CIRCOR International, Inc. (NYSE: CIR), a leading provider of
valves and other highly engineered products for the energy,
aerospace and industrial markets, today announced financial results
for the second quarter ended July 1, 2012.
“We performed well in the second quarter and were especially
pleased with the operational improvements and margin expansion
achieved by our teams in our Energy and Flow Technologies
segments,” said Chairman and Chief Executive Officer Bill Higgins.
“Our strong second-quarter earnings growth was driven by Energy
segment operating margins as both our North American short-cycle
and international project businesses exhibited strong operational
performance. Overall bookings were up year over year as a result of
a significant increase in Energy orders led by a second straight
quarter of strong international projects bookings, which bodes well
for 2013.”
Consolidated Results
Revenues for the second quarter of 2012 were $219.9 million, a
15% increase from $191.9 million in the second quarter of 2011. Net
income for the second quarter of 2012 was $11.1 million, or $0.64
per diluted share, compared with net income of $7.5 million, or
$0.43 per diluted share, for the second quarter of 2011.
Consolidated adjusted operating earnings were $18.5 million for
the second quarter of 2012 compared with $12.4 million in the
second quarter of 2011, an increase of 49%.
The Company received orders totaling $227.3 million during the
second quarter of 2012, an increase of 6% compared with the second
quarter of 2011. The increase was driven primarily by the Energy
segment and was partially offset by weakness in Flow Technologies’
LED equipment and Aerospace’s landing gear aftermarket. Backlog as
of July 1, 2012 was $422.3 million, down 4% from backlog of $442.0
million at July 3, 2011, primarily due to foreign currency
changes.
During the second quarter of 2012, the Company generated $5.1
million of free cash flow (defined as net cash from operating
activities less capital expenditures). This compares with $77.2
million of free cash flow used in the second quarter of 2011, which
included the payment of $76.6 million in April 2011 to fund the
Leslie Controls Bankruptcy Trust.
Energy
Energy segment revenues increased 38% to $113.5 million for the
second quarter of 2012 from $82.0 million for the second quarter of
2011 due to organic growth across most markets of 46%, partially
offset by a negative foreign currency impact of 8%.
Incoming orders for the second quarter of 2012 were $128.2
million, an increase of 24% year-over-year due to strength in
almost all markets led by international project orders. Ending
backlog totaled $197.4 million, a decrease of 13% year-over-year
primarily the result of shipments of large pipeline projects booked
in 2010 and the impact of unfavorable foreign currency fluctuations
related to the large international project business.
For the second quarter of 2012, the Energy segment adjusted
operating margin of 11.1% was up from 5.3% in the second quarter of
2011, primarily due to the significant volume increase and the
associated leverage as well as improved pricing in large
international projects, partially offset by increased expenses in
Brazil as the Company invests in this new geographic region.
Aerospace
Aerospace segment revenues of $35.9 million for the second
quarter of 2012 were in-line with the second quarter of 2011. The
Aerospace segment revenues grew 4% organically, which was offset by
a negative foreign currency impact of 4%.
Incoming orders for the second quarter of 2012 were $28.5
million, a decrease of 15% year-over-year primarily due to weak
landing gear aftermarket orders. Ending backlog totaled $150.6
million, an increase of 13% year-over-year due to both military and
commercial markets.
The Aerospace segment’s adjusted operating margin was 8.8% for
the second quarter of 2012, down from 11.2% in the second quarter
of 2011. Adjusted operating margin decreased primarily due to
increased expenses for product development and manufacturing
capabilities, which were partially offset by higher volumes and
favorable product mix.
Flow Technologies
Flow Technologies segment revenues decreased 5% to $70.4 million
for the second quarter of 2012 from $73.9 million in the second
quarter of 2011. Second-quarter 2012 Flow Technologies segment
revenues reflected an organic decline of 2% due to lower LED
equipment shipments and a negative foreign currency impact of
3%.
