Flow International Announces Third Quarter Results

Company Reports $0.03 EPS on 27% Increase in Revenue; Announces Credit Facility Renewal

Mar 03, 2011, 16:05 ET from Flow International Corporation

KENT, Wash., March 3, 2011 /PRNewswire/ -- Flow International Corporation (Nasdaq: FLOW), the world's leading developer and manufacturer of industrial waterjet machines for cutting and cleaning applications, today reported results for its fiscal 2011 third quarter ended January 31, 2011.

For the third quarter of fiscal 2011, Flow reported consolidated revenues of $57.5 million, a 27% increase from $45.4 million in the prior-year period.  Net income in the current quarter was $1.2 million or $0.03 per share.  In comparison, the Company reported net loss of $0.7 million or a loss of $0.02 per share in the prior-year period, which included a non-cash charge of $1.3 million for foreign currency adjustments primarily related to the liquidation of two dormant subsidiaries.

Consolidated Adjusted EBITDA for the quarter was $4.9 million compared to $1.8 million in the year-ago quarter.  A reconciliation of Adjusted EBITDA to Net Income is provided in the attached financial tables.

"Overall revenues increased 9% sequentially from our second quarter as we benefited from a very successful IMTS show," said Charley Brown, President and CEO of Flow.  "With EPS at $0.03 per share, these results represent the first quarter of significant net income generated from operations in over two years.  We also successfully renewed our credit facility for a three-year period, further strengthening our financial position and enhancing our ability to fund working capital needs. The renewed credit facility provides more favorable financial covenants as well as lower interest rates."

Operations Review for the Third Quarter of Fiscal 2011

  • Standard segment sales, which include sales of systems that do not require significant custom configuration as well as parts and services for those installed systems, were $49.9 million, an increase of $12.9 million or 35% from the prior-year quarter. 
  • Advanced segment sales, which include sales of complex aerospace and application systems requiring specific custom configuration and advanced features, as well as parts and services for those installed systems, were $7.6 million for the quarter, reflecting an anticipated $0.8 million decline from the prior-year quarter. Advanced segment sales are recorded using the percentage of completion method, with lead times ranging as long as 18 to 24 months. 
  • Aggregate gross margins were 40% for the quarter, in line with the aggregate gross margins of the prior-year quarter. Standard segment gross margins increased from 41% a year ago to 42% on favorable product mix. Advanced segment gross margins were 27% in the current quarter, compared to 36% in the prior-year quarter. The lower gross margin in the Advanced segment is primarily attributable to project mix and refinement of cost estimates. 
  • Total operating expenses for the quarter were $20.3 million, compared to $18.5 million in the prior-year quarter.  The $1.8 million increase is primarily the result of the full reinstatement of wages and benefits, higher commissions on increased sales, and other sales initiatives.
  • On March 2, 2011, the Company renewed its existing credit facility for three years. The new agreement, which expires on March 2, 2014, provides enhanced financial flexibility with more favorable interest rates and financial covenants.

Conference Call

Flow plans to hold a conference call to discuss these results today:  Thursday, March 3rd at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).  The conference call may be heard by dialing 877-941-4775 or 480-629-9761.  A 7-day replay will be available following the call by dialing 800-406-7325 or 303-590-3030.  The conference call passcode is 4415125.  A live audio Webcast of the conference call may be found in the investor section at www.flowcorp.com.  A Webcast replay of the call will also be available for 90 days.

About Flow International

Flow International Corporation is the world's leading developer and manufacturer of ultrahigh-pressure waterjet cutting technology to industries including automotive, aerospace, job shop, surface preparation, and more. For more information, visit www.flowcorp.com.

This press release contains forward-looking statements relating to future events or future financial performance that involve risks and uncertainties. The words "believe," "expect," "intend," "anticipate," variations of such words, and similar expressions identify forward-looking statements but their absence does not mean that the statement is not forward-looking. These statements are only predictions and actual results could differ materially from those anticipated in these statements based on a number of risk factors, including those set forth in the Company's filings with the U.S. Securities and Exchange Commission. Forward- looking statements in this press release include, without limitation, statements regarding the new credit facility enhancing funding of working capital and improving flexibility.  Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this announcement.

