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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
x | ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2002
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission file number 0-12448
FLOW INTERNATIONAL CORPORATION
VOLUNTARY PENSION AND SALARY DEFERRAL PLAN
(Full Title of the Plan)
FLOW INTERNATIONAL CORPORATION
(Issuer of the securities held pursuant to the Plan)
23500 – 64th Avenue South
Kent, Washington 98032
(Address of principal executive offices)
Table of Contents
Flow International Corporation
Voluntary Pension and
Salary Deferral Plan
Financial Statements and
Supplemental Schedules
December 31, 2002
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
3 – 4 | ||
Financial Statements | ||
5 | ||
6 | ||
7 – 14 | ||
Supplemental Schedules | ||
15 – 16 | ||
17 |
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To the Participants and Administrative Committee
Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Kent, Washington
We have audited the accompanying statement of net assets available for benefits of Flow International Corporation Voluntary Pension and Salary Deferral Plan (the Plan) as of December 31, 2002, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Flow International Corporation Voluntary Pension and Salary Deferral Plan as of December 31, 2002, and the related changes in net assets available for benefits for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets (held at end of year) and nonexempt transactions as of and for the year ended December 31, 2002, are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements as of and for the year ended December 31, 2002 taken as a whole.
/s/ BDO Seidman, LLP
Kirkland, WA
June 17, 2003
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Report of Independent Auditors
To the Participants and Administrative Committee of the
Flow International Corporation Voluntary Pension and Salary Deferral Plan
In our opinion, the accompanying statement of net assets available for benefits presents fairly, in all material respects, the net assets available for benefits of the Flow International Corporation Voluntary Pension and Salary Deferral Plan (“the Plan”) as of December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. This financial statement is the responsibility of the Plan’s management; our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit of this statement in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the statement of net assets available for benefits is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of net assets available for benefits, assessing the accounting principles used and significant estimates made by management, and evaluating the overall statement of net assets available for benefits presentation. We believe that our audit of the statement of net assets available for benefits provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers
Seattle, Washington
May 17, 2002
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Statements of Net Assets Available for Benefits
December 31, | 2002 | 2001 | ||||
Assets | ||||||
Investments, at fair value | ||||||
Mutual funds | $ | 13,493,317 | $ | 16,711,468 | ||
Collective trust fund | 3,988,169 | 3,130,945 | ||||
Flow International Corporation unitized common stock fund | 220,445 | 1,008,995 | ||||
Participant loans | 492,195 | 612,078 | ||||
18,194,126 | 21,463,486 | |||||
Receivables | ||||||
Participant salary deferrals | 50,014 | 89,548 | ||||
Employer contributions | — | 115,487 | ||||
Other | 1,607 | — | ||||
Total receivables | 51,621 | 205,035 | ||||
Cash | 1,449 | 4,842 | ||||
Total assets | 18,247,196 | 21,673,363 | ||||
Liabilities | ||||||
Other | 1,571 | 4,842 | ||||
Net assets available for benefits | $ | 18,245,625 | $ | 21,668,521 | ||
See accompanying notes to the financial statements.
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, | 2002 | |||||
Additions | ||||||
Investment income (loss): | ||||||
Net depreciation in fair value of investments | $ | (4,296,100 | ) | |||
Interest | 46,243 | |||||
(4,249,857 | ) | |||||
Contributions: | ||||||
Employer | 715,509 | |||||
Employee: | ||||||
Salary deferrals | 1,830,816 | |||||
Rollovers from other qualified retirement plans | 9,411 | |||||
Total additions | (1,694,121 | ) | ||||
Deductions | ||||||
Benefits paid to participants | 1,727,675 | |||||
Administrative expenses | 1,100 | |||||
Total deductions | 1,728,775 | |||||
Net decrease | (3,422,896 | ) | ||||
Net assets available for benefits, beginning of year | 21,668,521 | |||||
Net assets available for benefits, end of year | $ | 18,245,625 | ||||
See accompanying notes to the financial statements.
