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United States Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-K
  þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Fiscal Year Ended January 31, 2007
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to .
 Commission file number: 0-20578
 Layne Christensen Company
  Delaware
    
    48-0920712(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 
   
 
 o þ
 o þ
 þ o
 o
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TABLE OF CONTENTS  PART IItem 1. BusinessGeneralItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. Properties and EquipmentItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersItem 4A. Executive Officers of the RegistrantPART IIItem 5. Market for Registrants Common Equity and Related Stockholder MattersItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and ManagementItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accounting Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSignaturesExhibit 4 (2)Exhibit 4 (4)Exhibit 10 (24)Exhibit 21 (1)Exhibit 23 (1)Exhibit 23 (2)Exhibit 31 (1)Exhibit 31 (2)Exhibit 32 (1)Exhibit 32 (2)    Table of Contents  
 PART I
 
 Item 1. Business
 
 General
  www.laynechristensen.com
 Market Overview
  Water and Wastewater Infrastructure
     Mineral Exploration
   2




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Energy
  Business Strategy
  Expand turnkey service capabilities for water and wastewater treatment facilities, provide
ancillary water treatment products and services and further expand the Companys pipeline
construction and sewer rehabilitation techniques into its geographic markets.
   Continue to take advantage of robust market conditions in
mineral exploration
  Develop existing unconventional gas opportunities and expand presence in the resource market
  3




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Services and Products
 Overview of the Companys Drilling Techniques
  
    
    Conventional and reverse circulation rotary rigs are used
primarily in water well applications for drilling large
diameter wells and employ air or drilling fluid circulation
for removal of cuttings and borehole stabilization.
    
    Dual tube drilling, an innovation advanced by the Company
primarily for mineral exploration and environmental drilling,
conveys the drill cuttings to the surface inside the drill
pipe. This drilling method is critical in mineral exploration
drilling and environmental sampling because it provides
immediate representative samples and because the drill
cuttings do not contact the surrounding formation thus
avoiding contamination of the borehole while providing
reliable, uncontaminated samples. Because this method involves
circulation of the drilling fluid inside the casing, it is
highly suitable for penetration of underground voids or faults
where traditional drilling methods would result in the loss of
circulation of the drilling fluid, thereby preventing further
penetration.
    
    Diamond core drilling is used in mineral exploration
drilling to core solid rock, thereby providing geologists and
engineers with solid rock samples for evaluation.
    
    Cable tool drilling, which requires no drilling fluid, is
used primarily in water well drilling for larger diameter
wells. While slower than other drilling methods, it is well
suited for penetrating boulders, cobble and rock.
    
    Auger drilling is used principally in environmental
drilling applications for efficient completion of relatively
small diameter, shallow borings or monitoring wells. Auger
rigs are equipped with a variety of auger sizes and soil
sampling equipment.
 Water and Wastewater Infrastructure
  Water Systems
  Well and Pump Rehabilitation
  Water and Wastewater Treatment and Plant Construction
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Sewer Rehabilitation
 Environmental Assessment Drilling
 Mineral Exploration
    Energy
    5




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Operations
    Customers and Contracts
      Backlog
  Competition
  6




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Employees and Training
    Regulatory and Environmental Matters
   Potential Liability and Insurance
  7




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Applicable Legislation
  
 Item 1A. Risk Factors
 You should carefully consider the risks described below before making an investment decision.
The risks and uncertainties described below are not the only ones facing our company. If any of the
following risks actually occurs, our business, financial condition or results of operations could
be materially adversely affected. In that case, the trading price of our common stock could decline
substantially.
 Risks Relating To Our Business And Industry
 A significant portion of our water and wastewater infrastructure business is dependant on
municipalities and a decline in municipal spending could adversely impact our business
  We depend on continued mineral exploration and development
  
    
    global and domestic economic considerations;
    
    the economic feasibility of mineral exploration and production;
    
    the discovery rate of new mineral reserves;
    
    national and international political conditions; and
the ability of mining companies to access or generate sufficient funds to finance capital expenditures for their activities.
  Our businesses are cyclical, and therefore our results can fluctuate significantly
  
    
    the timing of the award and completion of contracts;
    
    the recording of related revenues; and
    
    unanticipated additional costs incurred on projects.
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Our use of the percentage-of-completion method of accounting could result in a reduction or
reversal of previously recorded results
  We may experience cost overruns on our fixed-price contracts, which could negatively affect our
profitability
  We have a substantial amount of debt and other contractual commitments, and the cost of servicing
those obligations could adversely affect our business and hinder our ability to make payments on
the obligations, and such risk could increase if we incur more debt
  
    
    our ability to obtain any necessary financing in the
future for working capital, capital expenditures, debt service
requirements or other purposes may be limited or financing may
be unavailable;
    
    a substantial portion of our cash flows must be dedicated
to the payment of principal and interest on our indebtedness
and other obligations and will not be available for use in our
business;
    
    our level of indebtedness could limit our flexibility in
planning for, or reacting to, changes in our business and the
markets in which we operate; and
    
    our high degree of indebtedness will make us more
vulnerable to changes in general economic conditions and/or a
downturn in our business, thereby making it more difficult for
us to satisfy our obligations.
  A significant portion of our revenues are generated from our operations in foreign countries, and
we face unique risks related to these operations
  
    
    political, social and economic instability;
    
    war and civil disturbances;
    
    the taking of property by nationalization or
expropriation without fair compensation;
    
    changes in government policies and regulations;
    
    tariffs, taxes and other trade barriers;
    
    exchange controls and limitations on remittance of
dividends or other payments to us by our foreign subsidiaries
and affiliates; and
    
    devaluations and fluctuations in currency exchange rates.
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Our profitability can vary significantly with fluctuations in the market price of gold as a
substantial portion of our mineral exploration business is comprised of drilling for gold
  
    
    the strength of the United States economy and the economies of other industrialized and developing nations;
    
    global or regional political or economic crises;
    
    the relative strength of the United States dollar and other currencies;
    
    expectations with respect to the rate of inflation;
    
    interest rates;
    
    sales of gold by central banks and other holders;
    
    demand for jewelry containing gold; and
    
    speculation.
  The volatility of natural gas prices could have a material adverse effect on our business
   The development of unconventional gas properties is capital intensive and involves numerous risks
that may result in a total loss of investment
  Our future success depends upon our ability to find, develop and acquire additional unconventional
gas reserves that will be commercially viable for production
  10




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Our bonding capacity may be limited in certain circumstances
  We are subject to market fluctuations of certain commodities in connection with the operation of
our business
  The dollar amount of our backlog, as stated at any given time, is not necessarily indicative of our
future earnings
  Our failure to meet the schedule or performance requirements of our contracts could adversely
affect us
  Our dependence on subcontractors could adversely affect us
  Our projects expose us to potential professional liability, product liability, warranty and other
claims
  We may be liable to complete work under our joint venture arrangements
  11




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Our drilling and other construction activities are subject to various risks and natural disasters,
and resulting losses could have a material adverse effect on us
  
    
    adverse weather conditions;
    
    natural disasters;
    
    work stoppages;
    
    mine closings; and
    
    force majeure and other similar events.
  We require skilled workers to conduct our operations
  We will lose business to our competitors if we are not able to demonstrate our technical
competence, competitive pricing and reliable performance to potential customers
  Our businesses are subject to complex governmental regulations which could have a material adverse
affect on our results of operations and financial condition
    12




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Our business is subject to environmental regulation that could result in substantial costs or
liabilities
   We have high deductibles for our health insurance, workers compensation insurance and liability
insurance
  Our actual results could differ from the estimates and assumptions that we use to prepare our
financial statements
  
    
    contract costs and profits and application of
percentage-of-completion accounting and revenue recognition of
contract claims;
    
    recoverability of inventory and application of lower of
cost or market accounting;
    
    provisions for uncollectible receivables and customer
claims and recoveries of costs from subcontractors, vendors
and others;
    
    provisions for income taxes and related valuation
allowances;
    
    recoverability of goodwill;
    
    recoverability of other intangibles and related estimated
lives;
    
    valuation of assets acquired and liabilities assumed in
connection with business combinations; and
    
    accruals for estimated liabilities, including litigation
and insurance reserves.
  We are and will continue to be involved in litigation
  13




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If we must write off a significant amount of intangible assets or long-lived assets, our earnings
will be negatively impacted
  Difficulties integrating our acquisitions could adversely affect us
  Risks Related To Our Common Stock
 Provisions in our organizational documents could prevent or frustrate attempts by shareholders
to replace our current management.
   Because we are a relatively small company, we are disproportionately negatively impacted by changes
in the securities laws and regulations, which are likely to increase our costs and require
additional management resources
  14




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A small number of shareholders own a significant amount of our common stock and have influence over
our business regardless of the opposition of other shareholders
  We are restricted from paying dividends
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties and Equipment
    Natural Gas Reserves
  2007
    
    2006Proved developed (MMcf)
    
    
    25,010
    
    
    
    19,402Proved undeveloped (MMCf)
    
    
    32,068
    
    
    
    25,718Total proved reserves (MMcf)
    
    
    57,078
    
    
    
    45,120Estimated future net revenue - pre-tax
    
    $
    199,569
    
    
    $
    192,235Present value of future net
revenues-pre-tax
    
    $
    126,442
    
    
    $
    120,116
   15




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Productive Wells, Production and Acreage
  Fiscal Years Ended January 31,
    
    2007
    
    2006Revenues
    
    $
    5.95
    
    
    $
    8.52Lease operating expenses
    
    
    1.46
    
    
    
    1.94Transportation costs
    
    
    1.88
    
    
    
    2.57Production and property taxes
    
    
    0.16
    
    
    
    0.24
  Gross
    
    NetAcres
    
    Acres2008
    
    
    62,572
    
    
    
    60,9402009
    
    
    27,729
    
    
    
    27,7292010
    
    
    20,568
    
    
    
    20,5682011
    
    
    10,852
    
    
    
    1,8402012
    
    
    13,363
    
    
    
    625Thereafter
    
    
    637
    
    
    
    637
  AcresFiscal Years Ended January 31,
    
    2007
    
    2006Gross developed
    
    
    63,973
    
    
    
    23,187Net developed
    
    
    50,159
    
    
    
    20,883Gross undeveloped
    
    
    161,301
    
    
    
    155,716Net undeveloped
    
    
    161,301
    
    
    
    144,164
 Drilling Activity
  Delivery Commitments
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 4A. Executive Officers of the Registrant
   Name
    
    Age
    
    PositionAndrew B. Schmitt
    
    
    58
    
    
    President, Chief Executive Officer and DirectorJeffrey J. Reynolds
    
    
    40
    
    
    Executive Vice President and DirectorGregory F. Aluce
    
    
    51
    
    
    Senior Vice President and Division President  Water ResourcesEric R. Despain
    
    
    58
    
    
    Senior Vice President and Division President  Mineral ExplorationSteven F. Crooke
    
    
    50
    
    
    Senior Vice President, Secretary and General CounselJerry W. Fanska
    
    
    58
    
    
    Senior Vice President-Finance and Treasurer
  Name
    
    Age
    
    PositionColin B. Kinley
    
    
    47
    
    
    Division President  Energy
     16




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PART II
 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters
  Fiscal Year 2007
    
    High
    
    LowFirst Quarter
    
    $
    33.93
    
    
    $
    25.60Second Quarter
    
    
    32.04
    
    
    
    25.12Third Quarter
    
    
    33.68
    
    
    
    26.57Fourth Quarter
    
    
    36.46
    
    
    
    28.67
 Fiscal Year 2006
    
    High
    
    LowFirst Quarter
    
    $
    19.17
    
    
    $
    14.72Second Quarter
    
    
    23.60
    
    
    
    14.41Third Quarter
    
    
    26.58
    
    
    
    20.20Fourth Quarter
    
    
    30.25
    
    
    
    19.95
   17




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##### Table of Contents



Item 6. Selected Financial Data
   Fiscal Years Ended January 31,
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Income Statement Data (in thousands, except per share data):Revenues
    
    $
    722,768
    
    
    $
    463,015
    
    
    $
    343,462
    
    
    $
    272,053
    
    
    $
    255,523Cost of revenues (exclusive of depreciation shown below)
    
    
    536,373
    
    
    
    344,628
    
    
    
    250,244
    
    
    
    196,462
    
    
    
    180,351Selling, general and administrative expense
    
    
    102,603
    
    
    
