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 3,
2016.
First-Quarter 2016 Highlights
- Delivered Revenue of $151 million and
Adjusted EPS of $0.52
- Accelerated cost control and
restructuring actions to improve bottom-line performance
- Achieved Energy adjusted operating
margin of 12.6%
- Expanded Aerospace & Defense
adjusted operating margin to 9.3%
“CIRCOR delivered solid first-quarter financial results,
demonstrating ongoing progress on our margin expansion and
simplification strategy,” said Scott Buckhout, President and Chief
Executive Officer. “Despite significant headwinds in our Energy
markets, we maintained strong margin performance and delivered
year-over-year sales growth in our engineered valve and control
valve businesses. Aerospace & Defense continued to improve its
bottom line results, expanding margins 130 basis points over last
year.”
“Going forward, we are focused on laying the foundation for
long-term above market growth. We continue to improve our
operations while we carefully invest in areas with the best
long-term growth potential,” added Buckhout. “In addition, we are
using the ongoing weakness in our Energy markets as an opportunity
to further accelerate our cost reduction strategy. Our
simplification and restructuring actions launched to date remain on
track.”
“Finally we remain committed to creating shareholder value
through growth, margin expansion, strong cash flow, and disciplined
capital deployment,” concluded Buckhout.
Second-Quarter 2016 GuidanceFor the second quarter of
2016, the Company will provide its guidance during the conference
call later today.
Selected Consolidated Results
($ millions except EPS)
Q1 2016 Q1 2015 Change Revenue
$
150.8 $ 165.9 (9 )% GAAP Operating Income
$
5.5 $ 12.3 (55 )% Adjusted Operating Income1
$
11.3 $ 14.6 (23 )% Adjusted Operating Margin1
7.5
% 8.8 % (130) bps GAAP Earnings Per Share (Diluted)
$
0.23 $ 0.50 (54 )% Adjusted Earnings Per Share (Diluted)1
$ 0.52 $ 0.60 (13 )% Free Cash Flow
$
3.7 $ (18.4 ) NM Orders
$ 136.8 $ 182.3 (25 )%
Segment Results
($ millions) Q1
2016 Q1 2015 Change Energy Revenue
$ 112.6 $ 127.6 (12 )% Adjusted Operating Margin1
12.6 % 13.8 % (120) bps Orders
$ 99.8 $
143.1 (30 )%
Aerospace & Defense Revenue
$
38.2 $ 38.3 0 % Adjusted Operating Margin1
9.3
% 8.0 % 130 bps Orders
$ 36.9 $ 39.2 (6 )%
1. Consolidated and Segment Results for Q1 2016 exclude special,
restructuring and impairment charges totaling $5.8 million. This
includes (i) $2.8 million related to the closure of the Brazil
manufacturing operations; (ii) $1.9 million for non-cash
acquisition-related intangible amortization expense; (iii) fixed
asset write-down of $1.4 million for the closure of the California
facility and (iv) other items for a net gain of $0.3 million. Q1
2015 results excluded special and restructuring charges totaling
$2.2 million.
Conference Call InformationCIRCOR International will hold
a conference call to review its financial results today, April 29,
2016, 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 MeasuresAdjusted net income,
adjusted earnings per share (diluted), 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 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.
