Will hold investor call on Thursday, March 12 at 5:00 p.m. Eastern Time
KENT, Wash., March 12 /PRNewswire-FirstCall/ -- Flow International Corporation (Nasdaq: FLOW), the world's leading developer and manufacturer of industrial waterjet machines for cutting and cleaning applications, announced today that Flow and OMAX Corporation have amended the terms of their proposed merger. The amendment converts Flow's obligation to close the transaction by March 31, 2009 into an option to close by August 15, 2009. The patent litigation pending between Flow and OMAX is being dismissed now. The parties have also agreed there will be no merger-related litigation if the merger is not completed. Flow is working with its advisors to investigate financing options if Flow elects to proceed with the merger.
Flow also reported results for its fiscal 2009 third quarter ended January 31, 2009, which includes a non-recurring charge of $29 million due to settlement of the patent litigation. For the quarter, Flow reported consolidated revenues of $48.7 million, a decrease of 25% from the prior year quarter. The Company reported a loss from continuing operations of $20.7 million, or $0.55 per share, compared to the prior year quarter income from continuing operations of $6.2 million or, $0.17 per share.
This loss from continuing operations for the quarter included the $29.0 million patent litigation charge, a goodwill impairment charge of $2.8 million, and $500,000 of previously announced charges related to cost reduction initiatives. Excluding these charges, and the related tax effects, the pro forma loss from continuing operations was $164,000.
"As we anticipated, our Advanced Segment is picking up strong momentum. Not only did our backlog in this segment begin translating into revenues, the backlog itself actually grew 15% during the quarter," said Charley Brown, President and CEO of Flow. "Also as expected, sales from our Standard Segment dropped significantly as the global economic crisis became more pervasive. Year-to-date we have reduced annual operating expenses by $6 million and we are already moving forward on another wave of reductions that will yield savings in excess of $5 million annually, effective in the next month. We remain confident that we will exit the recession as a stronger company.
"Regarding the OMAX merger, we remain determined to explore all prudent means to complete this transaction because it offers tremendous strategic benefits. Nevertheless, with weakness in our markets we need to proceed cautiously and not burden our company with a capital structure that could jeopardize the health of the organization. The revised merger terms give us the choice to complete the transaction or not, and the time to consider a wide range of alternative sources of financing. Plus, we will now avoid resumed patent litigation and potential merger-related litigation if we elect to not proceed with the merger."
Summary of Terms:
- Flow will pay OMAX $10 million now and will add $6 million to the $9 million already held in escrow in connection with the execution of the merger agreement. If Flow elects to complete the merger, all $15 million held in escrow and the $10 million paid now will be applied to the purchase price.
- If Flow elects not to complete the merger, the $15 million held in escrow will be released to OMAX as part of the settlement of the patent litigation. In addition, Flow will deliver to OMAX $10 million in two, four year subordinated promissory notes bearing interest payable at maturity at 2%, for the litigation settlement and for the release of any claims under the merger agreement.
- In either case, $29 million of the $35 million total is allocated to the settlement of the patent litigation with OMAX.
Operations Review
For the fiscal 2009 third quarter, compared to the prior-year quarter:
- 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, decreased 28% to $41.3 million. Operating income from the Standard segment totaled $2.7 million compared to $14.6 million in the prior year third quarter.
- Advanced Segment sales, which include sales of complex aerospace and automation systems requiring specific custom configuration and advanced features, as well as parts and services for those installed systems, were $7.4 million compared to $7.7 million in the prior year third quarter. Operating income from the Advanced segment for the quarter was $628,000 compared to an operating loss of $1.6 million in the prior year. The Advanced Segment backlog increased from the end of Q2 by 15% to $35.5 million.
- Operating expenses were $51.0 million compared with $19.0 million in the prior year third quarter. Operating expenses include several non-recurring charges: a $29.0 million settlement charge related to the patent litigation with OMAX, a $2.8 million goodwill impairment charge and severance charges of $500,000 related to downsizing the Company's global workforce.
