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CIRCOR International Reports First-Quarter 2012 Financial Results

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 first quarter ended April 1, 2012.

“CIRCOR performed well in the first quarter of 2012 as we exceeded our expectations for both top- and bottom-line performance,” said Chairman and Chief Executive Officer Bill Higgins. “Continued strength in the North American short-cycle Energy business and strong Aerospace segment sales helped drive year-over-year revenue growth of 5%. Bookings were up 12% year-over-year with solid gains in almost all areas excluding the market for LED equipment.”

“Earnings per diluted share were $0.49, and Energy segment operating margins were slightly better than anticipated at 8.2% in the first quarter,” said Higgins. “All in all, a good start to the year.”

Consolidated Results

Revenues for the first quarter of 2012 were $214.3 million, a 5% increase from $203.4 million in the first quarter of 2011. Net income for the first quarter of 2012 was $8.6 million, or $0.49 per diluted share, compared with net income of $7.9 million, or $0.45 per diluted share, for the first quarter of 2011. Excluding Leslie asbestos and bankruptcy charges, net of tax, adjusted earnings per diluted share was $0.49 in the first quarter of 2011.

Consolidated adjusted operating earnings, which excludes Leslie asbestos and bankruptcy charges was $13.7 million for the first quarter of 2012 down slightly from $13.8 million in the first quarter of 2011 as favorable volume was offset primarily by expenses related to future growth initiatives.

The Company received orders totaling $248.7 million during the first quarter of 2012, an increase of 12% compared with the first quarter of 2011. The increase was driven primarily by increases in the Energy and Aerospace segments and was partially offset by weakness in Flow Technology’s LED equipment business. Backlog as of April 1, 2012 was $432.3 million, up 3% from backlog of $419.1 million at April 3, 2011.

During the first quarter of 2012, the Company used $7.1 million of free cash flow (defined as net cash from operating activities less capital expenditures) compared with $0.5 million generated in the first quarter of 2011.

Energy

Energy segment revenues of $109.3 million for the quarter ended April 1, 2012 represent a 10% increase from $99.2 million for the quarter ended April 3, 2011. The increase in revenues year-over-year was due to organic growth of 10% and 2% growth from the February 2011 Brazilian energy acquisition, partially offset by a negative foreign currency impact of 2%.

Incoming orders for the first quarter of 2012 were $135.6 million, an increase of 19% year-over-year due to strength in the North American short-cycle business. International project orders, despite being down from the strong first quarter of last year, experienced its strongest quarter since the fourth quarter of 2010. Ending backlog totaled $195.2 million, a decrease of 4% year-over-year.

For the first quarter of 2012, the Energy segment adjusted operating margin of 8.2% was up from 6.4% in the first quarter of 2011, primarily due to the significant volume increase and the associated leverage in the North American short-cycle business as well as improved pricing in large international projects, partially offset by growth investments in Brazil.

Aerospace

Aerospace segment revenues increased by 19% to $38.1 million for the first quarter of 2012 from $32.1 million in the first quarter of 2011. The increase in Aerospace segment revenues is attributable to 20% organic growth, which was slightly offset by a negative foreign currency impact of 1%.

Incoming orders for the first quarter of 2012 were $40.2 million, an increase of 22% year-over-year. Orders increased due to strength in military projects and other programs. Ending backlog totaled $161.1 million, an increase of 19% year-over-year.

The Aerospace segment’s adjusted operating margin was 10.8% for the first quarter of 2012, down from 11.6% for the first quarter of 2011. Adjusted operating margin decreased primarily due to increased large future programs expenses, partially offset by favorable volume and associated leverage.

Flow Technologies

Flow Technologies segment revenues decreased 7% to $66.9 million for the first quarter of 2012 from $72.1 million in the first quarter of 2011. First-quarter 2012 Flow Technologies segment revenues reflected an organic decline of 6% due to lower LED equipment shipments and a negative foreign currency impact of 1%.

Incoming orders for this segment were $72.9 million for the first quarter of 2012, a decrease of 3% year-over-year, driven primarily by the soft LED market. Ending backlog totaled $76 million, a decrease of 6% year-over-year, which was also affected by lower LED equipment and navy orders.