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 3,2016
April 5,2015
Net revenues $ 150,798 $ 165,860 Cost of revenues 105,565
113,211 GROSS PROFIT 45,233 52,649 Selling,
general and administrative expenses 37,799 38,808 Special charges,
net 1,939 1,511 OPERATING INCOME
5,495 12,331 Other expense (income): Interest
expense, net 631 641 Other income, net (528 ) (506 )
TOTAL OTHER EXPENSE, NET 103 135 INCOME
BEFORE INCOME TAXES 5,392 12,196 Provision for income taxes
1,520 3,284 NET INCOME $ 3,872 $ 8,913
Earnings per common share: Basic $ 0.24 $ 0.50 Diluted $
0.23 $ 0.50 Weighted average number of common shares outstanding:
Basic 16,381 17,662 Diluted 16,481 17,712 Dividends paid per common
share $ 0.0375 $ 0.0375
CIRCOR INTERNATIONAL,
INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(in thousands)
UNAUDITED
Three Months Ended
April 3,2016
April 5,2015
OPERATING ACTIVITIES Net income $ 3,872 $ 8,913 Adjustments
to reconcile net income to net cash provided by (used in) operating
activities: Depreciation 3,263 3,521 Amortization 2,529 710 Bad
debt (recovery) expense (848 ) 312 Loss on write down of inventory
2,525 510 Compensation expense of share-based plans 1,538 2,222 Tax
effect of share-based plan compensation 92 (289 ) Loss on sale of
property, plant and equipment 14 46 Loss on write down of property,
plant and equipment 1,489 — Gain on sale of business — (972 )
Changes in operating assets and liabilities, net of effects of
acquisition and disposition: Trade accounts receivable 11,089 6,694
Inventories 8,486 (19,207 ) Prepaid expenses and other assets
(4,287 ) (3,431 ) Accounts payable, accrued expenses and other
liabilities (22,108 ) (18,224 ) Net cash provided by
(used in) operating activities 7,654 (19,195 )
INVESTING ACTIVITIES Purchases of property, plant and
equipment (4,021 ) (2,610 ) Proceeds from the sale of property,
plant and equipment 87 — Proceeds from the sale of affiliate
— 2,759 Net cash (used in) provided by
investing activities (3,934 ) 149
FINANCING
ACTIVITIES Proceeds from long-term debt 35,139 46,903 Payments
of long-term debt (27,871 ) (21,540 ) Dividends paid (625 ) (672 )
Proceeds from the exercise of stock options 111 38 Tax effect of
share-based plan compensation (92 ) 289 Purchases of common stock
— (13,291 ) Net cash provided by financing
activities 6,662 11,727 Effect of
exchange rate changes on cash and cash equivalents 1,657
(10,081 ) INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 12,039 (17,400 ) Cash and cash equivalents at beginning
of year 54,541 121,286 CASH AND CASH
EQUIVALENTS AT END OF PERIOD $ 66,580 $ 103,886
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
UNAUDITED
April 3,2016
December 31,2015
ASSETS CURRENT ASSETS: Cash and cash equivalents $ 66,580 $ 54,541
Trade accounts receivable, less allowance for doubtful accounts of
$7,628 and $8,290, respectively 117,569 125,628 Inventories 170,100
177,840 Prepaid expenses and other current assets 21,303
16,441 Total Current Assets 375,552
374,450 PROPERTY, PLANT AND EQUIPMENT, NET
86,089 87,029 OTHER ASSETS: Goodwill 118,170 115,452 Intangibles,
net 47,520 48,981 Deferred income taxes 36,483 36,799 Other assets
7,283 7,204 TOTAL ASSETS $ 671,097
$ 669,915 LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES: Accounts payable $ 55,726 $ 64,284 Accrued
expenses and other current liabilities 43,081 52,878 Accrued
compensation and benefits 17,173 18,424 Income taxes payable
8,406 6,585 Total Current Liabilities
124,386 142,171 LONG-TERM DEBT, NET OF CURRENT
PORTION 97,800 90,500 DEFERRED INCOME TAXES 10,168 10,424 OTHER
NON-CURRENT LIABILITIES 24,636 26,043 SHAREHOLDERS’ EQUITY: Common
stock 177 177 Additional paid-in capital 285,410 283,621 Retained
earnings 261,186 257,939 Common treasury stock, at cost (74,972 )
(74,972 ) Accumulated other comprehensive loss, net of tax
(57,694 ) (65,988 ) Total Shareholders’ Equity
414,107 400,777 TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY $ 671,097 $ 669,915
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED
Three Months Ended
April 3, 2016
April 5, 2015
ORDERS (1) Energy $ 99.8 $ 143.1 Aerospace & Defense
36.9 39.2 Total orders $ 136.8 $ 182.3
BACKLOG (2)
April 3, 2016
April 5, 2015
Energy $ 167.7 $ 247.6 Aerospace & Defense 92.3
104.2 Total backlog $ 260.0 $ 351.8
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.
CIRCOR INTERNATIONAL, INC.
