficial?

Andrew Schmitt

It’s a tough one to nail down. It’s probably about, when you look at direct and indirect, about $20 billion I think in the various stimulus plans that might impact our business. Whether there were a lot of wastewater, rule waste, EPA funding, core of engineers work, things like that.

In the context, I think the best thing to look at in total is its probably going to come in over the next couple of years and we can probably move it up. I’ll just take a guess, and it’ll really be a guess, maybe 10% or 15% from current level. We’ve got about $700 million in water and wastewater infrastructure type work, maybe we’ll get a 10% boost out of that, I don’t know, over the next couple of years, it’s a tough one to call.

It’s hard to take an industry number with so many different pieces and with it coming out so slowing from different public agencies and governmental departments, the core of engineers, department of energy, and so on. It’s a really tough one to get your arms around.

I think it’s impact, as we see bidding will be able to give you; hopefully over the next two quarter we’ll be able to give you an impact and say, we bid on X number of jobs and 20% of them we wouldn’t have even bid if it had not been for the stimulus. Totally we’ll be able to get our state revolving fund. I think I missed it that last quarter.

State revolving fund reauthorization, and I’m not talking about the piece that’s tied to the stimulus, I’m talking about the normal, old typical state revolving funds that grew out of green water, safe water drinking several years ago.

That reauthorization is very important. There’s a lot of money there, because it leveraged by the municipalities. As they borrow against that, pay that off on a first priority basis, that goes a long way towards helping these cities, counties, state; that’s the big factor, it shouldn’t be ignored. My guess is this state revolving fund in my mind, is equal to an importance as the stimulus.

Steven Fisher - UBS

They compare to three months ago, are you now more optimistic regarding the state revolving funds and the stimulus?

Andrew Schmitt

I think so, just because the time has passed. At first we were experiencing a situation that we talked about in our last earnings conference call, where it was actually a negative. Because cities, local communities that we work with were waiting to see what they got, and that was really having a negative effect, because they had projects that they normally would have probably found a way to fund it going forward with, but they said “Well, we’re waiting to see what we get in the stimulus money,” to see if we’re going to go forward with this project, are we going to do it later, and that was very disruptive.

I think a number of EMC contractors as well were a little bit frustrated, because we were hearing a lot of that. Rentals was hearing less of it, because their projects typically had a long fuse. So the genesis of their projects might have been four year ago or two years ago. So they had a much longer life. So the projects rentals is doing now, projects they’ve been doing the last couple of years we’re on the drawing board before we ever heard of the words stimulus.

Not so with Layne Energy, our Layne legacy, because the backlog turned so much quicker. They have about 90 days of backlog, so you immediately start looking for work. Whereas rentals backlog as you can see is approximately a years worth of business, a little bit different ball game.

So they weren’t hearing that as much, but the guys in Layne legacy clearly were, and we heard a fair amount of complaints from the guys saying “Things have just stopped.” Everybody can see what if any stimulus money they’ll get, and how the states will roll it out and how the feds will. So that’s beginning to get a little bit clearer. So I think the timing; I feel better now just because that time has past. So hopefully we’ll see more projects come out that we can readily identify, and we’ll get a boost in activity from that.

I think Layne legacy we’d like to think is on the bottom right know. Rentals is obviously flat, essentially with last year, so they have an experienced that yet and may not at all. They get a little boost to sort of the stimulus to the next level, but the Layne legacy guys should be at the bottom. They’ve been down close to 25%.

I always say, I wouldn’t ever expect that business to drop by more than half of the minerals declined. Just looking at the different businesses, and the use of water versus the need for copper, gold, lead, zinc or nickel, and we’re there now. We’re right at about 50% of where the minerals fell through, so I would be surprised.

It would be new ground quite honestly. Not that it can’t happen in this recession, it would be different than I’ve ever seen and we’ve seen historically, if they were declining any further than where they are now.

Steven Fisher - UBS

Then just lastly, you gave the revenue impact from those projects rolling off. Can you give us a sense of what the profit impact on the water business, the project that are completed in the quarter.

Andrew Schmitt

Yes, I’d say probably in that particular case, because you have the collector well margins fairly high, so I would say 20%. With the assumption we don’t replace and as I say, there might be projects in the backlog right now that replace them, so on the collector well side. We don’t have one in Colorado right now, the biggest one of the rolled off. So that would be the less profitable of the two.

Operator

Your next question comes from Debra Coy – Janney.

Debra Coy – Janney

Just a couple of more; we’ve gone round and round on this gas thing already, but my sense is that you’re still playing the game of chicken a bit, and are likely to do that for a few more months. When do you think that you will kind of…

Jerry Fanska

I’d like to see October future price, late October.

Debra Coy – Janney

So, the fall; whatever we see for like fall…

Jerry Fanska

I’d sort of like to see where that storage level is; where it finally tops out and then start to see if we get any move on the forward contracts in October. That we won’t necessarily see a big draw down since the whether is pretty mild through that, but we’ll get some feeling about where the futures markets is going to move.

