-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rB5PEEH/YcWBYGgkI5X7TSLYgvXjQoClSakzOhwkmWyAUWQsvDyPl/A3CLSJgfTR CvPJex7nShtv0VGRhKzSxw== 0000713002-95-000003.txt : 19950616 0000713002-95-000003.hdr.sgml : 19950616 ACCESSION NUMBER: 0000713002-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950131 FILED AS OF DATE: 19950308 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLOW INTERNATIONAL CORP CENTRAL INDEX KEY: 0000713002 STANDARD INDUSTRIAL CLASSIFICATION: 3569 IRS NUMBER: 911104842 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12448 FILM NUMBER: 95519363 BUSINESS ADDRESS: STREET 1: 23500 64TH AVE S STREET 2: P O BOX 97040 CITY: KENT STATE: WA ZIP: 98032 BUSINESS PHONE: 2068503500 MAIL ADDRESS: STREET 1: 23500 64TH AVENUE SOUTH CITY: KENT STATE: WA ZIP: 98032 FORMER COMPANY: FORMER CONFORMED NAME: FLOW SYSTEMS INC DATE OF NAME CHANGE: 19890320 10-Q 1 QUARTERLY REPORT FOR QUARTER ENDING 1/31/95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended January 31, 1995 Commission File Number 0-12448 FLOW INTERNATIONAL CORPORATION Incorporated in Delaware I.R.S. Employer No. 91-1104842 Post Office Box 97040 Kent, Washington 98064-9740 (206) 850-3500 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ The number of shares of common stock outstanding as of February 28, 1995: 14,299,243 shares. 2 FLOW INTERNATIONAL CORPORATION INDEX Page Part I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets - January 31, 1995 and April 30,1994...... ........................ 3 Condensed Consolidated Statements of Operations - Three Months Ended January 31, 1995 and 1994...................... 5 Nine Months Ended January 31, 1995 and 1994....................... 6 Condensed Consolidated Statements of Cash Flows - Nine Months Ended January 31, 1995 and 1994....................... 8 Notes to Condensed Consolidated Financial Statements................ 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 12 Part II - OTHER INFORMATION Item 1. Legal Proceedings.......................................... 14 Item 2. Changes in Securities...................................... 14 Item 3. Defaults Upon Senior Securities............................ 14 Item 4. Submission of Matters to a Vote of Security-Holders......................................... 14 Item 5. Other Information.......................................... 14 Item 6. Exhibits and Reports on Form 8-K........................... 14 Signatures.......................................................... 15 3 FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
January 31, April 30, 1995 1994 (Unaudited) ASSETS Current assets: Cash and short-term investments $ 627 $ 1,351 Trade accounts receivable, less allowances for doubtful accounts of $1,090 and $908, respectively 28,087 25,887 Inventories 26,401 22,160 Deferred income taxes 1,483 1,861 Other current assets 3,684 3,877 -------- -------- Total current assets 60,282 55,136 Property and equipment, net 22,754 20,030 Deferred income taxes 1,785 113 Intangible and other assets, net of accumulated amortization of $2,099 and $1,736, respectively 15,054 2,949 -------- -------- $ 99,875 $ 78,228 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks $ 24,459 $ 12,126 Current portion of long-term obligations 4,312 4,378 Accounts payable 8,816 7,968 Accrued payroll and related liabilities 3,308 2,027 Other accrued liabilities 5,078 3,222 -------- -------- Total current liabilities 45,973 29,721 Long-term obligations 7,178 10,559 -------- -------- Total liabilities 53,151 40,280 -------- -------- Stockholders' equity: Series A 8% convertible preferred stock - $.01 par value, $500 liquidation preference, 1,000,000 shares authorized, 0 shares issued and outstanding Common stock - $.01 par value, 20,000,000 shares authorized 14,575,646 and 14,299,243 shares issued and outstanding, respectively, at January 31, 1995 14,031,262 and 13,754,859 shares issued and outstanding,
See Accompanying Notes to Condensed Consolidated Financial Statements 4 FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
January 31, April 30, 1995 1994 (Unaudited) respectively, at April 30, 1994 146 140 Capital in excess of par 37,141 33,889 Retained earnings 9,155 3,728 Treasury common stock of 276,403 shares at cost (556) (556) Cumulative translation adjustment 1,045 1,023 Loan to employee stock ownership plan and trust (207) (276) -------- -------- Total stockholders' equity 46,724 37,948 -------- -------- $ 99,875 $ 78,228 ======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements 5 FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data; unaudited)
Three Months Ended January 31, 1995 1994 Revenue: Sales $ 21,986 $ 15,670 Services 2,980 2,904 Rentals 2,221 1,981 -------- -------- Total revenues 27,187 20,555 Cost of sales: Sales 12,930 9,670 Services 2,330 3,971 Rentals 973 906 -------- -------- Total cost of sales 16,233 14,547 -------- -------- Gross profit 10,954 6,008 Expenses: Marketing 4,089 3,772 Research and engineering 1,782 1,306 General and administrative 2,452 2,687 -------- -------- 8,323 7,765 -------- -------- Operating income (loss) 2,631 (1,757) Interest and other expense, net 860 485 -------- -------- Income (loss) before provision for income taxes 1,771 (2,242) Provision (benefit) for income taxes 155 (448) -------- -------- Net income (loss) $ 1,616 $ (1,794) ======== ======== Earnings (loss) per common and equivalent shares: Net income (loss) $ .11 $ (.13) ======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements 6 FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data; unaudited)
