-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bvd8YP+eLeAfpVqvUiar8ZvsBc7LHnr5AuGxKwwwhCHWg1ynUIU3R2hAZkVKmLFp eKJcXGmti/R1lYaVxbxjPQ== 0000912057-96-028696.txt : 19961210 0000912057-96-028696.hdr.sgml : 19961210 ACCESSION NUMBER: 0000912057-96-028696 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961209 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLOW INTERNATIONAL CORP CENTRAL INDEX KEY: 0000713002 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [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: 96677603 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 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number 2-81315 FLOW INTERNATIONAL CORPORATION DELAWARE 91-1104842 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 23500 - 64TH AVENUE SOUTH KENT, WASHINGTON 98032 (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 outstanding of common stock, as of November 29, 1996: 14,554,269 shares. FLOW INTERNATIONAL CORPORATION INDEX Page ---- Part I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets - October 31, 1996 and April 30, 1996.. . . . . . . . . . . 3 Condensed Consolidated Statements of Income - Three Months Ended October 31, 1996 and 1995. . . . . . . 4 Condensed Consolidated Statements of Income - Six Months Ended October 31, 1996 and 1995. . . . . . . . 5 Condensed Consolidated Statements of Cash Flows - Six Months Ended October 31, 1996 and 1995. . . . . . . . 6 Notes to Condensed Consolidated Financial Statements. . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. . . . . 8 Part II - OTHER INFORMATION Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 11 Item 2. Changes in Securities. . . . . . . . . . . . . . . . 11 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . 11 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . 11 Item 5. Other Information. . . . . . . . . . . . . . . . . . 11 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 11 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 -2- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) October 31, April 30, 1996 1996 ---------- --------- (unaudited) ASSETS Current Assets: Cash $ 3,502 $ 3,845 Trade Accounts Receivable, less allowances for doubtful accounts of $1,355 and $1,186, respectively 40,959 35,467 Inventories 36,986 34,589 Deferred Income Taxes 1,965 1,965 Other Current Assets 4,887 4,978 ---------- --------- Total Current Assets 88,299 80,844 Property and Equipment, net 27,532 27,083 Intangible Assets, net of accumulated amortization of $3,903 and $3,294, respectively 13,292 13,901 Deferred Income Taxes 712 699 Other Assets 4,300 3,966 ---------- --------- $ 134,135 $ 126,493 ---------- --------- ---------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable $ 1,867 $ 2,304 Current Portion of Long-Term Obligations 948 1,035 Accounts Payable 12,009 12,088 Accrued Payroll and Related Liabilities 4,734 3,942 Other Accrued Taxes 856 590 Other Accrued Liabilities 3,311 3,019 ---------- --------- Total Current Liabilities 23,725 22,978 Long-Term Obligations 47,970 45,590 Minority Interest 412 865 Stockholders' Equity: Series A 8% Convertible Preferred Stock - $.01 par value, $500 liquidation preference, 1,000,000 shares authorized, 0 issued Common Stock - $.01 par value, 20,000,000 shares authorized, 14,895,922 and 14,609,519 shares issued and outstanding, respectively, at October 31, 1996 14,784,647 and 14,508,244 shares issued and outstanding, respectively, at April 30, 1996 149 148 Capital in Excess of Par 38,511 38,038 Retained Earnings 23,197 18,541 Treasury Common Stock, at cost, 286,403 and 276,403 shares at October 31, 1996 and April 30, 1996, respectively (631) (556) Cumulative Translation Adjustment 833 981 Loan to Employee Stock Ownership Plan and Trust (31) (92) ---------- --------- Total Stockholders' Equity 62,028 57,060 ---------- --------- $ 134,135 $ 126,493 ---------- --------- ---------- --------- See Accompanying Notes to Condensed Consolidated Financial Statements -3- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in thousands, except per share data) Three Months Ended October 31, ----------------------- 1996 1995 Revenue: Sales $ 32,302 $ 27,238 Services 5,289 5,127 Rentals 3,732 3,257 ---------- --------- Total Revenues 41,323 35,622 Cost of Sales: Sales 18,279 16,328 Services 3,975 