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, 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
(253) 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 December 5, 1997:
14,906,669 shares.
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FLOW INTERNATIONAL CORPORATION
INDEX
Page
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Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
October 31, 1997 and April 30, 1997.. . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income -
Three Months Ended October 31, 1997 and 1996. . . . . . . . . . . . 4
Condensed Consolidated Statements of Income -
Six Months Ended October 31, 1997 and 1996. . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended October 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. . . . . . . . . . . 9
Part II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . 15
Item 4. Submission of Matters to a Vote
of Security Holders. . . . . . . . . . . . . . . . . . . . . 15
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
October 31, April 30,
1997 * 1997
--------- ---------
ASSETS (unaudited)
Current Assets:
Cash $ 3,615 $ 2,479
Trade Accounts Receivable, less allowances
for doubtful accounts of $545 and $1,008, respectively 29,951 40,050
Inventories 36,707 38,471
Deferred Income Taxes 4,758 4,758
Other Current Assets 5,428 4,959
--------- ---------
Total Current Assets 80,459 90,717
Property and Equipment, net 11,538 25,594
Intangible Assets, net of accumulated
amortization of $4,959 and $4,441, respectively 13,777 11,471
Deferred Income Taxes 515 515
Other Assets 2,919 5,169
--------- ---------
$109,208 $133,466
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes Payable $ 2,008 $ 1,651
Current Portion of Long-Term Obligations 2,149 79
Accounts Payable 8,472 11,619
Accrued Payroll and Related Liabilities 3,343 4,564
Other Accrued Taxes 452 1,139
Other Accrued Liabilities 4,910 3,539
--------- ---------
Total Current Liabilities 21,334 22,591
Long-Term Obligations 29,973 53,569
Minority Interest 627 553
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,
15,270,357 and 14,889,540 shares issued and outstanding,
respectively, at October 31, 1997
14,925,627 and 14,544,810 shares issued and outstanding,
respectively, at April 30, 1997 153 149
Capital in Excess of Par 40,021 38,871
Retained Earnings 20,121 19,266
Treasury Common Stock of 380,817 shares at cost (1,429) (1,429)
Cumulative Translation Adjustment (1,187) 101
Unrealized Loss on Equity Securities Available For Sale (405) (205)
--------- ---------
Total Stockholders' Equity 57,274 56,753
--------- ---------
$109,208 $133,466
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* See Note 2 which describes the disposition of certain business units during
fiscal 1998
See Accompanying Notes to Condensed
Consolidated Financial Statements
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FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in thousands, except per share data)
Three Months Ended
October 31,
------------------
1997 * 1996
Revenue:
Sales $35,162 $ 32,302
Services 5,289
Rentals 3,732
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Total Revenues 35,162 41,323
Cost of Sales:
Sales 20,476 18,279
Services 3,975
Rentals 1,758
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Total Cost of Sales 20,476 24,012
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Gross Profit 14,686 17,311
------- --------
Expenses:
Marketing 5,327 6,547
Research and Engineering 2,150 2,085
General and Administrative 3,420 4,348
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10,897 12,980
------- --------
Operating Income 3,789 4,331
Interest and Other Expense, net (1,014) (917)
------- --------
Income Before Provision for Income Taxes 2,775 3,414
Provision for Income Taxes 971 990
------- --------
Net Income $ 1,804 $ 2,424
------- --------
Earnings Per Common and Equivalent Shares $ .12 $ .16
------- --------
Average Common and Equivalent Shares Outstanding 15,384 15,055
* See Note 2 which describes the disposition of certain business units during
fiscal 1998
See Accompanying Notes to Condensed
Consolidated Financial Statements
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FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; in thousands, except per share data)
Six Months Ended
October 31,
--------------------
1997 * 1996
Revenue:
Sales $72,608 $ 64,655
Services 6,423 10,525
Rentals 3,645 7,072
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Total Revenues 82,676 82,252
Cost of Sales:
Sales 42,944 37,523
Services 5,887 7,783
Rentals 1,099 3,362
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Total Cost of Sales 49,930 48,668
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Gross Profit 32,746 33,584
Expenses:
Marketing 12,222 12,779
Research and Engineering 4,650 4,252
General and Administrative 7,580 8,450
Restructuring (Note 2) 4,910 -
------- --------
29,362 25,481
------- --------
Operating Income 3,384 8,103
Interest and Other Expense, net (2,069) (1,546)
------- --------
Income Before Provision for Income Taxes 1,315 6,557
Provision for Income Taxes 460 1,901
------- --------
Net Income $ 855 $ 4,656
------- --------
Earnings Per Common and Equivalent Shares $ .06 $ .31
------- --------