Incoming orders for the Flow Technologies segment were $70.6
million for the second quarter of 2012, a decrease of 8%
year-over-year, driven by the soft LED equipment market offsetting
an average 3% growth across the other markets. Ending backlog
totaled $74.3 million, a decrease of 11% year-over-year driven by
lower LED equipment and navy orders.
The segment’s adjusted operating margin for the second quarter
of 2012 was 12.8%, an increase from 12.4% in the second quarter of
2011.
Financial Outlook
CIRCOR currently expects revenues for the third quarter of 2012
in the range of $200 million to $210 million. Earnings are expected
to be in the range of $0.48 to $0.60 per diluted share. CIRCOR’s
guidance for earnings per share assumes a 28% tax rate and that
exchange rates remain at present levels. These Q3 revenue estimates
are slightly lower on a sequential basis due to the timing of
Energy projects and the seasonality in Aerospace and other
Europe-based businesses due to summer holiday shutdowns.
“Looking ahead, we continue to be excited about our prospects
for growth and profitability,” said Higgins. “We are in great
markets, we are well positioned to grow revenue both organically
and through acquisitions, and we have an aggressive plan to
increase margins and enhance shareholder value.”
Conference Call Information
CIRCOR International will hold a conference call to review its
financial results today, August 2, 2012, at 10:00 a.m. ET. Those
who wish to listen to the conference call and view the accompanying
presentation slides should visit “Webcasts & Presentations” in the “Investors” portion
of the CIRCOR website. The live call also can be accessed by
dialing (877) 407-5790 or (201) 689-8328. If you are unable to
listen to the live call, the webcast will be archived for one year
on the Company’s website.
Use of Non-GAAP Financial Measures
Adjusted net income, adjusted earnings per diluted share,
adjusted operating margin, and free cash flow are non-GAAP
financial measures and are intended to serve as a complement to
results provided in accordance with accounting principles generally
accepted in the United States. CIRCOR believes that such
information provides an additional measurement and consistent
historical comparison of the Company’s performance. A
reconciliation of the non-GAAP financial measures to the most
directly comparable GAAP measures is available in this news
release.
Safe Harbor Statement
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Reliance should not be placed on forward-looking
statements because they involve unknown risks, uncertainties and
other factors, which are, in some cases, beyond the control of
CIRCOR. Any statements in this press release that are not
statements of historical fact are forward-looking statements,
including, but not limited to, those relating to CIRCOR’s future
performance, including third-quarter revenue and earnings guidance.
Actual events, performance or results could differ materially from
the anticipated events, performance or results expressed or implied
by such forward-looking statements. BEFORE MAKING ANY INVESTMENT
DECISIONS REGARDING OUR COMPANY, WE STRONGLY ADVISE YOU TO READ THE
SECTION ENTITLED "RISK FACTORS" IN OUR MOST RECENT ANNUAL REPORT ON
FORM 10-K AND SUBSEQUENT REPORTS ON FORMS 10-Q, WHICH CAN BE
ACCESSED UNDER THE "INVESTORS" LINK OF OUR WEBSITE AT
WWW.CIRCOR.COM. We undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
About CIRCOR International, Inc.
CIRCOR International, Inc. designs, manufactures and markets
valves and other highly engineered products for the energy,
aerospace and industrial markets. With more than 7,500 customers in
over 100 countries, CIRCOR has a diversified product portfolio with
recognized, market-leading brands. CIRCOR’s culture, built on the
CIRCOR Business System, is defined by the Company’s commitment to
attracting, developing and retaining the best talent and pursuing
continuous improvement in all aspects of its business and
operations. The Company’s strategy includes growing organically by
investing in new, differentiated products; adding value to
component products; and increasing the development of
mission-critical subsystems and solutions. CIRCOR also plans to
leverage its strong balance sheet to acquire strategically
complementary businesses. For more information, visit the Company’s
investor relations web site at http://investors.circor.com.
