UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 31, 2019
EVOQUA WATER TECHNOLOGIES CORP.
(Exact name of registrant as specified in its charter)
Delaware
 
001-38272
 
46-4132761
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification Number)
210 Sixth Avenue
Pittsburgh, Pennsylvania
 
15222
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code: (724) 772-0044
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
AQUA
New York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Item 2.01. Completion of Acquisition or Disposition of Assets.
On December 31, 2019, Evoqua Water Technologies LLC, WTG Holdings Cooperatief U.A., Evoqua Water Technologies Limited, Evoqua Water Technologies Pte. Ltd., Evoqua Water Technologies Ltd., Evoqua Water Technologies (Shanghai) Co. Ltd., WTG Holdco Australia (Memcor) Pty. Ltd. (the “Australian Holding Company”) and Evoqua Water Technologies Membrane Systems Pty. Ltd. (together with the Australian Holding Company, the “Australian Subsidiaries,” and each of the foregoing entities, collectively, the “Evoqua Sellers”), each a wholly-owned subsidiary of Evoqua Water Technologies Corp. (the “Company”), completed the previously-announced sale (the “Transaction”) of the Company’s Memcor® low pressure membrane product line (including the product line’s global workforce, its manufacturing site in Windsor, Australia, associated operations and intellectual property) to DuPont de Nemours, Inc. and its affiliates (collectively, “DuPont”) pursuant to the Purchase and Sale Agreement dated October 1, 2019, by and among the Evoqua Sellers and DuPont, as amended (the “Agreement”). DuPont purchased 100% of the corporate capital of the Australian Subsidiaries and all of the other Evoqua Sellers’ assets related to the Memcor® low pressure membrane product line. The aggregate purchase price paid by DuPont in the Transaction was $110.0 million in cash, subject to certain adjustments. Following adjustments for cash and net working capital, gross proceeds paid by DuPont were $121.3 million. The Company and DuPont have a history of collaboration, and following the closing of the Transaction, DuPont will continue to supply the Company with Memcor® products.
The foregoing description of the Agreement and the Transaction does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, which was attached as Exhibit 2.1 to the Form 8-K filed by the Company on October 3, 2019, as amended by the first amendment to the Agreement, which was attached as Exhibit 2.1 to the Form 8-K filed by the Company on December 20, 2019.
Item 7.01. Regulation FD Disclosure.
On January 2, 2020, the Company issued a press release, a copy of which is furnished as Exhibit 99.1 hereto and incorporated herein by reference, announcing the closing of the Transaction.
In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.    
The unaudited pro forma consolidated balance sheet and statements of operations of the Company dated as of and for the year ended September 30, 2019 are filed as Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by reference.
(d) Exhibits.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
Date:
January 7, 2020
 
 
 
 
EVOQUA WATER TECHNOLOGIES CORP.
 
 
 
 
 
 
 
 
 
By:
 
/s/ Benedict J. Stas
 
 
 
 
 
 
Benedict J. Stas
 
 
 
 
 
 
Executive Vice President, Chief Financial Officer and Treasurer






Exhibit 99.1

EVOQUA COMPLETES DIVESTITURE OF MEMCOR® PRODUCT LINE


January 2, 2020 - PITTSBURGH - Evoqua Water Technologies (NYSE: AQUA) announced that the company has completed the divestiture of the Memcor® product line to Dupont Safety & Construction. Gross proceeds from the sale were approximately $110 million.
“The successful closing of the Memcor divestiture is an important milestone in our product portfolio strategy,” said Ron Keating, CEO of Evoqua. “We are pleased to expand our relationship with DuPont as we source innovative products to incorporate into our integrated solutions and services.”
The Memcor product line, which pioneered many firsts in low-pressure membrane technology, consists of microfiltration, ultrafiltration and membrane bioreactors (MBR). The divested business has approximately 190 employees globally.
About Evoqua Water Technologies
Evoqua Water Technologies is a leading provider of mission-critical water and wastewater treatment solutions, offering a broad portfolio of products, services and expertise to support industrial, municipal and recreational customers who value water. Evoqua has worked to protect water, the environment and its employees for more than 100 years, earning a reputation for quality, safety and reliability around the world. Headquartered in Pittsburgh, Pennsylvania, the company operates in more than 160 locations across 10 countries. Serving more than 200,000 installations worldwide, our employees are united by a common purpose: Transforming Water. Enriching Life.