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
1. Plan Description | The following description of the Flow International Corporation Voluntary Pension and Salary Deferral Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions. |
The Plan is a contributory defined contribution plan for the benefit of eligible employees of Flow International Corporation and its subsidiaries and Flow Autoclave Systems, Inc., (collectively the Company). The plan was established October 1, 1986. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). |
In 1999, Flow International Corporation formed a joint venture with Autoclave Systems, Inc., an independent third party. Employees in the newly created Flow Autoclave Systems, Inc. were admitted to the Plan at that time, changing the Plan status from single-employer to multiple-employer. A multiple-employer plan is one that involves more than one employer, and includes plans whose contributions from individual employers are available to pay benefits to all participants. The Plan is considered to be a multiple-employer plan because Autoclave, whose employees participate in the Plan, is less than 80% owned by Flow International Corporation. |
Trustee and Administrator of the Plan |
The Plan is administered by an Advisory Committee appointed by the Board of Directors of the Company. Contributions to the Plan and net plan earnings (losses) thereon are held by the Plan trustee under terms of a trust agreement with Security Trust Company. The funds must be used for the exclusive benefit of Plan participants and their beneficiaries. |
Eligibility |
Employees of the Company that are not members of a collective bargaining unit are eligible to participant in the Plan. Employees who are members of a collective bargaining unit are eligible to participate in the Plan only if the collective bargaining agreement provides for eligibility in the Plan. |
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Notes to Financial Statements
1. Plan Description | Employees are eligible for participation in the Plan upon the first quarterly open enrollment period after commencement of employment and are eligible for the Company match, if any, one year following that date. |
Contributions |
Eligible employees may elect to contribute up to 15% of pretax annual compensation, as defined in the Plan, subject to certain limitations under the Internal Revenue Code (IRC). The Plan also allows catch up contributions for participants age 50 and over and for transfers in from other qualified retirement plans (“Rollovers”). |
Through October 13, 2002, for employees meeting certain employment criteria, the Company provided a matching contribution in an amount equal to 50% of the first 6% of employee compensation contributed for employees with less than five years of service with the Company, or 75% of the first 6% of employee compensation contributed for employees with five years or more of service. |
Effective for compensation earned on or after October 14, 2002, the Plan was amended to make all employer-matching contributions discretionary to the employer. |
Participant Accounts |
Each participant’s account is credited with the participant’s and the Company’s contribution, when applicable, and net Plan earnings or losses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. |
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Notes to Financial Statements
1. Plan Description | Investment Options |
Because investments in the Flow Fund are not diversified, this investment may present higher than average volatility. Therefore, the Plan states that a participant is limited to investing no more than 25% of the balance in his or her account in the Flow Fund. |
Vesting |
Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Company contributions and earnings thereon vest with individual participants based upon years of service with the Company. Participants become 100% vested over five years of service or at a normal retirement age of 65. |
Participant Loans |
Participants may borrow, upon written application, any amount provided that the aggregate amount of all outstanding loans to the participant from the Plan and from any other qualified plan maintained by the employer, including accrued interest thereon, shall not exceed the lesser of $50,000 or 50% of the participants vested account balance. Loan terms shall not exceed five years, except for the purchase of a primary residence, in which case the maximum is ten years. |
The loans are collateralized by the balance in the participant’s account. The rate charged on participant loans is the prime rate (4.25% at December 31, 2002) plus 1%, as of the first day of the quarter in which the loan is approved. Principal and interest is paid ratably not less than monthly. |
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Notes to Financial Statements
1. Plan Description | Payment of Benefits |
Forfeitures |
Unvested forfeited investment balances are used to reduce future employer contributions. During 2002, employer contributions were reduced by $17,354 from forfeited non-vested accounts. |
Administrative Expenses |
