CIRCOR Reports Fourth-Quarter and Year-End 2012 Financial Results
CIRCOR Reports Fourth-Quarter and Year-End 2012 Financial Results
Adjusted EPS of $0.69 Exceeds Guidance Range
Full-Year Adjusted EPS Growth of 22% Driven by Margin Expansion
Repositioning Actions on Track
BURLINGTON, Mass.--(BUSINESS WIRE)-- CIRCOR International, Inc. (NYS: CIR) , a leading provider of valves and other highly engineered products for the energy, industrial and aerospace markets, today announced financial results for the fourth quarter and fiscal year ended December 31, 2012.
"Our earnings this past quarter and year reflect our commitment to drive improved operating results and margin expansion," said Wayne Robbins, CIRCOR's Executive Vice President and Chief Operating Officer, Acting President and Chief Executive Officer. "Our fourth quarter adjusted EPS increased 17% and exceeded expectations driven by solid execution, particularly in Energy and Flow Technologies. We also generated strong free cash flow in the quarter bringing the full year to $42 million."
"We are on schedule with the repositioning actions in California, Brazil and India that we announced last quarter, which include consolidating facilities, shifting expenses to lower cost regions and exiting certain non-strategic product lines," said Robbins. "These initiatives are positioning all three of our segments to generate greater profitability and better focus on key strategic markets. We continue to improve efficiency through our focus on Lean principles and operational excellence and remain on target to begin realizing annualized savings of approximately $7 million from our repositioning actions in the second half of 2013."
"Looking forward, we anticipate improved top- and bottom-line performance over 2012," said Robbins. "We are aggressively executing our strategy with a continued focus on margin expansion, including evaluating further repositioning opportunities. We believe that the markets we serve are attractive and provide opportunities for profitable growth, both organically and through acquisitions."
"We are pleased with the Company's performance under Wayne's leadership as interim CEO," said CIRCOR Chairman David F. Dietz. "The Board's previously announced search for a permanent CEO is on track and progress has been made to identify the right leader for the organization. We have a number of strong candidates under consideration and expect to announce our decision in the second quarter."
Revenues for the fourth quarter of 2012 were $201.6 million, a 7% decrease from $217.1 million in the fourth quarter of 2011. Net income for the fourth quarter of 2012 was $9.2 million, or $0.53 per diluted share, which includes special charges of $3.9 million compared with net income of $10.3 million, or $0.59 per diluted share, for the fourth quarter of 2011. Excluding the special charges from both periods, adjusted earnings per diluted share was $0.69 in the fourth quarter of 2012, a 17% increase compared to the prior year's fourth quarter results of $0.59.
Excluding the special charges in both periods, adjusted operating income was $15.6 million for the fourth quarter of 2012 compared with $15.0 million in the fourth quarter of 2011, an increase of 4%.
The Company received orders totaling $202.3 million during the fourth quarter of 2012, an increase of 9% compared with the fourth quarter of 2011. Backlog as of December 31, 2012 was $447.0 million, up 13% from backlog of $397.4 million at December 31, 2011.
Energy segment revenues decreased 12% to $96.6 million for the fourth quarter of 2012 from $110.2 million for the fourth quarter of 2011 as a result of lower volume in the short-cycle business and timing of large international energy and pipeline project shipments.
Incoming orders for the fourth quarter of 2012 were $95.6 million, an increase of 11% year-over-year as a result of higher orders across the short-cycle, large international energy projects and pipeline businesses. Ending backlog totaled $211.3 million, an increase of 25% year-over-year, primarily as a result of higher large international energy project orders.
For the fourth quarter of 2012, Energy segment adjusted operating margin increased to 12.5% from 8.4% in the fourth quarter of 2011, primarily driven by large international energy projects and improved pricing and improved operating performance in Brazil. Segment adjusted operating margin for the quarter excludes special and repositioning inventory impairment charges of $0.7 million related to the repositioning of the Company's Brazil operations as announced last quarter.
Flow Technologies segment revenues decreased 2% to $69.7 million for the fourth quarter of 2012 from $70.9 million in the fourth quarter of 2011.
Incoming orders for the Flow Technologies segment were $75.2 million for the fourth quarter of 2012, an increase of 17% year-over-year, primarily due to strength across most end markets. Ending backlog totaled $76.2 million, an increase of 9% year-over-year.
Flow Technologies adjusted operating margin for the fourth quarter of 2012 increased to 13.1% from 12.9% in the fourth quarter of 2011, primarily due to volume, pricing and productivity, offset by growth investments in the Company's power markets.
Aerospace segment revenues decreased 2% to $35.3 million for the fourth quarter of 2012 from $36.0 million in the fourth quarter of 2011 with unfavorable foreign currency translation of 1% contributing to the decrease.
Incoming orders for the fourth quarter of 2012 were $31.5 million, a decrease of 12% year-over-year primarily due to lower orders for commercial and military landing gear as well as fluid control products. Ending backlog totaled $159.5 million, an increase of 1% year-over-year.
Aerospace segment adjusted operating margin for the fourth quarter of 2012 decreased to 3.5% from 8.6% in the fourth quarter of 2011, primarily due to production start-up and R&D investments to support new large programs with new customers. These important programs with global aerospace leaders all have very long time horizons and the Company expects its success should lead to further business opportunities with these customers. Segment adjusted operating margin excludes special and repositioning inventory charges of $0.3 million related to the repositioning of certain operations and manufacturing activities within California as announced last quarter.
