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Layne Christensen (NASDAQ:LAYN)

Q1 2012 Earnings Call

June 08, 2011 11:00 am ET

Executives

Andrew Schmitt - Chief Executive Officer, President and Director

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

Analysts

Ryan Connors - Janney Montgomery Scott LLC

John Rogers - D.A. Davidson & Co.

Jay Chhatbar

William Nasgovitz - Heartland Funds.

Operator

Good day, ladies and gentlemen, and welcome to the Layne Christensen Fiscal 2012 First Quarter Earnings. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like introduce your host for today's conference, Andrew Schmitt, President and CEO.

Andrew Schmitt

Thanks, Devon. Good morning, everyone. I'm here with Jerry Fanska, our Chief Financial Officer. And we would like to welcome you to Layne Christensen's first quarter conference call. Earlier today, we issued a press release outlining the results for the first quarter ended April 30, 2011.

Before we discuss the financial results, 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 will give you an overview of division operating performance and how we see things going forward. Okay, Jerry?

Jerry Fanska

Thank you, Andy. Good morning, everyone.

Revenues for the first quarter increased $36.7 million or 15.9% to $267.4 million from $230.7 million in the prior year. Water Infrastructure revenues increased $23.2 million or 13.4% for the quarter to $196.1 million. During the quarter, revenues from previously acquired and start-up operations increased $14.9 million, accounting for most of the Water Infrastructure increase. Mineral Exploration revenues increased 36.8% to $62.8 million with increased activity across all regions. Layne Energy revenues decreased 40.7% to $5.7 million attributable to the expiration of favorably priced forward sales contracts and to a lower natural gas price.

Cost of revenues increased $28.3 million to $200.2 million or 74.9% of revenues for the 3 months ended April 30, compared to $171 million -- $171.9 million or 74.5% of revenues for the same period last year. Selling, general and administrative expenses increased $40 million in the quarter from $33.5 million in the prior year, primarily the result of increased compensation-related expenses of $2.2 million and $1.2 million in expenses from acquired operations. Depreciation, depletion and amortization increased in the quarter to $15.1 million from $14.1 million, primarily due to acquisitions and property additions, offset by $1.9 million lower depletion in the Energy division resulting from updated estimates of economically recoverable gas reserves.

Equity in earnings of affiliates increased 149.3% to $4.7 million in the quarter, due to improved mineral exploration markets in Latin America. Interest expense decreased to $344,000 for the quarter as a result of scheduled debt reductions. Other income and expense for the quarter of $6.9 million included a gain of $5.1 million on the sale of a facility in California, and the remainder were primarily gains on sales of other assets.

The income tax rate for the quarter was 41.5% compared to 47% 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.

The net result for the quarter was $0.66 per share on earnings compared to $0.34 per share last year. Excluding the onetime gain on sale of our California facility, EPS was $0.51 per share versus $0.34 per share last year.

The company's balance sheet at April 30, 2011, reflects total assets of $873.2 million; stockholders’ equity of $517.6 million; total long-term debt of $35.2 million, excluding current maturities of $6.7 million; and cash and cash equivalents of $47.3 million. The company used $4.6 million in cash from operating activities in the quarter. Investing activities totaled $25.5 million, net of proceeds from equipment sales. The investing activities included $745,000 in unconventional gas expenditures, an acquisition of $8.9 million and the remainder primarily for property, plant and equipment additions. With that, I'll turn it back over to Andy to talk about the operations.

Andrew Schmitt

Thanks, Jerry. Turning to the operations, the quarter continue to be paced by our Mineral Exploration division. Our wholly owned Mineral Exploration division revenue of $62.8 million was, as Jerry mentioned, up 37% from last year; while EBIT, at $12.7 million, is up 89%. And of course, our share of the net after-tax income of our Latin American affiliates was $4.5 million, up 143% from last year.

The group of companies that comprise these joint ventures had revenue of $98.5 million and an EBIT of $14.5 million, which is up 52% and 39%, respectively. As strong as our wholly owned MinEx division is, our Latin American affiliates have even been stronger in this year-over-year comparison.