    69,979
    
    
    
    60,214
    
    
    
    53,920
    
    
    
    52,425Depreciation, depletion and amorization
    
    
    32,853
    
    
    
    20,024
    
    
    
    14,441
    
    
    
    11,877
    
    
    
    13,204Other income (expense):Equity in earnings of affiliates
    
    
    4,452
    
    
    
    4,345
    
    
    
    2,637
    
    
    
    1,398
    
    
    
    842Interest
    
    
    (9,781
    )
    
    
    (5,773
    )
    
    
    (3,221
    )
    
    
    (2,604
    )
    
    
    (2,490
    )Debt extinguishment costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,320
    )
    
    
    (1,135
    )Other, net
    
    
    2,557
    
    
    
    900
    
    
    
    1,220
    
    
    
    358
    
    
    
    1,694Income from continuing operations before income taxes
and minority interest
    
    
    48,167
    
    
    
    27,856
    
    
    
    19,199
    
    
    
    6,626
    
    
    
    8,454Income tax expense
    
    
    21,915
    
    
    
    13,121
    
    
    
    9,215
    
    
    
    4,265
    
    
    
    5,084Minority interest
    
    
    
    
    
    
    (50
    )
    
    
    (17
    )
    
    
    
    
    
    
    (188
    )Net income from continuing operations before discontinued
operations and cumulative effect of accounting change
    
    
    26,252
    
    
    
    14,685
    
    
    
    9,967
    
    
    
    2,361
    
    
    
    3,182Gain (loss) from discontinued operations, net of income taxes
    
    
    
    
    
    
    (4
    )
    
    
    (213
    )
    
    
    (1,456
    )
    
    
    (2,225
    )Gain (loss) on sale of discontinued operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,746
    
    
    
    (23
    )Net income before cumulative effect of accounting change
    
    
    26,252
    
    
    
    14,681
    
    
    
    9,754
    
    
    
    2,651
    
    
    
    934Cumulative effect of accounting change, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,429
    )Net income (loss)
    
    $
    26,252
    
    
    $
    14,681
    
    
    $
    9,754
    
    
    $
    2,651
    
    
    $
    (13,495
    )Basic income (loss) per share:Net income from continuing operations before discontinued
operations and cumulative effect of accounting change
    
    $
    1.71
    
    
    $
    1.08
    
    
    $
    0.79
    
    
    $
    0.20
    
    
    $
    0.27Income (loss) from discontinued operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    0.02
    
    
    
    (0.19
    )Net income before cumulative effect of accounting change
    
    
    1.71
    
    
    
    1.08
    
    
    
    0.78
    
    
    
    0.22
    
    
    
    0.08Cumulative effect of accounting change, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.22
    )Net income (loss) per share
    
    $
    1.71
    
    
    $
    1.08
    
    
    $
    0.78
    
    
    $
    0.22
    
    
    $
    (1.14
    )Diluted income (loss) per share:Net income from continuing operations before discontinued
operations and cumulative effect of accounting change
    
    $
    1.68
    
    
    $
    1.05
    
    
    $
    0.77
    
    
    $
    0.19
    
    
    $
    0.26Income (loss) from discontinued operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    0.02
    
    
    
    (0.18
    )Net income before cumulative effect of accounting change
    
    
    1.68
    
    
    
    1.05
    
    
    
    0.75
    
    
    
    0.21
    
    
    
    0.08Cumulative effect of accounting change, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.19
    )Net income (loss) per share
    
    $
    1.68
    
    
    $
    1.05
    
    
    $
    0.75
    
    
    $
    0.21
    
    
    $
    (1.11
    )Balance Sheet Data (in thousands):Working capital, excluding debt
    
    $
    66,989
    
    
    $
    69,996
    
    
    $
    54,455
    
    
    $
    52,406
    
    
    $
    37,613Total assets
    
    
    547,164
    
    
    
    449,335
    
    
    
    245,380
    
    
    
    217,327
    
    
    
    178,100Total debt
    
    
    151,600
    
    
    
    128,900
    
    
    
    60,000
    
    
    
    42,000
    
    
    
    32,370Total stockholders equity
    
    
    205,034
    
    
    
    171,626
    
    
    
    104,697
    
    
    
    93,685
    
    
    
    83,373
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary Language Regarding Forward-Looking Statements
  18




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Management Overview of Reportable Operating Segments
  Water and Wastewater Infrastructure
    Mineral Exploration Division
    Energy Division
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Other
   Fiscal Years Ended January 31,
    
    Period-to-Period Change2007
    
    20062007
    
    2006
    
    2005
    
    vs. 2006
    
    vs. 2005Revenues:Water and wastewater infrastructure
    
    
    73.6
    %
    
    
    69.3
    %
    
    
    67.9
    %
    
    
    65.7
    %
    
    
    37.7
    %Mineral exploration
    
    
    20.6
    
    
    
    26.8
    
    
    
    30.4
    
    
    
    19.9
    
    
    
    19.1Energy
    
    
    3.7
    
    
    
    2.7
    
    
    
    1.1
    
    
    
    116.0
    
    
    
    228.1Other
    
    
    2.1
    
    
    
    1.2
    
    
    
    0.6
    
    
    
    181.6
    
    
    
    136.5Total revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    56.1
    
    
    
    34.8Cost of revenues (exclusive of depreciation shown below)
    
    
    74.2
    %
    
    
    74.4
    %
    
    
    72.9
    %
    
    
    55.6
    
    
    
    37.7Gross profit, as adjusted**
    
    
    25.8
    
    
    
    25.6
    
    
    
    27.1
    
    
    
    57.4
    
    
    
    27.0Selling, general and administrative expense
    
    
    14.2
    
    
    
    15.1
    
    
    
    17.5
    
    
    
    46.6
    
    
    
    16.2Depreciation, depletion and amortization
    
    
    4.5
    
    
    
    4.3
    
    
    
    4.2
    
    
    
    64.1
    
    
    
    38.7Other income (expense):Equity in earnings of affiliates
    
    
    0.6
    
    
    
    0.9
    
    
    
    0.8
    
    
    
    2.5
    
    
    
    64.8Interest
    
    
    (1.4
    )
    
    
    (1.3
    )
    
    
    (0.9
    )
    
    
    69.4
    
    
    
    79.2Other, net
    
    
    0.3
    
    
    
    0.2
    
    
    
    0.3
    
    
    
    184.1
    
    
    
    (26.2
    )Income from continuing operations before income taxes
    
    
    6.6
    
    
    
    6.0
    
    
    
    5.6
    
    
    
    72.9
    
    
    
    45.1Income tax expense
    
    
    3.0
    
    
    
    2.8
    
    
    
    2.7
    
    
    
    67.0
    
    
    
    42.4Net income from continuing operations
    
    
    3.6
    
    
    
    3.2
    
    
    
    2.9
    
    
    
    78.8
    
    
    
    47.3Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    *
    
    
    
    *Net income
    
    
    3.6
    %
    
    
    3.2
    %
    
    
    2.8
    %
    
    
    78.8
    %
    
    
    50.5
    %
 *
    
    Not meaningful**
    
    As used, gross profit is defined as revenues less cost of
revenues, excluding depreciation, depletion and amortization  (in thousands)Fiscal Years Ended January 31,
    
    2007
    
    2006
    
    2005RevenuesWater and wastewater infrastructure
    
    $
    531,916
    
    
    $
    320,996
    
    
    $
    233,111Mineral exploration
    
    
    148,911
    
    
    
    124,206
    
    
    
    104,299Energy
    
    
    27,081
    
    
    
    12,536
    
    
    
    3,821Other
    
    
    14,860
    
    
    
    5,277
    
    
    
    2,231Total revenues
    
    $
    722,768
    
    
    $
    463,015
    
    
    $
    343,462Equity in earnings of affiliatesWater and wastewater infrastructure
    
    $
    
    
    
    $
    839
    
    
    $
    (127
    )Mineral exploration
    
    
    4,452
    
    
    
    3,506
    
    
    
    2,764Total equity in earnings of affiliates
    
    $
    4,452
    
    
    $
    4,345
    
    
    $
    2,637Income (loss) from continuing operations before income taxes and minority interestWater and wastewater infrastructure
    
    $
    35,000
    
    
    $
    28,255
    
    
    $
    26,393Mineral exploration
    
    
    26,557
    
    
    
    13,947
    
    
    
    11,791Energy
    
    
    10,680
    
    
    
    2,891
    
    
    
    (1,993
    )Other
    
    
    4,094
    
    
    
    1,307
    
    
    
    (43
    )Unallocated corporate expenses
    
    
    (18,383
    )
    
    
    (12,771
    )
    
    
    (13,728
    )Interest
    
    
    (9,781
    )
    
    
    (5,773
    )
    
    
    (3,221
    )Total income from continuing operations before income taxes and minority interest
    
    $
    48,167
    
    
    $
    27,856
    
    
    $
    19,199
 20




---



##### Table of Contents



Comparison of Fiscal 2007 to Fiscal 2006
         Water and Wastewater Infrastructure Division
 (in thousands)Fiscal Years Ended January 31,
    
    2007
    
    2006Revenues
    
    $
    531,916
    
    
    $
    320,996Income from continuing
operations before income taxes
    
    
    35,000
    
    
    
    28,255
   Mineral Exploration Division
 (in thousands)Fiscal Years Ended January 31,
    
    2007
    
    2006Revenues
    
    $
    148,911
    
    
    $
    124,206Income from continuing
operations before income taxes
    
    
    26,557
    
    
    
    13,947
   21




---



##### Table of Contents



Energy Division
 (in thousands)Fiscal Years Ended January 31,
    
    2007
    
    2006Revenues
    
    $
    27,081
    
    
    $
    12,536Income from continuing
operations before income taxes
    
    
    10,680
    
    
    
    2,891
   Other
 (in thousands)Fiscal Years Ended January 31,
    
    2007
    
    2006Revenues
    
    $
    14,860
    
    
    $
    5,277Income from continuing
operations before income taxes
    
    
    4,094
    
    
    
    1,307
  Unallocated Corporate Expenses
  Comparison of Fiscal 2006 to Fiscal 2005
         Water and Wastewater Infrastructure Division
 (in thousands)Fiscal Years Ended January 31,
    
    2006
    
    2005Revenues
    
    $
    320,996
    
    
    $
    233,111Income from continuing
operations before income taxes
    
    
    28,255
    
    
    
    26,393
   22




---



##### Table of Contents



Mineral Exploration Division
 Fiscal Years Ended January 31,
    
    2006
    
    2005Revenues
    
    $
    124,206
    
    
    $
    104,299Income from continuing
operations before income taxes
    
    
    13,947
    
    
    
    11,791
   Energy Division
 (in thousands)Fiscal Years Ended January 31,
    
    2007
    
    2006Revenues
    
    $
    12,536
    
    
    $
    3,821Income from continuing
operations before income taxes
    
    
    2,891
    
    
    
    (1,993
    )
   Unallocated Corporate Expenses
  Fluctuation in Quarterly Results
  Inflation
  Liquidity and Capital Resources
  23




---



##### Table of Contents



Operating Activities
  Investing Activities
     Financing Activities
    24




---



##### Table of Contents



Contractual Obligations and Commercial Commitments
  (in thousands)
    
    Payments/Expiration by PeriodLess than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 year
    
    1-3 years
    
    4-5 years
    
    5 yearsContractual Obligations and Other Commercial CommitmentsCredit Agreement
    
    $
    91,600
    
    
    $
    
    
    
    $
    
    
    
    $
    91,600
    
    
    $
    Senior Notes
    
    
    60,000
    
    
    
    
    
    
    
    33,333
    
    
    
    26,667
    
    
    
    Operating leases
    
    
    17,652
    
    
    
    6,951
    
    
    
    7,815
    
    
    
    2,886
    
    
    
    Mineral interest obligations
    
    
    552
    
    
    
    118
    
    
    
    211
    
    
    
    208
    
    
    
    15Total cash contractual obligations
    
    
    169,804
    
    
    
    7,069
    
    
    
    41,359
    
    
    
    121,361
    
    
    
    15Standby letters of credit
    
    
    9,844
    
    
    
    9,844
    
    
    
    
    
    
    
    
    
    
    
    Asset retirement obligations
    
    
    812
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    812Total contractual obligations and commercial commitments
    