For the first quarter of 2013 the Company expects revenues to be in the range of $199 to $206 million. Compared with the prior year, revenues are expected to be lower primarily due to softer short-cycle energy volume in line with anticipated reduced rig counts.
During the first quarter, the Company expects to incur pre-tax repositioning related charges of between $3.0 and $3.7 million. Excluding those charges, adjusted earnings are expected to be in the range of $0.43 to $0.53 per diluted share. The Company expects lower year-over-year profitability in the first quarter due primarily to lower Energy volume and Aerospace margins.
Tax rate on adjusted earnings is expected to be approximately 36%, which is negatively impacted by repositioning charges in Brazil. Excluding repositioning, the rate is anticipated to be approximately 31%. This guidance assumes that exchange rates remain at present levels.
Conference Call Information
CIRCOR International will hold a conference call to review its financial results today, February 28, 2013, at 10:00 a.m. ET. Those who wish to listen to the conference call and view the accompanying presentation slides should visit "Webcasts & Presentations" in the "Investors" 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 for one year 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 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 first-quarter revenue and earnings guidance and estimated total annualized pre-tax savings from repositioning 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 valves and other highly engineered products for the energy, industrial and aerospace markets. With more than 7,500 customers in over 100 countries, CIRCOR has a diversified product portfolio with recognized, market-leading brands. CIRCOR's culture, built on the CIRCOR Business System, is defined by the Company's commitment to attracting, developing and retaining the best talent and pursuing continuous improvement in all aspects of its business and operations. The Company's strategy includes growing organically by investing in new, differentiated products; adding value to component products; and increasing the development of mission-critical subsystems and solutions. CIRCOR also plans to leverage its strong balance sheet to acquire strategically complementary businesses. For more information, visit the Company's investor relations web site at http://investors.circor.com.
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
|Three Months Ended||Twelve Months Ended|
|Cost of revenues||141,186||157,736||604,009||596,954|
|Selling, general and administrative expenses||44,820||44,338||179,382||168,421|
|Leslie asbestos and bankruptcy charges, net||—||—||—||676|
|Other (income) expense:|
|TOTAL OTHER EXPENSE||665||1,381||4,772||6,102|
|INCOME BEFORE INCOME TAXES||11,030||13,655||41,759||50,196|
|Provision for income taxes||1,821||3,370||10,960||13,562|
|Earnings per common share:|
|Weighted average number of common shares outstanding:|
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|Twelve Months Ended|
|Adjustments to reconcile net income to net cash provided by (used in) operating activities:|
|Payment for Leslie bankruptcy settlement||(1,000||)||(76,625||)|
|Compensation expense of share-based plans||4,374||3,807|
|Tax effect of share-based compensation||642||(673||)|
|Deferred Income Taxes||(832||)||307|
|Loss (gain) on property, plant and equipment||1,135||(69||)|
|Changes in operating assets and liabilities, net of effects from business acquisitions:|
|Trade accounts receivable||7,063||(17,862||)|
|Prepaid expenses and other assets||(2,422||)||(22,918||)|
|Accounts payable, accrued expenses and other liabilities||(15,504||)||47,718|
|Net cash provided by (used in) operating activities||60,523||(48,833||)|
|Additions to property, plant and equipment||(18,170||)||(17,901||)|
|Proceeds from the sale of property, plant and equipment||541||117|
|Business acquisitions, net of cash acquired||—||(20,221||)|
|Net cash used in investing activities||(17,629||)||(38,005||)|
|Proceeds from long-term debt||186,409||279,346|
|Payments of long-term debt||(220,918||)||(178,905||)|
|Debt issuance costs||—||(2,001||)|
|Proceeds from the exercise of stock options||406||589|
|Tax effect of share-based compensation||(642||)||673|
|Net cash (used in) provided by financing activities||(37,408||)||97,052|
|Effect of exchange rate changes on cash and cash equivalents||1,397||(1,111||)|
|INCREASE IN CASH AND CASH EQUIVALENTS||6,883||9,103|
|Cash and cash equivalents at beginning of period||54,855||45,752|
|CASH AND CASH EQUIVALENTS AT END OF PERIOD||$||61,738||$||54,855|
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|Cash and cash equivalents||$||61,738||$||54,855|
|Trade accounts receivable, less allowance for doubtful accounts of $1,706 and $1,127, respectively||150,825||156,075|
|Prepaid expenses and other current assets||16,510||12,376|
|Deferred income tax asset||15,505||16,320|
|Assets held for sale||542||542|
|Total Current Assets||443,226||444,044|
|PROPERTY, PLANT AND EQUIPMENT, NET||105,903||104,434|
|Deferred income tax asset||30,064||27,949|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Accrued expenses and other current liabilities||67,235||63,386|
|Accrued compensation and benefits||26,540||24,328|
|Income taxes payable||393||5,553|
|Notes payable and current portion of long-term debt||7,755||8,796|
|Total Current Liabilities||182,284||195,556|
|LONG-TERM DEBT, NET OF CURRENT PORTION||62,729||96,327|
|DEFERRED INCOME TAXES||10,744||11,284|
|OTHER NON-CURRENT LIABILITIES||35,977||35,271|
|CONTINGENCIES AND COMMITMENTS|
|Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding||—||—|
|Common stock, $0.01 par value; 29,000,000 shares authorized; 17,445,687 and 17,268,212 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively||174||173|
|Additional paid-in capital||262,744||258,209|
|Accumulated other comprehensive loss, net of taxes||(3,180||)||(4,670||)|