Contact:

Flow Investor Relations

Geoffrey Buscher

253-813-3286

investors@flowcorp.com

Flow International Corporation

Consolidated Statements of Operations

(Unaudited)

US Dollars in thousands, except per share data

Three months ended January 31,

Nine months ended January 31,

2011

2010

% Change

2011

2010

% Change

Sales

$      57,473

$   45,356

27%

$ 156,988

$ 125,145

25%

Cost of Sales

34,381

27,133

27%

94,710

76,314

24%

Gross Margin

23,092

18,223

27%

62,278

48,831

28%

Operating Expenses:

Sales and Marketing

11,568

10,065

15%

33,049

26,956

23%

Research and Engineering

2,513

2,235

12%

7,095

5,782

23%

General and Administrative

6,194

6,198

(0%)

17,811

19,391

(8%)

Restructuring and Other Operating Charges

-

-

NM

-

4,222

NM

Operating Expenses

20,275

18,498

10%

57,955

56,351

3%

Operating Income (Loss)

2,817

(275)

NM

4,323

(7,520)

NM

Interest Expense, net

(397)

(429)

(7%)

(1,182)

(1,774)

(33%)

Other Income (Loss), net

(81)

(1,218)

(93%)

315

(866)

NM

Income (Loss) Before (Provision) Benefit for Income Taxes

2,339

(1,922)

NM

3,456

(10,160)

NM

(Provision) Benefit for Income Taxes

(1,058)

1,124

NM

(2,926)

2,653

NM

Gain (Loss) from Continuing Operations

1,281

(798)

NM

530

(7,507)

NM

Gain (Loss) from Discontinued Operations, net of tax

(40)

51

NM

(152)

(1,089)

(86%)

Net Income (Loss)

$        1,241

$      (747)

NM

$        378

$   (8,596)

NM

Basic and Diluted Income (Loss) Per Share:

Income (Loss) from Continuing Operations

$          0.03

$     (0.02)

NM

$       0.01

$     (0.18)

NM

Net Income (Loss)

$          0.03

$     (0.02)

NM

$       0.01

$     (0.20)

NM

Weighted Average Shares Outstanding Used in Computing Basic and Diluted Income (Loss) Per Share (000):  

Basic

47,301

46,879

47,168

42,490

Diluted  

47,312

46,879

47,174

42,490

NM = not meaningful

Flow International Corporation

Consolidated Balance Sheets

(Unaudited)

US Dollars in thousands

January 31,

April 30,

2011

2010

% Change

ASSETS:

Current Assets:

Cash

$        8,001

$     6,367

26%

Receivables, net

39,929

35,749

12%

Inventories

28,709

22,503

28%

Other Current Assets

11,895

9,476

26%

Total Current Assets

88,534

74,095

Property and Equipment, net

19,139

21,769

(12%)

Other Long-Term Assets

34,268

35,345

(3%)

$    141,941

$ 131,209

LIABILITIES AND SHAREHOLDERS’ EQUITY:

Current Liabilities:

Notes Payable

$        1,900

$        350

NM

Current Portion of Long-Term Obligations

29

61

(52%)

Accounts Payable and Other Accrued Liabilities

24,569

24,358

1%

Other Current Liabilities

21,985

17,413

26%

Total Current Liabilities

48,483

42,182

Other Long-Term Liabilities

6,266

5,449

15%

Subordinated Notes

8,522

7,954

7%

Total Other Long-Term Liabilities

63,271

55,585

Shareholders’ Equity

78,670

75,624

4%

$    141,941

$ 131,209

NM = not meaningful

Flow International Corporation

Supplemental Data

(Unaudited)

US Dollars in thousands

Three months ended January 31,

Nine months ended January 31,

2011

2010

% Change

2011

2010

% Change

Sales Breakdown:

       Systems

$      39,987

31,905

25%

$ 105,429

$   83,673

26%

       Consumable Parts

17,486

13,451

30%

51,559

41,472

24%

  Total

$      57,473

$   45,356

27%

$ 156,988

$ 125,145

25%

Segment Revenue Breakdown:

     Standard

$      49,916

$   37,036

35%

$ 135,619

$   96,817

40%

     Advanced

7,557

8,320

(9%)

21,369

28,328

(25%)

$      57,473

$   45,356

27%

$ 156,988

$ 125,145

25%

Depreciation and Amortization Expense

$        1,522

$     1,485

2%

$     4,706

$     4,078

15%

Capital Spending

$        1,551

$        968

60%

$     2,700

$     8,925

(70%)

