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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 1995
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 2-81315
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
(206) 850-3500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 Par Value
Preferred Stock Purchase Rights
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 [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]
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The aggregate market value of the voting stock held by non affiliates of the
registrant based upon the closing price reported by the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") as of May 31, 1995,
was $124,645,257. The number of shares of common stock outstanding as of May
31, 1995, was 14,350,219 shares.
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DOCUMENTS INCORPORATED BY REFERENCE
PART I: None
PART II: None
PART III: ALL ITEMS -- SEE REGISTRANT'S DEFINITIVE PROXY STATEMENT WHICH
INVOLVES THE ELECTION OF DIRECTORS AND WHICH WILL BE FILED
WITH THE COMMISSION WITHIN 120 DAYS AFTER THE CLOSE OF THE
FISCAL YEAR.
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial
Owners and Management
Item 13 Certain Relationships and Related Transactions
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PART I
Item 1. Business
Flow International Corporation ("Flow" or the "Company") designs,
develops, manufactures, markets, and services ultrahigh-pressure ("UHP") (over
30,000 psi) waterjet cutting and cleaning systems, and is a provider of access
systems, robotics and factory automation equipment. Flow provides
technologically advanced, environmentally sound solutions to the manufacturing,
industrial cleaning and construction services markets. The Company's waterjet
systems are used to cut both metallic and nonmetallic materials in many
industry segments, including the aerospace, automotive, disposable products,
food processing, glass, job shop, marble, oil field services and paper
industries. The Company also provides the robotic articulation equipment used
in the cutting process as well as other factory automation systems such as pick
and place and load/unload operations. The Company's infrastructure products
include UHP waterjets for use in industrial cleaning, surface preparation,
construction, nuclear decontamination, and petro-chemical applications, as well
as access systems for use in many of the same applications. The Company also
provides, as a service, the removal of deteriorated concrete from bridges and
parking garages using UHP waterjets ("HydroMilling(R)"), and the removal of
rubber, paint and grout from commercial and military runways
("HydroCleaning(TM)").
The Company was formed in 1974 as a division of Flow Industries, Inc.
("Flow Industries"). In March 1983, the Company completed its initial public
offering. During the year ended April 30, 1990, the Company acquired and
retired Flow Industries' remaining interest in the Company.
In September 1992, the Company acquired all of the outstanding stock
of Spider Staging Corporation ("Spider"). Spider designs, manufactures, rents,
sells, and services access systems to a variety of infrastructure-related
markets.
In April 1993, the Company acquired substantially all of the assets of
Power Climber, Inc. ("Power Climber"), and affiliated companies. Power Climber
was, prior to the acquisition, a supplier to Spider, and designs and markets
access systems, using traction hoist technology.
On November 4, 1994, the Company entered into a licensing agreement
with Ark Systems, Inc. ("Ark"). Ark designs and manufactures a range of access
containment systems which are used in under-bridge applications for surface
preparation, lead-paint abatement, cleaning and maintenance. The agreement
gives Spider the exclusive worldwide marketing and manufacturing rights for the
Ark product line for five years.
On December 15, 1994, the Company purchased certain net assets of
Dynovation Machine Systems, Inc. ("Dynovation"). Dynovation designs and
manufactures robotic waterjet cutting cells and automated assembly systems for
the automotive market and other industries.
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On January 3, 1995, the Company purchased certain net assets of ASI
Robotics Systems ("ASI"). ASI designs and manufactures high accuracy gantry
robots and related systems used in waterjet and other applications. ASI
supplies it's products to the aerospace, automotive and other similar
industries.
PRODUCTS AND SERVICES
The Company provides UHP waterjets and related products and services
to a wide variety of industries. The Company divides its revenues into four
primary categories of product:
(In thousands) 1995 1994 1993
Revenue % Revenue % Revenue %
----------------------------------------------------------------------
UHP Waterjet and Factory
Automation Systems $36,600 33 $20,645 23 $24,160 31
UHP Spare Parts and Services 28,529 26 26,319 30 24,818 31
Access Systems and Services 33,566 31 28,888 33 22,015 28
HydroMilling(R) and
HydroCleaning(TM) Services 11,315 10 12,780 14 8,086 10
----------------------------------------------------------------------
Total Revenues $110,010 100 $88,632 100 $79,079 100
======================================================================
UHP WATERJET AND FACTORY AUTOMATION SYSTEMS, SPARE PARTS AND SERVICES
The Company offers a variety of UHP waterjet and factory automation
system products and accessories, including related robotic articulation
equipment. Intensifier and direct-drive pumps are currently the core
components of the Company's products. An intensifier pump pressurizes water up
to 60,000 psi and forces it through a small nozzle, generating a high-velocity
waterjet. The Company's unique direct- drive pressure-compensated pump
pressurizes water utilizing triplex piston technology. In order to cut
metallic and other hard materials, abrasives are added to the waterjet stream
creating an abrasivejet. The Company's abrasivejet cuts with little heat,
causes no metallurgical changes, and leaves a high-quality edge that usually
requires no additional finishing. Flow also produces a range of tools and
accessories which incorporate waterjet technology, and sells aftermarket spare
parts and services for its products. The Company also provides factory
automation equipment used in applications such as pick and place operations,
waterjet cutting and inspection. A UHP waterjet system consists of an
ultrahigh-pressure intensifier pump, one or more waterjet cutting heads, and a
motion control system. Sales of UHP waterjet and factory automation systems,
and replacement parts and services, accounted for 33% and 26%, respectively, of
fiscal 1995 revenues. Spare parts sales help to insulate the Company from the
adverse effects of economic swings, when industrial customers tend to reduce
investment in new capital equipment. System sales generate an after-market in
consumable spare parts and service. Higher system sales therefore have a
corresponding positive impact on spare parts and services revenue. The Company
has placed UHP waterjet cutting systems worldwide and in many different
industries, including the aerospace, automotive, disposable products, food
processing, glass, job shop, metal cutting, marble and other stone
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cutting, oil field services and paper industries. The Company's UHP waterjet
systems are also used in industrial cleaning applications such as paint
removal, surface preparation, factory, ship hull and heat exchanger cleaning.
ACCESS SYSTEMS AND SERVICES
The Company designs, manufactures, rents, sells, and services access
systems for use in structural and facade maintenance and construction
applications. The Company's mobile or temporary work platforms provide access
to exterior building surfaces and construction sites, bridges, ships, offshore
oil rigs, radio towers, sports stadiums, and hydroelectric dams; and internal
access to large water and chemical tanks, power plant boilers, and missile
silos. The Company's permanently installed systems provide access to exterior
surfaces of high-rise buildings for window washing, painting, building
restoration and exterior maintenance. The Company is also the exclusive U.S.
distributor of a line of permanently installed access systems produced by
Mannesmann of Germany, and is the North American distributor of the Nihon Bisoh
automatic exterior maintenance systems. In fiscal 1995, sales and rental of
access systems and services amounted to 31% of total revenues.
HYDROMILLING AND HYDROCLEANING SERVICES
The Company provides HydroMilling services on a contract and subcontract
basis for the removal of deteriorated concrete from bridge and parking garage
surfaces. The Company's proprietary HydroMilling systems operate in the
pressure range of 25,000 to 40,000 psi, and use a rotating ultrahigh-pressure
waterjet, mounted on a robot, to remove concrete. The depth of the cutting per
pass can be controlled by adjusting the pressure and traverse speed of the
waterjet. In January 1993, the Company began work on the John F. Kennedy
Center for the Performing Arts parking garage in Washington, D. C., where Flow
will remove and replace deteriorated concrete in this 500,000 square foot
facility. This $13.8 million contract is expected to be completed in early
fiscal 1997. The Company recently announced the award of two other contracts
totaling $5.5 million. HydroCleaning services are provided to commercial and
military airfields. Ultrahigh-pressure waterjets are mounted on a vehicle to
remove rubber, paint and grout from airport runways. In fiscal 1995,
HydroMilling and HydroCleaning revenues were 10% of total revenues.
MARKETING
The Company markets its products worldwide through its headquarters in
Kent, Washington (a suburb of Seattle), through subsidiaries, divisions and
joint ventures in Pittsburgh, Pennsylvania; Johnstown, Pennsylvania;
Jeffersonville, Indiana; Burlington, Canada; Darmstadt, Germany; Antwerp,
Belgium; Paris, France; Lyon, France; Marseilles, France; Tokyo, Japan; and
Hsinchu, Taiwan; and through branch offices in sixteen North American cities.
The Company sells directly to customers in the U.S., Europe and parts of Asia,
and has distributors or agents in most other countries.
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No customer accounted for 10% or more of the Company's revenues during
any of the three years ended April 30, 1995.
Marketing efforts are focused on certain target industries. To
enhance the effectiveness of sales efforts, the marketing staff and sales force
acquire detailed information on the manufacturing and construction processes in
targeted industries. This information is used to develop standardized and
customized solutions using both UHP waterjet and robotics technologies, and
access systems. In selling both standard and custom-designed waterjet and
access systems, the Company provides turnkey systems, including system design,
specification, hardware and software integration, equipment testing and
simulation, installation, start-up services, technical training and service.
One of the Company's marketing techniques utilizes a telemarketing
program to identify and qualify sales leads, thus increasing the efficiency of
the direct sales staff. Market responses to these activities are carefully
screened to identify new areas of interest and new potential applications. The
Company also attends trade shows for targeted market segments and advertises in
selected publications.
The Company markets its proprietary HydroMilling and HydroCleaning
services primarily in the United States due to the location of service staff
and equipment. HydroMilling services are provided primarily in the Northeast
and Midwest areas of the country. Roadway concrete deteriorates faster in
these areas due to the freeze-thaw cycle and use of salt on roadways.
