Flow International Announces Fiscal 2005 Second Quarter Results
Company Posts Fifth Quarter of Operating Profit and Outlines Debt
Reduction Initiatives KENT, Wash., Jan. 12 /PRNewswire-FirstCall/
-- Flow International Corporation (NASDAQ:FLOWE), 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 second quarter ended October 31, 2004. On a
consolidated basis, FLOW (the "Company") reported quarterly sales
of $55.5 million and a net loss of $275,000 or $0.02 diluted loss
per share. For comparison, in the fiscal 2004 second quarter the
Company reported revenues of $43.7 million and a net loss of $1.9
million or $0.13 diluted loss per share, as restated, which
included restructuring charges of $857,000. 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. "Even as we are putting the final touches on our
restructuring efforts, we posted another strong quarter of growth
and cash generation," said Stephen R. Light, FLOW's President and
Chief Executive Officer. "We have largely succeeded in accordance
with the aggressive restructuring plan we laid out two years ago,
which was intended to revive this company and return it to
operational and financial health, based on a solid and
well-capitalized core business. Now we look forward to the next
stage of growth for our company, in which we intend to extricate
ourselves from a weighty burden of debt obligations, return to
profitability and deliver genuine shareholder value." For the six
months ended October 31, 2004, FLOW reported sales of $104.4
million and a net loss of $2.6 million or $0.17 diluted loss per
share. In comparison, for the six months ended October 31, 2003,
revenues were $80.9 million and the net loss amounted to $7.6
million or $0.50 diluted loss per share, as restated, which
included restructuring charges of $1.2 million. Operations Review
FLOW Waterjet Systems: For the fiscal 2005 second quarter, Waterjet
Systems reported sales of $44.1 million and operating income of
$2.2 million, which compares to revenues of $33.0 million and
operating income of $682,000 in the fiscal 2004 second quarter.
Within Waterjet Systems during the fiscal 2005 second quarter and
first six months: -- Total systems sales were $31.3 million,
compared to $20.9 million in the fiscal 2004 second quarter. For
the six month period, system sales increased 37% to $57.2 million.
These increases were driven by strengthened demand in FLOW's
primary markets and across all geographies, with particular
strength domestically in both standard shapecutting systems and the
automotive sector. The Company also experienced an increase in
demand for cutting cell applications among non-automotive
customers. FLOW continues to see growth as the marketplace
increasingly recognizes the accuracy, speed, and versatility
advantages of the waterjet over conventional cutting technologies.
-- System sales for both the quarter and six-month period were
strong in Europe and in Asia, where the Company experienced
strengthened demand from the Chinese automotive industry for
cutting cells and from non-automotive industries for shapecutting
systems. System sales to Europe also increased, as the Company is
now benefiting from its standardized pricing and product offerings.
-- Consumables and spare parts sales increased from $12.1 million
in the year-ago quarter to $12.8 million in the fiscal second
quarter, as a greater number of systems have been sold and become
operational. Sales for the six months ended October 31, 2004
increased 2% over the comparable prior year period. The Company
also continues to benefit from the sale of its proprietary
productivity enhancing kits and the enhanced availability of parts,
with increased traffic on its Flowparts.com website. Avure
Technologies: For the fiscal 2005 second quarter, Avure recorded
sales of $11.4 million and operating income of $341,000, compared
to sales of $10.6 million and an operating loss of $400,000 in the
year-ago quarter, as restated. Year-to-date, sales have increased
to $22.1 million with operating income of $939,000 compared to
sales of $14.3 million and a related operating loss of $3.8 million
in the prior year period, as restated. Within Avure during the
fiscal 2005 second quarter and first six months: -- General Press
sales during the fiscal 2005 second quarter and year to date were
$8.8 million and $15.6 million, respectively, compared to $6.9
million and $9.9 million in the fiscal 2004 second quarter and
first six months, respectively. General Press revenues will vary
from quarter to quarter and from year to year due to the nature of
its one to four year sales and production cycle. Currently the
Company is experiencing increased production, as compared to the
prior year. -- Avure's Fresher Under Pressure(R) food technology
sales decreased to $2.6 million, from $3.7 million in the fiscal
