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Flow International Q4 Lags Estimates

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Flow International Corporation (FLOW - Free Report) reported loss of 4 cents per share for the fourth quarter 2013 (ended Apr 30, 2013). The results were disappointing compared with earnings of 6 cents recorded in the year-ago quarter and also lagged behind the Zacks Consensus Estimate of 1 cent earnings per share.

For fiscal 2013, the company reported net earnings of 11 cents, down compared with 20 cents earned in fiscal 2012.


As hinted earlier in the preliminary results, Flow International reported 8% year over year decline in sales that came in at $58.4 million. The fall can be attributed to uneven customer demand in the quarter as a few markets were strong while others maintained a cautious approach, primarily because of the prevailing global uncertainties.

Flow International reports its revenues under the following segments; a brief discussion has been provided below:

Standard segment revenues declined 13% year over year to $51.6 million while Advanced segment reported sales of $6.8 million, up roughly 55% year over year.  

In the sales category, Flow International’s Standard System sales in the fourth quarter declined 19% to $31.1 million; Advanced System sales were $7.0 million, up 59%; and Consumable Parts sales were flat at $20.4 million.

For fiscal 2013, sales at $259.3 million were up 2% year over year.


Cost of sales in the fourth quarter went down 3% year over year and represented 63.9% of total revenue, up from 60.9% in the year-ago quarter. Gross margin in the quarter came in at 36.1%. Sales and marketing combined with research and engineering expenses, as a percentage of total revenue, stood at 26.1%%.

Flow International reported operating loss of roughly $0.32 million versus operating income of $2.4 million in the year-ago quarter.

Balance Sheet/Cash Flow

Exiting the fourth quarter of fiscal 2013, Flow International’s cash and cash equivalents stood at $15.5 million, up 19% from $12.9 million in the year-ago quarter.
Net cash flow from operating activities in fiscal 2013 quarter was $7.9 million, down 38% year over year while capital expenditure was at $6.6 million, up 44% from $4.6 million in fiscal 2012.

Outlook: At its preliminary data release in Jun 2013, management of Flow International had communicated worries emanating from market conditions, which impacted fourth quarter results. These are expected to spill over to the fiscal first quarter 2014.

Also, Flow International announced to have undertaken a few initiatives to reduce its operating costs and save $9 million annually. An additional $4 million saving is expected from a new product line launched recently. All these savings are expected to be realized by the end of fiscal year 2014. Restructuring charges and other non-recurring costs of $1.0 million related to the cost saving initiatives will be recorded in the fiscal first quarter 2014.

Flow International is one of the leading manufacturers of industrial waterjet machines and currently has a $183 million market capitalization. The stock carries a Zacks Rank #4 (Sell). Other stocks to watch out for are Lennox International, Inc. (LII - Free Report) , with a Zacks Rank #1 (Strong Buy) while Dover Corporation (DOV - Free Report) and Nordson Corporation (NDSN - Free Report) , each carrying a Zacks Rank #2 (Buy).

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