The Plan provides that administrative expenses may be paid by either the Plan or the Company. With the exception to certain costs incurred in connection with the Flow International Corporation Unitized Common Stock Fund, administrative expenses were paid by the investment manager, out of commissions or by the Company, and are therefore not reflected in these financial statements. |
2. Summary of Significant | Basis of Preparation |
Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Advisory Committee to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. |
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Notes to Financial Statements
2. Summary of Significant | Risks and Uncertainties |
Investment Valuation and Income Recognition |
Investments are valued at their fair market value. Mutual funds are stated at fair value based on quoted market prices, which represent the net asset values of shares held by the Plan at year-end. The collective trust fund is valued at estimated fair value as determined based on the contract value of the underlying benefit-responsive investment contract with MetLife Insurance Company, as reported by the fund’s trustee. Flow International Corporation common stock is valued at quoted market prices. Participant loans are valued at their outstanding balances, which approximates fair value. |
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. |
The Plan presents in the statement of changes in net assets available for benefits the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains and losses and the unrealized appreciation (depreciation) on those investments. |
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Notes to Financial Statements
2. Summary of Significant | Benefits Paid to Participants |
Reclassifications |
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. |
3. Investments | All Plan investments are held in trust by Security Trust Company. The following table presents investments that represent 5% or more of the Plan’s net assets available for benefits. |
December 31, | 2002 | 2001 | ||||
Alliance Premier Growth Fund Class A | $ | 2,705,681 | ||||
American Century 20th Ultra Advisor Class Fund | $ | 1,459,872 | $ | 2,199,493 | ||
Janus Adviser Worldwide Fund | $ | 1,985,263 | $ | 3,134,229 | ||
MetLife Stable Value Fund | $ | 3,988,169 | $ | 3,143,466 | ||
Vanguard Index 500 Fund | $ | 1,812,640 | $ | 2,176,479 | ||
American Funds Growth Fund Class A | $ | 1,786,414 | ||||
PIMCO Total Return Class A Fund | $ | 1,198,629 | ||||
Safeco Growth Opportunity Class A Fund | $ | 925,729 | ||||
The Plan’s investments, including gains and losses on investments bought and sold, as well as held during the year, appreciated (depreciated) in value as follows: |
Year ended December 31, | 2002 | |||
Mutual funds | $ | (3,772,559 | ) | |
Collective trust fund | 203,919 | |||
Flow International Corporation unitized common stock fund | (727,460 | ) | ||
$ | (4,296,100 | ) | ||
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Notes to Financial Statements
4. Plan Termination | Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. Any unallocated assets of the Plan shall be allocated to participant accounts and distributed in such a manner as the Company may determine. |
5. Federal Income Taxes | The Internal Revenue Service has determined and informed the Company by a letter dated January 26, 2000, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). |
Subsequent to year-end, the Internal Revenue Service has determined and informed the Company by a letter dated May 20, 2003, that the Plan, including amendments made and proposed amendment dated April 30, 2003, and the related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). |
6. Non-Exempt Transactions | During the year ended December 31, 2002, the Company was late six times in remitting contributions into the Plan. The amount remitted late totaled $481,952 and was late an average of 8 days. The rules and regulations issued by the Department of Labor and the Internal Revenue Service require that the Company pay interest to the Plan for such late payments. Such interest is expected to be less than $1,500. |
7. Reconciliation of | For purpose of the financial statements, the investment in the MetLife Stable Value Fund is presented as a collective trust fund. Because the fund is not a direct filing entity, the investment is presented in the Form 5500 based on the underlying investments. The underlying investment of the fund is a contract with an insurance company. |
For purposes of the financial statements, the investment in the Flow Fund is presented as a unitized stock fund. The underlying assets are segregated on the Form 5500. |
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Notes to Financial Statements
7. Reconciliation of |
| The following is a reconciliation of the net assets available for benefits per the financial statements to Schedule H of Form 5500: |
December 31, | 2002 | 2001 | ||||
Net assets available for benefits per the financial statements | $ | 18,245,625 | $ | 21,668,521 | ||
Valuation difference for Flow International Corporation Unitized Common Stock Fund | — | 5,775 | ||||
Net assets available for benefits per Schedule H of Form 5500 | $ | 18,245,625 | $ | 21,674,296 | ||
