<PAGE>1
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 July 31, 1995
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 August 31, 1995:
14,680,147 shares.
<PAGE>2
FLOW INTERNATIONAL CORPORATION
INDEX
Page
Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
July 31, 1995 and April 30, 1995............................. 3
Condensed Consolidated Statements of Income -
Three Months Ended July 31, 1995 and 1994.................... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended July 31, 1995 and 1994.................... 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
<PAGE>3
FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
July 31, April 30,
1995 1995
(unaudited)
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 1,909 $ 1,074
Trade Accounts Receivable, less allowances
for doubtful accounts of $1,124 and $1,150,
respectively 33,211 31,638
Inventories 30,258 27,219
Deferred Income Taxes 1,340 1,335
Other Current Assets 4,969 4,719
---------- ----------
Total Current Assets 71,687 65,985
Property and Equipment, net 24,933 24,533
Intangible Assets, net of accumulated
amortization of $2,511 and $2,275, respectively 14,083 13,361
Other Assets 1,430 1,605
----------- ----------
$112,133 $105,484
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable to Banks $ 2,285 $ 1,614
Current Portion of Long-Term Obligations 3,832 798
Accounts Payable 10,959 12,221
Accrued Payroll and Related Liabilities 4,055 3,542
Other Accrued Taxes 477 638
Other Accrued Liabilities 3,258 2,580
-------- --------
Total Current Liabilities 24,866 21,393
Long-Term Obligations 34,103 33,359
Deferred Income Taxes 247 248
Minority Interest 1,154 681
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 14,655,860 and 14,379,457 shares
issued and outstanding, respectively, at
July 31, 1995
14,603,233 and 14,326,830 shares
issued and outstanding, respectively,
at April 30, 1995 147 146
Capital in Excess of Par 37,671 37,602
Retained Earnings 13,516 11,456
Treasury Common Stock of 276,403 shares at cost (556) (556)
Cumulative Translation Adjustment 1,146 1,339
Loan to Employee Stock Ownership Plan and Trust (161) (184)
--------- ---------
Total Stockholders' Equity 51,763 49,803
--------- ---------
$112,133 $105,484
========= =========
</TABLE>
See Accompanying Notes to Condensed
Consolidated Financial Statements
<PAGE>4
FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
-------------------
1995 1994
<S> <C> <C>
Revenue:
Sales $24,900 $17,604
Services 5,341 4,283
Rentals 2,772 2,622
-------- --------
Total Revenues 33,013 24,509
Cost of Sales:
Sales 14,063 9,852
Services 3,788 3,049
Rentals 1,257 1,170
------- --------
Total Cost of Sales 19,108 14,071
------- --------
Gross Profit 13,905 10,438
Expenses:
Marketing 5,254 3,815
Research and Engineering 1,824 1,379
General and Administrative 3,668 2,755
------- -------
10,746 7,949
------- -------
Operating Income 3,159 2,489
Interest and Other Expense, net 501 428
------- -------
Income Before Provision for Income Taxes 2,658 2,061
Provision for Income Taxes 598 412
------- -------
Net Income $ 2,060 $ 1,649
========= ========
Earnings Per Common and Equivalent Shares $ .14 $ .12
========= ========
</TABLE>
See Accompanying Notes to Condensed
Consolidated Financial Statements
<PAGE>5
FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 2,060 $ 1,649
Adjustments to Reconcile Net Income to Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 1,721 1,308
Other 23 23
Increase in assets (3,213) (640)
Increase (decrease) in liabilities (1,562) 236
-------- --------
Cash provided (used) by operating activities (971) 2,576
-------- --------
Cash Flows from Investing Activities:
Expenditures for property and equipment (2,002) (2,334)
Payment for business combination,
net of cash acquired (186)
Other 129 147
-------- --------
Cash used by investing activities (2,059) (2,187)
-------- --------
Cash Flows from Financing Activities:
Borrowings under line of credit agreements 27,815 18,783
Repayments under line of credit agreements (22,823) (17,880)
Payments of long-term debt (1,004) (1,901)
Proceeds from issuance of common stock 70 120
-------- --------
Cash provided (used) by financing activities 4,058 (878)
-------- --------
Effect of exchange rate changes on cash (193) (17)
-------- --------
Increase (decrease) in cash and cash equivalents 835 (506)
Cash and cash equivalents at beginning of period 1,074 1,351
-------- --------
Cash and cash equivalents at end of period $ 1,909 $ 845
======== ========
Supplemental Disclosures of Cash Flow Information
Fair value of assets acquired $ 2,860
Cash paid for assets acquired (597)
--------
Liabilities assumed $ 2,263
========
</TABLE>
See Accompanying Notes to Condensed
Consolidated Financial Statement
<PAGE>6
FLOW INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended July 31, 1995
(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, 1995 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, 1995 and
1994 were 15,002,000 and 14,210,000, respectively. Fully diluted
earnings per share do not differ materially from primary earnings per
share.
3. Inventories consist of the following:
(in thousands)
<TABLE>
<CAPTION>
July 31, 1995 April 30, 1995
<S> <C> <C>
Raw Materials and Parts $17,203 $15,794
Work in Process 5,362 4,432
Finished Goods 7,693 6,993
-------- --------
$30,258 $27,219
======== ========
</TABLE>
4. In July 1995, the Company received an irrevocable long-term commitment
from its principal bank for a new facility of $60 million to replace
its Revolving Credit and Term Loan Agreement (the "Loan Agreement"),
and equipment notes (collectively, "Domestic Financing"), and to
provide a source of available cash. Accordingly, all Domestic
Financings have been reclassified as long-term. The Loan Agreement
requires the Company to comply with certain financial covenants. As of
July 31, 1995, the Company was in compliance with all such covenants.