3,750 Rentals 1,758 1,353 ---------- --------- Total Cost of Sales 24,012 21,431 ---------- --------- Gross Profit 17,311 14,191 Expenses: Marketing 6,547 5,359 Research and Engineering 2,085 2,031 General and Administrative 4,348 3,713 ---------- --------- 12,980 11,103 ---------- --------- Operating Income 4,331 3,088 Interest and Other Expense, net (917) (758) ---------- --------- Income Before Provision for Income Taxes 3,414 2,330 Provision for Income Taxes 990 524 ---------- --------- Net Income $ 2,424 $ 1,806 ---------- --------- Earnings Per Common and Equivalent Shares $ .16 $ .12 ---------- --------- ---------- --------- Average Common and Equivalent Shares Outstanding 15,055 15,233 See Accompanying Notes to Condensed Consolidated Financial Statements -4- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in thousands, except per share data) Six Months Ended October 31, --------------------- 1996 1995 Revenue: Sales $ 64,655 $ 52,138 Services 10,525 10,468 Rentals 7,072 6,029 -------- ------- Total Revenues 82,252 68,635 Cost of Sales: Sales 37,523 30,391 Services 7,783 7,538 Rentals 3,362 2,610 -------- ------- Total Cost of Sales 48,668 40,539 -------- ------- Gross Profit 33,584 28,096 Expenses: Marketing 12,779 10,613 Research and Engineering 4,252 3,855 General and Administrative 8,450 7,381 -------- ------- 25,481 21,849 -------- ------- Operating Income 8,103 6,247 Interest and Other Expense, net (1,546) (1,259) -------- ------- Income Before Provision for Income Taxes 6,557 4,988 Provision for Income Taxes 1,901 1,122 -------- ------- Net Income $ 4,656 $ 3,866 -------- ------- Earnings Per Common and Equivalent Shares $ .31 $ .26 -------- ------- -------- ------- Average Common and Equivalent Shares Outstanding 15,042 15,117 See Accompanying Notes to Condensed Consolidated Financial Statements -5- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; in thousands) Six Months Ended October 31, --------------------- 1996 1995 Cash Flows from Operating Activities: Net Income $ 4,656 $ 3,866 Adjustments to Reconcile Net Income to Cash Provided (Used) by Operating Activities: Depreciation and Amortization 3,714 3,508 Other 61 50 Increase in assets (8,145) (6,598) Increase (decrease) in liabilities 818 (2,997) -------- ------- Cash provided (used) by operating activities 1,104 (2,171) -------- ------- Cash Flows from Investing Activities: Expenditures for property and equipment (3,823) (5,055) Payment for business combination, net of cash acquired (186) Other 269 812 -------- ------- Cash used by investing activities (3,554) (4,429) -------- ------- Cash Flows from Financing Activities: Borrowings under line of credit agreements, net 1,943 68 Proceeds from private debt placement 15,000 Payments of long-term debt (87) (7,306) Proceeds from issuance of common stock 474 21 Purchase of treasury stock (75) _ -------- ------- Cash provided by financing activities 2,255 7,783 -------- ------- Effect of exchange rate changes on cash (148) (421) -------- ------- Increase (decrease) in cash and cash equivalents (343) 762 Cash and cash equivalents at beginning of period 3,845 1,074 -------- ------- Cash and cash equivalents at end of period $ 3,502 $ 1,836 -------- ------- -------- ------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Fair value of assets acquired $ 2,860 Cash paid for assets acquired (597) ------- Liabilities assumed $ 2,263 ------- ------- See Accompanying Notes to Condensed Consolidated Financial Statements -6- FLOW INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Six Months Ended October 31, 1996 (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 income, and cash flows for the interim periods presented. These interim financial statements should be read in conjunction with the April 30, 1996 consolidated financial statements. 2. Primary earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding plus the equivalent shares attributable to dilutive stock options during each period. The weighted average number of shares outstanding, including equivalent shares where required, for the three months ended October 31, 1996 and 1995 were 15,055,000 and 15,233,000, respectively, and for the six months ended October 31, 1996 and 1995 were 15,042,000 and 15,117,000, respectively. Fully diluted earnings per share do not differ materially from primary earnings per share. 