-----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, M0Ff2M4WcDt+bW1h363kulUlBaIHkEmrjCfOfozkckpVhtptPmCULijXSXeYRSzF IMMXlHN2Zb1iaZ0jbysIJg== 0000912057-97-008462.txt : 19970312 0000912057-97-008462.hdr.sgml : 19970312 ACCESSION NUMBER: 0000912057-97-008462 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970131 FILED AS OF DATE: 19970311 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: 97554378 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 FORM 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 January 31, 1997 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 0-12448 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 March 6, 1997: 14,576,564 shares. FLOW INTERNATIONAL CORPORATION INDEX Page ---- Part I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets - January 31, 1997 and April 30, 1996............................ 3 Condensed Consolidated Statements of Income - Three Months Ended January 31, 1997 and 1996................... 4 Condensed Consolidated Statements of Income - Nine Months Ended January 31, 1997 and 1996.................... 5 Condensed Consolidated Statements of Cash Flows - Nine Months Ended January 31, 1997 and 1996.................... 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) January 31, April 30, 1997 1996 ----------- --------- (unaudited) ASSETS Current Assets: Cash $ 4,654 $ 3,845 Trade Accounts Receivable, less allowances for doubtful accounts of $1,372 and $1,186, respectively 35,574 35,467 Inventories 40,191 34,589 Deferred Income Taxes 1,965 1,965 Other Current Assets 4,616 4,978 ----------- --------- Total Current Assets 87,000 80,844 Property and Equipment, net 28,455 27,083 Intangible Assets, net of accumulated amortization of $4,172 and $3,294, respectively 13,023 13,901 Deferred Income Taxes 712 699 Other Assets 5,657 3,966 ----------- --------- $134,847 $126,493 ----------- --------- ----------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable $ 2,516 $ 2,304 Current Portion of Long-Term Obligations 725 1,035 Accounts Payable 10,417 12,088 Accrued Payroll and Related Liabilities 3,908 3,942 Other Accrued Taxes 872 590 Other Accrued Liabilities 3,958 3,019 ----------- --------- Total Current Liabilities 22,396 22,978 Long-Term Obligations 49,379 45,590 Minority Interest 309 865 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, 14,907,217 and 14,564,314 shares issued and outstanding, respectively, at January 31, 1997 14,784,647 and 14,508,244 shares issued and outstanding, respectively, at April 30, 1996 149 148 Capital in Excess of Par 38,541 38,038 Retained Earnings 24,509 18,541 Treasury Common Stock, at cost, 342,903 and 276,403 shares at January 31, 1997 and April 30, 1996, respectively (1,054) (556) Cumulative Translation Adjustment 618 981 Loan to Employee Stock Ownership Plan and Trust - (92) ----------- --------- Total Stockholders' Equity 62,763 57,060 ----------- --------- $134,847 $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 January 31, ------------------- 1997 1996 Revenue: Sales $31,943 $29,941 Services 4,573 3,389 Rentals 3,145 2,311 ------- ------- Total Revenues 39,661 35,641 Cost of Sales: Sales 18,870 18,173 Services 3,407 2,531 Rentals 1,605 1,111 ------- ------- Total Cost of Sales 23,882 21,815 ------- ------- Gross Profit 15,779 13,826 Expenses: Marketing 6,906 5,702 Research and Engineering 2,201 2,178 General and Administrative 3,789 3,775 ------- ------- 12,896 11,655 ------- ------- Operating Income 2,883 2,171 Interest and Other Expense, net (1,036) (826) ------- ------- Income Before Provision for Income Taxes 1,847 1,345 Provision for Income Taxes 535 194 ------- ------- Net Income $ 1,312 $ 1,151 ------- ------- ------- ------- Earnings Per Common and Equivalent Shares $ .09 $ .08 ------- ------- ------- ------- Average Common and Equivalent Shares Outstanding 15,069 15,074 See Accompanying Notes to Condensed Consolidated Financial Statements -4- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited; in thousands, except per share data) Nine Months Ended January 31, ---------------------- 1997 1996 Revenue: Sales $ 96,598 $ 82,079 Services 15,098 13,857 Rentals 10,217 8,340 ----------- --------- Total Revenues 121,913 104,276 Cost of Sales: Sales 56,393 48,564 Services 11,190 10,069 Rentals 4,967 3,721 ----------- --------- Total Cost of Sales 72,550 62,354 ----------- --------- Gross Profit 49,363 41,922 Expenses: Marketing 19,685 16,315 Research and Engineering 6,453 6,033 General and Administrative 12,239 11,156 ----------- --------- 38,377 33,504 ----------- --------- Operating Income 10,986 8,418 Interest and Other Expense, net (2,582) (2,085) ----------- --------- Income Before Provision for Income Taxes 8,404 6,333 Provision for Income Taxes 2,436 1,316 ----------- --------- Net Income $ 5,968 $ 5,017 ----------- --------- ----------- --------- Earnings Per