The second quarter is currently forecast to be similar to the first of these businesses, barring any execution problems. Prices are pretty much set for the work we have, and only if current shorter-duration jobs finish up and new ones are added will there be much more opportunity for price increases. We are ramping up training in Latin America in anticipation of increased demand on the existing contracts we have. In this case, we'll be adding rigs to accommodate higher activity later this year.

We're also keeping a watchful eye on the macroeconomic factors that affect demand for base metals and gold, especially in emerging and developing markets. We do anticipate that China and India may take a pause in hiking rates as their economies are cooling a bit. In addition, we see Japan’s rebuilding from the earthquake will increase demand for base metals, and restocking is occurring in the disrupted supply chains now. The U.S./European markets, we think, will continue to sputter along, in spite of the daily headlines of the various potential crises. Under that scenario, it's pretty reasonable to assume our Mineral Exploration activity and spending for such will continue at current levels for this year.

Layne Christensen's other commodity exposure is in our Layne Energy division. The segment results were down, as Jerry noted, from the prior year. We still have 2 months of hedges at extremely high natural gas prices. I think those were put in place in July 2008 at the absolute peak. But despite the natural gas prices, which are down more than 50% below the prior year, the division EBITDA of 47% was still respectable.

Capital spending continues to be low, as we drill mainly just to hold leases and an occasional oil well. If the natural gas prices on our Southern Star pipeline were to move much over the $5 per Mcf, we'd likely step up our drilling activities as returns would begin to be fairly attractive.

We continue to review oil-related transactions but generally find seller expectations are still too high, even for the less risky projects with lower capital requirements that sort of fits our profile. I think patience is a virtue in this case, and there seems to be no shortage of prospects to look over as large oil and gas companies continue to reposition their exposure.

The Water Infrastructure group managed to show year-over-year improvement, despite a lot of headwinds in the U.S.-based marketplace. There's several pieces in this group, so it's necessary to peel the numbers back a bit to get a better sense for the individual divisions. Our base water well drilling, repair and ground water treatment revenue combined in that group was $67.6 million, up 12% from prior year. Division EBIT was $4.4 million, which is up 46% from last year. The Afghanistan project contribution quarterly results of $3 million was pretty much similar to last year.

So we finally did see some year-over-year improvement in our base water business without Afghanistan, and perhaps a signal of the first glimmer of hope that a little loosening of spending by cities and states and towns is occurring, probably not an unreasonable expectation as tax collections have improved for most states. At the same time, they were paring expenses to balance budget. Granted, any recovery in municipal spending to the extent affected by the housing component looks to continue to be slower than recoveries in past recessions. Our response has been to steer our products, service lines of business to private sector customers. We have made progress in that area, but probably not enough to offset the challenge we face completely replacing the water well drilling job in Afghanistan. The equivalent for that job is en route back to the U.S. now, so we're on standby until it's returned to our Denver yard. That should be end of this month, maybe early July.

Moving on to Reynolds Inliner, our cured-in-place pipe division, revenues were up also 12%. Division EBIT of $2.9 million exceeded prior year by 7%. The recent acquisition of Wildcat, a Colorado-based CIPP company, provided some of the year-over-year revenue improvement. If you back that out, the revenue would have still been up about 6% over prior year. Our Reynolds Heavy Civil division revenue was up a solid 8% really given the difficulties in that market, totaling $81.1 million. But the weaker margins took a toll on the division EBIT. It was $2.1 million, falling from $2.7 million last year. As we’ve mentioned in the prior earnings calls, we've had to continue to sharpen our pencils on bids for infrastructure work in this area to maintain a share of a shrinking pie.

The backlog for Reynolds Heavy Civil and the Inliner, together at the end of April, were $364 million. That's down about $35 million from a year ago. About 30% of the decline was in Inliner, the balance in the heavy civil backlog. This decline in the Reynolds group of companies’ backlog is one of few times since we've entered the business with the original acquisition back in late 2005 we have experienced year-over-year backlog decline. Our bidding activities picked up recently, so perhaps we'll make it up in short order with a couple of project awards.