2004 second quarter, however sales for the first six months were
$6.5 million, an increase of $2.1 million over the $4.4 million
recognized in the prior six-months. While the current fiscal year
utilized percentage of completion for revenue recognition, fiscal
2004 included revenue recognition under both percentage of
completion and on as as- delivered basis. Revenues from several
completed systems were recognized in the second quarter of fiscal
2004 upon customer acceptance. Had these fiscal 2004 sales been
recognized on percentage of completion, a portion of the second
quarter fiscal 2004 revenue would have been recognized in the first
quarter of fiscal 2004. Delayed Filing of the Second Quarter Form
10-Q Due to Restatement The second quarter Form 10-Q, which the
Company filed on January 10, 2005 was late, from its due date of
December 15, 2004. The delayed filing was the result of the
restatement of historical financial statements. On December 20,
2004, the Company filed an amended Form 10-K/A for the year ended
April 30, 2004, followed by the filing of its Form 10-Q for the
fiscal 2005 first quarter on December 29, 2004. Subsequent
quarterly reports will reflect restated historical financial
statements for comparable fiscal 2004 interim periods. The
restatements include corrections to the Company's Consolidated
Statements of Operations resulting from the completion of
reconciliations of historical inter-company account balances and
review of treatment of foreign currency gains and losses on
inter-company balances. The amended Form 10-K/A reflects foreign
currency adjustments in Other Income (Expense), net, as well as
correction of entries originally recorded as foreign currency
revaluation that should have been recorded to Cost of Sales and
Provision for Income Taxes in the Consolidated Statement of
Operations. Finally, a correction in the value ascribed to the
warrants issued to our subordinated lender in May 2001 has resulted
in a reduction in interest expense, net. Appropriate tax provision
entries were also made. Accordingly, financial statements filed
prior to the amended Form 10-K/A and other communications related
to the periods covered by the restatements should no longer be
relied upon. In connection with the restatements, our independent
registered public accounting firm reported two matters that
constituted material weaknesses in the Company's internal control
over financial reporting. The Company and its Audit Committee have
dedicated significant resources to assessing the underlying issues
giving rise to the restatements and material weaknesses and to
ensuring that proper steps have been and are being taken to improve
its control environment. The Company has assigned the highest
priority to the correction of these deficiencies. In conjunction
with its analysis, management has begun to increase the level of
staffing and supervision in critical functional areas. Debt
Reduction In its efforts to continue paying down debt, during the
quarter ended October 31, 2004, the Board of Directors authorized
the Company to engage investment bankers on a best efforts basis to
act as placement agents in a "PIPE" (Private Investment in Public
Equity) transaction to raise funds to continue paying down debt. To
date, no effort has been made to attract investors, no terms of a
PIPE transaction have been negotiated, nor is there any assurance
that the Company will be able to execute a PIPE transaction. The
Company may also consider alternatives to a PIPE transaction in
order to reduce outstanding debt. During the quarter ended October
31, 2004, the Board of Directors also authorized the Company to
engage Danske Markets Inc. to assist in the sale of the Company's
General Press operations, consisting of the North America Press and
International Press segments. Although the divestiture is not
guaranteed, the Company does not consider these operations core to
its business and intends to use the proceeds of a divestiture to
further pay down debt. Financial Guidance In conjunction with a
potential PIPE or other equity transaction, the Company is
providing selected financial guidance for the remainder of fiscal
2005. The Company currently expects revenues for the full fiscal
2005 to be between $201 million and $212 million. Conference Call
Flow International will host a conference call at 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, statements that in our next stage of
growth, we intend to extricate ourselves from a weighty burden of
debt obligations and return to profitability and genuine
shareholder value; we continue to see growth as the marketplace
continues to recognize the increased accuracy, speed, and
versatility of the waterjet over conventional cutting technologies;
that in conjunction with its analysis, management intends to