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF
OPERATIONS
(in thousands, except per share
data)
UNAUDITED
Three Months Ended Six Months Ended
July 1, 2012 July 3, 2011 July 1, 2012
July 3, 2011 Net revenues $ 219,862 $ 191,908 $
434,142 $ 395,278 Cost of revenues 156,046 137,302
311,714 284,444 GROSS PROFIT 63,816
54,606 122,428 110,834 Selling, general and administrative expenses
45,337 42,180 90,249 84,635 Leslie asbestos and bankruptcy
(recoveries) charges, net — (124 ) — 877
OPERATING INCOME 18,479 12,550 32,179
25,322 Other (income) expense: Interest income (78 )
(54 ) (161 ) (97 ) Interest expense 1,095 1,286 2,259 2,102 Other,
net 184 560 322 1,476 TOTAL
OTHER EXPENSE 1,201 1,792 2,420 3,481
INCOME BEFORE INCOME TAXES 17,278 10,758 29,759 21,841
Provision for income taxes 6,142 3,261 10,038
6,439 NET INCOME $ 11,136 $ 7,497 $
19,721 $ 15,402 Earnings per common share:
Basic $ 0.64 $ 0.43 $ 1.14 $ 0.90 Diluted $ 0.64 $ 0.43 $ 1.13 $
0.88 Weighted average number of common shares outstanding: Basic
17,422 17,251 17,369 17,206 Diluted 17,451 17,434 17,421 17,406
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(UNAUDITED)
Six Months Ended July 1, 2012 July
3, 2011 OPERATING ACTIVITIES Net income $ 19,721
$ 15,402
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 7,833 7,496 Amortization 1,887 2,196 Payment for
Leslie bankruptcy settlement (1,000 ) (76,625 ) Compensation
expense of share-based plans 2,317 1,960 Tax effect of share-based
compensation 499 (637 )
Loss (gain) on disposal of property, plant
and equipment
133 (39 ) Changes in operating assets and liabilities, net of
effects from business acquisitions: Trade accounts receivable
(6,312 ) (5,790 ) Inventories (5,340 ) (34,236 ) Prepaid expenses
and other assets (1,408 ) (5,836 ) Accounts payable, accrued
expenses and other liabilities (9,559 ) 26,853 Net cash
provided by (used in) operating activities 8,771 (69,256 )
INVESTING ACTIVITIES Additions to property, plant and
equipment (10,783 ) (7,463 ) Proceeds from the sale of property,
plant and equipment 31 50 Purchase of investments — (2 ) Business
acquisitions, net of cash acquired — (20,221 ) Net cash used
in investing activities (10,752 ) (27,636 )
FINANCING
ACTIVITIES Proceeds from long-term debt 108,943 201,087
Payments of long-term debt (117,944 ) (101,994 ) Debt issuance
costs — (2,001 ) Dividends paid (1,331 ) (1,325 ) Proceeds from the
exercise of stock options 94 476 Tax effect of share-based
compensation (499 ) 637 Net cash (used in) provided by
financing activities (10,737 ) 96,880 Effect of exchange
rate changes on cash and cash equivalents (723 ) 2,562
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (13,441 ) 2,550
Cash and cash equivalents at beginning of period 54,855
