Waterlink announces second quarter results and new senior bank amendment

Waterlink, Inc. today announced a slight increase in net sales for its second fiscal quarter. The Board of Directors also is making plans to sell the European Water and Wastewater Division.

CLEVELAND, May 15, 2001 — Waterlink, Inc. today announced a slight increase in net sales for its second fiscal quarter. The Board of Directors also is making plans to sell the European Water and Wastewater Division.

Net sales from continuing operations were $20.6 million for the current quarter as compared to $20.1 million in the prior year quarter, an increase of 2.5%. The increase in sales in the current year quarter is attributable to the Pure Water Division, which experienced a 38.2% increase in sales as compared to the prior year due to increased systems sales.

This increase was partially offset by a 6.5% decrease in sales at the Specialty Products Division primarily due to a combination of certain systems orders previously received being delayed until the second half of fiscal 2001 and lower carbon sales. Bookings from continuing operations for the quarter ended March 31, 2001 were $20.9 million, resulting in backlog from continuing operations at March 31, 2001 of $24.2 million, which is unchanged from December 31, 2000, but is 29.1% higher than backlog from continuing operations at March 31, 2000.

Effective with the current fiscal quarter, Waterlink's continuing operations are only comprised of its Specialty Products and Pure Water Divisions, as the company's Board of Directors has approved a plan to sell the European Water and Wastewater Division, thereby causing this division to be treated as a discontinued operation.

Also included in discontinued operations are the results of the Biological and Separations Divisions, both sold previously during the fiscal year. Commenting on the treatment of the European Division as a discontinued operation, Scott King, Waterlink's President and Chief Executive Officer commented, "Given the sale of the Separations and Biological Divisions, the focus of the company is now more with the purification of water and air through media and membranes with our Specialty Products and Pure Water Divisions. As such, strategically, with the European Division's wastewater focus and poor operating performance, we have decided to exit this division. While we are currently in discussions with interested parties for the European division, at this time we can give no assurance that a buyer will ultimately purchase this division, or if the division is sold, what net proceeds will be realized."

For the quarter ended March 31, 2001 the company recorded a loss from continuing operations of $981,000, or ($0.05) per share, as compared to a loss from continuing operations of $159,000, or ($0.01) per share in the prior year quarter. The current year quarter includes an $807,000 increase in the amortization of deferred financing costs due to a change in the maturity date of the company's Senior Credit Facility. The current quarter net loss of $15,045,000, or ($0.77) per share, includes an estimated loss on the disposal of the European Water and Wastewater Division of $13,584,000, or ($0.69) per share. This estimated loss on disposal of the European Water and Wastewater Division includes a $6,416,000 write-off of the cumulative translation adjustment component of equity related to this division. The company reported a net loss of $1,328,000, or ($0.07) per share, during the same period last year, which included a loss from discontinued operations of $1,169,000, or ($0.06) per share.

The company also announced it has entered into an amendment to its Senior Credit Facility that waived existing covenant violations. The amendment also established additional covenant obligations on the company, modified the principal repayment terms, and increased the interest rate on all outstanding borrowings under the Senior Credit Facility to prime plus three percent.

For the six-month period ended March 31, 2001, the company reported net sales of $37.5 million as compared to $40.8 million for the same period last year, a decrease of 8.1%. With regard to the comparable six-month periods, the Pure Water Division realized an increase in sales of 8.4% due to higher bookings in the current fiscal year; and net sales at the Specialty Products Division decreased by 12.7%, primarily due to a combination of certain systems orders previously received being delayed until the second half of fiscal 2001 and lower carbon sales.

For the six-month period ended March 31, 2001 the company recorded a loss from continuing operations of $2,226,000, or ($0.11) per share, as compared to income from continuing operations of $5,000, or $0.00 per share, in the prior year. The current year includes an increase in the amortization of deferred financing costs of $814,000, which was discussed previously in the current quarter's results. The net loss of $20,484,000 for the six-month period ended March 31, 2001, or ($1.04) per share, includes an estimated loss on the disposal of the European Water and Wastewater Division and the loss on the disposal of the Separations Division, which together totaled $17,475,000, or ($0.89) per share. The company reported net income of $124,000, or $0.01 per share, during the same period last year, which included income from discontinued operations of $119,000, or $0.01 per share.

Scott King, commenting on the company's year to date performance, "While we are disappointed in our operating results for the first half of the year, we are entering the second half of our fiscal year with a strong backlog within our continuing operations. The systems backlog within our Specialty Products Division will be more accessible during the second half of the year as work on certain large projects received in late fiscal 2000 will soon begin. In addition, we are very pleased that we were able to enter into a new amendment with our banks which will give us the ability to operate over the coming months as we seek ways to maximize shareholder value under our strategic alternative process that was announced one year ago."

More in Industrial