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CIRCOR Reports First-Quarter 2015 Financial Results

CIRCOR International, Inc. (NYSE: CIR), a leading provider of valves and other highly engineered products for markets including oil & gas, power generation and aerospace & defense, today announced financial results for the first quarter ended April 5, 2015.

First-Quarter 2015 Highlights

  • Orders of $182 million with solid bookings for large international projects
  • Q1 revenue of $165.9 million and adjusted EPS of $0.60
  • Repurchased 302,000 shares of common stock for $16.7 million
  • Restructuring actions remain on track; announcing additional restructuring program
  • Announced acquisition of Schroedahl

“Our first-quarter revenues were in line with expectations overall at $166 million with adjusted EPS of $0.60 despite significant headwind from currencies,” said Scott Buckhout, President and Chief Executive Officer. “In our Energy segment, strong orders in our long-cycle large international projects business offset weaker orders in our short-cycle distributed valves business. Aerospace & Defense orders came in as expected. After adjusting for divestitures and currency, organic orders grew 9%.”

On April 16, the Company announced the acquisition of Germany-based Schroedahl, a manufacturer of automatic recirculation safety valves, primarily for the higher-growth power generation market in Asia. This acquisition is expected to be accretive to earnings per share in the first year. Additional details on the transaction will be provided during the conference call later today.

“We remain focused on enhancing shareholder value. During the quarter, we repurchased more than 302,000 shares under our previously announced share repurchase program. Our growth initiatives and restructuring actions remain on track. In addition, we are announcing another restructuring program expected to deliver $5.0 million of annualized savings. Going forward, we will continue to drive cost reduction, expand margins and focus on what we can control as we manage through this cycle,” concluded Buckhout.

Second-Quarter 2015 Guidance
For the second quarter of 2015, the Company will provide its guidance during the conference call later today.

Selected Consolidated Results

(In millions, except percentages and bps)Q1 2015Q1 20142Change
Revenue $165.9 $ 211.2 (21)%
Adjusted Operating Income1$14.6 $ 19.8 (26)%
Adjusted Operating Margin18.8% 9.4%

(60) bps

GAAP Earnings Per Share (Diluted) $0.54 $ 0.82 (34)%
Adjusted Earnings Per Share (Diluted)1$0.60 $ 0.78 (23)%
Free Cash Flow $(18.4) $ 14.4 NM
Orders $182.3 $ 199.9 (9)%

Segment Results

(In millions, except percentages and bps)Q1 2015Q1 20142Change
Energy
Revenue $127.6 $ 162.6 (22)%
Adjusted Operating Margin113.8% 13.8% 0 bps
Orders $143.1 $ 159.5 (10)%
Aerospace & Defense
Revenue $38.3 $ 48.6 (21)%
Adjusted Operating Margin18.0% 9.1% (110) bps
Orders $39.2 $ 40.4 (3)%

1. Consolidated and Segment Results exclude special charges of $1.5 million during Q1 2015 and special recoveries of $1.2 million during Q1 2014.

2. Q1 2014 Amounts have NOT been adjusted for divestitures or foreign currency impacts.

Conference Call Information
CIRCOR International will hold a conference call to review its financial results today, April 28, 2015, at 9:00 a.m. ET. To listen to the conference call and view the accompanying presentation slides, visit “Webcasts & Presentations” in the “Investors” portion of the CIRCOR website. The call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. 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 the performance of the Schroedahl acquisition and the realization of cost reductions from restructuring activities. Actual events, performance or results could differ materially from the anticipated events, performance or results expressed or implied by such forward-looking statements. 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 highly engineered products and sub-systems for markets including oil & gas, power generation and aerospace & defense. CIRCOR has a diversified product portfolio with recognized, market-leading brands that fulfill its customers’ unique application needs. The Company’s strategy is to grow organically and through complementary acquisitions; simplify CIRCOR’s operations; achieve world class operational excellence; and attract and retain top industry talent. 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 5,
2015

March 30,
2014

Net revenues $ 165,860 $ 211,186
Cost of revenues 113,211 146,548
GROSS PROFIT 52,649 64,638
Selling, general and administrative expenses 38,088 44,888
Special charges (recoveries), net 1,511 (1,157 )
OPERATING INCOME 13,050 20,907
Other expense (income):
Interest expense, net 640 918
Other (income), net (506 ) (468 )
TOTAL OTHER EXPENSE, NET 134 450
INCOME BEFORE INCOME TAXES 12,916 20,457
Provision for income taxes 3,284 5,825
NET INCOME $ 9,632 $ 14,632
Earnings per common share:
Basic $ 0.55 $ 0.83
Diluted $ 0.54 $ 0.82
Weighted average number of common shares outstanding:
Basic 17,662 17,620
Diluted 17,712 17,741
Dividends paid per common share $ 0.0375 $ 0.0375
CIRCOR INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

