06 6

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~April 3130, ~~2017~~2018

☐	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 001-34195

Layne Christensen Company

(Exact name of registrant as specified in its charter)

Delaware		48-0920712
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1800 Hughes Landing Boulevard Ste 800 The Woodlands, TX		77380
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code) (281)475-2600

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicated by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an “emerging growth company”. See definition of “large accelerated filer,” “accelerated filer,”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐		Accelerated filer	☒


Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 1920,~~882~~068,~~366~~036 shares of common stock, $.01 par value per share, outstanding on ~~November~~May 2825, ~~2017~~2018.

LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES

Form 10-Q

For the QUARTERLY PERIOD ENDED ~~October~~April 3130, ~~2017~~2018

INDEX

		Page
PART I
ITEM 1.	Financial Statements (Unaudited)	3
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2328
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3135
ITEM 4.	Controls and Procedures	3135
PART II
ITEM 1.	Legal Proceedings	3236
ITEM 1A.	Risk Factors	3236
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3236
ITEM 3.	Defaults Upon Senior Securities	3236
ITEM 4.	Mine Safety Disclosures	3236
ITEM 5.	Other Information	3236
ITEM 6.	Exhibits	3337
	Signatures	3438

PART I

ITEM 1. Financial Statements

LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	October 31,			January 31,
	April 30,			January 31,
(in thousands)	~~2017~~2018			~~2017~~2018
	(unaudited)			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2617,~~085~~805		$	6932,~~000~~041
Customer receivables, less allowance of $1,794 and $3,202, respectively		75,894			57,252
Customer receivables, less allowance of $1,862 and $2,084, respectively		73,681			59,558
Costs and estimated earnings in excess of billings on uncompleted contracts		5141,~~695~~088			4843,~~623~~177
Inventories		1923,~~492~~258			1820,~~697~~020
Other		1410,~~761~~556			1611,~~751~~915
Current assets of discontinued operations		—			40,160
Total current assets		166,388			166,711
Total current assets		187,927			250,483
Property and equipment, net		119,441			120,604
Property and equipment, net		117,623			96,985
Other assets:
Investment in affiliates		5554,~~136~~512			5553,~~290~~325
Goodwill		8,915			8,915
Other intangible assets, net		3,~~942~~700			13,~~779~~844
Restricted deposits - long-term		6,~~354~~190			56,~~055~~572
Other		98,~~573~~150			118,~~514~~408
Other assets of discontinued operations		—			6,130
Total other assets		81,467			81,064
Total other assets		83,920			88,683
Total assets	$	367,296		$	368,379
Total assets	$	389,470		$	436,151
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	42,980		$	41,146
Current maturities of long-term debt	$	68,036		$	67,293
Billings in excess of costs and estimated earnings on uncompleted contracts		14,730			19,160
Accounts payable		41,487			42,330
Other current liabilities		69,921			64,052
Billings in excess of costs and estimated earnings on uncompleted contracts		7,960			8,796
Current liabilities of discontinued operations		—			20,580
Other current liabilities		50,291			53,044
Total current liabilities		~~127~~167,~~631~~774			~~144~~171,~~938~~463
Noncurrent liabilities:
Long-term debt		~~165~~98,~~064~~985			~~162~~98,~~346~~769
Self-insurance reserve		1311,~~943~~755			1511,~~647~~464
Deferred income taxes		~~3,850~~827			~~4,199~~769
Other		2428,~~945~~539			2628,~~753~~404
Total noncurrent liabilities		~~207~~140,~~802~~106			~~208~~139,~~945~~406
Equity:
Common stock, par value $.01 per share, 60,000 shares authorized, 19,883 and 19,805 shares issued and outstanding, respectively		199			198
Common stock, par value $.01 per share, 60,000 shares authorized, 20,059 and 19,917 shares issued and outstanding, respectively		201			199
Capital in excess of par value		~~371~~372,~~434~~016			~~369~~372,~~160~~049
Accumulated deficit		(~~298~~293,~~706~~469	)		(~~268~~296,~~820~~174	)
Accumulated other comprehensive loss		(1819,~~938~~380	)		(18,~~318~~612	)
Total Layne Christensen Company equity		53,989			82,220
Total Layne Christensen equity		59,368			57,462
Noncontrolling interests		48			48
Total equity		5459,~~037~~416			8257,~~268~~510
Total liabilities and equity	$	~~389~~367,~~470~~296		$	~~436~~368,~~151~~379

See Notes to Condensed Consolidated Financial Statements.

LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months						~~Nine Months~~
	Ended October 31,						Ended October 31,
	Ended April 30,
	(unaudited)						~~(unaudited)~~
(in thousands, except per share data)	~~2017~~2018			~~2016~~2017			~~2017~~			~~2016~~
Revenues	$	~~127~~114,~~423~~551		$	~~120~~110,~~574~~913		$	~~365,090~~		$	~~364,855~~
Cost of revenues (exclusive of depreciation and amortization, shown below)		(~~100~~86,~~140~~026	)		(9786,~~124~~250	)		~~(285,292~~	)		~~(294,660~~	)
Selling, general and administrative expenses (exclusive of depreciation and amortization shown below)		(1917,~~303~~120	)		(17,~~609~~640	)		~~(55,983~~	)		~~(57,238~~	)
Depreciation and amortization		(6,~~821~~763	)		(6,~~517~~484	)		~~(19,678~~	)		~~(19,002~~	)
Gain on sale of fixed assets		~~881~~4,609			~~2,739~~612			~~1,913~~			~~2,828~~
Equity in earnings of affiliates		1,~~367~~714			~~189~~711			~~3,093~~			~~1,916~~
Restructuring costs		(~~953~~2,806	)		(~~1,711~~428	)		~~(2,208~~	)		~~(2,776~~	)
Interest expense		(4,~~308~~408	)		(4,~~206~~200	)		~~(12,745~~	)		~~(12,661~~	)
Other (expense) income, net		(70	)		554			(4	)		665
Other income (expense), net		99			(163	)
Loss from continuing operations before income taxes		(1,924	)		(3,111	)		(5,814	)		(16,073	)
Income (loss) from continuing operations before income taxes		3,850			(2,929	)
Income tax expense		(80970	)		(1,~~352~~050	)		~~(1,743~~	)		~~(1,824~~	)
Net loss from continuing operations		(2,004	)		(4,463	)		(7,557	)		(17,897	)
Net income (loss) from continuing operations		2,880			(3,979	)
Net loss from discontinued operations		(76175	)		(~~580~~19,482	)		~~(22,329~~	)		~~(1,259~~	)
Net loss	$	(2,080	)	$	(5,043	)	$	(29,886	)	$	(19,156	)
Net income (loss)	$	2,705		$	(23,461	)
Loss per share information:
Income (loss) per share information:
Loss per share from continuing operations - basic and diluted	$	(0.10	)	$	(0.23	)	$	(0.38	)	$	(0.91	)
Income (loss) per share from continuing operations - basic	$	0.14		$	(0.20	)
Loss per share from discontinued operations - basic and diluted		(0.01	)		(0.03	)		(1.13	)		(0.06	)
Loss per share from discontinued operations - basic		(0.01	)		(0.98	)
Loss per share - basic and diluted	$	(0.11	)	$	(0.26	)	$	(1.51	)	$	(0.97	)
Income (loss) per share - basic	$	0.13		$	(1.18	)
Weighted average shares outstanding - basic and dilutive		19,882			19,791			19,846			19,782
Income (loss) per share from continuing operations - diluted	$	0.14		$	(0.20	)
Loss per share from discontinued operations - diluted		(0.01	)		(0.98	)
Income (loss) per share - diluted	$	0.13		$	(1.18	)
Weighted average shares outstanding - basic		20,122			19,796
Weighted average shares outstanding - dilutive		21,159			19,796

See Notes to Condensed Consolidated Financial Statements.

LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months						~~Nine Months~~
	Ended October 31,						Ended October 31,
	Ended April 30,
	(unaudited)						~~(unaudited)~~
(in thousands)	~~2017~~2018			~~2016~~2017			~~2017~~			~~2016~~
Net loss	$	(2,080	)	$	(5,043	)	$	(29,886	)	$	(19,156	)
Net income (loss)	$	2,705		$	(23,461	)
Other comprehensive (loss) income:
Other comprehensive loss:
Foreign currency translation adjustments (net of taxes of $0.0 and $0.1 million for 2017 and 2016, respectively)		(627	)		361			(620	)		2,302
Foreign currency translation adjustments (net of taxes of $0.0 and $0.0 million for 2018 and 2017, respectively)		(768	)		(356	)
Other comprehensive (loss) income		(627	)		361			(620	)		2,302
Other comprehensive loss		(768	)		(356	)
Comprehensive loss	$	(2,707	)	$	(4,682	)	$	(30,506	)	$	(16,854	)
Comprehensive income (loss)	$	1,937		$	(23,817	)

See Notes to Condensed Consolidated Financial Statements.

LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

									Retained			Accumulated			Total
						Capital In			Earnings			Other			Layne
	Common Stock					Excess of			(Accumulated			Comprehensive			~~Shareholders'~~Christensen			Noncontrolling
(in thousands)	Shares			Amount		Par Value			Deficit)			Loss			Equity			Interests		Total
Balance February 1, 2017		19,805		$	198	$	369,160		$	(268,820	)	$	(18,318	)	$	82,220		$	48	$	82,268
Balance February 1, 2018		19,917		$	199	$	372,049		$	(296,174	)	$	(18,612	)	$	57,462		$	48	$	57,510
Net loss		—			—		—			(29,886	)		—			(29,886	)		—		(29,886	)
Net income		—			—		—			2,705			—			2,705			—		2,705
Other comprehensive loss		—			—		—			—			(~~620~~768	)		(~~620~~768	)		—		(~~620~~768	)
Issuance of stock for vested restricted stock units		76192			12		(12	)		—			—			—			—		—
Shares purchased and subsequently cancelled		(2350	)		—		(~~184~~730	)		—			—			(~~184~~730	)		—		(~~184~~730	)
Issuance of stock upon exercise of options		25			—		205			—			—			205			—		205
Equity-based compensation		—			—		699			—			—			699			—		699
Equity-based compensation		—			—		2,254			—			—			2,254			—		2,254
Balance April 30, 2018		20,059		$	201	$	372,016		$	(293,469	)	$	(19,380	)	$	59,368		$	48	$	59,416
Balance October 31, 2017		19,883		$	199	$	371,434		$	(298,706	)	$	(18,938	)	$	53,989		$	48	$	54,037

See Notes to Condensed Consolidated Financial Statements.

LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

	Nine Months Ended October 31,
	Three Months Ended April 30,
	(unaudited)
(in thousands)	~~2017~~2018			~~2016~~2017
Cash flow from operating activities:
Net loss	$	(29,886	)	$	(19,156	)
Net income (loss)	$	2,705		$	(23,461	)
Adjustments to reconcile net loss to cash flow from operating activities:
Depreciation and amortization		196,~~965~~763			206,~~247~~771
Bad debt expense		1,338			1,418
Bad debt (recovery) expense		(220	)		1,313
Loss on sale of discontinued operations		~~19,025~~—			—16,707
Deferred income taxes		~~(145~~58	)		~~656~~(27	)
Equity-based compensation		~~2,254~~699			~~2,749~~682
Amortization of discount and deferred financing costs		31,~~360~~248			31,~~133~~098
Equity in earnings of affiliates		(3,093	)		(1,916	)
Gain on sale of fixed assets		(4,609	)		(616	)
Dividends received from affiliates		3,202			3,014
Equity in earnings of affiliates		(1,714	)		(711	)
Gain on sale of fixed assets		(1,917	)		(3,051	)
Dividends received from affiliates		527			1,005
Interest earned on restricted deposits		(89	)		—
Changes in assets and liabilities:
Customer receivables		(1714,~~715~~138	)		4(11,~~499~~648	)
Costs and estimated earnings in excess
of billings on uncompleted contracts		(42,~~102~~091	)		~~2,868~~(433	)
Inventories		(~~922~~3,595	)		~~662~~(1,483	)
Other current assets		~~1,633~~151			~~(611~~585	)
Accounts payable and accrued expenses		(3,~~258~~992	)		(52,~~640~~454	)
Billings in excess of costs and
estimated earnings on uncompleted contracts		(~~2,618~~836	)		31,~~122~~905
Other, net		~~(1,433~~255	)		~~(225~~954	)
Cash (used in) provided by operating activities		(7,885	)		11,769
Cash used in operating activities		(14,607	)		(9,813	)
Cash flow from investing activities:
Capital expenditures		(405,~~670~~360	)		(1411,~~969~~147	)
Proceeds from sale of fixed assets		27,~~073~~279			~~8,520~~767
Proceeds from sale of business		~~3,468~~—			—5,804
Investment in foreign affiliate		~~(25~~—	)		—(25	)
Release of cash from restricted accounts		—			1,944
Cash provided by (used in) investing activities		1,919			(4,601	)
Cash used in investing activities		(35,154	)		(4,505	)
Cash flow from financing activities:
Payment of debt issuance costs		—			(9	)
Principal payments under capital lease obligation		(9	)		(2	)
Principal payments under capital lease obligation		(16	)		(63	)
Debt issuance costs		(1,250	)		—
Issuance of stock upon exercise of stock options		205			—
Purchases and retirement of Company shares		(730	)		—
Shares purchased and subsequently cancelled		(184	)		(2	)
Cash used in financing activities		(1,989	)		(2	)
Cash provided by (used in) financing activities		5			(74	)
Effects of exchange rate changes on cash		59			(43	)
Effects of exchange rate changes on cash		119			(48	)
Net decrease in cash, cash equivalents and restricted deposits		(14,618	)		(14,459	)
Net (decrease) increase in cash and cash equivalents		(42,915	)		7,142
Cash, cash equivalents and restricted deposits at beginning of period		38,613			74,055
Cash and cash equivalents at beginning of period		69,000			65,569
Cash, cash equivalents and restricted deposits at end of period	$	23,995		$	59,596
Cash and cash equivalents at end of period	$	26,085		$	72,711

See Notes to Condensed Consolidated Financial Statements.

LAYNE CHRISTENSEN COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ~~Accounting~~Summary ~~Policies and Basis~~ of ~~Presentation~~Significant Accounting Policies

Description of Business—Layne Christensen Company and its subsidiaries (together, “Layne,” the “Company,” “we,” “our,” or “us”) is a global water management, drilling and infrastructure services and drilling company, providing responsible solutions to the world of essential natural resources – water, minerals and energy. We ~~offer~~primarily ~~innovative,~~operate ~~sustainable~~in ~~products~~North America and ~~services~~Brazil ~~with an enduring commitment to safety, excellence~~ and ~~integrity.~~through Weour ~~primarily~~affiliates ~~operate~~ in ~~North~~Latin America ~~and Brazil~~. Our customers include government agencies, investor-owned utilities, industrial companies, global mining companies, consulting engineering firms, oil and gas companies, power companies and agribusinesses. We have an ownership interest in certain foreign affiliates operating in Latin America. See Note 78 to the Condensed Consolidated Financial Statements.

Fiscal Year—Our fiscal year end is January 31. References to fiscal years, or “~~FY2018~~FY2019” are to the twelve months then ended January 31 of that year.

Principles of Consolidation—The Condensed Consolidated Financial Statements include our accounts and the accounts of all of our subsidiaries where we exercise control. For investments in subsidiaries that are not wholly-owned, but where we exercise control, the equity held by the minority owners and their portions of net income (loss) are reflected as noncontrolling interests. All intercompany accounts and transactions have been eliminated in consolidation.

Investment in Affiliated Companies—Investments in affiliates (20% to 50% owned) in which we have the ability to exercise significant influence, but do not hold a controlling interest over operating and financial policies, are accounted for by the equity method. We ~~evaluate~~performed ~~our~~a ~~equity~~qualitative ~~method~~assessment ~~investments~~to ~~for~~determine ~~impairment~~the atexistence ~~least~~of ~~annually~~events orand ~~when~~circumstances ~~events~~that orwould ~~changes~~lead into ~~circumstances~~a ~~indicate~~determination ~~there~~that isa triggering event occurred that would indicate a loss in value of the investment. If such a conclusion is reached, then we would be required to perform a quantitative impairment assessment over the value of our investments. However if the assessment leads to a determination that the fair value of the investments is ~~other~~greater than the carrying amount, no further assessments are required. As of January 31, 2018, we performed a ~~temporary~~qualitative ~~decline~~assessment and concluded no triggering events had occurred. Distributions from our equity method investees are accounted for using the cumulative earnings approach on our Consolidated Statement of Cash Flows. Distributions received are considered returns on investment and classified as cash inflows from operating activities, unless the investor’s cumulative distribution received less distributions received in prior periods that were determined to be returns of investment exceed cumulative equity in earnings recognized by the investor. When such an excess occurs, the current-period distribution up to this excess is considered a return on investment and classified as cash inflows from investing activities.

Presentation—The unaudited Condensed Consolidated Financial Statements included herein have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, certain information and disclosures normally included in our annual consolidated financial statements have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017~~2018 (“Annual Report”). We believe the Condensed Consolidated Financial Statements included herein reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the interim periods. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. In the Notes to Condensed Consolidated Financial Statements, all dollar amounts in tabulations are in thousands of dollars, unless otherwise indicated.

As discussed further in Note 911 to the Condensed Consolidated Financial Statements, during the first quarter of FY2018, we completed the sale of substantially all of the assets of our Heavy Civil business. The results of operations related to the Heavy Civil business, ~~including the final working capital adjustment,~~ have been classified as discontinued operations for all periods presented. Unless noted otherwise, discussion in these Notes to Condensed Consolidated Financial Statements pertain to continuing operations.

~~Additionally,~~Effect ~~as part~~ of ~~management’s~~Adopting ~~continued~~Accounting ~~analysis~~Standards inCodification ~~connection~~(“ASC”) ~~with~~Topic the Water Resources Business Performance Initiative, we determined a better reflection of cost of revenues is to include indirect project manager costs that historically have been presented in selling, general and administrative expenses. Indirect project manager costs are included in cost of revenues beginning with the first quarter of FY2018, and prior periods have been revised. For the three and nine months ended October 31, 2016, approximately $2.0 million and $6.7 million, respectively, of these indirect project manager costs are now included in cost of revenue.606

~~Net~~On ~~gain~~February on1, ~~sale~~2018, ofwe ~~fixed~~adopted ~~assets~~ASC ~~were~~Topic ~~previously~~606, ~~reported~~Revenue infrom ~~other~~Contracts ~~income~~with ~~(expense)~~Customers, ~~net~~(“ASC ~~within~~Topic ~~the~~606”) ~~Condensed~~using ~~Consolidated~~the ~~Statement~~full ofretrospective ~~Operations,~~method. ~~rather~~As ~~than~~a ~~separately~~result ~~as part~~ of ~~income~~adoption, ~~(loss)~~our ~~from~~prior-period ~~operations~~financial orstatements ~~within~~and ~~cost~~disclosures ofhave ~~revenues~~been asrestated ~~per~~using ~~SEC~~the ~~Regulation~~cumulative Scatch-Xup ~~guidance~~method. We have ~~corrected~~updated ~~all~~our ~~periods~~accounting ~~presented~~policies inand ~~the~~internal ~~accompanying~~controls, ~~Condensed~~and ~~Consolidated~~implemented ~~Statement~~changes ofto ~~Operations.~~our ~~The~~business ~~change~~processes inand ~~presentation~~information ~~had~~systems noto ~~effect~~support onthe ~~net~~new ~~loss~~revenue recognition and ~~does~~disclosure ~~not affect the Condensed Consolidated Balance Sheets~~requirements.

~~Business~~The ~~Segments—We~~objective ~~currently~~of ~~report~~ASC ~~our~~Topic ~~financial~~606 ~~results~~is ~~under~~to ~~three~~report ~~reporting~~useful ~~segments~~information ~~consisting~~to users of ~~Water~~our ~~Resources,~~financial ~~Inliner,~~statements ~~and~~about ~~Mineral~~the ~~Services.~~nature, Asamount, ~~noted above~~timing, ~~during~~and ~~the~~uncertainty ~~first quarter~~ of ~~FY2018,~~revenue weand ~~completed~~cash ~~the~~flows ~~sale~~arising offrom ~~substantially~~a ~~all~~contract ofwith ~~the~~our ~~assets~~customer ofand ~~our~~to ~~Heavy~~recognize ~~Civil~~revenue ~~business.~~at ~~The~~an ~~results~~amount ofthat ~~operations~~reflects ~~related~~the consideration to ~~the~~which ~~Heavy~~we ~~Civil~~expect ~~business~~to ~~have~~be ~~been~~entitled ~~classified~~to asreceive ~~discontinued~~in ~~operations~~exchange for ~~all~~transferring ~~periods~~goods ~~presented~~or services to a customer.

WeThe ~~report~~adoption ~~corporate expenses under the title “Unallocated Corporate.” Unallocated corporate expenses primarily consist~~ of ~~general~~ASC ~~and~~Topic ~~administrative~~606, ~~functions~~Revenue ~~performed~~from onContracts awith ~~company-wide basis and benefiting all segments. These costs include expenses related to accounting~~Customers, ~~financial~~had ~~reporting,~~three ~~internal~~primary ~~audit,~~impacts ~~treasury,~~on ~~legal,~~our ~~tax~~Condensed ~~compliance,~~Consolidated ~~executive~~Financial ~~management~~Statements ~~and board of directors.~~-

~~Use~~ of(1) ~~and~~Prior ~~Changes~~to inadoption ~~Estimates—The preparation~~ of ~~the~~ASC ~~Condensed~~Topic ~~Consolidated~~606, ~~Financial~~we ~~Statements~~would inrecognize ~~conformity~~revenue ~~with GAAP requires management to make estimates~~ and ~~assumptions~~cost ~~that~~under ~~affect~~ the ~~reported~~completed ~~amounts~~contract ofmethod ~~assets~~on ~~and liabilities~~smaller, ~~disclosure~~shorter-term ofduration ~~assets~~contracts ~~and~~in ~~liabilities~~our atWater ~~the~~Resource ~~date~~segment ofonce the ~~Condensed~~contract ~~Consolidated~~was ~~Financial~~completed. ~~Statements~~This ~~and~~method ~~the~~is ~~reported~~no ~~amounts~~longer ofpermitted ~~revenues~~under ~~and expenses during~~ the ~~reporting period. Estimates and assumptions about future events and their effects cannot be perceived with certainty, and accordingly, these estimates may change as~~ new ~~events occur~~guidance, ~~as more experience is acquired, as additional information is obtained~~ and ~~as our operating environment changes. While~~ we ~~believe~~now ~~that~~recognize ~~the~~revenue ~~estimates~~ and ~~assumptions~~cost ~~used~~over intime ~~the~~when ~~preparation~~control of the ~~Condensed~~goods ~~Consolidated~~and/or ~~Financial~~services ~~Statements~~is ~~are~~transferred ~~appropriate,~~to ~~actual~~the ~~results could differ from those estimates~~customer.

