-----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, J3KJECKxonUQ9Z73/Bu8MP1O8LnM0Nx92T283AENUIfOblB8O8PxHpU9oocOnGSX wZOTaZTPXf2Yqra38gOgdw== 0000912057-97-030683.txt : 19970918 0000912057-97-030683.hdr.sgml : 19970918 ACCESSION NUMBER: 0000912057-97-030683 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19970912 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: SEC FILE NUMBER: 000-12448 FILM NUMBER: 97679912 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 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 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 August 21, 1997: 14,722,205 shares FLOW INTERNATIONAL CORPORATION INDEX PAGE Part I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets - July 31, 1997 and April 30, 1997. . . . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Income - Three Months Ended July 31, 1997 and 1996 . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended July 31, 1997 and 1996 . . . . . . . . . . . . . 5 Notes to Condensed Consolidated Financial Statements. . . . . . . . . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. . . . . . . . . . . . 7 Part II - OTHER INFORMATION Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 9 Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . . 9 Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . 9 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . 9 Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . 9 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 9 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 -2- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) JULY 31, APRIL 30, 1997 1997 --------- --------- (unaudited) ASSETS Current Assets: Cash $ 7,824 $ 2,479 Trade Accounts Receivable, less allowances for doubtful accounts of $953 and $1,008, respectively 42,940 40,050 Inventories 41,882 38,471 Deferred Income Taxes 4,758 4,758 Other Current Assets 4,338 4,959 --------- --------- Total Current Assets 101,742 90,717 Property and Equipment, net 27,774 25,594 Intangible Assets, net of accumulated amortization of $4,682 and $4,441, respectively 14,033 11,471 Deferred Income Taxes 515 515 Other Assets 3,091 5,169 --------- --------- $ 147,155 $ 133,466 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes Payable $ 1,843 $ 1,651 Current Portion of Long-Term Obligations 2,985 79 Accounts Payable 12,027 11,619 Accrued Payroll and Related Liabilities 4,324 4,564 Other Accrued Taxes 985 1,139 Other Accrued Liabilities 6,116 3,539 --------- --------- Total Current Liabilities 28,280 22,591 Long-Term Obligations 61,640 53,569 Minority Interest 518 553 Shareholders' 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 15,091,611 and 14,710,794 shares issued and outstanding, respectively, at July 31, 1997 14,925,627 and 14,544,810 shares issued and outstanding, respectively, at April 30, 1997 151 149 Capital in Excess of Par 39,012 38,871 Retained Earnings 21,508 19,266 Treasury Common Stock of 380,817 shares at cost (1,429) (1,429) Cumulative Translation Adjustment (2,184) 101 Unrealized Loss on Equity Securities Available For Sale (341) (205) --------- --------- Total Stockholders' Equity 56,717 56,753 --------- --------- $ 147,155 $ 133,466 --------- --------- --------- --------- See Accompanying Notes to Condensed Consolidated Financial Statements -3- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) THREE MONTHS ENDED JULY 31, ----------------------- 1997 1996 Revenue: Sales $ 37,446 $ 32,353 Services 6,423 5,236 Rentals 3,645 3,340 --------- --------- Total Revenues 47,514 40,929 Cost of Sales: Sales 22,468 19,244 Services 5,887 3,808 Rentals 1,099 1,604 --------- --------- Total Cost of Sales 29,454 24,656 --------- --------- Gross Profit 18,060 16,273 Expenses: Marketing 6,895 6,232 Research and Engineering 2,500 2,167 General and Administrative 4,160 4,102 --------- --------- 13,555 12,501 --------- --------- Operating Income 4,505 3,772 Interest and Other Expense, net (1,055) (629) --------- --------- Income Before Provision for Income Taxes 3,450 3,143 Provision for Income Taxes 1,208 911 --------- --------- Net Income $ 2,242 $ 2,232 --------- --------- --------- --------- Earnings Per Common and Equivalent Shares $ .15 $ .15 --------- --------- --------- --------- See Accompanying Notes to Condensed Consolidated Financial Statements -4- FLOW INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) THREE MONTHS ENDED JULY 31, ---------------------- 1997 1996 Cash Flows from Operating Activities: Net Income $ 2,242 $ 2,232 Adjustments to Reconcile Net Income to Cash Provided (Used) by Operating Activities: Depreciation and Amortization 1,186 1,949 Other 23 Increase in assets (2,434) (2,508) Increase in liabilities 1,475 1,667 --------- --------- Cash provided by operating activities 2,469 3,363 --------- --------- Cash Flows from Investing Activities: Expenditures for property and equipment (2,922) (2,023) Payment for business combination, net of cash acquired (2,528) Other 135 (19) --------- --------- Cash used by investing activities (5,315) (2,042) --------- --------- Cash Flows from Financing Activities: Borrowings (repayments) under line of credit agreements, net 10,345 (1,785) Payments of long-term debt (12) (38) Proceeds from issuance of common stock 143 262 --------- --------- Cash provided (used) by financing activities 10,476 (1,561) --------- --------- Effect of exchange rate changes (2,285) (332) --------- --------- Increase (decrease) in cash and cash equivalents 5,345 (572) Cash and cash equivalents at beginning of period 2,479 3,845 --------- --------- Cash and cash equivalents at end of period $ 7,824 $ 3,273 --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Fair value of assets acquired $4,735 Cash paid and stock issued for assets acquired (2,818) --------- Liabilities assumed $1,917 See Accompanying Notes to Condensed Consolidated Financial Statements -5- FLOW INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended July 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, 1997 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 July 31, 1997 and 1996 were 15,198,000 and 15,025,000, respectively. Fully diluted earnings per share do not differ materially from primary earnings per share. Statement of Financial Accounting Standards No. 128 ("FAS 128"), "Earnings Per Share" will be adopted at the end of fiscal 1998. Applying the provisions of FAS 128, the proforma basic earnings per share and the proforma diluted earnings per share would not differ from the amounts reported in the accompanying Consolidated Statements of Income. 