SUMMARY REPORT BY SEGMENT
(in thousands, except
percentages)
UNAUDITED
2015
2016
1ST QTR 2ND QTR 3RD QTR
4TH QTR TOTAL 1ST QTR NET
REVENUES Energy $ 127,586 $ 127,230
$ 122,905 $ 124,412 $ 502,133 $ 112,620 Aerospace & Defense
38,274 39,676
36,353 39,832 154,134
38,178 Total $ 165,860 $ 166,906 $
159,258 $ 164,243 $ 656,267 $ 150,798
ADJUSTED OPERATING
MARGIN Energy 13.8 % 13.4 % 15.4 % 13.4 % 14.0 % 12.6 %
Aerospace & Defense 8.0 % 8.8 %
9.1 % 10.4 % 9.1 %
9.3 % Segment operating margin 12.4 % 12.3 % 14.0 % 12.7 % 12.8 %
11.8 % Corporate expenses (3.6 )% (3.3 )%
(3.8 )% (2.5 )% (3.3 )%
(4.3 )% Adjusted operating margin 8.8 % 9.0 % 10.1 %
10.2 % 9.5 % 7.5 % Restructuring related inventory charges — % 1.2
% 4.0 % 0.6 % 1.4 % 1.3 % Impairment charges — % — % 1.6 % — % 0.4
% — % Special restructuring charges, net 0.9 % 1.9 % 0.2 % (0.2 )%
0.7 % 1.4 % Special acquisition amortization — % 1.3 % 1.6 % 1.4 %
1.0 % 1.2 % Special other charges, net of recoveries — % 0.1 % 5.0
% 1.0 % 1.5 % (0.1 )% Brazil restatement impact 0.4 %
1.5 % — % — % 0.5
% — % Total GAAP operating margin 7.4 %
3.0 % (2.2 )% 7.5 %
4.0 % 3.6 %
CIRCOR INTERNATIONAL,
INC.SUMMARY REPORT BY SEGMENT(in thousands, except
earnings per share and percentages)UNAUDITED
2015
2016
1ST QTR 2ND QTR 3RD QTR
4TH QTR TOTAL 1ST QTR
ADJUSTED OPERATING INCOME Energy $ 17,550 $ 17,008 $ 18,932
$ 16,724 $ 70,214 $ 14,186 Aerospace & Defense 3,045
3,494 3,298
4,146 13,982 3,562
Segment operating income 20,595 20,502 22,230 20,870 84,197
17,748 Corporate expenses (6,034 ) (5,477 )
(6,078 ) (4,122 ) (21,710
) (6,488 ) Adjusted operating income 14,561 15,025
16,152 16,748 62,487 11,260 Restructuring related inventory charges
— 2,005 6,412 974 9,391 1,958 Impairment charges — — 2,502 — 2,502
— Special restructuring charges, net 1,512 3,127 342 (347 ) 4,634
2,040 Special acquisition amortization — 2,110 2,490 2,238 6,838
1,868 Special other charges, net of recoveries (1 ) 183 7,935 1,603
9,720 (101 ) Brazil restatement impact 719
2,509 — —
3,228 — Total GAAP
operating income (loss) 12,331 5,090
(3,529 ) 12,281
26,174 5,495 INTEREST EXPENSE,
NET (640 ) (805 ) (828 ) (570 ) (2,844 ) (631 ) OTHER INCOME
(EXPENSE), NET 506 104
587 (2,099 ) (902 )
528 PRETAX INCOME (LOSS) 12,197 4,389 (3,770 )
9,612 22,428 5,392 PROVISION FOR INCOME TAXES (3,284 )
(2,517 ) (4,308 ) (2,456
) (12,565 ) (1,520 ) EFFECTIVE TAX RATE
26.9 % 57.3 % (114.3 )% 25.6 % 56.0 % 28.2 %
NET INCOME
(LOSS) $ 8,913 $ 1,872 $ (8,078 )
$ 7,156 $ 9,863 $ 3,872
Weighted Average Common Shares Outstanding (Diluted) 17,712 16,900
16,485 16,555 16,913 16,481
EARNINGS (LOSS) PER COMMON SHARE
(Diluted) $ 0.50 $ 0.11 $ (0.49 )
$ 0.43 $ 0.58 $ 0.23
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE
MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE
TERMS
(in thousands, except
percentages)
UNAUDITED
2015
2016
1ST QTR 2ND QTR 3RD QTR
4TH QTR TOTAL 1ST QTR FREE
CASH FLOW AS % OF NET INCOME (LOSS) (207 )%
239 % (27 )%
397 % 169 % 96 %
FREE CASH FLOW $ (18,415 ) $
4,483 $ 2,169 $ 28,403 $
16,640 $ 3,720 ADD: Capital expenditures, net
of sale proceeds 1,983 3,584
2,837 2,098
10,502 3,934 NET CASH (USED IN)