~~Foreign~~(2) ~~Currency~~Under ~~Transactions and Translation—In accordance with Accounting Standards Codification (“~~ASC”) Topic ~~830,~~606 ~~“Foreign~~the ~~Currency~~unit ~~Matters,”~~of ~~gains~~account ~~and~~is ~~losses~~a ~~resulting~~performance ~~from~~obligation, ~~foreign~~which ~~currency~~is ~~transactions~~a ~~are~~promise ~~included~~ in ~~the~~a ~~Condensed~~contract ~~Consolidated~~to ~~Statements~~transfer ofa ~~Operations.~~distinct ~~Assets~~good ~~and~~or ~~liabilities~~service ofto ~~non-U~~the customer.S. ~~subsidiaries~~A ~~whose~~contract’s ~~functional~~transaction ~~currency~~price is ~~the~~allocated ~~local~~to ~~currency~~each ~~are~~distinct ~~translated~~performance ~~into~~obligation ~~U.S.~~and ~~dollars~~recognized atas ~~exchange~~revenue ~~rates~~when, ~~prevailing~~or atas, the ~~balance~~performance ~~sheet~~obligation ~~date~~is satisfied. ~~The~~This ~~net~~change ~~foreign~~eliminated ~~currency~~segmentation ~~exchange~~treatment ~~differences~~for ~~resulting~~certain ~~from~~customer ~~these~~contracts ~~translations are reported~~ in ~~accumulated~~our ~~other~~Inliner ~~comprehensive income (loss)~~segment. ~~Revenues and expenses are translated at average foreign currency exchange rates during the reporting period.~~

(3) The ~~cash~~impact ~~flows and financing activities~~ of ~~our~~(1) ~~operations~~and in(2) ~~Mexico~~above ~~are~~on ~~primarily~~profit ~~denominated~~recorded in ~~U.S.~~prior ~~dollars.~~years ~~Accordingly,~~is ~~these~~now ~~operations~~reflected ~~use~~in the ~~U.S.~~period ~~dollar~~identified as(cumulative ~~their~~catch-up ~~functional~~method), ~~currency. Monetary~~rather ~~assets~~than ~~and~~prospectively ~~liabilities~~over ~~are~~the ~~remeasured~~remaining atcontract ~~period end~~term. ~~Foreign~~The ~~currency~~cumulative ~~transactions~~effect ~~are~~of ~~measured~~the atadoption ~~the~~was ~~current~~recognized ~~exchange~~as ~~rate,~~a ~~and~~reduction ~~nonmonetary~~to ~~items~~retained ~~are~~earnings ~~measured~~of at$43 ~~historical~~thousand ~~exchange~~on ~~rates~~January ~~with~~31, ~~exchange~~2018. ~~rate~~See ~~differences~~Note ~~reported~~9 into the Condensed Consolidated ~~Statement~~Financial ofStatements ~~Operations~~for further discussion.

~~Net~~As ~~foreign~~part ~~currency~~of ~~transaction~~our ~~losses were ($0.0) million and ($0.3) million for the three and nine months ended October 31~~adoption, ~~2017,~~we ~~respectively,~~applied ~~and ($0.1) million and ($0.2) million for~~ the ~~three~~following ~~and~~practical ~~nine months ended October 31, 2016, respectively and are recorded in other income (expense), net in the accompanying Condensed Consolidated Statements of Operations.~~expedients:

~~Revenue~~• ~~Recognition—Revenues~~We ~~are~~did ~~recognized~~not onrestate ~~large,~~projects ~~long-term~~that ~~contracts~~utilized ~~meeting~~ the ~~criteria~~completed ofcontract ~~ASC Topic 605-35 “Construction-Type and Production-Type Contracts” (“ASC Topic 605-35”), using the percentage-of-completion~~ method ~~based~~that ~~upon~~began ~~the ratio of costs incurred to total estimated costs at completion. Contract price~~ and ~~cost~~ended ~~estimates~~in ~~are reviewed periodically as work progresses and adjustments proportionate to~~ the ~~percentage~~same ofannual ~~completion are reflected in contract revenues in the~~ reporting period ~~when such estimates are revised~~. ~~The~~(ASC ~~nature~~Topic ~~of accounting for these contracts using the percentage~~606-of10-completion method is such that refinements of the estimating process for changing conditions and new developments may occur and are characteristic of the process. Many factors can and do change during a contract performance period which can result in a change to contract profitability including differing site conditions 65-1(~~to the extent that contract remedies are unavailable~~f), the availability of skilled contract labor, the performance of major material suppliers, the performance of major subcontractors, unusual weather conditions and unexpected changes in material costs. These factors may result in revisions to costs and income and are recognized in the period in which the revisions become known. When the estimate on a contract indicates a loss, the entire loss is recorded during the accounting period in which the facts that caused the revision become known. Management evaluates the performance of contracts on an individual basis. In the ordinary course of business, but at least quarterly, we prepare updated estimates of cost and profit or loss for each contract. The cumulative effect of revisions in estimates of the total forecasted revenue and costs, including unapproved change orders and claims, during the course of the contract is reflected in the accounting period in which the facts that caused the revision become known. Large changes in cost estimates on larger, more complex projects can have a material impact on our financial statements and are reflected in results of operations when they become known. (1))

• We ~~record~~utilized ~~revenue on contracts relating to unapproved change orders and claims by including in revenue an amount less than or equal to~~ the ~~amount of the costs incurred by us to date for~~ contract ~~price~~transaction ~~adjustments that we seek to collect from customers for delays, errors in specifications or designs, change orders in dispute or unapproved as to scope or~~ price, orat ~~other~~the ~~unanticipated~~date ~~additional costs, in each case when recovery of~~ the ~~costs~~contract iswas ~~considered~~completed ~~probable.~~rather ~~The~~than ~~amount~~estimating ofvariable ~~unapproved~~consideration ~~change~~amounts ~~orders and claims revenues are included~~ in ~~our Condensed Consolidated Balance Sheets as part of costs and estimated earnings in excess of billings on uncompleted contracts. When determining~~ the ~~likelihood~~comparative ofreporting ~~eventual recovery, we consider such factors as our experience on similar projects and our experience with the customer~~periods. As(ASC ~~new~~Topic ~~facts become known, an adjustment to the estimated recovery is made and reflected in the current period.~~ 606-10-65-1(f)(2))

As• ~~allowed~~For bycontracts ~~ASC~~that ~~Topic~~were ~~605-35,~~modified ~~revenue~~before isthe ~~recognized~~beginning onof ~~smaller~~the earliest reporting period presented in accordance with the standard, ~~short-term~~we ~~contracts~~did ~~using~~not retrospectively restate the ~~completed~~contract for those modifications in accordance with the contract ~~method~~modification guidance in ASC Topic 606-10-25-12 and 25-13. ~~Provisions~~Instead ~~for~~we ~~estimated~~reflected ~~losses~~the onaggregate ~~uncompleted~~effect ~~contracts~~of ~~are~~all ~~made~~modifications inwhen identifying the ~~period~~satisfied inand ~~which~~unsatisfied ~~such~~performance ~~losses~~obligations, ~~become~~determining ~~known~~the transaction price and ~~reported~~allocating inthe transaction price. (ASC Topic 606-10-65-1(f)(4))

•

We recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less. (ASC Topic 340-40-25-4))

•

As a practical expedient, when we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date, we recognize revenue in the amount to which we have a right to invoice. (ASC Topic 606-10-55-18)

The following tables summarize the effects of adopting this accounting standard on our unaudited Condensed Consolidated Financial Statements.

	As of January 31, 2018
	As Previously			Impact of Adoption
(in thousands)	Presented			of ASC Topic 606			As Adjusted
ASSETS
Current assets:
Costs and estimated earnings in excess of billings on uncompleted contracts	$	44,987		$	(1,810	)	$	43,177

LIABILITIES AND EQUITY
Current liabilities:
Billings in excess of costs and estimated earnings on uncompleted contracts		10,563			(1,767	)		8,796
Equity:
Accumulated deficit	$	(296,131	)	$	(43	)	$	(296,174	)

cost of revenues in the Condensed Consolidated Statements of Operations. We determine when short-term contracts are completed based on acceptance by the customer.

	Three Months Ended April 30, 2017
	As Previously			Impact of Adoption
(in thousands, except per share data)	Presented			of ASC Topic 606			As Adjusted
Revenues	$	111,507		$	(594	)	$	110,913
Cost of revenues (exclusive of depreciation and amortization, shown below)		(86,283	)		33			(86,250	)
Loss from continuing operations before income taxes		(2,368	)		(561	)		(2,929	)
Net loss from continuing operations		(3,418	)		(561	)		(3,979	)
Net loss	$	(22,900	)	$	(561	)	$	(23,461	)
Loss per share from continuing operations - basic and diluted	$	(0.17	)	$	(0.03	)	$	(0.20	)
Loss per share - basic and diluted		(1.15	)		(0.03	)		(1.18	)

~~Revenues~~(1) ~~for~~Of ~~drilling contracts within Mineral Services are primarily recognized in terms of~~ the ~~value~~$594 ofrevenue ~~total~~adjustment, ~~work~~$253 ~~performed~~relates to ~~date~~Water onResources ~~the~~and ~~basis~~$341 ofrelates ~~actual~~to ~~footage drilled~~Inliner, ~~meterage~~all ~~drilled~~in orthe ~~services performed~~U. S.

~~Revenues~~(2) ~~for~~The ~~direct~~$33 ~~sales~~cost of ~~equipment~~revenues ~~and~~(exclusive ~~other ancillary products not provided in conjunction with the performance~~ of ~~other~~depreciation ~~services~~and ~~are~~amortization) ~~recognized~~adjustment atrelates ~~the date of delivery~~ to, ~~and~~Water ~~acceptance by~~Resources, in the ~~customer~~U. S.

~~Our~~Business ~~revenues~~Segments—We ~~are~~report ~~presented~~our ~~net~~financial ofresults ~~taxes~~under ~~imposed~~three onreporting ~~revenue-producing~~segments ~~transactions~~consisting ~~with~~of ~~our~~Water ~~customers~~Resources, ~~such as~~Inliner, ~~but not limited to, sales, use, value-added~~ and ~~some~~Mineral ~~excise taxes~~Services.

~~Inventories—In~~We ~~February~~report ~~2017,~~corporate weexpenses ~~adopted~~under ~~Accounting Standards Update (“ASU”) 2015-11 “Inventory – Simplifying~~ the ~~Measurement~~title ~~of Inventory” issued by the Financial Accounting Standards Board (the~~ “~~FASB”)~~Unallocated ~~on July 22, 2015, on a prospective basis~~Corporate.” Unallocated Ascorporate ~~such,~~expenses ~~our~~primarily ~~October~~consist ~~31, 2017 inventories are valued at the lower~~ of ~~cost~~general ~~or net realizable value~~ and ~~our~~administrative ~~inventories~~functions atperformed ~~January~~on ~~31, 2017 are valued at the lower of cost or market. Implementation did not result in~~ a ~~material~~company-wide ~~difference~~basis ~~in our reported inventory values. Cost of U.S. inventories~~ and ~~the~~benefiting ~~majority~~all ~~of foreign operations are determined using the average cost method~~segments. ~~Inventories~~These ~~consist~~costs ~~primarily~~include ofexpenses ~~supplies~~related ~~and~~to ~~raw~~accounting, ~~materials.~~financial ~~Supplies~~reporting, ofinternal ~~$17.0~~audit, ~~million~~treasury, ~~and~~legal, ~~$16.4~~information ~~million~~technology, ~~and~~tax ~~raw~~compliance, ~~materials~~executive ofmanagement ~~$2.5 million~~ and ~~$2.3~~board ~~million were included in inventories in the Condensed Consolidated Balance Sheets as~~ of ~~October 31, 2017 and January 31, 2017, respectively~~directors.

~~Goodwill~~Use of and Changes in Estimates—InThe ~~accordance~~preparation ~~with~~of ~~ASC~~the ~~Topic~~Condensed ~~350-20,~~Consolidated ~~“Intangibles~~Financial –Statements ~~Goodwill~~in ~~and~~conformity ~~Other,”~~with weGAAP ~~are~~requires ~~required~~management to ~~test~~make ~~for~~estimates and assumptions that affect the ~~impairment~~reported amounts of ~~goodwill~~assets onand liabilities, disclosure of assets and liabilities at ~~least~~the andate ~~annual~~of ~~basis.~~the WeCondensed ~~conduct~~Consolidated ~~this~~Financial ~~evaluation~~Statements ~~annually~~and asthe reported amounts of ~~December~~revenues 31and orexpenses ~~more~~during ~~frequently~~the ifreporting ~~events~~period. orEstimates ~~changes~~and inassumptions ~~circumstances~~about ~~indicate~~future ~~that~~events ~~goodwill~~and ~~might~~their effects cannot be ~~impaired.~~perceived Wewith ~~believe~~certainty, atand ~~this~~accordingly, ~~time~~these ~~that~~estimates ~~the~~may ~~carrying~~change ~~value~~as ofnew ~~goodwill~~events isoccur, ~~appropriate.~~as Asmore ofexperience ~~October~~is 31acquired, ~~2017~~as additional information is obtained and ~~January~~as ~~31,~~our ~~2017,~~operating environment changes. While we ~~had~~believe ~~$8.9~~that ~~million~~the ofestimates ~~goodwill~~and ~~which~~assumptions isused ~~all~~in ~~attributable~~the topreparation of the ~~Inliner~~Condensed ~~reporting~~Consolidated ~~segment~~Financial Statements are appropriate, actual results could differ from those estimates.

~~Other~~Foreign ~~Long-lived~~Currency ~~Assets~~Transactions and Translation—~~Long-lived~~In ~~assets,~~accordance ~~including~~with ~~amortizable~~ASC ~~intangible~~Topic ~~assets~~830, ~~are~~“Foreign ~~reviewed~~Currency ~~for~~Matters,” ~~recoverability~~gains ~~whenever~~and ~~events~~losses orresulting ~~changes~~from inforeign ~~circumstances~~currency ~~indicate~~transactions ~~that~~are included in the ~~carrying~~Condensed ~~amount~~Consolidated Statements of anOperations. ~~asset~~Assets ~~may~~and ~~not~~liabilities beof ~~recoverable~~non-U.S. ~~Factors~~subsidiaries wewhose ~~consider~~functional ~~important~~currency ~~which~~is ~~could~~the ~~trigger~~local ancurrency ~~impairment~~are ~~review~~translated ~~include~~into ~~but~~U.S. dollars at exchange rates prevailing at the balance sheet date. The net foreign currency exchange differences resulting from these translations are ~~not~~reported ~~limited~~in toaccumulated other comprehensive income (loss). Revenues and expenses are translated at average foreign currency exchange rates during the ~~following:~~reporting period.

The cash flows and financing activities of our operations in Mexico are primarily denominated in U.S. dollars. Accordingly, these operations use the U.S. dollar as their functional currency. Monetary assets and liabilities are remeasured at period end. Foreign currency transactions are measured at the current exchange rate and nonmonetary items are measured at historical foreign currency exchange rates with exchange rate differences reported in the Condensed Consolidated Statement of Operations.

Net foreign currency transaction gains (losses) were $0.1 million and ($0.3) million for the three months ended April 30, 2018 and 2017, respectively, and are recorded in other income (expense), net in the accompanying Condensed Consolidated Statements of Operations.

Inventories—In February 2017, we adopted Accounting Standards Update (“ASU”) 2015-11 “Inventory (Topic 330) – Simplifying the Measurement of Inventory” issued by the Financial Accounting Standards Board (the “FASB”) on July 22, 2015. We adopted this ASU on a prospective basis, as such, our inventories are valued at the lower of cost or net realizable value. Implementation did not result in a material difference in our reported inventory values. Cost of U.S. inventories and the majority of foreign operations are determined using the average cost method. Inventories consist primarily of supplies and raw materials. Supplies of $19.5 million and $17.7 million and raw materials of $3.8 million and $2.3 million were included in inventories in the Condensed Consolidated Balance Sheets as of April 30, 2018 and January 31, 2018, respectively.

Goodwill—In accordance with ASC Topic 350-20, “Intangibles – Goodwill and Other,” we are required to test for the impairment of goodwill on at least an annual basis. We conduct this evaluation annually as of December 31 or more frequently if events or changes

in circumstances indicate that goodwill might be impaired. As a result of our annual impairment analysis, no impairment was required. As of April 30, 2018 and January 31, 2018, we had $8.9 million of goodwill which is all attributable to the Inliner reporting segment.

Other Long-lived Assets—Long-lived assets, including amortizable intangible assets, are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Factors management considers important which could trigger an impairment review include but are not limited to the following:

•

significant underperformance of assets;

•

significant changes in the use of the assets; and

•

significant negative industry or economic trends.

WeNo ~~found~~impairments nowere ~~indication~~indicated ~~for impairments~~ as of ~~October~~April 3130, ~~2017~~2018.

Cash, ~~and~~ Cash Equivalents and Restricted Deposits—WeOn ~~consider~~January ~~investments~~31, ~~with~~2018, anwe ~~original~~early ~~maturity~~adopted ASU 2016-18, “Statement of ~~three~~Cash ~~months~~Flows: orRestricted ~~less~~Cash,” ~~when~~issued ~~purchased~~by the FASB in November 2016, by applying a retrospective transition method to beeach ~~cash~~period ~~equivalents~~presented. ~~Our~~This ASU provides guidance about the presentation of changes in restricted cash and restricted cash equivalents ~~are~~on ~~subject~~the tostatement ~~potential~~of ~~credit~~cash ~~risk~~flows. ~~Our~~The ~~cash~~adoption ~~management~~of ~~and~~this ~~investment~~ASU ~~policies~~involved ~~restrict~~removing restricted deposits from cash provided by operating investments to ~~investment~~reconcile ~~grade~~net income to cash, ~~highly~~cash ~~liquid~~equivalents ~~securities.~~and ~~The~~restricted ~~carrying~~deposits ~~value~~for ofeach ~~cash~~year ~~and~~presented ~~cash~~in ~~equivalents~~the ~~approximates~~Consolidated ~~fair~~Statement ~~value~~of Cash Flows.

~~Restricted~~On ~~Deposits—Restricted~~January ~~deposits~~31, ~~consist~~2018 we formally adopted the ASU 2016-15, “Statement of ~~amounts~~Cash ~~associated~~Flows: ~~with~~Classification ~~certain~~of ~~letters~~Certain Cash Receipts and Cash Payments,” issued by the FASB in August 2016. This ASU provides guidance and clarification in regards to the classification of ~~credit~~eight ~~for~~types onof receipts and payments in the statement of cash flows, including debt repayment or extinguishment costs, settlement of zero-~~going~~coupon ~~projects~~bonds, ~~escrow~~proceeds ~~funds~~from ~~related~~the tosettlement aof ~~certain~~insurance ~~disposition~~claims, distributions received from equity method investees and ~~judicial~~cash ~~deposits~~receipts ~~associated~~from ~~with~~beneficial ~~tax~~interest ~~related~~in ~~legal~~securitization ~~proceedings~~transactions. Our Latin American affiliates issue dividends which we account for using the cumulative earnings approach, so no accounting transition was necessary. See “Investment in ~~Brazil~~Affiliated Companies” above.

~~Allowance for Uncollectible Accounts Receivable—~~We ~~make~~consider ~~ongoing~~investments ~~estimates~~with ~~relating~~an tooriginal ~~the~~maturity ~~collectability~~ of ~~our~~three ~~accounts~~months ~~receivable~~or ~~and~~less ~~maintain~~when anpurchased ~~allowance~~to ~~for~~be ~~estimated~~cash ~~losses~~equivalents. ~~resulting~~Our ~~from~~cash ~~the~~equivalents ~~inability~~are ofsubject ~~our customers~~ to ~~make~~potential ~~required~~credit ~~payments~~risk. InOur ~~determining~~cash ~~the~~management ~~amount~~and ofinvestment ~~the~~policies ~~allowance,~~restrict weinvestments ~~make~~to ~~judgments~~investment ~~about~~grade, ~~the~~highly ~~credit~~liquid ~~worthiness~~securities. ofThe ~~customers~~carrying ~~based~~value onof ~~ongoing~~cash ~~credit evaluations,~~ and ~~also~~cash ~~consider~~equivalents aapproximates ~~review~~fair ofvalue. ~~accounts~~Restricted ~~receivable~~deposits ~~aging,~~consist ~~industry~~of ~~trends,~~escrow ~~customer~~funds ~~financial~~related ~~strength,~~to ~~credit~~a ~~standing~~certain disposition and ~~payment~~judicial ~~history~~deposits toassociated ~~assess~~with ~~the~~tax ~~probability~~related oflegal ~~collection.~~proceedings in Brazil.

~~Concentration~~Our statement of ~~Credit~~cash ~~Risk—We~~flows ~~grant~~explains ~~credit~~the tochange ~~our customers, which may include concentrations~~ in ~~state~~the ~~and~~total ~~local governments or other customers. Although this concentration could affect our overall exposure to credit risk, we believe that our portfolio~~ of ~~accounts receivable is sufficiently diversified~~cash, ~~thus~~cash ~~spreading~~equivalents ~~the~~and ~~credit~~restricted ~~risk~~deposits. ToThe ~~manage~~following ~~this~~table ~~risk,~~provides wea ~~perform~~reconciliation ~~periodic credit evaluations~~ of ~~our~~cash, ~~customers’~~cash ~~financial condition~~equivalents, ~~including~~and ~~monitoring~~restricted ~~our~~deposits ~~customers’~~reported ~~payment~~within ~~history~~the ~~and~~Condensed ~~current~~Consolidated ~~credit~~Balance ~~worthiness.~~Sheet Wethat dosum ~~not~~to ~~generally~~the ~~require~~total ~~collateral in support~~ of ~~our~~the ~~trade~~same ~~receivables,~~such ~~but~~amounts ~~may require payment~~ in ~~advance~~the orCondensed ~~security~~Consolidated inStatements ~~the form~~ of aCash ~~letter~~Flows ofat ~~credit~~April or30, ~~bank~~2018 ~~guarantee~~and 2017.