45,752 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,414
$ 48,302
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share
data)
UNAUDITED
July 1, 2012 December 31, 2011 ASSETS
CURRENT ASSETS: Cash and cash equivalents $ 41,414 $ 54,855
Short-term investments 98 99 Trade accounts receivable, less
allowance for doubtful accounts of $1,231 and $1,127, respectively
160,012 156,075 Inventories 206,247 203,777 Prepaid expenses and
other current assets 15,498 12,376 Deferred income tax asset 15,623
16,320 Assets held for sale 542 542 Total Current
Assets 439,434 444,044 PROPERTY, PLANT AND EQUIPMENT,
NET 105,252 104,434 OTHER ASSETS: Goodwill 76,285 77,829
Intangibles, net 55,974 58,442 Deferred income tax asset 25,381
27,949 Other assets 10,051 9,825 TOTAL ASSETS $
712,377 $ 722,523 LIABILITIES AND SHAREHOLDERS’
EQUITY CURRENT LIABILITIES: Accounts payable $ 93,625 $ 92,493
Accrued expenses and other current liabilities 55,269 63,386
Accrued compensation and benefits 22,154 24,328 Asbestos liability
— 1,000 Income taxes payable 3,018 5,553 Notes payable and current
portion of long-term debt 6,366 8,796 Total Current
Liabilities 180,432 195,556 LONG-TERM DEBT, NET OF
CURRENT PORTION 89,522 96,327 DEFERRED INCOME TAXES 10,618 11,284
OTHER NON-CURRENT LIABILITIES 33,848 35,271 CONTINGENCIES AND
COMMITMENTS (See Note 10) SHAREHOLDERS’ EQUITY: Preferred stock,
$0.01 par value; 1,000,000 shares authorized; no shares issued and
outstanding — — Common stock, $0.01 par value; 29,000,000 shares
authorized; 17,405,140 and 17,268,212 shares issued and outstanding
at July 1, 2012 and December 31, 2011, respectively 174 173
Additional paid-in capital 260,556 258,209 Retained earnings
148,765 130,373 Accumulated other comprehensive loss (11,538 )
(4,670 ) Total Shareholders’ Equity 397,957 384,085
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 712,377 $
722,523
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED
Three Months Ended Six Months
Ended July 1, 2012 July 3, 2011 July 1,
2012 July 3, 2011 ORDERS (1) Energy
$ 128.2 $ 103.2 $ 263.9 $ 217.0 Aerospace 28.5 33.4 68.7 66.3 Flow
Technologies 70.6 76.8 143.4 151.7
Total orders $ 227.3 $ 213.4 $ 476.0 $ 435.0
BACKLOG (2) July 1, 2012 July 3, 2011
Energy $ 197.4 $ 225.7 Aerospace 150.6 133.1 Flow Technologies 74.3
83.2 Total backlog $ 422.3 $ 442.0
Note 1: Orders do not include the foreign
exchange impact due to the re-measurement of customer orderbacklog
amounts denominated in foreign currencies.
Note 2: Backlog includes all unshipped customer orders.
CIRCOR INTERNATIONAL, INC.
SUMMARY REPORT BY SEGMENT
(in thousands, except earnings per
share)
UNAUDITED
2011 2012 1ST QTR
2ND QTR 3RD QTR 4TH QTR
TOTAL 1ST QTR 2ND QTR
TOTAL NET REVENUES Energy $ 99,170 $ 81,994 $ 103,300
