CIRCOR Reports Third-Quarter 2009 Results

-- Revenues of $144.3 Million Slightly Exceed Guidance Range in Difficult Market Environment

-- EPS of $0.49 Significantly Exceeds Guidance Range as a Result of Lower Asbestos Charges and Other Non-operating Items

-- 13% Year-Over-Year Bookings Decline Reflects Continued Weak Global Demand Environment

• Press Release
• Source: CIRCOR International
• On 5:30 pm EDT, Wednesday October 28, 2009

BURLINGTON, Mass.--(BUSINESS WIRE)--CIRCOR International, Inc. (NYSE: CIR - News), 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 third quarter ended September 27, 2009.

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Symbol	Price	Change
CIR	24.24	-0.88

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Comments on the Third Quarter

According to Chairman and Chief Executive Officer Bill Higgins, “Our third-quarter revenues were slightly above our guidance range. Earnings significantly exceeded our guidance range primarily due to lower-than-expected asbestos charges and other non-operating gains.”

“As expected, bookings reflected the weak global demand environment and came in 13% lower year-over-year,” Higgins said. “Our Energy segment continued to experience a significant decrease in short-cycle bookings due to the substantial decline in rig counts and destocking at distributors. At the same time, our long-cycle international project business experienced an increase in year-over-year bookings due to very low orders booked in the third quarter of 2008. Within our Instrumentation and Thermal Fluid Controls segment we experienced continued weakness, particularly in commercial aerospace, although we did see signs of stabilization in some of our other diverse flow markets.”

“To adjust to this difficult market environment, we continue to focus on our quality of earnings initiatives by reducing our cost structure, driving operational improvements with Lean, and expanding our low-cost operations in emerging markets,” Higgins said. “Excluding acquisitions, we have reduced CIRCOR’s total workforce by approximately 17% year-to-date, and we continue to consolidate facilities.”

“We have a great balance sheet and continue to seek strategic acquisitions,” added Higgins. “We recently acquired Pipeline Engineering, a privately held pipeline products and solutions company based in the United Kingdom. This acquisition will be accretive in the first year and was funded with existing cash.”

Consolidated Results

Revenues for the third quarter of 2009 were $144.3 million, a 31% decrease from $208.7 million generated in the third quarter of 2008. Net income for the third quarter of 2009 declined to $8.4 million, or $0.49 per diluted share, compared with $19.8 million, or $1.16 per diluted share, for the third quarter of 2008. Third-quarter 2009 net income includes $2.0 million in pre-tax asbestos charges compared with $3.8 million in the third quarter of 2008. Third-quarter 2009 net income also includes a benefit of $0.5 million related to an acquisition completed earlier in the year, where the fair value of the acquired assets exceeded the purchase price.

For the nine months ended September 27, 2009, revenues were $484.5 million, a decrease of 18% from $591.9 million for the comparable period in 2008. Net income for the first nine months of 2009 was $26.6 million, or $1.56 per diluted share, a decrease of 48% from $51.1 million, or $3.01 per diluted share, from the first nine months of 2008. Net income for the first nine months of 2009 includes $13.7 million in pre-tax asbestos charges compared with $6.9 million in the year-ago period. Net income for the first nine months of 2009 also includes a pre-tax gain of $1.7 million related to proceeds from the sale of land use rights and the aforementioned benefit associated with the acquisition, recorded as a gain on the “special charges” line.

The Company received orders totaling $143.6 million during the third quarter of 2009, a decrease of 13% compared with the third quarter of 2008 and a 15% sequential decrease compared with the second quarter of 2009.

For the first nine months of 2009, orders totaled $434.8 million with a third-quarter 2009 ending backlog of $297.9 million. This compares to 2008 orders for the first nine months of $599.2 million and a third quarter 2008 ending backlog of $401.6 million, representing a year-over-year decrease of 26%.

During the third quarter of 2009, the Company generated $11.2 million of free cash flow (defined as net cash from operating activities, less capital expenditures and dividends paid), and, for the first nine months of 2009, the Company had free cash flow of $21.2 million. This compares to $24.1 million of free cash flow generated in the first nine months of 2008.

