CIRCOR Reports Second-Quarter 2013 Financial Results
CIRCOR Reports Second-Quarter 2013 Financial Results
BURLINGTON, Mass.--(BUSINESS WIRE)-- CIRCOR International, Inc. (NYS: CIR) , a leading provider of valves and other highly engineered products for markets including oil & gas, power generation and aerospace, today announced financial results for the second quarter ended June 30, 2013.
Second Quarter 2013 Highlights
Adjusted operating margin up 160 basis points to 10%, highest in four years
Adjusted EPS of $0.81 increased 27%
Organic revenue growth of 2%
Secured large specialty high pressure ball valve order for emerging FPSO technology
Completed previously announced restructuring - on track to deliver annualized savings of $7 million
Announced first step of CIRCOR simplification process
Management Comments
"We delivered a strong quarter due to our continued focus on growth, margin expansion and cash generation," said Scott Buckhout, CIRCOR's President and Chief Executive Officer. "Revenue increased sequentially in all three segments, while our adjusted operating margin expanded to 10% -- our highest level in four years.
"Our strategy to drive growth in the most innovative parts of our markets is delivering results. During the second quarter, we won a large order for high pressure ball valves to be used for emerging floating production, storage and off-loading technology.
"We are also pleased to have completed our previously announced restructuring initiatives on time and under budget. Through these projects, we delivered more than $1 million of savings in the second quarter and are on pace to deliver the $7 million of annualized savings that we had projected."
Added Buckhout, "Today we are announcing the first step of a new initiative to simplify CIRCOR, thereby reducing costs, growing margins and enhancing shareholder value. We are implementing three new restructuring actions designed to further reduce complexity and cost. This includes closing two facilities and downsizing another, reducing our overhead, eliminating legacy ERP systems, and increasing the utilization of our low cost manufacturing and design capabilities in India. We expect these actions will result in annualized savings of approximately $4 million."
Second Quarter Results
Revenues for the second quarter of 2013 increased 2% to $223.6 million, from $219.9 million in the second quarter of 2012. Net income for the second quarter of 2013, including the impact of special charges of $2.0 million, was $12.7 million, or $0.72 per diluted share, compared with net income of $11.1 million, or $0.64 per diluted share, for the second quarter of 2012. Adjusted earnings per diluted share in the second quarter of 2013, excluding the impact of the special charges, was $0.81, a 27% increase compared with $0.64 in the prior year's second-quarter.
The Company received orders totaling $200.1 million during the second quarter of 2013, a decrease of 12% compared with the second quarter of 2012, due primarily to lower Energy orders in the international project business. The Energy business experienced a particularly difficult comparison with last year when CIRCOR booked a $22 million order in the large project business. Backlog as of June 30, 2013 increased 3% to $433.5 million from June 30, 2012.
During the second quarter of 2013, the Company generated $9.5 million of free cash flow, up $4.4 million from the same period in 2012.
Third Quarter Guidance
For the third quarter of 2013, the Company expects revenues to be in the range of $212 to $218 million. In addition, CIRCOR expects to record special charges comprised of a gain of approximately $3.1 million related to a settlement on the Brazil arbitration and restructuring related-charges of between $1.5 and $1.7 million. Excluding these charges, adjusted earnings are expected to be in the range of $0.76 to $0.83 per diluted share in the third quarter of 2013.
Segment Results
Energy
Energy segment revenues decreased 2% to $110.8 million for the second quarter versus the same period in 2012.
For the second quarter of 2013, the Energy segment's adjusted operating margin increased 270 basis points to 13.8% year over year.
Incoming orders for the second quarter of 2013 were $107.2 million, a decrease of 16% year over year, as a result of lower large international project bookings. While the level of large international project inquiries and quoting remains comparable to 2012, the time to finalize orders from the original quotes has been increasing. This is likely the result of projects being delayed. In addition, the comparison with the second quarter of 2012 was difficult due to a $22 million project received in that quarter. Ending backlog totaled $213.7 million, an increase of 8% year over year.
Flow Technologies
Flow Technologies segment revenues increased 6% to $74.6 million for the second quarter of 2013.
Flow Technologies adjusted operating margin for the second quarter of 2013 increased 200 basis points to 14.8%.
Incoming orders for the Flow Technologies segment were $66.0 million for the second quarter of 2013, a decrease of 6% year over year. Ending backlog totaled $67.9 million, a decrease of 9% compared with the same period last year.
Aerospace
Aerospace segment revenues increased 6% to $38.2 million for the second quarter.
Aerospace segment adjusted operating margin for the second quarter of 2013 decreased slightly to 8.6% from 8.8% in the second quarter of 2012. Segment margins were up 510 basis points sequentially as the benefits of the restructuring program started to impact the business.