Nine Months Ended January 31, 1995 1994 Revenue: Sales $ 58,722 $ 45,116 Services 11,605 12,360 Rentals 8,127 7,025 -------- -------- Total revenues 78,454 64,501 Cost of sales: Sales 33,499 25,943 Services 8,477 10,640 Rentals 3,486 2,895 -------- -------- Total cost of sales 45,462 39,478 -------- -------- Gross profit 32,992 25,023 Expenses: Marketing 11,992 11,052 Research and engineering 4,631 3,968 General and administrative 8,078 7,914 -------- -------- 24,701 22,934 -------- -------- Operating income 8,291 2,089 Interest and other expense, net 1,756 692 -------- -------- Income before provision for income taxes and change in accounting principle 6,535 1,397 Provision for income taxes 1,108 280 -------- -------- Income before change in accounting principle 5,427 1,117 Change in accounting principle - 401 -------- -------- Net income $ 5,427 $ 1,518 ======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements 7 FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data; unaudited)
Nine Months Ended January 31, 1995 1994 Earnings per common and equivalent shares: Income before change in accounting principle $ .38 $ .07 Change in accounting principle - .03 -------- -------- Net income $ .38 $ .10 ======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements 8 FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands; unaudited)
Nine Months Ended January 31, ---------------- 1995 1994 Cash flows from operating activities: Net income $ 5,427 $ 1,518 Adjustments to reconcile net income to cash Provided by operating activities: Depreciation and amortization 3,563 3,254 Gain on sale of Spider facility - (445) Change in accounting principle - (401) Other 69 69 Change in assets and liabilities net of effects from the purchase of ASI and Dynovation, Inc. Increase in assets (1,462) (3,014) Increase (decrease) in liabilities (892) 1,266 -------- -------- Cash provided by operating activities 6,705 2,247 -------- -------- Cash flows from investing activities: Expenditures for property and equipment (4,459) (4,779) Payment for purchase of assets of ASI and Dynovation, Inc (11,470) - Proceeds from sale of Spider facility - 156 Other (174) 21 -------- -------- Cash used by investing activities (16,103) (4,602) -------- -------- Cash flows from financing activities: Borrowings under line of credit agreements 62,463 54,191 Repayments under line of credit agreements (62,643) (48,587) Financing for purchase of new companies 12,364 - Payments of long-term debt (3,675) (2,609) Proceeds from issuance of common stock 143 196 Payment of preferred stock dividends - (50) -------- -------- Cash provided by financing activities 8,652 3,141 -------- -------- Effect of exchange rate changes on cash 22 (122) -------- -------- Increase (decrease) in cash and cash equivalents (724) 664 Cash and cash equivalents at beginning of period 1,351 118 -------- -------- Cash and cash equivalents at end of period $ 627 $ 782 ======== ========
9 FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Nine Months Ended January 31, ---------------- 1995 1994 Supplemental schedule of noncash investing and financing activities: Fair value of assets acquired from ASI and Dynovation, Inc $ 19,839 Cash paid and stock issued for assets acquired (14,585) -------- Liabilities assumed $ 5,254 ======== Net proceeds from sale of the Spider manufacturing facility $ 1,031 Less one year note receivable (875) -------- Cash proceeds $ 156 ========
See Accompanying Notes to Condensed Consolidated Financial Statements 10 FLOW INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three and Nine Months Ended January 31, 1995 (All tabular dollar amounts in thousands; unaudited) 1. In the opinion of the management of Flow International Corporation (the "Company"), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position, statements of operations, and cash flows for the interim periods presented. These interim financial statements should be read in conjunction with the April 30, 1994 consolidated financial statements. 2. On December 15, 1994, the Company purchased certain net assets of Dynovation Machine Systems, Inc. ("Dynovation"), and on January 3, 1995, the Company purchased certain net assets of ASI Robotic Systems ("ASI"). The Company paid total cash of $11.5 million and issued 445,000 shares of its common stock to acquire the assets of Dynovation and ASI. Dynovation and ASI's operating results have been included from the date of acquisition based upon the purchase method of accounting. On November 4, 1994, Spider Staging Corporation, a wholly owned subsidiary of the Company, entered into a licensing agreement with Ark Systems, Inc. ("Ark") at a cost of $400,000, for the exclusive worldwide marketing and manufacturing rights for the Ark product line. The Company funded these transactions through a short-term bridge loan facility from the Company's principal bank. 3. The Company filed a Form 8-K on December 23, 1994 in respect of the purchase of the Dynovation net assets. If that transaction had occurred at the beginning of each of the three and nine month periods ended January 31, 1995 and 1994, the results of operations of Flow would be adjusted as follows