Instrumentation and Thermal Fluid Controls Products

CIRCOR’s Instrumentation and Thermal Fluid Controls Products segment revenues decreased 14% to $83.1 million from $96.3 million in the third quarter of 2008. Growth from acquisitions of 4% was more than offset by volume declines of 14% and lower foreign exchange rates compared to the U.S. dollar of 3%. Incoming orders for this segment were $88.4 million for the third quarter of 2009, a decrease of 13% from $101.6 million in the third quarter of 2008. Sequentially, this segment’s orders decreased 8%. The sequential decrease in orders in this segment related primarily to a large multi-year military landing gear order booked in the second quarter of 2009 expected to be shipped beginning in 2011. Ending backlog was $183.7 million, an increase of 8% from the third quarter of fiscal 2008 and a 3% increase from the second quarter of fiscal 2009.

This segment’s adjusted operating margin, which excludes the impact of special and asbestos charges, for the third quarter of 2009 was 11.6% compared with 12.3% in the third quarter of 2008, and 11.8% in the second quarter of 2009. The year-over-year and sequential declines were due to lower sales leverage and unfavorable foreign currency adjustments, partially offset by a decrease in material costs and labor expenses.

Energy Products

CIRCOR’s Energy Products segment revenues declined by 46% to $61.2 million for the quarter ended September 27, 2009 compared with a record $112.4 million in the quarter ended September 28, 2008. The year-over-year decrease included volume declines of 44%, as well as unfavorable foreign currency adjustments of 2%.

Incoming orders for the third quarter of 2009 were $55.1 million, a decrease of 12% from $62.7 million in the third quarter of 2008, and a decrease of 24% from $72.9 million in the second quarter of 2009. The sequential decrease was the result of large international project orders booked in the second quarter of 2009 scheduled to ship in 2010. Ending backlog totaled $114.1 million, a 51% decrease compared with $232.0 million at the end of the third quarter of 2008, and a 6% decrease sequentially.

The Energy Products segment’s adjusted operating margin was 10.9% during the third quarter of 2009 compared with 23.2% for the third quarter of 2008 and 12.3% for the second quarter of 2009. The year-over-year decrease was primarily the result of lower volume, unfavorable pricing and product mix, as well as acquisition-related costs, partially offset by lower material costs and labor expenses.

Business and Financial Outlook

“We believe that the ongoing global recession will continue to negatively affect our financial results for the fourth quarter and into 2010,” said Higgins. “In Energy, while there appears to be some stabilization in rig counts, it is difficult to determine whether this will be sustainable and how long it will take for distributors to work through excess inventory. Quoting activity continues on large international project orders, although pricing pressure has increased. Visibility into the Instrumentation and Thermal Fluid Controls Products side of the business is also limited, although we have seen areas of improvement in certain markets.”

“We continue to take aggressive actions to lower our cost structure and enhance our quality of earnings, including plant consolidations and increasing the use of India and China for materials sourcing. We anticipate incurring expenses in a range of $2.0 million to $2.5 million in the fourth quarter relating to certain cost-reduction activities. With a lower cost structure that is aligned with near term demand, we will be well positioned for bottom line improvement as our markets begin to recover. We also plan to leverage our strong balance sheet and cash generating ability to capitalize on acquisition opportunities as they present themselves,” concluded Higgins.

The Company currently expects revenues for the fourth quarter of 2009 in the range of $153 million to $162 million and earnings, excluding special charges, to be in the range of $0.17 to $0.23 per diluted share.

Conference Call Information

CIRCOR’s Chief Executive Officer, Bill Higgins, and Chief Financial Officer, Fred Burditt, will host a conference call live on Thursday, October 29, at 9:00 a.m. ET to discuss the financial results. Those who wish to listen to the conference call and view the accompanying presentation slides should visit “Webcasts & Presentations” in the “Investor Relations” 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 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 both known and 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 prospects for both the Energy and Instrumentation and Thermal Fluid Controls segments; taking aggressive actions to lower its cost structure and enhance quality of earnings, including plant consolidations and increasing the use of India and China for materials sourcing; incurring expenses in a range of $2.0 million to $2.5 million in the fourth quarter; anticipating bottom line improvement as its markets begin to recover; and leveraging its strong balance sheet and cash generating ability to capitalize on acquisition opportunities as they present themselves; expectations regarding the Pipeline Engineering acquisition, and CIRCOR’s future performance, including fourth-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
Frederic M. Burditt, 781-270-1200
Chief Financial Officer