    $
    180,460
    
    
    $
    16,913
    
    
    $
    41,359
    
    
    $
    121,361
    
    
    $
    827
   Critical Accounting Policies and Estimates
 
  Revenue Recognition
     Oil and Gas Properties and Mineral Interests
 25




---



##### Table of Contents



Reserve Estimates
 Goodwill and Other Intangibles
    Other Long-lived Assets
 Accrued Insurance Expense
 26




---



##### Table of Contents



Income Taxes
 Litigation and Other Contingencies
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
        27




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 Index to Consolidated Financial Statements and Financial Statement Schedules
 Layne Christensen Company and Subsidiaries
 PageStatement of Management Responsibility
    
    
    29Report of Independent Registered Public Accounting Firm
    
    
    30Financial Statements:Consolidated Balance Sheets as of January 31, 2007 and 2006
    
    
    31Consolidated Statements of Income for the Years Ended January 31, 2007, 2006 and 2005
    
    
    32Consolidated Statements of Stockholders Equity for the Years Ended January 31, 2007, 2006 and 2005
    
    
    33Consolidated Statements of Cash Flows for the Years Ended January 31, 2007, 2006 and 2005
    
    
    34Notes to Consolidated Financial Statements
    
    
    35Financial Statement Schedule II Valuation and Qualifying Accounts
    
    
    54
  28




---



##### Table of Contents



Statement of Management Responsibility
    /s/A. B. Schmitt
    
    /s/Jerry W. FanskaAndrew B. Schmitt
    
    Jerry W. FanskaPresident and Chief
    
    Senior Vice President and ChiefExecutive Officer
    
    Financial Officer
 29




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Share-Based Payment, Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB
Statements No. 87, 88, 106 and 132(R).
 Internal ControlIntegrated Framework
 /s/Deloitte & Touche LLP
 
 30




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##### Table of Contents



Consolidated Balance Sheets
 (in thousands)January 31,
    
    2007
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    13,007
    
    
    $
    17,983Customer receivables, less allowance of $7,020 and $5,573, respectively
    
    
    109,615
    
    
    
    91,159Costs and estimated earnings in excess of billings on uncompleted contracts
    
    
    51,210
    
    
    
    36,538Inventories
    
    
    18,456
    
    
    
    16,663Deferred income taxes
    
    
    16,551
    
    
    
    11,976Income taxes receivable
    
    
    521
    
    
    
    1,284Restricted cash  current
    
    
    8,270
    
    
    
    Other
    
    
    5,578
    
    
    
    5,975Total current assets
    
    
    223,208
    
    
    
    181,578Property and equipment:Land
    
    
    8,180
    
    
    
    9,486Buildings
    
    
    21,457
    
    
    
    19,595Machinery and equipment
    
    
    263,049
    
    
    
    222,531Gas transportation facilities and equipment
    
    
    24,939
    
    
    
    12,526Oil and gas properties
    
    
    58,458
    
    
    
    34,308Mineral interests in oil and gas properties
    
    
    12,515
    
    
    
    8,430388,598
    
    
    
    306,876Less  accumulated depreciation and depletion
    
    
    (174,081
    )
    
    
    (148,751
    )Net property and equipment
    
    
    214,517
    
    
    
    158,125Other assets:Investment in affiliates
    
    
    24,280
    
    
    
    21,741Goodwill
    
    
    65,184
    
    
    
    57,857Other intangible assets, net
    
    
    16,017
    
    
    
    16,948Restricted cash  long term
    
    
    
    
    
    
    9,143Other
    
    
    3,958
    
    
    
    3,943Total other assets
    
    
    109,439
    
    
    
    109,632$
    547,164
    
    
    $
    449,335LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    52,156
    
    
    $
    43,695Accrued compensation
    
    
    29,616
    
    
    
    20,025Cash purchase price adjustments
    
    
    240
    
    
    
    6,120Accrued insurance expense
    
    
    7,303
    
    
    
    5,562Other accrued expenses
    
    
    14,222
    
    
    
    12,212Acquisition escrow obligation  current
    
    
    9,395
    
    
    
    Income taxes payable
    
    
    9,045
    
    
    
    2,606Billings in excess of costs and estimated earnings on uncompleted contracts
    
    
    34,242
    
    
    
    21,362Total current liabilities
    
    
    156,219
    
    
    
    111,582Noncurrent and deferred liabilities:Long-term debt
    
    
    151,600
    
    
    
    128,900Accrued insurance expense
    
    
    8,160
    
    
    
    6,228Deferred income taxes
    
    
    23,302
    
    
    
    19,555Acquisition escrow obligation  long term
    
    
    
    
    
    
    9,143Other
    
    
    2,849
    
    
    
    2,301Total noncurrent and deferred liabilities
    
    
    185,911
    
    
    
    166,127ContingenciesStockholders equity:Common stock, par value $.01 per share, 30,000,000 shares authorized,
15,517,724 and 15,233,472 shares issued and outstanding, respectively
    
    
    155
    
    
    
    152Capital in excess of par value
    
    
    149,187
    
    
    
    141,067Retained earnings
    
    
    64,145
    
    
    
    37,893Accumulated other comprehensive loss
    
    
    (8,453
    )
    
    
    (7,442
    )Unearned compensation
    
    
    
    
    
    
    (44
    )Total stockholders equity
    
    
    205,034
    
    
    
    171,626$
    547,164
    
    
    $
    449,335
  31




---



##### Table of Contents



Consolidated Statements of Income
 (in thousands, except per share data)Years Ended January 31,
    
    2007
    
    2006
    
    2005Revenues
    
    $
    722,768
    
    
    $
    463,015
    
    
    $
    343,462Cost of revenues (exclusive of depreciation, depletion and amortization shown below)
    
    
    536,373
    
    
    
    344,628
    
    
    
    250,244Selling, general and administrative expense
    
    
    102,603
    
    
    
    69,979
    
    
    
    60,214Depreciation, depletion and amortization
    
    
    32,853
    
    
    
    20,024
    
    
    
    14,441Other income (expense):Equity in earnings of affiliates
    
    
    4,452
    
    
    
    4,345
    
    
    
    2,637Interest
    
    
    (9,781
    )
    
    
    (5,773
    )
    
    
    (3,221
    )Other, net
    
    
    2,557
    
    
    
    900
    
    
    
    1,220Income from continuing operations before income taxes and minority interest
    
    
    48,167
    
    
    
    27,856
    
    
    
    19,199Income tax expense
    
    
    21,915
    
    
    
    13,121
    
    
    
    9,215Minority interest
    
    
    
    
    
    
    (50
    )
    
    
    (17
    )Net income from continuing operations before discontinued operations
    
    
    26,252
    
    
    
    14,685
    
    
    
    9,967Loss from discontinued operations, net of income tax benefit (expense) of $(2) and $127
    
    
    
    
    
    
    (4
    )
    
    
    (213
    )Net income
    
    $
    26,252
    
    
    $
    14,681
    
    
    $
    9,754Basic income (loss) per share:Net income from continuing operations
    
    $
    1.71
    
    
    $
    1.08
    
    
    $
    0.79Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Net income per share
    
    $
    1.71
    
    
    $
    1.08
    
    
    $
    0.78Diluted income (loss) per share:Net income from continuing operations
    
    $
    1.68
    
    
    $
    1.05
    
    
    $
    0.77Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.02
    )Net income per share
    
    $
    1.68
    
    
    $
    1.05
    
    
    $
    0.75Weighted average shares outstanding  basic
    
    
    15,320
    
    
    
    13,550
    
    
    
    12,563Dilutive stock options
    
    
    311
    
    
    
    477
    
    
    
    368Weighted average shares outstanding  diluted
    
    
    15,631
    
    
    
    14,027
    
    
    
    12,931
  32




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##### Table of Contents



Consolidated Statements of Stockholders Equity
 NotesAccumulated
    
    
    
    
    
    ReceivableCapital In
    
    
    
    
    
    Other
    
    
    
    
    
    FromCommon Stock
    
    Excess of
    
    Retained
    
    Comprehensive
    
    Unearned
    
    Management(in thousands, except share data)
    
    Shares
    
    Amount
    
    Par Value
    
    Earnings
    
    Income (Loss)
    
    Compensation
    
    Stockholders
    
    TotalBalance, February 1, 2004
    
    
    12,533,818
    
    
    $
    125
    
    
    $
    89,759
    
    
    $
    13,458
    
    
    $
    (9,629
    )
    
    $
    
    
    
    $
    (28
    )
    
    $
    93,685Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,754
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,754Other comprehensive income:Change in unrecognized pension liability,
net of income tax benefit of $75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (118
    )
    
    
    
    
    
    
    
    
    
    
    (118
    )Foreign currency translation adjustments,
net of income tax benefit of $328
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,536
    
    
    
    
    
    
    
    
    
    
    
    1,536Change in unrealized gain on exchange
contracts, net of income tax benefit
of $539
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (856
    )
    
    
    
    
    
    
    
    
    
    
    (856
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,316Issuance of unvested shares
    
    
    24,576
    
    
    
    
    
    
    
    375
    
    
    
    
    
    
    
    
    
    
    
    (375
    )
    
    
    
    
    
    
    Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94
    
    
    
    
    
    
    
    94Issuance of stock upon exercise of options
    
    
    60,247
    
    
    
    1
    
    
    
    346
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    347Income tax benefit on exercise of options
    
    
    
    
    
    
    
    
    
    
    227
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227Payment of notes receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    28Balance, January 31, 2005
    
    
    12,618,641
    
    
    
    126
    
    
    
    90,707
    
    
    
    23,212
    
    
    
    (9,067
    )
    
    
    (281
    )
    
    
    
    
    
    
    104,697Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,681Other comprehensive income:Change in unrecognized pension liability,
net of income tax benefit of $1,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,902
    
    
    
    
    
    
    
    
    
    
    
    1,902Foreign currency translation adjustments,
net of income tax expense of $155
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (277
    )
    
    
    
    
    
    
    
    
    
    
    (277
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,306Cancellation of unvested shares
    
    
    (5,734
    )
    
    
    
    
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    
    
    
    
    (20
    )Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    
    
    
    
    170Issuance of stock upon acquisition
of business
    
    
    2,222,216
    
    
    
    22
    
    
    
    45,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,053Issuance of stock upon exercise of options
    
    
    398,349
    
    
    
    4
    
    
    
    3,320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,324Income tax benefit on exercise of options
    
    
    
    
    
    
    
    
    
    
    2,096
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,096Balance, January 31, 2006
    
    
    15,233,472
    
    
    
    152
    
    
    
    141,067
    
    
    
    37,893
    
    
    
    (7,442
    )
    
    
    (44
    )
    
    
    
    
    
    
    171,626Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,252Other comprehensive income:Foreign currency translation adjustments,
net of income tax expense of $35
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    291
    
    
    
    
    
    
    
    
    
    
    
    291Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,543Issuance of unvested shares
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reclassification of unearned compensation
related to the adoption of SFAS 123R
    
    
    
    
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    Adjustment to initially apply SFAS 158,
net of income tax benefit of $819
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,302
    )
    
    
    
    
    
    
    
    
    
    
    (1,302
    )Issuance of stock upon acquisition
of business
    
    
    45,563
    
    
    
    1
    
    
    
    1,262
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,263Issuance of stock upon exercise of options
    
    
    237,689
    
    
    
    2
    
    
    
    3,008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,010Income tax benefit on exercise of options
    
    
    
    
    
    
    
    
    
    
    1,654
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,654Share-based compensation
    
    
    
    
    
    
    
    
    
    
    2,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,240Balance, January 31, 2007
    
    
    15,517,724
    
    
    $
    155
    
    
    $
    149,187
    
    
    $
    64,145
    
    
    $
    (8,453
    )
    
    $
    
    
    
    $
    
    
    
    $
    205,034
  33




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##### Table of Contents



Consolidated Statements of Cash Flows
 (in thousands)Years Ended January 31,
    
    2007
    
    2006
    
    2005Cash flow from operating activities:Net income
    
    $
    26,252
    
    
    $
    14,681
    
    
    $
    9,754Adjustments to reconcile net income to cash from operations:Loss from discontinued operations, net of income taxes
    
    
    
    
    
    
    4
    
    
    
    213Depreciation, depletion and amortization
    
    
    32,853
    
    
    
    20,024
    
    
    
    14,441Deferred income taxes
    
    
    (2,985
    )
    
    
    6,540
    
    
    