This segment’s adjusted operating margin for the first quarter of 2012 decreased to 11.3%, compared with 13.7% in the first quarter of 2011, due to the decline in the LED equipment market and increased spending on this segment’s growth initiatives in the power generation market.

Financial Outlook

CIRCOR currently expects revenues for the second quarter of 2012 in the range of $219 million to $224 million. Earnings are expected to be in the range of $0.44 to $0.54 per diluted share. CIRCOR’s guidance for earnings per share assumes a 30% tax rate and that exchange rates remain at present levels.

Conference Call Information

CIRCOR International will hold a conference call to review its financial results today, May 3, 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 second-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 STATEMENTS OF INCOME
(in thousands, except per share data)
UNAUDITED
Three Months Ended
April 1, 2012April 3, 2011
Net revenues $ 214,280 $ 203,370
Cost of revenues 155,668 147,142
GROSS PROFIT 58,612 56,228
Selling, general and administrative expenses 44,912 42,455
Leslie asbestos and bankruptcy charges - 1,001
OPERATING INCOME 13,700 12,772
Other expense (income):
Interest income (83 ) (43 )
Interest expense 1,164 816
Other expense, net 138 915
Total other expense 1,219 1,688
INCOME BEFORE INCOME TAXES 12,481 11,084
Provision for income taxes 3,896 3,178
NET INCOME $ 8,585 $ 7,906
Earnings per common share:
Basic $ 0.50 $ 0.46
Diluted $ 0.49 $ 0.45
Weighted average common shares outstanding:
Basic 17,315 17,163
Diluted 17,390 17,378
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
UNAUDITED
Three Months Ended
April 1, 2012April 3, 2011
OPERATING ACTIVITIES
Net income $ 8,585 $ 7,906

Adjustments to reconcile net income to net cash provided
    by (used in) operating activities:

Depreciation 4,008 3,575
Amortization 964 1,418
Compensation expense of share-based plans 1,195 1,136
Tax effect of share based compensation 479 (256 )
Loss on disposal of property, plant and equipment 2 2

Changes in operating assets and liabilities, net of
    effects from business acquisitions:

Trade accounts receivable 3,539 3,734
Inventories (2,179 ) (2,818 )
Prepaid expenses and other assets (5,549 ) (6,657 )
Accounts payable, accrued expenses and other liabilities (14,011 ) (4,822 )
Net cash (used in) provided by operating activities (2,967 ) 3,218
INVESTING ACTIVITIES
Additions to property, plant and equipment (4,122 ) (2,693 )
Proceeds from the disposal of property, plant and equipment 15 12
Proceeds from the sale of investments 0 (1 )
Business acquisitions, net of cash acquired 0 (20,221 )
Net cash used in investing activities (4,107 ) (22,903 )
FINANCING ACTIVITIES
Proceeds from borrowings 41,123 60,748
Payments of borrowings (47,806 ) (34,778 )
Dividends paid (666 ) (663 )
Proceeds from the exercise of stock options 73 213
Tax effect of share based compensation (479 ) 256
Net cash (used in) provided by financing activities (7,755 ) 25,776
Effect of exchange rate changes on cash and cash equivalents 1,265 1,648
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (13,564 ) 7,739
Cash and cash equivalents at beginning of year 54,855 45,752
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,291 $ 53,491
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
UNAUDITED

April 1, 2012

December 31, 2011
ASSETS
Current Assets:
Cash & cash equivalents $ 41,291 $ 54,855
Short-term investments 101 99

Trade accounts receivable, less allowance
    for doubtful accounts of $1,152 and $1,127, respectively