$ 110,228 $ 394,692 $ 109,264 $ 113,527 $ 222,791 Aerospace 32,110
36,029 32,681 36,017 136,837 38,085 35,896 73,981 Flow Technologies
72,090 73,885 73,980 70,865 290,820
66,931 70,439 137,370 Total 203,370
191,908 209,961 217,110 822,349
214,280 219,862 434,142
* ADJUSTED
OPERATING MARGIN Energy 6.4 % 5.3 % 7.2 % 8.4 % 7.0 % 8.2 %
11.1 % 9.7 % Aerospace 11.6 % 11.2 % 5.6 % 8.6 % 9.3 % 10.8 % 8.8 %
9.8 % Flow Technologies 13.7 % 12.4 % 13.6 % 12.9 % 13.1 % 11.3 %
12.8 % 12.1 % Segment operating margin 9.8 % 9.1 % 9.2 % 9.9 % 9.5
% 9.6 % 11.3 % 10.5 % Corporate expenses (3.0 )% (2.7 )% (1.7 )%
(3.0 )% (2.6 )% (3.2 )% (2.9 )% (3.0 )% * Adjusted operating margin
6.8 % 6.5 % 7.5 % 6.9 % 6.9 % 6.4 % 8.4 % 7.4 % Leslie asbestos and
bankruptcy charges (recoveries) 0.5 % (0.1 )% (0.1 )% 0.0 % 0.1 %
0.0 % 0.0 % 0.0 % Total operating margin 6.3 % 6.5 % 7.6 % 6.9 %
6.8 % 6.4 % 8.4 % 7.4 %
* ADJUSTED OPERATING INCOME Energy
6,393 4,373 7,441 9,225 27,432 8,928 12,580 21,508 Aerospace 3,727
4,021 1,846 3,081 12,675 4,124 3,153 7,277 Flow Technologies 9,854
9,133 10,037 9,171 38,195 7,587
9,043 16,630 Segment operating
income 19,974 17,527 19,324 21,477 78,302 20,639 24,776 45,415
Corporate expenses (6,201 ) (5,100 ) (3,585 ) (6,441 ) (21,327 )
(6,939 ) (6,297 )
(13,236 ) * Adjusted operating income 13,773 12,427 15,739
15,036 56,975 13,700 18,479 32,179 Leslie asbestos and bankruptcy
charges (recoveries) 1,001 (124 ) (201 ) — 676
— — — Total operating income 12,772
12,550 15,940 15,036 56,298 13,700 18,479 32,179 INTEREST EXPENSE,
NET (773 ) (1,232 ) (887 ) (1,039 ) (3,930 ) (1,081 ) (1,017 )
(2,098 ) OTHER EXPENSE, NET (915 ) (560 ) (354 ) (342 ) (2,171 )
(138 ) (184 ) (322 ) PRETAX INCOME 11,084 10,758 14,699
13,655 50,196 12,481 17,278 29,759 PROVISION FOR INCOME TAXES
(3,178 ) (3,261 ) (3,752 ) (3,370 ) (13,562 ) (3,896 ) (6,142 )
(10,038 ) EFFECTIVE TAX RATE 28.7 % 30.3 % 25.5 % 24.7 % 27.0 %
31.2 % 35.5 % 33.7 %
NET INCOME $ 7,906 $ 7,496
$ 10,947 $ 10,285 $ 36,634 $ 8,585
$ 11,136 $ 19,721 Weighted Average Common
Shares Outstanding (Diluted) 17,378 17,434 17,423 17,435 17,417
17,390 17,451 17,421
EARNINGS PER COMMON SHARE (Diluted) $
0.45 $ 0.43 $ 0.63 $ 0.59 $ 2.10
$ 0.49 $ 0.64 $ 1.13 EBIT $ 11,857 $ 11,989 $
15,586 $ 14,694 $ 54,125 $ 13,562 $ 18,295 $ 31,857 Depreciation
3,575 3,921 3,770 3,820 15,085 4,008 3,825 7,833 Amortization of
intangibles 1,418 778 1,097 1,058 4,351
964 923 1,887
EBITDA $ 16,850
$ 16,687 $ 20,453 $ 19,572 $ 73,561
$ 18,534 $ 23,043 $ 41,577
EBITDA AS
A PERCENT OF SALES 8.3 % 8.7 % 9.7 % 9.0 % 8.9 % 8.6 % 10.5 %
9.6 %
CAPITAL EXPENDITURES $ 2,693 $ 4,770 $
3,792 $ 6,647 $ 17,901 $ 4,122 $ 6,661
$ 10,783
* Adjusted Operating Income &
Margin exclude Leslie asbestos and bankruptcy charges.
