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Flow International Corporation reported second quarter fiscal 2014 (ended Oct 31, 2013) financial results on Dec 4, 2013. The company reported earnings per share from continuing operations of 5 cents, up 66.7% from 3 cents reported in the year-ago quarter. The bottom line also surpassed the Zacks Consensus Estimate of 4 cents.

The company is in the process of being acquired by the middle-market private equity firm, American Industrial Partners (AIP), for a sum in excess of $200 million or $4.05 per share in cash. The transaction is anticipated to close at the start of 2014. The company has already received its board of directors’ approval while it still awaits approval from shareholders and regulatory authorities.

Revenues

Flow International’s sales for the quarter fell 1% year over year to $66.3 million. The top line has however surpassed management’s guidance range of $60–$62 million.

A brief mention of the two segments of Flow International is given below:

Standard segment reported sales of $57.8 million, down 9% year over year while sales from Advanced segment were $8.5 million, up 122% year over year.  

Flow International also reports sales by category. Standard System sales in the second quarter declined 14% to $34.6 million; Advanced System sales were $8.5 million, up 127%; and Consumable Parts sales were up 1% year over year to $23.2 million.

Margins

Flow International’s efforts to reduce its costs were seen in the fiscal second quarter as the company reported a 3% decline in cost of sales. As a percentage of revenues, cost of sales was 61.2% versus 62.1% in the year-ago quarter. Gross margin in the quarter came in at 38.8%.

Sales and marketing as well as research and engineering expenses fell 10% and 5% respectively, while an increase of 3% was recorded in general and administrative expenses. These combined expenses came to 30.6% of revenues.

Flow International reported a 2% increase in its operating income that came in at $4.1 million versus $4.0 million in the year-ago quarter.

Balance Sheet/Cash Flow

Exiting the fiscal second quarter 2014, Flow International’s cash and cash equivalents stood at $14.3 million, up 6.7% from $13.4 million in the previous quarter.

The company generated roughly $9.4 million of cash from operating activities as compared with $7.5 million generated in the year-ago quarter. Capital spending decreased 63.3% to $0.8 million.

Flow International is one of the major manufacturers of industrial waterjet machines. The stock currently carries a Zacks Rank #3 (Hold). Some other stocks worth considering in the industry include Raven Industries Inc. (RAVN - Analyst Report), Rexnord Corporation (RXN - Analyst Report) and Generac Holdings Inc. (GNRC - Snapshot Report). All these hold a Zacks Rank #2 (Buy).

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