CIRCOR Reports First-Quarter 2014 Financial Results

Business Wire

BURLINGTON, Mass.--(BUSINESS WIRE)--

CIRCOR International, Inc. (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 March 30, 2014.

First-Quarter 2014 Highlights

  • Revenue grew 3%
  • Adjusted operating margin increased 230 basis points to 9.4%
  • Adjusted EPS grew 50% to $0.78 (including $0.03 from foreign currency)
  • Free cash flow was $14.4 million, 98% of net income
  • Announcing growth investment funded by restructuring G&A

“CIRCOR began 2014 with strong first-quarter operating results,” said Scott Buckhout, CIRCOR President and Chief Executive Officer. “Our margin expansion initiatives continued to gain traction with adjusted operating margins up year-over-year by 230 basis points to 9.4%. Margins improved across most of our businesses. We had strong sales growth in our upstream markets, particularly in our large international projects business and our instrumentation and sampling business.”

“Q1 order intake was down over last year primarily due to orders from our project businesses, which can vary significantly from quarter to quarter. We remain bullish on our energy end markets and expect solid order intake for the full year,” said Buckhout.

“Today we are announcing an investment program to accelerate organic growth. We intend to invest approximately $7 million to increase the size our sales force in growing markets, open international sales offices in Brazil and Malaysia, and increase our investment in new products. These actions will be entirely funded with a reduction in G&A expenses and the closure of three small facilities,” concluded Buckhout.

Second-Quarter 2014 Guidance
For the second quarter of 2014, the Company expects:

  • Revenues in the range of $220 million to $230 million;
  • Adjusted earnings per share, excluding special charges, in the range of $0.88 to $0.94; and,
  • Restructuring related costs of approximately $5 million to $6 million.

Selected Consolidated Results

(In millions, except percents and bps)   Q1 2014   Q1 2013   Change
Revenue   $ 211.2 $ 205.4   3%
Adjusted Operating Income $ 19.8 $ 14.5 36%
Adjusted Operating Margin 9.4% 7.1% 230 bps
Adjusted Earnings Per Share (Diluted) $ 0.78 $ 0.52 50%
Orders $ 199.9 $ 226.8 (12)%
Backlog $ 448.3 $ 457.3 (2)%
Free Cash Flow $ 14.4 $ 1.1 -

Note: These amounts exclude special recoveries and charges. Refer to reconciliation to commonly used US GAAP terms.

Segment Results

(In millions, except percents and bps)   Q1 2014   Q1 2013   Change
Energy    
Revenue $ 162.6 $ 157.1 3%
Adjusted Operating Margin 13.8% 10.8% 300 bps
Orders $ 159.5 $ 173.5 (8)%
Backlog $ 283.1 $ 274.4 3%
 
Aerospace & Defense
Revenue $ 48.6 $ 48.3 1%
Adjusted Operating Margin 9.1% 5.9% 320 bps
Orders $ 40.4 $ 53.3 (24)%
Backlog $ 165.2 $ 182.9 (10)%

Note: These amounts exclude special recoveries and charges. Refer to reconciliation to commonly used US GAAP terms.

Conference Call Information

CIRCOR International will hold a conference call to review its financial results today, April 22, 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 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 second-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
March 30, 2014   March 31, 2013
Net revenues $ 211,186 $ 205,398
Cost of revenues 146,548   145,549
GROSS PROFIT 64,638 59,849
Selling, general and administrative expenses 44,888 45,571
Special (recoveries) charges, net (1,157 ) 1,378
OPERATING INCOME 20,907   12,900
Other (income) expense:
Interest expense, net 918 787
Other (income) expense, net (468 ) 612
TOTAL OTHER EXPENSE, NET 450   1,399
INCOME BEFORE INCOME TAXES 20,457 11,501
Provision for income taxes 5,825   3,592
NET INCOME $ 14,632   $ 7,908
Earnings per common share:
Basic $ 0.83 $ 0.45
Diluted $ 0.82 $ 0.45
Weighted average number of common shares outstanding:
Basic 17,620 17,511
Diluted 17,741 17,529
Dividends paid per common share $ 0.0375 $ 0.0375
 
