GLV finalizes carve-out with FLS and restructures US water operations
MONTREAL, QC, April 28, 2008 (Press Release) - GLV Inc. (GLV) announces that the external audit of its opening balance sheet conducted in recent months pursuant to the terms of the Arrangement (the Arrangement) closed on August 10, 2007 with FLSmidth & Co. (FLS), resulted in a C$1.8 million receipt representing an adjustment of the net debt assumed by GLV, net of the amounts receivable or payable between GLV and the companies of the Process Group acquired by FLS. The payment to GLV of this C$1.8 million consideration completes the financial transaction related to the carve-out of the net assets of GLV's Water Treatment Group and Pulp and Paper Group.
Furthermore, as management announced last fall, GLV took advantage of the transition period required by the carve-out operation, which not only concerned the assets but part of the work organization itself, to carry out a re-evaluation and restructuring of the Salt Lake City (Utah) Division of the Water Treatment Group in order to improve its market positioning and profitability. The restructuring plan, the broad lines of which the Company is announcing today, is aimed at three major objectives:
- to implement a more selective strategy in terms of targeted contracts, consistent with GLV's profitability and positioning criteria;
- to greatly improve the cost structure; and
- to further integrate the Salt Lake City operations with those of the Enviroquip Division in order to foster synergies and optimize market development efforts by leveraging the complete technological portfolio offered to North American customers.
The restructuring plan entails a reduction of approximately 15% of the Water Treatment Group's workforce in Salt Lake City and the reassessment of certain working capital items related to lowmargin contracts that will no longer be part of the strategic focus. After accounting for the severance pay and the reassessment of certain working capital items related to low-profit contracts, the Salt Lake City Division will incur an operating loss of approximately C$4 million for the fiscal year ended March 31, 2008. Given the expected benefits of the three-tiered restructuring plan and this Division's current order backlog, GLV's management estimates that it should generate an EBITDA margin of 5% to 6% for the fiscal year 2009, with continuous progress towards reaching the Water Treatment Group's global 10% EBITDA margin target.
Besides consolidating the transition of the Water Treatment Group's North American operations, Richard Verreault explained that this restructuring also fits into a broader framework, consisting in the implementation of a more decentralized and entrepreneurial organizational model throughout the Water Treatment Group worldwide. "Our goal is to build upon the strength of our global network, on the one hand, and of our technological portfolio, on the other, to provide our field teams with the main mandate to develop key segmented markets, namely the municipal market in certain regions, and targeted niches of the industrial market in high-potential territories."
"We are very pleased with the progress achieved by GLV since the official start of its operations in order to position the Water Treatment Group as an efficient and credible player in the global water treatment and re-use solutions industry. Within eight months, we have completed the major transition pursuant to the Arrangement, restructured our North American operations and provided the group with an organizational model tailored to our long-term vision of world leadership, and consistent with our management philosophy. These changes have not slowed down the development of the Water Treatment Group, as attests the sustained organic revenue growth recorded as of December 31, 2007, in addition to the recent closing of a strategic acquisition in Australia. As of now, our Water Treatment Group can fully dedicate itself to fulfilling our long-term vision in the water management market," concluded Richard Verreault.
