Waterlink Sells Division, First Quarter Results Unable to Meet NYSE and Covenant Requirements
Waterlink, Inc announced the sale of its assets and certain liabilities of its Waterlink Separations Division to Parkson Corp., a wholly owned subsidiary of Axel Johnson, Inc. The reported gross purchase price was approximately $19 million. Waterlink Separations accounted for $36.3 million of Waterlink's net sales for the fiscal year ended Sept. 30, 2000. The net proceeds from the sale will be used by Waterlink to reduce its senior indebtedness.
The completion of this transaction marks the second division Waterlink has sold since its May 2000 announcement that it was seeking strategic alternatives to maximize shareholder value. The company sold it Biological Wastewater Treatment Division in a series of transactions in September and December, 2000, for total gross proceeds of approximately $4.2 million.
"The sale of these two divisions are significant events in Waterlink's strategic alternative process as it reduces our leverage, lessens the company's dependence on large wastewater capital equipment orders and in the case of our Biological Division, allows us to shed an unprofitable segment of our business," said Scott King, president and chief executive officer of Waterlink.
Waterlink also announced results for its first fiscal quarter ended Dec. 31, 2000. Net sales from continuing operations, which excluded the Separations and Biological Divisions that were presented as discontinued operations, were $23.8 million for the current quarter as compared to $35.1 million in the prior year.
The decrease in sales primarily occurred in the company's UK and Swedish operations within the European Division and in the domestic portion of its Specialty Products Division. Bookings from continuing operations for the quarter ended Dec. 31, 2000, of $34.1 million, a 15.8 percent increase from Sept. 30, 2000. Each of the divisions within continuing operations contributed to the increase in backlog.
For the quarter ended Dec. 31, 2000, the company recorded a loss from continuing operations of approximately $1.6 million or $0.08 per share, as compared to income from continuing operations of approximately $1.02 million or $0.06 per share in the prior year quarter. The current period net loss of roughly $5.4 million or $0.28 per share included an estimated loss on the disposal of the Separations Div. Of approximately $3.9 million or $0.20 per share.
The company reported net income of $1.4 million or $0.08 per share during the same period last year, which included income from discontinued operations of $428,000 or $0.02 per share.
The company currently is in violation of certain covenants related to its senior credit facility, which have created an event of default under that facility. The company is in discussions with its senior bank group regarding this default; however, no assurance can be given as to whether a satisfactory waiver of the default or amendment to the senior credit facility will be obtained from its senior bank group.
The company also announced that it has received notice from the NYSE that the company is below the NYSE's continued listing requirements relating to total market capitalization, shareholders' equity and minimum share price. As permitted, the company will be submitting a plan demonstrating how it will comply with the continued listing requirements. The NYSE will review the plan and determine whether the company's common stock will continue to be eligible for trading on the NYSE.