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Flow International: Important News

Zacks Equity Research

Flow International Corporation’s (FLOW) financial results for the fiscal fourth quarter 2013 (ended Apr 30, 2013), which were brought forth recently in a preliminary data released on June 7, were quite a disappointment.

The company seems to be a victim of uneven customer demand as a few markets were strong while others maintained a cautious approach, primarily because of the prevailing global uncertainties. Worries emanating from market conditions have impacted Flow International’s fourth quarter results and are likely to have a spill over on the fiscal first quarter 2014 as well. Preliminary outcome of the fourth quarter and initiatives undertaken by the company are briefed below:

Management of Flow International estimates revenue in the fiscal fourth quarter to be roughly $58 million, representing an 8.5% year over year decline and operating profit to be roughly at a breakeven level versus a $2.4 million profit in the year-ago quarter. Revenue results in the first quarter 2014 are likely to be somewhat similar to the sequential quarter while operating income may reach $2.0 million.

Flow International has also undertaken a few initiatives to reduce its operating costs and save $9 million annually. Also, an additional $4 million savings are 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.
Along with the results and outlook, Flow International also announced amendments in its 3-yr $25.0 million Senior Credit Facility Agreement. The new agreement is a $40.0 million 4-year Credit Facility, due to mature on May 31, 2017. Another important announcement was the commencement of a review process—options include sale of the company as well— to enhance shareholders value. UBS Investment Bank will act as the financial advisor in the evaluation procedure.

Flow International is one of the leading manufacturers of industrial waterjet machines and currently has a $178 million market capitalization. The stock carries a Zacks Rank #3 (Hold). Other stocks to watch out for are Lincoln Electric Holdings Inc. (LECO) with a Zacks Rank #2 (Buy), Actuant Corporation (ATU) and Stanley Black & Decker, Inc. (SWK).

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