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 second quarter ended June 29,
2014.
Second-Quarter 2014 Highlights
- Adjusted operating margin expanded 70
basis points to 10.7%
- Adjusted EPS grew 12% to $0.91
- Year-to-date free cash flow was $21.8
million, 82% of net income
- Orders up 2%
- Growth and restructuring initiatives
remain on track
“CIRCOR continued to demonstrate strong bottom-line improvement
during the second quarter,” said Scott Buckhout, CIRCOR President
and Chief Executive Officer. “We achieved a 70 basis point increase
in adjusted operating margin to 10.7% largely driven by
restructuring and cost control initiatives.”
“Similar to the first quarter, second-quarter quoting activity
remained strong in upstream oil and gas, as well as in power
generation; however, actual bookings continue to be slow. In our
Aerospace & Defense business, bookings were up over the prior
year.”
“Our ability to meet our bottom-line expectations is a result of
our focus on expanding margins through operational excellence and
the CIRCOR simplification program. We expect that our margin
expansion initiatives will gain further traction throughout the
year.”
“We continue to make investments in transforming CIRCOR into a
growth company. We are increasing our sales and engineering
capacity in key international growth markets while we focus more
resources on developing innovative new products,” concluded
Buckhout.
Third-Quarter 2014 Guidance
For the third quarter of 2014, the Company expects:
- Revenues in the range of $200 million
to $215 million;
- Adjusted earnings per share, excluding
restructuring and special charges, in the range of $0.87 to $0.94;
and,
- Restructuring and special related
charges of approximately $1.6 million to $2.0 million.
Selected Consolidated Results
(In millions, except percents and bps) Q2
2014 Q2 2013 Change Revenue
$ 207.9
$ 223.6 -7% Adjusted Operating Income1
$ 22.2 $ 22.3
-1% Adjusted Operating Margin1
10.7% 10.0% 70 bps GAAP
Earnings Per Share (Diluted)
$ 0.67 $ 0.72 -7%
Adjusted Earnings Per Share (Diluted)
1
$ 0.91 $ 0.81 12% Orders
$ 203.7 $
200.1 2% Backlog2
$ 413.1 $ 433.5 -5% Free Cash Flow
$ 7.4 $ 9.5 -22%
Segment Results
(In millions, except percents and bps) Q2
2014 Q2 2013 Change Energy Revenue
$ 160.6 $ 173.6 -7% Adjusted Operating Margin1
14.6% 13.3% 130 bps Orders
$ 160.3 $ 163.8 -2%
Backlog
$ 279.5 $ 263.6 6%
Aerospace &
Defense Revenue
$ 47.3 $ 50.1 -6% Adjusted
Operating Margin1
7.1% 11.4% -430 bps Orders
$
43.4 $ 36.3 20% Backlog2
$ 133.5 $ 169.9 -21%
1. Consolidated and Segment Results exclude special and
restructuring charges, $1.3 million and $2.3 million related to
restructuring actions during Q2 2014 and Q2 2013, respectively, as
well as $5.1 million in inventory charges related to the exit of
certain landing gear product lines recorded during Q2 2014. Refer
to reconciliation to commonly used US GAAP terms.2. Consolidated
and Aerospace & Defense Segment Backlog reflects a Q2 2014
reduction of $28.6 million associated with the exit of certain
landing gear product lines.
Conference Call Information
CIRCOR International will hold a conference call to review its
financial results today, August 1, 2014, at 10:00 a.m. ET. To
listen to the conference call and view the accompanying
presentation slides, visit “Webcasts & Presentations” in the
“Investors” section of the CIRCOR website. The live 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 income, 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
and estimated total annualized pre-tax savings from restructuring
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
highly engineered products and sub-systems for markets including
oil & gas, power generation and aerospace & defense. With
more than 7,000 customers in over 100 countries, 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
website at http://investors.circor.com.