The following is a reconciliation of investment income per the financial statements to Schedule H of Form 5500: |
Year ended December 31, | 2002 | |||
Per financial statements: | ||||
Net depreciation in fair value of investments | $ | (4,296,100 | ) | |
Interest | 46,243 | |||
(4,249,857 | ) | |||
Difference calculated depreciation of Flow International Corporation Unitized Common Stock Fund | (5,775 | ) | ||
$ | (4,255,632 | ) | ||
Per Schedule H of Form 5500: | ||||
Interest | $ | 46,243 | ||
Realized (loss) on sale of assets | (56,561 | ) | ||
Unrealized depreciation of assets | (471,019 | ) | ||
Net investment (loss) from registered investment companies | (3,774,295 | ) | ||
$ | (4,255,632 | ) | ||
8. Subsequent Event | As of June 17, 2003, Flow International Corporation common stock has declined in value by approximately 46% since year-end. |
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Supplemental Schedules
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Schedule of Assets (Held at End of Year)
Form 5500, Schedule H, Line 4(i)
EIN: 91-1104842
Plan Number: 002
December 31, 2002 | |||||||||
(a) | (b) Identity of Issue, Borrower, Lessor or Similar Party | (c) Description of Investment, including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value | (d) Cost |
| (e) Current | ||||
Mutual Funds: | |||||||||
American Century 20th Ultra Advisor Class Fund | 69,451 shares | * | $ | 1,459,872 | |||||
American Funds Growth Fund Class A | 96,720 shares | * | 1,786,414 | ||||||
American Funds Washington Fund Class A | 2,575 shares | * | 60,544 | ||||||
Davis New York Venture Fund | 18,788 shares | * | 393,424 | ||||||
Gabelli Westwood Balanced Fund | 75,810 shares | * | 757,346 | ||||||
Janus Adviser Worldwide Fund | 91,868 shares | * | 1,985,263 | ||||||
PIMCO Total Return Class A Fund | 112,336 shares | * | 1,198,629 | ||||||
Putnam International Equity Fund Class A | 52,422 shares | * | 860,237 | ||||||
Safeco Growth Opportunity Class A Fund | 54,554 shares | * | 925,792 | ||||||
Van Kampen Capital Emerging Growth Fund | 10,267 shares | * | 290,157 | ||||||
Van Kampen Growth & Income Class A | 52,221 shares | * | 746,241 | ||||||
Vanguard Extended Market Index Fund | 22,337 shares | * | 684,223 | ||||||
Vanguard Index 500 Fund | 36,511 shares | * | 1,812,640 | ||||||
Wells Fargo Outlook 2010 Class A | 19,041 shares | * | 199,739 | ||||||
Wells Fargo Outlook 2020 Class A | 14,956 shares | * | 159,732 | ||||||
Wells Fargo Outlook 2030 Class A | 9,619 shares | * | 104,271 | ||||||
Wells Fargo Outlook 2040 Class A | 6,220 shares | * | 68,793 | ||||||
13,493,317 | |||||||||
* | Cost information is not required for participant-directed investments. |
** | A Party-in-interest as defined by ERISA. |
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Schedule of Assets (Held at End of Year)
(Continued)
Form 5500, Schedule H, Line 4(i)
EIN: 91-1104842
Plan Number: 002
December 31, 2002 | |||||||||
(a) | (b) Identity of Issue, Borrower, Lessor or Similar Party | (c) Description of Investment, including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value | (d) Cost |
| (e) Current | ||||
Collective Trust Fund: | |||||||||
MetLife Stable Value Fund | 339,179 units | * | 3,988,169 | ||||||
Flow International Corporation Unitized Common Stock Fund: | |||||||||
** | Flow International Corporation common stock | 79,600 shares | * | 204,864 | |||||
Cash and cash equivalents | Cash | * | 15,581 | ||||||
220,445 | |||||||||
** | Participant loans | Maturing through 2012 Interest rates ranging from 5.25% to 11.5% | * | 492,195 | |||||
Total investments | $ | 18,194,126 | |||||||
* | Cost information is not required for participant-directed investments. |
** | A Party-in-interest as defined by ERISA. |
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Flow International Corporation Voluntary
Pension and Salary Deferral Plan
Schedule of Non-Exempt Transactions
Form 5500, Schedule G, Part III
EIN: 91-1104842
Plan Number: 002
Year ended December 31, 2002 | |||||||||
(a) Identity of Party Involved | (b) Relationship to Plan | (c) Description of | (d) Purchase Price |
| (e) Current | ||||
Flow International Corporation | Plan Sponsor | Overdue employee contributions not timely remitted to the Plan | $481,952 | $ | 481,952 | ||||
* | This represents total amount of employee contributions that have been withheld from employees and related employer matching contributions that were not remitted timely into the Trust by the Plan sponsor. |
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Exhibit | Index |
Number | Title | |
23.1 | Consent of BDO Seidman, LLP, Independent Accountants | |
23.2 | Consent of PricewaterhouseCoopers LLP, Independent Accountants | |
99.1 | Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
99.2 | Certification Pursuant to the 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the members of the Plan Advisory Committee have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
FLOW INTERNATIONAL CORPORATION | ||||||||
VOLUNTARY PENSION AND SALARY | ||||||||
DEFERRAL PLAN | ||||||||
Date: | June 30, 2003 | /s/ Stephen D. Reichenbach | ||||||
Stephen D. Reichenbach | ||||||||
Interim Chief Financial Officer (Principal Financial Officer) |