- The Company exited its automated equipment consulting business ("CIS") during the quarter as anticipated and recorded a charge to discontinued operations of $686,000.
Conference Call
Flow plans to hold a conference call to discuss this announcement this afternoon: Thursday, March 12 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). The conference call may be heard by dialing 1-303-262-2191. A 48-hour replay will be available following the call by dialing 1-303-590-3000; the replay passcode is 11128054. 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 two weeks.
About Flow International
Flow International Corporation is the world's leading developer and manufacturer of ultrahigh-pressure waterjet technology for cutting and cleaning. Flow provides state-of-the-art ultrahigh-pressure (UHP) technology to numerous industries including automotive, aerospace, job shop, surface preparation, food and dozens 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 April 30, 2008 Flow International Corporation Form 10-K Report, filed with the Securities and Exchange Commission. Forward-looking statements in this press release include, without limitation, statements regarding future opportunities for Flow and OMAX, and the closing of the OMAX transaction. 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 Flow Media Relations
Geoffrey Buscher Lisa Brandli
253-813-3286 425-653-1237
investors@flowcorp.com lbrandli@flowcorp.com
Flow International Corporation
Consolidated Statements of Operations
(Unaudited)
US Dollars in
thousands,
except per share
data
Three months Nine months
ended January 31, ended January 31,
2009 2008 % Change 2009 2008 % Change
---- ---- -------- ---- ---- --------
Sales $48,711 $65,369 -25% $166,353 $180,986 -8%
Cost of sales 29,565 37,487 -21% 95,436 105,758 -10%
------ ------ ------ -------
Gross margin 19,146 27,882 -31% 70,917 75,228 -6%
------ ------ ------ ------
Operating
expenses:
Sales and
marketing 9,996 10,520 -5% 31,996 31,818 1%
Research and
engineering 2,281 2,163 5% 6,809 6,589 3%
General and
administrative 6,418 6,346 1% 22,586 25,991 -13%
Provision for
Patent
Litigation 29,000 - NM 29,000 - NM
Goodwill
Impairment 2,764 - NM 2,764 - NM
Restructuring
and Other
Operating
Charges 514 - NM 2,394 - NM
--- --- ----- ---
Operating
Expenses 50,973 19,029 NM 95,549 64,398 48%
------ ------ ------ ------
Operating income
(loss) (31,827) 8,853 NM (24,632) 10,830 NM
Interest Income
(Expense), net (348) 37 NM (337) 301 NM
Other Income
(Expense), net 392 (422) NM (56) (756) -93%
--- ---- --- ----
Income (Loss)
before taxes (31,783) 8,468 NM (25,025) 10,375 NM
Income tax
(provision)
benefit 11,106 (2,234) NM 6,277 (1,774) NM
------ ------ ----- ------
Income (Loss)
from
continuing
operations (20,677) 6,234 NM (18,748) 8,601 NM
Discontinued
operations, net
of tax (686) 55 NM (597) 418 NM
---- -- ---- ---
Net income
(loss) $(21,363) $6,289 NM $(19,345) $9,019 NM
======== ====== ======== ======
Per share
amounts:
Basic and
diluted
income (loss)
from
continuing
operations $(0.55) $0.17 NM $(0.50) $0.23 NM
Basic and
diluted net
income (loss) $(0.57) $0.17 NM $(0.51) $0.24 NM
Weighted average
shares
outstanding
(000):
Basic 37,639 37,471 37,609 37,366
Diluted 37,639 37,652 37,609 37,572
NM = not meaningful
Flow International Corporation
Supplemental Data
(Unaudited)
US Dollars in
thousands
Three months Nine months
ended January 31, ended January 31,
2009 2008 % Change 2009 2008 % Change
---- ---- -------- ---- ---- --------
Sales breakdown:
Systems $33,739 $48,209 -30% $115,997 $130,641 -11%
Consumable
parts 14,972 17,160 -13% 50,356 50,345 0%
------ ------ ------ ------
Total $48,711 $65,369 -25% $166,353 $180,986 -8%
======= ======= ======== ========
Segment revenue
breakdown:
Standard $41,269 $57,675 -28% $149,898 $158,907 -6%
Advanced 7,442 7,694 -3% 16,455 22,079 -25%
----- ----- ------ ------
$48,711 $65,369 -25% $166,353 $180,986 -8%
======= ======= ======== ========
Segment operating
income (loss)
breakdown:
Standard $2,660 $14,574 -82% $22,327 $32,833 -32%
Advanced 628 (1,558) NM (3,417) (5,874) -42%
All Other* (34,896) (2,751) NM (42,807) (14,119) NM
Intersegment
Eliminations (219) (1,412) -84% (735) (2,010) -63%
---- ------ ---- ------
$(31,827) $8,853 NM $(24,632) $10,830 NM
======== ====== ======== =======
* Includes corporate overhead expenses as well as general and
administrative expenses of inactive subsidiaries that do not constitute
segments.