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF
INCOME
(in thousands, except share
data)
UNAUDITED
Three Months Ended Six Months
Ended June 29, 2014 June 30, 2013 June
29, 2014 June 30, 2013 Net revenues $ 207,884 $
223,644 $ 419,070 $ 429,042 Cost of revenues 148,184 153,538
294,731 299,086 GROSS PROFIT 59,700 70,106 124,339
129,956 Selling, general and administrative expenses 42,609 47,596
87,498 93,168 Special charges, net 1,257 2,254 100
3,632 OPERATING INCOME 15,834 20,256 36,741
33,156 Other (income) expense: Interest expense, net 891 838
1,809 1,625 Other (income) expense, net (384 ) 626 (853 )
1,239 TOTAL OTHER EXPENSE, NET 507 1,464 956
2,864 INCOME BEFORE INCOME TAXES 15,328 18,792 35,785 30,292
Provision for income taxes 3,402 6,124 9,227
9,715 NET INCOME $ 11,926 $ 12,667 $ 26,558 $
20,577 Earnings per common share: Basic $ 0.68 $ 0.72 $ 1.51 $ 1.17
Diluted $ 0.67 $ 0.72 $ 1.50 $ 1.17 Weighted average number of
common shares outstanding: Basic 17,665 17,565 17,643 17,539
Diluted 17,767 17,607 17,754 17,569 Dividends paid per common share
$ 0.0375 $ 0.0375 $ 0.0750 $ 0.0750
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
(UNAUDITED)
Six Months Ended June 29, 2014
June 30, 2013 OPERATING ACTIVITIES Net income
$ 26,558 $ 20,577 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation 8,185 8,035
Amortization 1,591 1,509 Compensation expense of share-based plans
4,020 2,156 Tax effect of share-based plan compensation (971 ) (422
) (Gain) on disposal of property, plant and equipment (54 ) (129 )
Changes in operating assets and liabilities: Trade accounts
receivable, net (23,705 ) (9,406 ) Inventories, net 3,600 (4,059 )
Prepaid expenses and other assets 143 (2,412 ) Accounts payable,
accrued expenses and other liabilities 7,988 3,583
Net cash provided by operating activities 27,355 19,432
INVESTING ACTIVITIES Additions to property, plant and
equipment (5,603 ) (8,808 ) Proceeds from the sale of property,
plant and equipment 32 314 Net cash used in investing
activities (5,571 ) (8,494 )
FINANCING ACTIVITIES Proceeds
from long-term debt 81,910 74,255 Payments of long-term debt
(88,776 ) (84,679 ) Dividends paid (1,341 ) (1,340 ) Proceeds from
the exercise of stock options 237 1,498 Tax effect of share-based
compensation 971 422 Net cash used in financing
activities (6,999 ) (9,844 ) Effect of exchange rate changes on
cash and cash equivalents (639 ) (2,002 ) INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 14,146 (907 ) Cash and cash equivalents
at beginning of year 102,180 61,738 CASH AND CASH
EQUIVALENTS AT END OF PERIOD $ 116,326 $ 60,831 Cash
paid during the year for: Income taxes $ 6,375 $ 3,464 Interest $
1,358 $ 1,054
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 29, 2014 December 31, 2013 ASSETS
(unaudited) CURRENT ASSETS: Cash and cash equivalents $
116,326 $ 102,180 Short-term investments 95 95 Trade accounts
receivable, less allowance for doubtful accounts of $2,832 and
$2,449, respectively 168,541 144,742 Inventories, net 196,389
199,404 Prepaid expenses and other current assets 19,817 19,815
Deferred income tax asset 19,476 17,686 Total Current Assets
520,644 483,922 PROPERTY, PLANT AND EQUIPMENT, NET 105,461
107,724 OTHER ASSETS: Goodwill 76,860 75,876 Intangibles, net
34,476 35,656 Deferred income tax asset 16,779 18,579 Other assets
4,866 4,893 TOTAL ASSETS $ 759,086 $ 726,650
LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts
payable $ 81,886 $ 70,589 Accrued expenses and other current
liabilities 63,023 57,507 Accrued compensation and benefits 24,369
31,289 Income taxes payable 6,396 3,965 Notes payable and current
portion of long-term debt 3,642 7,203 Total Current
Liabilities 179,316 170,553 LONG-TERM DEBT, NET OF CURRENT
PORTION 39,797 42,435 DEFERRED INCOME TAXES 9,236 9,666 OTHER
NON-CURRENT LIABILITIES 23,375 27,109 SHAREHOLDERS’ EQUITY: Common
stock 170 176 Additional paid-in capital 274,580 269,884 Retained
earnings 227,868 202,930 Accumulated other comprehensive gain, net
of taxes 4,744 3,897 Total Shareholders’ Equity 507,362
476,887 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 759,086
$ 726,650
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED
Three Months Ended Six Months
Ended June 29, 2014 June 30,
2013 June 29, 2014 June 30,
2013 ORDERS (1) Energy $ 160.3 $ 163.8 $ 319.9 $
337.3 Aerospace & Defense 43.4 36.3 83.7
89.6 Total orders $ 203.7 $ 200.1 $ 403.6 $
426.9
BACKLOG (2) June 29, 2014 June
30, 2013 Energy $ 279.5 $ 263.6 Aerospace & Defense
(3) 133.5 169.9 Total backlog $ 413.1 $
433.5
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.