Average Common and Equivalent Shares Outstanding 15,253 15,042
* See Note 2 which describes the disposition of certain business units during
fiscal 1998
See Accompanying Notes to Condensed
Consolidated Financial Statements
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FLOW INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
Six Months Ended
October 31,
-----------------------------
1997 * 1996
Cash Flows from Operating Activities:
Net Income $ 855 $ 4,656
Adjustments to Reconcile Net Income to Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization 2,283 3,714
Restructuring Provision 4,910
Other 61
Increase in assets, net of disposition (7,486) (8,145)
Increase (decrease) in liabilities, net of disposition (1,294) 818
-------- ---------
Cash provided (used) by operating activities (732) 1,104
-------- ---------
Cash Flows from Investing Activities:
Expenditures for property and equipment (3,820) (3,823)
Payment for business combination, net of cash acquired (2,528)
Other 61 269
-------- ---------
Cash used by investing activities (6,287) (3,554)
-------- ---------
Cash Flows from Financing Activities:
Borrowings (repayments) under line of credit agreements, net 9,833 1,943
Payments of long-term debt (649) (87)
Proceeds from issuance of common stock 1,154 474
Purchase of treasury stock (75)
-------- ---------
Cash provided by financing activities 10,338 2,255
-------- ---------
Effect of exchange rate changes (2,183) (148)
-------- ---------
Increase (decrease) in cash and cash equivalents 1,136 (343)
Cash and cash equivalents at beginning of period 2,479 3,845
-------- ---------
Cash and cash equivalents at end of period $ 3,615 $ 3,502
-------- ---------
Supplemental Disclosures of Cash Flow Information
Fair value of assets acquired $ 4,735
Cash paid for assets acquired (2,818)
Liabilities assumed $ 1,917
* See Note 2 which describes the disposition of certain business units during
fiscal 1998
See Accompanying Notes to Condensed
Consolidated Financial Statements
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FLOW INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended October 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. The Company sold the assets and certain liabilities of the Access and
Services businesses. Operations of the disposed Access and Services
businesses are not included in the second quarter fiscal 1998
Consolidated Statement of Income. The primary business units
included in this transaction were Spider Staging Corporation, Power
Climber, Inc. and affiliated companies, Rampart Waterblast, Inc. and
the Flow Services division. Associated with the sale, the Company
recorded a $4.9 million charge during the first quarter of fiscal 1998
to write down the assets sold to net realizable value as well as
provide for probable future obligations associated with the sale. The
charge is included as a separate component of operating expenses in
the accompanying Consolidated Statements of Income. During fiscal
1997, the Company recorded a $9 million restructuring provision
related to the planned divestiture of the Access and Services
businesses.
3. In May 1997 the Company purchased the stock of Foracon Maschinen
Anlagenbau ("Foracon") for $2.3 million and 33,655 shares of Flow
common stock. 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
European market and further increases the Company's strength in that
market.
4. 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, 1997 and 1996 were 15,384,000 and 15,055,000, respectively, and
for the six months ended October 31, 1997 and 1996 were 15,253,000 and
15,042,000, 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 would be $.12 and $.17 for the quarters ended October 31, 1997
and 1996, respectively and $.06 and $.32 for the six months ended
October 31, 1997 and 1996, respectively. Diluted earnings per share
under FAS 128 would not differ from the amounts reported in the
accompanying Consolidated Statements of Income.
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FLOW INTERNATIONAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended October 31, 1997
(unaudited)
5. Inventories consist of the following:
(in thousands)
October 31, 1997 April 30, 1997
---------------- --------------
Raw Materials and Parts $23,966 $23,896
Work in Process 6,936 5,872
Finished Goods 5,805 8,703
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$36,707 $38,471
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-8-
FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
With the sale of its Access and Services operations complete, Flow
International Corporation's (the "Company's") results for the quarter ended
October 31, 1997 represent only ultrahigh-pressure ("UHP") operations, while the
first quarter ended July 31, 1997 as well as the three and six month periods
ended October 31, 1996 include the results of operations of both UHP and the
Access and Services groups. Additionally, the Company recorded a $4.9 million
restructuring provision during the first quarter ended July 31, 1997 to write
down the assets sold to net realizable value as well as provide for probable
future obligations associated with the sale. This charge is included as a
separate component of operating expenses in the accompanying Consolidated
Statements of Income.
