Summary of LAYNE CHRISTENSEN CO

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. Such statements are based on current expectations and are subject to certain risks, uncertainties and assumptions, including but not limited to: the outcome of the ongoing internal investigation into, among other things, the legality, under the FCPA and local laws, of certain payments to agents and other third parties interacting with government officials in certain countries in Africa relating to the payment of taxes and the importing of equipment (including any government enforcement action which could arise out of the matters under review or that the matters under review may have resulted in a higher dollar amount of payments or may have a greater financial or business impact than management currently anticipates), prevailing prices for various commodities, unanticipated slowdowns in the Company's major markets, the availability of credit, the impact of competition, the effectiveness of operational changes expected to increase efficiency and productivity, worldwide economic and political conditions and foreign currency fluctuations that may affect worldwide results of operations. 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 the Company assumes no obligation to update such forward-looking statements or to update the reasons why actual results could differ materially from those anticipated in such forward-looking statements.

Overview

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand Layne Christensen Company, our operations and our present business environment. MD&A is provided as a supplement to-and should be read in connection with-our consolidated financial statements and the accompanying notes thereto included under Part I Item 1 of this report. MD&A should also be read in conjunction with our consolidated financial statements as of January 31, 2012, and for the year then ended, and the related MD&A, both of which are contained in our Form 10-K for the year ended January 31, 2012. MD&A includes the following sections:
? Our Business-a general description of our business and key fiscal 2013 events.

? Consolidated Review of Operations-an analysis of our consolidated results of operations for the three and nine months ended October 31, 2012.

? Operating Segment Review of Operations-an analysis of our results of operations for the three and nine months ended October 31, 2012, as presented in our consolidated financial statements for our reporting segments: Water Resources Division, Inliner Division, Heavy Civil Division, Geoconstruction Division, and Mineral Exploration Division.

? Liquidity and Capital Resources-an analysis of cash flows, aggregate financial commitments and certain financial condition ratios.

? Critical Accounting Policies-a discussion of changes to our critical accounting policies in the current period that involve a higher degree of judgment or complexity. This section also includes the impact of new accounting standards.

Our Business

Layne is a global water management, construction and drilling company. We provide responsible solutions for water, mineral and energy challenges. The Company's operational and organizational structure is divided into five divisions based on primary service lines. Each division is comprised of individual district offices, which primarily offer similar services and serve similar markets. Periodically, individual offices within a division may perform services that are normally provided by another division. When that happens, the results of those services are recorded in the originating offices' own division. For example, if a Mineral Exploration Division office performed water well drilling services, the revenues would be recorded in the Mineral Exploration Division rather than the Water Resources Division. See Note 10 to the consolidated financial statements for a discussion of the Company's segments and the changes to the segments in fiscal 2012.

Key Fiscal 2013 Events

? Margins in all of our Water Infrastructure businesses have declined this year, producing an overall cost of revenues for the nine months as a percentage of revenue for the businesses of 85% as compared to 82% a year ago. Although performance has begun to improve in drought stricken areas served by our Water Resources division, the Company's Heavy Civil Division has been particularly hard hit by margin declines due to lower prices in the municipal bid market as well as delays and cost overruns. For the third quarter of fiscal 2013, Heavy Civil Division's revenues have decreased 20.3% compared to third quarter last year, and the division has experienced a pre-tax loss. We believe the municipal bid market has been impacted by the entry of a large number of competitors which have traditionally served other markets, but are now seeking municipal work to keep equipment and personnel utilized.

? For the third quarter of fiscal 2013, revenues in our Mineral Exploration Division have decreased 15.0% compared to last year driven by global economic uncertainty and tightening credit. We anticipate declines against last year's levels for the remainder of the fiscal year. Management has taken steps to reduce overhead costs, however certain expenses such as depreciation on previously acquired assets, could not be reduced. The combination of the lower activity levels and fixed overhead costs resulted in a decrease in pre-tax earnings of 34.5%.

? On May 30, 2012, the Company acquired the remaining 50% of Diberil Sociedad Anónima ("Diberil"), a Uruguayan company and parent company to Costa Fortuna (Brazil and Uruguay) for $18,473,000. Diberil, with operations in Sao Paulo, Brazil, and Montevideo, Uruguay, is one of the largest providers of specialty foundation and specialized marine geotechnical services in South America. In conjunction with the acquisition of the remaining 50% equity interest and recording the operation on a fully consolidated basis, the Company remeasured the previously held equity investment in Diberil to fair value and recognized a loss of $7,705,000 during the second quarter. The fair value of the 50% noncontrolling interest was estimated to be $15,794,000 at the time of the adjustment.

? During the third quarter of fiscal 2013, the Company completed the sale of the exploration and production assets of its Energy Division for $15,000,000, of which $13,500,000 was received in the quarter. Results of the Energy Division were loss on discontinued operations (net of tax) of $22,358,000 for the nine months ended October 31, 2012, and $347,000 for the three months ended October 31, 2012.

? On December 6, 2012, Layne's Board of Directors has approved the relocation of the Company's global corporate headquarters from Mission Woods, Kansas, to The Woodlands, a suburb of Houston, Texas. The move is expected to commence in spring 2013 and be completed by winter 2013. The move will involve most executive positions in Layne's corporate leadership, as well as certain other management and staff positions. Most senior executives from Layne's six divisions will ultimately consolidate into the Houston headquarters. In connection with this relocation, the Company expects that it will incur pre-tax charges of approximately $14-$17 million, associated with personnel relocation, employee attrition and replacement, and office relocation and other costs. Estimated expenses of $2-3 million will be incurred in the fourth quarter of fiscal 2013, with a substantial part of the remaining costs incurred in fiscal 2014.