Typically the futures markets; I mean if you looked at it over periods of time, over the last decade, we’ll say the March pricing and the October pricing, probably if you had to look at it by month, not withstanding the periodic hurricane or things like that. In a normalized environment you’d find you’re better future prices in those two months. I’d like not to wait till March to find out.

Debra Coy - Janney

So if we assume that, we stay at this miserable, call it 4.5 level, that you would put a tell in order so to speak, and pick up some and then leave some on the theory that maybe gets better next spring?

Andrew Schmitt

Yes, I think so. As long as we continue to see the economy gradually pick up, we’re not going to see much in the way of residential demand. I mean, it’s on the new residential growth; bigger homes moving, new homes.

We sort of know where the housing starts are going to go. So, that means our demand improvements got to come in the industrial sector and the power sector. So that will be the two areas, we’re watching for some continued improvement in demand; whether it’s automotive, whether it’s forest product, whether whatever it is, but those are two areas that we’ll want to see some improvement on the demand side.

As the rig count stays low in terms of the number of gas rigs working in the Unite States, we know that that will begin at some point, having an impact on the amount of gas production. Producers are doing just like we’re doing. As these prices start to move towards cash costs, they’re going to shut the production down and there’s a tremendous amount of hedges. They come out in 2009 this year.

So everybody in many cases, particularly smaller producers with less diversity and less multiple properties, we’ve sort of fallen into the same group. So you’ve got a lot of small field producers that have hedges coming out; in 2009, if they have their ability to continue to squeeze that production down like we are. So there is a combination of things that we want to conclude, that there is more upside than downside.

Of course the real wildcard is the unconventional tight black shale plays, but when you look at the decline curves in the newer shale plays, Fayetteville, Marcellus, Haynesville, those declined further really, really steep. So they’re going to get huge initial quantities of gas and then it’s going to disappear rapidly.

So at some point it’s got to cross over where the production is down and demand starts to pick up, and that’s usually the way of work in the commodities anyway. We see a little bit of movement in the first year, then you see a much bigger step in the second year. So we could conceivably have certainly a tough year in next year doing the best we can and try to minimize the damage. Probably the realistic number is more the following year after that, where we start to see some improvement.

Debra Coy - Janney

So it would make more sense from your standpoint, than to pick up some low price forward sales, and I don’t know, call it a third or a half and then just shut down production on rest and wait for price to come back, is that sort of how you’re thinking about it?

Andrew Schmitt

Yes, do the combination of squeezing down as much as we can to the point that we don’t damage the well. We want to make sure the respond when you take the pressure off of them, and then like you say, maybe hedge half of what you’ve got, take a chance of the rest.

Debra Coy - Janney

Are there partial year hedges, three months or six months instead of a one year?

Andrew Schmitt

Yes, there’s a lot of flexibility there. You can go colors with a range of prices. Typically we’ve taken a pretty simple approach, pretty conservative approach, but now we’ll have to be a little bit more creative in this environment. But no, there’s plenty of flexibility there, key is that you have the production. As long as you have the production it is flexible.

Debra Coy - Janney

Well and you’re already producing the lower you could be. This thing came roaring back.

Andrew Schmitt

Yes, we were probably aggressive moving close to $20 million to $21 million. We’re down to $16 million if you look at production on a daily basis.

Debra Coy - Janney

Then just on the water side; you’ve talked about the stimulus impact and some of the project bidding activity that’s starting to come through it. It sounds like what you’re seeing, and this is consistent with what I’m hearing as well, but more what’s coming to market tends to be smaller jobs coming out of the real water system program and some of the SRS stuff. There’s not too many $20 million, $30 million, $50 million tier deal size projects that are out for bid right now?

Andrew Schmitt

That’s a good way to characterize it. Just this year a number of bidding opportunities ramping up like that tells you they’re small, and they’re showing up in legacy for us, which are smaller jobs than rents.

So right now that’s where we’d like to seen them and the smaller projects typically, you don’t find in the Layne legacy piece, but that’s fine. They already have been delayed and so it sort of make sense when that comes back. Whereas the geneses for a lot of the rentals bigger projects, those projects are under work for as I said 12 months, 18 months, 24 months.

We’re not seeing any big stimulus related major relining project in CIPP at this point that’s going forward because of stimulus fund or a major pipeline, or a major water main. We are not saying that we had a major retrofit of a large treatment plan. We haven’t seen that as any kind of stimulus written on it at this point.

Debra Coy - Janney

Just generally it seems like the munies are putting off the big projects into little props?

Andrew Schmitt

I think they are.

Jerry Fanska

Easier to mange.

Debra Coy - Janney

Easier to pay for?

Andrew Schmitt

Yes, we are going to see rentals get a little bit softer next year, and Layne legacy pick back up a little bit more than we would expect it. That might be a neutral trade off for us.

Debra Coy - Janney

Looking at margins then in the water segment, we had the nice sequential improvement obviously still below where were last year. Field construction was a distinct drag and the first quarter, sounds like it was still a bit, I don’t it was a direct drag or it’s just kind of more back to?

Andrew Schmitt

Now they had a little profit in the second quarter. It had picked up a little bit and we were profitable, whereas they were not in the first quarter.