Depreciation
and amortization
expense $1,113 $856 30% $3,210 $2,636 22%
Capital spending $1,722 $2,041 -16% $6,251 $4,345 44%
Flow International Corporation
Selected Balance Sheet Data
US Dollars in thousands
January 31, April 30,
2009 2008 % Change
---- ---- --------
Cash $13,107 $29,099 -55%
Receivables, net 33,202 33,632 -1%
Inventories 25,037 29,339 -15%
Total debt 5,444 4,428 23%
Flow International Corporation
Reconciliation of GAAP to Proforma
(Unaudited)
US Dollars in thousands,
except per share data
Three months Nine months
ended ended
January 31, January 31,
2009 2008 2009 2008
---- ---- ---- ----
GAAP Income (Loss) from
Continuing Operations $(20,677) $6,234 $(18,748) $8,601
Adjustments:
Restructuring Charges
Restructuring and Other
Operating Charges 514 - 2,394 -
Goodwill Impairment 2,764 - 2,764 -
Provision for Patent
Litigation 29,000 - 29,000 -
Inventory Write-Off - - 108 -
Premium from Warrant
Repurchase - - - 629
Change in German Tax Law - - - 389
Amendment of Former CEO
Contract - - - 2,891
Reversal of German
Valuation Allowance - - - (1,160)
Tax effect of discrete items (11,765) - (11,765) 614
----- ------ ------ -----
Proforma Income (Loss) from
Continuing Operations $(164) $6,234 $3,753 $11,964
----- ------ ------ ------
GAAP Net Income (Loss) $(21,363) $6,289 $(19,345) $9,019
Adjustments:
Restructuring Charges
Restructuring and Other
Operating Charges 514 - 2,394 -
Goodwill Impairment 2,764 - 2,764 -
Provision for Patent
Litigation 29,000 - 29,000 -
Inventory Write-Off - - 108 -
Premium from Warrant
Repurchase - - - 629
Change in German Tax Law - - - 389
Amendment of Former CEO
Contract - - - 2,891
Reversal of German
Valuation Allowance - - - (1,160)
Tax effect of discrete items (11,765) - (11,765) 614
----- ------ ------ -----
Proforma Net Income (Loss) $(851) $6,289 $3,156 $12,381
----- ------ ------ -------
Per Share Amounts
GAAP Basic and Diluted Income
(Loss) Per Share
Income (Loss) from
Continuing Operations $(0.55) $0.17 $(0.50) $0.23
Net Income (Loss) $(0.57) $0.17 $(0.51) $0.24
Proforma Basic and Diluted
Income per Share
Income from Continuing
Operations $(0.00) $0.17 $0.10 $0.32
Net Income $(0.02) $0.17 $0.08 $0.33
