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CIRCOR Reports First-Quarter Results

CIRCOR International, Inc. (NYSE: CIR), a provider of valves and other highly engineered products and subsystems that control the flow of fluids safely and efficiently in the aerospace, energy and industrial markets, today announced financial results for the first quarter ended March 29, 2009.

Comments on the First Quarter

“CIRCOR continued to execute well in a difficult market environment in the first quarter of 2009 as we reported revenue and EPS in line with our guidance,” said Chairman and CEO Bill Higgins. “Our adjusted operating income margin¸ which is operating margin before special and asbestos charges, grew 80 basis points year-over-year to 12.5% on lower revenue. This underscores the success of our continuous efforts to improve our operations through Lean manufacturing, global sourcing and aggressive cost controls.”

“As we expected, our Energy segment experienced a significant decrease in demand, commensurate with the decline in North American rig activity,” continued Higgins. “On a positive note, Energy bookings declined by only 5% sequentially and quoting activity in the Middle East has continued at a strong level. Our Instrumentation and Thermal Fluids Controls segment reported year-over-year and sequentially lower revenue as expected due to weakness in many of our flow technologies end-markets. However, we did see a sequential and year-over-year improvement in our Aerospace group.”

Consolidated Results

Revenues for the first quarter of 2009 were $175.6 million, essentially flat with the $176.6 million generated in the first quarter of 2008. Net income for the first quarter of 2009 decreased 18.9% to $10.5 million, or $0.61 per diluted share, compared with $12.9 million, or $0.76 per diluted share, for the first quarter of 2008.

First-quarter 2009 net income includes $8.3 million of pre-tax asbestos charges related to the Company’s Leslie Controls subsidiary. This amount is higher than the $1.1 million asbestos charges reported in the first quarter of 2008 primarily due to increased indemnity costs of $3.3 million, an insurance adjustment of $2.1 million, lower insurance recoveries and higher defense costs.

First-quarter 2009 net income of $10.5 million includes a pre-tax gain of $1.1 million related to proceeds from the sale of land use rights, recorded as special charges. On an adjusted basis, net income, excluding the after-tax impact of the gain, for the first quarter of 2009 would have been $9.7 million, or $0.57 per diluted share. Adjusted net income for the first quarter of 2008, excluding special charges, was $13.0 million, or $0.77 per diluted share.

The Company received orders totaling $121.9 million during the first quarter 2009, a decrease of 49% compared with the first quarter of 2008 and a 15% sequential decrease compared with the fourth quarter of 2008. The decline in orders reflects ongoing weak market conditions as a result of the worldwide economic slowdown. Backlog as of March 29, 2009 was $298.1 million, down 34% from record backlog of $452.0 million at March 30, 2008 and down sequentially by 13% from December 31, 2008.

During the first quarter of 2009, the Company used $7.9 million of free cash flow (defined as net cash from operating activities, less capital expenditures and dividends paid) primarily due to a reduction in accounts payable and accrued expenses, partially offset by a reduction in accounts receivable and inventory.

Instrumentation and Thermal Fluid Controls Products

CIRCOR’s Instrumentation and Thermal Fluid Controls Products segment revenues decreased 2% to $86.3 million from $88.4 million in the first quarter of 2008. Organic growth of 2% and growth from acquisitions of 3% were more than offset by adverse foreign currency adjustments of 7%, primarily as a result of the U.S. dollar appreciating against the Euro during the quarter. Incoming orders for this segment were $76.1 million for the first quarter of 2009, a decrease of 32% from $111.2 million in the first quarter of 2008, which included several unusually large maritime orders as well as strong aerospace orders. Sequentially, this segment’s orders declined 20% and ending backlog remained flat at $170.9 million.

This segment’s adjusted operating margin, which excludes the impact of special and asbestos charges, for the first quarter of 2009 was 12.9% compared with 12.5% in the first quarter of 2008, and 11.2% in the fourth quarter of 2008. The year-over-year improvement was primarily due to price, favorable mix, productivity enhancements and a decrease in material costs.