    2,806Equity in earnings of affiliates
    
    
    (4,452
    )
    
    
    (4,345
    )
    
    
    (2,637
    )Dividends received from affiliates
    
    
    1,502
    
    
    
    1,693
    
    
    
    1,386Minority interest
    
    
    
    
    
    
    50
    
    
    
    17(Gain) loss on disposal of property and equipment
    
    
    (994
    )
    
    
    295
    
    
    
    (1,744
    )Gain on sale of domestic affiliate
    
    
    
    
    
    
    (1,289
    )
    
    
    Gain on sale of mineral concession
    
    
    (920
    )
    
    
    
    
    
    
    Share-based compensation
    
    
    2,240
    
    
    
    
    
    
    
    Share-based compensation excess tax benefits
    
    
    (1,382
    )
    
    
    
    
    
    
    Changes in current assets and liabilities, (exclusive of effects of acquisitions and
disposals):Increase in customer receivables
    
    
    (7,691
    )
    
    
    (3,139
    )
    
    
    (7,983
    )Increase in costs and estimated earnings in excess of
billings on uncompleted contracts
    
    
    (10,044
    )
    
    
    (432
    )
    
    
    (3,240
    )(Increase) decrease in inventories
    
    
    462
    
    
    
    3,682
    
    
    
    (3,428
    )(Increase) decrease in other current assets
    
    
    598
    
    
    
    (866
    )
    
    
    939Increase in accounts payable and accrued expenses
    
    
    27,522
    
    
    
    1,594
    
    
    
    11,336Increase (decrease) in billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    12,312
    
    
    
    3,534
    
    
    
    (1,215
    )Other, net
    
    
    (597
    )
    
    
    (1,185
    )
    
    
    (722
    )Cash from continuing operations
    
    
    74,676
    
    
    
    40,841
    
    
    
    19,923Cash from (used in) discontinued operations
    
    
    
    
    
    
    28
    
    
    
    (2,969
    )Cash from operating activities
    
    
    74,676
    
    
    
    40,869
    
    
    
    16,954Cash flow used in investing activities:Additions to property and equipment
    
    
    (36,150
    )
    
    
    (24,427
    )
    
    
    (15,603
    )Additions to gas transportation facilities and equipment
    
    
    (12,413
    )
    
    
    (5,125
    )
    
    
    (2,360
    )Additions to oil and gas properties
    
    
    (23,075
    )
    
    
    (11,084
    )
    
    
    (8,608
    )Additions to mineral interests in oil and gas properties
    
    
    (3,174
    )
    
    
    (2,281
    )
    
    
    (1,121
    )Payment of cash purchase price adjustment on prior year acquisition
    
    
    (6,120
    )
    
    
    
    
    
    
    Deposit of cash into restricted accounts
    
    
    (4,473
    )
    
    
    
    
    
    
    Release of cash from restricted accounts
    
    
    5,597
    
    
    
    
    
    
    
    Proceeds from disposal of property and equipment
    
    
    4,646
    
    
    
    892
    
    
    
    3,214Proceeds from sale of businesses
    
    
    
    
    
    
    2,355
    
    
    
    300Proceeds from sale of mineral concession
    
    
    920
    
    
    
    
    
    
    
    Acquisition of businesses, net of cash acquired
    
    
    (31,305
    )
    
    
    (61,542
    )
    
    
    (14,743
    )Acquisition of gas transportation facilities and equipment
    
    
    
    
    
    
    (1,445
    )
    
    
    (654
    )Acquisition of oil and gas properties and mineral interests
    
    
    (1,988
    )
    
    
    (4,704
    )
    
    
    (2,728
    )Return of capital from (investment in) affiliates
    
    
    411
    
    
    
    (69
    )
    
    
    (98
    )Cash used in investing activities
    
    
    (107,124
    )
    
    
    (107,430
    )
    
    
    (42,401
    )Cash flow from financing activities:Borrowings under revolving credit facilities
    
    
    425,925
    
    
    
    335,155
    
    
    
    46,900Repayments under revolving credit facilities
    
    
    (403,225
    )
    
    
    (266,255
    )
    
    
    (48,900
    )Issuance of long-term debt
    
    
    
    
    
    
    
    
    
    
    20,000Debt issuance costs
    
    
    
    
    
    
    (605
    )
    
    
    Payments on promissory note
    
    
    
    
    
    
    (1,080
    )
    
    
    (1,740
    )Issuance of common stock
    
    
    3,010
    
    
    
    3,324
    
    
    
    347Excess tax benefit on exercise of share-based instruments
    
    
    1,382
    
    
    
    
    
    
    
    Payments on notes receivable from management stockholders
    
    
    
    
    
    
    
    
    
    
    28Cash from financing activities
    
    
    27,092
    
    
    
    70,539
    
    
    
    16,635Effects of exchange rate changes on cash
    
    
    380
    
    
    
    (403
    )
    
    
    1,618Net increase (decrease) in cash and cash equivalents
    
    
    (4,976
    )
    
    
    3,575
    
    
    
    (7,194
    )Cash and cash equivalents at beginning of year
    
    
    17,983
    
    
    
    14,408
    
    
    
    21,602Cash and cash equivalents at end of year
    
    $
    13,007
    
    
    $
    17,983
    
    
    $
    14,408
  34




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##### Table of Contents



Notes to Consolidated Financial Statements
 (1) Summary of Significant Accounting Policies
 Description of Business
 Fiscal Year
 Investment in Affiliated Companies
 Principles of Consolidation
 Use of Estimates in Preparing Financial Statements
 Foreign Currency Transactions and Translation
   Revenue Recognition
     Inventories
 Property and Equipment and Related Depreciation
 YearsBuildings
    
    
    15  35Machinery and equipment
    
    
    3  10Gas transportation facilities and equipment
    
    
    15
 35




---



##### Table of Contents



Oil and Gas Properties and Mineral Interests
  Reserve Estimates
 Goodwill and Intangibles
    Other Long-Lived Assets
 Restricted Cash
 Accrued Insurance Expense
 36




---



##### Table of Contents



Fair Value of Financial Instruments
 Litigation and Other Contingencies
 Derivatives
 Consolidated Statements of Cash Flows
  (in thousands)
    
    2007
    
    2006
    
    2005Income taxes
    
    $
    15,489
    
    
    $
    7,399
    
    
    $
    3,017Interest
    
    
    9,564
    
    
    
    5,547
    
    
    
    3,665
 Supplemental Non-cash Transactions
    Income Taxes
 Earnings Per Share
 37




---



##### Table of Contents



Share-Based Compensation
 Transition Election Related
to Accounting for Tax Effects of Share-Based Payment Awards
   (in thousands,except per share amounts)
    
    2006
    
    2005Net income, as reported
    
    $
    14,681
    
    
    $
    9,754Deduct:Total stock-based employee
compensation determined under
fair value based method for all
awards, net of income taxes of
$428 and $260
    
    
    (681
    )
    
    
    (414
    )Pro forma net income
    
    $
    14,000
    
    
    $
    9,340Net income per share:Basic  as reported
    
    $
    1.08
    
    
    $
    0.78Basic  pro forma
    
    $
    1.03
    
    
    $
    0.74Diluted  as reported
    
    $
    1.05
    
    
    $
    0.75Diluted  proforma
    
    $
    1.00
    
    
    $
    0.72
 Unearned Compensation
 Other Comprehensive Loss
 AccumulatedCumulative
    
    Unrecognized
    
    OtherTranslation
    
    Pension
    
    Comprehensive(in thousands)
    
    Adjustment
    
    Liability
    
    LossBalance, February 1, 2005
    
    $
    (7,165
    )
    
    $
    (1,902
    )
    
    $
    (9,067
    )Period change
    
    
    (277
    )
    
    
    1,902
    
    
    
    1,625Balance, January 31, 2006
    
    
    (7,442
    )
    
    
    
    
    
    
    (7,442
    )Period change
    
    
    291
    
    
    
    (1,302
    )
    
    
    (1,011
    )Balance, January 31, 2007
    
    $
    (7,151
    )
    
    $
    (1,302
    )
    
    $
    (8,453
    )
 38




---



##### Table of Contents



(2) Acquisitions
    (in thousands)Working capital
    
    $
    11,723Property and equipment
    
    
    13,602Goodwill
    
    
    3,891Other intangible assets
    
    
    143Other long-term assets
    
    
    69Deferred income taxes
    
    
    (1,766
    )Total purchase price
    
    $
    27,662
  (in thousands, except per share data)
    
    2007
    
    2006Revenues
    
    $
    760,752
    
    
    $
    506,776Net income
    
    
    25,199
    
    
    
    14,303Basic earnings per share
    
    $
    1.64
    
    
    $
    1.06Diluted earnings per share
    
    $
    1.61
    
    
    $
    1.02
       (in thousands)Working capital
    
    $
    1,016Property and equipment
    
    
    1,580Goodwill
    
    
    3,436Deferred income taxes
    
    
    (590
    )Total purchase price
    
    $
    5,442
   39




---



##### Table of Contents



(in thousands)Working capital
    
    $
    20,998Property and equipment
    
    
    40,508Goodwill
    
    
    49,832Tradenames
    
    
    16,000Other intangible assets
    
    
    586Deferred income taxes
    
    
    (15,568
    )Total purchase price
    
    $
    112,356
  (in thousands, except per share data)
    
    2006
    
    2005Revenues
    
    $
    600,781
    
    
    $
    520,423Net income
from continuing operations
    
    
    17,945
    
    
    
    11,769Net income
    
    
    17,941
    
    
    
    11,556Basic earnings per share
from continuing operations
    
    $
    1.19
    
    
    $
    0.80Diluted earnings per share
from continuing operations
    
    $
    1.16
    
    
    $
    0.78Basic earnings per share
    
    $
    1.19
    
    
    $
    0.78Diluted earnings per share
    
    $
    1.16
    
    
    $
    0.76
   (in thousands)Mineral interest in oil and gas properties
    
    $
    2,479Oil and gas properties
    
    
    2,428Gas transportation facilities and equipment
    
    
    987Minority interest
    
    
    512Total purchase price
    
    $
    6,406
  (in thousands)Working capital
    
    $
    (10
    )Property and equipment
    
    
    84Other intangible assets
    
    
    379Total purchase price
    
    $
    453
  40




---



##### Table of Contents



(in thousands)Property and equipment
    
    $
    8,383Inventories
    
    
    658Costs and estimated earnings in excess
of billings on uncompleted contracts
    
    
    126Goodwill
    
    
    5,576Total purchase price
    
    $
    14,743
    (3) Investments in Affiliates
  OwnedChristensen Chile, S.A. (Chile)
    
    
    49.99
    %Christensen Commercial, S.A. (Chile)
    
    
    50.00Geotec Boyles Bros., S.A. (Chile)
    
    
    49.75Boyles Bros. Diamantina, S.A. (Chile)
    
    
    29.49Christensen Commercial, S.A. (Peru)
    
    
    35.38Geotec, S.A. (Peru)
    
    
    35.38Boytec, S.A. (Panama)
    
    
    49.99Plantel Industrial S.A. (Chile)
    
    
    50.00Boytec Sondajes de Mexico, S.A. de C.V. (Mexico)
    
    
    49.99Geoductos Chile, S.A. (Chile)
    
    
    50.00Mining Drilling Fluids (Panama)
    
    
    25.00Diamantina Christensen Trading (Panama)
    
    
    42.69Boyles Bros. do Brasil Ltd. (Brazil)
    
    
    40.00
   (in thousands)
    
    2007
    
    2006
    
    2005Current assets
    
    $
    42,584
    
    
    $
    36,937
    
    
    $
    34,402Noncurrent assets
    
    
    29,696
    
    
    
    28,866
    
    
    
    24,552Current liabilities
    
    
    19,857
    
    
    
    17,178
    
    
    
    17,208Noncurrent liabilities
    
    
    4,755
    
    
    
    5,211
    
    
    
    3,391Revenues
    
    
    130,090
    
    
    
    103,735
    
    
    
    86,661Gross profit
    
    
    23,274
    
    
    
    18,003
    
    
    
    14,056Operating income
    
    
    14,319
    
    
    
    10,828
    
    
    
    7,966Net income
    
    
    10,862
    
    
    
    9,452
    
    
    
    5,902
  (in thousands)
    
    2007
    
    2006
    
    2005Accounts Receivable
    
    $
    
    
    
    $
    
    
    