CONTACTS:
Media 
Lisa Marchewka
Vice President, Brand and Strategy
Evoqua Water Technologies
Telephone: 978-614-7219
Email: lisa.marchewka@evoqua.com 

Investors 
Dan Brailer
Vice President, Investor Relations
Evoqua Water Technologies
Telephone: 724-720-1605
Email: dan.brailer@evoqua.com








Exhibit 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On December 31, 2019, Evoqua Water Technologies Corp. (the “Company”), through its wholly-owned subsidiaries, completed the previously-announced sale (the “Transaction”) of the Company’s Memcor® low pressure membrane product line (including the product line’s global workforce, its manufacturing site in Windsor, Australia, associated operations and intellectual property) to DuPont de Nemours, Inc. and its affiliates (collectively, “DuPont”) pursuant to the Purchase and Sale Agreement dated October 1, 2019, by and among the Evoqua Sellers and DuPont, as amended (the “Agreement”). DuPont purchased 100% of the corporate capital of the Australian Subsidiaries and all of the other Evoqua Sellers’ assets related to the Memcor® low pressure membrane product line. The aggregate purchase price paid by DuPont in the Transaction was $110.0 million in cash, subject to certain adjustments. Following adjustments for cash and net working capital, gross proceeds paid by DuPont were $121.3 million, with an expected gain on the divestiture of $70.9 million. The Company and DuPont have a history of collaboration, and following the closing of the Transaction, DuPont will continue to supply the Company with Memcor® products.
The Transaction constituted a significant business divestiture in accordance with Rule 3-05 of Regulation S-X. As a result, we prepared the accompanying unaudited pro forma combined financial statements in accordance with Item 9.01(b) of Form 8-K and Article 11 of Regulation S-X.
The unaudited pro forma combined Balance Sheets and Statements of Operations were prepared as though the divestiture occurred on October 1, 2018. The historical financial statements have been recast for periods required under ASC 205-20, and have been adjusted in the unaudited pro forma combined financial statements to give effect to pro forma events that are: (1) directly attributable to the divestiture, (2) factually supportable, and (3) with respect to the unaudited pro forma combined statements of operations, expected to have a continuing impact on the combined results following the divestiture. In addition, these unaudited pro forma combined financial statements should not be considered to be indicative of our future consolidated financial performance and income statement results.
The unaudited pro forma combined financial statements have been developed from, and should be read in conjunction with, our historical audited consolidated financial statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019.


1


Evoqua Water Technologies Corp.
Proforma Combined Balance Sheet
As of September 30, 2019
(Unaudited)
(In thousands)
Evoqua Water Technologies Corp.
 
Memcor (note 2)
 
ProForma Adjustments
 
Pro Forma Combined
ASSETS
 
 
 
 
 
 
 
Current assets
$
637,293

 
$
84,093


$
—

 
$
721,386

Cash and cash equivalents
109,881

 
121,349

 
—

 
231,230

Receivables, net
257,585

 
—

 
—

 
257,585

Inventories, net
137,164

 
—

 
—

 
137,164

Contract assets
73,467

 
—

 
—

 
73,467

Prepaid and other current assets
21,940

 
—

 
—

 
21,940

Assets held for sale
37,256

 
(37,256
)
 
—

 
—

Property, plant, and equipment, net
333,584

 
—

 
—

 
333,584

Goodwill
392,890

 
—

 
—

 
392,890

Intangible assets, net
314,767

 
—

 
—

 
314,767

Deferred income taxes
2,790

 
174

 
—

 
2,964

Other non‑current assets
25,715

 
—

 
—

 
25,715

Non-current assets held for sale
30,809

 
(30,809
)
 