3. Inventories consist of the following: (in thousands) October 31, 1996 April 30, 1996 ---------------- -------------- Raw Materials and Parts $23,223 $20,982 Work in Process 6,194 6,339 Finished Goods 7,569 7,268 ------- ------- $36,986 $34,589 ------- ------- ------- ------- 4. During fiscal 1996 the Company invested in a joint venture with Okura & Co., Ltd., its exclusive Japanese distributor. The Company is the majority partner, and the business is known as Flow Japan Corporation. -7- FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Total revenues for the three months ended October 31, 1996 were $41.3 million, an increase of $5.7 million (16%) over the comparable period in the prior year. Year-to-date revenues of $82.3 million increased $13.6 million (20%) over the first half of fiscal 1996. The revenue increase for the quarter was primarily attributable to growth in the Company's ultrahigh-pressure ("UHP") and factory automation business, while year to date revenue growth was recorded by both UHP and factory automation as well as the access operations. Total revenues in North America rose 16% for the quarter. UHP and factory automation revenues increased 28% for the quarter and 32% year-to-date compared to the prior year periods. The Company's UHP European operations recorded a quarterly revenue increase of 52%, while Asian UHP revenues increased 46% over the prior year. Access systems revenues increased 2% for the quarter and 7% year to date compared to the prior periods a year ago, while the HydroMilling-Registered Trademark- and HydroCleaning-TM- ("Services") revenues decreased 13% and 10% versus the prior year quarter and year to date, respectively. The decrease in the Services business resulted from reduced revenues recognized in fiscal 1997 on the Kennedy Center project as it comes to completion. The Company was recently awarded two Services contracts totaling $12.5 million which begin in the third quarter of fiscal 1997. Gross profit as a percentage of revenues (gross margin rate) was 42% for the quarter as compared to 40% in the prior year and on a year to date basis was 41% for both the current and prior year. Comparison of gross margin rates is dependent on the mix of revenue types, which includes sales, services, and rentals; and the mix of spare parts, standard and special systems in sales revenues. Systems typically carry lower gross margin rates than the Company's pump, spare parts, and access systems businesses. The increase in gross margin rate for the quarter was primarily due to a shift in mix towards standard system sales as opposed to special systems. Operating expenses of $13 million increased $1.9 million (17%) for the quarter ended October 31, 1996, compared to the prior year and were $25.5 million, up $3.6 million (17%) for the six months ended October 31, 1996 versus the prior year period. Operating expenses expressed as a percent of revenues were 31% for both the current and prior year quarter. On a year to date basis, operating expenses were 31%, down from 32% in the prior year period. Management will continue to focus efforts on reducing these expenses as a percent of revenues. Second quarter fiscal 1997 interest and other expense, net, of $917,000 represents an increase of $159,000 (21%) compared to the prior year. Year-to- date, interest and other expense, net, totaled $1.5 million, an increase of $287,000 (23%) compared to the same period in fiscal 1996. The increase for both the quarter and year to date represents increased interest expense due to higher debt levels. Interest rates remained comparable for both the current and prior year. -8- FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The income tax rate was lower than the statutory rate in both the current and prior year due primarily to lower foreign tax rates, benefits from the foreign sales corporation, and an ongoing review of the Company's FAS 109 valuation allowance. Based upon the expected tax position of the Company for fiscal 1997, taxes have been provided for at 29% of pre tax income versus 22% in the prior year. Management expects the Company's effective tax rate to continue to increase in succeeding fiscal years. The weighted average number of average shares outstanding for the quarter