I think if you were to look at the detail of the number they probably lost, while I’m going to guess $1 million, $2 million in the first quarter and $1.35 million in the second, so that was their sequential improvement, but now they’re doing the jet priority around the column that are going in to support the levy in New Orleans and that is really production drilling, very precision jet priority and they’re really alright now at a very high level.

As they go around those big pilings, they’ve been putting them and seeing them all in effect. So they all have a very, very strong last six months and when they get that type of production gravity, their efficiency really, really gets good. So they can have a meaningful impact as small as they are on second half earnings and infrastructure.

Debra Coy - Janney

How much backlog are they working on?

Andrew Schmitt

I think about $30 million.

Debra Coy - Janney

And they’ll do most of that in the second half?

Andrew Schmitt

They’ll probably do; what do you think Jerry?

Jerry Fanska

Maybe half of that, possible.

Debra Coy – Janney

Next year

Andrew Schmitt

They should finish up. Now they got about $27 million worth of project. So they really got cranked up in July, so they have the balance for the year to go.

Jerry Fanska

They could do more than half if possible, maybe $2 million.

Debra Coy – Janney

So that combined with some utilization coming back and legacy certainly suggests that we should see some sequential improvement in your segment margins?

Andrew Schmitt

Yes I can tell you on a perfectly dual construction that if this floating turns into actual work, we got a lag though there Debra, we don’t quote it. They’re going to go through and make the comparison, then we’ll still have to wait on the notice to proceed. So it’s more of a quoting activity and it’s not reflected on the backlog and we’ll still have some period of time before we get a notice to proceed.

Debra Coy – Janney

What about in the upper Midwest, you wouldn’t actually due till next spring?

Andrew Schmitt

That’s right. Well, that would definitely have an impact late in the year, so I wouldn’t dwell too much into that. I just think we’re at the bottom now and I don’t think that it’ll be any worse that we are now other than the seasonal factors that we normally go through.

Operator

Your next question comes from Bill Doyle - Columbia Wanger.

Bill Doyle - Columbia Wanger

Quick question Jerry, kind of housekeeping. The way the segments are shown in the earning release and then the K’s and Q’s. When you put the pre-tax for each of the segments water than mineral, does that mineral pre-tax number include the equity income that’s shown above?

Jerry Fanska

It does.

Bill Doyle - Columbia Wanger

So when we look at this quarter, the $3.5 million of pre-tax from MinEx, is $2.3 million from the African and South American affiliates and one from kind of the consolidated Mexico and U.S. Op?

Jerry Fanska

I think it’s fair.

Andrew Schmitt

That ratio is probably going to continue too, because longer term contracts we have Bill are in Latin America, so…

Bill Doyle - Columbia Wanger

That’s go through the equity line?

Andrew Schmitt

Yes, that ratio probably continues the balance of the year, where the Latin American affiliates will earn either two thirds, one third type of breakout.

Bill Doyle - Columbia Wanger

Then the only question I had, you guys have really been patient today, on gas then, ex that impairment charge, do I look at a right on gas made about $4 million at the pre-tax line?

Jerry Fanska

That’s right.

Bill Doyle - Columbia Wanger

Driven by the hedges, but $4 million.

Jerry Fanska

That’s right.

Operator

Your final question comes from John Rogers - D.A. Davidson.

John Rogers – D.A. Davidson

Jerry one follow-up, did you say what capital spending was going to be this year?

Jerry Fanska

We did not. I mean right now year-to-date.

John Rogers – D.A. Davidson

What are you year-to-date, and kind of what are you thinking about, ex the acquisitions during the year?

Andrew Schmitt

Current year expenditure is right at the $19 million level. We’ve got a budget pretty much for the year of around half of what we did last year, say $40 million to $45 million and that spread obviously a much…

Jerry Fanska

I think we gave the number for the quarter though.

Andrew Schmitt

The quarter number I gave was about $9 million.

Jerry Fanska

$9 million was PB&E of the total.

Operator

There are no other questions in queue at this time.

Andrew Schmitt

Alright everybody, we appreciate you all dialing in and we’ll give it our best shot going forward. I guess we can say that at least on a sequential basis, the second quarter made everybody feel a little bit better.

I can tell you we felt particularly good about bringing back some employees we had laid off. So if we can keep the rentals businesses flat, deal contraction gives us a little bump in the second half and if we’re at the bottom in Layne legacy, that overall could be positive. Then minerals I think is at the bottom and it will bounce along, but we can keep sort of where we are right now, flat now, that would not be bad and then Layne Energy will be fine and we’ll just be having to watch that futures marketing design and what action we’ll take there.

So in summary I appreciate it, and we’ll give it our best shot going forward. Thanks for your dialing in. I appreciate it.

Operator

Thank you. Ladies and gentlemen, this conference will be able for replay after 01:00 pm central today, through midnight Wednesday, September 9, 2009. You may access the AT&T teleconference replay system at anytime by dialing 1800-475-6701 and entering the access code 112333. International participants may dial 320-365-3844. Those numbers again 1800-475-6701 and 320-365-3844, with the access code 112333.

That does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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Source: Layne Christensen Co. F2Q10 (Qtr End 7/31/09) Earnings Call Transcript
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