Three Months Ended

April 5,
2015

March 30,
2014

OPERATING ACTIVITIES
Net income $ 9,632 $ 14,632
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation 3,521 4,069
Amortization 710 786
Compensation expense of share-based plans 2,222 1,830
Tax effect of share-based plan compensation (289 ) (571 )
Loss on sale of property, plant and equipment 46 34
(Gain) on sale of business (972 )
Changes in operating assets and liabilities:
Trade accounts receivable, net 7,480 (9,952 )
Inventories (18,697 ) 234
Prepaid expenses and other assets (4,787 ) (859 )
Accounts payable, accrued expenses and other liabilities (15,298 ) 6,854
Net cash (used in) provided by operating activities (16,432 ) 17,057
INVESTING ACTIVITIES
Additions to property, plant and equipment (1,983 ) (2,670 )
Proceeds from the sale of property, plant and equipment 13
Proceeds from the sale of affiliate 2,759
Net cash provided by (used in) investing activities 776 (2,657 )
FINANCING ACTIVITIES
Proceeds from long-term debt 46,903 48,029
Payments of long-term debt (21,540 ) (41,781 )
Dividends paid (672 ) (670 )
Proceeds from the exercise of stock options 38 192
Tax effect of share-based plan compensation 289 571
Purchases of common stock (16,682 )
Net cash provided by financing activities 8,336 6,341
Effect of exchange rate changes on cash and cash equivalents (10,083 ) (824 )
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (17,403 ) 19,917
Cash and cash equivalents at beginning of year 121,286 102,180
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 103,883 $ 122,097
Cash paid during the year for:
Income taxes $ 2,216 $ 2,913
Interest $ 394 $ 472
CIRCOR INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

April 5, 2015

December 31,
2014

ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 103,883 $ 121,286
Short-term investments 80 86
Trade accounts receivable, less allowance for doubtful accounts of $9,122 and $9,536, respectively 140,752 156,738
Inventories 194,624 183,434
Prepaid expenses and other current assets 21,731 21,626
Deferred income tax asset 22,184 22,861
Total Current Assets 483,254 506,031
PROPERTY, PLANT AND EQUIPMENT, NET 90,045 96,212
OTHER ASSETS:
Goodwill 69,832 72,430
Intangibles, net 24,797 26,887
Deferred income tax asset 17,206 19,048
Other assets 3,557 4,114
TOTAL ASSETS $ 688,691 $ 724,722
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 77,893 $ 87,112
Accrued expenses and other current liabilities 53,443 65,223
Accrued compensation and benefits 18,166 24,728
Notes payable and current portion of long-term debt 8,481 8,423
Total Current Liabilities 157,983 185,486
LONG-TERM DEBT, NET OF CURRENT PORTION 29,065 5,261
DEFERRED INCOME TAXES 7,107 7,771
OTHER NON-CURRENT LIABILITIES 31,433 32,111
SHAREHOLDERS’ EQUITY:
Common stock 177 177
Additional paid-in capital 279,405 277,227
Retained earnings 259,599 250,635
Treasury stock (16,682 )
Accumulated other comprehensive loss, net of taxes (59,396 ) (33,946 )

Total Shareholders’ Equity

463,103 494,093
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 688,691 $ 724,722
CIRCOR INTERNATIONAL, INC.

SUMMARY OF ORDERS AND BACKLOG

(in millions)

UNAUDITED

Three Months Ended

April 5,
2015

March 30,
2014

ORDERS (1)(5)
Energy $ 143.1 $ 147.3
Aerospace & Defense 39.2 37.2
Total orders $ 182.3 $ 184.5
BACKLOG (2)(5)

April 5,
2015

March 30,
2014
Energy (3) $ 247.6 $ 265.5
Aerospace & Defense (4) 104.1 163.1
Total backlog $ 351.8 $ 428.6
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 unshipped customer orders.
Note 3: Energy backlog was reduced during the fourth quarter of 2014 by $5.5 million related to customer order cancellations initially recorded in prior years.
Note 4: Aerospace & Defense reduced backlog in the second quarter of 2014 by $28.6 million associated with the exit of certain landing gear product lines.
Note 5: Three months ended March 30, 2014 orders and backlog amounts exclude business divestitures in both the Energy and Aerospace & Defense segments.
CIRCOR INTERNATIONAL, INC.