CIRCOR INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

  Three Months Ended
March 30, 2014  

March 31, 2013

OPERATING ACTIVITIES  
Net income $ 14,632 $ 7,908
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 4,069 4,009
Amortization 786 758
Compensation expense of share-based plans 1,830 1,028
Tax effect of share-based plan compensation (571 ) (285 )
(Gain) loss on disposal of property, plant and equipment 34 (66 )
Changes in operating assets and liabilities:
Trade accounts receivable, net (9,952 ) (2,455 )
Inventories, net 234 (6,461 )
Prepaid expenses and other assets (859 ) (827 )
Accounts payable, accrued expenses and other liabilities 6,854   2,198  
Net cash provided by operating activities 17,057   5,807  
INVESTING ACTIVITIES
Additions to property, plant and equipment (2,670 ) (4,707 )
Proceeds from the sale of property, plant and equipment 13   75  
Net cash used in investing activities (2,657 ) (4,632 )
FINANCING ACTIVITIES
Proceeds from long-term debt 48,029 33,598
Payments of long-term debt (41,781 ) (37,655 )
Dividends paid (670 ) (670 )
Proceeds from the exercise of stock options 192 1,368
Tax effect of share-based compensation 571   285  
Net cash (used in) provided by financing activities 6,341   (3,074 )
Effect of exchange rate changes on cash and cash equivalents (824 ) (2,207 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19,917 (4,106 )
Cash and cash equivalents at beginning of year 102,180   61,738  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 122,097   $ 57,632  
Cash paid during the year for:
Income taxes $ 2,913 $ 1,462
Interest $ 677 $ 655
 
CIRCOR INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

UNAUDITED

   

March 30,
2014

 

December 31,
2013

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 122,097 $ 102,180
Short-term investments 92 95
Trade accounts receivable, less allowance for doubtful accounts of $2,543 and $2,449, respectively 154,821 144,742
Inventories, net 199,200 199,404
Prepaid expenses and other current assets 20,496 19,815
Deferred income tax asset 17,566   17,686
Total Current Assets 514,272   483,922
PROPERTY, PLANT AND EQUIPMENT, NET 106,455 107,724
OTHER ASSETS:
Goodwill 75,999 75,876
Intangibles, net 34,924 35,656
Deferred income tax asset 17,167 18,579
Other assets 5,140   4,893
TOTAL ASSETS $ 753,957   $ 726,650
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 83,391 $ 70,589
Accrued expenses and other current liabilities 56,710 57,507
Accrued compensation and benefits 25,191 31,289
Income taxes payable 4,946 3,965
Notes payable and current portion of long-term debt 10,519   7,203
Total Current Liabilities 180,757   170,553
LONG-TERM DEBT, NET OF CURRENT PORTION 45,614 42,435
DEFERRED INCOME TAXES 9,217 9,666
OTHER NON-CURRENT LIABILITIES 25,768 27,109
CONTINGENCIES AND COMMITMENTS
SHAREHOLDERS’ EQUITY:

Common stock

176

176

Additional paid-in capital 272,202 269,884
Retained earnings 217,045 202,930
Accumulated other comprehensive gain, net of taxes 3,178   3,897
Total Shareholders’ Equity 492,601   476,887
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 753,957   $ 726,650
 
CIRCOR INTERNATIONAL, INC.

SUMMARY OF ORDERS AND BACKLOG

(in millions)

UNAUDITED

  Three Months Ended
March 30,
2014
  March 31,
2013
ORDERS (1)
Energy $ 159.5 $ 173.5
Aerospace & Defense 40.4   53.3
Total orders $ 199.9   $ 226.8
 
BACKLOG (2) March 30,
2014
March 31,
2013
Energy $ 283.1 $ 274.4
Aerospace & Defense 165.2   182.9
Total backlog $ 448.3   $ 457.3
 