	Three Months Ended April 30,
(in thousands)	2018			2017
Beginning of the period
Cash and cash equivalents	$	32,041		$	69,000
Restricted deposits		6,572			5,055
Total cash, cash equivalents and restricted deposits, beginning of period		38,613			74,055
End of the period
Cash and cash equivalents		17,805			54,598
Restricted deposits		6,190			4,998
Total cash, cash equivalents and restricted deposits, end of period		23,995			59,596
Net decrease in cash, cash equivalents and restricted deposits	$	(14,618	)	$	(14,459	)

~~Fair~~Customer ~~Value of Financial Instruments~~Receivables—~~The~~Our ~~carrying amounts of financial instruments, including cash and cash equivalents,~~ customer receivables ~~and~~represents ~~accounts~~receivables ~~payable,~~from ~~approximate~~contracts ~~fair~~with ~~value at October 31, 2017 and January 31, 2017, because of the relatively short maturity of those instruments~~customers. ~~See Note 5 to the Condensed Consolidated Financial Statements for fair value disclosures.~~

~~Liquidity~~Cost and ~~Capital~~estimated ~~Resources—In~~earnings ~~August~~in ~~2014,~~excess ~~the~~of ~~FASB~~billings ~~issued~~on ~~ASU~~uncompleted ~~2014-15,~~contracts—Includes ~~“Presentation~~unapproved ofchange ~~Financial~~orders ~~Statements-Going~~and ~~Concern~~claims ~~(Subtopic~~included ~~205-40):~~in ~~Disclosure~~revenue offor ~~Uncertainties about~~ an ~~Entity’s~~amount ~~Ability~~less tothan ~~Continue as a Going Concern.” Under this standard, management must evaluate whether there are conditions~~ or ~~events,~~equal ~~considered in the aggregate, that raise substantial doubt about an entity’s ability~~ to ~~continue as a going concern within one year after~~ the ~~date~~amount ~~that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect~~ of ~~management’s plans that have not been fully implemented as of~~ the ~~date~~costs ~~the~~incurred ~~financial~~by ~~statements~~us ~~are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about an entity’s ability~~ to ~~continue~~date asfor acontract ~~going~~price ~~concern.~~adjustments ~~The mitigating effect of management’s plans, however, is only considered if both (1) it is probable~~ that ~~the~~we ~~plans~~seek ~~will~~to becollect ~~effectively~~from ~~implemented~~customers ~~within~~for ~~one year after the date that the financial statements are issued~~delays, ~~and~~errors ~~(2)~~in itspecifications isor ~~probable that the plans~~designs, ~~when~~change ~~implemented,~~orders ~~will~~in ~~mitigate~~dispute ~~the relevant conditions~~ or ~~events~~unapproved ~~that raise substantial doubt about the entity’s ability to continue~~ as ~~a going concern within one year after the date that the financial statements are issued. Generally,~~ to bescope ~~considered~~or ~~probable of being effectively implemented~~price, ~~the plans must have been committed and/~~or ~~approved~~other ~~before~~unanticipated ~~the~~additional ~~date~~costs, ~~that the financial statements are issued. We adopted this standard~~ in ~~the~~each ~~fourth~~case ~~quarter~~when recovery of the ~~fiscal~~costs ~~year~~is ~~ended~~considered ~~January 31, 2017~~probable. ~~The accompanying financial statements have been prepared in conformity with GAAP, which contemplates Layne’s continuation as a going concern.~~

~~Our~~Allowance ~~debt~~for ~~structure~~Uncollectible ~~currently~~Accounts ~~consists~~Receivable—We make ongoing estimates relating to the collectability of our accounts receivable and maintain an allowance for estimated losses resulting from the ~~following:~~inability of our customers to make required payments. In

Credit Facility

• a $100 million senior secured asset-based facility that is due on April 14, 2019. As of October 31, 2017, there are no outstanding borrowings on the facility although $24.5 million of letters of credits have been issued under the facility. The maturity date for the asset-based credit facility will accelerate to May 15, 2018, if the following have not occurred on or before such date:

• With respect to the 4.25% Convertible Notes, either

o all of the 4.25% Convertible Notes are converted,

o the maturity date for the 4.25% Convertible Notes (or any permitted refinancing indebtedness) is extended to a date after October 15, 2019, or

o the 4.25% Convertible Notes are redeemed, repurchased, otherwise retired, or discharged in accordance with their terms, and

• With respect to the 8.0% Convertible Notes, either

o all of the 8.0% Convertible Notes are converted, or

o the maturity date of the 8.0% Convertible Notes (or any permitted refinancing indebtedness) is extended to a date after October 15, 2019.

We believe we can extend, expand or replace our asset-based facility by May 15, 2018. If we are unable to do so, we believe we could support the outstanding letters of credit with existing cash, other collateral or with a new facility.

Convertible Notes

• $69.5 million of 4.25% Convertible Notes that are due on November 15, 2018.

• $99.9 million of 8.0% Convertible Notes that are due on May 1, 2019. However, if the 4.25% Convertible Notes have not been redeemed, repurchased, otherwise retired, or discharged in accordance with their terms or converted into our common stock, in each case on or prior to August 15, 2018 or the scheduled maturity date of the 4.25% Convertible Notes (or any permitted refinancing indebtedness) has not been extended to a date that is after October 15, 2019, then the 8.0% Convertible Notes will mature on August 15, 2018.

With respect to our 4.25% Convertible Notes, we have retained advisors to assist us in evaluating alternatives and raising capital to refinance or extend our debt to a date beyond October 15, 2019, and eliminate the accelerating maturity provisions of the 8.0% Convertible Notes. We believe the refinance or extension of our debt is likely based on current on-going discussions with existing and new potential lenders, our improving financial performance and credit quality, and the fact that our stock price is above the $11.70 conversion price for the 8% Convertible Notes. Although we believe these refinancing options are viable and likely, because our plans to refinance or restructure our debt have not been finalized, and therefore are not in our control (in part, due to the fact that neither of our Convertible Notes can be prepaid or have redemption provisions prior to February 2018), these plans are not considered probable

~~under~~determining the ~~new~~amount ~~standard.~~of ~~Consequently~~the allowance, ~~per~~we make judgments about the ~~standard,~~creditworthiness ~~these~~of ~~conditions~~customers based on ongoing credit evaluations, inand ~~the~~also ~~aggregate~~consider a review of accounts receivable aging, ~~raise~~industry ~~substantial~~trends, ~~doubt~~customer ~~about~~financial ~~our~~strength, ~~ability~~credit standing and payment history to ~~continue~~assess the probability of collection. Bad debt expense, which is recorded as apart ~~going~~of ~~concern~~Selling, ~~within~~General ~~one~~and ~~year~~Administrative ~~after~~Expenses in the ~~date~~Condensed ~~these~~Consolidated ~~financial~~Statement ~~statements~~of ~~are~~Operations, ~~filed~~amounted to $0.2 million and $0.4 million for the three months ended April 30, 2018 and 2017, respectively.

~~Litigation~~Concentration ~~and~~of ~~Other~~Credit ~~Contingencies~~Risk—We ~~are~~grant ~~involved~~credit ~~in litigation incidental~~ to our ~~business~~customers, ~~the disposition of~~ which ismay ~~not~~include ~~expected~~concentrations toin ~~have~~state aand ~~material~~local ~~effect~~governments. onAlthough ~~our~~this ~~business,~~concentration ~~financial~~could ~~position,~~affect ~~results~~our ofoverall ~~operations~~exposure orto ~~cash~~credit ~~flows. In addition~~risk, ~~some~~we ofbelieve ~~our contracts contain provisions~~ that ~~require~~our ~~payment~~portfolio of ~~liquidated~~accounts ~~damages~~receivable ifis wesufficiently ~~are~~diversified, ~~responsible~~thus ~~for~~spreading the ~~failure~~credit ~~to meet specified contractual milestone dates and the applicable customer asserts a claim under these provisions~~risk. InTo ~~some~~manage ofthis ~~the~~risk, ~~cases in which~~ we ~~have~~perform ~~historically~~periodic ~~had~~credit ~~potential~~evaluations ~~exposure~~of ~~for liquidated damages, such damages ultimately were not asserted by~~ our customers.’ Itfinancial ~~is possible~~condition, ~~however,~~including ~~that~~monitoring ~~future results of operations for any particular quarterly or annual period could be materially affected by changes in~~ our ~~assumptions~~customers’ ~~related~~payment tohistory ~~these proceedings. If the assessment of a contingency indicates that it is probable that a material loss has been incurred~~ and ~~the~~current ~~amount~~credit ~~of the liability can be estimated, then the estimated liability is accrued in our Condensed Consolidated Financial Statements~~worthiness. IfWe ~~the~~do ~~assessment indicates that a potentially material loss contingency is~~ not ~~probable~~generally ~~but~~require iscollateral ~~reasonably~~in ~~possible,~~support ~~or is probable but cannot be estimated, then the nature~~ of ~~the~~our ~~contingent~~trade ~~liability~~receivables, ~~and~~but anmay ~~estimate~~require ofpayment ~~the~~in ~~range~~advance ofor ~~possible~~security ~~losses,~~in ~~if determinable and material, is disclosed. These provisions are reviewed at least quarterly and adjusted to reflect~~ the ~~impacts~~form of ~~negotiations,~~a ~~settlements,~~letter ~~rulings, advice~~ of ~~legal~~credit ~~counsel,~~or ~~and~~bank ~~other information and events pertaining to a particular case~~guarantee.

~~Income~~Billings (Loss) Per Share—Income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. For periods in ~~which~~excess ~~we recognize losses, the calculation~~ of ~~diluted~~cost ~~loss~~and ~~per~~estimated ~~share~~earnings ison ~~the~~uncompleted ~~same~~contracts—Represents as the ~~calculation~~excess of ~~basic~~contract ~~loss~~costs ~~per~~and ~~share. For~~contract ~~periods~~revenue inrecognized ~~which~~to wedate ~~recognize~~on ~~net~~when ~~income,~~a ~~diluted~~performance ~~earnings~~obligation ~~per common share~~ is ~~computed~~accounted infor ~~the~~using ~~same way as basic earnings per common share except that~~ the ~~denominator~~costs isincurred ~~increased~~ to ~~include~~date ~~the~~to ~~number~~total ofestimated ~~additional~~costs ~~common~~at ~~shares~~completion ~~that~~over ~~would~~contract bebillings ~~outstanding~~to ~~if all potential common shares had been issued that were dilutive~~date. ~~Options~~Costs ~~to purchase common stock~~ and ~~nonvested~~estimated ~~shares are included based on the treasury stock method for dilutive~~ earnings ~~per share, except when their effect is antidilutive. The 4.25% Convertible Notes and the 8.0% Convertible Notes (see Note 3 to the Condensed Consolidated Financial Statements) are included~~ in ~~the~~excess ~~calculation~~ of ~~diluted~~billings ~~loss~~occur ~~per~~when ~~share~~costs ifrelated ~~their inclusion is dilutive under the if-converted method. Options~~ to ~~purchase~~unapproved ~~0.7~~change ~~million~~orders ~~shares~~or ~~have~~claims ~~been~~are ~~excluded from weighted average shares outstanding in the three and nine months ended October 31~~incurred, ~~2017,~~or ~~respectively,~~a asportion ~~their effect was antidilutive. A total~~ of ~~2.0 million nonvested shares have been excluded from weighted average shares outstanding in~~ the ~~three~~revenue ~~and~~recorded ~~nine~~cannot ~~months~~be ~~ended~~billed ~~October~~currently ~~31,~~due ~~2017, respectively, as their effect was antidilutive. Options~~ to ~~purchase 0.8 million shares have been excluded from weighted average shares outstanding in~~ the ~~three~~billing ~~and~~terms ~~nine months ended October 31, 2016, respectively, as their effect was antidilutive. A total of 1.9 million nonvested shares have been excluded from weighted average shares outstanding~~ in the ~~three and nine months ended October 31, 2016, respectively, as their effect was antidilutive~~contract.

~~Supplemental~~Fair ~~Cash~~Value ~~Flow~~of ~~Information~~Financial Instruments—The carrying amounts ~~paid~~of ~~for~~financial ~~income~~instruments, ~~taxes~~including cash and cash equivalents, ~~interest~~customer receivables and ~~noncash~~accounts ~~investing~~payable, approximated fair value at April 30, 2018 and ~~financing~~January 31, ~~activities~~2018, ~~were~~because asof ~~follows:~~the relatively short maturity of those instruments. See Note 6 to the Condensed Consolidated Financial Statements for fair value disclosures.

	Nine Months Ended October 31,
(in thousands)	2017			2016
Income taxes paid	$	983		$	783
Income tax refunds		(114	)		(185	)
Interest paid		6,462			6,843
Noncash investing and financing activities:
Accrued capital additions		1,162			2,184

Liquidity and Capital Resources—Under GAAP, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Initially, this evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt exists, management evaluates the mitigating effect of its plans if it is probable (1) that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been committed and/or approved before the date that the financial statements are issued. As of the date of filing these financial statements, we have debt and letters of credit coming due within one year, and we do not have committed refinancing plans or the liquidity to meet all of these obligations as they become due. These conditions, therefore, raise substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements are issued.

~~New~~Management’s ~~Accounting~~current ~~Pronouncements—In~~plans ~~May~~include ~~2017,~~several ~~the~~alternatives ~~FASB~~to ~~issued~~manage ~~ASU~~our ~~2017-09,~~debt ~~“Compensation – Stock Compensation (Topic 718),” this ASU provides clarity~~ and ~~reduces~~letters ~~both diversity in practice and cost and complexity when applying the guidance in Topic 718, Compensation – Stock Compensation, to a change to the terms or conditions~~ of acredit ~~share-based~~coming ~~payment~~due ~~award.~~over ~~This ASU is effective after December 15, 2017 with early adoption permitted with prospective application. We have evaluated~~ the ~~impact~~next ~~of the adoption of this ASU and do not believe the effect will be material on our financial statements~~year.

InOn ~~January~~February ~~2017~~13, ~~the~~2018, ~~FASB~~we ~~issued~~entered ~~ASU~~into ~~2017-04,~~a ~~“Intangibles—Goodwill~~definitive ~~and~~agreement ~~Other~~whereby ~~(Topic~~Granite ~~350):~~Construction ~~Simplifying~~Incorporated will acquire all of the ~~Test~~outstanding shares of Layne in a stock-for-stock ~~Goodwill~~transaction ~~Impairment”,~~with ~~under~~each ~~the~~share ~~amendments~~of inLayne ~~this~~common ~~update,~~stock anexchanged ~~entity~~for ~~should~~0.27 ~~perform~~shares ~~its~~of ~~annual,~~Granite orcommon ~~interim,~~stock. ~~goodwill~~The ~~impairment~~transaction ~~test~~is bysubject ~~comparing~~to the ~~fair~~approval ~~value~~by ofLayne’s ashareholders ~~reporting~~and ~~unit~~other ~~with~~customary ~~its~~closing ~~carrying amount~~conditions. AnA ~~entity~~special ~~should~~meeting ~~recognize~~of anLayne ~~impairment~~shareholders ~~charge~~to ~~for~~approve the ~~amount~~transaction byis ~~which~~scheduled ~~the~~for ~~carrying~~June ~~amount~~13, ~~exceeds~~2018. ~~the~~Granite ~~reporting~~has ~~unit’s~~stated ~~fair~~its ~~value; however~~intention, if the ~~loss~~transaction ~~recognized~~closes, ~~should~~to ~~not~~repay ~~exceed~~the 4.25% Convertible Notes on the ~~total~~maturity ~~amount~~date of ~~goodwill~~November ~~allocated~~15, to2018, ~~that~~which ~~reporting~~would ~~unit.~~result ~~Additionally,~~in anthe ~~entity~~maturity ~~should~~date ~~consider~~of ~~income~~the ~~tax~~8.0% ~~effects~~Convertible ~~from~~Notes ~~any~~being ~~tax~~August ~~deductible~~15, ~~goodwill~~2018. Based on the ~~carrying~~exchange ~~amount~~ratio offor the ~~reporting~~merger ~~unit~~and ~~when~~the ~~measuring~~current ~~the~~trading ~~goodwill~~price ~~impairment~~for ~~loss~~Granite common stock, ifwe ~~applicable.~~believe Asmost, aif ~~public~~not ~~business~~all, ~~adoption~~ of the ~~amendments~~holders inof ~~this~~our ~~update~~8.0% ~~are~~Convertible ~~required,~~Notes ~~prospectively,~~would ~~for~~convert ~~the~~their ~~annual~~notes orinto ~~any~~Granite ~~interim~~common ~~goodwill~~stock ~~impairment~~on ~~tests~~or inprior ~~fiscal~~to ~~years~~August ~~beginning~~15, ~~after~~2018 ~~December~~and ~~15,~~any ~~2019~~remaining ~~with~~unconverted ~~early~~amounts ~~adoption~~could ~~permitted~~be ~~for~~paid ~~testing~~with ~~dates~~available ~~after~~cash ~~January~~or 1,funding ~~2017~~from Granite. WeGranite ~~believe~~has ~~the~~advised ~~adoption~~us ofthat ~~this~~it ~~ASU~~intends ~~will~~to ~~not~~terminate ~~have~~the aasset-based ~~material~~credit ~~impact~~facility onif ~~our~~the ~~financial~~transaction ~~statements~~closes.

The 4.25% Convertible Notes are due November 15, 2018, and are currently classified as current. On March 19, 2018, we entered into an option to issue, at our election, $71.0 million of new 11.0% Senior Unsecured Notes (“11% Unsecured Notes”) to one of our existing bondholders. If the Granite merger is not consummated, we may elect to issue the 11.0% Unsecured Notes in order to effectively discharge the 4.25% Convertible Notes on or prior to July 16, 2018. Under this scenario, we would plan to refinance (1) the asset-based credit facility on or prior to April 14, 2019, (2) to the extent they are not converted into our common stock, the 8.0% Convertible Notes on May 1, 2019 and (3) the 11.0% Unsecured Notes on or prior to October 16, 2019. As it relates to our 8.0% Convertible Notes, if the market price of our common stock remains above the conversion price of $11.70 per share, we believe the holders would convert the 8.0% Convertible Notes into our common stock on or prior to August 15, 2018.

~~In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”~~probable. ~~The~~As ~~definition of a business affects many areas of accounting including acquisitions~~such, ~~disposals,~~there ~~goodwill,~~remains ~~and~~substantial ~~consolidation.~~doubt ~~This~~about ~~ASU~~our ~~was~~ability ~~issued~~ to ~~clarify~~continue ~~the~~as ~~definition of~~ a ~~business~~going ~~with~~concern ~~the~~within ~~objective~~one ofyear adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Public business entities should apply the amendments in this update, prospectively, to annual periods beginning after ~~December 15, 2017, including interim periods within those periods. We believe~~ the ~~adoption~~date ofthese ~~this ASU will not have a material impact on our~~ financial statements are filed.

In ~~February~~Litigation ~~2016~~and Other Contingencies—We are involved in litigation incidental to our business, the ~~FASB~~disposition ~~issued~~of ~~ASU~~which ~~No.~~is ~~2016-02~~not expected to have a material effect on our business, ~~“Leases~~financial position,” ~~which~~results ~~establishes~~of aoperations ~~right-~~or cash flows. In addition, some of~~-use~~ ~~(“ROU”)~~our ~~model~~contracts contain provisions that ~~requires~~require apayment ~~lessee~~of liquidated damages if we are responsible for the failure to ~~record~~meet aspecified ~~ROU~~contractual ~~asset~~milestone dates and the applicable customer asserts a ~~lease~~claim ~~liability~~under onthese provisions. These contracts define the ~~balance~~conditions ~~sheet~~under ~~for~~which ~~all~~our ~~leases~~customers ~~with~~may ~~terms~~make ~~longer~~claims ~~than~~against ~~twelve~~Layne ~~months~~for liquidated damages. ~~Leases~~In ~~will~~many becases ~~classified~~in aswhich ~~either~~we ~~finance~~have orhistorically ~~operating,~~had ~~with~~potential ~~classification~~exposure ~~affecting~~for ~~the~~liquidated ~~pattern~~damages, ofsuch ~~expense~~damages ~~recognition~~ultimately inwere ~~the~~not ~~income~~asserted ~~statement.~~by ~~This~~our ~~ASU~~customers. It is ~~effective~~possible, however, that future results of operations for ~~fiscal~~any ~~years~~particular ~~beginning~~quarterly ~~after~~or ~~December~~annual ~~15,~~period ~~2018,~~could ~~including~~be ~~interim~~materially ~~periods~~affected ~~within~~by ~~those~~changes ~~fiscal~~in ~~years.~~our ~~Early~~assumptions ~~adoption~~related isto ~~permitted~~these proceedings. ~~ASU~~If ~~2016-02~~the ~~requires~~assessment ~~modified~~of ~~retrospective~~a ~~adoption~~contingency ~~for~~indicates ~~all~~that ~~leases~~it ~~existing~~is ~~at,~~probable orthat ~~entered~~a ~~into~~material ~~after,~~loss has been incurred and the ~~date~~amount of ~~initial~~the ~~application~~liability can be estimated, ~~with~~then anthe ~~option~~estimated toliability ~~use~~is ~~certain~~accrued ~~transition~~in ~~relief~~our Condensed Consolidated Financial Statements. WeIf ~~are~~the ~~preparing~~assessment toindicates ~~implement~~that ~~changes~~a topotentially ~~our~~material ~~accounting~~loss ~~policies~~contingency ~~and~~is ~~controls~~not probable but is reasonably possible, ~~business~~or ~~processes~~is ~~and~~probable ~~information~~but ~~systems~~cannot tobe ~~support~~estimated, then the ~~new~~nature ~~accounting~~of ~~and~~the ~~disclosure~~contingent ~~requirements~~liability, ~~which~~and isan ~~effective~~estimate ~~for~~of usthe ~~beginning~~range onof ~~February~~possible 1losses, ~~2019.~~if Wedeterminable ~~are~~and ~~currently~~material, ~~evaluating~~is ~~the~~disclosed. ~~significance~~These ofprovisions ~~adoption~~are ofreviewed ~~this~~at ~~ASU~~least quarterly and ~~currently,~~adjusted ~~based~~to onreflect ~~our~~the ~~limited~~impacts ~~number~~ of ~~leases~~negotiations, wesettlements, dorulings, ~~not~~advice ~~believe~~of ~~the~~legal ~~effect~~counsel, ~~will~~and beother ~~material~~information onand ~~our~~events ~~financial~~pertaining ~~statements~~to a particular case.

~~The~~Supplemental ~~FASB~~Cash ~~issued~~Flow ~~ASU~~Information—The ~~2014-09,~~amounts ~~“Revenue~~paid ~~from~~or ~~Contracts~~refunded ~~with~~for ~~Customers”~~income ~~on May 28~~taxes, ~~2014~~interest and ~~issued the related Update 2016~~non-20cash ~~“Technical~~investing ~~Corrections~~ and ~~Improvements~~financing toactivities ~~Topic~~were ~~606, Revenue from Contracts with Customers” in December, 2016 with the same effective dates~~ as ~~ASU~~follows: 2014-09. On August 12, 2015, the FASB issued ASU 2015-14, which defers the adoption of ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

The collective guidance in these ASUs defines the steps to recognize revenue for entities that have contracts with customers as well as requiring significantly expanded disclosures regarding the qualitative and quantitative information of the nature, amount, timing, and uncertainty of revenue and cash flows arising from such contracts. We have completed our initial assessment of the guidance, where we determined the primary impact is the elimination of the completed contract method. We have reviewed our contract structure and have begun training for changes in how to account for our customers’ contracts under the new guidance. We anticipate adopting the new guidance beginning on February 1, 2018 using the full retrospective method that will result in restatement of the comparative periods presented. We are continuing to implement changes to our accounting policies and controls, business processes and information systems to support the new revenue recognition and disclosure requirements. We are continuing to evaluate and quantify the potential impact that these ASUs will have on our financial position and results of operations.


	Three Months Ended April 30,
(in thousands)	2018			2017
Income taxes paid	$	398		$	490
Income tax refunds		(187	)		(46	)
Interest paid		351			245
Noncash investing and financing activities:
Accrued capital additions		1,411			1,404

Income (Loss) Per Share—Income (loss) per share is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. For periods in which we recognize losses, the calculation of diluted loss per share is the same as the calculation of basic loss per share. For periods in which we recognize net income, diluted earnings per common share is computed in the same way as basic earnings per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares had been issued that were dilutive. Options to purchase common stock and nonvested shares are included based on the treasury stock method for dilutive earnings per share, except when their effect is antidilutive. The 4.25% Convertible Notes and the 8.0% Convertible Notes are included in the calculation of diluted earnings (loss) per share if their inclusion is dilutive under the if-converted method. Options to purchase 0.2 million and 0.7 ~~Property~~million shares have been excluded from weighted average shares outstanding in the three months ended April 30, 2018 and ~~Equipment~~2017, respectively, as their effect was antidilutive. A total of 2.2 million nonvested shares have been excluded from weighted average shares outstanding in the three months ended April 30, 2017, as their effect was antidilutive.

New Accounting Pronouncements—

In February 2018, the FASB issued ASU 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”. The amendments in this ASU affect any entity that is required to apply the provisions of Topic 220, Income Statement—Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We anticipate adopting this ASU beginning on February 1, 2019 and do not believe the adoption will have a material impact on our financial statements

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. In January 2018, the FASB issued ASU No. 2018-01 Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. These ASUs are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 requires modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are preparing to implement changes to our accounting policies and controls, business processes and information systems to support the new accounting and disclosure requirements, which is effective for us beginning on February 1, 2019. We are currently evaluating the significance of adoption of this ASU.