HydroCleaning services are provided throughout the United States. Services are
marketed directly to customers by the Company's sales force.
Application of the Company's products and services in the construction
industry vary with construction cycles. Sales in the March through October
period tend to be higher than sales in the remaining months of the year.
PATENTS AND LICENSES
The Company holds a number of patents relating to UHP waterjet
technology and systems, and to access system products and applications. Some
of these patents are subject to sub-licenses. In addition, the Company has
been granted licenses with respect to patents held in the name of Flow
Industries, the Company's former parent.
While the Company believes the patents it uses are valid, it does not
consider its business dependent on patent protection. In addition, the Company
has over the years developed non-patented proprietary expertise and know-how in
waterjet and access system applications, and in the manufacture of these
systems.
The Company believes the patents it holds, along with the proprietary
application and manufacturing know-how, act as a barrier of entry into the
markets it serves.
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BACKLOG
At April 30, 1995, the Company reported a year-end backlog of $23.5
million, up 54% from $15.3 million at the prior year end. Based upon the terms
of the customer contracts and the Company's manufacturing schedule, all of the
revenue backlog as of April 30, 1995 is expected to be realized during fiscal
1996. Amounts expected to be billed after April 30, 1996 have been excluded
from this backlog presentation. The unit sales price for most of the Company's
products and services is relatively high (typically ranging from tens of
thousands to over a million dollars) and individual orders can involve the
delivery of several hundred thousand dollars of products or services at one
time. Furthermore, some items in backlog can be shipped more quickly than
others, and some have higher profit margins than others. Consequently, even
sizable variations in the amount of the Company's backlog between particular
dates are not necessarily indicative of comparable variations in sales or
earnings.
COMPETITION
The major competitors for UHP waterjet systems are conventional
cutting and cleaning methods. These methods, which use saws, knives, shears,
lasers, abrasive wheels, grinders, routers, drills, dies, and abrasive cleaning
techniques, often have a lower initial cost. A UHP waterjet cutting system has
many advantages over conventional cutting systems, including the generation of
little heat and airborne dust, easy adaptability to complex cutting programs,
and the ability to leave clean-cut edges. These factors in addition to
elimination of secondary processing in certain circumstances enhance
manufacturing productivity. Waterjet cleaning offers many advantages over
other cleaning methods, such as the ability to remove difficult-to-clean
coatings or deposits from a surface without damaging underlying material. A
UHP waterjet system is an environmentally-friendly answer to many difficult
cutting and cleaning applications and can often be justified solely on the
basis of the removal of hazardous materials from the production process.
The Company also competes with other waterjet cutting equipment
manufacturers in the United States, Europe and Asia. Certain of these
competitors have greater financial resources than the Company. The recent
robotics acquisitions give Flow a competitive advantage as the only total
system provider of a complete line of articulation equipment used in waterjet
cutting. Although independent market information is not generally available,
based upon data assembled from internal and external sources, Company
management believes it is the largest manufacturer of UHP waterjet cutting
systems in the world.
With respect to access systems, the Company believes that service,
price, product performance, and reliability are the key competitive factors.
Management believes that its products are priced competitively and that the
strength of its North American branch system and its product reliability are
key to its results. In the permanently installed access system markets, the
Company believes there are 15 to 20 firms with which it competes. None of
these firms dominate the market.
The primary competitors to HydroMilling services are traditional
concrete removal operators. The advantages of the UHP approach of HydroMilling
over other concrete removal systems, such as jackhammers, include increased
speed, reduced cost, depth control, better concrete bonding; and the
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elimination of micro-cracks, rebar damage, vibration, dust, and noise.
HydroMilling also competes with other hydrodemolition contractors, most of
which use waterjets at 10,000 to 25,000 psi with significantly higher volumes
of water. The Company believes that its process, operating with pressures to
36,000 psi, produces a higher quality bonding surface and that the size of its
fleet as compared to competitors enables it to complete larger projects more
quickly.
HydroCleaning competitors include companies using chemical processes
and other mechanical means. The Company believes that the speed and
environmentally-friendly aspects of its process are key advantages.
Overall, the Company believes that its competitive position is
enhanced by (1) technically advanced, proprietary products that provide
excellent reliability, low operating costs, and user-friendly features, (2) a
strong application-oriented, problem-solving marketing approach, (3) an active
research and development program that allows it to maintain technical
leadership, (4) the ability to provide complete turnkey systems, (5) strong
position in key markets, such as the U.S., Japan, southeast Asia and Europe,
(6) strong OEM customer ties, and (7) efficient production facilities.
RESEARCH AND ENGINEERING
The Company has allocated over 6% of revenues to research and
engineering during each of the three years ended April 30, 1995. Research and
engineering expenses were approximately $6,784,000, $5,361,000, and $4,983,000
in fiscal years 1995, 1994, and 1993, respectively.
EMPLOYEES
As of April 30, 1995, the Company employed 792 full time and 6 part
time personnel. There are no material collective bargaining agreements to
which the Company is a party.
FOREIGN AND DOMESTIC OPERATIONS
See Note 13 of Notes to Consolidated Financial Statements for
information regarding foreign and domestic operations.
10
Item 2. Properties
The Company's headquarters and primary manufacturing facilities are
located in one leased facility in Kent, Washington. In addition, the Company
maintains HydroMilling office and shop facilities in Pittsburgh, Pennsylvania;
manufacturing facilities in Jeffersonville, Indiana; sales facilities in
sixteen North American cities; Tokyo, Japan and three facilities in France; and
sales, manufacturing and warehouse facilities in Johnstown, Pennsylvania;
Burlington, Canada; Hsinchu, Taiwan; Antwerp, Belgium; and Darmstadt, Germany.
In connection with the acquisition of certain assets of ASI, the
Company owns the land and building in which ASI operates. The plant is located
in Jeffersonville, Indiana.
All other facilities of the Company are leased with the exception of a
warehouse and sales facility in Chicago, Illinois.
The Company believes that its facilities are suitable for its current
operations and that expansion in the near term will not require additional
space. The Company further considers that its primary manufacturing facility
will be adequate to meet production requirements for the next three to five
years.
Item 3. Legal Proceedings
The Company is party to various legal actions incident to the normal
operation of its business, none of which is believed to be material to the
financial condition of the Company. See Notes 1 and 12 of Notes to
Consolidated Financial Statements for a description of the Company's product
liability insurance coverage and estimated exposure.
Item 4. Submission of Matters to a Vote of Security Holders
An annual stockholders' meeting was held on August 31, 1994, during
which three persons were elected to be members of the Board of Directors.
Daniel J. Evans, Kenneth M. Roberts and Ronald W. Tarrant were elected to
three-year terms ending with the 1997 Annual Meeting of Stockholders receiving,
respectively, 11,229,042, 11,238,915 and 11,214,996 votes in favor, and 85,307,
75,434 and 99,353 votes withheld. There were no broker non-votes for any of the
above submitted for vote.
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PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
See page 12
Item 6. Selected Financial Data.
See page12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
See pages 13 through 17
Item 8. Financial Statements and Supplementary Data.
See pages 18 through 40
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
12
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The principal market for the Company's common stock is the
over-the-counter market. The Company's stock is traded on the NASDAQ National
Market under the symbol "FLOW." The range of high and low sales prices for the
Company's common stock for the last two fiscal years is set forth in the table
below.
Fiscal Year 1995 Fiscal Year 1994
High Low High Low
-------------------------------------------------------
First Quarter $6.88 $4.63 $8.25 $5.75
Second Quarter 7.25 5.63 8.75 6.25
Third Quarter 7.88 6.13 8.75 6.88
Fourth Quarter 8.50 6.50 8.50 5.38
There were 1,592 stockholders of record as of May 31, 1995.
The Company has not paid dividends to common stockholders in the past.
The Board of Directors intends to retain future earnings to finance development
and expansion of the Company's business and does not expect to declare
dividends to common stockholders in the near future.
Item 6. Selected Financial Data
(In thousands, except per share data) Year Ended April 30
- ----------------------------------------------------------------------------------------------------------
1995 1994 1993 1992(1) 1991(1)
------------------------------------------------------------------------
Income Statement Data:
Revenue $110,010 $88,632 $79,079 $69,071 $60,509
Pretax Income (Loss) 9,259 3,112 5,791 4,272 (704)
Net Income (Loss) 7,728 2,953 4,641 3,511 (865)
Earnings (Loss) Per Share 0.53 0.21 0.33 0.25 (0.11)
Balance Sheet Data:
Working Capital 44,592 25,415 25,060 16,399 16,806
Total Assets 105,484 78,228 69,276 57,448 54,329
Short-Term Debt 2,412 16,504 10,403 8,477 11,472
Long-Term Obligations 33,359 10,559 12,549 7,899 8,903
Stockholders' Equity 49,803 37,948 34,225 28,873 24,748
- ----------
(1) Results for the fiscal year have been restated to include the results
of Spider Staging Corporation, which was acquired in a pooling-of-interests
transaction on September 30, 1992.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The Company provides ultrahigh-pressure ("UHP") waterjet, factory
automation and access systems, and related products and services to a wide
variety of industries. The following table sets forth the Company's
consolidated revenues by major product categories.
