Company Experiences Strong Waterjet Sales Growth and Significant Debt
Reduction
KENT, Wash., March 17 /PRNewswire-FirstCall/ -- Flow International
Corporation (Nasdaq: FLOW), the world's leading developer and manufacturer of
ultrahigh-pressure waterjet technology equipment used for cutting, cleaning
(surface preparation) and food safety applications, today reported results for
its fiscal 2005 third quarter ended January 31, 2005. On a consolidated
basis, FLOW reported quarterly sales of $49.9 million and a net loss of
$3.5 million or $0.22 diluted loss per share, including $239,000 in
restructuring charges. For comparison, in the fiscal 2004 third quarter the
Company reported revenues of $42.4 million and a net loss of $0.3 million or
$0.02 per diluted loss per share, as restated, including $1.3 million in
charges related to restructuring and financial consulting efforts. The
Company recorded operating income of $946,000, including $239,000 in
restructuring charges for the three months ended January 31, 2005 as compared
to the prior year's quarter operating loss of $216,000, as restated, including
$1.3 million in restructuring and financial consulting costs. As previously
announced, the Company has reviewed and reconciled certain historical
inter-company transactions and made other corrections for the fiscal years
ended April 30, 2004, 2003 and 2002, and all historical financial information
for periods prior to April 30, 2004 discussed herein has been restated to
reflect the impact of such corrections.
"With two years of aggressive restructuring nearly complete, we have come
a long way towards returning our Company to financial health based on a solid
core of well-run businesses," said Stephen R. Light, FLOW's President and
Chief Executive Officer. "Our constant focus on cash flow has allowed us to
further reduce our debt and continue to bring the balance sheet back to
health. At the same time, our financials reflect the increasing strength of
our operations. Our rejuvenated operations and successful restructuring have
allowed us to re-capitalize the Company through our recently announced equity
raise of $65 million, which we are in the process of closing now."
For the nine months ended January 31, 2005, FLOW reported sales of $154.3
million and a net loss of $6.1 million or $0.39 diluted loss per share,
including $862,000 in restructuring and financial consulting charges. For
comparison, in the nine months ended January 31, 2004, FLOW reported revenues
of $123.3 million and a net loss of $7.9 million or $0.52 diluted loss per
share, as restated, including restructuring and financial consulting charges
of $3.6 million. The Company recorded operating income of $5.2 million,
including $862,000 in restructuring charges for the nine months ended January
31, 2005 as compared to an operating loss of $3.6 million, as restated,
including $3.6 million in restructuring and financial consulting costs in the
prior year.
Operations Review
FLOW Waterjet: For the fiscal 2005 third quarter, the Waterjet operations
reported sales of $41.7 million and operating income of $1.7 million, which
compares to revenues of $31.3 million and an operating loss of $2.0 million in
the fiscal 2004 third quarter. Waterjet performed well across all reporting
geographies, with $7.0 million of the $10.4 million increase in sales coming
from the North America Waterjet segment. This domestic growth is largely a
result of increased awareness of waterjet technology through marketing and
tradeshow efforts, most notably the bi-annual International Manufacturing
Technology Show in September 2004, as well as increased sales and technical
service personnel and the addition of two machine tool distributors during the
past year.
Within Waterjet during the fiscal 2005 third quarter and first nine
months:
-- Total systems sales increased 45% to $29.4 million, with $6.3 million
of the $9.1 million increase recognized domestically. For the nine-month
period, system sales increased 39% or $24.4 million to $86.5 million, from
$62.1 million in the comparable nine-months of fiscal 2004. Similar to the
quarter, the majority of the growth, $18.1 million, was generated
domestically. These increases were driven by strengthened demand in FLOW's
primary markets resulting from increased awareness of waterjet technology and
continued improving economic conditions. The marketplace continues to
increase its recognition of the accuracy, speed, and versatility advantages of
the waterjet over conventional cutting technologies.
-- Sales of systems in Asia and Europe were $11.9 million and $14.5
million for the nine months ended January 31, 2005 and 2004 respectively, up a
respective 35% and 19%. The Company is experiencing increased demand in Asia
for shapecutting waterjet systems, as well as strengthened demand for cutting
cell applications among automotive customers. Strong sales in Europe are a
result of more aggressive pricing, improvements in standardized systems and
delivery and a slowly strengthening European marketplace.
-- Consumables and spare parts revenues increased 12% during the quarter
and 5% over the nine months, to $12.4 million and $37.6 million, respectively,
with most of the increase from domestic sales. The growth in consumables is
being driven by an increase in working hours of the installed systems and an
increasing number of new systems operating in the marketplace, each of which
requires consumables and spares. Consumables are also being driven by the
Company's proprietary productivity enhancing kits, improved parts
availability, and by Flowparts.com.