154,930 156,075
Inventories 208,125 203,777
Prepaid expenses and other current assets 17,067 12,376
Deferred income tax asset 16,578 16,320
Assets held for sale 542 542
Total Current Assets 438,634 444,044
Property, Plant and Equipment, net 105,973 104,434
Other Assets:
Goodwill 78,676 77,829
Intangibles, net 58,188 58,442
Deferred income tax asset 28,054 27,949
Other assets 11,008 9,825
Total Assets $ 720,533 $ 722,523
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 87,420 $ 92,493
Accrued expenses and other current liabilities 61,332 63,386
Accrued compensation and benefits 23,457 24,328
Leslie asbestos and bankruptcy related liabilities 1,000 1,000
Income taxes payable 4,310 5,553
Notes payable and current portion of long-term debt 3,159 8,796
Total Current Liabilities 180,678 195,556
Long-Term Debt, net of current portion 95,496 96,327
Deferred income taxes 11,480 11,284
Other Non-Current Liabilities 33,861 35,271
Shareholders' Equity:

Preferred stock, $.01 par value; 1,000,000 shares
   authorized; no shares issued and outstanding

0 0

Common stock, $.01 par value; 29,000,000 shares
   authorized; and 17,392,225 and 17,268,212 issued and
   outstanding, respectively

174 173
Additional paid-in capital 259,538 258,209
Retained earnings 138,296 130,373
Accumulated other comprehensive income (loss) 1,010 (4,670 )
Total Shareholders' Equity 399,018 384,085
Total Liabilities and Shareholders' Equity $ 720,533 $ 722,523
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED
Three Months Ended
April 1, 2012April 3, 2011
ORDERS 1
Energy $ 135.6 $ 113.7
Aerospace 40.2 32.8
Flow Technologies 72.9 75.0
Total orders $ 248.7 $ 221.5
April 1, 2012April 3, 2011
BACKLOG 2
Energy $ 195.2 $ 203.1
Aerospace 161.1 135.3
Flow Technologies 76.0 80.7
Total backlog $ 432.3 $ 419.1
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

20112012
1ST QTR2ND QTR3RD QTR4TH QTRYTD1ST QTR
NET REVENUES
Energy $ 99,170 $ 81,994 $ 103,300 $ 110,228 $ 394,692 $ 109,264
Aerospace 32,110 36,029 32,681 36,017 136,837 38,085
Flow Technologies 72,090 73,885 73,980 70,865 290,820 66,931
Total 203,370 191,908 209,961 217,110 822,349 214,280
* ADJUSTED OPERATING MARGIN
Energy 6.4 % 5.3 % 7.2 % 8.4 % 7.0 % 8.2 %
Aerospace 11.6 % 11.2 % 5.6 % 8.6 % 9.3 % 10.8 %
Flow Technologies 13.7 % 12.4 % 13.6 % 12.9 % 13.1 % 11.3 %
Segment operating margin 9.8 % 9.1 % 9.2 % 9.9 % 9.5 % 9.6 %
Corporate expenses -3.0 % -2.7 % -1.7 % -3.0 % -2.6 % -3.2 %
* Adjusted operating margin 6.8 % 6.5 % 7.5 % 6.9 % 6.9 % 6.4 %
Leslie asbestos and bankruptcy charges (recoveries) 0.5 % -0.1 % -0.1 % 0.0 % 0.1 % 0.0 %
Total operating margin 6.3 % 6.5 % 7.6 % 6.9 % 6.8 % 6.4 %
* ADJUSTED OPERATING INCOME
Energy 6,393 4,373 7,441 9,225 27,432 8,928
Aerospace 3,727 4,021 1,846 3,081 12,675 4,124
Flow Technologies 9,854 9,133 10,037 9,171 38,195 7,587
Segment operating income 19,974 17,527 19,324 21,477 78,302 20,639
Corporate expenses (6,201 ) (5,100 ) (3,585 ) (6,441 ) (21,327 ) (6,939 )
* Adjusted operating income 13,773 12,427 15,739 15,036 56,975 13,700
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
INTEREST EXPENSE, NET (773 ) (1,232 ) (887 ) (1,039 ) (3,930 ) (1,081 )
OTHER EXPENSE, NET (915 ) (560 ) (354 ) (342 ) (2,171 ) (138 )
PRETAX INCOME 11,084 10,758 14,699 13,655 50,196 12,481
PROVISION FOR INCOME TAXES (3,178 ) (3,261 ) (3,752 ) (3,370 ) (13,562 ) (3,896 )
EFFECTIVE TAX RATE 28.7 % 30.3 % 25.5 % 24.7 % 27.0 % 31.2 %
NET INCOME $ 7,906 $ 7,497 $ 10,947 $ 10,285 $ 36,634 $ 8,585
Weighted Average Common Shares Outstanding (Diluted) 17,378 17,434 17,423 17,435 17,417 17,390
EARNINGS PER COMMON SHARE (Diluted) $ 0.45 $ 0.43 $ 0.63 $ 0.59 $ 2.10 $ 0.49
EBIT $ 11,857 $ 11,990 $ 15,586 $ 14,694 $ 54,127 $ 13,562
Depreciation 3,575 3,921 3,770 3,820 15,085 4,008
Amortization of intangibles 1,418 778 1,097 1,058 4,351 964
EBITDA $ 16,850 $ 16,689 $ 20,453 $ 19,572 $ 73,563 $ 18,534
EBITDA AS A PERCENT OF SALES 8.3 % 8.7 % 9.7 % 9.0 % 8.9 % 8.6 %
CAPITAL EXPENDITURES $ 2,693 $ 4,770 $ 3,792 $ 6,647 $ 17,901 $ 4,122
* Adjusted Operating Income & Margin excludes Leslie asbestos and bankruptcy charges.
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED
GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands)
UNAUDITED