    $
    202Revenues
    
    
    3
    
    
    
    302
    
    
    
    955
   (4) Discontinued Operations
  41




---



##### Table of Contents



(5) Goodwill and Other Intangible Assets
  2007
    
    2006Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    Accumulated(in thousands)
    
    Amount
    
    Amortization
    
    Amount
    
    AmortizationGoodwill (non tax
deductible)
    
    $
    65,184
    
    
    $
    
    
    
    $
    57,857
    
    
    $
    Other amortizable
intangible assetsTradenames
    
    $
    16,000
    
    
    $
    (818
    )
    
    $
    16,000
    
    
    $
    (204
    )Customer-related
    
    
    332
    
    
    
    (134
    )
    
    
    227
    
    
    
    (34
    )Patents
    
    
    359
    
    
    
    (160
    )
    
    
    359
    
    
    
    (40
    )Non-competition
agreements
    
    
    379
    
    
    
    (227
    )
    
    
    379
    
    
    
    (58
    )Other
    
    
    762
    
    
    
    (476
    )
    
    
    730
    
    
    
    (411
    )Total amortizable
intangible assets
    
    $
    17,832
    
    
    $
    (1,815
    )
    
    $
    17,695
    
    
    $
    (747
    )
  (in thousands)2008
    
    $
    1,0502009
    
    
    7962010
    
    
    7012011
    
    
    6642012
    
    
    632
  Water and WastewaterEnergy
    
    Infrastructure
    
    TotalBalance, February 1, 2005
    
    $
    950
    
    
    $
    7,075
    
    
    $
    8,025Additions
    
    
    
    
    
    
    49,832
    
    
    
    49,832Balance, January 31, 2006
    
    
    950
    
    
    
    56,907
    
    
    
    57,857Additions
    
    
    
    
    
    
    7,327
    
    
    
    7,327Balance, January 31, 2007
    
    $
    950
    
    
    $
    64,234
    
    
    $
    65,184
 (6) Other Income (Expense)
  (in thousands)
    
    2007
    
    2006
    
    2005Gain (loss) from disposal of
property and equipment
    
    $
    994
    
    
    $
    (295
    )
    
    $
    1,744Gain on sale of domestic affiliate
    
    
    
    
    
    
    1,289
    
    
    
    Gain on sale of mineral concession
    
    
    920
    
    
    
    
    
    
    
    Exchange gain (loss)
    
    
    95
    
    
    
    (290
    )
    
    
    (342
    )Miscellaneous, net
    
    
    548
    
    
    
    196
    
    
    
    (182
    )Total
    
    $
    2,557
    
    
    $
    900
    
    
    $
    1,220
  42




---



##### Table of Contents



(7) Costs and Estimated Earnings on Uncompleted Contracts:
 (in thousands)
    
    2007
    
    2006Costs incurred on uncompleted contracts
    
    $
    711,922
    
    
    $
    441,473Estimated earnings
    
    
    155,520
    
    
    
    102,947867,442
    
    
    
    544,420Less: Billings to date
    
    
    850,474
    
    
    
    529,244Total
    
    $
    16,968
    
    
    $
    15,176Included in accompanying balance sheets
under the following captions:Costs and estimated earnings in excess
of billings on uncompleted contracts
    
    $
    51,210
    
    
    $
    36,538Billings in excess of costs and estimated
earnings on uncompleted contracts
    
    
    (34,242
    )
    
    
    (21,362
    )Total
    
    $
    16,968
    
    
    $
    15,176
  (8) Income Taxes
  (in thousands)
    
    2007
    
    2006
    
    2005Domestic
    
    $
    31,928
    
    
    $
    21,039
    
    
    $
    13,234Foreign
    
    
    16,239
    
    
    
    6,817
    
    
    
    5,965Total
    
    $
    48,167
    
    
    $
    27,856
    
    
    $
    19,199
  (in thousands)
    
    2007
    
    2006
    
    2005Currently due:U.S. federal
    
    $
    13,150
    
    
    $
    3,536
    
    
    $
    438State and local
    
    
    2,541
    
    
    
    462
    
    
    
    16Foreign
    
    
    8,615
    
    
    
    3,785
    
    
    
    5,17424,306
    
    
    
    7,783
    
    
    
    5,628Deferred:U.S. federal
    
    
    (941
    )
    
    
    4,100
    
    
    
    3,995State and local
    
    
    (649
    )
    
    
    372
    
    
    
    848Foreign
    
    
    (801
    )
    
    
    866
    
    
    
    (1,256
    )(2,391
    )
    
    
    5,338
    
    
    
    3,587Total
    
    $
    21,915
    
    
    $
    13,121
    
    
    $
    9,215
  (in thousands)
    
    2007
    
    2006Assets
    
    Liabilities
    
    Total
    
    Assets
    
    Liabilities
    
    TotalContract income
    
    $
    4,372
    
    
    $
    
    
    
    $
    4,372
    
    
    $
    3,041
    
    
    $
    
    
    
    $
    3,041Inventories
    
    
    1,956
    
    
    
    (164
    )
    
    
    1,792
    
    
    
    1,852
    
    
    
    (306
    )
    
    
    1,546Accrued insurance
    
    
    2,600
    
    
    
    
    
    
    
    2,600
    
    
    
    2,254
    
    
    
    
    
    
    
    2,254Other accrued
liabilities
    
    
    2,382
    
    
    
    
    
    
    
    2,382
    
    
    
    1,547
    
    
    
    
    
    
    
    1,547Prepaid expenses
    
    
    
    
    
    
    (619
    )
    
    
    (619
    )
    
    
    
    
    
    
    (409
    )
    
    
    (409
    )Bad debts
    
    
    2,521
    
    
    
    
    
    
    
    2,521
    
    
    
    2,243
    
    
    
    
    
    
    
    2,243Employee
compensation
    
    
    3,361
    
    
    
    
    
    
    
    3,361
    
    
    
    1,339
    
    
    
    
    
    
    
    1,339Alternative minimum
tax credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    474
    
    
    
    
    
    
    
    474Other
    
    
    481
    
    
    
    (339
    )
    
    
    142
    
    
    
    115
    
    
    
    (174
    )
    
    
    (59
    )Total current
    
    
    17,673
    
    
    
    (1,122
    )
    
    
    16,551
    
    
    
    12,865
    
    
    
    (889
    )
    
    
    11,976Cumulative
translation
adjustment
    
    
    5,088
    
    
    
    
    
    
    
    5,088
    
    
    
    5,124
    
    
    
    
    
    
    
    5,124Buildings,
machinery and
equipment
    
    
    126
    
    
    
    (16,554
    )
    
    
    (16,428
    )
    
    
    204
    
    
    
    (15,509
    )
    
    
    (15,305
    )Gas transportation
facilities and
equipment
    
    
    
    
    
    
    (2,270
    )
    
    
    (2,270
    )
    
    
    
    
    
    
    (1,297
    )
    
    
    (1,297
    )Mineral interests
and oil and gas
properties
    
    
    
    
    
    
    (11,779
    )
    
    
    (11,779
    )
    
    
    
    
    
    
    (7,681
    )
    
    
    (7,681
    )Intangible assets
    
    
    747
    
    
    
    (6,072
    )
    
    
    (5,325
    )
    
    
    617
    
    
    
    (6,465
    )
    
    
    (5,848
    )Tax deductible
goodwill
    
    
    3,448
    
    
    
    
    
    
    
    3,448
    
    
    
    3,533
    
    
    
    
    
    
    
    3,533Accrued insurance
    
    
    3,384
    
    
    
    
    
    
    
    3,384
    
    
    
    2,723
    
    
    
    
    
    
    
    2,723Pension
    
    
    673
    
    
    
    (331
    )
    
    
    342
    
    
    
    600
    
    
    
    (1,457
    )
    
    
    (857
    )Stock-based
compensation
    
    
    633
    
    
    
    
    
    
    
    633
    
    
    
    
    
    
    
    
    
    
    
    Unremitted foreign
earnings
    
    
    
    
    
    
    (1,587
    )
    
    
    (1,587
    )
    
    
    
    
    
    
    (1,302
    )
    
    
    (1,302
    )Other
    
    
    1,430
    
    
    
    (238
    )
    
    
    1,192
    
    
    
    1,577
    
    
    
    (222
    )
    
    
    1,355Total noncurrent
    
    
    15,529
    
    
    
    (38,831
    )
    
    
    (23,302
    )
    
    
    14,378
    
    
    
    (33,933
    )
    
    
    (19,555
    )Total
    
    $
    33,202
    
    
    $
    (39,953
    )
    
    $
    (6,751
    )
    
    $
    27,243
    
    
    $
    (34,822
    )
    
    $
    (7,579
    )
 43




---



##### Table of Contents



2007
    
    2006
    
    2005Effective
    
    
    
    
    
    Effective
    
    
    
    
    
    Effective(in thousands)
    
    Amount
    
    Rate
    
    Amount
    
    Rate
    
    Amount
    
    RateIncome tax at statutory rate
    
    $
    16,858
    
    
    
    35.0
    %
    
    $
    9,750
    
    
    
    35.0
    %
    
    $
    6,720
    
    
    
    35.0
    %State income tax, net
    
    
    1,230
    
    
    
    2.6
    
    
    
    542
    
    
    
    1.9
    
    
    
    562
    
    
    
    2.9Difference in tax expense
resulting from:Nondeductible expenses
    
    
    842
    
    
    
    1.8
    
    
    
    593
    
    
    
    2.1
    
    
    
    475
    
    
    
    2.5Taxes on foreign
affiliates
    
    
    (774
    )
    
    
    (1.6
    )
    
    
    (422
    )
    
    
    (1.5
    )
    
    
    (446
    )
    
    
    (2.3
    )Taxes on foreign
operations
    
    
    3,461
    
    
    
    7.2
    
    
    
    2,641
    
    
    
    9.5
    
    
    
    2,171
    
    
    
    11.3Other, net
    
    
    298
    
    
    
    0.5
    
    
    
    17
    
    
    
    0.1
    
    
    
    (267
    )
    
    
    (1.4
    )$
    21,915
    
    
    
    45.5
    %
    
    $
    13,121
    
    
    
    47.1
    %
    
    $
    9,215
    
    
    
    48.0
    %
  (9) Operating Leases
  (in thousands)2008
    
    $
    6,5912009
    
    
    5,0442010
    
    
    2,7702011
    
    
    1,6382012
    
    
    1,249Thereafter
    
    
    
  (10) Employee Benefit Plans
  SFAS
158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  An
Amendment of FASB Statements 87, 88, 106 and 132(R)
 44




---



##### Table of Contents



Pension PlanPrior to
    
    
    
    
    
    PostAdoption
    
    
    
    
    
    Adoptionof SFAS
    
    
    
    
    
    of SFAS158
    
    Adjustments
    
    158Other non-current assets
    
    $
    2,979
    
    
    $
    (2,121
    )
    
    $
    858Accumulated other
comprehensive loss
before taxes
    
    $
    
    
    
    $
    (2,121
    )
    
    $
    (2,121
    )Deferred tax liabilities
    
    
    
    
    
    
    819
    
    
    
    819Accumulated other
comprehensive loss
    
    $
    
    
    
    $
    (1,302
    )
    
    $
    (1,302
    )
  (in thousands)
    
    2007
    
    2006Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    7,967
    
    
    $
    8,087Service cost
    
    
    
    
    
    
    Interest cost
    
    
    452
    
    
    
    436Actuarial gain (loss)
    
    
    164
    
    
    
    (159
    )Benefits paid
    
    
    (392
    )
    
    
    (397
    )Benefit obligation at end of year
    
    
    8,191
    
    
    
    7,967Change in plan assets:Fair value of plan assets at beginning of year
    
    
    8,108
    
    
    
    7,050Actual return on plan assets
    
    
    833
    
    
    
    455Employer contribution
    
    
    500
    
    
    
    1,000Benefits paid
    
    
    (392
    )
    
    
    (397
    )Fair value of plan assets at end of year
    
    
    9,049
    
    
    
    8,108Funded status
    
    
    858
    
    
    
    141Unrecognized actuarial loss
    
    
    
    
    
    
    2,619Contributions between measurement
date and year-end
    
    
    
    
    
    
    250Net amount recognized as other
non-current assets
    
    $
    858
    
    
    $
    3,010
  (in thousands)
    
    2007
    
    2006
    
    2005Service cost and expenses
    
    $
    86
    
    
    $
    74
    
    
    $
    66Interest cost
    
    
    452
    
    
    
    436
    
    
    
    438Expected return on assets
    
    
    (529
    )
    
    
    (484
    )
    
    
    (486
    )Net amortization
    
    
    271
    
    
    
    278
    
    
    
    207Net periodic pension cost
    
    $
    280
    
    
    $
    304
    
    
    $
    225
   2007
    
    2006
    
    2005Discount rate
    
    
    5.90
    %
    
    
    5.67
    %
    
    
    5.50
    %Expected long-term return
on plan assets
    
    
    7.0
    %
    
    
    7.0
    %
    
    
    7.5
    %Rate of compensation increase
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AHealth care cost trend
on covered charges
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AMarket-related value of assets
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AExpected return on assets
    
    Smoothed
    
    Smoothed
    
    Smoothedvalue
    
    value
    
    value
   As of December 31,2006
    
    2005Equity securities
    
    
    63
    %
    
    
    68
    %Debt securities
    
    
    35
    
    
    
    32Cash and cash equivalents
    
    
    2
    
    
    
    Total
    
    
    100
    %
    
    
    100
    %
  Normal
    
    PolicyWeighting
    
    RangeEquity securities
    
    
    60
    %
    
    
    40-70
    %Debt securities
    
    
    35
    
    
    
    20-60Cash and cash equivalents
    
    
    5
    
    
    
    0-15
  45




---



##### Table of Contents




    
    Equity Securities Allowable equity securities include
common stocks listed on any U.S. stock exchange or
over-the-counter common stocks, preferred and convertible
securities. The equity holdings of any single issuer should
aggregate to no more than 10% of the total market value of the
Plan.
 