In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”. Under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. As a public business, adoption of the amendments in this ASU are required, prospectively, for the annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 with early adoption permitted for testing dates after January 1, 2017. We anticipate adopting this ASU beginning on February 1, 2020 and do not believe the adoption will have a material impact on our financial statements.

2. Costs and Estimated Earnings on Uncompleted Contracts

Costs and estimated earnings on uncompleted contracts consisted of the following:

	April 30,			January 31,
(in thousands)	2018			2018
Cost incurred on uncompleted contracts	$	511,629		$	496,324
Estimated earnings		214,325			204,081
		725,954			700,405
Less: Billings to date		692,826			666,024
Total	$	33,128		$	34,381
Included in accompanying balance sheets under the following captions:
Costs and estimated earnings in excess of billings on uncompleted contracts	$	41,088		$	43,177
Billings in excess of costs and estimated earnings on uncompleted contracts		(7,960	)		(8,796	)
Total	$	33,128		$	34,381

We bill our customers based on specific contract terms. Substantially all billed amounts are collected within one year. As of April 30, 2018 and January 31, 2018, our costs and estimated earnings in excess of billings on uncompleted contracts included unbilled contract retainage amounts of $16.2 million and $16.0 million, respectively.

3. Property and Equipment:

Property and equipment consisted of the following:

	October 31,			January 31,
	April 30,			January 31,
(in thousands)	~~2017~~2018			~~2017~~2018
Land	$	11,~~862~~071		$	1011,~~037~~156
Buildings and improvements		32,~~891~~659			3031,~~835~~530
Machinery, equipment and pipeline		~~349~~355,~~823~~227			~~323~~356,~~280~~132
Property and equipment, at cost		~~394~~398,~~576~~957			~~364~~398,~~152~~818
Less - Accumulated depreciation		(~~276~~279,~~953~~516	)		(~~267~~278,~~167~~214	)
Property and equipment, net	$	~~117~~119,~~623~~441		$	96120,~~985~~604

34. Indebtedness

Debt outstanding was as follows:

	October 31,			January 31,
	April 30,			January 31,
(in thousands)	~~2017~~2018			~~2017~~2018
4.25% Convertible Notes	$	6668,~~506~~000		$	6467,~~387~~248
8.0% Convertible Notes		98,~~558~~985			9798,~~952~~769
Capitalized lease obligations		—36			1745
Less amounts representing interest		—			(1	)
Total debt		167,021			166,062
Total debt		165,064			162,355
Less current maturities of long-term debt (1)		(68,036	)		(67,293	)
Less current maturities of long-term debt		—			(9	)
Total long-term debt	$	98,985		$	98,769
Total long-term debt	$	165,064		$	162,346

13(1) Based on the latest possible maturity date (May 1, 2019) for the 8.0% Convertible Notes. The maturity date for the 8.0% Convertible Notes will accelerate to August 15, 2018 under certain circumstances, including if the 4.25% Convertible Notes have not been effectively discharged by that date.

The following table presents the carrying value of the ~~Convertible~~convertible ~~Notes~~notes:

	October 31,			January 31,
	April 30,			January 31,
(in thousands)	~~2017~~2018			~~2017~~2018
4.25% Convertible Notes:
Carrying amount of the equity conversion component	$	3,106		$	3,106
Principal amount of the 4.25% Convertible Notes	$	69,500		$	69,500
Unamortized deferred financing fees		(~~622~~326	)		(~~1,033~~476	)
Unamortized debt discount (1)		(21,~~372~~174	)		(41,~~080~~776	)
Net carrying amount	$	6668,~~506~~000		$	6467,~~387~~248
8.0% Convertible Notes:
Principal amount of the 8.0% Convertible Notes	$	99,898		$	99,898
Unamortized deferred financing fees		(~~1,340~~913	)		(1,~~946~~129	)
Net carrying amount	$	98,~~558~~985		$	9798,~~952~~769

(1) As of ~~October~~April 3130, ~~2017~~2018, the remaining period over which the unamortized debt discount will be amortized is ~~twelve~~6 months using an effective interest rate ~~of 9~~.~~0%.~~

We utilize surety bonds to secure performance on a portion of our contracted projects. As of October 31, 2017 and January 31, 2017, the amount of surety bonds outstanding was $153.6 million and $223.8 million, respectively. Of the amount outstanding at October 31, 2017, $58.9 million related to surety bonds on contracts which were assumed by the purchasers of our Heavy Civil business. Layne is currently working with our surety providers to negotiate the release of $26.1 million of these surety bonds. The remaining $32.8 million of the Heavy Civil-related surety bonds are associated with projects that are nearing completion.15

~~4. Income~~11% ~~Taxes~~Unsecured Notes

~~Income~~On ~~tax~~March ~~(expense)~~19, ~~benefit~~2018, ~~for~~we ~~continuing~~entered ~~operations~~into ofa (note purchase agreement with two investments funds advised by Corre Partners Management, LLC to sell $0 71.1)0 million ~~and~~of ~~($1~~our 11.7)0% ~~million~~Unsecured ~~was~~Notes. ~~recorded~~Corre inPartners Management and its affiliated funds, including the ~~three~~purchasers of the 11.0% Unsecured Notes, own a portion of our 4.25% Convertible Notes and ~~nine~~8.0% ~~months~~Convertible ~~ended~~Notes. ~~October~~Under 31the note purchase agreement, ~~2017~~the ~~compared~~purchasers have committed to (purchase $171.4)0 million ~~and~~of ~~($1~~our 11.8)0% ~~million~~Unsecured ~~for~~Notes ~~the~~due ~~same~~October ~~periods~~16, ~~last~~2019 at ~~year.~~a Wepurchase ~~recorded~~price noequal ~~tax~~to ~~benefit~~100% onof ~~domestic~~the ~~deferred~~principal ~~tax~~amount ~~assets~~of ~~and~~the ~~certain~~11.0% ~~foreign~~Unsecured ~~deferred~~Notes. ~~tax~~The ~~assets~~closing ~~generated~~of ~~during~~ the ~~three~~purchase and ~~nine~~sale ~~months~~of ~~ended~~the ~~October~~11.0% ~~31,~~Unsecured ~~2017.~~Notes ~~Current~~will ~~period~~be ~~tax~~the ~~expense~~earlier isto ~~primarily~~occur ~~related~~of to(i) ~~income~~October in1, ~~Mexico~~2018 and ~~withholding~~(ii) ~~tax~~the ~~related~~fifth tobusiness ~~our~~day ~~dividends~~after ~~from~~delivery ~~our~~of ~~affiliates,~~a ~~offset~~funding notice by ~~favorable~~us ~~resolution~~to ofthe ~~tax~~purchasers. ~~audits~~As ~~and~~a ~~statute~~result, if the proceeds of ~~limitation~~the ~~expirations~~11.0% ~~The~~Unsecured ~~effective~~Notes ~~tax~~were ~~rate~~to ~~for~~be ~~continuing~~used ~~operations~~to ~~for~~effectively discharge the ~~three~~4.25% ~~and~~Convertible ~~nine~~Notes ~~months~~prior ~~ended~~to ~~October~~July 3116, ~~2017~~2018, ~~was~~we ~~(4.2%)~~would ~~and~~then need to refinance (~~30.0%~~1) ~~compared~~the asset-based credit facility on or prior to April 14, 2019, (432) to the extent they are not converted into our common stock, the 8.50%) Convertible Notes on May 1, 2019 and (3) the 11.30%) ~~for~~Unsecured ~~the~~Notes ~~same~~on ~~periods~~or ~~last~~prior ~~year~~to October 16, 2019. The ~~difference~~commitment ~~between~~of the ~~effective~~purchasers ~~tax~~to ~~rates~~purchase ~~and~~the 11.0% Unsecured Notes terminates upon the ~~statutory~~earliest ~~tax~~to ~~rates~~occur ~~resulted~~of: ~~primarily~~(i) ~~from~~a ~~valuation~~change ~~allowances~~of ~~recorded~~control ~~during~~(including the ~~respective~~closing ~~periods~~of onthe ~~current~~pending ~~year~~merger ~~losses,~~with ~~partially~~Granite) ~~offset~~and by(ii) ~~favorable~~delivery ~~resolution~~to ofthe ~~tax~~purchasers ~~audits~~of ~~and~~a ~~statute~~notice of ~~limitation~~termination ~~expirations.~~by us.

We may at our option prepay the 11.0% Unsecured Notes in whole or in part at any time. The 11.0% Unsecured Notes are subject to a mandatory prepayment upon the closing of a change of control. The 11.0% Unsecured Notes are subject to an Early Payment Event Fee if the 11.0% Unsecured Notes are repaid less than 90 days after the 11.0% Unsecured Notes are issued. The amount of the Early Payment Event Fee will be equal to the excess, if any, of (x) 90 days of accrued interest on the principal amount repaid, over (y) the amount of interest accrued and paid or payable with respect to the principal amount repaid from the date of issuance to and including the date of the repayment.

There are no covenants applicable to us under the Unsecured Notes purchase agreement so long as: (i) the 11.0% Unsecured Notes have not been issued, (ii) any of the 8.0% Convertible Notes are outstanding and (iii) none of the provisions of the indenture governing the 8.00% Convertible Notes have been amended or waived. After the 11.0% Unsecured Notes have been issued, we will be subject to certain covenants, including, delivery of financial statements and other reports, compliance with material contracts and applicable laws, and maintenance of corporate existence, insurance and properties. In addition, after the earliest date that (i) none of the 8.0% Convertible Notes are outstanding or (ii) all or any of the provisions of the indenture governing the 8.0% Convertible Notes are no longer in effect or have been amended or waived, we will be subject to negative covenants related to indebtedness, liens, sale and leaseback transactions, asset sales, dividends and restricted payments, transactions with affiliates, and maximum ratio of funded indebtedness to earnings before interest, taxes, depreciation and amortization ("EBITDA"). None of our 11.0% Unsecured Notes were outstanding as of April 30, 2018.

Asset-Based Credit Facility

On March 30, 2018, our asset-based credit facility agreement was amended to revise the acceleration provision included in the definition of Maturity Date to be July 16, 2018 if we have not delivered to the administrative agent for the asset-based credit facility evidence by July 15, 2018 that the 4.25% Convertible Notes have been effectively discharged with the proceeds from the issuance of the 11.0% Unsecured Notes or (b) May 15, 2018 if (i) the issuance of the 11.0% Unsecured Notes is cancelled for any reason or (ii) the proceeds of the 11.0% Unsecured Notes are used for a purpose other than to effectively discharge the 4.25% Convertible Notes in full; provided, that if an event described in clause (i) or (ii) above occurs after May 15, 2018, then the maturity date of the asset-based credit facility will be the date the event occurred.

Surety Bonds

We utilize surety bonds to secure performance of a portion of our projects. As of April 30, 2018 and January 31, 2018, the amount of surety bonds outstanding was $133.7 million and $148.3 million, respectively, based on the expected amount of revenues remaining to be recognized on the projects. Of the amount outstanding at April 30, 2018, $36.4 million related to surety bonds on contracts which were assumed by the purchasers of our Heavy Civil business. We expect to obtain releases on the remaining jobs when those jobs are completed.

5. Income Taxes

On December 22, 2017, the United States enacted tax reform legislation commonly known as the Tax Cuts and Jobs Act (the “The Act”), resulting in significant modifications to existing U.S. tax law, including but not limited to, (1) lowering the corporate federal income tax rate from 35% to 21% effective January 1, 2018; (2) implementing a territorial tax system; and (3) imposing a one-time repatriation tax on deemed repatriated earnings of foreign subsidiaries.

The Act provides for a new requirement, beginning in 2018, that certain income earned by controlled foreign corporations in excess of an allowable return on foreign subsidiary’s tangible assets is subject to U.S. income tax (the global intangible low-taxed income or “GILTI” provision). We have elected to account for GILTI tax in the period in which it is incurred. We do not expect the GILTI provisions to have a material impact to our financial statements. Also beginning in 2018, The Act provides for a new base erosion and anti-abuse tax provision (“BEAT”) which eliminates the deduction of certain base-erosion payments made to related foreign corporations and imposes a minimum tax if greater than regular tax. We do not expect the BEAT provision to have a material impact to our financial statements.

The SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”) which provides additional clarification regarding situations where the Company does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of The Act for the reporting period in which The Act was enacted. We have recognized the provisional tax impacts, based on reasonable estimates, related to the Deemed Dividend and the revaluation of deferred tax assets and liabilities and have included these amounts in our consolidated financial statements for the year ended January 31, 2018. The ultimate impact may differ from these provisional amounts, possibly materially, due to among other things, additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a result of The Act. We intend to complete our accounting under The Act within the measurement period set forth in SAB 118. During the three months ended April 30, 2018, the Company did not make any adjustments to its provisional amounts included in its consolidated financial statements for the year ended January 31, 2018. The accounting is expected to be completed when the U.S. corporate income tax return is filed in 2018.

On April 2, 2018, the Internal Revenue Service issued Notice 2018-26 which provides guidance on how to determine, report and pay the repatriation tax on deemed repatriated earnings of foreign subsidiaries provided in The Act and included in the consolidated financial statements for the year ended January 31, 2018. Notice 2018-26 is not expected to have a significant impact on the Company’s consolidated financial statements.

Income tax expense for continuing operations of $1.0 million was recorded in the three months ended April 30, 2018, compared to $1.1 million for the same period last year. We recorded no tax benefit on domestic deferred tax assets and certain foreign deferred tax assets generated during the three months ended April 30, 2018. Current period tax expense is primarily related to income in Mexico and withholding tax related to our dividends from our Latin American affiliates. The effective tax rate for continuing operations for the three months ended April 30, 2018 was 25.2% compared to (35.8%) for the same period last year. The difference between the effective tax rates and the statutory tax rates resulted primarily from valuation allowances recorded during the respective periods on current year losses.

After valuation allowances, we maintain no domestic net deferred tax assets and no net deferred tax assets from foreign jurisdictions. The establishment of a valuation allowance does not have any impact on cash, nor does such an allowance preclude us from using our loss carryforwards or utilizing other deferred tax assets in the future.

As of ~~October~~April 3130, ~~2017~~2018 and January 31, ~~2017~~2018, the total amount of unrecognized tax benefits recorded was $98.09 million and $109.31 million, respectively, of which substantially all would affect the effective tax rate if recognized. It is reasonably possible that the amount of unrecognized tax benefits will decrease during the next twelve months by approximately $7.4.5 million due to settlements of audit issues ~~and expiration of statutes of limitation~~. We classify uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. We report income tax-related interest and penalties as a component of income tax expense. As of ~~October~~April 3130, ~~2017~~2018 and January 31, ~~2017~~2018, the total amount of liability for income tax-related interest and penalties was $8.89 million and $89.71 million, respectively.

56. Fair Value Measurements

Our estimates of fair value for financial assets and financial liabilities are based on the framework established in the fair value accounting guidance. The framework is based on the inputs used in the valuation, gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The three levels of ~~inputs~~the ~~used~~hierarchy ~~to measure fair value~~ are ~~listed~~as ~~below~~follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than those included in Level 1, such as quoted market prices for similar assets and liabilities in active markets or quoted prices for identical assets in inactive markets.

Level 3 — Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing an asset or liability.

Our assessment of the significance of a particular input to the fair value in its entirety requires judgment and considers factors specific to the asset or liability. Our financial instruments held at fair value are presented below as of October 31, 2017, and January 31, 2017: 17

			Fair Value Measurements
(in thousands)	Carrying Value		Level 1		Level 2		Level 3
October 31, 2017
Financial Assets:
Long-term restricted deposits held at fair value	$	6,354	$	6,354	$	—	$	—
Contingent consideration receivable (1)		4,244		—		—		4,244
January 31, 2017
Financial Assets:
Long-term restricted deposits held at fair value	$	5,055	$	5,055	$	—	$	—
Contingent consideration receivable (1)		4,244		—		—		4,244

(1) Contingent consideration receivable represents our share in the profits of one of the contracts assumed by the purchaser, as part of the sale of the Geoconstruction business on August 17, 2015. The amount was estimated based on the projected profits of the contract and is included in Other Assets in the Condensed Consolidated Balance Sheet. There have been no changes in the estimated fair value since the closing date of the sale agreement.

			Fair Value Measurements
(in thousands)	Carrying Value		Level 1		Level 2		Level 3
April 30, 2018
Financial Assets:
Long-term restricted deposits held at fair value	$	6,190	$	6,190	$	—	$	—
Contingent consideration receivable ⁽¹⁾		4,244		—		—		4,244
January 31, 2018
Financial Assets:
Long-term restricted deposits held at fair value	$	6,572	$	6,572	$	—	$	—
Contingent consideration receivable ⁽¹⁾		4,244		—		—		4,244

(1) The contingent consideration receivable represents our share in the profits of one of the contracts assumed by the purchaser, as part of the sale of the Geoconstruction business on August 17, 2015. The amount was estimated based on the projected profits of the contract. There have been no changes in the estimated fair value since the closing date of the sale agreement.

Other Financial Instruments

We use the following methods and assumptions in estimating the fair value disclosures for our other financial instruments:

~~Convertible~~Cash ~~Notes—~~equivalents – The ~~Convertible~~carrying ~~Notes~~amounts ~~are~~reported ~~measured~~in ~~using~~the ~~Level~~accompanying 1Condensed ~~inputs~~Consolidated ~~based~~Balance ~~upon~~Sheets ~~observable~~approximates ~~quoted~~their ~~prices~~fair ofvalues ~~the~~and ~~4.25%~~are ~~Convertible~~classified ~~Notes~~as ~~and~~Level 1 within the ~~8.0%~~fair ~~Convertible~~value ~~Notes~~hierarchy.

~~The~~Short-term ~~following~~and ~~table~~long-term ~~summarized~~debt, other than the ~~carrying~~convertible ~~values~~notes ~~and~~– ~~estimated~~The fair ~~values~~value of debt instruments is classified as Level 2 within the ~~long-term~~fair value hierarchy and is valued using a market approach based on quoted prices for similar instruments traded in active markets. Where quoted prices are not available, the income approach is used to value these instruments based on the present value of future cash flows discounted at estimated borrowing rates for similar debt: instruments or on estimated prices based on current yields for debt issues of similar quality and terms.

	October 31, 2017				January 31, 2017
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
4.25% Convertible Notes	$	66,506	$	69,326	$	64,387	$	64,705
8.0% Convertible Notes		98,558		127,240		97,952		115,882

Convertible notes— The convertible notes are measured on a non-recurring basis using Level 1 inputs based upon observable quoted prices of the 4.25% Convertible Notes and the 8.0% Convertible Notes.

6.The ~~Equity-Based~~following ~~Compensation~~table summarizes the carrying values and estimated fair values of our debt:

We have an equity-based compensation plan that provides for the granting of options to purchase or the issuance of shares of common stock at a price fixed by the Compensation Committee. As of October 31, 2017, there were 773,836 shares available to be granted under the plan as stock options or restricted stock awards. We have the ability to issue shares under the plan either from new issuances or from treasury, although we have previously issued new shares and expect to continue to issue new shares in the future. We granted 258,446 restricted stock units and 277,799 performance restricted stock units under the Layne Christensen Company 2006 Equity Incentive Plan during the nine months ended October 31, 2017. All of the awards granted during the nine month period ended October 31, 2017, may be settled in cash or shares at the Compensation Committee’s discretion except for 36,725 restricted stock units granted to the Board of Directors that are required to be settled in shares. It is the intention to settle all awards in shares.

	April 30, 2018				January 31, 2018
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
4.25% Convertible Notes	$	68,000	$	69,674	$	67,248	$	68,631
8.0% Convertible Notes		98,985		125,996		98,769		122,150

~~We recognized compensation cost for equity-based compensation arrangements of $0.8 million and $2.3 million for the three and nine months ended October 31, 2017, respectively, and $0.~~7 ~~million and $2~~.7 million for the three and nine months ended October 31, 2016, respectively. Of these amounts, $0.7 million and $2.1 million, for the three and nine months ended October 31, 2017, respectively, and $0.6 million and $2.3 million for the three and nine months ended October 31, 2016, respectively, related to nonEquity-~~vested~~Based ~~stock.~~Compensation ~~There was no income tax benefit recognized on our equity-based compensation as a full valuation allowance has been provided on our deferred tax asset.~~

15Layne has an equity-based compensation plan that provides for the granting of options to purchase or the issuance of shares of common stock at a price fixed by the Board of Directors or a committee. As of April 30, 2018, there were 787,247 shares which remain available to be granted under the plan as stock options or restricted stock awards. We have the ability to issue shares under the plan either from new issuances or from treasury shares, although we have previously always issued new shares and expect to continue to issue new shares in the future.

AsWe ofrecognized ~~October~~compensation ~~31,~~cost ~~2017,~~for ~~there~~equity-based ~~was~~compensation ~~approximately~~arrangements of $40.67 million ofand ~~total~~$1.0 ~~unrecognized~~million ~~compensation~~for ~~cost~~the ~~related~~three tomonths ~~nonvested~~ended ~~restricted~~April ~~stock~~30, ~~awards~~2018 and ~~restricted~~2017, ~~stock~~respectively. ~~units~~Of ~~that~~these isamounts, ~~expected~~$0.7 tomillion beand ~~recognized~~$0.9 ~~over~~million, afor ~~weighted-average~~the ~~period~~three ofmonths ~~1.9~~ended ~~years.~~April As30, of2018 ~~October~~and 312017, ~~2017~~respectively, related to non-vested stock. The total ~~unrecognized~~income ~~compensation~~tax ~~cost~~benefit ~~related~~recognized tofor ~~unvested~~equity-based ~~stock~~compensation ~~options~~arrangements was ~~approximately~~$0.3 million and $0.14 million for the three months ended April 30, ~~which~~2018 and 2017, respectively; however, as of April 30, 2018, no tax benefit is expected to be ~~recognized~~realized ~~over~~for equity-based compensation arrangements due to a ~~weighted-average~~full ~~period~~valuation allowance of ~~0.3~~our ~~years.~~domestic deferred tax assets.

~~A summary of nonvested share activity for the nine months ended October 31, 2017, is as follows:~~ 18

	Number of Shares			Weighted Average Grant Date Fair Value		Intrinsic Value (in thousands)
Nonvested stock at February 1, 2017		1,871,640		$	5.00	$	—
Granted - Restricted stock units		258,446			8.86
Granted - Performance shares		277,799			6.92
Vested		(90,238	)		15.49
Forfeitures		(296,945	)		5.45
Nonvested stock at October 31, 2017		2,020,702		$	5.22	$	26,693

As of April 30, 2018, there was approximately $3.2 million of total unrecognized compensation cost related to nonvested restricted stock awards and restricted stock units that is expected to be recognized over a weighted-average period of 1.7 years. As of April 30, 2018, total unrecognized compensation cost related to unvested stock options was approximately $0.1 million, which is expected to be recognized over a weighted-average period of 0.2 years.