—

 
—

Total assets
$
1,737,848


$
53,458

 
$
—

 
$
1,791,306

LIABILITIES AND EQUITY
 
 
 
 
 
 
—

Current liabilities
322,221

 
(14,085
)
 
(2,601
)
 
305,535

Accounts payable
144,247

 
—

 
—

 
144,247

Current portion of debt
13,418

 
—

 
—

 
13,418

Contract liabilities
39,051

 
—

 
—

 
39,051

Product warranties
4,922

 
—

 
—

 
4,922

Accrued expenses and other liabilities
101,839

 
—

 
(2,601
)
4
99,238

Income tax payable
4,536

 
123

 


 
4,659

Liabilities held for sale
14,208

 
(14,208
)
 
—

 
—

Non‑current liabilities
1,049,805

 
(7,059
)
 
—

 
1,042,746

Long‑term debt
951,599

 
—

 
—

 
951,599

Product warranties
2,332

 
—

 
—

 
2,332

Other non‑current liabilities
78,661

 
—

 
—

 
78,661

Deferred income taxes
13,548

 
(3,394
)
 
—

 
10,154

Non-current liabilities held for sale
3,665

 
(3,665
)
 
—

 
—

Total liabilities
1,372,026

 
(21,144
)
 
(2,601
)
 
1,348,281

Commitments and Contingent Liabilities
 
 
 
 
 
 
—

Shareholders’ equity
 
 
 
 
 
 
—

Common stock, par value $0.01: authorized 1,000,000 shares; issued 116,008 shares, outstanding 114,344 at September 30, 2019;
1,154

 
—

 
—

 
1,154

Treasury stock: 1,664 shares at September 30, 2019
(2,837
)
 
—

 
—

 
(2,837
)
Additional paid‑in capital
552,422

 
—

 
—

 
552,422

Retained deficit
(174,976
)
 
68,296

 
2,601

5
(104,079
)
Accumulated other comprehensive loss, net of tax
(13,004
)
 
6,306

 
—

 
(6,698
)
Total Evoqua Water Technologies Corp. equity
362,759

 
74,602

 
2,601

 
439,962

Non‑controlling interest
3,063

 
—

 
—

 
3,063

Total shareholders’ equity
365,822

 
74,602

 
2,601

 
443,025

Total liabilities and shareholders’ equity
$
1,737,848

 
$
53,458

 
$
—

 
$
1,791,306

See accompanying notes to the unaudited pro forma combined financial statements.

2


Evoqua Water Technologies Corp.
Pro Forma Combined Statements of Operations
Year Ended September 30, 2019
(unaudited)
(In thousands, except per share data)
Evoqua Water Technologies Corp.
for the Year Ended September 30, 2019
 
Historical Memcor for the Year Ended September 30, 2019
 
ProForma Adjustments
 
Pro Forma Combined
Revenue from product sales
$
851,161

 
$
(58,774
)
 
$
—

 
$
792,387

Revenue from services
593,280

 
(769
)
 
—

 
592,511

Revenue
1,444,441

 
(59,543
)

—


1,384,898

Cost of product sales
(615,171
)
 
43,496

 
9

4
(571,666
)
Cost of services
(403,308
)
 
375

 
—

 
(402,933
)
Cost of product sales and services
(1,018,479
)
 
43,871


9


(974,599
)
Gross Profit
425,962

 
(15,672
)

9


410,299

General and administrative expense
(217,013
)
 
1,135

 
4,233

4
(211,641
)
Sales and marketing expense
(138,936
)
 
6,634

 
—

 
(132,302
)
Research and development expense
(15,300
)
 
2,294

 
—

 
(13,006
)
Total operating expenses
(371,249
)
 
10,063


4,233

 
(356,949
)
Other operating income
5,613

 
(162
)
 