3. Inventories consist of the following: (in thousands) JULY 31, 1997 APRIL 30, 1997 ------------ -------------- Raw Materials and Parts $25,062 $23,896 Work in Process 8,345 5,872 Finished Goods 8,475 8,703 --------- --------- $41,882 $38,471 --------- --------- 4. In May 1997 the Company purchased the stock of Foracon Maschinen Anlangenbau ("Foracon") for $2.3 million and 33,655 shares of Flow common stock. The acquisition further increases the Company's strength in the European market. An additional 97,601 shares of Flow common stock will be paid as consideration if Foracon achieves certain financial targets. Foracon supplies ultrahigh-pressure and related systems to the German market. 5. In September 1997 the Company signed a definitive agreement to sell its Access and Services businesses. The transaction is expected to close at the end of September. The agreement provides for purchase of substantially all the assets of the Access and Services businesses. In fiscal 1997 the Company recorded a $9 million restructuring provision related to the planned divestiture. Management has reviewed the allowance and is of the opinion the provision as recorded is adequate. -6- FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JULY 31, 1997 AND 1996 Total revenues for the three months ended July 31, 1997 were $47.5 million, representing an increase of $6.6 million (16%) over the comparable prior year period. Total product sales increased $5.1 million (16%) versus the prior year quarter. Product sales from the Company's ultrahigh-pressure ("UHP") and Automation business increased $4.7 million (18%). Included in this increase was a 23% increase in system sales and a 12% increase in spare parts sales. The current year includes the results of Foracon Maschinen Anlagenbau ("Foracon") which was acquired in May 1997 to increase the Companys capacity as well as strengthen the Company's market position in Europe. Excluding the effect of Foracon, UHP revenues increased $3.3 million (13%). This $3.3 million increase includes the negative effect of the stronger dollar versus the deutschemark, an approximate $1 million reduction in revenues in the current year. All primary UHP and Automation sales territories experienced revenue gains with North America, Asia and Europe increasing 11%, 45% and 27%, respectively. Access product sales increased $392,000 (6%) as compared to the prior year. Service revenues of $6.4 million represent a $1.2 million increase (23%) over last year and rental revenues increased $305,000 (9%). Gross profit as a percentage of revenues (gross margin rate) was 38% for the quarter as compared to 40% in the prior year. The gross margin rate on the core UHP and Automation business remained at 42% for both the current and prior year quarter. The change in consolidated gross margin is attributable to the Services division which experienced higher than anticipated costs on several projects. 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 and systems in sales revenues. Robotic systems typically carry lower gross margin rates than the Company's pump, spare parts, and access systems businesses. Operating expenses of $13.6 million for the quarter ended July 31, 1997 were 29% of revenues as compared to 31% in the prior year. This decrease primarily results from general and administrative expenses which were flat quarter over quarter. Interest and other expense, net, of $1.1 million represents an increase of $426,000 (68%) over the prior year. Interest expense increased $300,000 reflecting increased borrowings. The remaining difference relates primarily to minority interest in net losses of the joint ventures. Based upon the expected tax position of the Company for fiscal 1998, taxes have been provided for at 35% versus 29% in the prior year. 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. -7- FLOW INTERNATIONAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The weighted average number of shares outstanding for the quarter increased to 15,198,000 from 15,025,000 in the prior year. The increase relates primarily to stock consideration associated with the Foracon acquisition. As a result of the above, the Company recorded net income of $2.2 million, or 15 cents per share for the three months ended July 31, 1997 and 1996. LIQUIDITY AND CAPITAL RESOURCES The Company generated $2.5 million in cash from operations during the three months ended July 31, 1997 as compared to $3.4 million in the prior year. Total debt at July 31, 1997 was $66.5 million, up $11.2 million from April 30, 1997, while cash increased $5.3 million. The increase in debt was attributable to the purchase of Foracon, timing of cash receipts and paydown of debt, and the negative effect of several Services projects. Subsequent to quarter end the Company signed a definitive agreement to sell the Access and Services business. The cash proceeds will be used to paydown existing debt. In conjunction with this sale, the Company anticipates re-negotiating its current credit facilities to more properly reflect the anticipated credit needs in the future. 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. The Company's Credit Agreement and Private Placement require the Company to comply with certain financial covenants. As of July 31, 1997, the Company was in compliance with all such covenants. Gross trade receivables at July 31, 1997 increased $2.8 million (7%), from April 30, 1997. This is a function of an increase in sales, the acquisition of Foracon receivables, as well as a shift in the mix towards large system sales. 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 July 31, 1997 increased $3.4 million (9%), from April 30, 1997. This increase is in large part work in process and represents products manufactured by Flow Robotics and Flow Automation which can require an extended manufacturing period, as well as the acquisition of Foracon inventory. 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 1997 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. -8- 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 -9- 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: September 11, 1997 /s/ Ronald W. Tarrant --------------------- Ronald W. Tarrant Chairman, President and Chief Executive Officer (Principal Executive Officer) Date: September 11, 1997 /s/ Stephen D. Reichenbach --------------------- Stephen D. Reichenbach Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) -10- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS APR-30-1998 JUL-31-1997 7824 0 43,893 953 41,882 101,742 62,767 34,993 147,155 28,280 0 0 0 151 56,566 147,155 37,446 47,514 22,468 43,009 (78) (55) 1,133 3,450 1,208 2,242 0 0 0 2,242 .15 .15
-----END PRIVACY-ENHANCED MESSAGE-----