SUMMARY REPORT BY SEGMENT

(in thousands, except percentages)

UNAUDITED

20142015
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR
NET REVENUES
Energy $ 162,587 $ 160,580 $ 157,658 $ 172,432 $ 653,257 $ 127,586
Aerospace & Defense 48,599 47,304 46,160 46,126 188,189 38,274
Total $ 211,186 $ 207,884 $ 203,818 $ 218,558 $ 841,446 $ 165,860
ADJUSTED OPERATING MARGIN
Energy 13.8 % 14.6 % 16.9 % 14.3 % 14.9 % 13.8 %
Aerospace & Defense 9.1 % 7.1 % 5.0 % 5.3 % 6.6 % 8.0 %
Segment operating margin 12.7 % 12.9 % 14.2 % 12.4 % 13.0 % 12.4 %
Corporate expenses (3.4 )% (2.2 )% (2.8 )% (2.7 )% (2.8 )% (3.6 )%
Adjusted operating margin 9.4 % 10.7 % 11.4 % 9.6 % 10.2 % 8.8 %
Restructuring inventory charges % 2.5 % 1.4 % % 0.9 % %
Impairment charges % % % 0.3 % 0.1 % %
Special restructuring charges 0.4 % 0.6 % 0.2 % 1.2 % 0.6 % 0.9 %
Special other charges, net of recoveries (0.9 )% % % 4.3 % 0.9 % %
Total GAAP operating margin 9.9 % 7.6 % 9.7 % 3.7 % 7.7 % 7.9 %
20142015
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR
ADJUSTED OPERATING INCOME
Energy $ 22,462 $ 23,502 $ 26,577 $ 24,575 $ 97,117 $ 17,550
Aerospace & Defense 4,426 3,362 2,295 2,425 12,508 3,045
Segment operating income 26,888 26,864 28,872 27,000 109,625 20,595
Corporate expenses (7,137 ) (4,634 ) (5,678 ) (5,965 ) (23,415 ) (6,034 )
Adjusted operating income 19,750 22,231 23,194 21,035 86,210 14,561
Restructuring inventory charges 5,139 2,850 7,989
Impairment charges 726 726
Special restructuring charges 786 1,257 478 2,725 5,246 1,512
Special other charges, net of recoveries (1,943 ) 9,434 7,491 (1 )
Total GAAP operating income 20,907 15,835 19,866 8,150 64,757 13,050
INTEREST EXPENSE, NET (918 ) (891 ) (436 ) (407 ) (2,652 ) (640 )
OTHER INCOME (EXPENSE), NET 468 384 (419 ) 722 1,156 506
PRETAX INCOME 20,457 15,328 19,012 8,465 63,261 12,916
(PROVISION FOR) BENEFIT FROM INCOME TAXES (5,825 ) (3,402 ) (4,337 ) 690 (12,875 ) (3,284 )
EFFECTIVE TAX RATE28.5%22.2%22.8%(8.2)%20.4%25.4%
NET INCOME $ 14,632 $ 11,926 $ 14,675 $ 9,155 $ 50,386 $ 9,632
Weighted Average Common Shares Outstanding (Diluted) 17,741 17,767 17,779 17,782 17,768 17,712
EARNINGS PER COMMON SHARE (Diluted) $ 0.82 $ 0.67 $ 0.83 $ 0.51 $ 2.84 $ 0.54
ADJUSTED EBITDA $ 25,073 $ 27,536 $ 27,530 $ 26,789 $ 106,927 $ 19,298
ADJUSTED EBITDA AS A % OF SALES 11.9 % 13.2 % 13.5 % 12.3 % 12.7 % 11.6 %
CAPITAL EXPENDITURES $ 2,670 $ 2,933 $ 3,297 $ 3,910 $ 12,810 $ 1,983
CIRCOR INTERNATIONAL, INC.

RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS

(in thousands, except percentages)

