UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
FLOW INTERNATIONAL CORPORATION
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01
(Title of Class of Securities)
343468104
(CUSIP Number)
John G. Igoe, P.A.
Edwards Wildman Palmer LLP
525 Okeechobee Boulevard, Suite 1600
West Palm Beach, Florida 33401
(561) 833-7700
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
March 27, 2013
(Date of Event which Requires Filing this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨
NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.
* | The remainder of this cover page shall be filled out for a reporting persons initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. |
The information required on the remainder of this cover page shall not be deemed to be filed for the purpose of Section 18 of the Securities Exchange Act of 1934 (Exchange Act) or otherwise subject to the liabilities of that section of the Exchange Act but shall be subject to all other provisions of the Exchange Act (however, see the Notes).
(1) |
NAME OF REPORTING PERSON
Otter Creek Partners I, L. P. | |||||
(2) | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ¨ (b) ¨
| |||||
(3) | SEC USE ONLY
| |||||
(4) | SOURCE OF FUNDS
WC | |||||
(5) | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ¨
| |||||
(6) | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
(7) | SOLE VOTING POWER
0 | ||||
(8) | SHARED VOTING POWER
1,020,337 | |||||
(9) | SOLE DISPOSITIVE POWER
0 | |||||
(10) | SHARED DISPOSITIVE POWER
1,020,337 | |||||
(11) |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,020,337 | |||||
(12) | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
(See Instructions) | |||||
(13) | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.1% | |||||
(14) | TYPE OF REPORTING PERSON
PN |
- 2 -
(1) |
NAME OF REPORTING PERSON
Otter Creek International Ltd. | |||||
(2) | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ¨ (b) ¨
| |||||
(3) | SEC USE ONLY
| |||||
(4) | SOURCE OF FUNDS
WC | |||||
(5) | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ¨
| |||||
(6) | CITIZENSHIP OR PLACE OF ORGANIZATION
British Virgin Islands | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
(7) | SOLE VOTING POWER
0 | ||||
(8) | SHARED VOTING POWER
1,443,927 | |||||
(9) | SOLE DISPOSITIVE POWER
0 | |||||
(10) | SHARED DISPOSITIVE POWER
1,443,927 | |||||
(11) |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,443,927 | |||||
(12) | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
(See Instructions) | |||||
(13) | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.0% | |||||
(14) | TYPE OF REPORTING PERSON
CO |
- 3 -
(1) |
NAME OF REPORTING PERSON
Otter Creek Management, Inc. | |||||
(2) | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ¨ (b) ¨
| |||||
(3) | SEC USE ONLY
| |||||
(4) | SOURCE OF FUNDS
AF | |||||
(5) | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ¨
| |||||
(6) | CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
(7) | SOLE VOTING POWER
0 | ||||
(8) | SHARED VOTING POWER
2,464,264 | |||||
(9) | SOLE DISPOSITIVE POWER
0 | |||||
(10) | SHARED DISPOSITIVE POWER
2,464,264 | |||||
(11) |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,464,264 | |||||
(12) | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
(See Instructions) | |||||
(13) | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1% | |||||
(14) | TYPE OF REPORTING PERSON
CO |
- 4 -
(1) |
NAME OF REPORTING PERSON
R. Keith Long | |||||
(2) | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) ¨ (b) ¨
| |||||
(3) | SEC USE ONLY
| |||||
(4) | SOURCE OF FUNDS
AF | |||||
(5) | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) ¨
| |||||
(6) | CITIZENSHIP OR PLACE OF ORGANIZATION
United States | |||||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
|
(7) | SOLE VOTING POWER
0 | ||||
(8) | SHARED VOTING POWER
2,464,264 | |||||
(9) | SOLE DISPOSITIVE POWER
0 | |||||
(10) | SHARED DISPOSITIVE POWER
2,464,264 | |||||
(11) |
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,464,264 | |||||
(12) | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES ¨
(See Instructions) | |||||
(13) | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1% | |||||
(14) | TYPE OF REPORTING PERSON
IN |
- 5 -
This Amendment No. 2 to Schedule 13D amends the Schedule 13D filed on August 12, 2011, as amended March 21, 2012 (the Original Statement, and as amended by this Amendment No. 2, this Schedule 13D) and is being filed pursuant to Rule 13d-2(a) under the Securities Exchange Act of 1934, as amended (the Exchange Act), on behalf of Otter Creek Partners I, L.P., a Delaware limited partnership (the Domestic Fund), Otter Creek International, Ltd., a British Virgin Islands international business company (the Offshore Fund), Otter Creek Management, Inc., a Delaware corporation (the Management Company) and R. Keith Long, an individual (Mr. Long and, together with the Domestic Fund, the Offshore Fund and the Management Company, the Reporting Persons).