on a pro forma basis: a) for the three months ended January 31, 1995, total revenues would have been $28,131,000, and net income would have been $1,325,000, or 9 cents per share. The adjustments to net income include additional interest expense of $71,000, and additional goodwill amortization of $81,000. For the comparative period in 1994, total revenues would have been $22,338,000, and the net loss would have been $2,032,000, or 15 cents per share. The 1994 adjustments include additional interest expense of $120,000, and additional goodwill amortization of $121,000. b) for the nine months ended January 31, 1995, total revenues would have been $85,634,000, and net income would have been $4,877,000, or 34 cents per share. The adjustments to net income include additional interest expense of $369,000, and additional goodwill amortization of $317,000. For the comparative period in 1994, total revenues would have been $69,635,000, and net income would have been $788,000, or 6 cents per share. The 1994 adjustments include additional interest expense of $359,000, and additional goodwill amortization of $362,000. 11 FLOW INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three and Nine Months Ended January 31, 1995 (Continued) The pro forma consolidated financial information is presented for information purposes only, does not take into account savings which would have been realized from the combination of the Company and Dynovation, and is not indicative of the actual consolidated financial position or results of operations in the future. 4. Primary earnings per common share are computed by dividing net income available to common stockholders by the weighted average number of outstanding shares plus the equivalent shares attributable to dilutive stock options during each period. The weighted average number of outstanding shares for the three months ended January 31, 1995 and 1994 were 14,474,000 and 13,661,000, and for the nine months ended January 31, 1995 and 1994 were 14,327,000 and 14,100,000, respectively. Fully diluted earnings per share do not differ materially from primary earnings per share. Common share equivalents are not included in total shares outstanding for loss per share calculations, as they are antidilutive. 5. Inventories consist of the following: January 31, 1995 April 30, 1994 Raw Materials and Parts $ 13,400 $ 12,417 Work in Process 4,309 1,819 Finished Goods 8,692 7,924 -------- -------- $ 26,401 $ 22,160 ======== ========
Included in inventory at January 31, 1995, is a total amount of $3,450,000 related to Dynovation, ASI and Ark, primarily consisting of work in process. 12 FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations for the Three and Nine Months Ended January 31, 1995 and 1994 During the quarter ended January 31, 1995, the Company purchased certain net assets of two robotics systems manufacturers, Dynovation Machine Systems, Inc. ("Dynovation") and ASI Robotics, Inc. ("ASI"). These acquisitions are part of the Company's long-term strategic plan. Both companies are, and had previously been, integrators of the Company's products. Consolidation of the sales and marketing force began during the quarter, and integration of other functions will continue into fiscal 1996. During the quarter the Company also entered into a licensing agreement with Ark Systems, Inc. ("Ark"), for the exclusive worldwide marketing and manufacturing rights for the Ark product line. Ark produces access system equipment used in the cleaning and maintenance of the under structure of bridges. The Company's consolidated statements of operations include the results of Dynovation, ASI and Ark from the dates of acquisition. The Company paid total cash of $11.5 million and issued 445,000 shares of common stock to acquire the assets of Dynovation and ASI, and paid $400,000 for the licensing agreement from Ark. The Company funded these transactions through a short-term bridge loan facility from the Company's principal bank. Total revenues for the three and nine months ended January 31, 1995 were $27,187,000 and $78,454,000, respectively, representing increases of $6,632,000 (32%) and $13,953,000 (22%) over the corresponding prior year periods. The increase in sales revenues of $6,316,000 (40%) for the three months ended January 31, 1995 compared to the corresponding period in 1994, came primarily from improved ultra high-pressure ("UHP") cutting and cleaning product sales, and the effect of the third quarter acquisitions. The $13,606,000 (30%) increase in sales revenues for the nine months ended January 31, 1995 compared to the corresponding period in 1994, arose for the same reasons as for the three month period, and also from improved access system sales. The Company's European operations contributed to these overall revenue increases with gains of 63% and 53% for the three and nine month periods ended January 31, 1995 over the prior year, respectively. This reflects a continued improvement in that region's economy. Domestic revenues increased by 26% and 17% for the same periods, respectively. Rental revenues increased by $240,000 (12%) and $1,102,000 (16%) for the three and nine month periods ended January 31, 1995 over the prior year, respectively, as a result of expanding the available rental fleet. Service revenues were flat for the three month period ended January 31, 1995 compared to the prior