Energy Products

CIRCOR’s Energy Products segment revenues increased by $1.2 million, or 1%, to $89.3 million for the quarter ended March 29, 2009 compared with $88.1 million in the quarter ended March 30, 2008. Organic revenue growth of 10% was substantially offset by adverse foreign currency adjustments of 9%.

Incoming orders for the first quarter of 2009 were $45.8 million, a decrease of 64% from $125.9 million in the first quarter of 2008 and 5% sequentially. The first quarter of 2008 reflected unusually high project orders. Ending backlog totaled $127.3 million, a 57% decrease compared with $292.6 million at the end of the first quarter of 2008, and a 26% decrease sequentially.

The Energy Products segment adjusted operating margin was 18.1% during the first quarter of 2009 compared with 16.2% for the first quarter of 2008 and 20.1% for the fourth quarter of 2008. The year-over-year improvement was due to growth in large international projects and fabricated systems in North America. The sequential decrease was the result of unfavorable product mix and lower short-cycle volume.

Business and Financial Outlook

“Many of the end-markets that we serve declined sharply this year,” said Higgins. “While we have limited visibility into the rest of the year, we expect that our end-markets will continue to be affected by the global recession. We continue to believe that our strong balance sheet, excellent team and diverse business portfolio will enable us to weather this storm. Furthermore, our proven success at enhancing margins, reducing lead times, and improving on-time customer delivery should provide us with a significant competitive advantage for the long term.”

CIRCOR is providing its outlook for the second quarter of 2009. The Company currently expects revenues for the second quarter of 2009 in the range of $164 million to $171 million and earnings, excluding special charges, to be in the range of $0.34 to $0.42 per diluted share.

Conference Call Information

CIRCOR International will hold a conference call to review its financial results Thursday, April 30, 2009, at 9:00 a.m. ET. Those who wish to listen to the conference call should visit http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=109457&eventID=2161774. 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 on the Company’s website.

The presentation slides that will be discussed in the conference call are expected to be available today, Wednesday, April 29, 2009, at approximately 6:00 pm ET and may be downloaded from the quarterly earnings page of the investor section on the CIRCOR website at http://www.circor.com/quarterlyearnings.

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, 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. provides valves and other highly engineered products and subsystems that control the flow of fluids safely and efficiently in the aerospace, energy and industrial markets. With more than 9,000 customers in over 100 countries, CIRCOR has a diversified product portfolio with recognized, market-leading brands. CIRCOR’s strategy includes growing organically by investing in new, differentiated products; adding value to component products; and increasing the development of mission-critical subsystems. The Company also plans to leverage its strong balance sheet to acquire complementary businesses.

CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
UNAUDITED
Three Months Ended
March 29, 2009March 30, 2008
Net revenues $ 175,647 $ 176,575
Cost of revenues 119,628 121,686
GROSS PROFIT 56,019 54,889
Selling, general and administrative expenses 34,099 34,145
Asbestos charges 8,263 1,075
Special charges (1,135 ) 160
OPERATING INCOME 14,792 19,509
Other (income) expense:
Interest income (146 ) (202 )
Interest expense 178 347
Other (income) expense, net (183 ) 401
Total other expense (151 ) 546
INCOME BEFORE INCOME TAXES 14,943 18,963
Provision for income taxes 4,483 6,068
NET INCOME $ 10,460 $ 12,895
Earnings per common share:
Basic $ 0.62 $ 0.77
Diluted $ 0.61 $ 0.76
Weighted average common shares outstanding:
Basic 16,916 16,679
Diluted 17,014 16,872
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
UNAUDITED
Three Months Ended
March 29, 2009March 30, 2008
OPERATING ACTIVITIES
Net income $ 10,460 $ 12,895

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 2,839 2,874
Amortization 622 656
Compensation expense of stock-based plans 808 1,503
Tax effect of share based compensation 290 (1,171 )
Gain on disposal of property, plant and equipment (21 ) (83 )