CONSOLIDATED REVENUES BY MAJOR PRODUCT CATEGORIES
(In thousands) 1995 1994 1993
Revenue % Revenue % Revenue %
----------------------------------------------------------------------
UHP Waterjet and Factory
Automation Systems $ 36,600 33 $20,645 23 $24,160 31
UHP Spare Parts and Services 28,529 26 26,319 30 24,818 31
Access Systems and Services 33,566 31 28,888 33 22,015 28
HydroMilling(R) and
HydroCleaning(TM) Services 11,315 10 12,780 14 8,086 10
----------------------------------------------------------------------
Total Revenues $110,010 100 $88,632 100 $79,079 100
======================================================================
FISCAL 1995 COMPARED TO FISCAL 1994
During the year ended April 30, 1995, the Company purchased certain
net assets of two robotics systems manufacturers, Dynovation Machine Systems,
Inc. ("Dynovation") and ASI Robotics, Inc. ("ASI"). These acquisitions are part
of the Company's long-term strategic growth plan. Both companies are, and had
previously been, integrators of the Company's products. Consolidation of the
sales and marketing force began during the third quarter of fiscal 1995, and
integration of other functions will continue into fiscal 1996. During the year
the Company also entered into a licensing agreement with Ark Systems, Inc.
("Ark"), for the exclusive worldwide marketing and manufacturing rights for the
Ark product line. Ark produces access system equipment used in the cleaning
and maintenance of the under-structure of bridges. The Company also entered
into a joint venture relationship with Consortium Europeen du Materiel ("CEM")
in France, for the distribution of access system equipment in France. The
Company's consolidated statements of income include the results of Dynovation,
ASI, Ark and CEM from the dates of acquisition or agreement. The Company paid
total cash of $11.5 million and issued 445,000 shares of common stock to
acquire the assets of Dynovation and ASI. The investments in Ark and CEM have
not been material to date. The Company funded these transactions through a
short-term bridge loan facility from the Company's principal bank.
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Revenues for the year ended April 30, 1995 increased $21.4 million
(24%) from the prior year period. This increase arose primarily from the
strong advances in the European and domestic UHP markets, where revenues
increased 46% and 18%, respectively and from business acquisitions and
partnerships made during fiscal 1995. Sales into Asia were similar to those of
the prior year. The Company typically sells its products at higher prices
outside the United States due to the costs of servicing these markets. UHP
waterjet spare parts and services revenues increased by $2.2 million (8%),
reflecting an increased base of UHP waterjet systems installed throughout the
world. Spare parts and services are a continuing and significant part of the
Company's business, and generally have a higher profit margin than new systems.
As a percentage of total revenues, spare parts and services decreased as
compared to the prior year because the acquired systems manufacturers carry a
lower relative percentage of such revenues. Spare parts are composed primarily
of consumables used in the cutting or cleaning process. Access system revenues
increased $4.7 million (16%), reflecting continued domestic strength of the
sales and rental of temporary access equipment as well as the recent licensing
agreement with Ark. HydroMilling and HydroCleaning services revenues decreased
by $1.5 million (11%). Management of this division has focused on contracts
which maintain its target margins, in a market which softened slightly during
the year. The $13.8 million contract for parking garage rehabilitation
services at the John F. Kennedy Center for the Performing Arts in Washington,
D.C. remains on target, with the job approximately 70% complete at the end of
fiscal 1995.
Gross margin expressed as a percent of sales was 42% in fiscal 1995
compared with 40% in fiscal 1994. Excluding the effect of certain
non-recurring charges in fiscal 1994, the gross margin percentage would have
also been 42%. Since the Company's products have different gross margins,
product mix variations can have a significant impact on overall gross margins.
In general, UHP systems sales have gross margins less than 40% and spare parts
sales have margins in excess of 50%. The margin in the HydroMilling and
HydroCleaning revenue is dependent on the mix of services provided and the
utilization of the equipment. Services margins approximate 30% of sales,
while rental margins typically exceed 50% of sales. Slow moving and obsolete
inventory provisions increased by $112,000, net of disposals.
Expenses increased by $3.6 million (12%), in part as a result of the
acquisitions completed during 1995. However, expressed as a percentage of
revenues, expenses decreased from 35% in 1994 to 31% in 1995. Excluding the
effect of certain non-recurring charges in fiscal 1994, the expense percentage
would have been 34%. Marketing, and general and administrative expenses both
declined by two percentage points. This was achieved by a continued focus on
cost control by Company management during fiscal 1995. Research and
engineering expense exceeded 6% of revenues, reflecting the Company's continued
emphasis on increased product development efforts.
Operating income can vary significantly for domestic and foreign
operations (see Note 13 of Notes to Consolidated Financial Statements), but is
primarily the result of product mix variations and volume from year to year.
There are no known trends that management expects to result in a materially
unfavorable impact on revenues or income from operations.
Net interest expense increased by $825,000 in fiscal 1995 compared to
1994. This was as a result of the higher borrowings related to the
acquisitions, and to the increased interest rates during fiscal 1995. Cash flow
from operations enabled the Company to decrease debt $4.3 million during fiscal
1995.
15
During fiscal 1995, other expense, net, totaled $30,000, compared to
other income, net, of $652,000 in 1994. The 1994 results included a $445,000
gain on the sale of a vacated manufacturing facility.
Income tax expense for fiscal 1995 was 17% of income before tax as
compared to 18% in the previous year. Income tax expense was lower than the
statutory rate in both fiscal 1995 and 1994 primarily due to lower tax rates in
certain foreign jurisdictions, the benefit of the Company's foreign sales
corporation and changes in the Company's FAS 109 valuation allowance. In the
first quarter of fiscal 1994, the Company recorded income of $401,000, related
to the mandatory adoption of Statement of Financial Accounting Standards No.
109 ("FAS 109"), "Accounting for Income Taxes." This is reflected as a change
in accounting principle.
FISCAL 1994 COMPARED TO FISCAL 1993
Revenues for the year ended April 30, 1994 increased $9.6 million
(12%) from the prior year period. UHP waterjet system sales declined by $3.5
million (15%), reflecting the soft economies in Europe and Japan that were
prevalent throughout the year. UHP waterjet replacement spare parts and
services revenues increased by $1.5 million (6%). Access system revenues
increased $6.9 million (31%), reflecting primarily the acquisition of Power
Climber at the end of fiscal 1993. HydroMilling and HydroCleaning services
revenues increased $4.7 million (58%), relating primarily to the performance of
parking garage rehabilitation services at the John F. Kennedy Center for the
Performing Arts in Washington, D.C.
North American and Asian sales (excluding Japan) increased by 20% and
34%, respectively; European and Japanese sales decreased by 5% and 44%,
respectively, as their soft economies reduced the demand for machine tools.
Gross margin expressed as a percent of sales was 40% in fiscal 1994
compared with 43% in fiscal 1993. The reduction in gross margin is primarily
attributable to a construction services project terminated in the third quarter
of fiscal 1994 for which the Company recorded cost of sales of $2.6 million and
revenues of $400,000. Excluding this project, gross margin would have been 42%
in fiscal 1994. Slow moving and obsolete inventory provisions increased by
$86,000, net of disposals.
Expenses increased by $3.8 million in fiscal 1994. However, they were
35% of sales in both years. Marketing expenses increased by $2.5 million.
This increase includes approximately $600,000 related to Power Climber, whose
expenses were nominal in fiscal 1993 as the acquisition was completed in April
1993. Additionally, marketing expenses increased in the domestic access system
and waterjet marketing areas by approximately $700,000 and $900,000,
respectively, primarily from increased efforts directed at expanding the
Company's access system and field cleaning markets and operations. The
$378,000 increase in research and engineering expenses resulted from increased
product development efforts. General and administrative expenses increased by
$863,000, which includes Power Climber expenses of $1.3 million. Additionally,
during the third and fourth quarters of the fiscal year the Company incurred
approximately $400,000 in expenses associated with a letter of intent to
acquire the assets of the Waterjet Cutting Systems Division of Ingersoll-Rand
Company. The Company terminated the letter of intent subsequent to
16
year end but has written off these costs to general and administrative expense
in fiscal 1994. These increases were offset partially by reduced domestic
general and administrative expenses.
Net interest expense increased by $347,000 in fiscal 1994 and was
related to increased borrowings.
Other income, net, increased by $649,000 which was composed of a
$445,000 gain on the sale of a vacated manufacturing facility and greater
realized and unrealized foreign exchange gains in fiscal 1994 over 1993.
Income tax expense for fiscal 1994 was 18% of income before tax as
compared to 28% in the previous year. In the previous year, net operating loss
carryforwards were recognized as an extraordinary item and reduced the net tax
expense to 20% of income before tax. In the first quarter of fiscal year 1994,
the Company recorded income of $401,000, related to the mandatory adoption of
Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting
for Income Taxes." This is reflected as a change in accounting principle.
Income tax expense was lower than the statutory rate in fiscal 1994 due
primarily to lower tax rates in certain foreign jurisdictions, the benefit of
the Company's foreign sales corporation and the change in the Company's FAS 109
valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Subsequent to year end the Company received an irrevocable long-term
commitment from its bank to replace its domestic borrowings. Such borrowings
arose from a working capital line, equipment purchase notes, and the financing
required to complete various acquisitions and business partnerships and
agreements during fiscal 1995. The new financing arrangement comprises a $60
million five-year reducing line of credit. The interest rate will be at prime
or linked to IBOR, at the Company's option. Debt as of April 30, 1995, which
will be replaced by the new financing arrangement, has been classified
accordingly.
See Note 7 of Notes to Consolidated Financial Statements for a
schedule of long-term debt maturities. Long-term debt obligations are expected
to be met from working capital provided by operations and, as necessary, by
other indebtedness.
Capital spending plans currently provide for outlays of approximately
$6 to $7 million in fiscal 1996. It is expected that funds necessary for these
expenditures will be generated internally, and through available credit
facilities.
The 22% increase in gross trade accounts receivable at April 30, 1995
from April 30, 1994 was principally due to higher fourth quarter revenues, and
to the new businesses acquired during fiscal 1995. Days' sales outstanding in
gross accounts receivable are impacted by sales outside the United States.
Additionally, longer payment terms are sometimes negotiated on large system
orders. The Company's management does not believe these timing issues will
present a material adverse impact on the Company's short-term liquidity
requirements.