Common and Equivalent Shares $ .40 $ .33 ----------- --------- Average Common and Equivalent Shares Outstanding 15,047 15,095 See Accompanying Notes to Condensed Consolidated Financial Statements -5- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; in thousands) Nine Months Ended January 31, ------------------- 1997 1996 Cash Flows from Operating Activities: Net Income $ 5,968 $ 5,017 Adjustments to Reconcile Net Income to Cash Provided (Used) by Operating Activities: Depreciation and Amortization 5,465 5,119 Other 92 73 Increase in assets (5,551) (13,645) Decrease in liabilities (1,041) (91) --------- -------- Cash provided (used) by operating activities 4,933 (3,527) --------- -------- Cash Flows from Investing Activities: Expenditures for property and equipment (6,346) (6,419) Investment in equity security (1,500) Payment for business combination, net of cash acquired (186) Other 387 1,047 --------- -------- Cash used by investing activities (7,459) (5,558) --------- -------- Cash Flows from Financing Activities: Borrowings under line of credit agreements, net 4,422 3,635 Proceeds from private debt placement 15,000 Payments of long-term debt (729) (8,309) Proceeds from issuance of common stock 503 140 Purchase of treasury stock (498) --------- -------- Cash provided by financing activities 3,698 10,466 --------- -------- Effect of exchange rate changes on cash (363) (298) --------- -------- Increase in cash and cash equivalents 809 1,083 Cash and cash equivalents at beginning of period 3,845 1,074 --------- -------- Cash and cash equivalents at end of period $ 4,654 $ 2,157 --------- -------- --------- -------- 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 Nine Months Ended January 31, 1997 (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 January 31, 1997 and 1996 were 15,069,000 and 15,074,000, respectively, and for the nine months ended January 31, 1997 and 1996 were 15,047,000 and 15,095,000, respectively. Fully diluted earnings per share do not differ materially from primary earnings per share. 3. Inventories consist of the following: (in thousands) JANUARY 31, 1997 APRIL 30, 1996 ---------------- -------------- Raw Materials and Parts $25,453 $20,982 Work in Process 6,765 6,339 Finished Goods 7,973 7,268 ------- ------- $40,191 $34,589 ------- ------- ------- ------- 4. During the third quarter of fiscal 1997 the Company purchased 369,791 shares of Western Garnet International Ltd. ("Western Garnet") stock for $1.5 million. The Company classifies this investment as available-for-sale under Statement of Financial Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities'. Western Garnet is the primary supplier of the Company's garnet which is used in abrasivejet cutting. 5. 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 January 31, 1997 were $39.7 million, an increase of $4 million (11%) over the prior year quarter. Year-to-date revenues of $121.9 million increased $17.6 million (17%) over the comparable period in fiscal 1996. Product sales increased $2 million (7%) for the quarter and $14.5 million (18%) year-to-date as compared to the prior year. Product sales from the Company's ultrahigh-pressure ("UHP") and Automation business increased $3.1 million (13%) for the quarter and $16 million (25%) for the nine months ended January 31, 1997 versus the prior year periods. Access product sales decreased $1.1 million (19%) and $1 million (6%) for the three and nine month period ended January 31, 1997 versus the prior year periods, respectively. Service revenues increased $1.2 million (35%) for the quarter and $1.2 million (9%) for the nine month period versus the prior year periods. The HydroMilling-Registered Trademark- and HydroCleaning-TM- ("Services") business was up $935,000 (38%) for the quarter and up $102,000 (1%) for the year as compared to the prior year periods. Quarterly rental revenues increased $834,000 (36%) to $3.1 million as compared to the prior year. Year-to-date rental revenues were $10.2 million, an increase of $1.9 million (23%) versus the prior year. Domestic revenues increased $3.8 million (19%) and represent 59% of the quarterly revenues. For the nine month period, domestic revenues increased $13.4 million (21%) versus the prior year period and represent 63% of total revenues. The Company's UHP European operations recorded a quarterly revenue increase of 2% and a year-to-date increase of 23%. Asian UHP revenues increased 15% over the prior year quarter and 18% on a year-to-date basis. Gross profit as a percentage of total revenues (gross margin rate) was 40% for the quarter as compared to 39% in the prior year and on a year to date basis was 40% for both the current and prior year. Gross margin rate on product sales for the quarter improved to 41% from 39% in the prior year quarter. For the nine months ended January 31, 1997, the sales gross margin improved