CIRCOR International, Inc. (NYSE: CIR), a leading provider of
valves and other highly engineered products for markets including
energy, oil & gas, power generation and aerospace, today
announced financial results for the first quarter ended March 31,
2013.
“CIRCOR began the year achieving both revenue and adjusted EPS
at the high end of our Q1 guidance ranges,” said Scott Buckhout,
CIRCOR’s President and Chief Executive Officer. “Our focus on
improving operating results and expanding margins led to a 6%
year-over-year increase in adjusted EPS and a 70 basis point
improvement in adjusted operating margins.”
“Bookings grew 12% sequentially due to increased Aerospace
orders, as well as strong demand in Energy for large international
projects,” said Buckhout. “In Brazil, we received our first large
oil and gas valve order since acquiring operations in this
market.”
“The repositioning actions we took in all three of our segments
to generate greater profitability and better focus on key strategic
markets are on track for completion by the end of the current
second quarter,” said Buckhout. “We expect to begin realizing the
full run-rate of approximately $7 million in annualized savings
from these actions in the second half of 2013.”
“We anticipate improved performance on both the top and bottom
lines in the second quarter and we remain focused on margin
expansion and evaluating further repositioning opportunities. Our
key markets are attractive and have significant long-term growth
potential. We believe these markets will continue to provide
opportunities for CIRCOR to expand organically and through
acquisitions,” concluded Buckhout.
Consolidated Results
Revenues for the first quarter of 2013 were $205.4 million, a 4%
decrease from $214.3 million in the first quarter of 2012, due
primarily to lower energy shipments as a result of lower North
American rig counts. Adjusted earnings per diluted share in the
first quarter of 2013, excluding the impact of special charges of
$0.07, was $0.52, a 6% increase compared to the prior year’s
first-quarter results of $0.49. Net income for the first quarter of
2013, including special charges, was $7.9 million, or $0.45 per
diluted share, compared with net income of $8.6 million, or $0.49
per diluted share, for the first quarter of 2012.
The Company received orders totaling $226.8 million during the
first quarter of 2013, a decrease of 9% compared with the first
quarter of 2012 due primarily to lower Energy orders in both the
North American short cycle and large international project
businesses. This was partially offset by growth in both Aerospace
and Flow Technologies. Backlog as of March 31, 2013 was $457.3
million, up 6% from backlog of $432.3 million at April 1, 2012.
During the first quarter of 2013, the Company generated $1.1
million of free cash flow, up $8.2 million from the same period in
2012 due primarily to improved working capital.
Energy
Energy segment revenues decreased 11% to $96.7 million for the
first quarter of 2013 from $109.3 million for the first quarter of
2012. First-quarter 2013 Energy segment revenues declined across
most markets compared to the same period in 2012 when revenues were
particularly strong with high rig counts. In addition, the
year-over-year decrease was exacerbated by unfavorable foreign
currency fluctuations.
Incoming orders for the first quarter of 2013 were $110.1
million, a decrease of 19% year-over-year as a result of a decline
in rig counts in North America and timing of large international
projects. Ending backlog totaled $217.8 million, an increase of 12%
year-over-year, primarily due to higher order levels in the Middle
East within the Company’s large international project business.
For the first quarter of 2013, the Energy segment’s adjusted
operating margin increased to 11.1% from 8.2% in the first quarter
of 2012, primarily driven by improved large international project
pricing. This was partially offset by lower volume and increases in
selling and marketing expenses to expand the Company's presence in
emerging markets. Segment adjusted operating margin for the quarter
excludes special and repositioning related inventory charges of
$0.6 million related to the repositioning of the Company’s Brazil
operations.
Flow Technologies
Flow Technologies segment revenues increased 7% to $71.4 million
for the first quarter of 2013 from $66.9 million in the first
quarter of 2012. The revenue increase was primarily due to higher
power generation and instrumentation revenues, partially offset by
unfavorable foreign currency fluctuations.
Incoming orders for the Flow Technologies segment were $74.5
million for the first quarter of 2013, an increase of 2%
year-over-year, primarily driven by power generation and
instrumentation, partially offset by lower HVAC orders. Ending
backlog totaled $76.9 million, an increase of 1% over last
year.
