Flow International Announces Fiscal 2005 Fourth Quarter and Year End Results
Quarterly Waterjet Sales Up 40%, Annual Waterjet Sales Up 30%, Equity Raise Allows for Elimination of Subordinated Debt
KENT, Wash., July 28 -- Flow International Corporation , the world's leading supplier of ultrahigh-pressure waterjet products, today reported results for its fiscal 2005 fourth quarter and year ended April 30, 2005. On a consolidated basis, FLOW reported quarterly sales of $65.0 million, operating income of $6.3 million, or 9.7% of sales, and a net loss of $4.7 million or $0.20 basic and diluted loss per share, which includes in interest expense, the write off of $6.3 million in debt discount and related loan fees. For comparison purposes, in the fiscal 2004 fourth quarter, the Company reported consolidated sales of $54.4 million, operating income of $1.7 million and a net loss of $3.6 million or $0.23 basic and diluted loss per share. The fiscal 2004 loss included restructuring charges of $1.2 million and tax expense of $1.9 million for the future repatriation of foreign earnings. FLOW paid off all of its subordinated debt, as well as a significant portion of its senior debt, during the fourth fiscal quarter, as a result of strong cash flow from operations and the completion of a $59 million net Private Investment in Public Equity ('PIPE') transaction in March 2005.
"We continue to progress against all measures by growing our core waterjet business, and by continuing to increase operating profitability," said Stephen R. Light, FLOW's President and Chief Executive Officer. "I am very pleased to report 40% revenue growth in the quarter in our core waterjet business. In addition to many positive developments during the quarter, including our PIPE, we are particularly gratified to have recently received a number of awards in recognition of our achievements in providing industry leading "customer" value and restoring our Company to financial health. That others should choose to take a fresh interest in the positive events at our Company, serves as testament to the dedicated and ongoing efforts of everyone at FLOW."
For the year ended April 30, 2005, FLOW reported record sales of $219.4 million, operating income of $11.5 million and a net loss of $10.8 million or $0.61 basic and diluted loss per share. These 2005 results include $862,000 in restructuring and financial consulting charges, as well as $6.3 million in additional interest expense resulting from the amortization of debt discount and related debt fees associated with the early pay-off of the Company's subordinated debt. For comparison, in the 12 months ended April 30, 2004 the Company reported consolidated revenues of $177.6 million, an operating loss of $1.9 million, and a net loss of $11.5 million or $0.75 basic and diluted loss per share. Results for fiscal 2004 include restructuring and financial consulting charges of $4.8 million and the tax expense of $1.9 million for the future repatriation f foreign earnings.
Operations Review
FLOW Waterjet: For the fiscal 2005 fourth quarter, the Waterjet operations reported sales of $48.8 million and operating income of $3.8 million, which compares to revenues of $35.0 million and an operating loss of $431,000 in the fiscal 2004 fourth quarter. Waterjet continued to perform well across all reporting geographies, with $5.7 million of the $13.8 million increase attributable to standard systems and spares in North America, where improved unit sales are a result of increased sales and marketing activity. Throughout fiscal 2005, FLOW enhanced the awareness of its waterjet technology through increased marketing and tradeshow efforts, most notably the bi-annual International Manufacturing Technology Show in September, 2004. The Company also increased sales and technical service personnel and added two machine tool distributors in North America during the past 12 months.
Within Waterjet during the fiscal 2005 fourth quarter and the 12 months ended April 30, 2005:
-- For the quarter, total systems sales increased 55% to $35.6 million,
with $7 million of the $12.7 million increase from domestic system
sales. For the 12-month period, system sales increased 44% or $37.1
million to $122.1 million, on strong domestic and global demand
resulting from our increased marketing and sales investments. The
Company generated the bulk of the increase, or $25.1 million, through
an increase in domestic systems sales. The marketplace continues to
increase its recognition of the accuracy, speed, and versatility
advantages of the waterjet over conventional cutting technologies.
-- Waterjet sales in Asia and Europe were $16.1 million and $56.2 million
for the quarter and 12 months ended April 30, 2005, respectively. That
compares to $10.9 million and $45.1 million in the comparable quarter
and 12-month period in fiscal 2004, respectively. In particular, Asia
Waterjet sales increased $5.0 million or 24% for the year, driven
largely by sales in China, where the Company experienced strong demand
for shapecutting and cutting cell systems from a strengthening
automotive industry. In addition, FLOW continues to grow sales in
Europe as it benefits from more aggressive pricing, improvements in
standardized systems, and short lead-time delivery.
-- Consumables parts and service revenues increased 10% during the quarter
and 6% during the 12 months, to $13.2 million and $50.8 million,
respectively, with most of the increase from domestic sales a result of
the increasing number of operating systems, increasing sales of
proprietary productivity enhancing kits, as well as increased usage of
Flowparts.com for spare parts ordering.
Avure Technologies: For the fiscal 2005 fourth quarter, Avure recorded sales of $16.2 million and operating income of $2.5 million or 15.4% of sales, compared to sales of $19.4 million and operating income of $2.1 million in the year-ago quarter. For the year, Avure sales were $46.4 million with operating income of $2.6 million, compared to sales of $44.7 million with an operating loss of $206,000 over the prior 12 months.
Within Avure during the fiscal 2005 fourth quarter and 12 months ended April 30, 2005:
-- General Press revenue during the fiscal 2005 fourth quarter was $10.0
million, compared to $13.2 million in the prior-year quarter. For the
year, General Press revenue increased to $31.3 million from $29.5
million in the prior 12 months. All of this growth was experienced in
North America as the result of revenue recognized under two large
contracts obtained in fiscal 2004 and manufactured in fiscal 2005.
International Press sales for the year ended April 30, 2005 decreased
$7.3 million as compared to the prior year. The International Press
sales are almost exclusively large contract sales in excess of $2
million per contract and accordingly revenue will vary depending on the
number and stage of manufacture of these contracts. The Company
continues to benefit from an overall increase in production, even as
sales fluctuate due to the 1-4 year sales and production cycle.
-- Avure's Fresher Under Pressure(R) food technology revenue increased
slightly during the quarter to $6.2 million from $6.1 million in the
prior-year quarter. Fresher Under Pressure sales during the year
decreased slightly to $15.1 million, compared to $15.3 million over the
12 months in fiscal 2004. The decrease is attributable to the timing
of food systems production and the corresponding revenue recognition.
General Press Divestiture
The General Press operations, which consist of the North America Press and International Press segments, while profitable, are not considered core to Flow's business. In January 2005, the Company, with the assistance of Danske Markets Inc., began to market the General Press operations, with a confidential information memorandum. The Company is continuing to explore the possibility of selling these segments. However, there can be no assurance that the Company will find a suitable buyer at an acceptable price.
Debt Reduction
As a result of continued strong cash flow from operations and the $59 million net proceeds from the PIPE, FLOW paid off its total $49 million in subordinated debt and interest and paid down its senior debt by $13 million. The Company recorded an associated $6.3 million charge to amortize debt discount and expense related loan fees. FLOW recently announced that it has entered into a new three-year $30 million credit agreement with Bank of America N.A. and U.S. Bank N.A. The new agreement replaced the Company's short-term facility, which was due to expire on August 1, 2005, with the new facility expiring July 08, 2008.
About Flow InternationalFlow International Corporation is the world's leading developer and manufacturer of ultrahigh-pressure waterjet technology for cutting, cleaning, and food safety applications, providing state-of-the-art ultrahigh-pressure (UHP) technology to industries including automotive, aerospace, job shop, surface preparation, food and more. For more information, visit www.flowcorp.com.