Flow International Corporation

Supplemental Data

(Unaudited)

US Dollars in thousands

Three months ended January 31,

Nine months ended January 31,

2011

2010

% Change

2011

2010

% Change

Net Income (Loss)

$        1,241

$      (747)

NM

$        378

$   (8,596)

NM

Add Back:

Depreciation and Amortization

1,522

1,485

2%

4,706

4,078

15%

Income Tax Provision (Benefit)

1,058

(1,124)

NM

2,926

(2,653)

NM

Interest Charges

418

468

(11%)

1,268

1,906

(33%)

Non-Cash Charges

647

1,742

(63%)

1,548

2,527

(39%)

Other (i)

40

(51)

NM

152

5,718

(97%)

Consolidated Adjusted EBITDA

$        4,926

$     1,773

NM

$   10,978

$     2,980

NM

(i) Allowable Add Backs Pursuant to Senior Credit Facility Agreement

NM = not meaningful

The Company defines Adjusted EBITDA as net income (loss), determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), excluding the effects of income taxes, depreciation, amortization of intangible assets, interest expense, and other non-cash charges, which includes such items as stock-based compensation expense, foreign currency gains or losses, and other non-cash allowable add backs pursuant to the Company's Senior Credit Facility Agreement.  

Adjusted EBITDA is a non-GAAP financial measure and the presentation of this non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The items excluded from this non-GAAP financial measure are significant components of the Company's financial statements and must be considered in performing a comprehensive analysis of the overall financial results. The Company uses this measure, together with GAAP financial metrics, to assess its financial performance, allocate resources, evaluate the overall progress towards meeting its long-term financial objectives, and assess compliance with its debt covenants. The Company believes that this non-GAAP financial measure is useful to investors and analysts in allowing for greater transparency with respect to the supplemental information used in the Company's financial and operational decision making. The Company's calculation of Adjusted EBITDA may not be consistent with calculations of similar measures used by other companies.  

Flow International Corporation

Reconciliation of GAAP to Pro forma

(Unaudited)

US Dollars in thousands, except per share data

Three months ended January 31,

Nine months ended January 31,

2011

2010

2011

2010

GAAP Income (Loss) from Continuing Operations

$        1,281

$      (798)

$        530

$   (7,507)

Adjustments:

OMAX Termination Charge

-

-

-

3,219

Restructuring and Other Operating Charges

-

-

-

1,003

Write-off of Deferred Debt Issuance Costs

-

-

-

253

Liquidation of Dormant Foreign Subsidiaries

-

1,277

-

1,277

Tax Effect of Adjustments

-

(780)

-

(3,390)

Tax Impact from Cash Repatriation & Discrete Foreign Tax Matters

-

-

990

-

Pro forma Income (Loss) from Continuing Operations

$        1,281

$      (301)

$     1,520

$   (5,145)

GAAP Net Income (Loss)

$        1,241

$      (747)

$        378

$   (8,596)

Adjustments:

OMAX Termination Charge

-

-

-

3,219

Restructuring and Other Operating Charges

-

-

-

1,003

Write-off of Deferred Debt Issuance Costs

-

-

-

253

Liquidation of Dormant Foreign Subsidiaries

-

1,277

-

1,277

Discontinued Operations

40

(51)

152

1,089

Tax Effect of Adjustments

-

(780)

-

(3,390)

Tax Impact from Cash Repatriation & Discrete Foreign Tax Matters

-

-

990

-

Pro forma Net Income (Loss)

$        1,281

$      (301)

$     1,520

$   (5,145)

Per Share Amounts

GAAP Basic and Diluted Income (Loss) Per Share

Income (Loss) from Continuing Operations

$          0.03

$     (0.02)

$       0.01

$     (0.18)

Net Income (Loss)

$          0.03

$     (0.02)

$       0.01

$     (0.20)

Pro forma Basic and Diluted Income (Loss) per Share

Income (Loss) from Continuing Operations

$          0.03

$     (0.01)

$       0.03

$     (0.12)

Net Income (Loss)

$          0.03

$     (0.01)

$       0.03

$     (0.12)

SOURCE Flow International Corporation



RELATED LINKS

http://www.flowcorp.com