Avure Technologies: For the fiscal 2005 third quarter, Avure recorded
sales of $8.1 million and an operating loss of $785,000, compared to sales of
$11.1 million and operating income of $1.8 million in the year-ago quarter, as
restated. For the nine months, Avure sales were $30.2 million with operating
income of $94,000, compared to sales of $25.4 million and an operating loss of
$2.3 million over the prior nine months, as restated. Avure revenue is
recorded on a percentage of completion basis.
Within Avure during the fiscal 2005 third quarter and first nine months:
-- General Press revenue during the fiscal 2005 third quarter was
$5.7 million, compared to $6.3 million in the prior-year quarter. Over the
nine months, General Press revenue increased to $21.3 million from $16.2
million in the prior nine months. All of this growth was experienced in North
America and was the result of revenue recognized under two large contracts
signed in fiscal 2004 and manufactured in fiscal 2005. Even as sales
fluctuate due to the 1-4 year sales and production cycle, the Company
continues to benefit from an overall increase in production.
-- The General Press operations, which consist of the North America Press
and International Press segments, while profitable, are not considered core to
the business and the Company intends to divest itself of them if presented
with an acceptable offer. In January 2005, with the assistance of Danske
Markets Inc., the Company began to market the General Press operations, with a
confidential information memorandum. There can be no assurance that the
Company will receive an acceptable offer.
-- Avure's Fresher Under Pressure(R) food technology revenue decreased
during the quarter to $2.4 million from $4.7 million in the prior-year period,
and to $8.9 million from $9.2 million over nine months. The decrease is
attributable to the timing of food systems production and the corresponding
revenue recognition.
Debt Reduction
On February 22, 2005, the Company announced that it has entered into a
Private Placement in Public Equity ("PIPE") agreement with institutional
investors for the private placement of approximately 17.5 million equity units
of securities, each comprised of one share of common stock and a warrant to
purchase one-tenth of a share of common stock, at a per-unit price of $3.72.
The warrants are exercisable at $4.07 per share until 2010. The Company is in
the process of closing the PIPE and expects gross proceeds of $65 million and
net proceeds of over $59 million. Proceeds are expected to be collected
within the next several days. Under terms of the PIPE agreement, the Company
has 60 days from the date of close to file an initial Form S-1 registration of
the shares and 180 days subsequent to close of the PIPE to have the Form S-1
go effective in order to avoid cash penalties.
Third Quarter Form 10-Q
As a result of our efforts devoted to completing the PIPE transaction, we
require additional time to complete our Quarterly Report on Form 10-Q for the
period ended January 31, 2005. Accordingly we intend to file a Form 12b-25
with the SEC requesting an extension of time for filing the Form 10-Q. We
expect to file our report within the allotted extension.
Conference Call
Flow International will host a conference call today at 1:00 p.m. EST
(10:00 a.m. PST) to discuss the results. A live Webcast of the call may be
found in the investor section at http://www.flowcorp.com.
A Webcast replay of the call will also be available for two weeks.
About Flow International
FLOW provides total system solutions for various industries, including
automotive, aerospace, paper, job shop, surface preparation, and food
production. For more information, visit http://www.flowcorp.com.
This press release 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 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 December 20, 2004 Flow International
Corporation Form 10-K/A Report filed with the Securities and Exchange
Commission. Forward-looking statements in this press release include, without
limitation, PIPE proceeds are expected to be collected within the next several
days; that the European market is strengthening; that we intend to file a Form
12b-25 with the SEC requesting an extension in time for filing the Form 10-Q
and that we expect to file our report within the allotted extension. Readers
are cautioned not to place undue reliance on these forward-looking statements
that speak only as of the date of this announcement.
The Company is under no obligation, and does not intend, to update any of
the forward looking statements in this press release.
CONTACT: Steve Reichenbach, Chief Financial Officer of Flow
International, +1-253-850-3500.