Finally, our geoconstruction business earnings contribution slipped badly this quarter, despite significantly higher revenue from the Bencor acquisition. Geo's revenue was up 66%, entirely due to Bencor. Without Bencor, revenue was actually down 18%. Earnings were down 47% again, despite a hefty positive contribution from Bencor as they continue to perform just as we projected. Unfortunately, we had a real gap between jobs in our base business in the U.S. And at the same time, our Italian manufacturing operations has stayed somewhat weak. We're rebuilding the backlog, and as we begin to execute the work, the second half of the year will improve.

A little better news on our recent joint venture in Brazil. They were profitable this quarter and, in their case, have experienced a significant pickup in backlog. In fact, Costa Fortuna, the joint venture which was started in July in Bencor, which we acquired in November, together have well in excess of $100 million in projects that they’ve picked up recently. So really, it's our bread-and-butter jet grouting business that was weak this quarter. We're going to need a good contribution from this geoconstruction division, along with the continued good results from Mineral Exploration to counter maybe a softer Infrastructure business and try and replace the Afghanistan project in the second half.

So in summary, highest first quarter revenue in Layne's history. In fact, to my surprise, it was within $8 million of an all-time quarterly revenue high. So it would be quite a feat to duplicate this revenue in any quarter, much less the first, but a very positive start for the year.

Looking forward, second quarter looks to be a little more challenging than the first, which is a bit unusual for us given the normally better weather in that quarter. In fact, historically, the second or third quarter are generally almost always our best quarters. The commodity side of our business looks like it will hold its own. So I think next couple of quarters will hinge on how the Water and Infrastructure side of the work fares.

So, Devon, if you want to see if there are any questions, we'll take them now.

Question-and-Answer Session

Operator

[Operator Instructions] Our first caution comes from Ryan Connors with Janney Montgomery.

Ryan Connors - Janney Montgomery Scott LLC

A couple of questions, one on the MinEx side and then one on Water. First on the MinEx, you mentioned the possibility, Andy, of adding rigs in the affiliates. And can you just expand on your view there in the capacity situation? I mean, obviously with the margins where they are, the customers are kind of sending a signal that they'd like to see more capacity. So if you could just give us your expanded thoughts on your own capacity additions, not only in the affiliates but also in the wholly-owned business? And then where you see capacity rig additions evolving for the industry as a whole?

Andrew Schmitt

We see, in our case, the -- I'll start with the Latin American affiliates. They have contracts -- some of their larger contracts in both Chile and Peru have been extended, and actually in terms of the amount of activity on those contracts. So the contracts are there. It's just the customers have come back on some of the larger contracts and said, "We're going to need more equipment." And in most cases, we're either the -- we're the sole source for that equipment. So we've stepped up to the table or we run the risk of having competitors service those accounts. Of course, the competitors are pretty strapped for rigs themselves. So it wouldn't be unreasonable for us to add north of 20 rigs in the Latin American affiliates. Between Chile, Peru and Mexico, probably about 4 in Peru, 5 in Mexico and the balance would be in Chile. In our Mineral Exploration business, wholly owned business, it's more of just an add a rig. We don't have one customer coming through and saying, "We need 5 or 6 more rigs." At this point, we're dealing with more of the individual smaller accounts, more of the junior businesses, the junior companies increase their presence in the marketplace. So we're sought out in the wholly owned business in the fill area, which tells you we have more room for price appreciation. Shorter jobs, shorter contracts, a little bit different from the Latin American affiliates with their bigger jobs, bigger mines, bigger contracts. So they're stepping up with existing work. We're probably adding rigs on the wholly owned to pick up intermediate or junior mining companies. I think what you'll find in the industry is when you look at Layne Christensen and its Latin American affiliates, we did not buy a lot of companies in the last going -- that period of time from 2004, '05, '06, '07 and '08, so we did not pick up a lot of older equipment in some cases. So when you see us add, it's generally for capacity. I think when you look at Boart and Major Drilling, they'll add incremental capacity, but they probably upgrade more. So I think what you're going to see in the industry in terms of appreciable additions in rigs, is going to be the more of the small independent, more mom-and-pop-type drillers that will pick up a lot of the work that comes from the junior companies. Major does a little bit more junior mining work than we do, mainly because of the geography they service. Boart, a little bit more like us, more majors. And of course, our Latin American affiliates probably have the largest concentration of majors. Juniors are not a big factor for them. As a result, they tend to be less volatile, where if you look at the declines in 2009, you'll see our business was pretty much like Boart's business. Major dropped a little bit sharper than we did initially with the junior exposure. But they will eventually -- growth rate probably overtake us all because of the junior business. So that's sort of the way it works. And it would not surprise me. I think Major was out earlier today, and they talked about the number of rigs that they'll spend and the capital spending. And that spending is, I think, I think CAD $70 million, so quite a bit larger than ours. Jerry, what did we spend on our wholly owned Minerals business CapEx this year?