17
The inventory increase of $5 million (23%) is related primarily to the
higher levels of business and the new businesses acquired during fiscal 1995.
Certain products manufactured by ASI and Dynovation can require an extended
manufacturing period, and therefore involve higher levels of work in process.
Higher inventory levels also reflect new product introductions and the
Company's efforts to reduce lead times associated with customer orders. The
amount provided for obsolete and slow-moving goods at April 30, 1995, increased
$112,000, net of disposals, from April 30, 1994.
It is the Company's policy to hedge net assets denominated in foreign
currencies (primarily the German Mark) where significant currency rate
fluctuations may impact profitability.
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
Management is responsible for the fair and accurate presentation of
information in this annual report. The financial statements and related notes
have been prepared in accordance with generally accepted accounting principles.
Financial and operating information comes from Company records and other
sources. Certain amounts are, of necessity, based on judgment and estimation.
We believe that adequate accounting systems and financial controls are
maintained to ensure that the Company's records are free from material
misstatement and to protect the Company's assets from loss or unauthorized use.
In addition, the Audit Committee of the Board of Directors periodically meets
with Price Waterhouse LLP and management to review the work of each, to discuss
financial reporting matters, and to review auditing and internal control
procedures.
/s/ Lee M. Andrews
LEE M. ANDREWS
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
18
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements are filed as a part of
this report:
Index to Financial Statements Page in This Report
- -----------------------------------------------------------------------------------------------------------------
Report of Independent Accountants 19
Consolidated Balance Sheets at April 30, 1995 and 1994 20
Consolidated Statements of Income for each of the three
years in the period ended April 30, 1995 21
Consolidated Statements of Cash Flows for each of
the three years in the period ended April 30, 1995 22
Consolidated Statements of Changes in Stockholders'
Equity for each of the three years in the period ended April 30, 1995 24
Notes to Consolidated Financial Statements 25
Financial Statement Schedules
- -----------------------------
VIII -- Valuation and Qualifying Accounts 40
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Flow International Corporation
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Flow International Corporation and its subsidiaries at April 30,
1995 and 1994, and the results of their operations and their cash flows for
each of the three years in the period ended April 30, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 8 to the financial statements, the Company
changed its method of accounting for income taxes in fiscal 1994.
/s/ Price Waterhouse LLP
Seattle, Washington
July 6, 1995
20
FLOW INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
April 30
---------------------
1995 1994
---- ----
ASSETS:
- -------
Current Assets:
Cash $1,074 $1,351
Trade Accounts Receivable, less
allowances for doubtful accounts of $1,150 and $908, respectively 31,638 25,887
Inventories 27,219 22,160
Deferred Income Taxes 1,335 1,422
Other Current Assets 4,719 4,316
----------------------
Total Current Assets 65,985 55,136
Property and Equipment, net 24,533 20,030
Deferred Income Taxes - 113
Intangible Assets, net of accumulated amortization of
$2,275 and $1,736, respectively 13,361 1,809
Other Assets 1,605 1,140
----------------------
$105,484 $78,228
======================
LIABILITIES AND STOCKHOLDERS' EQUITY:
- -------------------------------------
Current Liabilities:
Notes Payable to Banks $1,614 $12,126
Current Portion of Long-Term Obligations 798 4,378
Accounts Payable 12,221 7,968
Accrued Payroll and Related Liabilities 3,542 2,027
Other Accrued Taxes 638 178
Other Accrued Liabilities 2,580 3,044
---------------------
Total Current Liabilities 21,393 29,721
Long-Term Obligations 33,359 10,559
Deferred Income Taxes 248 -
Minority Interest 681 -
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,
14,603,233 and 14,326,830 shares issued and outstanding, respectively, in 1995
14,031,262 and 13,754,859 shares issued and outstanding, respectively, in 1994 146 140
Capital in Excess of Par 37,602 33,889
Retained Earnings 11,456 3,728
Treasury Common Stock of 276,403 shares at cost (556) (556)
Cumulative Translation Adjustment 1,339 1,023
Loan to Employee Stock Ownership Plan & Trust (184) (276)
----------------------
Total Stockholders' Equity 49,803 37,948
----------------------
Commitments and Contingencies (Note 12) - -
----------------------
$105,484 $78,228
======================
The accompanying notes are an integral part of these consolidated financial
statements.
21
FLOW INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
April 30
------------------------------------
1995 1994 1993
---- ---- ----
Revenue:
Sales $84,800 $63,808 $60,663
Services 15,256 16,110 11,146
Rentals 9,954 8,714 7,270
------------------------------------
Total Revenues 110,010 88,632 79,079
Cost of Sales:
Sales 48,454 36,223 33,414
Services 10,850 13,351 7,788
Rentals 4,395 3,980 3,574
------------------------------------
Total Cost of Sales 63,699 53,554 44,776
------------------------------------
Gross Profit 46,311 35,078 34,303
Expenses:
Marketing 16,582 15,106 12,591
Research and Engineering 6,784 5,361 4,983
General and Administrative 11,282 10,602 9,739
------------------------------------
34,648 31,069 27,313
------------------------------------
Operating Income 11,663 4,009 6,990
Interest Expense, net (2,374) (1,549) (1,202)
Other Income (Expense), net (30) 652 3
------------------------------------
Income before Provision for Income Taxes,
Extraordinary Item and Change in Accounting Principle 9,259 3,112 5,791
Provision for Income Taxes 1,531 560 1,600
------------------------------------
Income before Extraordinary Item and Change in
Accounting Principle 7,728 2,552 4,191
Extraordinary Item:
Realization of Operating Loss Carryforwards -- -- 450
Change in Accounting Principle -- 401 --
------------------------------------
Net Income $ 7,728 $2,953 $4,641
====================================
Earnings per Common and Equivalent Shares:
Income before Extraordinary Item and Change
in Accounting Principle $ .53 $ .18 $ .30
Extraordinary Item and Change in Accounting Principle -- .03 .03
------------------------------------
Net Income $ .53 $ .21 $ .33
====================================
The accompanying notes are an integral part of these consolidated financial
statements.
22
FLOW INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended April 30,
----------------------------------------
1995 1994 1993
---- ---- ----
Cash Flows from Operating Activities:
Net Income $ 7,728 $ 2,953 $ 4,641
Adjustments to Reconcile Net Income to Cash
Provided (Used) by Operating Activities:
Depreciation and amortization 5,199 4,236 3,763
Gain on sale of Spider facility - (445) -
Change in accounting principle and extraordinary item - (401) (450)
Provision for losses on trade accounts receivable 480 324 237
Provision for slow moving and obsolete inventory 324 269 312
Tax effect of exercised stock options 164 554 175
Other 92 92 92
(Increase) Decrease in Current Assets,
net of effects of business combinations:
Trade Accounts Receivable (2,651) (4,325) (2,807)
Inventories (1,516) (2,552) (3,033)
Other Current Assets (29) (1,878) 636
Deferred Income Taxes 87 (686) 36
Increase (Decrease) in Current Liabilities,
net of effects of business combinations:
Accounts Payable (1,378) 513 181
Accrued Payroll and Related Liabilities 796 (87) (433)
Other Accrued Taxes 372 (257) (282)
Other Accrued Liabilities (813) 1,119 (472)
(Increase) in Intangible Assets (400) - -
(Increase) Decrease in Other Long-Term Assets (39) 195 175
Increase in Other Long-Term Liabilities 192 - -
------- ------- -------
Cash provided (used) by operating activities 8,608 (376) 2,771
------- ------- -------
Cash Flows from Investing Activities:
Expenditures for property and equipment (5,584) (6,228) (7,222)
Payment for business combinations (11,850) - -
Payment received on Flow Industries note - 2,744 -
Investment in Preferred Stock - - (609)
Proceeds from sale of property and equipment - 156 -
Other 17 702 644
------- ------- -------
Cash used by investing activities (17,417) (2,626) (7,187)
------- ------- -------
Cash Flows from Financing Activities:
Borrowings under line of credit agreements 81,895 73,213 52,581
Repayments under line of credit agreements (82,127) (67,768) (50,418)
Proceeds from bridge loan 12,364 - -
Proceeds from long-term obligations 287 2,340 2,552
Payments of long-term obligations (4,397) (3,674) (1,144)
Proceeds from issuance of common stock 194 315 488
Payment of Preferred Stock Dividends - (50) (200)
------- ------- -------
Cash provided by financing activities 8,216 4,376 3,859
------- ------- -------
Effect of exchange rate changes on cash 316 (141) (102)
------- ------- -------
Increase (decrease) in cash and cash equivalents (277) 1,233 (659)
Cash and cash equivalents at beginning of period 1,351 118 777
------- ------- -------
Cash and cash equivalents at end of period $ 1,074 $ 1,351 $ 118
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
23
FLOW INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Year Ended April 30,
--------------------------------------
1995 1994 1993
------- ------- -------
Supplemental disclosures of cash flow information
- -------------------------------------------------
Cash paid during the year for
Interest $2,273 $1,756 $1,434
Income Taxes 740 531 878
Supplemental schedule of non-cash investing and financing activities
- --------------------------------------------------------------------
Fair value of assets acquired (Note 2) $ 23,175 $4,054
Cash paid, stock issued and notes assumed for assets acquired (14,965) (2,262)
-------- ------
Liabilities assumed $ 8,210 $1,792
======== ======
Net proceeds from sale of the Spider manufacturing facility $ 1,031
Less one year note receivable (875)
-------
Cash proceeds $ 156
=======
The accompanying notes are an integral part of these consolidated financial
statements.