Flow Technologies adjusted operating margin for the first
quarter of 2013 increased to 12.7% from 11.3% in the first quarter
of 2012, primarily due to higher volume and associated leverage.
Segment adjusted operating margin excludes special and
repositioning charges of $0.1 million related to repositioning
activities in India.
Aerospace
Aerospace segment revenues decreased 2% to $37.3 million for the
first quarter of 2013 from $38.1 million in the first quarter of
2012 primarily due to a decline in landing gear shipments
associated with exiting the low margin landing gear overhaul
product line as part of the repositioning actions in
California.
Incoming orders for the first quarter of 2013 were $42.2
million, an increase of 5% year-over-year, primarily due to higher
landing gear orders. Ending backlog totaled $162.7 million, an
increase of 1% year-over-year.
Aerospace segment adjusted operating margin for the first
quarter of 2013 decreased to 3.5% from 10.8% in the first quarter
of 2012, primarily due to product development investments and
start-up costs for new programs, including the A350, A330 and
Blackhawk with an approximate impact of 500bps. In addition, during
Q1 of 2012 CIRCOR completed a large engineering project which
favorably impacted segment adjusted operating margin that quarter.
Segment adjusted operating margin for Q1 2013 excludes special and
repositioning charges of $0.9 million related to the repositioning
of certain operations and manufacturing activities.
Financial Outlook
For the second quarter of 2013 the Company expects revenues to
be in the range of $214 to $220 million, up sequentially from the
first quarter of 2013, led by Energy.
During the second quarter, the Company expects to incur pre-tax
repositioning related charges of between $4.2 and $4.8 million.
Excluding those charges, adjusted earnings are expected to be in
the range of $0.64 to $0.70 per diluted share, up sequentially from
the first quarter of 2013 with margin expansion in all
segments.
The tax rate on adjusted earnings is expected to be
approximately 29.5%. Excluding repositioning, the rate is
anticipated to be approximately 31.1%. This guidance assumes that
exchange rates remain at present levels.
Conference Call Information
CIRCOR International will hold a conference call to review its
financial results today, May 2, 2013, 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. Free cash flow is defined as net
cash from operating activities less capital expenditures. 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 second-quarter revenue and earnings guidance
and estimated total annualized pre-tax savings from repositioning
actions. 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 markets including
energy, oil & gas, power generation and aerospace. 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 March
31, 2013 April 1, 2012 Net revenues $
205,398 $ 214,280 Cost of revenues 145,549 155,668
GROSS PROFIT 59,849 58,612 Selling, general and administrative
expenses 45,571 44,912 Special charges 1,378 —
OPERATING INCOME 12,900 13,700 Other (income)
expense: Interest income (43 ) (83 ) Interest expense 830 1,164
Other, net 612 138 TOTAL OTHER EXPENSE 1,399
1,219 INCOME BEFORE INCOME TAXES 11,501 12,481 Provision for
income taxes 3,592 3,896 NET INCOME $ 7,908 $
8,585 Earnings per common share: Basic $ 0.45 $ 0.50 Diluted