    
    International Securities Allowable international
securities include common stocks, preferred stocks, warrants,
convertible securities, as well as government and corporate
debt securities.
 
    
    Mutual Funds Mutual funds may be utilized for
investments in fixed income, equity and international
securities to enhance diversification and performance.
 
    
    Fixed Income Securities Allowable fixed income
securities include U.S. Treasury securities, U.S. Agency
securities and corporate bonds. All fixed income securities
shall be rated A or better at the time of purchase. No fixed
income security shall continue to be held if its rating falls
below BBB. The securities of any single issuer, with the
exception of U.S. Treasuries and Agencies, should aggregate to
no more than 10% of the total market value of the Plan. The
fixed income segment of the portfolio will generally have an
intermediate average maturity (five to ten years) and a
maximum permitted maturity for an individual issue of fifteen
years.
   (in thousands)2008
    
    $
    4142009
    
    
    4322010
    
    
    4422011
    
    
    4572012
    
    
    4772013-2017
    
    
    2,494
  (in thousands)
    
    2007
    
    2006
    
    2005Service cost
    
    $
    100
    
    
    $
    120
    
    
    $
    98Interest cost
    
    
    88
    
    
    
    75
    
    
    
    71Net periodic pension cost
    
    $
    188
    
    
    $
    195
    
    
    $
    169
    (11) Indebtedness
   46




---



##### Table of Contents



(in thousands)
    
    2007
    
    2006Long-term debt:Credit Agreement
    
    $
    91,600
    
    
    $
    68,900Senior Notes
    
    
    60,000
    
    
    
    60,000Total long-term debt
    
    $
    151,600
    
    
    $
    128,900
  (in thousands)2008
    
    $
    2009
    
    
    13,3332010
    
    
    20,0002011
    
    
    111,6002012
    
    
    6,667Thereafter
    
    
    
 (12) Derivatives
     (13) Stock and Stock Option Plans
  47




---



##### Table of Contents



RemainingContractualGrant
    
    Options
    
    Options
    
    Exercise
    
    TermDate
    
    Outstanding
    
    Exercisable
    
    Price
    
    (Months)4/97
    
    
    723
    
    
    
    723
    
    
    $
    11.400
    
    
    
    32/98
    
    
    20,900
    
    
    
    20,900
    
    
    
    14.000
    
    
    
    124/98
    
    
    5,144
    
    
    
    5,144
    
    
    
    10.290
    
    
    
    154/99
    
    
    9,773
    
    
    
    9,773
    
    
    
    4.125
    
    
    
    274/99
    
    
    112,375
    
    
    
    112,375
    
    
    
    5.250
    
    
    
    272/00
    
    
    3,500
    
    
    
    3,500
    
    
    
    5.500
    
    
    
    374/00
    
    
    14,794
    
    
    
    14,794
    
    
    
    3.495
    
    
    
    398/00
    
    
    2,500
    
    
    
    2,500
    
    
    
    5.125
    
    
    
    436/04
    
    
    25,000
    
    
    
    25,000
    
    
    
    16.600
    
    
    
    896/04
    
    
    216,589
    
    
    
    81,589
    
    
    
    16.650
    
    
    
    906/05
    
    
    12,000
    
    
    
    12,000
    
    
    
    17.540
    
    
    
    1029/05
    
    
    245,000
    
    
    
    57,500
    
    
    
    23.050
    
    
    
    1061/06
    
    
    210,231
    
    
    
    52,558
    
    
    
    27.870
    
    
    
    1096/06
    
    
    12,000
    
    
    
    12,000
    
    
    
    29.290
    
    
    
    1146/06
    
    
    70,000
    
    
    
    
    
    
    
    29.290
    
    
    
    11410/06
    
    
    3,000
    
    
    
    3,000
    
    
    
    30.110
    
    
    
    117963,529
    
    
    
    413,356
    Shares Under OptionWeightedWeighted
    
    
    Average
    
    
    AggregateAverage
    
    
    Remaining
    
    
    IntrinsicNumber of
    
    
    Exercise
    
    
    Contractual Term
    
    
    Value (inShares
    
    
    Price
    
    
    (years)
    
    
    thousands)Stock Option
Activity Summary:Outstanding
at February 1, 2004
    
    
    790,333
    
    
    $
    8.118Exercisable
at February 1, 2004
    
    
    719,451
    
    
    
    8.410Granted
    
    
    325,000
    
    
    
    16.645Exercised
    
    
    (60,247
    )
    
    
    5.757
    
    
    
    
    
    
    $
    639Canceled
    
    
    (16,250
    )
    
    
    15.959
    
    
    
    
    
    
    
    49Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Outstanding
at January 31, 2005
    
    
    1,038,836
    
    
    
    10.800Exercisable at January 31, 2005
    
    
    745,653
    
    
    
    8.761Granted
    
    
    476,231
    
    
    
    24.993Exercised
    
    
    (398,349
    )
    
    
    8.345
    
    
    
    
    
    
    
    5,534Canceled
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Outstanding at January 31, 2006
    
    
    1,116,718
    
    
    
    17.728Exercisable at January 31, 2006
    
    
    455,640
    
    
    
    10.603Granted
    
    
    87,000
    
    
    
    29.318Exercised
    
    
    (237,689
    )
    
    
    12.656
    
    
    
    
    
    
    
    4,422Canceled
    
    
    
    
    
    
    Forfeited
    
    
    (2,500
    )
    
    
    16.650
    
    
    
    
    
    
    
    30Expired
    
    
    
    
    
    
    Outstanding at January 31, 2007
    
    
    963,529
    
    
    $
    20.028
    
    
    
    7.41
    
    
    $
    14,454Exercisable at January 31, 2007
    
    
    413,356
    
    
    $
    15.202
    
    
    
    5.79
    
    
    $
    8,196
 (14) Contingencies
  48




---



##### Table of Contents



(15) Operating Segments and Foreign Operations
  Water and Wastewater Infrastructure
  Mineral Exploration Division
  Energy Division
  Other
  49




---



##### Table of Contents



(in thousands)As of and for the Year Ended January 31,
    
    2007
    
    2006
    
    2005RevenuesWater and wastewater infrastructure
    
    $
    531,916
    
    
    $
    320,996
    
    
    $
    233,111Mineral exploration
    
    
    148,911
    
    
    
    124,206
    
    
    
    104,299Energy
    
    
    27,081
    
    
    
    12,536
    
    
    
    3,821Other
    
    
    14,860
    
    
    
    5,277
    
    
    
    2,231Total revenues
    
    $
    722,768
    
    
    $
    463,015
    
    
    $
    343,462Equity in earnings of affiliatesWater and wastewater infrastructure
    
    $
    
    
    
    $
    839
    
    
    $
    (127
    )Mineral exploration
    
    
    4,452
    
    
    
    3,506
    
    
    
    2,764Total equity in earnings of affiliates
    
    $
    4,452
    
    
    $
    4,345
    
    
    $
    2,637Income from continuing operations before income
taxes and minority interestsWater and wastewater infrastructure
    
    $
    35,000
    
    
    $
    28,255
    
    
    $
    26,393Mineral exploration
    
    
    26,557
    
    
    
    13,947
    
    
    
    11,791Energy
    
    
    10,680
    
    
    
    2,891
    
    
    
    (1,993
    )Other
    
    
    4,094
    
    
    
    1,307
    
    
    
    (43
    )Unallocated corporate expenses
    
    
    (18,383
    )
    
    
    (12,771
    )
    
    
    (13,728
    )Interest
    
    
    (9,781
    )
    
    
    (5,773
    )
    
    
    (3,221
    )Total income from continuing operations
before income taxes and minority interests
    
    $
    48,167
    
    
    $
    27,856
    
    
    $
    19,199Investment in affiliatesWater and wastewater infrastructure
    
    $
    
    
    
    $
    411
    
    
    $
    1,041Mineral exploration
    
    
    24,280
    
    
    
    21,330
    
    
    
    19,517Total investment in affiliates
    
    $
    24,280
    
    
    $
    21,741
    
    
    $
    20,558Total assetsWater and wastewater infrastructure
    
    $
    321,406
    
    
    $
    297,928
    
    
    $
    115,659Mineral exploration
    
    
    89,826
    
    
    
    85,110
    
    
    
    77,873Energy
    
    
    91,552
    
    
    
    55,080
    
    
    
    32,178Other
    
    
    4,112
    
    
    
    1,546
    
    
    
    1,210Corporate
    
    
    40,268
    
    
    
    9,671
    
    
    
    18,460Total assets
    
    $
    547,164
    
    
    $
    449,335
    
    
    $
    245,380Capital expendituresWater and wastewater infrastructure
    
    $
    23,777
    
    
    $
    10,640
    
    
    $
    9,755Mineral exploration
    
    
    11,607
    
    
    
    13,525
    
    
    
    5,325Energy
    
    
    40,737
    
    
    
    24,639
    
    
    
    15,509Other
    
    
    483
    
    
    
    69
    
    
    
    305Corporate
    
    
    196
    
    
    
    193
    
    
    
    180Total capital expenditures
    
    $
    76,800
    
    
    $
    49,066
    
    
    $
    31,074Depreciation, depletion and amortizationWater and wastewater infrastructure
    
    $
    17,691
    
    
    $
    10,604
    
    
    $
    6,618Mineral exploration
    
    
    8,260
    
    
    
    6,306
    
    
    
    6,193Energy
    
    
    6,531
    
    
    
    2,703
    
    
    
    1,228Other
    
    
    229
    
    
    
    273
    
    
    
    258Corporate
    
    
    142
    
    
    
    138
    
    
    
    144Total depreciation, depletion and amortization
    
    $
    32,853
    
    
    $
    20,024
    
    
    $
    14,441
 50




---



##### Table of Contents



(in thousands)As of and for the Year Ended January 31,
    
    2007
    
    2006
    
    2005Geographic information:RevenuesUnited States
    
    $
    595,959
    
    
    $
    356,899
    
    
    $
    254,093Australia/Africa
    
    
    78,640
    
    
    
    71,594
    
    
    
    67,294Mexico
    
    
    32,749
    
    
    
    22,345
    
    
    
    13,744Other foreign
    
    
    15,420
    
    
    
    12,177
    
    
    
    8,331Total revenues
    
    $
    722,768
    
    
    $
    463,015
    
    
    $
    343,462Property and equipment, netUnited States
    
    $
    191,797
    
    
    $
    137,162
    
    
    $
    74,095Africa/Australia
    
    
    16,655
    
    
    
    17,486
    
    
    
    13,017Mexico
    
    
    5,279
    
    
    
    3,104
    
    
    
    2,033Other foreign
    
    
    786
    
    
    
    373
    
    
    