Note 3: Aerospace & Defense backlog reflects a reduction of
$28.6 million associated with the exit of certain landing gear
product lines recorded in the second quarter of 2014.
CIRCOR INTERNATIONAL, INC.
SUMMARY REPORT BY SEGMENT
(in thousands, except earnings per
share)
UNAUDITED
2013 2014 1ST QTR 2ND QTR 3RD
QTR 4TH QTR TOTAL 1ST QTR 2ND QTR
TOTAL NET REVENUES Energy $ 157,104 $ 173,557 $
167,660 $ 162,649 $ 660,970 $ 162,587
$160,580
$323,167
Aerospace & Defense 48,294 50,087 47,071
51,386 196,838 48,599 47,304 95,903
Total $ 205,398 $ 223,644 $ 214,731 $ 214,035 $ 857,808 $
211,186 $ 207,884 $ 419,070
ADJUSTED OPERATING MARGIN Energy
10.8 % 13.3 % 15.2 % 17.1 % 14.1 % 13.8 % 14.6 % 14.2 % Aerospace
& Defense 5.9 % 11.4 % 12.1 % 8.4 % 9.5 % 9.1 % 7.1 % 8.1 %
Segment operating margin 9.6 % 12.9 % 14.5 % 15.0 % 13.0 % 12.7 %
12.9 % 12.8 % Corporate expenses (2.6 )% (2.9 )% (3.4 )% (3.5 )%
(3.1 )% (3.4 )% (2.2 )% (2.8 )% Adjusted operating margin 7.1 %
10.0 % 11.1 % 11.6 % 9.9 % 9.4 % 10.7 % 10.0 % Restructuring
inventory charges 0.1 % (0.1 )% — % 0.3 % 0.1 % — % 2.5 % 1.2 %
Impairment charges — % — % — % 3.2 % 0.8 % — % — % — % Special
(recoveries) — % — % (1.5 )% — % (0.4 )% (1.1 )% — % (0.5 )%
Special charges 0.7 % 1.0 % 1.4 % 2.4 % 1.4 % 0.5 % 0.6 % 0.6 %
Total GAAP operating margin 6.3 % 9.1 % 11.1 % 5.6 % 8.1 % 9.9 %
7.6 % 8.8 %
2013 2014 1ST QTR 2ND QTR 3RD
QTR 4TH QTR TOTAL 1ST QTR 2ND QTR
TOTAL ADJUSTED OPERATING INCOME Energy $ 16,940 $
23,114 $ 25,441 $ 27,809 $ 93,304 $ 22,462
$23,502
$ 45,964 Aerospace & Defense 2,864 5,724 5,705
4,342 18,635 4,426 3,362 7,788
Segment operating income 19,804 28,838 31,146 32,151 111,939
26,888 26,864 53,752 Corporate expenses (5,277 ) (6,570 ) (7,400 )
(7,400 ) (26,646 ) (7,137 ) (4,634 ) (11,771 ) Adjusted operating
income 14,528 22,268 23,746 24,751 85,293 19,750 22,231 41,981
Restructuring inventory charges 250 (242 ) — 638 646 — 5,139 5,139
Impairment charges — — — 6,872 6,872 — — — Special (recoveries) — —
(3,151 ) — (3,151 ) (2,243 ) — (2,243 ) Special charges 1,378
2,254 2,961 5,160 11,752 1,086
1,257 2,343 Total GAAP operating income 12,900
20,256 23,936 12,081 69,174
20,907 15,834 36,741 INTEREST EXPENSE, NET
(787 ) (838 ) (745 ) (792 ) (3,162 ) (918 ) (891 ) (1,809 ) OTHER
(EXPENSE) INCOME, NET (612 ) (626 ) (568 ) (167 ) (1,974 ) 468
384 853 PRETAX INCOME 11,501 18,792 22,623
11,122 64,038 20,457 15,328 35,785 PROVISION FOR INCOME TAXES
(3,592 ) (6,124 ) (4,903 ) (2,297 ) (16,916 ) (5,825 ) (3,402 )
(9,227 ) EFFECTIVE TAX RATE 31.2 % 32.6 % 21.7 % 20.7 % 26.4 % 28.5