$ 0.45 $ 0.49 Weighted average number of common shares outstanding:
Basic 17,511 17,315 Diluted 17,529 17,390
CIRCOR
INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(UNAUDITED) Three Months Ended March
31, 2013 April 1, 2012 OPERATING
ACTIVITIES Net income $ 7,908 $ 8,585 Adjustments
to reconcile net income to net cash provided by (used in) operating
activities: Depreciation 4,009 4,008 Amortization 758 964
Compensation expense of share-based plans 1,028 1,195 Tax effect of
share-based compensation (285 ) 479
(Gain) loss on property, plant and
equipment
(66 ) 2 Changes in operating assets and liabilities, net of effects
from business acquisitions: Trade accounts receivable (2,455 )
3,539 Inventories (6,461 ) (2,179 ) Prepaid expenses and other
assets (827 ) (5,549 ) Accounts payable, accrued expenses and other
liabilities 2,198 (14,011 ) Net cash provided by (used in)
operating activities 5,807 (2,967 )
INVESTING
ACTIVITIES Additions to property, plant and equipment (4,707 )
(4,122 ) Proceeds from the sale of property, plant and equipment 75
15 Net cash used in investing activities (4,632 )
(4,107 )
FINANCING ACTIVITIES Proceeds from long-term debt
33,598 41,123 Payments of long-term debt (37,655 ) (47,806 )
Dividends paid (670 ) (666 ) Proceeds from the exercise of stock
options 1,368 73 Tax effect of share-based compensation 285
(479 ) Net cash used in financing activities (3,074 ) (7,755 )
Effect of exchange rate changes on cash and cash equivalents (2,207
) 1,265 DECREASE IN CASH AND CASH EQUIVALENTS (4,105 )
(13,564 ) Cash and cash equivalents at beginning of period 61,738
54,855 CASH AND CASH EQUIVALENTS AT END OF PERIOD $
57,633 $ 41,291
CIRCOR INTERNATIONAL,
INC. CONSOLIDATED BALANCE SHEETS
(in thousands, except share
data)
UNAUDITED
March 31, 2013
December 31, 2012
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 57,633 $ 61,738
Short-term investments 99 101 Trade accounts receivable, less
allowance for doubtful accounts of $1,683 and $1,706, respectively
150,849 150,825 Inventories 201,618 198,005 Prepaid expenses and
other current assets 17,647 16,510 Deferred income tax asset 15,365
15,505 Assets held for sale 542 542 Total Current
Assets 443,753 443,226 PROPERTY, PLANT AND EQUIPMENT,
NET 104,756 105,903 OTHER ASSETS: Goodwill 76,535 77,428
Intangibles, net 42,954 45,157 Deferred income tax asset 28,563
30,064 Other assets 7,549 8,203 TOTAL ASSETS $
704,110 $ 709,981 LIABILITIES AND SHAREHOLDERS’
EQUITY CURRENT LIABILITIES: Accounts payable $ 90,756 $ 80,361
Accrued expenses and other current liabilities 58,683 67,235
Accrued compensation and benefits 22,732 26,540 Income taxes
payable 982 393 Notes payable and current portion of long-term debt
8,000 7,755 Total Current Liabilities 181,153
182,284 LONG-TERM DEBT, NET OF CURRENT PORTION 58,546 62,729
DEFERRED INCOME TAXES 9,956 10,744 OTHER NON-CURRENT LIABILITIES
35,636 35,977 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; 17,549,210 and 17,445,687 shares issued and outstanding
at March 31, 2013 and December 31, 2012, respectively 175 174
Additional paid-in capital 264,719 262,744 Retained earnings
165,750 158,509 Accumulated other comprehensive loss, net of taxes
(11,825 ) (3,180 ) Total Shareholders’ Equity 418,819
418,247 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 704,110
$ 709,981