5. During the quarter the Company invested in a joint venture with Okura &
Co., Ltd., its exclusive Japanese distributor. The Company is the
majority partner, and the business will be know as Flow Japan
Corporation.
<PAGE>7
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, 1995 and 1994
Total revenues for the three months ended July 31, 1995 were $33,013,000,
representing an increase of $8,504,000 (35%) over the comparable period in
the prior year. The increase in sales revenues of $7,296,000 (41%) to
$24,900,000 from the previous year was primarily attributable to the ultra-
high pressure ("UHP") business. UHP sales were up approximately 57% compared
to the prior year. This growth came from current year revenue contributions
by the Company's two robotics acquisitions made during the third quarter of
fiscal 1995, and from growth in the comparable UHP business units. Within
the comparable UHP business units, the Company's European operations recorded
revenue increases of 52% over the prior year, while domestic sales increased
only 3%. A contributing factor to the lower domestic revenue growth is a
softening of the domestic capital goods economy.
As a percent of revenue, gross profit for the three months ended July 31,
1995 decreased by approximately one-half percent to 42% compared to the prior
year. Comparison of the total gross profit percentage is dependent on the
various mix of revenue types, and the level of spare parts and services
activity compared to system sales. However, the gross profit percentage for
the types of revenue shown in the income statement for the three months ended
July 31, 1995 are similar to those of the same period in the prior year. As
a result of the acquisitions made during fiscal 1995, the Company expects a
higher percentage of system sales as it moves towards being a total system
supplier.
Operating expenses of $10,746,000 for the quarter ended July 31, 1995 were
33% of total revenues which is similar to that of the prior year. The dollar
increase from the prior year arose primarily from the acquisitions made
during the second half of fiscal 1995, a Japanese joint venture created
during the quarter, and expenses associated with the integration of the new
businesses into the organization.
Interest and other expense, net, of $501,000 represents an increase of
$73,000 (17%) over the prior year. Included in current year interest and
other expense, net, is approximately $260,000 of additional interest related
to increased borrowings to finance the acquisitions in fiscal 1995 and a
joint venture during the first quarter of fiscal 1996. Offsetting some of
the interest expense are foreign exchange gains and other income recognition,
within several divisions, including the impact of minority interests.
Income tax expense was lower than the statutory rate primarily due to lower
foreign tax rates, benefits from the foreign sales corporation, and an
ongoing review of the Company's FAS 109 valuation allowance.
As a result of the above, the Company recorded net income of $2,060,000, or
14 cents per share for the three months ended July 31, 1995, compared to
$1,649,000, or 12 cents per share for the same period in 1994.
<PAGE>8
FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
In July 1995, the Company received an irrevocable long-term commitment from
its principal bank, US Bank of Washington N.A., to refinance its domestic
borrowings and to provide a source of available cash. The new financing
arrangement comprises a $60 million five-year reducing line of credit. July
31, 1995 debt which will be replaced by the new financing arrangement, has
been classified accordingly. The Company is also in negotiation to complete a
$15 million private placement of debt financing. The Company believes that
the new financings, together with other available credit facilities and
working capital generated by operations, will provide sufficient resources to
meet its operating and capital requirements. The Company's Revolving Credit
and Term Loan Agreement requires the Company to comply with certain financial
covenants. As of July 31, 1995, the Company was in compliance with all such
covenants.
Gross trade receivables at July 31, 1995 increased by $1.6 million, or 5%,
from April 30, 1995, primarily reflecting higher quarterly sales and
inclusion of the Company's Japanese joint venture. Increased days sales in
gross accounts receivable can be attributed to higher foreign sales where
account payment terms are typically longer than in the United States, and
special payment terms negotiated on large system orders. The Company's
management does not believe these timing issues will result in a material
adverse impact on the Company's short-term liquidity requirements.
Inventories at July 31, 1995 increased $3 million, or 11%, from April 30,
1995, primarily related to the higher levels of business and the inclusion of
the newly formed joint venture. Certain products manufactured by ASI and
Dynovation can require an extended manufacturing period, and therefore
involve higher levels of work in process.
<PAGE>9
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
<PAGE>10
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
<TABLE>
<CAPTION>
<S> <C>
Date: September 5, 1995 /s/ Ronald W. Tarrant
----------------------------------------
Ronald W. Tarrant
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: September 5, 1995 /s/ Lee M. Andrews
-----------------------------------------
Lee M. Andrews
Vice President, Chief Financial
Officer (Principal Financial Officer
and Principal Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> JUL-31-1995
<EXCHANGE-RATE> 1
<CASH> 1909
<SECURITIES> 0
<RECEIVABLES> 34335
<ALLOWANCES> 1124
<INVENTORY> 30258
<CURRENT-ASSETS> 71687
<PP&E> 53055
<DEPRECIATION> 28122
<TOTAL-ASSETS> 112133
<CURRENT-LIABILITIES> 24866
<BONDS> 0
<COMMON> 147
0
0
<OTHER-SE> 51636
<TOTAL-LIABILITY-AND-EQUITY> 112133
<SALES> 24900
<TOTAL-REVENUES> 33013
<CGS> 14063
<TOTAL-COSTS> 29854
<OTHER-EXPENSES> (345)
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 846
<INCOME-PRETAX> 2658
<INCOME-TAX> 598
<INCOME-CONTINUING> 2060
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2060
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