A summary of ~~stock~~nonvested ~~option~~share activity for the ~~nine~~three months ended ~~October~~April 3130, ~~2017~~2018, is as follows:

	Number of Shares			Weighted Average ~~Exercise~~Grant ~~Price~~Date Fair Value		~~Weighted~~Intrinsic ~~Average~~Value ~~Remaining Contractual Term~~ (~~Years~~in thousands)		~~Intrinsic Value (in thousands)~~
Outstanding at February 1, 2017		750,044		$	14.54		6.5
Nonvested stock at February 1, 2018		1,957,803		$	5.17
Forfeited		(45,022	)		25.11
Vested		(926,314	)		3.80	$	13,070
Exercised		(25,000	)		8.22
Nonvested stock at April 30, 2018		1,031,489		$	6.39	$	14,554
Expired		(19,125	)		42.42
Outstanding at October 31, 2017		660,897		$	13.25		6.3	$	2,077
Exercisable at February 1, 2017		611,453		$	15.43		6.8
Exercisable at October 31, 2017		536,386		$	14.04		6.1	$	1,661

A summary of stock option activity for the three months ended April 30, 2018, is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Intrinsic Value (in thousands)
Outstanding at February 1, 2018		659,086	$	13.23		6.1
Outstanding at April 30, 2018		659,086		13.23		5.8	$	2,454

Exercisable at February 1, 2018		649,086		13.30		6.0
Exercisable at April 30, 2018		649,086		13.30		5.8	$	2,399
Options expected to vest after April 30, 2018		10,000		8.6		7.2		55

The aggregate intrinsic value was calculated using the difference between the current market price and the exercise price for only those options that have an exercise price less than the current market price.

Nonvested stock awards having service requirements only, are valued as of the grant date closing stock price and generally vest ratably over service periods of one to five years. Other nonvested stock awards vest based upon Layne meeting various performance goals. Certain nonvested stock awards provide for accelerated vesting if there is a change of control (as defined in the plans) or the disability or the death of the executive and for equitable adjustment in the event of changes in our equity structure. ~~We granted performance based nonvested stock awards during the nine months ended October 31, 2017, which were valued using a Monte Carlo simulation model.~~

~~Assumptions used in the Monte Carlo simulation model for the stock awards granted during the nine months ended October 31, 2017 were as follows:~~19

Assumptions:	2017
Weighted-average expected volatility		59.6%
Expected dividend yield		0.0%
Weighted-average risk free rate		1.5%
Weighted-average fair value	$	6.92

8. Investment in Affiliates

16We have investments in affiliates that are engaged in mineral drilling services, and the manufacture and supply of drilling equipment, parts and supplies. Investment in affiliates may include other drilling related joint ventures from time to time.

7.A ~~Investment~~summary inof ~~Affiliates~~material, jointly-owned affiliates, as well as their primary operating subsidiaries, if applicable, and the percentages directly and indirectly owned by us are as follows as of April 30, 2018:

We have investments in affiliates that are engaged in mineral drilling services, and the manufacture and supply of drilling equipment, parts and supplies. Investment in affiliates may include other drilling-related joint ventures from time to time.

	Percentage Owned Directly		Percentage Owned Indirectly
Boyles Bros Servicios Tecnicos Geologicos S.A. (Panama)	50.00%
Boytec, S.A. (Panama)			50.00%
Boytec Sondajes de Mexico, S.A. de C.V. (Mexico)				50.00
Sondajes Colombia, S.A. (Columbia)				50.00
Mining Drilling Fluids (Panama)				25.00
Inmobiliaria Plantel Industrial Limitada (Chile)				50.00
Christensen Chile, S.A. (Chile)		50.00
Christensen Commercial, S.A. (Chile)		50.00
Geotec Boyles Bros., S.A. (Chile)		50.00
Centro Internacional de Formacion S.A. (Chile)				50.00
Diamantina Christensen Trading (Panama)		42.69
Christensen Commercial, S.A. (Peru)		35.42
Geotec, S.A. (Peru)		35.38
Boyles Bros. Diamantina, S.A. (Peru)		29.49
Mining Drilling Fluids S.A. (Chile)		25.00
Boytec Chile S.A. (Chile)		50.00

AFinancial ~~summary~~information of ~~material,~~the ~~jointly-owned~~ affiliates, asis ~~well~~reported aswith ~~their~~a ~~primary~~one-month ~~operating~~lag ~~subsidiaries,~~in ifthe ~~applicable,~~reporting ~~and~~period. The impacts of the ~~percentages~~lag ~~directly~~on ~~and~~our ~~indirectly~~investment ~~owned~~and byresults usof operations are asnot ~~follows~~significant. asSummarized financial information of ~~October~~the ~~31,~~affiliates ~~2017~~was as follows:

	Percentage Owned Directly		Percentage Owned Indirectly
	Three Months
Boyles Bros Servicios Tecnicos Geologicos S.A. (Panama)	50.00%
	Ended April 30,
Boytec, S.A. (Panama)			50.00%
(in thousands)	2018		2017
Boytec Sondajes de Mexico, S.A. de C.V. (Mexico)				50.00
Income statement data:
Sondajes Colombia, S.A. (Columbia)				50.00
Revenues	$	46,133	$	36,120
Mining Drilling Fluids (Panama)				25.00
Gross profit		9,310		5,716
Plantel Industrial S.A. (Chile)				50.00
Operating income		5,078		1,840
Christensen Chile, S.A. (Chile)		50.00
Net income		3,268		1,754
Christensen Commercial, S.A. (Chile)		50.00
Geotec Boyles Bros., S.A. (Chile)		50.00
Centro Internacional de Formacion S.A. (Chile)				50.00
Geoestrella S.A. (Chile)				25.00
Diamantina Christensen Trading (Panama)		42.69
Christensen Commercial, S.A. (Peru)		35.38
Geotec, S.A. (Peru)		35.38
Boyles Bros. Diamantina, S.A. (Peru)		29.49
Mining Drilling Fluids S.A. (Chile)		25.00

~~Financial information for the affiliates is reported with a one-month lag in the reporting period~~9. ~~The~~Revenue ~~impact of the lag on our investment and results of operations are not significant. Summarized financial information of the affiliates is as follows:~~

	Three Months				Nine Months
	Ended October 31,				Ended October 31,
(in thousands)	2017		2016		2017		2016
Income statement data:
Revenues	$	37,362	$	29,716	$	106,659	$	89,623
Gross profit		7,838		5,141		20,924		16,674
Operating income		3,963		1,324		9,618		5,602
Net income		3,268		568		7,397		4,095

Our revenue is primarily derived from construction contracts that can span weeks, months or years. We account for revenue in accordance with ASC Topic 606, which we adopted on February 1, 2018, using the full retrospective method (see Note 1 to the Condensed Consolidated Financial Statements for further discussion of the adoption, including the impact on our prior period financial statements). ASC Topic 606 provides for a five-step model for recognizing revenue from contracts with customers as follows:

81. ~~Operating~~Identify ~~Segments~~the contract

~~During the first quarter FY2018, we sold our Heavy Civil business~~2. ~~The~~Identify ~~operating~~performance results of the Heavy Civil business are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. See Note 9 to the Condensed Consolidated Financial Statements for further discussion. With the sale of the Heavy Civil business, we now manage and report our operations through three segments: Water Resources, Inliner, and Mineral Services.obligations

Determine the transaction price

Allocate the transaction price

Recognize revenue

The unit of account in ASC Topic 606 is a performance obligation, which is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring goods and services to the customer. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts contain a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each

performance obligation using our best estimate of the standalone selling price (based on estimated cost plus margin) of each distinct good or service in the contract.

Revenue on large, longer-term water drilling and infrastructure services contracts are recognized over time on the basis of costs incurred to date to total estimated costs at completion as we have an enforceable right to payment from the customer for the performance obligation completed. The amount of revenues recognized reflects the cost of revenues (e.g. labor, materials and overhead) that contributes to our progress in satisfying the performance obligation that has been transferred to date to the customer, inclusive of the estimated project profit margin. The input measure used is the ratio of costs incurred to date to total estimated costs at completion.

Revenue on contracts relating to unapproved change orders and claims are recognized by including in revenue an amount less than or equal to the amount of the costs incurred by us to date for contract price adjustments that we seek to collect from customers for delays, differing site conditions, errors in specifications or designs, change orders in dispute or unapproved as to scope or price, or other unanticipated additional costs, in each case when recovery of the costs is considered probable. The amount of unapproved change orders and claims revenues are included in our Condensed Consolidated Balance Sheets as part of costs and estimated earnings in excess of billings on uncompleted contracts (see Note 2 to the Condensed Consolidated Financial Statements). When determining the likelihood of eventual recovery, we consider such factors as our experience on similar projects and our experience with the customer. As new facts become known, an adjustment to the estimated recovery is made and reflected in the current period.

Revenues for drilling contracts within Mineral Services are primarily recognized over time on the basis of time and materials in terms of the value of total work performed to date determined by actual footage drilled, meterage drilled or services performed.

Revenues for direct sales of equipment and other ancillary products not provided in conjunction with the performance of drilling and infrastructure services contracts are recognized at a point in time at the date of delivery to, and acceptance by, the customer. Provisions for estimated warranty obligations are made in the period in which the sales occur.

Our revenues are presented net of taxes imposed on revenue-producing transactions with our customers, such as, but not limited to, sales, use, value-added and some excise taxes.

Of our total revenues, 87% are recognized over time (Water Resources 95%, Inliner 79%, and Mineral Services 86%), by costs incurred to date to total estimated costs at completion contracts and time and material contracts, and 13% are recognized at a point in time by direct sales contracts (Water Resources 5%, Inliner 21%, and Mineral Services 14%).

See Note 10 to the Condensed Consolidated Financial Statements for disaggregated revenues by product line and geographic location.

On April 30, 2018, we had $163.1 million of remaining performance obligations, including contracts fulfilled over less than one year. We expect to recognize approximately 88% of our total remaining performance obligations as revenue by January 31, 2019, an additional 10% by January 31, 2020 and the balance thereafter.

Contract Estimates. Contract price and cost estimates are reviewed periodically as work progresses and adjustments proportionate to the costs incurred to date to total estimated costs at completion are reflected in contract revenues in the reporting period when such estimates are revised. The nature of accounting for these contracts is such that refinements of the estimating process for changing conditions and new developments may occur and are characteristic of the process. Many factors can and do change during a contract performance obligation period which can result in a change to contract profitability including differing site conditions (to the extent that contract remedies are unavailable), the availability of skilled contract labor, the performance of major material suppliers, the performance of major subcontractors, unusual weather conditions and unexpected changes in material costs. These factors may result in revisions to costs and income and are recognized in the period in which the revisions become known. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. Provisions for estimated losses on uncompleted water drilling and infrastructure services contracts are made in the period in which such losses became known. When the estimate on a contract indicates a loss, the entire loss is recorded during the accounting period in which the facts that caused the revision become known.

Management evaluates the performance of contracts on an individual basis. In the ordinary course of business, but at least quarterly, we prepare updated estimates that may impact the cost and profit or loss for each contract. The cumulative effect of revisions in estimates of the total forecasted revenue and costs, including unapproved change orders and claims, during the course of the contract is reflected in the accounting period in which the facts that caused the revision become known. Large changes in cost estimates on larger, more complex drilling and infrastructure services projects can have a material impact on our financial statements and are reflected in results of operations when they become known.

Contract Assets. Our contract assets are presented as “cost and estimated earnings in excess of billings on uncompleted contracts” on our Condensed Consolidated Balance Sheet and include amounts due under contractual retainage provisions of $16.2 million and $16.0 million as of April 30, 2018 and January 31, 2018, respectively, and provisions for losses of ($0.8) million and ($0.9) million as of April 30, 2018 and January 31, 2018, respectively. Costs and estimated earnings in excess of billings on uncompleted contracts represent amounts earned and reimbursable under contracts, but have a conditional right for billing and payment such as achievement of milestones or completion of the project. The balances billed but not paid by customers pursuant to retainage provisions generally also become due upon completion and acceptance of the project work or products by the owners. Such unbilled amounts will become billable according to the contract terms and generally will be billed and collected over the next twelve months. Based on our historical experience, we generally consider the collection risk related to billable amounts to be low. When events or conditions indicate that it is probable that the amounts outstanding become unbillable, the transaction price and associated contract asset is reduced.

Contract Liabilities. Our contract liabilities are presented as “Billings in excess of costs and estimated earnings on uncompleted contracts” on our Condensed Consolidated Balance Sheet and includes provisions for losses of ($0.1) million and ($0.1) million as of April 30, 2018 and January 31, 2018, respectively. Billings in excess of costs and estimated earnings on uncompleted contracts are billings to customers on contracts in advance of work performed, including advance payments negotiated as a contract condition. Generally, unearned project-related costs will be earned over the next twelve months. Provisions for losses are recognized in the consolidated statements of operations at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue.

During the three months ended April 30, 2018, we recognized revenue on 99% of the contract liabilities balance at January 31, 2018.

10. Segments and Foreign Operations

We are a global solutions provider to the world of essential natural resources – water, minerals and energy. The Chief Operating Decision Maker (“CODM”) reviews operating results to determine the appropriate allocation of resources within the organization. The CODM defines the operational and organizational structure into discrete segments based on our primary product lines.

During the first quarter FY2018, we completed the sale of substantially all of the assets of our Heavy Civil business. The operating results related to the Heavy Civil business are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. See Note 11 to the Condensed Consolidated Financial Statements for further discussion.

Our segments are defined as follows:

Water Resources

Water Resources provides its customers with an array of water management solutions, including discovery and ~~definition~~defining of water sources through hydrologic studies, water supply development through water well drilling and intake construction. Through our ~~new~~ Water Midstream business we provide water delivery through pipeline and pumping infrastructure with the ability to deliver non-potable water at multiple points along the pipeline route. Water Resources also brings technologies to the water and wastewater markets and offers water treatment equipment engineering services, providing systems for the treatment of regulated and nuisance contaminants, specifically, iron, manganese, hydrogen sulfide, arsenic, radium, nitrate, perchlorate, and volatile organic compounds. Water Resources drills deep injection wells for industrial and municipal clients that need to dispose of wastewater associated with their processes. Water Resources also performs complete diagnostic and rehabilitation services for existing wells, pumps and related equipment, including conducting downhole closed circuit televideo inspections to investigate and resolve water well and pump performance problems. In addition, Water Resources constructs radial collector wells through its Ranney® Collector Wells technology, which is an alternative to conventional vertical wells and can be utilized to develop moderate to very high capacities of groundwater. Water Resources provides water systems and services in most regions of the U.S.

Water Resources drills deep injection wells for industrial and municipal clients for the disposal of wastewater associated with their processes. As part of their repair and installation services, Water Resources performs complete diagnostic and rehabilitation services for existing wells, pumps and related equipment, including conducting downhole closed circuit televideo inspections to investigate and resolve water well and pump performance problems. In addition, Water Resources constructs radial collector wells through its Ranney® Collector Wells technology, which is an alternative to conventional vertical wells and can be utilized to develop moderate to very high capacities of groundwater. Water Resources provides water systems and services in most regions of the U.S.

Inliner

Inliner provides a wide range of process, sanitary and storm water rehabilitation ~~solutions~~techniques and services to municipalities and industrial customers dealing with aging infrastructure needs. Inliner focuses on its proprietary Inliner® cured-in-place pipe (“CIPP”) which allows it to rehabilitate aging sanitary sewer, storm water and process water infrastructure to provide structural rebuilding as well as infiltration and inflow reduction. Inliner’s trenchless technology minimizes environmental impact and reduces or eliminates surface and social disruption. Inliner has the ability to supply both traditional felt-based CIPP lining tubes cured with water or steam, as well as, a fiberglass-based lining tubes cured with ultraviolet (“UV”) light. Inliner ~~holds~~owns the North American rights to the Inliner CIPP technology, owns and operates the liner manufacturer, and also provides installation of Inliner CIPP product. While Inliner focuses on our proprietary Inliner CIPP, it provides full system renewal, including ~~a wide variety of other rehabilitative methods including~~ Janssen structural renewal for service lateral connections and mainlines, slip lining, traditional excavation and replacement, and form and manhole renewal with cementitious and epoxy products. Inliner provides services in most regions of the U.S.

Mineral Services

Mineral Services conducts primarily above ground drilling activities, including all phases of core drilling, reverse circulation, dual tube, hammer and rotary air-blast methods. Our service offerings include both exploratory and definitional drilling. Global mining companies engage companies such as Mineral Services to extract samples from sites that the mining companies analyze for mineral content before investing heavily in development to extract the minerals. Mineral Services helps its clients determine if aany minable mineral deposit is on the site, the economic viability of the mining site and the geological properties of the ground, which helps in the determination of mine planning. Mineral Services also offers its customers water management and soil stabilization expertise. Mine water management consists of vertical, large diameter wells for sourcing and dewatering; and horizontal drains for slope de-pressurization. The primary markets are in the western U.S., Mexico, and Brazil. ~~As discussed in Note 11 to the Condensed Consolidated Financial Statements, during FY2016, we implemented a plan to exit our operations in Africa and Australia.~~ Mineral Services also has ownership interests in foreign affiliates operating in Latin America that form our primary presence in Chile and Peru.

Financial information for our segments is presented below. Unallocated corporate expenses primarily consist of interest expense, tax expense and the expenses of general and administrative functions performed on a company-wide basis ~~that~~and ~~benefit~~benefiting all segments. These costs include expenses related to accounting, financial reporting, internal audit, treasury, legal, information technology, tax compliance, executive management and board of directors.

Our measure of Total Adjusted EBITDA, which may not be comparable to other companies’ measure of Total Adjusted EBITDA, represents net loss before discontinued operations, taxes, interest, depreciation and amortization, gain or loss on sale of fixed assets, non-cash equity-based compensation, equity in earnings or losses from affiliates, certain non-recurring items such as restructuring costs, and certain other gains or losses, plus dividends received from affiliates. Our chief operating decision maker evaluates segment performance based on the segment’s revenues and Adjusted EBITDA, among other factors. In addition, we use Total Adjusted EBITDA as a factor in incentive compensation decisions and our credit facility agreement uses measures similar to Total Adjusted EBITDA to measure compliance with certain covenants.

	Three Months					~~Nine Months~~
Revenues	Ended October 31,					Ended October 31,
	Ended April 30,
(in thousands)	~~2017~~2018		~~2016~~2017			~~2017~~		~~2016~~
Water Resources	$	4539,~~902~~777	$	4941,~~939~~890		$	~~132,875~~	$	~~168,360~~
Inliner		5448,~~623~~888		5047,~~517~~067			~~155,993~~		~~151,027~~
Mineral Services		2625,~~898~~886		2021,~~188~~956			~~76,222~~		~~45,761~~
Other items/eliminations		—		(70	)		—		(293	)
Total revenues	$	114,551	$	110,913
Total revenues	$	127,423	$	120,574		$	365,090	$	364,855

	Three Months
	Ended April 30,
(in thousands)	2018			2017
Total Adjusted EBITDA
Water Resources	$	4,469		$	249
Inliner		8,155			7,732
Mineral Services		4,811			5,026
Unallocated corporate expenses		(4,804	)		(3,960	)
Total Adjusted EBITDA	$	12,631		$	9,047

	Three Months						Nine Months
Total Adjusted EBITDA	Ended October 31,						Ended October 31,
(in thousands)	2017			2016			2017			2016
Water Resources	$	2,082		$	(798	)	$	3,942		$	5,064
Inliner		8,317			9,628			25,310			24,979
Mineral Services		5,202			2,701			15,412			6,815
Unallocated corporate expenses		(5,655	)		(4,495	)		(15,104	)		(18,250	)
Total Adjusted EBITDA	$	9,946		$	7,036		$	29,560		$	18,608

The following table reconciles net loss to Total Adjusted EBITDA.

	Three Months
	Ended April 30,
(in thousands)	2018			2017
Net income (loss)	$	2,705		$	(23,461	)
Items not included in Total Adjusted EBITDA
Net loss from discontinued operations		175			19,482
Income tax expense		970			1,050
Interest expense		4,408			4,200
Depreciation expenses and amortization		6,763			6,484
Gain on sale of fixed assets		(4,609	)		(612	)
Non-cash equity-based compensation		699			1,019
Equity in earnings of affiliates		(1,714	)		(711	)
Restructuring costs		2,806			428
Other (income) expense, net		(99	)		163
Dividends received from affiliates		527			1,005
Total Adjusted EBITDA	$	12,631		$	9,047

	Three Months						Nine Months
Reconciliation of Net Loss to Total Adjusted EBITDA	Ended October 31,						Ended October 31,
(in thousands)	2017			2016			2017			2016
Net loss	$	(2,080	)	$	(5,043	)	$	(29,886	)	$	(19,156	)
Items not included in Total Adjusted EBITDA
Net loss from discontinued operations		76			580			22,329			1,259
Income tax expense		80			1,352			1,743			1,824
Interest expense		4,308			4,206			12,745			12,661
Depreciation and amortization		6,821			6,517			19,678			19,002
Gain on sale of fixed assets		(881	)		(2,739	)		(1,913	)		(2,828	)
Non-cash equity-based compensation		774			619			2,543			2,637
Equity in earnings of affiliates		(1,367	)		(189	)		(3,093	)		(1,916	)
Restructuring costs		953			1,711			2,208			2,776
Other expense (income), net		70			(554	)		4			(665	)
Dividends received from affiliates		1,192			576			3,202			3,014
Total Adjusted EBITDA	$	9,946		$	7,036		$	29,560		$	18,608

The following table presents various financial information for each segment.

	Three Months				~~Nine Months~~
Depreciation and amortization	Ended October 31,				Ended October 31,
	Ended April 30,
(in thousands)	~~2017~~2018		~~2016~~2017		~~2017~~		~~2016~~
Water Resources	$	3,078	$	2,970	$	9,133	$	9,138
Revenues by product line
Inliner		1,645		1,500		4,743		4,016
Water systems	$	33,775	$	32,179
Mineral Services		1,908		1,753		5,268		4,773
Water treatment technologies		2,909		5,723
Corporate		190		294		534		1,075
Sewer rehabilitation		48,888		47,067
Total depreciation and amortization	$	6,821	$	6,517	$	19,678	$	19,002
Exploration drilling		24,557		21,098
Other		4,422		4,846
Total revenues by product line	$	114,551	$	110,913

	Three Months				~~Nine Months~~
Geographic Information	Ended October 31,				Ended October 31,
	Ended April 30,
(in thousands)	2017		2016		2017		2016
Revenue by geographic location
United States/Canada	$	~~114~~103,~~636~~764	$	~~110~~100,~~189~~554	$	~~328,780~~	$	~~342,052~~
Africa/Australia		—		—		—		151
South America		3,141		2,253
South America		3,260		2,756		7,652		5,057
Mexico		7,646		8,106
Mexico		9,527		7,629		28,658		17,595
Total revenues	$	114,551	$	110,913
Total revenues	$	127,423	$	120,574	$	365,090	$	364,855

	Three Months
	Ended April 30,
Depreciation and amortization
Water Resources	$	2,987	$	3,057
Inliner		1,719		1,517
Mineral Services		1,854		1,686
Corporate		203		224
Total depreciation and amortization	$	6,763	$	6,484

~~9. Discontinued Operations~~ 24

On April 30, 2017, we completed the sale of substantially all of the assets of the Heavy Civil business to Reycon Partners LLC (the "Buyer"), which is owned by a group of private investors, including members of the former Heavy Civil senior management team11. ~~The~~Discontinued ~~purchase~~Operations ~~price was $10.1 million, less an estimate of the business’s working capital. After final working capital adjustments of ($2.3) million, the purchase price was $3.5 million.~~

~~The~~On ~~components~~April 30, 2017, we completed the sale of substantially all of the assets ~~and~~of ~~liabilities~~the Heavy Civil business to Reycon Partners LLC (the "Buyer"), which is owned by a group of private investors, including members of the former Heavy Civil senior management team. The purchase price was $10.1 million, plus or minus the amount by which the business’s ~~classified~~working ascapital ~~discontinued~~was ~~operations~~less inthan an agreed upon target amount. After the ~~Condensed~~working ~~Consolidated~~capital ~~Balance~~adjustment, ~~Sheets~~the ~~are~~purchase asprice ~~follows:~~was $3.5 million.