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE
MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE
TERMS
(in thousands, except earnings per
share)
UNAUDITED
2011 2012 1ST QTR 2ND
QTR 3RD QTR 4TH QTR
TOTAL 1ST QTR 2ND QTR
TOTAL FREE CASH FLOW [NET CASH FLOW FROM OPERATING
ACTIVITIES LESS CAPITAL EXPENDITURES] $ 525
$ (77,244 ) $ (5,214 )
$ 15,199 $ (66,734 ) $
(7,089 ) $ 5,077 $ (2,012
) ADD: Capital Expenditures 2,693 4,770 3,792
6,647 17,902 4,122 6,661 10,783
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 3,218
$ (72,474 ) $ (1,422 ) $ 21,846 $ (48,832 ) $ (2,967
) $ 11,738 $ 8,771
NET DEBT (CASH) [TOTAL DEBT
LESS CASH & CASH EQUIVALENTS LESS INVESTMENTS] $
(22,554 ) $ 56,828 $
64,145 $ 50,169 $ 50,169
$ 57,263 $ 54,376 $
54,376 ADD: Cash & Cash Equivalents 53,491 48,302 39,254
54,855 54,855 41,291 41,414 41,414 Investments 99 107
98 99 99 101 98 98 TOTAL
DEBT $ 31,036 $ 105,237 $ 103,497 $ 105,123
$ 105,123 $ 98,655 $ 95,888 $ 95,888
DEBT AS % OF EQUITY 8 % 27
% 27 % 27 % 27 %
25 % 24 % 24 % TOTAL DEBT
31,036 105,237 103,497 105,123 105,123 98,655 95,888 95,888 TOTAL
SHAREHOLDERS' EQUITY 374,706 385,833 384,296 384,085 384,085
399,018 397,957 397,957
EBIT [NET INCOME LESS INCOME TAXES LESS
INTEREST EXPENSE, NET] $ 11,857 $
11,990 $ 15,586 $ 14,694
$ 54,127 $ 13,562 $
18,295 $ 31,857 LESS: Interest expense, net
(773 ) (1,232 ) (887 ) (1,039 ) (3,931 ) (1,081 ) (1,017 ) (2,098 )
Provision for income taxes (3,178 ) (3,261 ) (3,752 ) (3,370 )
(13,561 ) (3,896 ) (6,142 ) (10,038 ) NET INCOME
$
7,906
$ 7,497
$ 10,947
$ 10,285
$ 36,635
$ 8,585
$ 11,136
$ 19,721
EBITDA [NET INCOME LESS INTEREST EXPENSE, NET LESS
DEPRECIATION LESS AMORTIZATION LESS INCOME TAXES] $
16,850 $ 16,689 $ 20,453
$ 19,572 $ 73,563 $
18,534 $ 23,043 $ 41,577 LESS:
Interest expense, net (773 ) (1,232 ) (887 ) (1,039 ) (3,931 )
(1,081 ) (1,017 ) (2,098 ) Depreciation (3,575 ) (3,921 ) (3,770 )
(3,820 ) (15,086 ) (4,008 ) (3,825 ) (7,833 ) Amortization (1,418 )
(778 ) (1,097 ) (1,058 ) (4,351 ) (964 ) (923 ) (1,887 ) Provision
for income taxes (3,178 ) (3,261 ) (3,752 ) (3,370 ) (13,561 )
(3,896 ) (6,142 ) (10,038 ) NET INCOME $ 7,906 $ 7,497
$ 10,947 $ 10,285 $ 36,635 $ 8,585
$ 11,136 $ 19,721
ADJUSTED INCOME [NET
INCOME EXCLUDING LESLIE ASBESTOS AND BANKRUPTCY CHARGES, NET OF
TAX] $ 8,557 $ 7,416 $
10,816 $ 10,285 $ 37,074
$ 8,585 $ 11,136 $ 19,721
LESS: Leslie asbestos and bankruptcy charges (recoveries), net of
tax 651 (81 ) (131 ) — 439 — — —
NET INCOME $ 7,906 $ 7,497 $ 10,947 $
10,285 $ 36,635 $ 8,585 $ 11,136 $
19,721
ADJUSTED EARNINGS PER SHARE [EPS EXCLUDING LESLIE
ASBESTOS AND BANKRUPTCY CHARGES, NET OF TAX] $
0.49 $ 0.43 $ 0.62 $
0.59 $ 2.13 $ 0.49 $
0.64 $ 1.13 LESS: Leslie asbestos and
bankruptcy charges (recoveries), net of tax impact on EPS $ 0.04
$ — $ (0.01 ) $ — $ 0.03 $ — $ —
$ — EARNINGS PER COMMON SHARE (Diluted) $ 0.45
$ 0.43 $ 0.63 $ 0.59 $ 2.10 $ 0.49
$ 0.64 $ 1.13
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