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

Trade accounts receivable 7,151 (6,858 )
Inventories 8,998 (5,090 )
Prepaid expenses and other assets 3,538 (3,477 )
Accounts payable, accrued expenses and other liabilities (39,380 ) (3,138 )
Net cash used in operating activities (4,695 ) (1,889 )
INVESTING ACTIVITIES
Additions to property, plant and equipment (2,576 ) (2,851 )
Proceeds from disposal of property, plant and equipment 31 94
Purchase of ST investments (85,739 ) -
Proceeds from sale of ST investments 82,569 5,451
Business acquisitions, net of cash acquired (6,666 ) -
Net cash (used in) provided by investing activities (12,381 ) 2,694
FINANCING ACTIVITIES
Proceeds from debt borrowings 35,352 16,500
Payments of debt (28,324 ) (13,606 )
Dividends paid (657 ) (626 )
Proceeds from the exercise of stock options - 2,115
Tax effect of share based compensation (290 ) 1,171
Net cash provided by financing activities 6,081 5,554
Effect of exchange rate changes on cash and cash equivalents (365 ) 1,669

(DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS

(11,360 ) 8,028
Cash and cash equivalents at beginning of year 47,473 34,662
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,113 $ 42,690
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
UNAUDITED
March 29, 2009December 31, 2008
ASSETS
Current Assets:
Cash & cash equivalents $ 36,113 $ 47,473
Short-term investments 36,991 34,872

Trade accounts receivable, less allowance
 for doubtful accounts of $1,875 and $1,968, respectively

131,449 134,731
Inventories 177,539 183,291
Prepaid expenses and other current assets 7,470 3,825
Deferred income taxes 13,109 12,396
Insurance receivable 7,655 6,081
Assets held for sale 726 1,015
Total Current Assets 411,052 423,684
Property, Plant and Equipment, net 85,865 82,843
Other Assets:
Goodwill 34,697 32,092
Intangibles, net 42,742 42,123
Non-current insurance receivable 1,432 4,684
Other assets 2,153 2,597
Total Assets $ 577,941 $ 588,023
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 70,899 $ 94,421
Accrued expenses and other current liabilities 55,452 69,948
Accrued compensation and benefits 20,348 22,604
Asbestos liability 13,297 9,310
Income taxes payable 13,944 9,873
Notes payable and current portion of long-term debt 354 622
Total Current Liabilities 174,294 206,778
Long-Term Debt, net of current portion 23,231 12,528
Deferred Income Taxes 4,024 3,496
Long-Term Asbestos Liability 11,695 9,935
Other Non-Current Liabilities 22,837 21,664
Shareholders' Equity:

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

- -

Common stock, $.01 par value; 29,000,000 shares
 authorized; and 16,962,965 and 16,898,497 issued and
 outstanding, respectively

170 169
Additional paid-in capital 247,465 247,196
Retained earnings 92,951 83,106
Accumulated other comprehensive income 1,274 3,151
Total Shareholders' Equity 341,860 333,622
Total Liabilities and Shareholders' Equity $ 577,941 $ 588,023
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in thousands)
UNAUDITED
Three Months Ended
March 29, 2009March 30, 2008
ORDERS

Instrumentation & Thermal Fluid Controls

$ 76,055 $ 111,166
Energy Products 45,820 125,860
Total orders $ 121,875 $ 237,026
March 29, 2009March 30, 2008
BACKLOG