Given the significant disposition of part of the Company, management has
provided below two separate Results of Operations reviews. The first one "UHP
Results of Operations Analysis" provides a detailed review of the three and six
month periods ended October 31, 1997 and 1996 for the UHP operations only. In
the opinion of management this review is most appropriate as it compares the
current and prior year results of operations of the core UHP business which
remains after the disposition. Management also provides the "Historical Results
of Operations Analysis" which is a comparison of the three and six month periods
ended October 31, 1997 and 1996 as presented on the Consolidated Statements of
Income.
UHP RESULTS OF OPERATIONS ANALYSIS -
Included in the accompanying Consolidated Statements of Income for all
periods presented are the results of operations for the UHP business. The
Access and Services results from operations are included only in the six months
ended October 31, 1997 and the three and six months ended October 31, 1996.
The following pro-forma table presents the results of operations related to the
Company's UHP business only and excludes Access and Services:
Pro-forma, in (000's) Three months ended Six months ended
October 31, October 31,
--------------------- ---------------------
1997 1996 1997 1996
--------------------- ---------------------
Revenue $ 35,162 $ 26,956 $ 65,826 $ 52,919
Gross Profit 14,686 11,465 27,499 22,240
Operating Expenses 10,897 9,160 20,935 18,170
Operating Income 3,789 2,305 6,564 4,070
Interest / other exp., net (1,014) (775) (1,692) (1,086)
Pre-tax profit 2,775 1,530 4,872 2,984
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FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The following analysis compares the results of operations for the UHP
business only for the three and six month periods ended October 31, 1997 and
1996 as outlined above.
Revenues for the three months ended October 31, 1997 were $35.2 million, an
increase of $8.2 million (30%) as compared to the prior year quarter of $27
million. For the six month period ended October 31, 1997 revenues increased
$12.9 million (24%) to $65.8 million as compared to $52.9 million in the prior
year. Revenue growth in both the quarter and year to date have been achieved
in all three major geographic markets served by the Company. Year over year
revenue growth in North America, Europe and Asia was 41%, 8% and 28% for the
quarter and 25%, 17% and 35% for the six months ended October 31, 1997,
respectively. The Company's revenues can be segregated into systems sales and
consumables sales. In general a system sale is comprised of a pump along with
the robotics or articulation to move the cutting head. Consumables represent
parts used during the operation. Systems and consumables revenues increased 36%
and 19% for the quarter and 30% and 15% for the six months ended October 31,
1997, respectively over the prior year periods.
The gross margin rate was 42% for the quarter as compared to 43% in the
prior year quarter and on a year to date basis was 42% for both the current and
prior year. Comparison of gross margin rates is dependent on the mix of sales
revenue types, which includes special system, standard system and consumables
sales. Systems typically carry lower gross margin rates than the Company's
consumable parts. The gross margin rate decrease in the quarter was primarily
due to a higher percentage of systems sales relative to consumable sales in the
current quarter versus the prior year period as well as continued competitive
pressure on margins in Europe.
Operating expenses of $10.9 million increased $1.7 million (19%) for the
quarter ended October 31, 1997, compared to the prior year and were $20.9
million, up $2.8 million (15%) for the six months ended October 31, 1997 versus
the prior year period. For the three and six month periods ended October 31,
1997, sales and marketing increased $790,000 (17%) and $1.3 million (15%),
research and engineering increased $333,000 (18%) and $649,000 (17%) and general
& administrative increased $614,000 (22%) and $814,000 (15%), respectively as
compared to the prior year period. Operating expenses expressed as a percent of
revenues however were 31% for the current quarter, an improvement from 34% of
revenues in the prior year quarter. For the six months ended October 31, 1997
operating expenses as a percent of revenues were 32%, an improvement from 34% in
the comparable period last year. The primary improvement resulted from reduced
sales and marketing expenses as a percent of revenues.
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FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating income for the quarter ended October 31, 1997 was $3.8 million,
an increase of $1.5 million (64%) over the prior year quarter. For the year,
operating income was $6.6 million, an improvement of 61% over the like period in
the prior year.