% 22.2 % 25.8 %
NET INCOME $ 7,908 $ 12,668 $
17,720 $ 8,825 $ 47,121 $ 14,632 $
11,926 $ 26,558 Weighted Average Common Shares
Outstanding (Diluted) 17,529 17,607 17,667 17,710 17,629 17,741
17,767 17,754
EARNINGS PER COMMON SHARE (Diluted) $ 0.45
$ 0.72 $ 1.00 $ 0.50 $ 2.67 $
0.82 $ 0.67 $ 1.50
ADJUSTED EBITDA $
18,682 $ 26,419 $ 27,850 $ 29,441 $
102,392 $ 27,387 $ 14,744 $ 42,131
ADJUSTED EBITDA AS A % OF SALES 9.1 % 11.8 % 13.0 % 13.8 %
11.9 % 13.0 % 7.1 % 10.1 %
CAPITAL EXPENDITURES $ 4,707 $
4,100 $ 4,772 $ 3,749 $ 17,328 $ 2,670 $ 2,933 $ 5,603
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE
MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE
TERMS
(in thousands, except earnings per
share)
UNAUDITED
2013 2014 1ST
QTR 2ND QTR 3RD QTR 4TH
QTR TOTAL 1ST QTR 2ND
QTR TOTAL FREE CASH FLOW AS % OF NET
INCOME 14 % 75 %
167 % 167 % 116
% 98 % 62 %
82 % FREE CASH FLOW $ 1,100
$ 9,525 $ 29,557 $ 14,696
$ 54,878 $ 14,387 $ 7,365
$ 21,752 ADD: Capital Expenditures 4,707
4,100 4,772 3,749
17,328 2,670 2,933 5,603
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,807
$ 13,625 $ 34,329 $ 18,445
$ 72,206 $ 17,057 $
10,298 $ 27,355
NET DEBT (CASH)
$ 8,814 $ (1,376 ) $
(36,466 ) $ (52,637 ) $
(52,637 ) $ (66,056 ) $
(72,982 ) $ (72,982 ) ADD: Cash
& Cash Equivalents 57,633 60,831 86,285 102,180 102,180 122,097
116,326 116,326 Investments 99 96 98
95 95 92 95
95 TOTAL DEBT $ 66,546 $ 59,551
$ 49,917 $ 49,638 $
49,638 $ 56,133 $ 43,439
$ 43,439
DEBT AS % OF EQUITY 16 %
14 % 11 % 10 % 10
% 11 % 9 % 9 %
TOTAL DEBT 66,546 59,551 49,917
49,638 49,638 56,133
43,439 43,439 TOTAL SHAREHOLDERS'
EQUITY 418,819 432,151 459,058
476,887 476,887 492,601
507,363 507,363
2013 2014 1ST QTR
2ND QTR 3RD QTR 4TH QTR
TOTAL 1ST QTR 2ND QTR
TOTAL ADJUSTED OPERATING INCOME $
14,528 $ 22,268 $ 23,746
$ 24,751 $ 85,293 $
19,750 $ 22,230 $ 41,980 LESS:
Inventory restructuring charges 250 (242 ) — 638 646 — 5,139 5,139
Impairment charges — — — 6,872 6,872 — — — Special (recoveries) — —
(3,151 ) — (3,151 ) (2,243 ) — (2,243 ) Special charges 1,378
2,254 2,961 5,160
11,753 1,086 1,257
2,343 OPERATING INCOME $ 12,900 $ 20,256 $ 23,936 $ 12,081 $
69,173 $ 20,907 $ 15,834 $ 36,741
ADJUSTED NET INCOME
$ 9,043 $ 14,044 $ 16,439
$ 16,773 $ 56,299 $
13,916 $ 16,090 $ 30,006 LESS:
Inventory restructuring charges, net of tax 174 (165 ) — 396 405 —
3,316 3,316 Impairment charges, net of tax — — — 4,261 4,261 — — —
Special (recoveries), net of tax — — (3,151 ) — (3,151 ) (1,391 ) —
(1,391 ) Special charges, net of tax 961 1,541