Instrumentation & Thermal Fluid Controls

$ 170,860 $ 159,468
Energy Products 127,283 292,575
Total backlog $ 298,143 $ 452,043
Note: Backlog includes all unshipped customer orders.
CIRCOR INTERNATIONAL, INC.
SUMMARY REPORT BY SEGMENT
(in thousands, except earnings per share)
UNAUDITED
20082009
1ST QTR2ND QTR3RD QTR4TH QTRYTD1ST QTR
NET REVENUES
Instrumentation & Thermal Fluid Controls (TFC) $ 88,450 $ 98,867 $ 96,298 $ 94,499 $ 378,114 $ 86,340
Energy Products 88,125 107,738 112,382 107,457 415,702 89,307
Total 176,575 206,605 208,680 201,956 793,816 175,647
ADJUSTED OPERATING MARGIN
Instrumentation & TFC (excl. special & asbestos charges) 12.5 % 12.6 % 12.3 % 11.2 % 12.1 % 12.9 %
Energy Products (excl. special charges) 16.2 % 20.4 % 23.2 % 20.1 % 20.2 % 18.1 %
Segment operating income (excl. special & asbestos charges) 14.4 % 16.6 % 18.1 % 15.9 % 16.3 % 15.5 %
Corporate expenses (excl. special & asbestos charges) -2.6 % -2.4 % -2.4 % -3.0 % -2.6 % -3.1 %
Adjusted Operating Income 11.7 % 14.3 % 15.7 % 12.9 % 13.7 % 12.5 %
Asbestos charges (attributable to Instrumentation & TFC) -0.6 % -1.0 % -1.8 % -0.7 % -1.0 % -4.7 %
Special charges -0.1 % 0.0 % 0.0 % -70.0 % -17.8 % 0.6 %
Total operating margin 11.0 % 13.3 % 13.9 % -57.8 % -5.1 % 8.4 %
ADJUSTED OPERATING INCOME
Instrumentation & TFC (excl. special & asbestos charges) 11,069 12,451 11,803 10,558 45,881 11,116
Energy Products (excl. special charges) 14,303 21,938 26,023 21,556 83,820 16,169
Segment operating income (excl. special & asbestos charges) 25,372 34,389 37,826 32,114 129,701 27,285
Corporate expenses (excl. special & asbestos charges) (4,628 ) (4,890 ) (5,001 ) (6,042 ) (20,561 ) (5,365 )
Adjusted Operating Income 20,744 29,499 32,825 26,072 109,140 21,920
Asbestos charges (attributable to Instrumentation & TFC) (1,075 ) (2,009 ) (3,810 ) (1,417 ) (8,311 ) (8,263 )
Special charges (160 ) - - (141,297 ) (141,457 ) 1,135
Total operating income 19,509 27,490 29,015 (116,642 ) (40,628 ) 14,792
INTEREST (EXPENSE) INCOME, NET (145 ) 23 182 120 180 (32 )
OTHER (EXPENSE) INCOME, NET (401 ) (248 ) (11 ) 390 (270 ) 183
PRETAX INCOME 18,963 27,265 29,186 (116,132 ) (40,718 ) 14,943
PROVISION FOR INCOME TAXES (6,068 ) (8,840 ) (9,413 ) 6,024 (18,297 ) (4,483 )
EFFECTIVE TAX RATE 32.0 % 32.4 % 32.3 % 5.2 % -44.9 % 30.0 %
NET INCOME $ 12,895 $ 18,425 $ 19,773 $ (110,108 ) $ (59,015 ) $ 10,460
Weighted Average Common Shares Outstanding (Diluted) 16,872 17,053 17,068 16,897 16,817 17,014
EARNINGS PER COMMON SHARE (Diluted) $ 0.76 $ 1.08 $ 1.16 $ (6.52 ) $ (3.51 ) $ 0.61
EBIT $ 19,108 $ 27,242 $ 29,004 $ (116,252 ) $ (40,898 ) $ 14,975
Depreciation 2,874 2,977 3,001 2,696 11,548 2,839
Amortization of intangibles 656 676 680 613 2,625 622
EBITDA $ 22,638 $ 30,895 $ 32,685 $ (112,943 ) $ (26,725 ) $ 18,436
EBITDA AS A PERCENT OF SALES 12.8 % 15.0 % 15.7 % -55.9 % -3.4 % 10.5 %
CAPITAL EXPENDITURES $ 2,851 $ 3,433 $ 3,878 $ 4,810 $ 14,972 $ 2,576
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED
GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands)
UNAUDITED
20082009
1ST QTR2ND QTR3RD QTR4TH QTRYTD1ST QTR