Flow International Corporation
Consolidated Statement of Operations
(Unaudited)
Dollars in thousands, except per share data
Three months ended Nine months ended
January 31, January 31,
% %
2005 2004 Change 2005 2004 Change
(restated) (restated)
Sales $49,872 $42,382 18% $154,321 $123,253 25%
Cost of sales 31,258 26,035 20% 99,557 77,870 28%
Gross margin 18,614 16,347 14% 54,764 45,383 21%
Operating expenses:
Marketing 8,541 6,459 32% 23,916 19,694 21%
Research and
engineering 2,171 2,901 -25% 6,677 8,790 -24%
General and
administrative 6,717 5,891 14% 18,149 16,844 8%
Financial
consulting -- 654 -100% 623 1,851 -66%
Restructuring 239 658 -64% 239 1,763 -86%
Operating expenses 17,668 16,563 7% 49,604 48,942 1%
Operating income
(loss) 946 (216) NM 5,160 (3,559) NM
Interest expense, net (3,748) (2,955) -27% (10,632) (9,625) -10%
Other income, net (156) 4,195 -104% 1,064 6,816 -84%
Loss before taxes (2,958) 1,024 NM (4,408) (6,368) 31%
Income tax provision (543) (1,345) -60% (1,707) (2,075) -18%
Loss before
discontinued
operations (3,501) (321) NM (6,115) (8,443) 28%
Discontinued
operations, net of
tax -- -- NM -- 526 -100%
Net loss $(3,501) $(321) NM $(6,115) $(7,917) 23%
Loss per share:
Basic and diluted
before discontinued
operations $(0.22) $(0.02) NM $(0.39) $(0.55) 29%
Basic and diluted $(0.22) $(0.02) NM $(0.39) $(0.52) 25%
Weighted average
shares outstanding
(000):
Basic 15,950 15,359 15,847 15,359
Diluted 15,950 15,359 15,847 15,359
NM = not meaningful
Flow International Corporation
Statement of Operations
Operations Breakdown
(Unaudited)
Dollars in thousands, except per share data
Three months ended January 31, 2005
Flow Waterjet Avure
Systems Technologies Consolidated
Sales $41,750 $8,122 $49,872
Cost of sales 26,073 5,185 31,258
Gross margin 15,677 2,937 18,614
Operating expenses 13,946 3,722 17,668
Operating income (loss) 1,731 (785) 946
Three months ended January 31, 2004
Flow Waterjet Avure
Systems Technologies Consolidated
(restated) (restated)
Sales $31,329 $11,053 $42,382
Cost of sales 19,915 6,120 26,035
Gross margin 11,414 4,933 16,347
Operating expenses 13,418 3,145 16,563
Operating income (loss) (2,004) 1,788 (216)
Nine months ended January 31, 2005
Flow Waterjet Avure
Systems Technologies Consolidated
Sales $124,136 $30,185 $154,321
Cost of sales 79,296 20,261 99,557
Gross margin 44,840 9,924 54,764
Operating expenses 39,774 9,830 49,604
Operating income (loss) 5,066 94 5,160
Nine months ended January 31, 2004
Flow Waterjet Avure
Systems Technologies Consolidated
(restated) (restated)
Sales $97,859 $25,394 $123,253
Cost of sales 62,034 15,836 77,870
Gross margin 35,825 9,558 45,383
Operating expenses 37,071 11,871 48,942
Operating income (loss) (1,246) (2,313) (3,559)
Flow International Corporation
Supplemental Data
(Unaudited)
Dollars in thousands
Three months ended Nine months ended
January 31, January 31,
% %
2005 2004 Change 2005 2004 Change
Divisional revenue
breakdown:
Flow Waterjet
Systems:
Systems $29,367 $20,244 45% $86,541 $62,091 39%
Consumable parts
and services 12,383 11,085 12% 37,595 35,768 5%
Total 41,750 31,329 33% 124,136 97,859 27%
Avure Technologies
Fresher Under
Pressure 2,429 4,750 -49% 8,881 9,160 -3%
General Press 5,693 6,303 -10% 21,304 16,234 31%
Total 8,122 11,053 -27% 30,185 25,394 19%
$49,872 $42,382 18% $154,321 $123,253 25%
Geographic revenue
breakdown:
United States $28,981 $22,964 26% $90,230 $64,463 40%
Rest of Americas 4,295 3,409 26% 13,900 13,166 6%
Europe 10,719 11,009 -3% 31,510 30,414 4%
Asia 5,877 5,000 18% 18,681 15,210 23%
$49,872 $42,382 18% $154,321 $123,253 25%
Depreciation and
amortization expense $1,408 $1,584 -11% $3,954 $4,817 -18%
Capital spending $315 $1,125 -72% $761 $5,009 -85%
Flow International Corporation
Preliminary Condensed Balance Sheet Data
Dollars in thousands
January 31, April 30,
2005 2004 % Change
(restated)
Cash, including short-term restricted
cash $12,839 $12,835 0%
Receivables, net 41,088 44,860 -8%
Inventories 29,584 26,384 12%
Total current assets 92,575 90,611 2%
Total assets 136,226 135,071 1%
Total debt $72,400 $86,808 -17%
Total liabilities 145,671 142,263 2%
Total shareholders' deficit (11,958) (9,552) -25%
SOURCE Flow International
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Related links:
http://www.flowcorp.com
CONTACT:
Steve Reichenbach, Chief Financial Officer of
Flow International, +1-253-850-3500
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