increase the level of staffing and supervision in critical
functional areas; that the Company will enter into a PIPE or other
equity transaction in order to reduce outstanding debt; that the
Company intends to use proceeds from the divestiture of two
segments to further pay down debt and the Company currently expects
revenues for the full fiscal 2005 to be between $201 million and
$212 million. 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
253-850-3500 Flow International Corporation Consolidated Statement
of Operations (Unaudited) Dollars in thousands, except per share
data Three months ended Six months ended October 31, October 31,
2004 2003 % Change 2004 2003 % Change (restated) (restated) Sales
$55,467 $43,689 27% $104,449 $80,871 29% Cost of sales 37,212
28,038 33% 68,299 51,835 32% Gross margin 18,255 15,651 17% 36,150
29,036 25% Operating expenses: Marketing 8,066 6,078 33% 15,375
13,511 14% Research and engineering 1,902 2,881 -34% 4,506 5,613
-20% General and administrative 5,704 5,456 5% 11,432 10,953 4%
Financial consulting -- 857 -100% 623 1,105 -44% Restructuring --
97 -100% -- 1,197 -100% Operating expenses 15,672 15,369 2% 31,936
32,379 -1% Operating income (loss) 2,583 282 NM 4,214 (3,343) NM
Interest expense, net (3,789) (3,371) 12% (6,884) (6,670) 3% Other
income, net 1,389 1,894 -27% 1,219 2,621 -53% Loss before taxes 183
(1,195) 115% (1,451) (7,392) 80% Income tax provision (458) (734)
-38% (1,164) (730) 59% Loss before discontinued operations (275)
(1,929) -86% (2,615) (8,122) -68% Discontinued operations, net of
tax -- -- NM -- 526 -100% Net loss $(275) $(1,929) -86% $(2,615)
$(7,596) -66% Loss per share: Basic and diluted before discontinued
operations $(0.02) $(0.13) -85% $(0.17) $(0.53) -68% Basic and
diluted $(0.02) (0.13) -85% $(0.17) (0.50) -66% Weighted average
shares outstanding (000): Basic 15,916 15,359 15,801 15,359 Diluted
15,916 15,359 15,801 15,359 NM = not meaningful Flow International
Corporation Statement of Operations Operations Breakdown
(Unaudited) Dollars in thousands, except per share data Three
Months ended October 31, 2004 Flow Waterjet Avure Systems
Technologies Consolidated Sales $44,087 $11,380 $55,467 Cost of
sales 28,897 8,315 37,212 Gross margin 15,190 3,065 18,255
Operating expenses 12,948 2,724 15,672 Operating income (loss)
2,242 341 2,583 Six Months ended October 31, 2004 Flow Waterjet
Avure Systems Technologies Consolidated Sales $82,386 $22,063
$104,449 Cost of sales 53,223 15,076 68,299 Gross margin 29,163
6,987 36,150 Operating expenses 25,888 6,048 31,936 Operating
income (loss) 3,275 939 4,214 Three Months ended October 31, 2003
Flow Waterjet Avure Systems Technologies Consolidated (restated)
(restated) Sales $33,041 $10,648 $43,689 Cost of sales 21,149 6,889
28,038 Gross margin 11,892 3,759 15,651 Operating expenses 11,210
4,159 15,369 Operating income (loss) 682 (400) 282 Six Months ended
October 31, 2003 Flow Waterjet Avure Systems Technologies
Consolidated (restated) (restated) Sales $66,530 $14,341 $80,871
Cost of sales 42,119 9,716 51,835 Gross margin 24,411 4,625 29,036
Operating expenses 23,926 8,453 32,379 Operating income (loss) 485
(3,828) (3,343) Flow International Corporation Supplemental Data
(Unaudited) Dollars in thousands Three months ended Six months
ended October 31, October 31, 2004 2003 % Change 2004 2003 % Change
Divisional revenue breakdown: Flow Waterjet Systems: Systems
$31,274 $20,904 50% $57,174 $41,847 37% Consumable parts and
services 12,813 12,137 6% 25,212 24,683 2% Total 44,087 33,041 33%
82,386 66,530 24% Avure Technologies Fresher Under Pressure 2,584
3,716 -30% 6,452 4,410 46% General Press 8,796 6,932 27% 15,611
9,931 57% Total 11,380 10,648 7% 22,063 14,341 54% $55,467 $43,689
27% $104,449 $80,871 29% Geographic revenue breakdown: United
States $35,301 $23,417 51% $63,306 $43,756 45% Rest of Americas
3,679 3,901 -6% 7,548 7,500 1% Europe 10,034 10,934 -8% 20,791
19,405 7% Asia 6,453 5,437 19% 12,804 10,210 25% $55,467 $43,689
27% $104,449 $80,871 29% Depreciation and amortization expense
$1,224 $1,560 -22% $2,546 $3,233 -21% Capital spending $117 $2,159
-95% $446 $3,884 -89% Flow International Corporation Preliminary
Condensed Balance Sheet Data Dollars in thousands October 31, April
30, 2004 2004 % Change (restated) Cash, including short-term
restricted cash $14,896 $12,835 16% Receivables, net 44,573 44,860
-1% Inventories 28,228 26,384 7% Total current assets 95,547 90,611
5% Total assets 139,905 135,071 4% Total debt $85,174 $86,808 -2%
Total liabilities 146,453 142,263 3% Total shareholders' deficit
(9,061) (9,552) -5% DATASOURCE: Flow International Corporation
CONTACT: Steve Reichenbach, Chief Financial Officer of Flow
International Corporation, +1-253-850-3500 Web site:
http://www.flowcorp.com/
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