	As of January 31,
(in thousands)	2017
Major classes of assets
Customer receivables	$	13,731
Costs and estimated earnings in excess of billings on uncompleted contracts		22,970
Inventories		2,426
Other current assets		1,033
Total current assets of discontinued operations		40,160
Property and equipment, net		5,235
Other assets of discontinued operations		895
Total major classes of assets of discontinued operations	$	46,290
Major classes of liabilities
Accounts payable	$	16,963
Billings in excess of costs and estimated earnings on uncompleted contracts		3,530
Other current liabilities		87
Total current liabilities of discontinued operations		20,580
Total major classes of liabilities of discontinued operations	$	20,580

The financial results of discontinued operations are as follows:

	Three Months						~~Nine Months~~
	Ended October 31,						Ended October 31,
	Ended April 30,
(in thousands)	~~2017~~2018			~~2016~~2017			~~2017~~			~~2016~~
Revenue	$	—		$	3230,~~993~~359		$	~~30,359~~		$	~~107,500~~
Cost of revenues (exclusive of depreciation and amortization, shown below)		~~(10~~—	)		(3025,~~778~~674	)		~~(28,859~~	)		~~(98,677~~	)
Selling, general and administrative expenses (exclusive of depreciation and amortization, shown below)		(66175	)		(27,~~480~~129	)		~~(4,464~~	)		~~(8,613~~	)
Depreciation and amortization		—			(~~348~~287	)		~~(287~~	)		~~(1,245~~	)
Gain on sale of fixed assets		—			594			4			~~223~~
Restructuring costs		—			(1427	)		~~(27~~	)		~~(409~~	)
Other expense items		-—			(1221	)		~~(30~~	)		~~(38~~	)
Total operating loss on discontinued operations before income taxes		(76175	)		(~~580~~2,775	)		~~(3,304~~	)		~~(1,259~~	)
Income tax expense		—			—			—			—
Total operating loss on discontinued operations		(76175	)		(~~580~~2,775	)		~~(3,304~~	)		~~(1,259~~	)
Loss on sale of discontinued operations before income taxes		—			—(16,707	)		~~(19,025~~	)		—
Income tax expense		—			—			—			—
Total loss on discontinued operations	$	(76175	)	$	(~~580~~19,482	)	$	~~(22,329~~	)	$	~~(1,259~~	)

20Supplemental cash flow data relating to the Heavy Civil business is presented below:

We recorded a loss on sale of discontinued operations of $19.0 million for the nine months ended October 31, 2017, calculated as the difference between the net book value of the Heavy Civil business sold as a continuing operations of $21.2 million and cash consideration of $3.5 million, less cost to sell of $1.3 million.

At12. ~~January~~Contingencies ~~31, 2017, we performed an asset impairment test of the Heavy Civil reporting segment and no impairment was indicated.~~

Cash flow data relating to the Heavy Civil business is presented below:

	Nine Months Ended		Nine Months Ended
(in thousands)	October 31, 2017		October 31, 2016
Cash flow data:
Depreciation and amortization	$	287	$	1,245
Capital expenditures		226		837
Bad debt expense		1,551		472

10. Contingencies

Our drilling activities involve certain operating hazards that can result in personal injury or loss of life, damage and destruction of property and equipment, damage to the surrounding areas, release of hazardous substances or wastes and other damage to the environment, interruption or suspension of drill site operations and loss of revenues and future business. The magnitude of these operating risks is amplified when we, as is frequently the case, conduct a project on a fixed-price, turn-key basis where we delegate certain functions to subcontractors but remain responsible to the customer for the subcontracted work. In addition, we are exposed to potential liability under foreign, federal, state and local laws and regulations, contractual indemnification agreements or otherwise in connection with our services and products. Litigation arising from any such occurrences may result in Layne being named as a defendant in lawsuits asserting large claims. Although we maintain insurance protection that we consider economically prudent, there can be no assurance that any such insurance will be sufficient or effective under all circumstances or against all claims or hazards to which we may be subject or that we will be able to continue to obtain such insurance protection. A successful claim or damage resulting from a hazard for which we are not fully insured could have a material adverse effect on us. In addition, we do not maintain political risk insurance with respect to our foreign operations.

Through one of our discontinued segments, Geoconstruction, ~~was~~we were a subcontractor on the foundation for the Salesforce Tower office building in San Francisco, California in 2013 and 2014. Certain anomalies were discovered in March 2014 in the foundation’s structural concrete, which were remediated by the general contractor during 2015. We have participated in discussions with the project owner and the general contractor regarding potential causes of the anomalies. Layne has assigned its claims under the project's builder's risk insurance policy to the general contractor. During FY2016, the owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages. The claim was denied by the builder’s risk insurers and the owner and the general contractor subsequently filed a legal proceeding against the insurers seeking coverage under the builder’s risk insurance policy. Although the Company is not a party to this legal proceeding, the Company believes, based on court filings in the legal proceeding, that the owner and the general contractor are asserting a claim for damages against the project’s builder’s risk insurers of approximately $100 million. Management does not believe that we are liable for any of the remediation costs or other claims related to this project. As of the date of this report, no action has been filed against us. Accordingly, no provision has been made in these interim Condensed Consolidated Financial Statements.

We are involved in various other matters of litigation, claims and disputes which have arisen in the ordinary course of business. We believe that the ultimate disposition of these matters will not, individually and in the aggregate, have a material adverse effect upon our business or consolidated financial position, results of operations or cash flows. However, it is possible, that future results of operations for any particular quarterly or annual period could be materially affected by changes in the assumptions related to these proceedings. In accordance with U.S. GAAP, we record a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. To the extent additional information arises or the strategies change, it is possible that our estimate of the probable liability in these matters may change. 25

11owner and the general contractor regarding potential causes of the anomalies. ~~Restructuring~~We ~~Costs~~have assigned our claims under the project's builder's risk insurance policy to the general contractor. During the fiscal year ended January 31, 2016, the project owner and the general contractor submitted a claim to the project’s builder’s risk insurers to cover the cost of remedial work and related damages. The claim was denied by the builder’s risk insurers and the project owner and the general contractor subsequently filed a legal proceeding against the insurers seeking coverage under the builder’s risk insurance policy. Although we are not a party to this legal proceeding, we believe, based on court filings in the legal proceeding, that the project owner and the general contractor are asserting a claim for damages against the project’s builder’s risk insurers of approximately $100 million. Management does not believe that we are liable for any of the remediation costs or other claims related to this project. Accordingly, no provision has been made in these interim Condensed Consolidated Financial Statements.

~~During~~We are involved in various other matters of litigation, claims and disputes which have arisen in the ~~second~~ordinary ~~quarter~~course of ~~FY2017~~business. We believe that the ultimate disposition of these matters will not, weindividually ~~initiated~~and in the aggregate, have a ~~plan~~material toadverse ~~reduce~~effect upon our ~~cost~~business ~~structure~~or ~~and~~consolidated ~~streamline~~financial ~~our~~position, results of operations toor ~~improve~~cash ~~our~~flows. ~~profitability~~However, it is possible, that future results of operations for any particular quarterly or annual period could be materially affected by changes in ~~our~~the ~~Water~~assumptions ~~Resources~~related ~~segment~~to ~~(“Water~~these ~~Resources~~proceedings. ~~Business~~In ~~Performance~~accordance ~~Initiative”)~~with GAAP, we record a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. ~~The~~These ~~Water~~provisions ~~Resources~~are ~~Business~~reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. To the extent additional information arises or the strategies change, it is possible that our estimate of the probable liability in these matters may change.

21Litigation Relating to the Merger

~~Performance~~On ~~Initiative~~April ~~involves~~3, ~~cost rationalization~~2018, ~~increased~~two ~~standardization~~putative ofclass ~~functions~~actions ~~such~~captioned asMalka ~~sales~~Raul v. Layne Christensen Company, ~~pricing~~et al., and ~~estimation~~Colleen Witmer v. Layne Christensen Company, ~~disposal~~et al., were filed in the U.S. District Court for the Southern District of ~~underutilized~~Texas ~~assets~~against Layne, Layne’s directors, Granite and ~~process~~Lowercase ~~improvements~~Merger toSub ~~drive~~Incorporated ~~efficiencies~~("Merger Sub"). ~~Towards~~The ~~this~~complaints ~~continued~~generally ~~pursuit~~allege that Layne, the Layne directors and Granite disseminated a false or misleading registration statement regarding the proposed merger in ~~FY2018,~~violation weof ~~have~~Section ~~incurred~~14(a) ~~$1.0~~of ~~million~~the Securities Exchange Act of 1934 (the "Exchange Act") and $1SEC Rule 14a-9.1 ~~million~~Specifically, ofthe ~~restructuring~~complaints ~~expenses~~allege ~~for~~that the ~~three~~registration ~~and~~statement ~~nine~~misstated ~~months~~or ~~ended~~omitted ~~October~~material 31information regarding the parties’ financial projections, ~~2017~~the valuation analysis performed by Greentech Capital Advisors, ~~respectively~~LLC ("Greentech") in support of its fairness opinion, and potential conflicts of interest of Greentech. WeThe ~~estimate~~complaints ~~remaining~~further ~~amounts~~allege tothat bethe ~~incurred~~Layne directors and/or Granite are liable for ~~the~~these ~~Water~~violations ~~Resources~~as ~~Business~~“controlling ~~Performance~~persons” ~~Initiative~~of Layne under Section 20(a) of ~~approximately~~the $1Exchange Act.0 ~~million~~The complaints seek injunctive relief, including to enjoin and/or rescind the merger, rescission or rescissory damages in the event the merger is consummated, and an award of attorneys’ fees, in addition to other relief.

WeAdditional ~~continued~~lawsuits ~~the~~arising ~~implementation~~out of ~~our~~the ~~FY2016~~merger ~~Restructuring~~may ~~Plan~~be ~~during~~filed in the ~~three~~future. ~~and~~There ~~nine~~can ~~months~~be ~~ended~~no ~~October~~assurance ~~31,~~that ~~2017.~~any ~~This~~of ~~plan involves~~ the ~~exit~~defendants ofwill ~~our~~be ~~operations~~successful in ~~Africa~~the ~~and~~outcome ~~Australia and other actions to support our strategic focus~~ of ~~simplifying~~ the ~~business~~pending ~~and~~or ~~building~~any onpotential ~~our~~future ~~capabilities in water (“FY2016 Restructuring Plan”)~~lawsuits. InA ~~FY2018,~~preliminary weinjunction ~~have~~could ~~incurred~~delay ~~($0.2)~~or ~~million~~jeopardize ~~and~~the ~~$1.1~~completion ~~million~~ of ~~restructuring expenses for~~ the ~~three~~merger, and ~~nine~~an ~~months~~adverse ~~ended~~judgment ~~October~~granting ~~31,~~permanent ~~2017,~~injunctive ~~respectively.~~relief ~~The~~could ~~FY2016~~indefinitely ~~Restructuring~~enjoin ~~Plan~~the ~~costs~~completion ~~for~~of the ~~three~~merger. Layne and ~~nine~~Granite ~~months~~believe ~~ended~~that ~~October~~the ~~31,~~lawsuits ~~2017~~are ~~related~~without ~~primarily~~merit toand ~~our~~intend ~~Mineral Services segment. We estimate remaining amounts~~ to bedefend ~~incurred~~vigorously ~~for~~against the ~~FY2016~~lawsuits ~~Restructuring~~and ~~Plan~~any toother befuture ~~less~~lawsuits ~~than~~challenging ~~$0.4~~the ~~million~~transaction.

13. Restructuring Costs

During the second quarter of FY2017, we initiated a plan to reduce costs and improve profitability in our Water Resources segment (“Water Resources Business Performance Initiative”). The Water Resources Business Performance Initiative involves cost rationalization, increased standardization of functions such as sales, pricing and estimation, disposal of underutilized assets, and process improvements to drive efficiencies. We recorded $1.1 million in restructuring costs related to the Water Resources Business Performance Initiative for the three months ended April 30, 2018, primarily for consulting fees. We estimate that the remaining amounts to be incurred for the Water Resources Business Performance Initiative are approximately $1.1 million.

During the three months ended April 30, 2018, we continued the implementation of our FY2016 Restructuring Plan, which involves the exit of our operations in Africa and Australia and other actions to support our strategic focus in simplifying the business and building upon our capabilities in water (“FY2016 Restructuring Plan”). In FY2019, we have incurred costs supporting this strategic focus, recognizing $0.4 million of restructuring expenses for the three months ended April 30, 2018. The FY2016 Restructuring Plan costs for the three months ended April 30, 2018 related primarily to our Mineral Services segment. We estimate that the remaining amounts to be incurred for the FY2016 Restructuring Plan are approximately $0.1 million.

During the three months ended April 30, 2018, we incurred cost associated with the pending merger with Granite of $1.3 million. We estimate that the remaining amounts to be incurred for merger related costs are approximately $0.1 million.

The following table summarizes the carrying amount of the accrual for the restructuring plans discussed above:

	Severance
	and other
	personnel-
	related
(in thousands)	costs			Other			Total
Balance at January 31, 2017	$	669		$	170		$	839
Balance at January 31, 2018	$	641		$	1,070		$	1,711
Restructuring Costs
Water Resources Business Performance Initiative		~~666~~75			~~450~~1,018			1,~~116~~093
FY2016 Restructuring Plan		93—			~~999~~420			~~1,092~~420
Total restructuring costs		759			1,449			2,208
Pending Merger Related Costs		—			1,293			1,293
Cash expenditures		(856	)		(1,334	)		(2,190	)
Total restructuring costs		75			2,731			2,806
Balance at October 31, 2017	$	572		$	285		$	857
Cash expenditures		(327	)		(2,440	)		(2,767	)
Balance at April 30, 2018	$	389		$	1,361		$	1,750

22 14. Pending Merger

As discussed in Note 20 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2018, on February 13, 2018, we entered into a definitive agreement whereby Granite will acquire all of the outstanding shares of Layne in a stock-for-stock transaction with each share of Layne common stock exchanged for 0.27 shares of Granite common stock. The transaction is subject to the approval by Layne’s shareholders and other customary closing conditions. A special meeting of Layne shareholders to approve the transaction is scheduled for June 13, 2018. There is no impact in these first quarter of FY2019 Condensed Consolidated Financial Statements and Notes from this pending transaction other than merger related costs of $1.3 million included in restructuring costs.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Language Regarding Forward-Looking Statements

This Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. Such statements may include, but are not limited to, statements of plans and objectives, statements of future economic performance and statements of assumptions underlying such statements, and statements of management’s intentions, hopes, beliefs, expectations or predictions of the future. Forward-looking statements can often be identified by the use of forward-looking terminology, such as “should,” “intended,” “continue,” “believe,” “may,” “hope,” “anticipate,” “goal,” “forecast,” “plan,” “estimate” and similar words or phrases that convey the uncertainty of future events or outcomes. ~~Such~~It is uncertain whether any of the events anticipated by the forward-looking statements ~~are~~will ~~based~~transpire or occur, or if any of them do, what impact they will have on ~~current~~the ~~expectations~~results of operations and ~~are~~financial ~~subject~~condition of Layne and Granite as a combined company or the price of Layne’s or Granite’s common stock prior to the proposed merger, or Granite’s common stock following the proposed merger. These forward-looking statements involve certain risks, and uncertainties ~~and~~that ~~assumptions~~could cause actual results to differ materially from those indicated in such forward-looking statements, including but not limited to: failure to obtain stockholder approval in a timely manner or otherwise; failure to satisfy other closing conditions to the proposed merger; risks that Layne will not be integrated successfully or that Granite will not realize estimated cost savings, synergies and growth or that such benefits may take longer to realize than expected; failure to realize anticipated benefits from Layne’s operations; risks relating to unanticipated costs of integration; reductions in customer spending, or a slowdown in customer payments; unanticipated changes relating to competitive factors in the industry in which Layne and Granite participate; ability to hire and retain key personnel; ability to successfully integrate Layne’s businesses; the potential impact of announcement or consummation of the proposed merger on relationships with third parties, including customers, employees and competitors; ability to attract new customers and retain existing customers in the manner anticipated; reliance on and integration of information technology systems; changes in legislation or governmental regulations affecting the companies; international, national or local economic, social or political conditions that could adversely affect the companies or their customers; conditions in the credit markets; risks associated with assumptions the parties make in connection with the parties’ critical accounting estimates and legal proceedings; estimates and assumptions regarding our strategic direction and business strategy,; the timely and effective execution of our turnaround strategy for Water Resources,; the ~~continuing~~extent and timing of a recovery in the mining industry,; prevailing prices for various commodities,; the timing and extent of future oil and gas drilling and production in the Delaware Basin,; longer term weather patterns,; unanticipated slowdowns in our major markets, the availability of credit, the ~~availability~~risks ofand ~~equity~~uncertainties ornormally ~~debt~~incident ~~capital~~to ~~needed~~our ~~for~~infrastructure ~~our~~services ~~business~~industries, ~~including~~the impact of competition, the ~~refinancing~~effectiveness of ~~our~~operational ~~existing~~changes ~~indebtedness~~expected asto itreduce ~~matures~~operating orexpenses ~~accelerates~~and increase efficiency, productivity and profitability, the ~~risks~~availability ~~and~~of ~~uncertainties~~equity ~~normally~~or ~~incident~~debt tocapital ~~our~~needed ~~infrastructure~~for ~~services~~our ~~industries~~business, including the ~~impact~~refinancing of ~~competition~~our existing indebtedness as it matures, worldwide economic and political conditions and foreign currency fluctuations that may affect our results of operations. ~~Should~~Additional ~~one~~factors orthat ~~more~~may ofcause ~~these~~results ~~risks~~to ordiffer ~~uncertainties~~materially ~~materialize,~~from orthose ~~should~~described ~~underlying~~in ~~assumptions~~the ~~prove~~forward-looking ~~incorrect,~~statements ~~actual~~are ~~results~~set ~~may~~forth ~~vary~~in ~~materially~~our reports and ~~adversely~~other ~~from~~filings ~~those~~made ~~anticipated,~~with ~~estimated~~the orSecurities ~~projected. Please~~and ~~see~~Exchange ~~Part~~Commission I,(the ~~Item 1A~~“SEC”), ~~Risk~~which ~~Factors~~are inavailable ~~our~~at ~~Annual~~the ~~Report~~SEC’s ~~for~~website anat ~~additional discussion~~www.sec.gov. Many of the factors that will impact our risk factors are beyond our ability to control or predict. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially and adversely from those anticipated, estimated or projected. These forward-looking statements are made as of the date of this filing,. ~~and~~Neither weLayne ~~assume~~nor noGranite undertakes any obligation to update any such forward-looking statements or to ~~update~~reflect ~~the~~any ~~reasons~~new ~~why~~information, ~~actual~~subsequent ~~results~~events ~~could~~or ~~differ~~circumstances, ~~materially~~or ~~from~~otherwise, ~~those~~except ~~anticipated~~as inmay ~~such~~be ~~forward-looking~~required ~~statements~~by law.

Overview

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the related notes included in Part I, Item 1 in this Form 10-Q, as well as our consolidated financial statements included in the Annual Report. As used herein, phrases such as the “Company,” “we,” “our,” and “us” are intended to refer to Layne Christensen Company when used.

We are a global water management, infrastructure services and drilling company. We primarily operate in North America and Brazil. We manage and report our operations through three segments: Water Resources, Inliner and Mineral Services. ~~We have ownership interest in certain foreign affiliates operating in Latin America.~~ Our operations are cyclical and subject to seasonality. Drilling and infrastructure services activities and revenues tend to decrease ~~during~~in ~~the months of~~ November through January.

~~Recent~~Consolidated ~~Developments~~Results of Operations – Three Months Ended April 30, 2018 and 2017

OnWe ~~November~~account 1,for werevenue ~~entered~~in ~~into~~accordance ~~a long-term agreement~~ with ~~the~~ASC ~~Texas~~Topic ~~General~~606, ~~Land Office (~~“~~GLO”)~~Revenue ~~that~~from ~~provides~~Contracts ~~Layne~~ with ~~the~~Customers”, ~~exclusive~~which ~~right~~we toadopted ~~develop GLO non-potable water resources for use in oil and gas drilling and completion activities~~ on ~~approximately~~February 881,~~000~~ ~~acres~~2018. ~~interspersed~~As ~~across~~a ~~Reeves~~result ~~and~~of ~~Culberson~~adoption, ~~counties~~our inprior-period ~~the~~results ~~Delaware~~of ~~Basin~~operations ~~oil~~ and ~~gas~~backlog ~~producing~~have ~~region~~been ~~of Texas~~restated.

InRevenues ~~the~~increased ~~third~~3.3% ~~quarter~~to ~~FY2018~~$114.6 million, ~~Hurricane~~for ~~Irma~~the ~~made~~three ~~landfall~~months inended ~~Texas~~April ~~and~~30, ~~Florida~~2018, ~~and~~from ~~some~~$110.9 ~~neighboring~~million ~~states.~~for ~~Due~~the ~~primarily~~same toperiod ~~the~~last ~~impact~~year, ~~the~~primarily ~~storms~~due ~~had~~to onan ~~some~~increase ofin ~~our~~Mineral ~~customers~~Services’ ~~and~~exploration ~~employees~~drilling activity, ~~including~~notably ~~our~~in ~~limited~~the ~~access~~western toU.S. ~~some~~and ~~job~~Brazil ~~sites,~~and wein ~~experienced~~Inliner ~~work~~partially ~~delays~~offset onby ~~certain~~reduced ~~Inliner~~Water ~~projects~~Resources’ activity.

~~During~~Cost ~~the~~of ~~second~~revenues ~~quarter~~(exclusive ~~FY2018,~~of wedepreciation ~~completed~~and ~~our~~amortization) ~~initial~~decreased ~~water~~$0.2 ~~pipeline~~million, ~~infrastructure~~to ~~system for our new Water Midstream business serving energy producers in the Delaware Basin in West Texas~~$86.0 ~~Our~~million ~~new Water Midstream business is anchored by nearly~~ (75.1~~,000~~% ~~acres~~ of ~~Company-owned,~~revenues) ~~water-producing~~for ~~land~~the ~~near~~three ~~Pecos,~~months ~~TX,~~ended ~~and~~April ~~consists of a high capacity 22-inch diameter pipeline of more than 20 miles in length~~30, ~~750~~2018,~~000~~ ~~barrels~~from of$86.3 ~~storage~~million ~~through~~(77.8% ~~two~~of ~~lined,~~revenues) ~~in-ground~~for ~~storage ponds near~~ the ~~water~~same ~~wells,~~period ~~and~~last ~~associated pump stations~~year. WeCost ~~have~~of ~~the~~revenues ~~ability~~as toa ~~deliver~~percentage ~~water~~of atrevenues ~~multiple~~for ~~points along~~ the ~~pipeline~~three ~~route.~~months ~~The~~ended ~~system~~April ~~has initial production and delivery capacity of 100~~30,~~000~~ ~~barrels~~2018 ~~per~~decreased ~~day of non-potable water, with capacity to support further anticipated expansion~~ from ~~both additional water sources and delivery points. The capital investment for~~ the ~~system,~~prior ~~including~~year ~~land~~primarily ~~and~~due ~~right~~to ofimproved ~~way~~project ~~costs,~~execution ~~was~~in ~~approximately~~Water ~~$18 million~~Resources.