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED Three Months Ended
March 31, 2013
April 1, 2012
ORDERS (1) Energy $ 110.1 $ 135.6 Aerospace 42.2 40.2 Flow
Technologies 74.5 72.9 Total orders $ 226.8 $ 248.7
BACKLOG (2) March 31, 2013 April
1, 2012 Energy $ 217.8 $ 195.2 Aerospace 162.7 161.1
Flow Technologies 76.8 76.0 Total backlog $ 457.3 $
432.3
Note 1: Orders do not include the foreign exchange impact due to
the re-measurement of customer order backlog 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 2012
2013 1ST QTR 2ND QTR
3RD QTR 4TH QTR
TOTAL 1ST QTR NET REVENUES Energy $ 109,264 $
113,527 $ 109,968 $ 96,582 $ 429,341 $ 96,722 Aerospace 38,085
35,896 31,795 35,316 141,092 37,326 Flow Technologies 66,931
70,439 68,041 69,707 275,119 71,350
Total 214,280 219,862 209,804 201,605
845,552 205,398
* ADJUSTED OPERATING
MARGIN Energy 8.2 % 11.1 % 14.0 % 12.5 % 11.4 % 11.1 %
Aerospace 10.8 % 8.8 % 4.2 % 3.5 % 7.0 % 3.5 % Flow Technologies
11.3 % 12.8 % 13.1 % 13.1 % 12.6 % 12.7 % Segment operating margin
9.6 % 11.3 % 12.2 % 11.1 % 11.1 % 10.3 % Corporate expenses (3.2 )%
(2.9 )% (3.4 )% (3.4 )% (3.2 )% (3.2 )% * Adjusted operating margin
6.4 % 8.4 % 8.8 % 7.8 % 7.8 % 7.1 % Repositioning inventory charges
0.0 % 0.0 % 2.0 % 0.0 % 0.5 % 0.1 % Impairment charges 0.0 % 0.0 %
4.9 % 0.0 % 1.2 % 0.0 % Special charges 0.0 % 0.0 % 0.7 % 1.9 % 0.6
% 0.7 % Total operating margin 6.4 % 8.4 % 1.3 % 5.8 % 5.5 % 6.3 %
* ADJUSTED OPERATING INCOME Energy 8,928 12,580 15,432
12,100 49,040 10,751 Aerospace 4,124 3,153 1,324 1,234 9,835 1,320
Flow Technologies 7,587 9,043 8,919 9,105
34,654 9,044 Segment operating income 20,639
24,776 25,675 22,439 93,529 21,115 Corporate expenses (6,939 )
(6,297 ) (7,170 ) (6,802 ) (27,207 ) (6,588 ) * Adjusted operating
income 13,700 18,479 18,505 15,637 66,322 14,528 Repositioning
inventory charges — — 4,124 37 4,161 250 Impairment charges — —
10,348 — 10,348 — Special charges — — 1,377
3,905 5,282 1,378 Total operating income
13,700 18,479 2,656 11,695 46,531
12,900 INTEREST EXPENSE, NET (1,081 ) (1,017 ) (1,122
) (1,038 ) (4,258 ) (787 ) OTHER EXPENSE, NET (138 ) (184 ) (564 )
373 (514 ) (612 ) PRETAX INCOME 12,481 17,278 970 11,030
41,759 11,501 (PROVISION) BENEFIT FOR INCOME TAXES (3,896 ) (6,142
) 899 (1,822 ) (10,960 ) (3,592 ) EFFECTIVE TAX RATE 31.2 %
35.5 % (92.8 )% 16.5 % 26.2 % 31.2 %
NET INCOME $ 8,585
$ 11,136 $ 1,869 $ 9,208 $ 30,799
$ 7,908 Weighted Average Common Shares Outstanding
(Diluted) 17,390 17,451 17,467 17,499 17,452 17,529
EARNINGS PER
COMMON SHARE (Diluted) $ 0.49 $ 0.64 $ 0.11
$ 0.53 $ 1.76 $ 0.45
ADJUSTED
EBITDA $ 18,534 $ 23,043 $ 22,809 $ 16,808
$ 81,194 $ 18,682
ADJUSTED EBITDA AS A % OF
SALES 8.6 % 10.5 % 10.9 % 8.3 % 9.6 % 9.1 %
CAPITAL
EXPENDITURES $ 4,122 $ 6,661 $ 3,314 $
4,073 $ 18,170 $ 4,707
* Adjusted
Operating Income & Margin exclude inventory repositioning,
impairment and special charges. CIRCOR INTERNATIONAL,
INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY
USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands, except earnings per
share)
UNAUDITED 2012
2013 1ST QTR 2ND QTR
3RD QTR 4TH QTR
TOTAL 1ST QTR FREE CASH FLOW [NET CASH FLOW FROM
OPERATING ACTIVITIES LESS CAPITAL EXPENDITURES] $(7,089)
$5,077 $18,746 $25,619 $42,353
$1,100 ADD: Capital Expenditures 4,122 6,661 3,314 4,073
