Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Richard Paget – Morgan Joseph & Co., Inc.
Richard Paget – Morgan Joseph & Co., Inc.
I wanted to talk a little bit more about the water business, you guys had said mix and then some lower volumes and pricing and then some problem projects all hit margins. I wondered if you could maybe quantify at least what the problem projects were so we could get a better sense going forward what margins should be based on what you’re seeing today?
Andrew B. Schmitt
The biggest problem we had was on a project where we were doing the drilling for an eventual ground freezing of shaft but you’re using the same water well type drills and the water well business that we use and sonic type rigs. The equipment was new design and we really had mechanical problems as much as anything on the rig. We haven’t closed it out, we’re still in the process of connecting up the freeze but, by the time we got through the drilling phase of it, we had about $1 million that we were underwater on the job I think when the quarter ended.
There’s more to do but the drilling piece is pretty much over so it’s more the mechanical construction piece, maybe we’ll make up a little ground there next quarter as we get in to that phase of it. But, that was the biggest single project that we had that caused problems. I think Richard too, our weakest business, I should have said this actually, is in the western United States. California, Nevada, Colorado and Arizona are big businesses for us at Layne and our legacy water site.
So, when you look at that overall revenue decline in water of 20%, it’s down year-over-year 40% in the west. Now, this is an area that’s represented historically 50% of revenue and at times as much as 70% of the legacy profit. So, when we talk about mix I should have said that because that western part of the United States giving us the most problems. We’re seeing softening everywhere else but that clearly was an area that for many years drove a lot of organic growth, a lot of water treatment growth in Layne Legacy and that is really our most difficult business right now.
I don’t remember outside of 1995 when we had a great deal of water, a great deal of rain, reservoirs filled up and that was more California specific, I don’t think that I’ve ever seen that decline even Jerry, the last downturn, we didn’t see that kind of decline. So, that’s really one that has us on point and we’ll see if that picks up. But, the job was actually on the east coast, it was in the state of New York, our problem on the mix side is clearly more in the west than any other area and that’s a big profitable business, for Layne it has been really forever.
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