~~During the first quarter FY2018~~Selling, wegeneral ~~sold~~and ~~our~~administrative ~~Heavy~~expenses ~~Civil~~decreased ~~business~~$0.5 ~~The operating results of the Heavy Civil business are presented as discontinued operations and~~million, asor ~~such~~2.9%, ~~have~~to ~~been~~$17.1 ~~excluded~~million ~~from~~for ~~continuing~~the ~~operations~~three ~~and~~months ~~segment~~ended ~~results~~April ~~for~~30, ~~all periods presented~~2018.

23Depreciation and amortization increased $0.3 million, or 4.3%, to $6.8 million for the three months ended April 30, 2018 primarily due to higher capital expenditures over the past year.

~~See~~Equity ~~Note~~in 9earnings of affiliates increased to $1.7 million for the ~~Condensed~~three ~~Consolidated~~months ~~Financial~~ended ~~Statements~~April ~~for~~30, ~~further~~2018, ~~discussion.~~as ~~The~~compared ~~sale~~to of$0.7 million during the ~~Heavy~~same ~~Civil~~period ~~business~~last ~~closed~~year ondue ~~April~~to ~~30,~~improved ~~2017~~revenues and margins by our affiliates.

~~Additionally,~~Restructuring ascosts ~~part~~ of ~~management’s~~$2.8 ~~continued~~million ~~analysis~~were inrecorded ~~connection~~for ~~with~~ the ~~Water~~three ~~Resources~~months ~~Business~~ended ~~Performance~~April ~~Initiative~~30, we2018, ~~determined~~compared ~~a better reflection of cost of revenues would be~~ to ~~include~~$0.4 ~~indirect~~million ~~project~~for ~~manager~~the ~~costs~~same ~~that~~period ~~historically~~last ~~have been presented in selling~~year, ~~general~~primarily ~~and~~related ~~administrative~~to ~~expenses. Indirect project manager~~ cost ~~are~~associated ~~included in cost of revenues beginning~~ with ~~the~~our ~~first~~Water ~~quarter~~Resources ofBusiness ~~FY2018,~~Performance ~~and~~Initiative ~~prior~~initiated ~~periods~~in ~~have been revised. For~~ the ~~three~~fiscal ~~and~~year ~~nine months~~ ended ~~October~~January 31, ~~2016,~~2017 ~~approximately $2.0 million~~ and ~~$6.7~~cost ~~million,~~related ~~respectively,~~to ofour ~~these~~pending ~~indirect~~merger ~~project~~with ~~manager costs are now included in cost of revenue~~Granite.

~~Consolidated~~Income ~~Results~~tax expense from continuing operations of ~~Operations~~$1.0 –million ~~Three~~was ~~Months~~recorded ~~Ended~~for ~~October~~the 31three months ended April 30, ~~2017~~2018, compared to $1.1 million for the same period last year. Current period tax expense is primarily related to income in Mexico and ~~2016~~withholding tax related to our dividends from our affiliates. We currently record no tax benefit on domestic deferred tax assets and certain foreign deferred tax assets. The effective tax rate for the three months ended April 30, 2018 was 25.2%, compared to (35.8%) for the same period last year. The difference between the effective tax rate and the statutory tax rate resulted primarily from a valuation allowance recorded during the period.

~~Revenues~~Net ~~increased~~loss ~~5.7%~~from todiscontinued operations of $~~127~~0.42 million, was recorded for the three months ended ~~October~~April 3130, ~~2017,~~2018 ~~from~~compared to $~~120~~19.65 million ~~for~~during the same period last year,. ~~due~~Prior toyear ~~increased~~loss ~~drilling~~relates ~~activity~~to ~~in Mineral Services, primarily in~~ the ~~western~~loss ~~U.S.~~on ~~and~~sale ~~Mexico,~~of ~~higher activity at Inliner and activity from~~ our ~~new~~Heavy ~~Water~~Civil ~~Midstream~~ business. ~~These increases were partially offset by Water Resources’ reduced drilling activity in the western and mid-western U.S. stemming from increased precipitation in the region.~~

~~Cost~~Segment ofOperating ~~revenues~~Results ~~(exclusive~~– ofThree ~~depreciation~~Months ~~and~~Ended ~~amortization)~~April ~~was 78.6% of revenues ($100.1 million) for the three months ended October 31~~30, ~~2017~~2018 and ~~80.5% of revenues ($97.1 million) for the same period last year. Cost of revenues as a percentage of revenues for the three months ended October 31,~~ 2017 ~~decreased from the prior year primarily in Water Resources due to better performance on projects.~~

Selling, general and administrative expenses increased $1.7 million, or 9.6%, to $19.3 million for the three months ended October 31, 2017, including an increase in unallocated corporate overhead costs of $1.3 million primarily as a result of an increase in incentive compensation expense.

Depreciation and amortization increased $0.3 million, or 4.7%, to $6.8 million for the three months ended October 31, 2017, primarily due to higher capital expenditures during the current year.

Equity in earnings of affiliates increased to $1.4 million for the three months ended October 31, 2017 compared to earnings of $0.2 million during the same period last year resulting from increased performance by our international affiliates.

Restructuring costs of $1.0 million were recorded for the three months ended October 31, 2017 compared to $1.7 million for the same period last year, primarily related to our Water Resources Business Performance Initiative initiated in FY2017.

Income tax expense from continuing operations of ($0.1) million was recorded for the three months ended October 31, 2017 compared to income tax expense of ($1.4) million for the same period last year. Current period tax expense is primarily related to taxes accrued on income earned in Mexico and withholding tax related to our dividends from our affiliates, offset by favorable resolutions of tax audits and statute of limitation expirations. We currently record no tax benefit on domestic deferred tax assets and certain foreign deferred tax assets. The decrease in tax expense in the current quarter versus the prior year was due to resolution of tax audits and statute of limitation expirations in the current year. The effective tax rate for the three months ended October 31, 2017 was (4.2%) compared to (43.5%) for the same period last year. The difference between the effective tax rate and the statutory tax rate resulted primarily from a valuation allowance recorded during the period on current year losses partially offset by favorable resolution of tax audits and statute of limitation expirations.

Segment Operating Results – Three Months Ended October 31, 2017 and 2016

Water Resources

	Three Months
	Three Months Ended April 30,
	Ended October 31,
(in thousands)	2018			2017			$ Change			% Change
(in thousands)	2017			2016			$ Change			% Change
Revenues	$	39,777		$	41,890		$	(2,113	)		(5.0	)	%
Revenues	$	45,902		$	49,939		$	(4,037	)		(8.1	)	%
Adjusted EBITDA		4,469			249			4,220		n/m
Adjusted EBITDA		2,082			(798	)		2,880		n/m
Adjusted EBITDA as a percentage of revenues		11.2	%		0.6	%	n/m			n/m
Adjusted EBITDA as a percentage of revenues		4.5	%		-1.6	%	n/m			n/m

n/m – not meaningful

Revenues for Water Resources decreased during the three months ended October 31, 2017 compared to the prior year period due to reduced activity primarily in agricultural drilling projects in the western and mid-western U.S. stemming from increased precipitation in the region. The decline was partially offset by activity from our new Water Midstream business.29

24Revenues for Water Resources decreased during the three months ended April 30, 2018 compared to the prior year period primarily due to office closures during our last fiscal year related to the Water Resources Business Performance Initiative and lower activity levels in our collector well business. The decrease was partially offset by revenues from our Water Midstream business which began during the three months ended July 31, 2017.

The increase in Adjusted EBITDA for the three months ended ~~October~~April 3130, ~~2017~~2018 reflects improved ~~compared~~project toexecution, ~~the~~a ~~prior~~reduction ~~year~~in ~~with~~general ~~reduced~~and ~~losses~~administrative ~~from~~costs ~~injection~~as ~~well~~a ~~drilling~~result ~~and~~of ~~increased~~the ~~activity~~Water ~~from~~Resources Business Performance Initiative and the contribution our Water Midstream business. ~~Partially~~Our ~~offsetting~~Hermosa ~~these~~pipeline ~~improvements~~system ~~was~~within ~~reduced~~our ~~drilling~~Water ~~activity~~Midstream business generated $1.3 million in ~~the~~EBITDA ~~western~~in ~~U.S.~~first ~~from~~quarter ~~increased~~FY2019, ~~precipitation~~consistent with EBITDA performance in ~~the~~our ~~region.~~fourth quarter of FY2018.

Inliner

	Three Months
	Three Months Ended April 30,
	Ended October 31,
(in thousands)	2018			2017			$ Change			% Change
(in thousands)	2017			2016			$ Change			% Change
Revenues	$	48,888		$	47,067		$	1,821			3.9		%
Revenues	$	54,623		$	50,517		$	4,106			8.1		%
Adjusted EBITDA		8,155			7,732			423			5.5
Adjusted EBITDA		8,317			9,628			(1,311	)		(13.6	)
Adjusted EBITDA as a percentage of revenues		16.7	%		16.4	%	n/m			n/m
Adjusted EBITDA as a percentage of revenues		15.2	%		19.1	%	n/m			n/m

n/m – not meaningful

Revenues for Inliner ~~were~~increased ~~higher~~during bythe ~~8.1%~~three ~~compared~~months toended ~~the~~April ~~prior~~30, ~~year~~2018, ~~period~~primarily due to higher levels of subcontracted work and increased activity levels. ~~Delays~~for ~~resulting~~UV ~~from~~liners. ~~hurricanes~~These inincreases ~~Texas~~were ~~and~~partially ~~Florida~~offset ~~reduced~~by ~~revenues~~lower activity levels in the ~~current~~eastern ~~quarter~~region bydue ~~approximately~~to $1weather ~~million~~delays.

The ~~decrease~~increase in Adjusted EBITDA ~~was~~for ~~primarily~~the ~~attributable~~Inliner tosegment ~~margin~~compared ~~pressure~~to ~~from~~the ~~certain~~prior ~~jobs~~year ~~and~~period ~~the~~reflects ~~impact~~increased ofactivity ~~revenue~~levels ~~delays~~discussed ~~from~~above ~~hurricane activity~~ in the current quarter~~. The~~ ~~prior~~as ~~year~~compared ~~period~~to ~~included~~the ~~favorable~~prior ~~margins~~year ~~on a number of jobs~~period.

Mineral Services

	Three Months
	Three Months Ended April 30,
	Ended October 31,
(in thousands)	2018			2017			$ Change			% Change
(in thousands)	2017			2016			$ Change			% Change
Revenues	$	25,886		$	21,956		$	3,930			17.9		%
Revenues	$	26,898		$	20,188		$	6,710			33.2		%
Adjusted EBITDA		4,811			5,026			(215	)		(4.3	)
Adjusted EBITDA		5,202			2,701			2,501			92.6
Adjusted EBITDA as a percentage of revenues		18.6	%		22.9	%	n/m			n/m
Adjusted EBITDA as a percentage of revenues		19.3	%		13.4	%	n/m			n/m

n/m – not meaningful

Revenues for Mineral Services increased ~~33.2%~~ from the prior year period due to increased drilling activity, ~~related~~primarily ~~to the minerals market recovery~~ in the western U.S. and ~~Mexico~~Brazil.

~~The increase in~~ Adjusted EBITDA for the three months ended ~~October~~April 3130, ~~2017~~2018 decreased slightly compared to the prior year period ~~was~~ primarily due to ~~increased~~lower ~~activity~~dividends ~~and~~received ~~profitability~~from inour ~~the~~Latin ~~western~~American Uaffiliates.~~S. with higher utilization within the core drilling business, and increased mine water management work.~~

Unallocated Corporate Expenses

Unallocated corporate expenses reflected in our Adjusted EBITDA were $54.78 million for the three months ended ~~October~~April 3130, ~~2017~~2018, compared to $4.50 million for the same period last year due primarily to favorable reserve adjustments during the prior year period. ~~The~~Unallocated ~~increase~~corporate ~~was~~expenses ~~primarily~~for ~~due~~the tocurrent anperiod ~~increase~~declined inby ~~incentive~~$0.4 ~~compensation~~million ~~expense~~sequentially ~~based~~from onthe ~~improved~~prior ~~operating~~quarter ~~performance~~due to continuing cost reduction efforts and reduced corporate office headcount.

Consolidated Results of Operations – Nine Months Ended October 31, 2017 and 2016

Revenues increased 0.1% to $365.1 million, for the nine months ended October 31, 2017, from $364.9 million for the same period last year, primarily due to increased drilling activity in Mineral Services in the western U.S. and Mexico and overall increased activity levels in Inliner. This increase was partially offset by Water Resources’ reduced drilling activity primarily in the western U.S. stemming from increased precipitation in the region and a decline in injection well activity.

Cost of revenues (exclusive of depreciation and amortization) was 78.1% of revenues ($285.3 million) for the nine months ended October 31, 2017 and 80.8% of revenues ($294.7 million) for the same period last year. Cost of revenues as a percentage of revenues for the nine months ended October 31, 2017 decreased from the prior year primarily resulting from improved margins in Mineral Services with the increase in drilling activity and in Water Resources due to better performance on projects with less work site execution issues.

Selling, general and administrative expenses decreased $1.3 million, or 2.2%, to $56.0 million for the nine months ended October 31, 2017. The prior year included a $2.2 million value added tax recovery in Mineral Services. Excluding the tax recovery in the prior year, selling, general and administrative expenses decreased $3.5 million reflecting reduced unallocated corporate overhead costs of $3.5 million, which included lower legal and professional fees and compensation related expenses partially offset by an increase in incentive compensation expense related to improved operating performance.

Depreciation and amortization increased $0.7 million, or 3.6%, to $19.7 million for the nine months ended October 31, 2017 primarily due to higher capital expenditures over the past year.

Equity in earnings of affiliates increased $1.2 million to $3.1 million for the nine months ended October 31, 2017 compared to the same period last year resulting from increased performance by our international affiliates.

Restructuring costs of $2.2 million were recorded for the nine months ended October 31, 2017 compared to $2.8 million for the same period last year, primarily related to finalizing tax issues and exit costs in Africa and Australia and costs associated with our Water Resources Business Performance Initiative initiated in FY2017.

Income tax expense from continuing operations of ($1.7) million was recorded for the nine months ended October 31, 2017 compared to ($1.8) million for the same period last year. Current period tax expense is primarily related to taxes accrued on income earned in Mexico and withholding tax related to our dividends from affiliates. We currently record no tax benefit on domestic deferred tax assets and certain foreign deferred tax assets. The effective tax rate for the nine months ended October 31, 2017 was (30.0%) compared to (11.3%) for the same period last year. The difference between the effective tax rate and the statutory tax rate resulted primarily from a valuation allowance recorded during the period on current year losses.

Net loss from discontinued operations of $22.3 million was recorded for the nine months ended October 31, 2017, primarily related to the loss on sale of our Heavy Civil business.

Segment Operating Results – Nine Months Ended October 31, 2017 and 2016

Water Resources

	Nine Months
	Ended October 31,
(in thousands)	2017			2016			$ Change			% Change
Revenues	$	132,875		$	168,360		$	(35,485	)		(21.1	)	%
Adjusted EBITDA		3,942			5,064			(1,122	)		(22.2	)
Adjusted EBITDA as a percentage of revenues		3.0	%		3.0	%	n/m			n/m

n/m – not meaningful

Revenues for Water Resources decreased during the nine months ended October 31, 2017 primarily due to reduced activity in agricultural drilling projects in the western U.S. stemming from increased precipitation in the region and a decline in injection well activity.

The decrease in Adjusted EBITDA for the nine months ended October 31, 2017 primarily reflects reduced drilling activity in the western U.S. and better performance on projects with less project execution issues.

Inliner

	Nine Months
	Ended October 31,
(in thousands)	2017			2016			$ Change		% Change
Revenues	$	155,993		$	151,027		$	4,966		3.3	%
Adjusted EBITDA		25,310			24,979			331		1.3
Adjusted EBITDA as a percentage of revenues		16.2	%		16.5	%	n/m		n/m

n/m – not meaningful

Revenues for Inliner during the nine months ended October 31, 2017 were 3.3% higher compared to the prior year period due to overall increased activity levels.

Adjusted EBITDA remained flat for the Inliner segment compared to the prior year period.

Mineral Services

	Nine Months
	Ended October 31,
(in thousands)	2017			2016			$ Change		% Change
Revenues	$	76,222		$	45,761		$	30,461		66.6	%
Adjusted EBITDA		15,412			6,815			8,597	n/m
Adjusted EBITDA as a percentage of revenues		20.2	%		14.9	%	n/m		n/m

n/m – not meaningful

Revenues for Mineral Services increased 66.6% from the prior year period due to increased drilling activity from business in the western U.S. and Mexico.

The increase in Adjusted EBITDA for the nine months ended October 31, 2017 was primarily due to increased activity and profitability in the western U.S. and Mexico compared to the prior year period. Prior year Adjusted EBITDA included a $2.2 million value added tax recovery.

Unallocated Corporate Expenses

Unallocated corporate expenses reflected in our Adjusted EBITDA were $15.1 million for the nine months ended October 31, 2017 compared to $18.3 million for the same period last year. The improvement was primarily due to a reduction in legal and professional fees and consulting fees partially offset by an increase in incentive compensation expense.

Backlog Analysis

Backlog represents the dollar amount of revenues we expect to recognize in the future from contracts that have been awarded. We include a project in backlog at such time as contracts are executed or notices to proceed are obtained, depending on terms of the contract. Backlog amounts include anticipated revenues associated with the original contract amounts, executed change orders, and any claims that may be outstanding with customers for which recovery is considered probable. The backlog figures are subject to modifications, alterations or cancellation provisions contained in the various contracts. Historically, those provisions have not had a material effect on the Condensed Consolidated Financial Statements.

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~~Our~~contract. ~~backlog~~Backlog atamounts ~~October~~include 31anticipated revenues associated with the original contract amounts, ~~2017~~executed change orders, ~~was~~and ~~$172~~any claims that may be outstanding with customers for which recovery is considered probable.1 ~~million~~The ~~compared~~backlog figures are subject to ~~$166.6~~modifications, ~~million~~alterations ator ~~January 31~~cancellation provisions contained in the various contracts. Historically, ~~2017~~those ~~and~~provisions ~~are~~have ~~reasonably~~not ~~expected~~had toa bematerial ~~completed~~effect ~~during~~on the ~~next~~Condensed ~~twelve~~Consolidated ~~months~~Financial Statements.

					Revenues Recognized
	Backlog at		New Business		during the nine months ended		Backlog at		Backlog at
(in millions)	January 31, 2017		Awarded(1)		October 31, 2017		October 31, 2017		October 31, 2016
Water Resources	$	49.2	$	147.1	$	132.9	$	63.4	$	59.9
Inliner		117.4		147.3		156.0		108.7		112.4
Total	$	166.6	$	294.4	$	288.9	$	172.1	$	172.3

Our backlog at April 30, 2018, was 163.1 million compared to $178.6 million at January 31, 2018. We expect to recognize approximately 88% of our remaining performance obligations as revenue by 2019, an additional 10% by 2020 and the balance thereafter.

					Revenues Recognized
	Backlog at		New Business		during the three months ended		Backlog at		Backlog at
(in millions)	January 31, 2018		Awarded⁽¹⁾		April 30, 2018		April 30, 2018		April 30, 2017
Water Resources	$	47.9	$	33.3	$	39.8	$	41.4	$	62.3
Inliner		130.7		39.9		48.9		121.7		109.9
Total	$	178.6	$	73.2	$	88.7	$	163.1	$	172.2

(1)	New business awarded consists of the original contract price of projects added to backlog plus or minus subsequent changes to the estimated total contract price of existing contracts.

Liquidity and Capital Resources

Our primary source of liquidity is cash flow generated from operations, ~~with~~supplemented ~~the~~by ~~ability to supplement cash flow with~~ borrowings under our credit facilities, or issuances of debt, and sales of assets. Our cash flow is affected by prices of raw materials, demand for our services, ~~weather and seasonal conditions,~~ operational risks, volatility in commodity prices, industry and economic conditions, and conditions in the global markets.

As of ~~October~~April 3130, ~~2017~~2018, our total liquidity was $~~101~~93.62 million, consisting of Excess Availability under our asset-based credit facility and total cash and cash equivalents. Our cash and cash equivalents as of ~~October~~April 3130, ~~2017~~2018, were $2617.18 million, compared to $6932.0 million and $7254.76 million as of January 31, ~~2017~~2018 and ~~October~~April 3130, ~~2016~~2017, respectively. ~~The decrease in cash primarily reflects investment during the first three quarters of the year in our Water Midstream business.~~ Of our cash and cash equivalents, amounts held by foreign subsidiaries as of ~~October~~April 3130, ~~2017~~2018, January 31, ~~2017~~2018 and ~~October~~April 3130, ~~2016~~2017 were $64.08 million, $85.28 million and $7.4.9 million, respectively. No amounts held by foreign subsidiaries at ~~October~~April 3130, ~~2017~~2018 could be subject to repatriation restrictions. If ~~the~~ cash held at our foreign subsidiaries is repatriated to the U.S., weit ~~would~~may be ~~required~~subject to ~~accrue~~withholding ~~and pay U.S. income~~ taxes onin ~~these~~the ~~funds,~~jurisdiction ~~based~~where on the ~~unremitted~~subsidiary ~~amount~~is incorporated. AsThe aremittance ~~consequence~~will ofnot ~~our~~be ~~exit~~subject ~~from operations in Africa and Australia, we intend~~ to ~~bring~~additional ~~back any remaining residual cash to the~~ U.S. ~~through intercompany debt repayment~~taxation. WeAs ~~believe~~we ~~the~~continue ~~cash~~to ~~remitted~~wind ~~from~~down our subsidiaries in Africa and Australia, ~~would~~we ~~not~~expect ~~result~~that inany aremaining ~~repatriation~~residual ofcash ~~earnings and therefore~~ will ~~not~~be ~~result~~treated inas arepayment ~~U.S. tax liability. With respect to our remaining foreign subsidiaries in Mexico, Canada and South America, other than the periodic payment~~ of ~~dividends~~intercompany ~~by these subsidiaries, it is our intention to permanently reinvest their earnings and our current plans do not demonstrate a need to repatriate any earnings to fund our U~~loans.S. ~~operations.~~

Our working capital ~~was $60.3 million~~ as of ~~October~~April 3130, ~~2017~~2018 was ($1.4) million and ($~~105~~4.58) million as of January 31, ~~2017~~2018. Adjusted Working Capital (working capital excluding cash and cash equivalents of $2617.18 million at ~~October~~April 3130, ~~2017~~2018 and $6932.0 million at January 31, ~~2017~~2018), ~~decreased~~was ~~slightly by~~ ($219.32) million as of April 30, 2018 compared to ($3436.28) million as of ~~October~~January 31, ~~2017~~2018. ~~from~~Working capital is negative primarily due to inclusion of our current maturities of our long-term debt of $3668.50 million asand of$67.3 million for the period ended April 30, 2018 and January 31, ~~2017~~2018 respectively. We use Adjusted Working Capital to assist in assessing performance and liquidity of the organization.

Cash Flows

~~The~~For the fiscal year ended April 30, 2018, the cash used in operating activities primarily reflected our net ~~loss~~income, adjusted for non-cash items and changes in components of our working capital. Fluctuations in working capital are normal in our business. ~~and~~Working ~~are~~capital is impacted by the size of our projects, timing of project start dates and completion dates and the achievement of billing milestones on backlog as we complete certain phases of the project.