This Schedule 13D relates to the common stock, par value $0.01 per share, of Flow International Corporation, a Washington corporation (the Issuer), which has principal executive offices located at 23500 64th Avenue South, Kent, Washington 98032. Unless the context otherwise requires, references herein to the Common Stock are to such Common Stock of the Issuer. The Management Company is the sole general partner of the Domestic Fund and the investment adviser to the Domestic Fund and the Offshore Fund (collectively, the Funds). The Funds directly own the Common Stock to which this Schedule 13D relates, and the Reporting Persons may be deemed to have beneficial ownership over such Common Stock by virtue of the authority granted to them by the Funds to vote and to dispose of the securities held by the Funds, including the Common Stock.
Item 4. | Purpose of Transaction. |
Item 4 of the Original Statement is hereby supplemented as follows: On March 27, 2013, the Funds sent a letter to the Board of Directors of the Issuer urging that the Issuer explore strategic options, including a sale of the company. A copy of the letter is filed as Exhibit 99.2 to this Schedule 13D.
Item 5. | Interest in Securities of the Issuer. |
Item 5 of the Original Statement is hereby amended and restated in its entirety as follows:
(a) | The following table sets forth the aggregate number and the percentage of outstanding shares of Common Stock that the Reporting Persons beneficially owned as of March 27, 2013. |
Name |
Shares of Common Stock Beneficially Owned |
Percentage of Shares of Common Stock Beneficially Owned (1) |
||||||
The Domestic Fund |
1,020,337 | 2.1 | % | |||||
The Offshore Fund |
1,443,927 | 3.0 | % | |||||
The Management Company |
2,464,264 | (2) | 5.1 | % | ||||
R. Keith Long |
2,464,264 | (2) | 5.1 | % | ||||
|
|
|
|
|||||
The Reporting Persons, as a group |
2,464,264 | 5.1 | % |
- 6 -
(1) | Based on 48,423,308 shares of Common Stock reported outstanding by the Issuer as of February 26, 2013 in its Quarterly Report on Form 10-Q for the period ended January 31, 2013. |
(2) | Each of the Management Company and R. Keith Long disclaims beneficial ownership of the shares of Common Stock held by the Funds, except to the extent of its or his pecuniary interest therein and this statement shall not be deemed an admission that the Management Company or R. Keith Long is the beneficial owner of such shares for purposes of Section 13 of the Securities Exchange Act of 1934, as amended, or any other purpose. |
(b) | The Management Company and Mr. Long share voting and dispositive power with respect to the 2,464,264 shares of Common Stock held directly by the Funds. The Management Company, Mr. Long and the Domestic Fund share voting and dispositive power with respect to the 1,020,337 shares of Common Stock held directly by the Domestic Fund. The Management Company, Mr. Long and the Offshore Fund share voting and dispositive power with respect to the 1,443,927 shares of Common Stock held directly by the Offshore Fund. |
(c) | Since January 26, 2013, the Reporting Persons acquired and disposed of shares of Common Stock as set forth below. All such shares were acquired through brokers transactions. |
Transactions by the Domestic Fund
Trade Date |
Number of Shares | Price Per Share | Transaction | |||||||||
1/21/2013 |
20,000 | $ | 3.8899 | Sold | ||||||||
3/21/2013 |
25,000 | 3.44 | Bought | |||||||||
3/21/2013 |
9,126 | 3.4624 | Bought | |||||||||
3/22/2013 |
7,371 | 3.5331 | Bought |
Transactions by the Offshore Fund
Trade Date |
Number of Shares | Price Per Share | Transaction | |||||||||
1/23/2013 |
30,000 | $ | 3.8899 | Sold | ||||||||
2/26/2013 |
1,700 | 3.8819 | Sold | |||||||||
2/27/2013 |
1,806 | 3.8825 | Sold | |||||||||
3/5/2013 |
7,227 | 3.8019 | Sold | |||||||||
3/11/2013 |
6,500 | 3.7619 | Sold |
(d) | Other than the Funds which directly hold the shares of Common Stock, and except as set forth in this Item 5, no person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock. |
(e) | Not applicable. |
- 7 -
Item 7. | Material to Be Filed as Exhibits. |
99.1 | Joint Filing Agreement and Power of Attorney dated August 12, 2011 among the Reporting Persons (previously filed). | |
99.2 | Letter dated March 27, 2013. |
- 8 -
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
Dated: March 27, 2013
OTTER CREEK PARTNERS I, L.P. | ||||
By: | Otter Creek Management, Inc., | |||
its general partner | ||||
By: | /s/ R. Keith Long | |||
R. Keith Long, President | ||||
OTTER CREEK INTERNATIONAL, LTD. | ||||
By: | /s/ R. Keith Long | |||
R. Keith Long, Director | ||||
OTTER CREEK MANAGEMENT, INC. | ||||
By: | /s/ R. Keith Long | |||
R. Keith Long, Chief Executive Officer | ||||
R. KEITH LONG | ||||
R. Keith Long | ||||
R. Keith Long |
- 9 -
Exhibit 99.2
OTTER CREEK MANAGEMENT, INC.