70,898

 
76,349

Other operating expense
(654
)
 
—

 
—

 
(654
)
Income before interest expense and income taxes
59,672

 
(5,771
)

75,140


129,045

Interest expense
(58,556
)
 
—

 
—

 
(58,556
)
Income before income taxes
1,116

 
(5,771
)

75,140


70,489

Income tax expense
(9,587
)
 
4,611

 
—

3
(4,976
)
Net income
(8,471
)
 
(1,160
)

75,140

 
65,509

Net income attributable to non-controlling interest
1,052

 
—

 
—

 
1,052

Net income attributable to Evoqua Water Technologies Corp.
$
(9,523
)
 
$
(1,160
)

$
75,140

 
$
64,457

Basic earnings per common share
$
(0.08
)
 
 
 
 
 
$
0.56

Diluted earnings per common share
$
(0.08
)
 
 
 
 
 
$
0.56

Weighted-average shares used in computation of earnings per share
 
 
 
 
 
 
 
Basic
114,703

 
 
 
 
 
114,703

Diluted
114,703

 
 
 
 
 
114,703

See accompanying notes to the unaudited pro forma combined financial statements.


3


Evoqua Water Technologies Corp.
Notes to the Pro Forma Combined Financial Statements
(Unaudited, in thousands)
Note 1 - Basis of Presentation
The unaudited pro forma combined financial statements were derived from the historical audited consolidated financial statements of Evoqua Water Technologies Corp. (the “Company”) and the unaudited results and balances of the Memcor business. The unaudited pro forma combined financial statements give effect to the pro forma adjustments necessary to reflect the Memcor disposition as if the transaction had occurred on October 1, 2018, in the unaudited pro forma combined balance sheets and statements of operations for the fiscal year ended September 30, 2019.
The historical financial information has been adjusted in the unaudited pro forma combined financial statements to give effect to pro forma events that are (i) directly attributable to the divestiture, (ii) factually supportable and (iii) with respect to the unaudited pro forma combined statements of operations, expected to have a continuing impact on the combined results and have been prepared in accordance with Article 11 of Regulation S-X. Such unaudited pro forma condensed consolidated financial statements should be read in conjunction with (i) the audited consolidated financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended September 30, 2019 included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2019 and (ii) the risk factors outlined in detail under the caption “Risk Factors” within the Reports described above. These reports may not be useful in predicting the future financial condition and results of operations of the Company. The actual results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
Note 2 - Memcor Balances
The information in the Memcor column of the unaudited pro forma consolidated balance sheet was derived from the Company’s audited financial statements as of September 30, 2019, adjusted to include certain assets and liabilities that are directly attributable to the Memcor business and have been adjusted in the unaudited pro forma combined financial statements to give effect to pro forma events that are: (1) directly attributable to the divestiture, (2) factually supportable, and (3) with respect to the unaudited pro forma combined statements of operations, expected to have a continuing impact on the combined results following the divestiture. The Memcor column also reflects the $121.3 million cash proceeds received in conjunction with the sale of the Memcor business.
Note 3 - Taxes
Represents the tax impact of the divestiture of the Memcor business. Based on the structure of the sale, available net operating losses, and valuation allowances, the Company does not expect to incur net tax expense related to the gain on the sale of the Memcor business.
Note 4 - Transaction expenses and income
These are one time transaction costs the Company incurred specific to the sale of the Memcor business. As of September 30, 2019, $2.8 million of these costs were incurred but $2.6 million had not been paid and as such, was included in Accrued expenses and other liabilities. The Company expects to incur and pay approximately $1.4 million of additional one time transaction costs subsequent to September 30, 2019.
Note 5 - Shareholder’s equity
Shareholders’ equity was adjusted for the pro forma adjustments specified in Notes (3) and (4), including the $121.3 million cash proceeds received in conjunction with the sale of Memcor. Note that the cash proceeds are subject to post closing net working capital adjustments, and as such, may be subject to change and impact the final gain on sale.




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