Cash used in operating activities was ($714.96) million for the ~~nine~~three months ended ~~October~~April 3130, ~~2017~~2018, compared to ~~cash provided by operating activities of~~ ($119.8) million for the ~~nine~~three months ended ~~October~~April 3130, ~~2016~~2017. ~~With~~The ~~the~~primary ~~increase~~impact inis ~~business~~the ~~activity~~change ~~levels,~~in working capital ~~increased~~items ~~during~~with ~~the~~a ~~current~~use ~~year~~of bycash of $2513.45 million, ~~primarily~~ in ~~accounts~~the ~~receivable~~prior ~~heavily~~year ~~weighted~~compared ~~in Mineral Services due~~ to ~~increase~~a inuse ~~activity,~~of ~~and~~cash ~~costs~~of ~~and~~$20.3 ~~estimated~~million ~~earnings~~ in ~~excess~~the ofcurrent ~~billings on uncompleted contracts~~year. ~~Partially~~This ~~offsetting~~increase ~~our~~in ~~use of~~ cash used for working capital ~~needs~~items ~~was~~is areflective ~~lower net loss, excluding non-cash items~~ of ~~$6.7~~the ~~million,~~overall ~~due~~increase ~~to lower unallocated corporate expenses combined with improved earnings~~ in ~~Inliner~~operating ~~and Mineral Services~~activity.

Cash ~~used~~provided inby investing activities was ($351.2)9 million for the ~~nine~~three months ended ~~October~~April 3130, ~~2017~~2018, compared to cash used of ($4.56) million for the ~~nine~~three months ended ~~October~~April 3130, ~~2016~~2017. The ~~increase~~change ~~in cash used of $30.6 million compared to the prior year period~~ was primarily ~~related~~due to higher ~~capital~~proceeds ~~expenditures~~from ofthe ~~$25.7~~sale ~~million~~of tofixed ~~implement~~assets ~~an accounting system upgrade~~ and ~~complete~~ a ~~project~~decrease ~~within~~in ~~our~~capital ~~Water~~expenditures ~~Midstream~~compared ~~business~~to ~~(see~~the ~~Recent~~prior ~~Developments~~year ~~in this Item 2 above)~~period, partially offset by proceeds from the sale of the Heavy Civil business during the ~~nine~~three months ended ~~October~~April 3130, 2017 ~~of $3~~.5 ~~million.~~

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Financing Agreements

Below is a summary of certain provisions of our credit facility and debt instruments. For more information about our indebtedness, see Note 34 to the Condensed Consolidated Financial Statements and Note 8 to the Consolidated Financial Statements included in our Annual Report.

4.25% Convertible Senior Notes due 2018. We have outstanding $69.5 million in aggregate principal amount of our 4.25% Convertible Notes as of ~~October~~April 3130, ~~2017~~2018. The 4.25% Convertible Notes bear interest payable semi-annually in arrears in cash on May 15 and November 15 of each year. The 4.25% Convertible Notes mature on November 15, 2018, unless earlier repurchased, redeemed or converted. ~~The~~Beginning May 15, 2018, the 4.25% Convertible Notes are ~~contingently~~ convertible, at the option of the holders, ~~into consideration consisting of, at our election, cash, shares of our common stock or a combination of cash and shares of our common stock (and cash in lieu of fractional shares)~~ until the close of business on the scheduled trading day immediately preceding ~~May~~November 15, 2018.

The initial conversion rate was 43.6072 shares of our common stock per $1,000 principal amount of 4.25% Convertible Notes (which is equivalent to an initial conversion price of approximately $22.93 per share of our common stock). The conversion rate will be subject to adjustment upon the occurrence of certain events. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with a “fundamental change” (as defined in our 4.25% Convertible Notes Indenture) or our call of the 4.25% Convertible Notes for redemption. Beginning May 15, 2018, all conversions will be settled in cash.

On and after November 15, 2016, and prior to the maturity date, we may redeem all, but not less than all, of the 4.25% Convertible Notes for cash if the sale price of our common stock equals or exceeds 130% of the applicable calculated conversion price for a specified time period ending on the trading day immediately prior to the date we deliver notice of the redemption. The redemption price will equal 100% of the principal amount of the 4.25% Convertible Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the redemption date. In addition, upon the occurrence of a fundamental change (as defined in ~~the~~our 4.25% Convertible Notes Indenture), holders of the 4.25% Convertible Notes will have the right, at their option, to require us to repurchase their 4.25% Convertible Notes in cash at a price equal to 100% of the principal amount of the 4.25% Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

8.0% Senior Secured Second Lien Convertible Notes. We have outstanding $99.9 million in aggregate principal amount of our 8.0% Convertible Notes as of ~~October~~April 3130, ~~2017~~2018. The 8.0% Convertible Notes, issued pursuant to the 8.0% Convertible Notes Indenture, bear interest at a rate of 8.0% per annum, payable semi-annually in arrears on May 1 and November 1 of each year. The 8.0% Convertible Notes will mature on May 1, 2019; provided, however, that, unless all of the 4.25% Convertible Notes (or any permitted refinancing indebtedness in respect thereof) have been redeemed, repurchased, otherwise retired, discharged in accordance with their terms or converted into our common stock, or have been effectively discharged, in each case on or prior to August 15, 2018 or the scheduled maturity date of the 4.25% Convertible Notes (or any permitted refinancing indebtedness incurred in respect thereof) is extended to a date that is after October 15, 2019, the 8.0% Convertible Notes will mature on August 15, 2018.

The 8.0% Convertible Notes are convertible, at the option of the holders, into consideration consisting of shares of our common stock (and cash in lieu of fractional shares) until the close of business on the scheduled trading day immediately preceding the maturity date. No holder will have the right to convert any 8.0% Convertible Notes into shares of common stock to the extent that the conversion would cause that holder to beneficially own more than 9.9% of the shares of our common stock then outstanding after giving effect to the proposed conversion.

The initial conversion rate was 85.4701 shares of our common stock per $1,000 principal amount of 8.0% Convertible Notes (equivalent to an initial conversion price of approximately $11.70 per share of our common stock). The conversion rate is subject to adjustment upon the occurrence of certain events. In addition, we may be obligated to increase the conversion rate for any conversion that occurs in connection with a “fundamental change” (as defined in our 8.0% Convertible Notes Indenture) or our call of the 8.0% Convertible Notes for redemption.

At any time prior to the maturity date, we may redeem for cash all, but not less than all, of the 8.0% Convertible Notes; provided, however, that we may not redeem the 8.0% Convertible Notes on a redemption date that is outside an Open Redemption Period (as defined in the 8.0% Convertible Notes Indenture) unless the last reported sale price of our common stock equals or exceeds 140% of the conversion price of the 8.0% Convertible Notes in effect on each of at least 20 trading days during the 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we deliver the redemption notice.

In addition, upon the occurrence of a “fundamental change” (as defined in the 8.0% Convertible Notes Indenture), holders of the 8.0% Convertible Notes will have the right, at their option, to require us to repurchase their 8.0% Convertible Notes in cash at a price equal to 100% of the principal amount of the 8.0% Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Asset-based revolving credit facility. As of ~~October~~April 3130, ~~2017~~2018, availability under our asset-based credit facility was $100.0 million, with outstanding letters of credit amounting to $24.56 million, leaving Excess Availability of approximately $75.54 million.

2932

The asset-based credit facility is guaranteed by our direct and indirectly wholly-owned domestic subsidiaries, subject to certain exceptions described in the asset-based credit facility. The obligations under the asset-based credit facility are secured by a lien on substantially all of our assets and the assets of the guarantor subsidiaries, subject to certain exceptions described in the asset-based credit facility, including a pledge of up to 65.0% of the equity interest of our first tier foreign subsidiaries.

If Excess Availability is less than the greater of 17.5% of Total Availability or $17.5 million for more than one business day, then a Covenant Compliance Period (as defined in the asset-based credit facility agreement) will exist until Excess Availability has been equal to or greater than the greater of 17.5% of the Total Availability or $17.5 million for a period of 30 consecutive days. We must maintain a minimum fixed charge coverage ratio of not less than 1.0 to 1.0 and a maximum first lien leverage ratio of not greater than 5.0 to 1.0 for the four fiscal quarters ended immediately preceding any Covenant Compliance Period and for any four fiscal quarter period ending during a Covenant Compliance Period. We would not have been in compliance with the fixed charge coverage ratio had we been in a Covenant Compliance period during any fiscal quarter ending from ~~January~~July 31, 2015 through ~~October~~ 31April 30, ~~2017~~2018.

The asset-based credit facility also contains a subjective acceleration clause that can be triggered if the lenders determine that we have experienced a material adverse change. If triggered by the lenders, this clause would create an Event of Default which in turn would permit the lenders to accelerate repayment of outstanding obligations.

In general, during a Covenant Compliance Period or if an Event of Default has occurred and is continuing, all of our funds received on a daily basis will be applied to reduce amounts owing under the asset-based credit facility. Based on current projections, we do not anticipate being in a Covenant Compliance Period during the next twelve months.

InOn ~~August~~March ~~2014~~30, ~~the FASB issued ASU 2014-15~~2018, ~~“Presentation~~our ~~of Financial Statements~~asset-~~Going~~based ~~Concern~~credit ~~(Subtopic~~facility ~~205-40):~~agreement ~~Disclosure~~was ofamended ~~Uncertainties about an Entity’s Ability~~ to ~~Continue~~revise asthe aacceleration ~~Going~~provision ~~Concern”.~~included ~~Under~~in ~~this~~the ~~standard,~~definition ~~management~~of ~~must~~Maturity ~~evaluate~~Date ~~whether~~to ~~there~~be ~~are~~July ~~conditions or events~~16, ~~considered~~2018 inif ~~the~~we ~~aggregate,~~have ~~that~~not ~~raise~~delivered ~~substantial~~to ~~doubt~~the ~~about~~administrative anagent ~~entity’s~~for ~~ability~~the toasset-based ~~continue~~credit asfacility aevidence ~~going~~by ~~concern~~July ~~within~~15, ~~one~~2018 ~~year after the date~~ that the ~~financial statements are issued~~4.25% ~~This~~Convertible ~~evaluation~~Notes ~~initially does not take into consideration the potential mitigating effect of management’s plans that~~ have ~~not~~ been ~~fully~~effectively ~~implemented~~discharged aswith of the ~~date~~proceeds ~~the~~from ~~financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether~~ the ~~mitigating~~issuance ~~effect~~ of ~~its~~the ~~plans sufficiently alleviates substantial doubt about an entity’s ability to continue as a going concern~~11.0% ~~The~~Unsecured ~~mitigating~~Notes ~~effect~~or of(b) ~~management’s~~May ~~plans~~15, ~~however,~~2018 ~~is only considered~~ if ~~both~~ (1i) ~~it is probable that~~ the ~~plans~~issuance ~~will~~of ~~be effectively implemented within one year after~~ the ~~date~~11.0% ~~that~~Unsecured ~~the~~Notes ~~financial~~is ~~statements~~cancelled ~~are~~for ~~issued,~~any ~~and~~reason or (2ii) ~~it is probable that~~ the ~~plans,~~proceeds ~~when~~of ~~implemented, will mitigate~~ the ~~relevant~~11.0% ~~conditions~~Unsecured orNotes ~~events~~are ~~that~~used ~~raise~~for ~~substantial~~a ~~doubt~~purpose ~~about~~other ~~the~~than ~~entity’s ability~~ to ~~continue~~effectively asdischarge athe ~~going~~4.25% ~~concern~~Convertible ~~within~~Notes ~~one~~in ~~year~~full; ~~after~~provided, ~~the date~~ that ~~the~~if ~~financial~~an ~~statements~~event ~~are~~described ~~issued.~~in ~~Generally,~~clause to(i) beor ~~considered~~(ii) ~~probable~~above ofoccurs ~~being~~after ~~effectively~~May ~~implemented~~15, ~~the~~2018, ~~plans~~then ~~must have been committed and/or approved before~~ the maturity date ~~that~~of the ~~financial~~asset-based ~~statements~~credit ~~are~~facility ~~issued.~~will Webe ~~adopted this standard in~~ the ~~fourth~~date ~~quarter of~~ the ~~fiscal~~event ~~year ended January 31, 2017~~occurred. ~~The accompanying financial statements have been prepared in conformity with GAAP, which contemplates Layne’s continuation as a going concern.~~

We11% ~~believe~~Unsecured Notes. On March 19, 2018, we ~~can~~entered ~~extend~~into a note purchase agreement with two investments funds advised by Corre Partners Management, ~~expand~~LLC orto ~~replace~~sell $ 71.0 million of our 11.0% Unsecured Notes. Corre Partners Management and its affiliated funds, including the purchasers of the 11.0% Unsecured Notes, own a portion of our 4.25% Convertible Notes and 8.0% Convertible Notes. Under the note purchase agreement, the purchasers have committed to purchase $71.0 million of our 11.0% Unsecured Notes due October 16, 2019. The closing of the purchase and sale of the 11.0% Unsecured Notes will be the earlier to occur of (i) October 1, 2018 and (ii) the fifth business day after delivery of a funding notice by us to the purchasers. As a result, if the proceeds of the 11.0% Unsecured Notes were to be used to effectively discharge the 4.25% Convertible Notes prior to July 16, 2018, we would need to refinance (1) the asset-based credit facility byon or prior to April 14, 2019, (2) to the extent they are not converted into our common stock, the 8.0% Convertible Notes on May 151, ~~2018~~2019 and (3) the 11.0% IfUnsecured weNotes ~~are~~on ~~unable~~or prior to doOctober so16, we2019. ~~believe~~The wecommitment ~~could~~of ~~support~~the purchasers to purchase the ~~outstanding~~11.0% ~~letters~~Unsecured Notes terminates upon the earliest to occur of: ~~credit~~(i) ~~with~~a ~~existing~~change ~~cash,~~of ~~other~~control ~~collateral~~(including orthe closing of the pending merger with Granite) and (ii) delivery to the purchasers of a ~~new~~notice ~~facility~~of termination by us.

~~With~~We ~~respect~~may toat our 4option prepay the 11.250% ~~Convertible~~Unsecured Notes, wein ~~have~~whole ~~retained~~or ~~advisors to assist us~~ in ~~evaluating~~part ~~alternatives~~at ~~and~~any ~~raising~~time. ~~capital~~The to11.0% ~~refinance~~Unsecured orNotes ~~extend~~are ~~our~~subject ~~debt~~ to a ~~date~~mandatory ~~beyond~~prepayment ~~October~~upon ~~15, 2019, and eliminate~~ the ~~accelerating~~closing ~~maturity~~of ~~provisions~~a change of ~~the~~control. 8The 11.0% ~~Convertible~~Unsecured Notes. Weare ~~believe~~subject ~~the~~to ~~refinance~~an orEarly ~~extension~~Payment ofEvent ~~our~~Fee ~~debt~~if isthe ~~likely~~11.0% ~~based~~Unsecured onNotes ~~current~~are ~~on-going~~repaid ~~discussions~~less ~~with~~than ~~existing~~90 ~~and~~days ~~new~~after ~~potential lenders, our improving financial performance and credit quality, and~~ the ~~fact that our stock price is above the $~~11.~~70 conversion price for the 8.~~0% ~~Convertible~~Unsecured Notes. ~~Although~~are weissued. ~~believe~~The ~~these~~amount ~~refinancing~~of ~~options~~the ~~are~~Early ~~viable~~Payment ~~and~~Event ~~likely,~~Fee ~~because~~will ~~our~~be ~~plans~~equal to ~~refinance~~the orexcess, ~~restructure~~if ~~our~~any, ~~debt~~of ~~have~~(x) ~~not~~90 ~~been~~days ~~finalized,~~of ~~and~~accrued ~~therefore~~interest ~~not~~on inthe ~~our~~principal ~~control~~amount ~~(in part~~repaid, ~~due~~over to(y) the ~~fact~~amount ~~that neither~~ of ~~our~~interest ~~Convertible~~accrued ~~Notes~~and ~~can~~paid ~~be prepaid~~ or ~~have~~payable ~~redemption~~with ~~provisions~~respect ~~prior~~ to ~~February~~the ~~2018),~~principal ~~these~~amount ~~plans~~repaid ~~are~~from ~~not~~the ~~considered~~date ~~probable~~of ~~under~~issuance ~~the~~to ~~new~~and ~~standard.~~including ~~Consequently, per~~ the ~~standard,~~date ~~these~~of ~~conditions, in~~ the ~~aggregate,~~repayment. ~~raise~~No ~~substantial~~amount ~~doubt~~of ~~about~~ our ~~ability~~11.0% toUnsecured ~~continue~~Notes aswere aoutstanding ~~going~~as ~~concern~~of ~~within~~April ~~one~~30, ~~year after the date these financial statements are filed~~2018.

Under GAAP, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Initially, this evaluation does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt exists, management evaluates the mitigating effect of its plans if it is probable (1) that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been committed and/or approved before the date that the financial statements are issued. As of the date of filing these financial statements, we have debt and letters of credit coming due within one year, and we do not have committed refinancing plans or the liquidity to meet all of these obligations as they become due. These conditions, therefore, raise substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements are issued.

Management’s current plans include several alternatives to manage our debt and letters of credit coming due over the next year.

On February 13, 2018, we entered into a definitive agreement whereby Granite Construction Incorporated will acquire all of the outstanding shares of Layne in a stock-for-stock transaction with each share of Layne common stock exchanged for 0.27 shares of Granite common stock. The transaction is subject to the approval by Layne’s shareholders and other customary closing conditions. A special meeting of Layne shareholders to approve the transaction is scheduled for June 13, 2018. Granite has stated its intention, if the transaction closes, to repay the 4.25% Convertible Notes on the maturity date of November 15, 2018, which would result in the maturity date of the 8.0% Convertible Notes being August 15, 2018. Based on the exchange ratio for the merger and the current trading price for Granite common stock, we believe most, if not all, of the holders of our 8.0% Convertible Notes would convert their notes into Granite common stock on or prior to August 15, 2018 and any remaining unconverted amounts could be paid with available cash or funding from Granite. Granite has advised us that it intends to terminate the asset-based credit facility if the transaction closes.

If the Granite merger is not consummated, nor the 8% Convertible Notes converted, we believe refinancing options are viable and likely. However, these conditions and events are not within the Company’s control, and management’s plans cannot be considered probable. As such, there remains substantial doubt about our ability to continue as a going concern within one year after the date these financial statements are filed.

Contractual Obligations and Commercial Commitments

There have been no material changes in our contractual obligations and commercial commitments from those described in the Annual Report under “Contractual Obligations and Commercial Commitments.”, ~~except the following:~~

As part of the sale of our Heavy Civil business discussed in Note 9 to the Condensed Consolidated Financial Statements, we assigned lease obligations for certain equipment and property to the Buyer. As of April 30, 2017, the future minimum lease payments relating to these leases were approximately $1.2 million, which would reduce the total amount of our contractual obligations as presented in the Annual Report.34

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The principal market risks to which we are exposed are interest rates on variable rate debt and foreign exchange rates giving rise to translation and transaction gains and losses.

Interest Rate Risk

We centrally manage our debt portfolio considering overall financing strategies and tax consequences. A description of our debt is included in Note 34 to the Condensed Consolidated Financial Statements in this Form 10-Q. As of ~~October~~April 3130, ~~2017~~2018, an instantaneous change in interest rates of one percentage point would impact our annual interest expense by approximately $1.7 million.

Foreign Currency Risk

Operating in international markets involves exposure to possible volatile movements in foreign currency exchange rates. Currently, our primary international operations are in Mexico, Canada and Brazil. Our affiliates also operate in Latin America. The operations are described in Notes l and 25 of the Notes to Consolidated Financial Statements appearing in our Annual Report and Notes 78 and 810 of the Condensed Consolidated Financial Statements included in this Form 10-Q. The majority of our contracts in Mexico are U.S. dollar based, providing a natural reduction in exposure to currency fluctuations. As a result, we have historically not hedged our foreign currency exchange rate risk. As of ~~October~~April 3130, ~~2017~~2018, we do not have any outstanding foreign currency option contracts.

As foreign currency exchange rates change, translation of the income statements of our international operations into U.S. dollars may affect year-to-year comparability of operating results. We estimate that a ten percent change in foreign exchange rates would have impacted income before income taxes by ~~approximately~~ less than $0.1 million for the three months ended ~~October~~April 3130, ~~2017~~2018. This quantitative measure has inherent limitations, as it does not take into account any governmental actions, changes in customer purchasing patterns or changes in our financing and operating strategies.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

Based on an evaluation of disclosure controls and procedures as of ~~October~~April 3130, ~~2017~~2018, conducted under the supervision and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer, we concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management (including the Principal Executive Officer and the Principal Financial Officer) to allow timely decisions regarding required disclosure, and is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~October~~April 3130, ~~2017~~2018, that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

3135

PART II

ITEM 1. Legal Proceedings

See Part I, Item 1, Note 1012 to our Condensed Consolidated Financial Statements entitled “Contingencies,” which is incorporated in this item by reference.

ITEM 1A. Risk Factors

Reference is made to Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017~~2018 for information concerning risk factors.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

NOT APPLICABLE

ITEM 3. Defaults Upon Senior Securities

NOT APPLICABLE

ITEM 4. Mine Safety Disclosures

Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report.

ITEM 5. Other Information

NONE

3236

ITEM 6. Exhibits

a) Exhibits

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated February 13, 2018, by and among Layne Christensen Company, Granite Construction Incorporated and Lowercase Merger Sub Incorporated (filed as Exhibit 2.1 to Layne's Form 8-K, filed on February 14, 2018, and incorporated herein by this reference).
4.1		Second Amendment to Amended and Restated Credit Agreement dated March 30, 2018, among Layne Christensen Company, as Borrower, certain subsidiaries of Layne Christensen Company, as Co-Borrowers, the guarantors party thereto, the lenders party thereto, and PNC Bank, National Association, as Administrative Agent (filed as Exhibit 4.11 to Layne's Form 10-K, filed on April 10, 2018, and incorporated herein by this reference).
4.2		Agreement dated as of March 19, 2018, among Layne Christensen Company and the purchasers listed therein relating to the issuance of Layne's 11.0% Senior Unsecured Notes due October 16, 2019 (filed as Exhibit 4.12 to Layne's Form 10-K, filed on April 10, 2018, and incorporated herein by this reference).
4.3		Notice of Substitution dated March 28, 2018 with respect to the purchasers of Layne's 11.0% Senior Unsecured Notes due October 16, 2019 (filed as Exhibit 4.13 to Layne's Form 10-K, filed on April 10, 2018, and incorporated herein by this reference).
31.1		Section 302 Certification of Chief Executive Officer of the Company.
31.2		Section 302 Certification of Chief Financial Officer of the Company.
32.1		Section 906 Certification of Chief Executive Officer of the Company.
32.2		Section 906 Certification of Chief Financial Officer of the Company.
95		Mine Safety Disclosures.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

* * * * * * * * * *

3337

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Layne Christensen Company
		(Registrant)
DATE: December 5, 2017		/s/ Michael J. Caliel
DATE: June 5, 2018		/s/ Michael J. Caliel
		Michael J. Caliel,
		President and Chief Executive Officer
DATE: December 5, 2017		/s/ J. Michael Anderson
DATE: June 5, 2018		/s/ J. Michael Anderson
		J. Michael Anderson,
		Senior Vice President and Chief Financial Officer
DATE: December 5, 2017		/s/ Lisa Curtis
DATE: June 5, 2018		/s/ Lisa Curtis
		Lisa Curtis,
		Vice President and Chief Accounting Officer

3438

Three Months Ended

(in thousands)

April 30, 2017

Cash flow data:

Depreciation and amortization

Capital expenditures

Bad debt expense

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