222 LAKEVIEW AVENUE
SUITE 1100
WEST PALM BEACH, FL 33401
PHONE: (561) 832-4110
FAX: (561) 655-6902
EMAIL: KLONG@OTTERCREEKMGT.COM
SHAREHOLDER-BOARD COMMUNICATION
March 27, 2013
Via Federal Express and Fax (253-813-9377)
Mr. Jerry L. Calhoun, Chairman
Mr. Charles M. Brown, Director
Mr. Patrick J. Byrne, Director
Mr. Richard P. Fox, Director
Mr. Robert S. Jaffe, Director
Mr. Larry A. Kring, Director
Mr. Lorenzo C. Lamadrid, Director
Mr. Bradley D. Tilden, Director
c/o Corporate Secretary
Flow International Corporation
23500 64th Avenue South
Kent, WA 98032
Dear Directors:
We have been Flow shareholders for more than 12 years. Since the completion of the initial public offering (the IPO) at $12 per share in 1984, serial management teams have arrived, enriched themselves, destroyed value and diluted shareholders. Twenty-eight years after the IPO shareholders own stock valued at $3.50. No dividends have been paid.
In order to recognize the path toward value creation for shareholders it is necessary to understand what Flow (the company) is and is not. Flow is the global leader in the machine tool waterjet cutting category. The machine tool industry is cyclical. Industry growth approximates GDP growth. The waterjet cutting category has grown faster than the overall industry offering an incremental growth opportunity within the context of industry cyclicality. Six years ago (April 2007) Flows largest shareholder urged the Board to abandon its search for a CEO and retain an investment bank for the purpose of offering the company for sale. The market capitalization at that time was in excess of $400 million. The share price was $11.00. It was clear at the time that the costs of remaining as a standalone public company were such that the shareholders would never realize the true value of their ownership. Despite the urging of knowledgeable shareholders, the Board of Directors announced that in their opinion remaining independent in a public format offered the best option for optimizing shareholder value. The market capitalization is presently $170 million. The share price is $3.50. Shareholders have been brutalized. The result for shareholders has been an unmitigated disaster.
In the summer of 2007 the Board proceeded to hire Mr. Charles Brown as CEO. In his first shareholder letter he stated that while continuing to rebuild infrastructure
our eyes will continue to be focused on growth, which is in our DNA. As in the past, this growth will be driven by our proven formula: creating new opportunities with our technology advantage while adding sales resources that generate incremental revenue
Shareholder-Board Communication Letter | Page 2 of 2 | |
March 27, 2013 |
To experienced investors in Flow used to the cycles inherent in the machine tool industry, the concept that growth was in our DNA seemed rather bizarre. Thus began Mr. Browns strange and quixotic journey to reframe the company as some sort of 1990s hot technology growth entity.
For the fiscal year ending April 2008 revenues came in at $244 million. Pretax income before extraordinary items totaled $15.3 million. For the fiscal year ending in April 2013 revenues are projected to come in at $267 million and pretax income is projected to be approximately $15.5 million. April 2008 share count was 37.4 million. April 2013 share count will be approximately 48.4 million. For the five years ending 2013, cumulative income available to shareholders totals to a $12.5 loss. In his quest for recognition as a growth company Mr. Brown has certainly followed through on his plan to add sales resources. Sales and marketing expenses that were running at an annual rate of $42 million in fiscal year 2008 are now running in excess of $50 million. The $8 million incremental annual expense run rate has generated $20 million in incremental revenue. Since a meaningful component of that revenue increase has been in consumables we estimate that shareholders are paying roughly $1 million in incremental sales and marketing expenses for every $2 million in incremental machine sales.
Over the past six years the machine tool industry experienced cyclical top line performance not dissimilar to long term industry history. Flows peers took the cycle as an opportunity to rationalize costs through disciplined expense management. Those peers have rebounded with strong profit performance. Flow management has been unwilling to make hard cost cutting decisions. Instead we have been told the Flow plan is to invest in growth initiatives which will drive future revenue and profitability. The result has been abysmal performance with Flow ranking at the bottom in virtually every peer company performance metric. Meanwhile over the same six years, while shareholders have been severely diluted, Mr. Brown, primarily through options and share grants, has accumulated 1.4 million shares or roughly 2.9% of the company.
Six years ago your largest shareholder expressed concern with the relative small scale of Flows operations and the accompanying high cost incurred to maintain public company status. The past six years have shown that shareholders will never realize value with Flow as an independent public company. It is time to end the shareholder abuse. We urge the Board of Directors to hire a reputable investment bank with a mandate to explore strategic alternatives including the sale of the company. The environment is receptive. Do not make the same horrendous mistake twice.
Sincerely, | ||||
OTTER CREEK PARTNERS I, L.P. | ||||
By: | Otter Creek Management, Inc., its General Partner | |||
By: | /s/ R. Keith Long | |||
R. Keith Long, President | ||||
OTTER CREEK INTERNATIONAL, LTD. | ||||
By: | /s/ R. Keith Long | |||
R. Keith Long, Director |