FREE CASH FLOW [NET CASH FLOW FROM OPERATING ACTIVITIES
 LESS CAPITAL EXPENDITURES LESS DIVIDENDS PAID]

$(5,366)$31,536$(2,062)$23,216$47,324$(7,928)
ADD: Capital expenditures 2,851 3,433 3,878 4,810 14,972 2,576
Dividends paid 626 631 631 634 2,522 657
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (1,889 ) $ 35,600 $ 2,447 $ 28,660 $ 64,818 $ (4,695 )

NET (CASH) DEBT [TOTAL DEBT LESS CASH & CASH EQUIVALENTS
 LESS INVESTMENTS]

$(21,709)$(46,796)$(42,029)$(69,195)$(69,195)$(49,519)
ADD: Cash & cash equivalents 42,690 38,835 35,177 47,473 47,473 36,113
Investments 4,036 31,590 29,376 34,872 34,872 36,991
TOTAL DEBT $ 25,017 $ 23,629 $ 22,524 $ 13,150 $ 13,150 $ 23,585
DEBT AS % OF EQUITY6%5%5%4%4%7%
TOTAL DEBT 25,017 23,629 22,524 13,150 13,150 23,585
TOTAL SHAREHOLDERS' EQUITY 446,379 465,958 470,888 333,622 333,622 341,860
EBIT [NET INCOME LESS INTEREST EXPENSE, NET]$19,108$27,242$29,004$(116,252)$(40,898)$14,975
LESS: Interest expense, net (145 ) 23 182 120 180 (32 )
Provision for income taxes (6,068 ) (8,840 ) (9,413 ) 6,024 (18,297 ) (4,483 )
NET INCOME $ 12,895 $ 18,425 $ 19,773 $ (110,108 ) $ (59,015 ) $ 10,460

EBITDA [NET INCOME LESS INTEREST EXPENSE, NET
 LESS DEPRECIATION LESS AMORTIZATION LESS TAXES]

$22,638$30,895$32,685$(112,943)$(26,725)$18,436
LESS:
Interest expense, net (145 ) 23 182 120 180 (32 )
Depreciation (2,874 ) (2,977 ) (3,001 ) (2,696 ) (11,548 ) (2,839 )
Amortization (656 ) (676 ) (680 ) (613 ) (2,625 ) (622 )
Provision for income taxes (6,068 ) (8,840 ) (9,413 ) 6,024 (18,297 ) (4,483 )
NET INCOME $ 12,895 $ 18,425 $ 19,773 $ (110,108 ) $ (59,015 ) $ 10,460
ADJUSTED INCOME, EXCLUDING SPECIAL CHARGES, NET OF TAX
$13,004$18,425$19,773$19,026$70,228$9,666
LESS: Special charges, net of tax (109 ) - - (129,134 ) (129,243 ) 794
NET INCOME $ 12,895 $ 18,425 $ 19,773 $ (110,108 ) $ (59,015 ) $ 10,460
ADJUSTED WEIGHTED AVERAGE SHARES
16,87217,05317,06817,01017,00517,014
Adjustment for anti-dilutive conversion of shares - - - 113 188 -
Weighted average common shares outstanding (diluted) 16,872 17,053 17,068 16,897 16,817 17,014
ADJUSTED EARNINGS PER SHARE EXCLUDING SPECIAL CHARGES, NET OF TAX
$0.77$1.08$1.16$1.12$4.13$0.57
LESS:

Special charges, net of tax impact on EPS

$ (0.01 ) $ - $ - $ (7.64 ) $ (7.64 ) $ 0.05
EARNINGS PER COMMON SHARE (Diluted) $ 0.76 $ 1.08 $ 1.16 $ (6.52 ) $ (3.51 ) $ 0.61

Contacts:

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

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