Second quarter fiscal 1998 interest and other expense, net of $1 million
represents an increase of $239,000 (31%) compared to the prior year. The
current quarter includes approximately $400,000 of increased interest expense
versus the prior year period. This increased interest expense is a result of
higher average borrowings during the current year. Included in the prior year
quarter were higher foreign exchange losses associated with the strengthening
dollar against the Deutschemark. Year-to-date, interest and other expense, net
totaled $1.7 million, an increase of $606,000 (56%) compared to the same period
in fiscal 1997. This increase is primarily related to higher interest expense
on increased borrowings.
Pre-tax income increased $1.2 million (81%) to $2.8 million in the quarter
and was $4.9 million for the six months ended October 31, 1997, a $1.9 million
(63%) improvement over the prior year period.
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 higher tax rate
in fiscal 1998 is reflective of the projected change in mix of pre-tax income to
higher taxing jurisdictions. 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.
The weighted average number of average shares outstanding for the
quarter increased to 15,384,000 from 15,055,000 as compared to fiscal 1997.
Year-to-date average shares outstanding increased to 15,253,000 from
15,042,000 over the prior year. This increase includes the issuance of stock
related to the acquisition of Foracon.
Applying the reported tax rate to the pre-tax income of the UHP operations,
the Company recorded net income of $1.8 million, or 12 cents per share for the
three months ended October 31, 1997, compared to $1.1 million, or 7 cents per
share for the same period in the prior year. Year-to-date, net income for
fiscal 1998 totaled $3.2 million, or 21 cents per share, compared to $2.1
million, or 14 cents per share, for fiscal 1997.
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FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
HISTORICAL RESULTS OF OPERATIONS ANALYSIS -
The following analysis compares the three and six month periods ended
October 31, 1997 and 1996 as presented in the accompanying Consolidated
Statements of Income
Revenues for the three months ended October 31, 1997 were $35.2 million, a
decrease of $6.2 million (15%) as compared to the prior year quarter of $41.3
million. For the six month period ending October 31, 1997 revenues increased
$424,000 (1%) to $82.7 million as compared to $82.3 million in the prior year.
The decrease of $6.2 million in quarterly revenue results from the fact that
Access and Services revenues were not recorded during the quarter ended October
31, 1997 due to the sale. This net decrease of $6.2 million is comprised of an
$8.2 million (30%) increase in UHP revenues to $35.2 million offset by a drop in
Access and Services revenues from $14.4 million in the prior year quarter to
zero in the second quarter of fiscal 1998. For the six months ended October 31,
1997, UHP revenues increased $12.9 million (24%) and Access and Services
revenues decreased $12.5 million (43%) as Access and Services revenues were only
recorded during the first quarter of fiscal 1998 as compared to the prior year.
See the "UHP Results of Operations Analysis" for more in depth discussion of
revenue fluctuations within the UHP business.
Gross profit as a percentage of revenues (gross margin rate) was 42% for
both the current and prior year quarter and on a year to date basis was 40% for
the current year as compared to 41% in the prior year period. The Access and
Services businesses historically carry a lower gross margin rate then the
Company's UHP product line. See the "UHP Results of Operations Analysis" for
additional discussion of gross margin rate fluctuations in the UHP business.
Operating expenses of $10.9 million decreased $2.1 million (16%) for the
quarter ended October 31, 1997, compared to the prior year and were $29.4
million, up $3.9 million (15%) for the six months ended October 31, 1997 versus
the prior year period. Excluding the restructuring charge, year to date
operating expenses decreased $1 million (4%) as compared to the prior year
period. Current quarter and year to date UHP operating expenses have increased
19% and 15% versus the prior year, respectively. This increase is offset by the
exclusion of Access and Services expenses during the quarter ended October 31,
1997. Operating expenses expressed as a percent of revenues however were 31%
for both the current quarter and prior year quarter. For the six months ending
October 31, 1997 operating expenses as a percent of revenues were 36% versus 31%
in the comparable period last year. Excluding the $4.9 million restructuring
charge, operating expenses improved to 30% of revenues in the six months ended
October 31,
-12-
FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
1997. See the "UHP Results of Operations Analysis" for more in depth discussion
of operating expenses in the UHP business.
Operating income for the quarter ended October 31, 1997 was $3.8 million, a
decrease of $542,000 (13%) over the prior year quarter. For the year, operating
income was $3.4 million, a decrease of $4.7 million (58%) over the like period
in the prior year.