Jerry Fanska

Probably $30 million.

Andrew Schmitt

Okay. And maybe that much in Latin America?

Jerry Fanska

Possibly.

Andrew Schmitt

Possibly. So right in there, Ryan. So that sort of paints a background for you.

Ryan Connors - Janney Montgomery Scott LLC

Okay. And then just to follow-on to that, Jerry and Andy. You talked the last quarter about this potentially being the peak year in MinEx. And when we talked to some of the miners, the rule of thumb that we often hear is that as long as copper prices, for example, remain above $3 a pound, that's a very, very conducive environment to drilling. And we haven't even come close to that. We're still well over $4 a pound, even though we're off the highs. So that kind of suggests to us that maybe the cycle is not so close to rolling over. I mean, can you just update us on your view?

Andrew Schmitt

Yes. When I said peak, I thought about that later. Plateau might have been better and I said because we’re starting to run into having to train people, okay? And just trying to train the people and keep up with the work would put some correction [ph] on the ability of everybody to grow. So I thought about peak. That generally tells you, you're getting ready to decline. I was thinking more of a peak in the operational challenges that we start facing. And I think that if you talk to Boart or Major, they will tell that when you bring new people on board, the efficiency goes down as well. So we started hitting a little saturation point, so maybe plateau would have been better. Now we'd have to see a sharp pullback in emerging and developing market growth, some kind of liquidity financial crisis. We’d have to see something like that to probably come down at this point. I think maybe plateau, and I was again thinking more operations. When you look at most of the forecasts particularly for copper and you're looking at a, what, a 30-year reserve like copper compared to extensive reserve lives for a lot of other metals. Now you could make a case that you're going to do much more than plateau for a while, unless some outside influence like the financial crisis would get everybody to halt spending. So I think that probably plateau is probably a better word, and we're at a high level. Clearly, our affiliates are going to move up. We won't add that many rigs, and these are not replacement rigs. So their contribution will pick up in the second half of the year and next year.

Ryan Connors - Janney Montgomery Scott LLC

Okay. Well, that's very helpful. I'll step out and let some of the other guys cover Water.

Operator

Our next question comes from Jonathan Ellis with Bank of America Merrill Lynch.

Jay Chhatbar

This is Jay Chhatbar on for Jonathan. So my first question, you mentioned bidding activity was up in the Reynolds business. Can you talk about what is the total value of projects out there? And how much are you currently bidding on, and what has been your historical success rate?

Andrew Schmitt

Well, I don't know that I would know a historical success rate. I'd have to have Jeff Reynolds in here to answer that, Jay. I'm not sure that I'd know that. Jerry, do you in terms of success rate?

Jerry Fanska

No.

Andrew Schmitt

Yes, I don't know. We are -- I signed off on the bids that are over $10 million. So it's just more when I start seeing more and more bids north of $10 million across my desk. And recently, we've seen a steady number of bids come in. We had a little bit of a low point a while back where I didn't see a bid a week. And now I'm seeing 3 and 4 bids, 5 bids a week, so -- and only sign off on the ones over $10 million require my signature. So that's sort of my benchmark there, Jay.

Jay Chhatbar

Okay. And then can you talk about margin trends in the Water backlog versus existing projects and specifically on the Reynolds business?