decreased to 15,055,000 from 15,233,000 as compared to fiscal 1996. Year-to- date average shares outstanding decreased to 15,042,000 from 15,117,000 over the prior year. This decrease was caused by the reduction in the Company's stock price over the prior year and the related effect on the treasury stock method of calculating common stock equivalents. As a result of the above, the Company recorded net income of $2.4 million, or 16 cents per share for the three months ended October 31, 1996, compared to $1.8 million, or 12 cents per share for the same period in the prior year. Year-to-date, net income for fiscal 1997 totaled $4.7 million, or 31 cents per share, compared to $3.9 million, or 26 cents per share, for fiscal 1996. LIQUIDITY AND CAPITAL RESOURCES The Company generated $1.1 million in cash flow from operations during the six months ended October 31, 1996. For the like period in the prior year, the Company used $2.2 million in its operating activities. Total debt at October 31, 1996 was $50.8 million, up $1.9 million from April 30, 1996. The Company believes that the available credit facilities and working capital generated by operations will provide sufficient resources to meet its operating and capital requirements for the next twelve months. The Company's Credit Agreement and Private Placement require the Company to comply with certain financial covenants. As of October 31, 1996, the Company was in compliance with all such covenants. Gross trade receivables at October 31, 1996 increased $5.7 million (15%), from April 30, 1996. This is a function of an increase in sales as well as a change in the mix towards large standard system sales. Longer payment terms are sometimes negotiated on large system orders. Days sales in gross accounts receivable can be negatively impacted by the traditionally longer payment cycle outside the United States. The Company's management does not believe these timing issues will present a material adverse impact on the Company's short-term liquidity requirements. -9- FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Inventories at October 31, 1996 increased $2.4 million (7%), from April 30, 1996. This increase is primarily in raw material and parts, which is reflective of the anticipate growth in the business. SAFE HARBOR STATEMENT: STATEMENTS IN THIS REPORT THAT ARE NOT STRICTLY HISTORICAL ARE "FORWARD-LOOKING" STATEMENTS WHICH SHOULD BE CONSIDERED AS SUBJECT TO THE MANY UNCERTAINTIES THAT EXIST IN THE COMPANY'S OPERATIONS AND BUSINESS ENVIRONMENT. THESE UNCERTAINTIES, WHICH INCLUDE ECONOMIC AND CURRENCY CONDITIONS, MARKET DEMAND AND PRICING, COMPETITIVE AND COST FACTORS, AND THE LIKE, ARE SET FORTH IN THE FLOW INTERNATIONAL CORPORATION FORM 10-K REPORT FOR 1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. -10- 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 The Company held its 1996 Annual Meeting of Stockholders on August 29, 1996. At the meeting three directors were elected. Kathryn L. Munro, Sandra F. Rorem and Dean D. Thornton were elected to three year terms ending with the 1999 Annual Meeting of Stockholders receiving, respectively, 12,011,837, 12,008,041 and 12,051,360 votes in favor, and 767,751, 771,547 and 728,228 votes withheld. In addition, the proposal to amend the Company's 1987 Stock Option Plan for Nonemployee Directors ("the NED Plan") was approved. The NED Plan received 11,258,984 shares for approval, 1,328,943 shares against approval and 135,561 shares abstained. There were 56,100 broker non-votes against the NED Plan amendment. Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - None (b) Reports on Form 8-K - None -11- 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 Date: December 9, 1996 /s/ Ronald W. Tarrant --------------------- Ronald W. Tarrant Chairman, President and Chief Executive Officer (Principal Executive Officer) Date: December 9, 1996 /s/ Stephen D. Reichenbach -------------------------- Stephen D. Reichenbach Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) EX-27 2 EXHIBIT 27
5 6-MOS APR-30-1997 MAY-01-1996 OCT-31-1996 3,502 0 42,314 1,355 36,986 88,299 61,735 34,203 134,135 23,725 0 0 0 149 61,879 134,135 64,655 82,252 37,523 74,149 (135) 169 1,052 6,557 1,901 4,656 0 0 0 4,656 .31 .31 This is income
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