Second quarter fiscal 1998 interest and other expense, net of $1 million
was flat as compared with the prior year. Year-to-date, interest and other
expense, net totaled $2.1 million, an increase of $523,000 (34%) compared to the
same period in fiscal 1997. Approximately one half of this increase is higher
interest expense associated with higher year over year borrowings. Also included
in the prior year was increased other income associated with the minority
interest in net losses of an Access and Services joint venture. See the "UHP
Results of Operations Analysis" for more in depth discussion of interest and
other expense, net in the UHP business.
Pre-tax income was $2.8 million in the current quarter versus $3.4 million
in the prior year. The UHP operations recorded a $1.2 million (81%) improvement
during the current quarter while Access and Services recorded income of $1.9
million in the prior year quarter but were not included in the current quarter.
For the year, pre-tax income was $1.3 million as compared to $6.6 million in the
prior year period. See the "UHP Results of Operations Analysis" for more in
depth discussion of pre-tax income in the UHP business.
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 higher tax rate
in fiscal 1998 is reflective of the projected change in mix of pre-tax income to
higher taxing jurisdictions. 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.
The weighted average number of average shares outstanding for the
quarter increased to 15,384,000 from 15,055,000 as compared to fiscal 1997.
Year-to-date average shares outstanding increased to 15,253,000 from
15,042,000 over the prior year. This increase includes the issuance of stock
related to the acquisition of Foracon.
As a result the Company recorded net income of $1.8 million or $.12 in the
current quarter versus $2.4 million or $.16 in the prior year period. For the
six months ended October 31, 1997 the Company recorded net income of $855,000 or
$.06 as compared to
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FLOW INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
$4.7 million or $.31 in the like period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $732,000 in its operating activities during the six months
ended October 31, 1997. For the like period in the prior year, the Company
generated $1.1 million from operations. The use of cash during the current year
is a result of the increase in trade accounts receivable and inventories as
further discussed below. The current year Consolidated Statement of Cashflows
reflects the disposition of the Access and Services businesses. Total notes
payable and term obligations at October 31, 1997 was $34.1 million, down $21.2
million from April 30, 1997. This decrease reflects application of cash
proceeds from the sale of Access and Services offset in part by borrowings to
purchase Foracon. The Company believes that the available credit facilities and
future 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, 1997, the Company was in
compliance with all such covenants.
Gross trade receivables at October 31, 1997 decreased $10.6 million (26%),
from April 30, 1997. Excluding Access and Services, the gross trade receivables
of $30 million have increased $3.5 million (13%). This is the result of the
increase in sales. 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.
Inventories at October 31, 1997 decreased $1.8 million (5%), from April 30,
1997. Excluding Access and Services, inventory at October 31, 1997 of $36.7
million has increased $3.7 million (10%) from April 30, 1997. This increase is
a result of the acquisition of Foracon and increases in work in process as well
as raw materials and parts.
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 RISKS ASSOCIATED WITH THE RESTRUCTURING, 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.
-14-
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 1997 Annual Meeting of Stockholders on August
27,1997. At the meeting three directors, Daniel J. Evans, Kenneth M. Roberts
and Ronald W. Tarrant were elected to three-year terms ending with the 2000
Annual Meeting of Stockholders receiving, respectively, 12,304,165, 12,338,978,
and 12,302,946 votes in favor and 140,858, 106,045 and 142,077 votes withheld.
An amendment to the 1995 Long-Term Incentive Compensation Plan (the "Plan") was
also approved. The Plan received 8,699,919 votes for approval, 3,665,846 shares
against and 79,258 shares abstained. In addition, a stockholder proposal
received 540,748 votes in favor, 7,435,613 against and 568,177 abstained. There
were no broker non-votes for the vote on the directors nor for the amendment.
There were 3,900,485 broker non-votes for the stockholder proposal.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K -
The Company filed a Current Report on Form 8-K on September 30,
1997 reporting the sale of substantially all the assets and selected liabilities
of the Company's Access and Services businesses.
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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
CORPORATION
Date: December 12, 1997 /s/ Ronald W. Tarrant
---------------------
Ronald W. Tarrant
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: December 12, 1997 /s/ Stephen D. Reichenbach
--------------------------
Stephen D. Reichenbach
Executive Vice President, Chief
Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
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