Andrew Schmitt

Yes, we were in the fully loaded costs, including the cost of the equipment depreciated, in the best of times in the 12% bid range. That's moved down to about 8% and is holding flat.

Operator

Our next question comes from the line of John Rogers with D.A. Davidson.

John Rogers - D.A. Davidson & Co.

Andy, just relative to your comment about the second quarter being a little more challenging. And I know you guys are conservative, and I appreciate it. But I mean, it seems to me that, I mean, seasonally the Minerals business should be at least as good, I mean given the market. And if you get some capacity expansion, it should be even better.

Andrew Schmitt

Yes, the rigs -- we're going to talk about buying [ph] in the second half, so it won't affect the second quarter. The -- if you look at the current forecast for Minerals and the Latin American affiliates, it's about -- together, our share as affiliates, it's about $2 million less than what we just reported in the first quarter. Now it's a forecast, the latest forecast we have. The Infrastructure business quarter was down from the prior year. So if we move with the current level of activity into the second quarter. I don't have the second quarter year-over-year number, but my guess is it would be down from there. We were down about $600,000 in earnings in the first quarter. So that's what I was looking at. And we'd probably get June with the Afghanistan job, which really being on standby, its equipment on the water, standby rates were not that big a discount from drilling rates. So we might not have that in the second quarter July month. Geoconstruction, we are rebuilding the backlog, but we won't get on those jobs till the second half. So when I say a bit more challenging, it really is in those areas. Energy looks to be pretty decent at current natural gas prices. So what we're looking at there is one month of Afghanistan, $2 million less in MinEx, maybe $1 million in Water. So that's really what I was thinking of when I said a bit more challenged.

John Rogers - D.A. Davidson & Co.

Yes, but the MinEx...

Andrew Schmitt

The weather is better. We generally can get more work done, bill more percent of completion work. The weather does help us. And obviously February and March and April had some challenges. May did as well, quite honestly. We note some wicked weather there.

John Rogers - D.A. Davidson & Co.

Okay. But the MinEx being down, I mean that sounds kind of conservative given what's going on in the market.

Andrew Schmitt

Yes, and it really -- it's just the ebb and flow of the work. I said it's just a forecast. I looked at it, it was 15 instead of, what, 17 or something. Could be the guys being conservative. We'll see. It'll get a little get sharper as we get -- well, I haven't gotten a forecast for the month of June and won't see one for a couple of weeks. We'll have a better idea then.

John Rogers - D.A. Davidson & Co.

Okay. And then the other thing I want to ask you about is in terms of acquisitions, I mean, it's been a little quieter of late. But I assume pricing is a little better now, both on the Water side and on the -- or the Infrastructure side of the business. But I'm also curious, I mean, you mentioned you're reluctant to get into the oil markets right now given the kind of the froth there. But I mean, do you see that changing? And I mean, how big an opportunity would you look at?

Andrew Schmitt

On the oil and gas side?

John Rogers - D.A. Davidson & Co.

Yes, first. And then -- but also, I'd like to hear your thoughts on the Water Infrastructure.

Andrew Schmitt

Okay. We are probably -- $100 million is probably the tipping point for us, and the property would have current cash flow. It would be what we call a little bit more mundane. We would not have any have-to-drill capital commitment, so basically more of the acquire-and-develop with existing production that just gets extended, down-spaced, pushed out a bit, with hopefully some upside, would be fairly conservative stuff. So it would be something that's got a decent return, capital that we can control. We're not forced into having to drill to hold leases, and ones that better returns than we could get -- we would have to require better than -- returns than we felt we could get in the Water or Infrastructure or Minerals side of business. That would definitely be a bar that Energy would have to go over, in our view. On the Water and Wastewater Infrastructure, surprisingly, we're not seeing -- we were seeing quite a few businesses. And as you know, we bought 5 or 6 of them when times were better. We're not seeing the amount of activity in terms of people calling up with more of the general contracting infrastructure type of business. Wildcat came up on the CIPP, and we just bought that. It was thought of a bolt-on for Inliner, gave us that western exposure because we really didn't have any exposure at all west of the Mississippi. And we would certainly look at others along those lines even further west if they came up. We're not seeing the design-build type businesses that we saw in 2006, '07 and '08. So it's just been a little bit slower. You think the prices are down, but there seems to be a reluctance for those who come to the table. And it may be that people don't have to sell. Typically, these businesses don't carry a lot of debt, so they're pretty flexible, and they're typically privately owned. So I think that may be the reason, because we have not seen a lot of activity.