to 42%, up from 41% in the prior year period. Gross margin rate on the UHP and Automation sales business for the quarter was 44%, an increase over the prior year quarter from 41%. On a year-to-date basis, the UHP and Automation gross margin rate was 43% in the current year versus 44% in the prior year. Gross margin on Service revenues for the quarter remained comparable to the prior year at 25% and was 26% for the year-to-date period, a decrease of one percentage point versus last year. Rental gross margin rates for the quarter decreased to 49% from 52% in the prior year and for the year-to-date, decreased to 51% from 55% versus last year, primarily as a result of increased depreciation expense associated with additions to the Company's rental assets. 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 rate for the quarter was primarily due to a shift in mix towards standard system sales as opposed to special systems. -8- FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Operating expenses of $12.9 million increased $1.2 million (11%) for the quarter ended January 31, 1997, compared to the prior year and were $38.4 million, up $4.9 million (15%) for the nine months ended January 31, 1997 versus the prior year period. Operating expenses expressed as a percent of revenues were 33% for both the current and prior year quarter. On a year to date basis, operating expenses in fiscal 1997 were 31%, down from 32% in fiscal 1996. Third quarter fiscal 1997 interest and other expense, net, of $1 million represents an increase of $210,000 (25%) compared to the prior year. Year-to-date, interest and other expense, net, totaled $2.6 million, an increase of $497,000 (24%) compared to the same period in fiscal 1996. Approximately one half of the increase for both the quarter and year to date represents increased interest expense due to higher debt levels, while the remainder represents foreign exchange losses. 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 for the year have been provided for at 29% of pre tax income versus 21% 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 15,069,000 from 15,074,000 as compared to fiscal 1996. Year-to-date average shares outstanding decreased to 15,047,000 from 15,095,000 over the prior year. As a result of the above, the Company recorded net income of $1.3 million, or 9 cents per share for the three months ended January 31, 1997, compared to $1.2 million, or 8 cents per share for the same period in the prior year. Year-to-date, net income for fiscal 1997 totaled $6 million, or 40 cents per share, compared to $5 million, or 33 cents per share, for fiscal 1996. The Company has announced its intention to refocus its energy on the UHP and Automation business. To assist the Company in evaluating its strategic alternatives associated with the Access and Services businesses, 34% of the current year revenues, the Company will retain an investment banker. The Company believes this refocusing may result in a fourth quarter pre-tax charge of not more than $9 million. LIQUIDITY AND CAPITAL RESOURCES The Company generated $4.9 million in cash flow from operations during the nine months ended January 31, 1997. For the like period in the prior year, the Company used $3.5 million in its operating activities. The Company has invested $6.3 million in property & equipment during -9- FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) the nine months ended January 31, 1997. Total debt at January 31, 1997 was $52.6 million, up $3.7 million (8%) 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 January 31, 1997, the Company was in compliance with all such covenants. Gross trade receivables at January 31, 1997 were unchanged compared to April 30, 1996. Days sales in gross accounts receivable can be negatively impacted by the traditionally longer payment cycle outside the United States as well as that longer payment terms are sometimes negotiated on large system orders. The Company's management does not believe these timing issues will present a material adverse impact on the Company's short-term liquidity requirements. Inventories at January 31, 1997 increased $5.6 million (16%), 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 None 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: March 10, 1997 /s/ Ronald W. Tarrant --------------------- Ronald W. Tarrant Chairman, President and Chief Executive Officer (Principal Executive Officer) Date: March 10, 1997 /s/ Stephen D. Reichenbach -------------------------- Stephen D. Reichenbach Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) -12- EX-27 2 EXHIBIT 27
5 9-MOS APR-30-1997 MAY-01-1996 JAN-31-1997 4,654 0 36,946 1,372 40,191 87,000 64,022 35,567 134,847 22,396 0 0 0 149 62,614 134,847 96,598 121,913 56,393 110,927 (332) 186 2,914 8,404 2,436 5,968 0 0 0 5,968 .40 .40
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