U.S. Filter Posts 1st-Quarter Loss Tied to Costly Culligan Deal
U.S. Filter Corp., a global provider of water and waste treatment systems, on Tuesday posted a net loss of $155 million, or nearly a dollar per share, for its most recent quarter because of costs associated with its $1.5-billion takeover of Culligan Water Technologies Inc.
Palm Desert-based U.S. Filter logged losses of 98 cents per diluted share on record revenue of $1.1 billion for its fiscal first quarter ended June 30. That contrasts with net income of $39 million, or 30 cents, including one-time gains, on revenue of $793 million a year ago.
U.S. Filter reported that earnings for the most recent quarter would have been 4 cents higher if not for the June acquisition of Culligan and the $261 million in integration and restructuring charges that accompanied it.
Still, Tim Traff, U.S. Filter executive vice president, said news that the charges were expected to net the company an annual savings of $44 million helped buoy its stock on a day the market plunged.
The company’s shares traded up for most of the day on the New York Stock Exchange before dropping 25 cents to close at $27.50. Even so, the stock has plunged from a 52-week high of $44.44.
U.S. Filter lost $3.13 a share in its most recent fiscal year, ended March 31, despite a record $3.2 billion in sales. The company reported $440 million in charges resulting from acquisitions.
Ever since Chief Executive Richard Heckmann and a group of investors seized control of the then-ailing company in 1990, growth through acquisition has been U.S. Filter’s overriding concern.
Heckmann has overseen more than 100 acquisitions in the highly fragmented water treatment industry. In the most recent third quarter alone, the company gobbled up 24 businesses. U.S. Filter is now a major worldwide presence in the industry’s municipal, industrial and residential arenas.
Although he supports the company’s growth strategy, analyst David Manlowe of BT Alex. Brown Inc. said U.S. Filter should consider focusing its takeover appetites on smaller companies in the short run to avoid hefty merger costs.
“Certainly the company management is going to have to do what they think is in the best long-term interest of the company,” Manlowe said. “But to generate a more accurate valuation of their stock, I think they are going to have to see quarters that don’t have charges.”
Traff, however, said the charges are a necessary bitter pill that have ultimately made the company stronger. “We have picked the crown jewels of all the various aspects of this industry,” Traff said. “What we have cannot be replicated: a leadership position in virtually every market we’re in.”