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

   
2013   2014
1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR
NET REVENUES        
Energy $ 157,104 $ 173,557 $ 167,660 $ 162,649 $ 660,970 $ 162,587
Aerospace & Defense 48,294     50,087     47,071     51,386     196,838     48,599  
Total $ 205,398 $ 223,644 $ 214,731 $ 214,035 $ 857,808 $ 211,186
ADJUSTED OPERATING MARGIN
Energy 10.8 % 13.3 % 15.2 % 17.1 % 14.1 % 13.8 %
Aerospace & Defense 5.9 %   11.4 %   12.1 %   8.4 %   9.5 %   9.1 %
Segment operating margin 9.6 % 12.9 % 14.5 % 15.0 % 13.0 % 12.7 %
Corporate expenses (2.6 )%   (2.9 )%   (3.4 )%   (3.5 )%   (3.1 )%   (3.4 )%
Adjusted operating margin 7.1 % 10.0 % 11.1 % 11.6 % 9.9 % 9.4 %
Restructuring inventory charges 0.1 % (0.1 )% % 0.3 % 0.1 % %
Impairment charges % % % 3.2 % 0.8 % %
Special (recoveries) % % (1.5 )% % (0.4 )% (1.1 )%
Special charges 0.7 %   1.0 %   1.4 %   2.4 %   1.4 %   0.5 %
Total GAAP operating margin 6.3 %   9.1 %   11.1 %   5.6 %   8.1 %   9.9 %
 
 
 
2013 2014
1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR
ADJUSTED OPERATING INCOME
Energy $ 16,940 $ 23,114 $ 25,441 $ 27,809 $ 93,304 $ 22,462
Aerospace & Defense 2,864     5,724     5,705     4,342     18,635     4,426  
Segment operating income 19,804 28,838 31,146 32,151 111,939 26,888
Corporate expenses (5,277 )   (6,570 )   (7,400 )   (7,400 )   (26,646 )   (7,137 )
Adjusted operating income 14,528 22,268 23,746 24,751 85,293 19,750
Restructuring inventory charges 250 (242 ) 638 646
Impairment charges 6,872 6,872
Special (recoveries) (3,151 ) (3,151 ) (2,243 )
Special charges 1,378     2,254     2,961     5,160     11,752     1,086  
Total GAAP operating income 12,900     20,256     23,936     12,081     69,174     20,907  
INTEREST EXPENSE, NET (787 ) (838 ) (745 ) (792 ) (3,162 ) (918 )
OTHER (EXPENSE) INCOME, NET (612 )   (626 )   (568 )   (167 )   (1,974 )   468  
PRETAX INCOME 11,501 18,792 22,623 11,122 64,038 20,457
PROVISION FOR INCOME TAXES (3,592 )   (6,124 )   (4,903 )   (2,297 )   (16,916 )   (5,825 )
EFFECTIVE TAX RATE 31.2 % 32.6 % 21.7 % 20.7 % 26.4 % 28.5 %
NET INCOME $ 7,908     $ 12,668     $ 17,720     $ 8,825     $ 47,121     $ 14,632  
Weighted Average Common Shares Outstanding (Diluted) 17,529 17,607 17,667 17,710 17,629 17,741
EARNINGS PER COMMON SHARE (Diluted) $ 0.45     $ 0.72     $ 1.00     $ 0.50     $ 2.67     $ 0.82  
ADJUSTED EBITDA $ 18,682     $ 26,419     $ 27,850     $ 29,441     $ 102,392     $ 27,387  
ADJUSTED EBITDA AS A % OF SALES 9.1 %   11.8 %   13.0 %   13.8 %   11.9 %   13.0 %
CAPITAL EXPENDITURES $ 4,707 $ 4,100 $ 4,772 $ 3,749 $ 17,328 $ 2,670
 
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
FREE CASH FLOW AS % OF NET INCOME 14 %   75 %   167 %   167 %   116 % 98 %
FREE CASH FLOW $ 1,100 $ 9,525 $ 29,557 $ 14,696 $ 54,878 $ 14,387
ADD:
Capital Expenditures 4,707     4,100     4,772     3,749     17,328     2,670  
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,807     $ 13,625     $ 34,329     $ 18,445     $ 72,206     $ 17,057  
NET DEBT (CASH) $ 8,814 $ (1,376 ) $ (36,466 ) $ (52,637 ) $ (52,637 ) $ (66,056 )
ADD:
Cash & Cash Equivalents 57,633 60,831 86,285 102,180 102,180 122,097
Investments 99     96     98     95     95     92  
TOTAL DEBT $ 66,546     $ 59,551     $ 49,917     $ 49,638     $ 49,638     $ 56,133  
DEBT AS % OF EQUITY 16 % 14 % 11 % 10 % 10 % 11 %
TOTAL DEBT 66,546     59,551     49,917     49,638     49,638     56,133  
TOTAL SHAREHOLDERS' EQUITY 418,819     432,151     459,058     476,887     476,887     492,601  
 