John Rogers - D.A. Davidson & Co.

Okay. So don't look for anything there near term, it sounds like.

Andrew Schmitt

We don't have anything in the hopper, John, that we're looking at.

Operator

[Operator Instructions] And our next question comes from Will Nasgovitz with Heartland Advisors.

William Nasgovitz - Heartland Funds.

I realize it's a very small part of your business, but I just want to get more color on the Energy business. Did you give production guidance for the year?

Andrew Schmitt

We typically don't. I mean, currently, we’ve held our production pretty, pretty flat. It's -- we're at -- where are we, Jerry?

Jerry Fanska

Well, we're at 12 million a day basically.

Andrew Schmitt

About 12 million a day. We've got that pretty steady. We would -- if Southern Star line, it’s base’s [ph] differential varied, but it's $0.30, $0.35, $0.40, sometimes below. NYMEX, we move on that line up above $5, we'd probably step out. We've got quite a few locations. We've got quite a few PUDs, as well, that we could drill as well. So we probably would step it up, actually see that gas pick up a little bit, if that were the case. But it's been pretty flat. We've kept it flat for a number of years now going back in that range. We ramped down from a growth of about 20, down initially to just what we had hedge, Will. And then we have just sort of drilled. The decline has flattened out for us a little bit. So if you look at production a year ago, it's not much different than it was -- is today year-over-year, quarter-over-quarter. I think it's actually -- looking at it here, net production is almost flat, almost no change. So we've been in that no-change mode for a while. If pricing would improve, we’d step up drilling. We haven't done much of that except to hold leases. And the occasional oil well, we've got some oil mixed in with those gas properties.

William Nasgovitz - Heartland Funds.

I'm just curious, you referenced in your opening remarks the shift from a lot of these E&P companies. I'm presuming the shift from -- into more liquids-rich and oil versus just gas.

Andrew Schmitt

We do. There's definitely a lot of repositioning. So some of the things we see would be like a water flood in the Bakken. El Paso getting rid of some older-producing properties in the powder [ph]. So we fall in the category as that evolution occurs from the bigger companies as they reposition, we sort of fall in that lower end of the chain. It suits our appetite from the capital and also the fact that we get current cash flow in the oil market. We'd probably hedge part of it, and we can extend the property a little bit or down-space. That's a better fit for us. We wouldn't run away from something with a lot of upside, but we don't like to be under the gun on capital, whether it's drill it or lose it. We like the horizontal property aspect. But in those particular cases, you've got a bigger capital commitment on the well. So you still, in our view, have to be centered in a play and have some room on expiring leases to be attractive to us. And we drill in our -- some of our deeper water rigs. We drill horizontal wells from time to time for customers, not quite these extended reaches, so those wells don't bother us from that standpoint.

William Nasgovitz - Heartland Funds.

Do you have a longer-term, I guess, price tag for natural gas that you think is -- or we could get to, assuming a shift continues to accelerate, or just your thoughts on that?

Andrew Schmitt

Well, there's so many wells that are sitting awaiting completion, waiting infrastructure. You have to be pretty bold, I think, to see prices move much above $5, plus or minus 10% in the next year or so because there’s just a backlog of some on these big wells in the various shale plays that are waiting on infrastructure, waiting on completion, may remain tapped as well. But I think one of the things that will be interesting to see is despite the big initial production numbers, where do these shale wells, big shale wells actually, not the oil side but the gas side, what do they really need to make a return? That's one thing we've not seen a long enough period of time to judge that. There might be a cost push there that, looking at supply and demand, we might not be all seeing. So that would bring some wells like ours and the Cherokee, make them look more attractive as well. Because we can make a pretty decent return if we got a little bit north of $5.