18,170 4,707 NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$(2,967) $11,738 $22,060 $29,692 $60,523 $5,807
NET DEBT [TOTAL
DEBT LESS CASH & CASH EQUIVALENTS LESS INVESTMENTS]
$57,263 $54,376 $34,706 $8,645
$8,645 $8,814 ADD: Cash & Cash Equivalents 41,291
41,414 48,976 61,738 61,738 57,633 Investments 101 98 102 101 101
99 TOTAL DEBT $98,655 $95,888 $83,784 $70,484 $70,484 $66,546
DEBT AS % OF EQUITY 25% 24% 20%
17% 17% 16% TOTAL DEBT 98,655 95,888 83,784
70,484 70,484 66,546 TOTAL SHAREHOLDERS' EQUITY 399,018 397,957
409,016 418,247 418,247 418,819
EBIT [NET INCOME LESS INCOME
TAXES LESS INTEREST EXPENSE, NET] $13,562 $
18,295 $2,092 $12,068 $46,017
$12,287 LESS: Interest expense, net (1,081) (1,017) (1,122)
(1,038) (4,258) (787) (Provision) benefit for income taxes (3,896)
(6,142) 899 (1,822) (10,960) (3,592) NET INCOME $8,585 $11,136
$1,869 $9,208 $30,799 $7,908
ADJUSTED OPERATING INCOME
[OPERATING INCOME EXCLUDING INVENTORY REPOSITIONING, IMPAIRMENT AND
SPECIAL CHARGES] $13,700 $ 18,479
$18,505 $ 15,600 $ 66,322
$14,528 LESS: Inventory repositioning charges — — 4,124 37
4,161 250 Impairment charges — — 10,348 — 10,348 — Special charges
— — 1,377 3,905 5,282 1,378 OPERATING INCOME $13,700 $18,479 $2,656
$11,695 $46,531 $12,900
ADJUSTED EARNINGS PER SHARE [EPS
EXCLUDING INVENTORY REPOSITIONING, IMPAIRMENT AND SPECIAL CHARGES,
NET OF TAX] $0.49 $0.64 $0.77 $0.69
$ 2.59 $0.52 LESS: Inventory repositioning
charges, net of tax $— $— $0.17 $— $0.17 $0.01 Impairment charges,
net of tax $— $— $0.43 $— $0.43 $— Special charges, net of tax $—
$— $0.06 $0.16 $0.22 $0.06 EARNINGS PER COMMON SHARE (Diluted)
$0.49 $0.64 $0.11 $0.53 $1.76 $0.45
EBITDA [NET INCOME
LESS NET INTEREST EXPENSE, DEPRECIATION, AMORTIZATION AND INCOME
TAXES] $18,534 $23,043 $ 2,092
$ 12,068 $ 65,345 $17,054 LESS:
Interest expense, net (1,081) (1,017) (1,122) (1,038) (4,258) (787)
Depreciation (4,008) (3,825) (3,932) (3,967) (15,732) (4,009)
Amortization (964) (923) (936) (773) (3,596) (758) (Provision)
benefit for income taxes (3,896) (6,142) 899 (1,822) (10,960)
(3,592) NET INCOME $8,585 $11,136 $1,869 $9,208
$30,799 $7,908
ADJUSTED EBIDTA [NET INCOME
EXCLUDING INVENTORY REPOSITIONING, IMPAIRMENT AND SPECIAL CHARGES,
NET INTEREST EXPENSE, DEPRECIATION, AMORTIZATION AND INCOME
TAXES] $18,534 $23,043 $22,809
$20,750 $ 85,136 $18,682 Inventory
repositioning charges $— $— $(4,124) $(37) $(4,161) $(250)
Impairment charges $— $— $(10,348) $— $(10,348) $— Special charges
$— $— $(1,377) $(3,905) $(5,282) $(1,378) Interest expense, net
$(1,081) $(1,017) $(1,122) $(1,038) $(4,258) $(787) Depreciation
$(4,008) $(3,825) $(3,932) $(3,967) $(15,732) $(4,009) Amortization
$(964) $(923) $(936) $(773) $(3,596) $(758) (Provision) benefit for
income taxes $(3,896) $(6,142) $899 $(1,822) $(10,960) $(3,592) NET
INCOME $8,585 $11,136 $1,869 $9,208 $30,799 $7,908
CIRCOR
INTERNATIONAL, INC. RECONCILIATION OF FUTURE PERFORMANCE
MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING
PRINCIPLE TERMS UNAUDITED 2nd Quarter
2013 Low High EXPECTED ADJUSTED
EARNINGS PER SHARE [EPS EXCLUDING INVENTORY REPOSITIONING,
IMPAIRMENT AND SPECIAL CHARGES, NET OF TAX] $
0.64 $ 0.70
LESS: REPOSITIONING RELATED CHARGES
[INVENTORY REPOSITIONING, IMPAIRMENT AND SPECIAL CHARGES, NET OF
TAX]
$
(0.19
)
$
(0.17
)
EXPECTED EARNINGS PER COMMON SHARE
(Diluted)
$
0.45
$
0.53
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