2011

2012

1ST QTR2ND QTR3RD QTR4TH QTRYTD1ST QTR
FREE CASH FLOW [NET CASH FLOW FROM OPERATING
ACTIVITIES LESS CAPITAL EXPENDITURES]$525$(77,244)$(5,214)$15,199$(66,734)$(7,089)
ADD:
Capital Expenditures 2,693 4,770 3,792 6,647 17,902 4,122
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 3,218 $ (72,474 ) $ (1,422 ) $ 21,846 $ (48,832 ) $ (2,967 )
NET DEBT (CASH) [TOTAL DEBT LESS CASH & CASH
EQUIVALENTS LESS INVESTMENTS]$(22,554)$56,828$64,145$50,169$50,169$57,263
ADD:
Cash & cash equivalents 53,491 48,302 39,254 54,855 54,855 41,291
Investments 99 107 98 99 99 101
TOTAL DEBT $ 31,036 $ 105,237 $ 103,497 $ 105,123 $ 105,123 $ 98,655
DEBT AS % OF EQUITY8%27%27%27%27%25%
TOTAL DEBT 31,036 105,237 103,497 105,123 105,123 98,655
TOTAL SHAREHOLDERS' EQUITY 374,706 385,833 384,296 384,085 384,085 399,018
EBIT [NET INCOME LESS INCOME TAXES LESS
INTEREST EXPENSE, NET]$11,857$11,990$15,586$14,694$54,127$13,562
LESS:
Interest expense, net (773 ) (1,232 ) (887 ) (1,039 ) (3,930 ) (1,081 )
Provision for income taxes (3,178 ) (3,261 ) (3,752 ) (3,370 ) (13,561 ) (3,896 )
NET INCOME $ 7,906 $ 7,497 $ 10,947 $ 10,285 $ 36,635 $ 8,585
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
LESS:
Interest expense, net (773 ) (1,232 ) (887 ) (1,039 ) (3,931 ) (1,081 )
Depreciation (3,575 ) (3,921 ) (3,770 ) (3,820 ) (15,085 ) (4,008 )
Amortization (1,418 ) (778 ) (1,097 ) (1,058 ) (4,351 ) (964 )
Provision for income taxes (3,178 ) (3,261 ) (3,752 ) (3,370 ) (13,561 ) (3,896 )
NET INCOME $ 7,906 $ 7,497 $ 10,947 $ 10,285 $ 36,635 $ 8,585
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
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
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
LESS:
Leslie asbestos and bankruptcy charges
(recoveries), net of tax impact on EPS 0.04 (0.00 ) (0.01 ) - 0.03 -
EARNINGS PER COMMON SHARE (Diluted) $ 0.45 $ 0.43 $ 0.63 $ 0.59 $ 2.10 $ 0.49

Contacts:

CIRCOR International
Frederic M. Burditt, 781-270-1200
Chief Financial Officer

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