24
FLOW INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
Series A
Convertible Retained
Preferred Stock Common Stock Earnings/
----------------- ------------------ Capital (Accumu- Cumulative
Par Par In Excess lated Translation Treasury
Shares Value Shares Value of Par Deficit) Adjustment Stock
---------------------------------------------------------------------------------------
Balances, April 30, 1992 5 $ -- 12,843 $128 $32,089 $(3,616) $1,266 $(534)
Repayment of Director Loan 83
Exercise of Stock Options 464 5 833
Dividends on Preferred Stock (200)
Cumulative Translation Adjustment (102)
Net Income 4,641
---------------------------------------------------------------------------------------
Balances, April 30, 1993 5 $ -- 13,307 $133 $33,005 $ 825 $1,164 $(534)
=======================================================================================
Exercise of Stock Options 205 2 748 (22)
Conversion of Convertible
Preferred Stock (5) 519 5
Dividends on Preferred Stock (50)
Cumulative Translation Adjustment (141)
Other 136
Net Income 2,953
---------------------------------------------------------------------------------------
Balances, April 30, 1994 - $ -- 14,031 $140 $33,889 $ 3,728 $1,023 $(556)
=======================================================================================
Issuance of Stock 445 5 3,111
Exercise of Stock Options 127 1 356
Cumulative Translation Adjustment 316
Other 246
Net Income 7,728
---------------------------------------------------------------------------------------
Balances, April 30, 1995 - $ -- 14,603 $146 $37,602 $11,456 $1,339 $(556)
=======================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three years ended April 30, 1995
(All tabular dollar amounts in thousands, except per share amounts)
Note 1 - Summary of Significant Accounting Policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include Flow International
Corporation, ("Flow" or the "Company"), and its wholly-owned subsidiaries, Flow
Europe GmbH ("Flow Europe"), Flow Services Corporation, Flow Asia Corporation
("Flow Asia"), Rampart Waterblast, Inc., Spider Staging Corporation ("Spider"),
Power Climber and affiliated companies ("Power Climber"), Dynovation Inc.
("Dynovation") and two majority owned joint ventures. All significant
intercompany transactions have been eliminated.
OPERATIONS
The Company develops and manufactures ultrahigh-pressure waterjet
cutting, cleaning and factory automation systems, and powered access equipment
for the manufacturing, industrial cleaning and construction services markets.
Equipment is designed, developed, and primarily manufactured at the Company's
principal facilities in Kent, Washington, and at manufacturing facilities in
Johnstown, Pennsylvania; Jeffersonville, Indiana; and in Burlington, Canada.
The Company markets its products to customers worldwide through its principal
offices in Kent, its subsidiaries in Germany, Taiwan, Canada, and Belgium, and
through regional offices in major U.S. cities.
REVENUE RECOGNITION
Revenues are recognized at the time of shipment for products and
certain types of systems, and under the percentage of completion accounting
method for other types of systems, and at the time of service or rental with
respect to service and rental revenues. Products are warranted to be free from
material defects for a period of one year from the date of shipment. Warranty
obligations are limited to the repair or replacement of products. The
Company's warranty accrual is reviewed quarterly by management for adequacy
based upon recent shipments and historical warranty expense. Credit is issued
for product returns upon receipt of the returned goods, or, if material, at the
time of notification and approval.
Services revenue primarily consist of revenues related to
hydrodemolition services. Rental revenues consist of charges to customers for
the temporary use of access system equipment.
PRODUCT LIABILITY
The Company is obligated under terms of its product liability
insurance contracts to pay all costs up to deductible amounts. Included in
general and administrative expense are insurance, investigation and legal
defense costs. Legal settlements, if any, are included in other expense.
26
INVENTORIES
Inventories are stated at the lower of cost, determined by using the
first-in, first-out method, or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation for financial
reporting purposes is provided using the straight-line method over the
estimated useful lives of the assets which range from three to eleven years.
Leasehold improvements are amortized over the related lease term.
PATENTS AND GOODWILL
Patents are amortized on a straight-line basis over the shorter of the
estimated economic life of the patent or seven years. Goodwill is amortized on
a straight-line basis over fifteen years.
INCOME TAXES
In May 1993, the Company prospectively adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes". The
adoption of FAS 109 resulted in income recognition of $401,000 which was
reflected as a change in accounting principle in the year ended April 30, 1994
(see Note 8).
EARNINGS PER SHARE
Primary earnings per share is computed by dividing net income
available to common stockholders by the weighted average number of shares
outstanding plus the common stock equivalents attributable to dilutive stock
options during each period.
Net income available to common stockholders is computed by subtracting
preferred stock dividends from net income. The weighted average number of
shares outstanding, including equivalent shares where required, for the years
ended April 30, 1995, 1994, and 1993 were 14,460,000, 14,091,000, and
13,517,000, respectively. Fully diluted earnings per share do not differ
materially from primary earnings per share. Equivalent shares are not included
as part of the shares outstanding in loss per share calculations.
FOREIGN CURRENCY TRANSLATION
The functional currency of Flow Asia is the New Taiwan dollar; of Flow
Europe, the U.S. dollar; of Dynovation, the Canadian dollar; and of Power
Climber N.V. (part of Power Climber), the Belgian franc. All appropriate assets
and liabilities of these foreign subsidiaries are translated at year-end or
historical exchange rates. Income and expense accounts of the foreign
subsidiaries are translated at the average rates in effect during the year,
except that Flow Europe depreciation and cost of sales are translated at
historical rates. Adjustments resulting from the translation of
27
Flow Asia, Dynovation, and Power Climber N.V.'s financial statements are
recorded in the cumulative translation adjustment account in the stockholders'
equity section of the Consolidated Balance Sheets. Adjustments resulting from
the foreign currency translations of Flow Europe are included in the
Consolidated Statements of Income.
STATEMENTS OF CASH FLOWS
For the purposes of the Consolidated Statements of Cash Flows, the
Company considers short-term investments with maturities from the date of
purchase of three months or less, if any, to be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company sells products to a wide variety of industries, including
the automotive, aerospace, disposable products, food processing, and
construction industries on a worldwide basis.
In countries or industries where the Company is exposed to material
credit risk, sufficient collateral, including cash deposits and/or letters of
credit, is required prior to the completion of a transaction. The Company does
not believe there is a material credit risk beyond that provided for in the
financial statements in the ordinary course of business. The Company makes use
of foreign exchange contracts to cover some transactions denominated in foreign
currencies, and does not believe there is an associated material credit or
financial statement risk.
RECLASSIFICATIONS
Certain 1994 and 1993 amounts have been reclassified to conform with the 1995
presentation
Note 2 - Business Combinations:
In September 1992, the Company acquired all of the outstanding stock
of Spider in a pooling-of-interests transaction. Spider is a supplier of
access systems to the construction services industry. Pursuant to the merger
agreement, Flow issued 1,152,253 shares of its own common stock to holders of
shares of Spider common stock.
In April 1993, the Company acquired certain assets of Power Climber
and the stock of Power Climber N.V., for promissory notes totaling $2,262,000.
Additionally, Flow pays a royalty based upon net sales to the former
shareholders of Power Climber until 2003. Power Climber is a supplier of
access systems to the construction services industry. Its products are
complementary to those sold by the Spider organization. Results have been
included in the consolidated financial statements from the date of acquisition
based upon the purchase method of accounting.
28
On November 11, 1994, Spider entered into a licensing agreement with
Ark Systems, Inc. ("Ark") at a cost of $400,000. Ark, a division of the
Company, designs and manufactures a range of access containment systems which
are used in under-bridge applications for surface preparation, lead-paint
abatement, cleaning and maintenance. The agreement gives Spider the exclusive
worldwide marketing and manufacturing rights for the Ark product line for five
years.
On December 15, 1994, the Company purchased substantially all of the
assets and assumed substantially all of the liabilities of Dynovation Machine
Systems, Inc. for consideration of $7,970,000. The difference between the net
fair market value of assets acquired and consideration given has been recorded
as goodwill. Dynovation designs and manufactures robotic waterjet cutting
cells and automated assembly systems. Results have been included in the
consolidated financial statements from the date of acquisition based upon the
purchase method of accounting.
On January 3, 1995, the Company purchased certain net assets of ASI
Robotics Systems ("ASI") for consideration of $3,500,000 and 445,000 shares of
Company common stock. The difference between the net fair market value of
assets acquired and consideration given has been recorded as goodwill. ASI
designs and manufactures high accuracy gantry robots and related systems used
in waterjet and other applications. Results of this division have been
included in the consolidated financial statements from the date of acquisition
based upon the purchase method of accounting.
In April 1995 Power Climber N.V. became a majority partner in a joint
venture with Consortium Europeen du Materiel ("CEM"). CEM operates three
access systems sales, service and rental operations in France.
Note 3 - Pro Forma Financial Information (Unaudited):
If Dynovation Machine Systems, Inc.'s net assets had been acquired at
the beginning of each of the years ended April 30, 1995 and 1994, the results
of the operations of Flow would be adjusted as follows on a pro forma basis.
For the year ended April 30, 1995, total revenues would have been $117,190,000,
and net income would have been $7,178,000, or 50 cents per share. The
adjustments to net income include additional interest expense of $369,000, and
additional goodwill amortization of $317,000. For the comparative period in
1994, total revenues would have been $96,453,000, and net income would have
been $2,067,000, or 15 cents per share. The adjustments to net income include
additional interest expense of $565,000, and additional goodwill amortization
of $472,000.
The pro forma consolidated financial information is presented for
information purposes only, does not take into account savings which may have
been realized from the combination of the Company and Dynovation Machine
Systems, Inc., and is not indicative of the actual consolidated financial
position or results of operations in the future.
29
Note 4 - Related Party Transactions:
During fiscal year 1994, the Company received $2,744,000 in principal
and interest in full settlement of notes due from Flow Industries, Inc. ("Flow
Industries"), former parent of the Company. Interest was payable at prime plus
1.5% and was due upon maturity. During the years ended April 30, 1994 and
1993, the Company recognized interest income of $238,000 and $201,000,
respectively, related to the notes.