    311Total property and equipment, net
    
    $
    214,517
    
    
    $
    158,125
    
    
    $
    89,456
 (16) New Accounting Pronouncements
         51




---



##### Table of Contents



(17) Quarterly Results (Unaudited)
  (in thousands of dollars, except per share data)2007:
    
    First
    
    Second
    
    Third
    
    FourthRevenues
    
    $
    156,717
    
    
    $
    187,146
    
    
    $
    185,824
    
    
    $
    193,081Net income from continuing operations
    
    
    4,642
    
    
    
    7,192
    
    
    
    7,762
    
    
    
    6,656Net income
    
    
    4,642
    
    
    
    7,192
    
    
    
    7,762
    
    
    
    6,656Basic net income per share from continuing
operations
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.05
    
    
    
    0.43Diluted net income per share from continuing
operations
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.50
    
    
    
    0.42Basic net income per share
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.51
    
    
    
    0.43Diluted net income per share
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.50
    
    
    
    0.42
 2006:
    
    First
    
    Second
    
    Third
    
    FourthRevenues
    
    $
    96,658
    
    
    $
    106,102
    
    
    $
    113,526
    
    
    $
    146,729Net income from continuing operations
    
    
    2,754
    
    
    
    4,534
    
    
    
    4,281
    
    
    
    3,116Net income
    
    
    2,753
    
    
    
    4,526
    
    
    
    4,286
    
    
    
    3,116Basic net income per share from
continuing operations
    
    
    0.22
    
    
    
    0.36
    
    
    
    0.31
    
    
    
    0.20Diluted net income per share from
continuing operations
    
    
    0.21
    
    
    
    0.35
    
    
    
    0.31
    
    
    
    0.20Basic net income per share
    
    
    0.22
    
    
    
    0.36
    
    
    
    0.31
    
    
    
    0.20Diluted net income per share
    
    
    0.21
    
    
    
    0.35
    
    
    
    0.31
    
    
    
    0.20
 Supplemental Information on Oil and Gas Producing Activities (Unaudited)
  Capitalized Costs Related to Oil and Gas Producing Activities
  (in thousands)
    
    2007
    
    2006
    
    2005Oil and gas properties
    
    $
    58,458
    
    
    $
    34,308
    
    
    $
    20,573Mineral interest in oil
and gas properties
    
    
    12,515
    
    
    
    8,430
    
    
    
    3,67170,973
    
    
    
    42,738
    
    
    
    24,244Accumulated depreciation
and depletion
    
    
    (7,848
    )
    
    
    (2,931
    )
    
    
    (910
    )Total
    
    $
    63,125
    
    
    $
    39,807
    
    
    $
    23,334
   (in thousands)
    
    2007
    
    2006
    
    2005Gas transportation facilities
and equipment
    
    $
    24,939
    
    
    $
    12,526
    
    
    $
    6,413Accumulated depreciation
    
    
    (2,353
    )
    
    
    (883
    )
    
    
    (287
    )Total
    
    $
    22,586
    
    
    $
    11,643
    
    
    $
    6,126
 Cost Incurred in Oil and Gas Producing Activities
  (in thousands)
    
    2007
    
    2006
    
    2005AcquisitionProved
    
    $
    4,249
    
    
    $
    4,751
    
    
    $
    4,498Unproved
    
    
    
    
    
    
    
    
    
    
    Exploration
    
    
    25
    
    
    
    64
    
    
    
    66Development
    
    
    23,719
    
    
    
    13,454
    
    
    
    7,69627,993
    
    
    
    18,269
    
    
    
    12,260Asset retirement costs
    
    
    243
    
    
    
    224
    
    
    
    167Total
    
    $
    28,236
    
    
    $
    18,493
    
    
    $
    12,427
  52




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##### Table of Contents



Results of Operations for Oil and Gas Producing Activities
  Proved Oil and Gas Reserve Quantities
 (in thousands, except per Mcf)
    
    2007
    
    2006
    
    2005Revenues
    
    $
    14,014
    
    
    $
    8,554
    
    
    $
    2,481Operating costs:Production taxes
    
    
    552
    
    
    
    345
    
    
    
    112Lease operating expenses
    
    
    5,051
    
    
    
    2,753
    
    
    
    1,446Depreciation and depletion
    
    
    4,917
    
    
    
    2,021
    
    
    
    880Asset retirement accretion expense
    
    
    43
    
    
    
    27
    
    
    
    12Income tax expense
    
    
    1,286
    
    
    
    1,271
    
    
    
    12Total
operating costs
    
    
    11,849
    
    
    
    6,417
    
    
    
    2,462Results of
operations
    

    $
    2,165
    
    
    $
    2,137
    
    
    $
    19Depletion per Mcf
    
    $
    1.46
    
    
    $
    1.44
    
    
    $
    1.57
     (MMcf):
    
    2007
    
    2006Balance, beginning of year
    
    
    45,120
    
    
    
    26,589Revisions of previous estimates
    
    
    (5,627
    )
    
    
    (4,925
    )Extensions, discoveries and other additions
    
    
    19,019
    
    
    
    19,397Production
    
    
    (3,250
    )
    
    
    (1,403
    )Purchases of reserves in place
    
    
    1,816
    
    
    
    5,462Balance, end of year
    
    
    57,078
    
    
    
    45,120Proved Developed Reserves
    
    
    25,010
    
    
    
    19,402
 Standardized Measure Of Discounted Future Net Cash Flows Relating To Proved Oil And Gas Reserve Quantities
   (in thousands)
    
    2007
    
    2006Future cash inflows
    
    $
    393,153
    
    
    $
    329,664Future production costs
    
    
    (144,511
    )
    
    
    (102,165
    )Future development costs
    
    
    (49,073
    )
    
    
    (35,264
    )Future income taxes
    
    
    (59,098
    )
    
    
    (63,700
    )Future net cash flows
    
    
    140,471
    
    
    
    128,53510% discount to reflect timing of cash flows
    
    
    (51,459
    )
    
    
    (48,924
    )Standardized measure of discounted cash flows
    
    $
    89,012
    
    
    $
    79,611
  (in thousands)
    
    2007
    
    2006Balance, beginning of year
    
    $
    79,611
    
    
    $
    29,949Sales of gas produced, net of production costs
    
    
    (11,687
    )
    
    
    (7,608
    )Net changes in prices and production costs
    
    
    (16,568
    )
    
    
    31,461Extensions and discoveries, less related costs
    
    
    37,431
    
    
    
    45,683Revisions of quantity estimates
    
    
    (14,420
    )
    
    
    (13,110
    )Purchases of reserves in place
    
    
    3,729
    
    
    
    15,202Change in future development
    
    
    (34,038
    )
    
    
    (16,504
    )Accretion of discount
    
    
    12,998
    
    
    
    5,392Net change in income taxes
    
    
    3,075
    
    
    
    (25,099
    )Development costs incurred
    
    
    28,881
    
    
    
    14,244Asset retirement obligation and other
    
    
    
    
    
    
    1Net change
    
    
    9,401
    
    
    
    49,662Balance, end of year
    
    $
    89,012
    
    
    $
    79,611
 53




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##### Table of Contents



Schedule II: Valuation and Qualifying Accounts
 AdditionsBalance at
    
    Charges to
    
    Charges to
    
    
    
    
    
    BalanceBeginning
    
    Costs and
    
    Other
    
    
    
    
    
    at End(in thousands)
    
    of Period
    
    Expenses
    
    Accounts
    
    Deductions
    
    of PeriodAllowance for customer
receivables:Fiscal year ended
January 31, 2005
    
    $
    4,104
    
    
    $
    575
    
    
    $
    512
    
    
    $
    (1,085
    )
    
    $
    4,106Fiscal year ended
January 31, 2006
    
    
    4,106
    
    
    
    1,496
    
    
    
    709
    
    
    
    (738
    )
    
    
    5,573Fiscal year ended
January 31, 2007
    
    
    5,573
    
    
    
    1,700
    
    
    
    666
    
    
    
    (919
    )
    
    
    7,020Reserves for inventories:Fiscal year ended
January 31, 2005
    
    $
    6,242
    
    
    $
    695
    
    
    $
    
    
    
    $
    (725
    )
    
    $
    6,212Fiscal year ended
January 31, 2006
    
    
    6,212
    
    
    
    318
    
    
    
    
    
    
    
    (1,567
    )
    
    
    4,963Fiscal year ended
January 31, 2007
    
    
    4,963
    
    
    
    (26
    )
    
    
    
    
    
    
    (99
    )
    
    
    4,838
 54




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##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures.
 Managements Report on Internal Control over Financial Reporting.
   Changes in Internal Control over Financial Reporting.
 55




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control-Integrated Framework 
    Internal Control-Integrated Framework Internal Control-Integrated Framework
  /s/Deloitte & Touche LLP
 
 56




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##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accounting Fees and Services
  57




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules.
        ExhibitNumber
    
    Description4(1)-
    
    Restated Certificate of Incorporation of the Registrant (filed with the Registrants Annual Report on
Form 10-K for the
fiscal year ended January 31, 1996 (File No. 0-20578), as Exhibit 3(1) and incorporated herein by this
reference)4(2)-
    
    Certificate of Designations of Series A Junior Participating Preferred Stock of Layne Christensen
Company4(3)-
    
    Amended and Restated Bylaws of the Registrant (filed as Exhibit 99.2 to the Registrants Form 8-K
dated December 5, 2003 and incorporated herein by reference)4(4)-
    
    Certificate of Amendment of Certificate of Incorporation of Layne Christensen Company4(5)-
    
    Specimen Common Stock Certificate (filed with Amendment No. 3 to the Registrants Registration
Statement (File No. 33-48432) as Exhibit 4(1) and incorporated herein by reference)4(6)-
    
    Amended and Restated Loan Agreement, dated as of September 28, 2005, by and among Layne Christensen
Company, LaSalle Bank National Association, as Administrative Agent and as Lender, and the other
Lenders listed therein (filed as Exhibit 4.1 to the Companys Form 8-K, dated September 28, 2005, and
incorporated herein by this reference)4(7)-
    
    Amendment No. 1 to Amended and Restated Loan Agreement, dated June 16, 2006, by and among Layne
Christensen Company and LaSalle Bank National Association (LaSalle) as Administrative Agent, and
LaSalle and the other Lenders a party thereto (filed as Exhibit 10(1) to the Companys Form 10-Q for
the quarter ended July 31, 2006 and incorporated herein by this reference).4(8)-
    
    Amendment No. 2 to the Amended and Restated Loan Agreement, dated as of November 20, 2006, by and
among Layne Christensen Company and LaSalle, as Administrative Agent, and LaSalle and the other
Lenders a party thereto (filed as Exhibit 4(1) to the Companys Form 8-K, dated November 20, 2006, and
incorporated herein by this reference).4(9)-
    
    Master Shelf Agreement, dated as of July 31, 2003, by and among Layne Christensen Company, Prudential
Investment Management, Inc., The Prudential Insurance Company of America, Pruco Life Insurance
Company, Security Life of Denver Insurance Company and such other Purchasers of the Notes as may be
named in the Master Shelf Agreement from time to time (filed with the Registrants 10-Q for the
quarter ended July 31, 2003 (File No. 0-20578) as Exhibit 4(5) and incorporated herein by reference)4(10)-
    
    Letter Amendment No. 1 to Master Shelf Agreement, dated as of May 15, 2004, by and among Layne
Christensen Company, Prudential Investment Management, Inc., The Prudential Insurance Company of
America, Pruco Life Insurance Company, Security Life of Denver Insurance Company and such other
Purchasers of the Notes as may be named in the Master Shelf Agreement from time to time (filed as
Exhibit 4(6) to the Companys Form 10-K for the fiscal year ended January 31, 2006, and incorporated
herein by this reference)4(11)-
    
    Letter Amendment No. 2 to Master Shelf Agreement, dated as of September 28, 2005, by and among Layne
Christensen Company, Prudential Investment Management, Inc., The Prudential Insurance Company of
America, Pruco Life Insurance Company, Security Life of Denver Insurance Company and such other
Purchasers of the Notes as may be named in the Master Shelf Agreement from time to time (filed as
Exhibit 4.2 to the Companys Form 8-K, dated September 28, 2005, and incorporated herein by this
reference)
 58




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##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules.
 ExhibitNumber
    