William Nasgovitz - Heartland Funds.

And I -- forgive me if you touched on this either today or in prior calls. But I was just curious, you got any update on just the potential for treating on those frac water? I know you made an acquisition in the past couple of years.

Andrew Schmitt

We did. We picked up Intevras, which there was an evaporation unit, which was more tied to the produced Water side. So that evaporation is going to fit in line when you've got more produced water and wells online. It's got a separation -- or it's called an Integra filter. It's sort of a separation mechanism that helps divert that flowback water. So you get the nasty stuff one way and stuff that can be recycled and worked back in. We've got a couple of those units working in the field. We haven't sold another evaporative unit, but we really need for that unit to work as a real good source of waste heat like you pull off the compressors. And if you park it next to the compressor station. So we'll probably see our Produced Water business improve as these fields come on into production, whereas the little Integra filter we have is in the field now. So we have active discussions in that area. And I think that's a good long-term growth because no matter where you're going in the shale, whether it's in the Eagle Ford or the Marcellus, there is a fair amount of water. We get more and more of the major large oil and gas companies like Shell talking to us about more of an expanded water roll, where we drill the injection wells, handle the wastewater, handle the frac flow back, take that whole water issue off the table for them. So when you get into the larger companies, there seems to be a recent move based on contacts we’ve had more towards somebody picking up that whole problem, if you will, and dealing with it. So we have several divisions that, that affects in Layne. So that's something the guys are still looking at fairly actively with each other now. We could do the pipelines for them, too, for that matter. We just haven't put in a lot of oil and gas lines, but we certainly can do that. If we can put in an 80-inch sewer line, we can put in a natural gas line.

Operator

And we have a follow-up on the line from Ryan Connors with Janney Montgomery.

Ryan Connors - Janney Montgomery Scott LLC

Just one follow-up on the Water side. You talked a little bit in your prepared remarks, Andy, about this dynamic of competition being especially fierce on the water projects because there are contractors who, historically, would have focused on other things now bidding on water. Is there any fear that highway-related contractors could be the next wave of competition on some of these? I know that we’re seeing some of these state highway budgets come in, there are huge cuts year-over-year, and the federal highway bill looks to be disappointing. So we're concluding that the project activity there is going to dry up. It doesn't seem like a huge leap for some of those guys to seek work in the water space.

Andrew Schmitt

They could. I think we've seen all manner -- as we've gone through the residential downturn, we saw a lot of small contractors that really surprised they could even bond [ph] the job, but would even bid on some of the more risky jobs, then we ran into commercial guys who were more capable. So it wouldn't surprise me to see -- we've seen a fair amount of roadwork. Some of it were repairs, some of it shorter projects, but it kept a lot of people out of that. So it's not out of the question. The guys in the heavy civil work can tell you if you're going to find those skill sets with the people. But you're right, Ryan, as you get in -- as these markets and get depressed, people really start to stretch their geographic territory, stretch their skill set, try to maintain some complement or core group of people. And so it's still some places where you'll see a fair amount of competition. On a couple of the bids I saw last week, I saw one in the Colorado that had only 4 other bidders-- well, there were 6 including us. And you sort of recognize them. I saw another on design-build project, and there were 14 including us. So you still -- I couldn't tell you who 10 of them were. So they could very well even be out of that area. I wouldn't recognize the name so...

Ryan Connors - Janney Montgomery Scott LLC

Just one data point. You mentioned the backlog numbers in Reynolds and CIPP and Inliner. Can you just rattle those facts off again? The backlog -- looking specifically for the backlog number in the CIPP piece, at least the year-over-year change?

Andrew Schmitt

Yes, sure. We had Inliner at $72 million, okay, a year ago at this time. It's $60 million now, so we're down 20%.

Operator

[Operator Instructions] I'm showing no further questions in the queue.

Andrew Schmitt

Okay. Thanks, everybody. We appreciate it. And we will be back in touch next quarter. And thanks, Devon.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may all disconnect. Everyone, have a great day.

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