On July 31, 1993, Okura America, a subsidiary of the Company's
Japanese distributor, Okura & Co., Ltd. ("Okura")., exercised its option to
convert its remaining one half of Series A Convertible Preferred Stock into
518,995 shares of common stock at $4.817 per common share.
In August 1992, the Company entered into a stock purchase agreement
with Phenix Composites, Incorporated. The Company contributed cash and certain
equipment valued at cost. The book value is $609,000 at April 30, 1995 and
1994, and is being accounted for under the cost method. Currently, the
Company's president is a member of the board of directors of Phenix Composites,
Inc.
Note 5 - Inventories:
Inventories consist of the following:
April 30,
1995 1994
---------------------------
Raw Materials and Parts $17,999 $14,510
Work in Process 4,432 1,819
Finished Goods 6,993 7,924
--------------------------
29,424 24,253
Less: Provision for Slow-Moving
and Obsolete Inventory 2,205 2,093
--------------------------
$27,219 $22,160
========================
Note 6 - Property and Equipment:
Property and equipment are as follows:
April 30,
1995 1994
---------------------------
Land and Buildings $592 $292
Machinery and Equipment 43,426 33,704
Furniture and Fixtures 2,097 1,626
Leasehold Improvements 4,560 4,001
Construction in Progress 507 189
--------------------------
51,182 39,812
Less: Accumulated Depreciation and
Amortization 26,649 19,782
-------------------------
$24,533 $20,030
========================
30
Note 7 - Notes Payable to Banks and Long-Term Obligations:
Current notes payable to banks are as follows:
April 30,
1995 1994
-------------------------
Revolving Line of Credit - Flow $ - $11,672
Notes Payable to Banks by Flow Asia 617 328
Notes Payable to Banks by Power Climber N.V. 646 126
Notes Payable to Banks by Dynovation 351 -
-------------------------
$1,614 $12,126
=========================
Long-term obligations are as follows:
April 30,
1995 1994
-------------------------
Flow Term Loans Payable $32,679 $12,862
Guarantee of ESOP Loan 184 276
Power Climber Acquisition Note 1,294 1,799
------------------------
34,157 14,937
Less: Current Portion 798 4,378
------------------------
$33,359 $10,559
========================
In July 1995, the Company received an irrevocable long-term commitment
from its principal bank for a new facility of $60 million to replace its
Revolving Credit and Term Loan Agreement (the "Loan Agreement"), and equipment
notes (collectively, "Domestic Financing"). Accordingly, all Domestic
Financings have been reclassified as long-term, and are included in Flow Term
Loans Payable above. Under the terms of the bank's commitment, interest rates
will be comparable to those of the Loan Agreement, and the facility will be
collateralized by a general lien on the Company's business assets.
Other than the reclassification of certain of the Company's borrowings
from short-term to long-term as described above, the terms of its Loan
Agreement and other financing are as follows. The Company's Loan Agreement
provides for revolving lines of credit of up to $17 million which are
collateralized by, and are subject to limitations based on trade accounts
receivable and inventory; and an acquisition bridge loan facility of $14
million, which is secured by a general lien on the Company's assets. Interest
rates under the Loan Agreement are at the bank's prime rate or are linked to
LIBOR, at the Company's option. Based on the Company's election, borrowings
under the Loan Agreement are primarily at LIBOR plus 1.5% or at LIBOR plus 2%.
The Company had borrowed $22.8 million under the Loan Agreement as of April 30,
1995. The Company pays 3/16% as an unused commitment fee. As of April 30,
1995 the Company had approximately $8.2 million in domestic unused lines of
credit. The Company elected a 30-day LIBOR rate, which at April 30, 1995 was
6.1%.
31
The unsecured notes payable to banks by Flow Asia are denominated in
New Taiwan dollars, and provide for interest at rates ranging from 7.8% to 9.8%
at April 30, 1995. Flow Asia's total available lines of credit were
approximately $5.8 million at April 30, 1995.
The unsecured notes payable to banks by Power Climber N.V. are
denominated in Belgian francs, and provide for interest at 7.0% at April 30,
1995.
The notes payable to banks by Dynovation are collateralized by trade
accounts receivable and inventory, and are denominated in Canadian dollars.
Dynovation has approximately $175,000 in unused credit facilities at April 30,
1995. The interest rate is Canadian prime plus 0.5%.
Term loans payable at April 30, 1995 include domestic equipment notes
of $6.3 million, and $3.5 million of foreign debt. The equipment loans are
collateralized by capital equipment, and bear interest at prime plus 1/4%, or a
7.5% fixed rate, and amortize through April 1997.
A $2.5 million standby letter of credit has been issued by the
Company's principal bank to the Company's German bank, to secure a credit
facility for use by Flow Europe. This letter of credit expires on April 30,
1996. Interest and principal on the outstanding term loans of $2,056,000 is
payable quarterly at fixed rates ranging from 6.25% to 9.6%, with payments
amortized over a four-year period. At April 30, 1995, Flow Europe had an
unused $830,000 credit facility.
The Company has approximately $900,000 in term debt denominated in
Belgian francs at interest rates ranging from 8.5% to 9.8% at April 30, 1995.
Principal and interest is paid monthly through fiscal 1998.
In September 1989, the Company guaranteed a loan of $844,000 funding
the purchase of 250,000 shares of the Company's common stock by the Flow
International Corporation Employee Stock Ownership Plan and Trust (the "ESOP").
The loan bears interest, payable quarterly, at 93% of the bank's prime rate and
is due in annual installments of $92,000 through fiscal 1997 (see Note 9). The
loan is secured by the Company's common stock owned by the ESOP; security for
the Company's guarantee is provided in conjunction with the Loan Agreement.
In April 1993, the Company executed promissory notes totaling
$2,262,000 to the previous owners of Power Climber in conjunction with the
acquisition of assets. The notes are secured by inventory, equipment and
intellectual property obtained in the acquisition and have an interest rate of
7.25%. The notes require monthly payments of principal and interest through
fiscal 1998 except for one note which requires payments through fiscal 2003.
The Company is required to comply with certain covenants including
restrictions on dividends and transactions with affiliates, limitations on
additional indebtedness, limitations on capital expenditures, and maintenance
of tangible net worth, current working capital, debt to tangible net worth, and
cash flow coverage ratios. As of April 30, 1995, the Company was in compliance
with all such covenants.
32
Long-term obligation retirements for the next five years and
thereafter are as follows: $798,000 in 1996, $3,641,000 in 1997, $387,000 in
1998, $48,000 in 1999, $48,000 in 2000, and $29,235,000 thereafter.
Note 8 - Income Taxes:
The components of consolidated income before income taxes,
extraordinary item and change in accounting principle, and the provision for
income taxes for the years ended April 30, 1995 and April 30, 1994 under FAS
109, and the year ended April 30, 1993 under APB 11, are as follows:
1995 1994 1993
------ ------ ------
Income before Income Taxes,
Extraordinary Item and Change in
Accounting Principle:
Domestic $8,994 $3,319 $5,662
Foreign 265 (207) 129
------ ------ ------
Total $9,259 $3,112 $5,791
====== ====== ======
The provision for income taxes comprises:
1995 1994 1993
------ ------ ------
Current Tax Expense
Domestic $ 749 $ 652 $ 1,975
State and Local 271 42
Foreign 63 552 (375)
------- ------- -------
Total 1,083 1,246 1,600
Deferred Tax Liability (Benefit) 448 (686)
------- ------- -------
Total Provision for Income Taxes $ 1,531 $ 560 $ 1,600
======= ======= =======
33
Net deferred tax assets (liabilities) under FAS 109 comprise the
following:
April 30, 1995 April 30, 1994
-------------- --------------
Fixed assets ($ 435) ($ 594)
Obsolete inventory provisions 491 526
Net operating loss carryover 2,605 5,024
Subpart F income 298 228
Foreign taxes (190) 378
Accounts receivable allowances 179 169
Inventory capitalization 187 135
All other 412 633
------ ------
Subtotal 3,547 6,499
Valuation allowance (2,460) (4,964)
------ ------
Total Net Deferred Taxes $1,087 $1,535
====== ======
A reconciliation of income taxes at the federal statutory rate to the
provision for income taxes is as follows:
Year Ended April 30,
1995 1994 1993
------- ------- -------
Income taxes at federal statutory rate $3,148 $1,058 $2,112
Foreign sales corporation benefit (162) (143) (136)
Foreign operations (benefit)/expense 541 244 (375)
Change in FAS 109 valuation allowance (2,504) (599) -
State and local taxes 179 28 66
Alternative minimum tax - domestic 200 - -
Other 129 (28) (67)
------ ------ ------
Income tax provision $1,531 $ 560 $1,600
====== ====== ======
As of May 1, 1995, the Company had approximately $8 million of net
operating loss carryforwards to offset certain Flow earnings for federal income
tax purposes. Of the $8 million carryforward, $1 million was currently
available. An additional $943,000 becomes available each fiscal year. These
net operating loss carryforwards expire in varying amounts through the year
2003. Also, as of May 1, 1995, $256,000 of net operating loss carryforwards to
offset earnings of Spider were available for federal income tax purposes.
Spider net operating loss carryforwards expire in varying amounts through the
year 2007.
Because of current and expected future earnings, the Company expects
increased utilization of its net operating loss carryforwards. Therefore, the
FAS 109 valuation allowance was reduced by a net tax effected amount of
$2,504,000.