    Description4(12)-
    
    Letter Amendment No. 3 to Master Shelf Agreement, dated as of June 16, 2006, by and among Layne
Christensen Company, Prudential Investment Management, Inc., The Prudential Insurance Company of
America, Pruco Life Insurance Company, Security Life of Denver Insurance Company and such other
Purchasers of the Notes as may be named in the Master Shelf Agreement from time to time (filed as
Exhibit 10(2) to the Companys Form 10-Q for the quarter ended July 31, 2006 and incorporated herein
by this reference)4(13)
    
    Letter Amendment No. 4 to Master Shelf Agreement, dated as of November 20, 2006, by and among Layne
Christensen Company, Prudential Investment Management, Inc., The Prudential Insurance Company of
America, Pruco Life Insurance Company, Security Life of Denver Insurance Company and such other
Purchasers of the Notes as may be named in the Master Shelf Agreement from time to time (filed as
Exhibit 4(2) to the Companys Form 8-K, dated November 20, 2006, and incorporated herein by this
reference)10(1)-
    
    Tax Liability Indemnification Agreement between the Registrant and The Marley Company (filed with
Amendment No. 3 to the Registrants Registration Statement (File No. 33-48432) as Exhibit 10(2) and
incorporated herein by reference)10(2)-
    
    Lease Agreement between the Registrant and Parkway Partners, L.L.C. dated December 21, 1994 (filed
with the Registrants Annual Report on Form 10-K for the fiscal year ended January 31, 1995 (File No.
0-20578) as Exhibit 10(2) and incorporated herein by reference)10(2.1)-
    
    First Modification & Ratification of Lease, dated as of February 26, 1996, between Parkway Partners,
L.L.C. and the Registrant (filed with the Registrants Annual Report on Form 10-K for the fiscal year
ended January 31, 1996 (File No. 0-20578), as Exhibit 10(2.1) and incorporated herein by this
reference)10(2.2)-
    
    Second Modification and Ratification of Lease Agreement between Parkway Partners, L.L.C. and Layne
Christensen Company dated April 28, 1997 (filed with the Registrants Annual Report on Form 10-K for
the fiscal year ended January 31, 1999 (File No. 0-20578), as Exhibit 10(2.2) and incorporated herein
by this reference)10(2.3)-
    
    Third Modification and Extension Agreement between Parkway Partners, L.L.C. and Layne Christensen
Company dated November 3, 1998 (filed with the Companys 10-Q for the quarter ended October 31, 1998
(File No. 0-20578) as Exhibit 10(1) and incorporated herein by reference)10(2.4)-
    
    Fourth Modification and Extension Agreement between Parkway Partners, L.L.C. and Layne Christensen
Company executed May 17, 2000, effective as of December 29, 1998 (filed with the Companys 10-Q for
the quarter ended July 31, 2000 (File No. 0-20578) as Exhibit 10.1 and incorporated herein by
reference)10(2.5)-
    
    Fifth Modification and extension Agreement between Parkway Partners, L.L.C. and Layne Christensen
Company dated March 1, 2003 (filed as Exhibit 10(2.5) to the Registrants Annual Report on Form 10-K
for the fiscal year ended January 31, 2003 (File No. 0-20578) and incorporated herein by this
reference)**10(3)-
    
    Form of Stock Option Agreement between the Company and management of the Company (filed with Amendment
No. 3 to the Registrants Registration Statement (File No. 33-48432) as Exhibit 10(7) and incorporated
herein by reference)10(4)-
    
    Insurance Liability Indemnity Agreement between the Company and The Marley Company (filed with
Amendment No. 3 to the Registrants Registration Statement (File No. 33-48432) as Exhibit 10(10) and
incorporated herein by reference)10(5)-
    
    Agreement between The Marley Company and the Company relating to tradename (filed with the
Registrants Registration Statement (File No.33-48432) as Exhibit 10(10) and incorporated herein by
reference)**10(6)-
    
    Form of Subscription Agreement for management of the Company (filed with Amendment No. 3 to the
Registrants Registration Statement (File No. 33-48432) as Exhibit 10(16) and incorporated herein by
reference)**10(7)-
    
    Form of Subscription Agreement between the Company and Robert J. Dineen (filed with Amendment No. 3 to
the Registrants Registration Statement (File No. 33-48432) as Exhibit 10(17) and incorporated herein
by reference)**10(8)-
    
    Letter Agreement between Andrew B. Schmitt and the Company dated October 12, 1993 (filed with the
Companys Annual Report on Form 10-K for the fiscal year ended January 31, 1995 (File No. 0-20578) as
Exhibit 10(13) and incorporated herein by reference)**10(9)-
    
    Form of Incentive Stock Option Agreement between the Company and Management of the Company (filed with
the Companys Annual Report on Form 10-K for the fiscal year ended January 31, 1996 (File No.
0-20578), as Exhibit 10(15) and incorporated herein by this reference)
 59




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##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules.
 ExhibitNumber
    
    Description10(10)-
    
    Registration Rights Agreement, dated as of November 30, 1995, between the Company and Marley Holdings,
L.P. (filed with the Companys Annual Report on Form 10-K for the fiscal year ended January 31, 1996
(File No. 0-20578), as Exhibit 10(17) and incorporated herein by this reference)**10(11)-
    
    Form of Incentive Stock Option Agreement between the Company and Management of the Company effective
February 1, 1998 (filed with the Companys Form 10-Q for the quarter ended April 30, 1998 (File No.
0-20578) as Exhibit 10(1) and incorporated herein by reference)**10(12)-
    
    Form of Incentive Stock Option Agreement between the Company and Management of the Company effective
April 20, 1999 (filed with the Companys Form 10-Q for the quarter ended April 30, 1999 (File No.
0-20578) as Exhibit 10(2) and incorporated herein by reference)**10(13)-
    
    Form of Non Qualified Stock Option Agreement between the Company and Management of the Company
effective as of April 20, 1999 (filed with the Companys Form 10-Q for the quarter ended April 30, 1999
(File No. 0-20578) as Exhibit 10(3) and incorporated herein by reference)**10(14)-
    
    Layne Christensen Company District Incentive Compensation Plan (revised effective February 1,
2000)(filed as Exhibit 10(17) to the Registrants Annual Report on Form 10-K for the fiscal year ended
January 31, 2003 (File No. 0-20578) and incorporated herein by this reference)10(15)-
    
    Layne Christensen Company Executive Incentive Compensation Plan (revised effective May 1, 1997) (filed
as Exhibit 10(17) to the Registrants Annual Report on Form 10-K for the fiscal year ended January 31,
2004 (File No. 0-20578) and incorporated herein by this reference)**10(16)-
    
    Layne Christensen Company Corporate Staff Incentive Compensation Plan (revised effective October 10,
2003) (filed as Exhibit 10(18) to the Registrants Annual Report on Form 10-K for the fiscal year
ended January 31, 2004 (File No. 0-20578) and incorporated herein by this reference)10(17)-
    
    Standstill Agreement, dated March 26, 2004, by and among Layne Christensen Company, Wynnefield
Partners Small Cap Value, L.P., Wynnefield Small Cap Value Offshore Fund, Ltd., Wynnefield Partners
Small Cap Value L.P.I., Channel Partnership II, L.P., Wynnefield Capital Management, LLC, Wynnefield
Capital, Inc., Wynnefield Capital, Inc. Profit Sharings Money Purchase Plan, Nelson Obus and Joshua
Landes (filed as Exhibit 10(19) to the Registrants Annual Report on Form 10-K for the fiscal year
ended January 31, 2004 (File No. 0-20578) and incorporated herein by this reference)**10(18)
    
    Layne Christensen Company 2006 Equity Incentive Plan, as amended (filed as Exhibit 10.1 to the
Companys Form 8-K, filed June 14, 2006, and incorporated herein by this reference)**10(19)
    
    Form of Incentive Stock Option Agreement between the Company and management of the Company for use
with the 2006 Equity Incentive Plan (filed as Exhibit 4(e) to the Companys Form S-8 (File No.
333-135683), filed July 10, 2006, and incorporated herein by this reference)**10(20)
    
    Form of Nonqualified Stock Option Agreement between the Company and management of the Company for use
with the 2006 Equity Incentive Plan (filed as Exhibit 4(f) to the Companys Form S-8 (File No.
333-135683), filed July 10, 2006, and incorporated herein by this reference)**10(21)
    
    Form of Nonqualified Stock Option Agreement between the Company and non-employee directors of the
Company for use with the 2006 Equity Incentive Plan (filed as Exhibit 4(g) to the Companys Form S-8
(File No. 333-135683), filed July 10, 2006, and incorporated herein by this reference)**10(22)
    
    Form of Restricted Stock Award Agreement between the Company and management of the Company for use
with the 2006 Equity Incentive Plan (filed as Exhibit 10(7) to the Companys Form 10-Q for the quarter
ended July 31, 2006 and incorporated herein by this reference)**10(23)
    
    Layne Christensen Company Water and Wastewater Infrastructure Group Incentive Compensation Plan (filed
as Exhibit 10.1 to the Companys Form 8-K, filed August 28, 2006, and incorporated herein by this
reference)**10(24)-
    
    Summary of 2007 Salaries of Named Executive Officers10(25)-
    
    Agreement and Plan of Merger, dated August 30, 2005, among Layne Christensen Company, Layne Merger Sub
1, Inc., Reynolds, Inc. and the Stockholders of Reynolds, Inc. listed on the signature pages thereto
(filed as Exhibit 10.2 to the Companys Form 8-K, dated September 28, 2005, and incorporated herein by
this reference)
 60




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##### Table of Contents



Item 15. Exhibits and Financial Statement Schedules.
 ExhibitNumber
    
    Description**10(26)-
    
    Layne Christensen Company Key Management Deferred Compensation Plan, effective as of January 1,
2006 (filed as Exhibit 10.1 to the Companys Form 8-K, dated January 20, 2006, and incorporated herein
by this reference)**10(27)-
    
    Reynolds Division of Layne Christensen Company Cash Bonus Plan, dated September 28, 2005 (filed as
Exhibit 10.1 to the Companys Form 8-K, dated September 28, 2005, and incorporated herein by this
reference)10(28)-
    
    Settlement Agreement, dated March 31, 2006, by and among Layne Christensen Company, Steel Partners II,
L.P., Steel Partners, L.L.C. and Warren G. Lichtenstein (filed as Exhibit 10.1 to the Companys Form
8-K, dated April 5, 2006, and incorporated herein by this reference)21(1)-
    
    List of Subsidiaries23(1)-
    
    Consent of Deloitte & Touche LLP23(2)-
    
    Consent of Cawley, Gillespie & Associates, Inc.31(1)-
    
    Section 302 Certification of Principal Executive Officer of the Company31(2)-
    
    Section 302 Certification of Principal Financial Officer of the Company32(1)-
    
    Section 906 Certification of Principal Executive Officer of the Company32(2)-
    
    Section 906 Certification of Principal Financial Officer of the Company
 
 **
    
    Management contracts or compensatory plans or arrangements required to be identified by Item 14(a)(3).
 (b)
    
    ExhibitsThe exhibits filed with this report on Form 10-K are identified above under Item 15(a)(3).(c)
    
    Financial Statement SchedulesThe financial statement schedule filed with this report on Form 10-K is identified above
under Item 15(a)(2).
 61




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##### Table of Contents



Signatures
  Layne Christensen CompanyBy
    
    /s/ A. B. SchmittAndrew B. SchmittPresident and Chief Executive Officer:Dated April 16, 2007
  Signature and Title
    
    Date/s/ A. B. Schmitt
    
    April 16, 2007Andrew B. SchmittPresident, Chief Executive Officerand Director (Principal Executive Officer)/s/ Jerry W. Fanska
    
    April 16, 2007Jerry W. FanskaSenior Vice President-Finance and Treasurer(Principal Financial and Accounting Officer)/s/ Jeff Reynolds
    
    April 16, 2007Jeffrey J. ReynoldsDirector/s/ Donald K. Miller
    
    April 16, 2007Donald K. MillerDirector/s/ David A. B. Brown
    
    April 16, 2007David A. B. BrownDirector/s/ J. Samuel Butler
    
    April 16, 2007J. Samuel ButlerDirector/s/ Anthony B. Helfet
    
    April 16, 2007Anthony B. HelfetDirector/s/ John J. Quicke
    
    April 16, 2007John J. QuickeDirector/s/ Nelson Obus
    
    April 16, 2007Nelson ObusDirector
 62