year, and down slightly for the nine month comparison. As a percent of revenue, gross profit for the three and nine months ended January 31, 1995 was 40% and 42%, respectively. This compares to 29% and 39% for the same periods in 1994. Due to the historical impact of the winter weather on construction services, along with a higher percentage of turnkey systems business sold during the third quarter, the gross profit percentage decreased to 40% from 43% for the first two quarters of fiscal 1995. Comparison of gross profit margins between periods is dependent on the differing sales mixes. Sales of UHP material separation spare parts and services typically carry higher margins than UHP systems sales. The prior year third quarter results include a charge of $2,300,000 related to a terminated construction services contract. Exclusive of this non-recurring charge, the prior year gross margin percentage would 13 FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) have been 40% and 42% for the three and nine month periods ended January 31, 1994, respectively. Operating results also improved due to a reduction in operating expenses to 31% of revenues for both the three and nine months ended January 31, 1995, compared to 38% and 36% for the corresponding prior year periods. As a percentage of revenues, improvements were achieved in marketing and general and administrative expense over the prior year quarter. These improvements were primarily a result of ongoing cost containment programs and from integrating certain functions since fiscal 1994. Research and engineering expense as a percent of revenues rose to 7% from 6% in the prior year quarter primarily as a result of the acquisitions which require a high investment in ongoing engineering applications. Interest and other expense, net, of $860,000 and $1,756,000 for the three and nine months ended January 31, 1995, respectively, represent an increase of $375,000 and $1,064,000, respectively, from the corresponding prior year periods. The increase in net interest expense includes approximately $120,000 related to increased borrowings to finance the acquisitions. The prior year also includes interest income on certain notes receivable which were settled in the second half of fiscal 1994. The nine months ended January 31, 1994, also includes recognized income of $445,000 related to the sale of a building previously used by a subsidiary company. Income tax expense was lower than the statutory rate primarily due to lower foreign tax rates, benefits from the foreign sales corporation, and a reassessment of the Company's FAS 109 valuation allowance in light of the recent acquisitions. As a result of the above, the Company recorded net income of $1,616,000, or 11 cents per share, and $5,427,000, or 38 cents per share, for the three and nine months ended January 31, 1995, respectively, compared to a loss of $1,794,000, or 13 cents per share, and net income of $1,518,000, or 10 cents per share, for the same periods in 1994. Liquidity and Capital Resources As of January 31, 1995, the Company had cash of $627,000 and available credit facilities of approximately $15,400,000 (exclusive of the bridge facility), of which $9,700,000 was available to use domestically. The Company's Revolving Credit and Term Loan Agreement requires the Company to comply with certain financial covenants. As of January 31, 1995, the Company was in compliance with all such covenants. During the quarter, the Company obtained a short-term bridge loan facility of $14,000,000 from its principal bank, specifically for acquisition purposes, including those of Dynovation, ASI and the Ark licensing agreement. The Company is in the process of evaluating various options to replace the bridge loan facility with permanent or long-term financing. The Company believes its available credit facilities and working capital generated by operations are sufficient to meet operating and capital requirements. 14 FLOW INTERNATIONAL CORPORATION PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is party to various legal actions incident to the normal operations of its business, none of which is believed to be material to the financial condition of the Company. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security-Holders Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K The Company filed a Current Report on Form 8-K on December 23, 1994, reporting the completion of the acquisition of certain net assets of Dynovation Machine Systems, Inc. on December 15, 1994. The Current Report includes a pro forma consolidated balance sheet as of October 31, 1994, a consolidated pro forma income statement for the six months ended October 31, 1994 and a consolidated pro forma income statement for the year ended April 30, 1994. Also included was the audited financial statements of Dynovation for the year ended September 30, 1994. 15 FLOW INTERNATIONAL CORPORATION 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 thereunto duly authorized. FLOW INTERNATIONAL CORPORATION Ronald W. Tarrant Date: March 8, 1995 ____________________________________ Ronald W. Tarrant Chairman, President and Chief Executive Officer (Principal Executive Officer) Lee M. Andrews Date: March 8, 1995 ____________________________________ Lee M. Andrews Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
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