Provision has not been made for U.S. or foreign taxes on $2,360,000 of
undistributed earnings of foreign subsidiaries. Those earnings have been and
will continue to be reinvested. These earnings could become subject to
additional tax if they were remitted as dividends, if foreign earnings were
lent to the Company or a U.S. affiliate, or if the Company should sell its
34
stock in the subsidiaries. It is not practicable to estimate the amount of
additional tax that might be payable on the foreign earnings; however, the
Company believes that U.S. foreign tax credits would largely eliminate any U.S.
tax and offset any foreign tax.
Note 9 - Voluntary Pension and Salary Deferral Plan:
The Company has a 401(k) savings plan in which employees may
contribute a percentage of their compensation. The Company makes contributions
based on employee contributions and length of employee service. Company
contributions and expenses under the plan for the years ended April 30, 1995,
1994, and 1993 were $531,000, $520,000, and $510,000, respectively.
In September 1989, the Company established an ESOP for all employees
meeting certain service requirements. Company contributions to the ESOP are
discretionary; however, the Company has agreed to make contributions as
necessary to fund the repayment of the ESOP loan (see Note 7). During the
years ended April 30, 1995, 1994 and 1993, the Company recorded compensation
and interest expense related to the ESOP of $109,000, $110,000 and $116,000,
respectively.
Note 10 - Stock Options:
The Company has stock options outstanding under various option plans
described below.
1984 RESTATED STOCK OPTION PLAN (THE "1984 RESTATED PLAN"). Approved
by the Company's shareholders in September 1984 and subsequently amended and
restated, the 1984 Restated Plan provides for grants to employees and
contractors to purchase a maximum of 1,800,000 shares of the Company's common
stock. The 1984 Restated Plan allows for the grant of either incentive or
nonqualified stock options.
ADMAC 1984 INCENTIVE STOCK OPTION PLAN (THE "ADMAC PLAN"). The ADMAC
Plan was adopted in September 1983. Options vested under the plan were
converted into Flow stock options when the Company acquired ADMAC, Inc. in
February 1989. No further grants can be made under the ADMAC Plan.
1987 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS (THE "1987
NONEMPLOYEE DIRECTORS PLAN"). Approved by the Company's stockholders in
September 1987, the 1987 Nonemployee Directors Plan, as subsequently amended,
provides for the automatic grant of nonqualified options for 10,000 shares of
Company common stock to a nonemployee director when initially elected or
appointed, and currently, the issuance of 5,000 shares annually thereafter
during the term of directorship.
35
OTHER NONEMPLOYEE DIRECTOR OPTIONS. In fiscal 1988, two separate
stock options were granted for 45,000 and 10,000 shares to two nonemployee
directors.
1991 STOCK OPTION PLAN (THE "1991 SO PLAN"). The 1991 SO Plan was
adopted in October 1991 and amended in August 1993. Incentive and nonqualified
stock options up to 700,000 shares may be issued under this plan.
During the years ended April 30, 1995, 1994 and 1993, a total of
127,011, 205,000 and 464,000 options, respectively, were exercised under all
stock option plans of the Company at an average price of $1.52, $1.67 and $1.44
per share, respectively.
All options become exercisable upon a change in control of the
Company. Options have a two-year vesting schedule, and are granted at fair
market value.
The following chart summarizes the status of the options at April 30, 1995:
1984 Restated 1987 and Other
and Nonemployee 1991
ADMAC Plan Directors Plan SO Plan Total
------------------ -------------- ------- -----
Number of options outstanding 415,524 245,000 652,300 1,312,824
Number of options vested 415,524 209,000 476,000 1,100,524
Average exercise price per share $2.09 $5.00 $5.53 $4.34
Note 11 - Preferred Share Rights Purchase Plan:
On June 7, 1990, the Board of Directors of the Company adopted a
Preferred Share Rights Purchase Plan under which a Preferred Share Purchase
Right (a "Right") is attached to each share of Company common stock. The
Rights will be exercisable only if a person or group acquires 20% or more of
the Company's common stock or announces a tender offer, the consummation of
which would result in ownership by a person or group of 20% or more of the
common stock. Each Right entitles stockholders to buy one one-hundredth of a
share of Series B Junior Participating Preferred Stock (the "Series B Preferred
Shares") of the Company at a price of $15. If the Company is acquired in a
merger or other business combination transaction, each Right will entitle its
holder to purchase a number of the acquiring company's common shares having a
value equal to twice the exercise price of the Right. If a person or group
acquires 20% or more of the Company's outstanding common stock, each Right will
entitle its holder (other than such person or members of such group) to
receive, upon exercise, a number of the Company's common shares having a value
equal to two times the exercise price of the Right. Following the acquisition
by a person or group of 20% or more of the Company's common stock and prior to
an acquisition of 50% or more of such common stock, the Board of Directors may
exchange each Right (other than Rights owned by such person or group) for one
share of common stock or for one one-hundredth of a Series B Preferred Share.
Prior to the acquisition
36
by a person or group of 20% of the Company's common stock, the Rights are
redeemable, at the option of the Board, for $.01 per Right. The Rights expire
on June 17, 2000. The Rights do not have voting or dividend rights, and until
they become exercisable, have no dilutive effect on the earnings of the
Company.
Note 12 - Commitments and Contingencies:
The Company rents certain facilities and equipment under agreements
treated for financial reporting purposes as operating leases. The majority of
leases currently in effect are renewable for periods of two to five years.
Rent expense under these leases was approximately $2,724,000, $2,687,000, and
$2,744,000 for the years ended April 30, 1995, 1994 and 1993, respectively.
Future minimum rents payable under operating leases for years ending
April 30 are as follows:
1996 $ 2,387
1997 2,233
1998 1,887
1999 1,615
2000 1,495
Thereafter 4,966
-----
$14,583
=======
The Ark licensing agreement includes an obligation for the Company to
pay significant additional consideration if and when certain future criteria
are achieved. The Company does not believe the criteria will be met in the
next year. Payment of this consideration will give the Company ownership of
all patents and legal rights related to the Ark product line.
The Company has been subject to product liability claims primarily
through its Spider subsidiary. To minimize the financial impact of product
liability risks and adverse judgments, product liability insurance has been
purchased in amounts and under terms considered acceptable to management.
At any point in time covered by these financial statements, there are
outstanding product liability claims against the Company, and incidents are
known to management which may result in future claims. Management, in
conjunction with defense counsel, periodically reviews the likelihood that such
product claims and incidents will result in adverse judgments, the estimated
amount of such judgments, and costs of defense, and provides reserves as
appropriate.
Recoveries, if any, may be realized from indemnitors, codefendants,
insurers or insurance guaranty funds. Management, based on estimates provided
by the Company's legal counsel on such claims, believes its insurance coverage
is adequate.
37
Management estimates the range of the Company's future exposure
amounts relating to unresolved claims at April 30, 1995, aggregate from
approximately $0 to $300,000 before recoveries and between $0 and $100,000 net
of recoveries.
Included in Other Income (Expense), net, in the year ended April 30,
1995, 1994 and 1993 are product liability claim settlements of approximately
$32,000, $20,000, and $85,000, respectively.
38
Note 13 - Foreign Operations:
- --------------------------------------------------------------------------------------------------------
UNITED OTHER ADJUSTMENTS &
STATES EUROPE FOREIGN ELIMINATIONS CONSOLIDATED
- --------------------------------------------------------------------------------------------------------
1995 (3)
========================================================================================================
Revenues:
Customers (1) $79,406 $19,714 $10,890 $ - $110,010
Inter-area (2) 8,347 - 1,094 (9,441) -
- --------------------------------------------------------------------------------------------------------
Total revenues 87,753 19,714 11,984 (9,441) 110,010
- --------------------------------------------------------------------------------------------------------
Operating Income Before
Corporate Expenses 15,413 366 511 16,290
Corporate Expenses (4,627)
--------
Operating Income $ 11,663
========
Identifiable Assets 70,357 16,316 18,811 $105,484
1994
========================================================================================================
Revenues:
Customers (1) $69,205 $13,476 $5,951 $ - $ 88,632
Inter-area (2) 8,203 - 718 (8,921) -
- --------------------------------------------------------------------------------------------------------
Total revenues 77,408 13,476 6,669 (8,921) 88,632
- --------------------------------------------------------------------------------------------------------
Operating Income (Loss) Before
Corporate Expenses 8,512 (753) 518 8,277
Corporate Expenses (4,268)
--------
Operating Income $ 4,009
========
Identifiable Assets 60,339 12,066 5,823 $ 78,228
========
1993
========================================================================================================
Revenues:
Customers (1) $62,234 $11,467 $5,378 $ - $ 79,079
Inter-area (2) 5,297 - 77 (5,374) -
- --------------------------------------------------------------------------------------------------------
Total revenues 67,531 11,467 5,455 (5,374) 79,079
- --------------------------------------------------------------------------------------------------------
Operating Income (Loss) Before
Corporate Expenses 9,605 (373) 600 9,832
Corporate Expenses (2,842)
--------
Operating Income $ 6,990
========
Identifiable Assets 53,249 10,289 5,738 $ 69,276
========
(1) U.S. sales to unaffiliated customers in foreign countries were
$6,881,000, $5,058,000 and $8,135,000 in fiscal 1995, 1994, and 1993,
respectively.
(2) Inter-area sales to affiliates represent products which were transferred
between geographic areas at negotiated prices. These amounts have
been eliminated in the consolidation.
(3) Other Foreign includes the assets of Dynovation and its operating
results from the date of acquisition.