1,870 3,291 7,663
675 848 1,523 NET INCOME $ 7,908
$ 12,668 $ 17,720 $ 8,825
$ 47,121 $ 14,632 $
11,926 $ 26,558
ADJUSTED EARNINGS PER
SHARE $ 0.52 $ 0.81 $
0.93 $ 0.95 $ 3.21 $
0.78 $ 0.91 $ 1.70 LESS:
Inventory restructuring charges, net of tax 0.01 (0.01 ) — 0.02
0.02 — 0.19 0.19 Impairment charges, net of tax — — — 0.24 0.24 — —
— Special (recoveries), net of tax — — (0.18 ) — (0.18 ) (0.08 ) —
(0.08 ) Special charges, net of tax 0.06 0.10
0.11 0.19 0.46
0.04 0.05 0.09 EARNINGS PER
COMMON SHARE (Diluted) $ 0.45 $ 0.72 $
1.00 $ 0.50 $ 2.67 $ 0.82
$ 0.67 $ 1.50
2013 2014 1ST QTR
2ND QTR 3RD QTR 4TH QTR
TOTAL 1ST QTR 2ND QTR
TOTAL EBITDA $ 17,054 $
24,407 $ 23,368 $ 11,914
$ 86,272 $ 26,230 $
21,140 $ 47,370 LESS: Interest expense, net
(787 ) (838 ) (745 ) (792 ) (3,162 ) (918 ) (891 ) (1,809 )
Depreciation (4,009 ) (4,026 ) (3,908 ) (4,091 ) (16,034 ) (4,069 )
(4,116 ) (8,185 ) Amortization (758 ) (751 ) (764 ) (766 ) (3,039 )
(786 ) (805 ) (1,591 ) Provision for income taxes (3,592 )
(6,124 ) (4,903 ) (2,297 ) (16,916 )
(5,825 ) (3,402 ) (9,227 ) NET INCOME $ 7,908
$ 12,668 $ 17,720 $ 8,825
$ 47,121 $ 14,632 $ 11,926
$ 26,558
ADJUSTED EBITDA $
18,682 $ 26,419 $ 27,850
$ 29,441 $ 102,392 $
27,387 $ 14,744 $ 42,131
Inventory restructuring charges (250 ) 242 — (638 ) (646 ) — 5,139
5,139 Impairment charges — — — (6,872 ) (6,872 ) — — — Special
(recoveries) — — 3,151 — 3,151 (2,243 ) — (2,243 ) Special charges
(1,378 ) (2,254 ) (2,961 ) (5,160 ) (11,753 ) 1,086 1,257 2,343
Interest expense, net (787 ) (838 ) (745 ) (792 ) (3,162 ) (918 )
(891 ) (1,809 ) Depreciation (4,009 ) (4,026 ) (3,908 ) (4,091 )
(16,034 ) (4,069 ) (4,116 ) (8,185 ) Amortization (758 ) (751 )
(764 ) (766 ) (3,039 ) (786 ) (805 ) (1,591 ) Provision for income
taxes (3,592 ) (6,124 ) (4,903 ) (2,297 )
(16,916 ) (5,825 ) (3,402 ) (9,227 )
NET INCOME $ 7,908 $ 12,668 $ 17,720
$ 8,825 $ 47,121 $ 14,632
$ 11,926 $ 26,558
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF FUTURE PERFORMANCE
MEASURES TO COMMONLY
USED GENERALLY ACCEPTED ACCOUNTING
PRINCIPLE TERMS
UNAUDITED
3rd Quarter 2014
Low
High
REVENUE (in millions)
$
200
$ 215
EXPECTED ADJUSTED EARNINGS PER SHARE
(DILUTIVE)
$ 0.87 $ 0.94
LESS: Restructuring related charges,
Special charges
0.08 0.06 EXPECTED EARNINGS PER COMMON SHARE
(Diluted) $ 0.79 $ 0.88 Note: Assumes 26% to 27% tax rate
and exchange rates at present values.
CIRCOR InternationalRajeev Bhalla, 781-270-1200Executive Vice
President & Chief Financial Officer
CIRCOR (NYSE:CIR)
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