PROVIDED BY OPERATING ACTIVITIES $ (16,432 ) $ 8,067
$ 5,006 $ 30,501 $ 27,142
$ 7,654
NET (CASH) DEBT $
(66,337 ) $ 59,051 $
57,277 $ 35,959 $ 35,959
$ 31,220 ADD: Cash & cash equivalents
103,883 55,027 53,822
54,541 54,541
66,580 TOTAL DEBT $ 37,546 $
114,078 $ 111,099 $ 90,500
$ 90,500 $ 97,800 TOTAL SHAREHOLDERS'
EQUITY $ 462,384 $ 421,070 $ 407,979 $ 400,777 $ 400,777 $ 414,107
DEBT AS % OF EQUITY 8 % 27 %
27 % 23 % 23 % 24
%
CIRCOR INTERNATIONAL,
INC.RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY
USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS(in
thousands, except earnings per share)UNAUDITED
2015
2016
1ST QTR 2ND QTR 3RD QTR
4TH QTR TOTAL 1ST QTR
ADJUSTED NET INCOME $ 10,564 $
9,357 $ 10,635 $ 10,512 $
41,068 $ 8,683 LESS: Restructuring related
inventory charges, net of tax — 1,339 6,412 799 8,550 1,945
Impairment charges, net of tax — — 2,502 — 2,502 — Special
restructuring charges, net of tax 1,079 2,175 304 (561 ) 2,997
1,665 Special acquisition amortization, net of tax — 1,409 1,587
1,695 4,691 1,266 Special other net charges, net of tax (147 ) 53
7,908 1,423 9,237 (65 ) Brazil restatement impact 719
2,509 — —
3,228 — NET INCOME
(LOSS) $ 8,913 $ 1,872 $ (8,078 )
$ 7,156 $ 9,863 $ 3,872
ADJUSTED EARNINGS PER SHARE (Diluted) $ 0.60
$ 0.55 $ 0.64 $ 0.63
$ 2.43 $ 0.52 LESS: Restructuring
related inventory charges, net of tax — 0.08 0.39 0.05 0.51 0.12
Impairment charges, net of tax — — 0.15 — 0.15 — Special
restructuring charges, net of tax 0.06 0.13 0.02 (0.03 ) 0.18 0.10
Special acquisition amortization, net of tax — 0.08 0.10 0.10 0.28
0.08 Special other net charges, net of tax — — 0.47 0.08 0.54 (0.01
) Brazil restatement impact 0.04 0.15
— —
0.19 — EARNINGS (LOSS) PER COMMON SHARE
(Diluted) $ 0.50 $ 0.11 $ (0.49 )
$ 0.43 $ 0.58 $ 0.23
CIRCOR INTERNATIONAL,
INC.RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY
USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS(in
thousands, except earnings per share)UNAUDITED
2015
2016
1ST QTR 2ND QTR 3RD QTR
4TH QTR TOTAL 1ST QTR
ADJUSTED EBITDA $ 19,299 $
19,474 $ 20,980 $ 18,927
$ 78,681 $ 15,712 LESS: Restructuring
related inventory charges — (2,005 ) (6,412 ) (974 ) (9,391 )
(1,958 ) Impairment charges — — (2,502 ) — (2,502 ) — Special
restructuring charges, net (1,512 ) (3,127 ) (342 ) 347 (4,634 )
(2,040 ) Special other charges, net of recoveries 1 (183 ) (7,935 )
(1,603 ) (9,720 ) 101 Brazil restatement impact (719 )
(2,509 ) — —
(3,228 ) —
EBITDA
$ 17,068 $ 11,650
$ 3,789 $ 16,698
$ 49,206 $
11,815 LESS: Interest expense, net (641 ) (805 ) (828
) (570 ) (2,844 ) (631 ) Depreciation (3,521 ) (3,629 ) (3,526 )
(3,578 ) (14,254 ) (3,263 ) Amortization, including special
acquisition (710 ) (2,827 ) (3,205 ) (2,939 ) (9,681 ) (2,529 )
Provision for income taxes (3,284 ) (2,517 )
(4,308 ) (2,456 ) (12,565
) (1,520 ) NET INCOME (LOSS) $ 8,913 $
1,872 $ (8,078 ) $ 7,156 $ 9,863
$ 3,872
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CIRCOR InternationalRajeev Bhalla, 781-270-1200Executive Vice
President & Chief Financial Officer
CIRCOR (NYSE:CIR)
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