39
Note 14 - Selected Quarterly Financial Data (unaudited):
Fiscal 1995 Quarters First Second Third Fourth Total
- -------------------- ----- ------ ----- ------ -----
Revenue $24,509 $26,758 $27,187 $31,556 $110,010
Gross Profit 10,438 11,600 10,954 13,319 46,311
Net Income 1,649 2,162 1,616 2,301 7,728
Earnings Per Share .12 .15 .11 .15 .53
Fiscal 1994 Quarters First Second Third Fourth Total
- -------------------- ----- ------ ----- ------ -----
Revenue $19,355 $24,591 $20,555 $24,131 $88,632
Gross Profit 8,809 10,206 6,008 10,055 35,078
Income (Loss) Before Change in Accounting
Principle 1,109 1,802 (1,794) 1,435 2,552
Net Income (Loss) 1,510 1,802 (1,794) 1,435 2,953
Earnings (Loss) Per Share Before Change in
Accounting Principle .08 .13 (.13) .10 .18
Earnings (Loss) Per Share .11 .13 (.13) .10 .21
Fiscal 1993 Quarters First Second Third Fourth Total
- -------------------- ----- ------ ----- ------ -----
Revenue $19,340 $20,874 $18,783 $20,082 $79,079
Gross Profit 8,947 9,465 7,569 8,322 34,303
Income Before Extraordinary Item 1,088 1,167 820 1,116 4,191
Net Income 1,194 1,347 973 1,127 4,641
Earnings Per Share Before Extraordinary Item .07 .09 .06 .08 .30
Earnings Per Share .08 .10 .07 .08 .33
40
FLOW INTERNATIONAL CORPORATION
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Additions
-----------------------
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Classification of Period Expenses Accounts Deductions* of Period
- -------------- --------- -------- -------- ---------- ---------
Year Ended April 30:
- --------------------
Allowance for Doubtful Accounts
- -------------------------------
1995 $ 908 $ 480 $ - $ (238) $ 1,150
1994 846 324 - (262) 908
1993 748 237 - (139) 846
Provision for Slow-Moving and Obsolete Inventory
- ------------------------------------------------
1995 $2,093 $ 324 $ - $ (212) $2,205
1994 2,007 269 - (183) 2,093
1993 2,346 312 - (651) 2,007
__________
* Write-offs of uncollectible accounts and disposal of obsolete
inventory.
41
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information regarding directors and executive officers of the
registrant is incorporated herein by reference from the Company's Proxy
Statement.
Item 11. Executive Compensation.
Information regarding executive compensation is incorporated herein by
reference from the Company's Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information regarding security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's Proxy
Statement.
Item 13. Certain Relationships and Related Transactions.
Information regarding certain relationships and related transactions
is incorporated herein by reference from the Company's Proxy Statement.
42
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements.
See Item 8 of Part II for a list of the Financial Statements filed
as part of this report.
2. Financial Statement Schedules.
See Item 8 of Part II for a list of the Financial Statement
Schedules filed as part of this report.
3. Exhibits. See subparagraph (c) below.
(b) No reports on Form 8-K were filed during the fourth quarter of fiscal
1995.
(c) Exhibits.
43
EXHIBIT
NUMBER
3.1 Restated Certificate of Incorporation, filed with the state of Delaware September 14, 1989. (Incorporated by reference
to Exhibit 3.1 to the registrant's Annual Report on Form 10-K for the year ended April 30, 1990.)
3.2 By-Laws of Flow International Corporation. (Incorporated by reference to Exhibit 3.2 to the registrant's Annual Report
on Form 10-K for the year ended April 30, 1990.)
4.1 Certificate of Designation of Series B Junior Participating Preferred Stock. (Incorporated by reference to Exhibit 4.5
to the registrant's Annual Report on Form 10-K for the year ended April 30, 1990.)
4.2 Rights Agreement dated as of June 7, 1990, between Flow International Corporation and First Interstate Bank, Ltd.
(Incorporated by reference to Exhibit 4.1 to the registrant's Current Report on Form 8-K dated June 8, 1990.)
10.1 Flow International Corporation 1984 Restated Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10.1
to the registrant's Annual Report on Form 10-K for the year ended April 30, 1990.)
10.2 Flow International Corporation 1987 Stock Option Plan for Nonemployee Directors, as amended. (Incorporated by reference
to Exhibit 10.5 to the registrant's Annual Report on Form 10-K for the year ended April 30, 1994.)
10.3 Flow International Corporation 1991 Stock Option Plan, as amended. (Incorporated by reference to Exhibit 10.6 to the
registrant's Annual Report on Form 10-K for the year ended April 30, 1994.)
10.4 Flow International Corporation 1995 Long-Term Incentive Plan
10.5 Flow International Corporation Employee Stock Ownership Plan and Trust Agreement, as amended and restated effective
January 1, 1994, and certain later dates, between Flow International Corporation and Seattle-First National Bank, as
trustee. (Incorporated by reference to Exhibit 10.7 to the registrant's Annual Report on Form 10-K for the year ended
April 30, 1994).
10.6 Stock Purchase Agreement dated as of September 26, 1989, between Flow International Corporation Employee Stock Ownership
Plan and Trust and Seattle-First National Bank. (Incorporated by reference to Exhibit 10.7 to the registrant's Annual
Report on Form 10-K for the year ended April 30, 1990.)
10.7 ESOT Loan and Guaranty Agreement dated September 26, 1989, among U.S. Bank of Washington, N.A., Flow International
Corporation Employee Stock Ownership Plan and Trust and Flow International Corporation. (Incorporated by reference to
Exhibit 10.8 to the registrant's Annual Report on Form 10-K for the year ended April 30, 1990).
10.8 Replacement ESOT Note dated September 1992. (Incorporated by reference to Exhibit 10.10 to the registrant's Annual
Report on Form 10-K for the year ended April 30, 1993).
10.9 Pledge Agreement dated September 26, 1989, among U.S. Bank of Washington, N.A., Flow International Corporation. Employee
Stock Ownership Plan and Trust and Flow
44
International Corporation. (Incorporated by reference to Exhibit 10.10 to the registrant's Annual Report on Form 10-K
for the year ended April 30, 1990.)
10.10 Unconditional Guaranty dated September 26, 1989, by Flow International Corporation for the benefit of U.S. Bank of
Washington, N.A. (Incorporated by reference to Exhibit 10.11 to the registrant's Annual Report on Form 10-K for the year
ended April 30, 1990.)
10.11 Flow International Corporation Voluntary Pension and Salary Deferral Plan and Trust Agreement, as restated effective
January 1, 1992. (Incorporated by reference to Exhibit 10.13 to the registrant's Annual Report on Form 10-K for the year
ended April 30, 1993).
10.12 Amendment to Flow International Corporation Voluntary Pension and Salary Deferral Plan. (Incorporated by reference to
Exhibit 10.13 to the registrant's Annual Report on Form 10-K for the year ended April 30, 1994).
10.13 Lease dated September 24, 1991, between Flow International and Birtcher LP/LC Partnership, together with Addendum to Lease.
(Incorporated by reference to Exhibit 10.25 to the registrant's Annual Report on Form 10-K for the year ended April 30,
1992.)
10.14 Credit Agreement dated October 14, 1992 among U.S. Bank of Washington, N.A., Flow International Corporation and Spider
Staging Corporation, together with First Amendment dated April 28, 1993. (Incorporated by reference to Exhibit 10.22 to
the registrant's Annual Report on Form 10-K for the year ended April 30, 1993).
10.15 Second Amendment to Credit Agreement dated September 30, 1993, between U.S. Bank of Washington, N.A. and Flow International
Corporation. (Incorporated by reference to Exhibit 10.23 to the registrant's Annual Report on Form 10-K for the year
ended April 30, 1994.)
10.16 Dynovation Agreement. (Incorporated by reference to Exhibit 2.1 to the registrant's Current Report on Form 8-K dated
December 15, 1994.)
10.17 Third Amendment to Credit Agreement dated October 28, 1994, between U.S. Bank of Washington, N.A. and Flow International
Corporation.
10.18 Fourth Amendment to Credit Agreement dated December 13, 1994, between U.S. Bank of Washington, N.A. and Flow International
Corporation.
10.19 Commitment letter dated July 12, 1995, between U.S. Bank of Washington, N.A. and Flow International Corporation.
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
July 27, 1995
/s/ Ronald W. Tarrant
------------------------------
RONALD W. TARRANT
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on the behalf of the
registrant and in the capacities on this 27th day of July, 1995
Signature Title
--------- -----
/s/ Ronald W. Tarrant Chairman, President, Chief
- --------------------------------------- Executive Officer
Ronald W. Tarrant (Principal Executive Officer)
/s/ Lee M. Andrews Executive Vice President and
- --------------------------------------- Chief Financial Officer
Lee M. Andrews (Principal Financial Officer &
Principal Accounting Officer)
/s/ Louis J. Alpinieri Director
- ---------------------------------------
Louis J. Alpinieri
/s/ Lloyd J. Andrews Director
- ---------------------------------------
Lloyd J. Andrews
46
Signature Title
--------- -----
/s/ John S. Cargill Director
- -------------------------------------------
John S. Cargill
/s/ Daniel J. Evans Director
- -------------------------------------------
Daniel J. Evans
/s/ Rita A. O'Brien Director
- -------------------------------------------
Rita A. O'Brien
/s/ Arlen I. Prentice Director
- -------------------------------------------
Arlen I. Prentice
/s/ Kenneth M. Roberts Director
- -------------------------------------------
Kenneth M. Roberts
/s/ Dean D. Thornton Director
- -------------------------------------------
Dean D. Thornton
47
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
10.4 Flow International Corporation 1995 Long-Term
Incentive Plan
10.17 Third Amendment to Credit Agreement dated
October 28, 1994, between U.S. Bank of
Washington, N.A. and Flow International
Corporation
10.18 Fourth Amendment to Credit Agreemet dated
December 13, 1994, between U.S. Bank of
Washington, N.A. and Flow International
Corporation
10.19 Commitment letter dated July 12, 1995, between
U.S. Bank of Washington, N.A. and Flow
International Corporation
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule