KENT, Wash., Jan. 16 /PRNewswire-FirstCall/ -- Flow International
Corporation (Nasdaq: FLOW), the world's leading developer and supplier of
ultrahigh-pressure waterjet products, announced that it has completed its
previously announced audit committee investigation of allegations regarding
the timing of recognition of revenue in Flow Asia. As a result of the
investigation and related further procedures, the Company expects its
restated fiscal 2006 financial results to show an increase to revenue of
approximately $2 million, a decrease in cost of goods sold of approximately
$900,000, with a net after tax increase to net income of approximately $2
million.
As has been disclosed, the investigation stems from allegations that
certain members of Flow's Taiwan-based Flow Asia Corporation intentionally
and inappropriately recognized certain revenues in fiscal 2007 that should
have been recorded in fiscal 2006. Upon learning of the allegations in
early September, the Company's Board of Directors instructed the Audit
Committee to investigate the matter. The Audit Committee retained outside
counsel to conduct the investigation. Counsel retained a forensic
accounting advisor to provide accounting services to the investigation.
The investigators have presented their final report, whose conclusions
the Audit Committee and the Board of Directors have adopted.
The investigation found that in connection with the sale of Nanojet
machines, approximately $2.0 million of revenue was recognized by the
division in the quarter ended July 31, 2006 that should have been
recognized in the fourth quarter of fiscal 2006 (the quarter ended April
30, 2006). This resulted from violations of the Company's policies at Flow
Asia and the violations were limited to Flow Asia.
The three senior employees who directed the violations of inappropriate
revenue recognition left the Company effective November 28, 2006. The
investigation found no evidence that any personnel outside Flow Asia, and
in particular any personnel at the Company headquarters in Kent,
Washington, participated in any violations.
In addition to the investigation, the Company performed further
procedures to ensure the proper reporting of system sales in Flow Asia.
This work uncovered errors not specifically related to the willful
misconduct of Flow Asia executive management. As a result of the
investigation and this further work performed by the Company in Flow Asia,
the Company expects to restate its financial statements for the fiscal year
ended April 30, 2006 to include the recognition of a total of approximately
$2 million of additional revenue and approximately $900,000 reduction in
cost of goods sold, resulting in an increase in net income after tax of
approximately $2 million. The Company is completing its final review
procedures of its restated financial statements and these adjustments are
therefore not final. Because of the ongoing review, the Company has been a
delinquent filer for and the first and second quarters of fiscal 2007,
which are grounds for possible Nasdaq delisting. On December 15, Flow
announced that the Nasdaq Listing Qualifications Panel has granted the
Company's request for continued listing, subject to certain conditions that
include the filing of all delinquent reports and necessary restatements by
January 31, 2007. The Company will file an amended Annual Report on Form
10-K/A. The Company has not yet published financial statements for the
quarters ended July 31, 2006 and October 31, 2006 and has not yet filed
Quarterly Reports of Form 10-Q for such periods. The Company intends to
file the amended Form 10-K for the year ended April 30, 2006 and to file
the Form 10-Qs for the periods ended July 31, 2006 and October 31, 2006 by
January 31, 2007.
As previously reported, the Company has appointed Tom Johnson, an
experienced Company executive, as Executive Vice President and General
Manager of its Asian operations.
About Flow International
Flow International Corporation is the world's leading developer and
manufacturer of ultrahigh-pressure waterjet cutting technology to
industries including automotive, aerospace, job shop, surface preparation,
and more. For more information, visit http://www.flowcorp.com .
This letter contains forward-looking statements relating to future
events or future financial performance that involve risks and
uncertainties. The words "believe," "expect," "intend," "anticipate,"
variations of such words and similar expressions identify forward-looking
statements but their absence does not mean that the statement is not
forward-looking. These statements include, but are not limited to regaining
full compliance for ongoing listing by January 31, 2007. These statements
are only predictions and actual results could differ materially from those
anticipated in these statements based on a number of risk factors,
including those set forth in the April 30, 2006 Flow International
Corporation Form 10-K Report filed with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date of this letter.
Contact:
Flow Investor Relations
253-813-3286
SOURCE Flow International Corporation
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Related links:
http://www.flowcorp.com
CONTACT:
Flow Investor Relations, +1-253-813-3286
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