UNAUDITED

20142015
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR
FREE CASH FLOW AS % OF NET INCOME98%62%96%243%115%(191)%
FREE CASH FLOW$14,387$7,365$14,015$22,249$58,016$(18,415)
ADD:
Capital Expenditures 2,670 2,933 3,297 3,910 12,810 1,983
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 17,057 $ 10,298 $ 17,312 $ 26,159 $ 70,826 $ (16,432 )
NET DEBT (CASH)$(66,056)$(72,982)$(80,829)$(107,688)$(107,688)$(66,417)
ADD:
Cash & Cash Equivalents 122,097 116,326 114,580 121,286 121,286 103,883
Investments 92 95 91 86 86 80
TOTAL DEBT $ 56,133 $ 43,439 $ 33,842 $ 13,684 $ 13,684 $ 37,546
DEBT AS % OF EQUITY11%9%7%3%3%8%
TOTAL DEBT 56,133 43,439 33,842 13,684 13,684 37,546
TOTAL SHAREHOLDERS' EQUITY $ 492,601 $ 507,363 $ 508,035 $ 494,093 $ 494,093 $ 463,103
20142015
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR
ADJUSTED OPERATING INCOME$19,750$22,230$23,194$21,035$86,210$14,561
LESS:
Inventory restructuring charges 5,139 2,850 7,989
Impairment charges 726 726
Special restructuring charges 786 1,257 478 2,725 5,246 1,512
Special other charges, net of recoveries (1,943 ) 9,434 7,491 (1 )
OPERATING INCOME $ 20,907 $ 15,834 $ 19,866 $ 8,150 $ 64,757 $ 13,050
ADJUSTED NET INCOME$13,916$16,090$16,827$19,188$66,019$10,564
LESS:
Inventory restructuring charges, net of tax 3,316 1,839 5,155
Impairment charges, net of tax 726 726
Special restructuring charges, net of tax 508 848 313 1,763 3,432 1,079
Special other charges, net of recoveries, net of tax (1,224 ) 7,544 6,320 (147 )
NET INCOME $ 14,632 $ 11,926 $ 14,675 $ 9,155 $ 50,386 $ 9,632
ADJUSTED EARNINGS PER SHARE (Diluted)$0.78$0.91$0.95$1.08$3.72$0.60
LESS:
Inventory restructuring charges, net of tax 0.19 0.10 0.29
Impairment charges, net of tax 0.04 0.04
Special restructuring charges, net of tax 0.03 0.05 0.02 0.10 0.20 0.06

Special other charges, net of recoveries, net of tax

(0.07 ) 0.42 0.35
EARNINGS PER COMMON SHARE (Diluted) $ 0.82 $ 0.67 $ 0.83 $ 0.51 $ 2.84 $ 0.54
20142015
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR
EBITDA$26,230$21,140$24,202$13,904$85,475$17,787
LESS:
Interest expense, net (918 ) (891 ) (436 ) (407 ) (2,652 ) (640 )
Depreciation (4,069 ) (4,116 ) (3,978 ) (4,283 ) (16,446 ) (3,521 )
Amortization (786 ) (805 ) (776 ) (749 ) (3,116 ) (710 )
(Provision for) benefit from income taxes (5,825 ) (3,402 ) (4,337 ) 690 (12,875 ) (3,284 )
NET INCOME $ 14,632 $ 11,926 $ 14,675 $ 9,155 $ 50,386 $ 9,632
ADJUSTED EBITDA$25,073$27,536$27,530$26,789$106,927$19,298
LESS:
Inventory restructuring charges (5,139 ) (2,850 ) (7,989 )
Impairment charges (726 ) (726 )
Special restructuring charges (786 ) (1,257 ) (478 ) (2,725 ) (5,246 ) (1,512 )
Special other charges, net of recoveries 1,943 (9,434 ) (7,491 ) 1
Interest expense, net (918 ) (891 ) (436 ) (407 ) (2,652 ) (640 )
Depreciation (4,069 ) (4,116 ) (3,978 ) (4,283 ) (16,446 ) (3,521 )
Amortization (786 ) (805 ) (776 ) (749 ) (3,116 ) (710 )
(Provision for) benefit from income taxes (5,825 ) (3,402 ) (4,337 ) 690 (12,875 ) (3,284 )
NET INCOME $ 14,632 $ 11,926 $ 14,675 $ 9,155 $ 50,386 $ 9,632
CIRCOR INTERNATIONAL, INC.

RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS

(in thousands, except per share data)

UNAUDITED

2014
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL
NET REVENUES EXCLUDING DIVESTITURES$198,204$194,349$189,705$207,970$790,228
ADD:
Energy divestiture 10,554 10,037 10,667 8,465 39,723
Aerospace & Defense divestiture 2,428 3,498 3,446 2,123 11,495
NET REVENUES $ 211,186 $ 207,884 $ 203,818 $ 218,558 $ 841,446
ADJUSTED EARNINGS PER SHARE EXCLUDING DIVESTITURES (Diluted)0.790.880.891.053.61
ADD:
Divestitures (0.01 ) 0.03 0.06 0.03 0.11
ADJUSTED EARNINGS PER SHARE (Diluted) $ 0.78 $ 0.91 $ 0.95 $ 1.08 $ 3.72

Contacts:

CIRCOR International
Rajeev Bhalla, 781-270-1200
Executive Vice President & Chief Financial Officer

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