 
2013 2014
1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR
ADJUSTED OPERATING INCOME $ 14,528 $ 22,268 $ 23,746 $ 24,751 $ 85,293 $ 19,750
LESS:
Inventory restructuring charges 250 (242 ) 638 646
Impairment charges 6,872 6,872
Special (recoveries) (3,151 ) (3,151 ) (2,243 )
Special charges 1,378     2,254     2,961     5,160     11,753     1,086  
OPERATING INCOME $ 12,900 $ 20,256 $ 23,936 $ 12,081 $ 69,173 $ 20,907
ADJUSTED NET INCOME $ 9,043 $ 14,044 $ 16,439 $ 16,773 $ 56,299 $ 13,916
LESS:
Inventory restructuring charges, net of tax 174 (165 ) 396 405
Impairment charges, net of tax 4,261 4,261
Special (recoveries), net of tax (3,151 ) (3,151 ) (1,391 )
Special charges, net of tax 961     1,541     1,870     3,291     7,663     675  
NET INCOME $ 7,908     $ 12,668     $ 17,720     $ 8,825     $ 47,121     $ 14,632  
ADJUSTED EARNINGS PER SHARE $ 0.52 $ 0.81 $ 0.93 $ 0.95 $ 3.21 $ 0.78
LESS:
Inventory restructuring charges, net of tax 0.01 (0.01 ) 0.02 0.02
Impairment charges, net of tax 0.24 0.24
Special (recoveries), net of tax (0.18 ) (0.18 ) (0.08 )
Special charges, net of tax 0.06     0.10     0.11     0.19     0.46     0.04  
EARNINGS PER COMMON SHARE (Diluted) $ 0.45     $ 0.72     $ 1.00     $ 0.50     $ 2.67     $ 0.82  
 
 
2013 2014
1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR
EBITDA $ 17,054 $ 24,407 $ 23,368 $ 11,914 $ 86,272 $ 26,230
LESS:
Interest expense, net (787 ) (838 ) (745 ) (792 ) (3,162 ) (918 )
Depreciation (4,009 ) (4,026 ) (3,908 ) (4,091 ) (16,034 ) (4,069 )
Amortization (758 ) (751 ) (764 ) (766 ) (3,039 ) (786 )
Provision for income taxes (3,592 )   (6,124 )   (4,903 )   (2,297 )   (16,916 )   (5,825 )
NET INCOME $ 7,908     $ 12,668     $ 17,720     $ 8,825     $ 47,121     $ 14,632  
ADJUSTED EBITDA $ 18,682 $ 26,419 $ 27,850 $ 29,441 $ 102,392 $ 27,387
Inventory restructuring charges (250 ) 242 (638 ) (646 )
Impairment charges (6,872 ) (6,872 )
Special (recoveries) 3,151 3,151 (2,243 )
Special charges (1,378 ) (2,254 ) (2,961 ) (5,160 ) (11,753 ) 1,086
Interest expense, net (787 ) (838 ) (745 ) (792 ) (3,162 ) (918 )
Depreciation (4,009 ) (4,026 ) (3,908 ) (4,091 ) (16,034 ) (4,069 )
Amortization (758 ) (751 ) (764 ) (766 ) (3,039 ) (786 )
Provision for income taxes (3,592 )   (6,124 )   (4,903 )   (2,297 )   (16,916 )   (5,825 )
NET INCOME $ 7,908     $ 12,668     $ 17,720     $ 8,825     $ 47,121     $ 14,632  
 
CIRCOR INTERNATIONAL, INC.

RECONCILIATION OF FUTURE PERFORMANCE MEASURES TO COMMONLY

USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS

UNAUDITED

  2nd Quarter 2014
Low   High
REVENUE (in millions) $ 220 $ 230
 
EXPECTED ADJUSTED EARNINGS PER SHARE (DILUTIVE) $

0.88

$

0.94

LESS: Restructuring related charges, Special charges

 

$

0.25

$

0.21

EXPECTED EARNINGS PER COMMON SHARE (Diluted)

$

0.63

 

$

0.73

 

Note: Assumes 26% - 27% tax rate and exchange rates at present values.

 

 

 

 

 

 

 

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

Rates

View Comments (0)