Incoming orders for the second quarter of 2013 were $26.9 million, a decrease of 6% year over year. Ending backlog totaled $151.9 million, an increase of 1% year over year.
Conference Call Information
CIRCOR International will hold a conference call to review its financial results today, August 1, 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 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 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. Free cash flow is defined as net cash from operating activities less capital expenditures. 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 valves and other highly engineered products for markets including energy, oil & gas, power generation and aerospace. 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) (UNAUDITED) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, 2013 | July 1, 2012 | June 30, 2013 | July 1, 2012 | |||||||||||||
Net revenues | $ | 223,644 | $ | 219,862 | $ | 429,042 | $ | 434,142 | ||||||||
Cost of revenues | 153,538 | 156,046 | 299,086 | 311,714 | ||||||||||||
GROSS PROFIT | 70,106 | 63,816 | 129,956 | 122,428 | ||||||||||||
Selling, general and administrative expenses | 47,596 | 45,337 | 93,168 | 90,249 | ||||||||||||
Special charges | 2,254 | — | 3,632 | — | ||||||||||||
OPERATING INCOME | 20,256 | 18,479 | 33,156 | 32,179 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest income | (79 | ) | (78 | ) | (122 | ) | (161 | ) | ||||||||
Interest expense | 917 | 1,095 | 1,747 | 2,259 | ||||||||||||
Other, net | 626 | 184 | 1,239 | 322 | ||||||||||||
TOTAL OTHER EXPENSE | 1,464 | 1,201 | 2,864 | 2,420 | ||||||||||||
INCOME BEFORE INCOME TAXES | 18,792 | 17,278 | 30,292 | 29,759 | ||||||||||||
Provision for income taxes | 6,124 | 6,142 | 9,715 | 10,038 | ||||||||||||
NET INCOME | $ | 12,668 | $ | 11,136 | $ | 20,577 | $ | 19,721 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.72 | $ | 0.64 | $ | 1.17 | $ | 1.14 | ||||||||
Diluted | $ | 0.72 | $ | 0.64 | $ | 1.17 | $ | 1.13 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 17,565 | 17,422 | 17,539 | 17,369 | ||||||||||||
Diluted | 17,607 | 17,451 | 17,569 | 17,421 | ||||||||||||
CIRCOR INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (UNAUDITED) | ||||||||
Six Months Ended | ||||||||
June 30, 2013 | July 1, 2012 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 20,577 | $ | 19,721 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 8,035 | 7,833 | ||||||
Amortization | 1,509 | 1,887 | ||||||
Payment for Leslie bankruptcy settlement | — | (1,000 | ) | |||||
Compensation expense of share-based plans | 2,156 | 2,317 | ||||||
Tax effect of share-based compensation | (422 | ) | 499 | |||||
(Gain) loss on property, plant and equipment | (129 | ) | 133 | |||||
Changes in operating assets and liabilities, net of effects from business acquisitions: | ||||||||
Trade accounts receivable | (9,406 | ) | (6,312 | ) | ||||
Inventories | (4,059 | ) | (5,340 | ) | ||||
Prepaid expenses and other assets | (2,412 | ) | (1,408 | ) | ||||
Accounts payable, accrued expenses and other liabilities | 3,583 | (9,559 | ) | |||||
Net cash provided by operating activities | 19,432 | 8,771 | ||||||
INVESTING ACTIVITIES | ||||||||
Additions to property, plant and equipment | (8,808 | ) | (10,783 | ) | ||||
Proceeds from the sale of property, plant and equipment | 314 | 31 | ||||||
Net cash used in investing activities | (8,494 | ) | (10,752 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from long-term debt | 74,255 | 108,943 | ||||||
Payments of long-term debt | (84,679 | ) | (117,944 | ) | ||||
Dividends paid | (1,340 | ) | (1,331 | ) | ||||
Proceeds from the exercise of stock options | 1,498 | 94 | ||||||
Tax effect of share-based compensation | 422 | (499 | ) | |||||
Net cash used in financing activities | (9,844 | ) | (10,737 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (2,002 | ) | (723 | ) | ||||
DECREASE IN CASH AND CASH EQUIVALENTS | (907 | ) | (13,441 | ) | ||||
Cash and cash equivalents at beginning of period | 61,738 | 54,855 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 60,831 | $ | 41,414 | ||||
CIRCOR INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (UNAUDITED) | ||||||||
June 30, | December 31, | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 60,831 | $ | 61,738 | ||||
Short-term investments | 96 | 101 | ||||||
Trade accounts receivable, less allowance for doubtful accounts | 158,286 | 150,825 | ||||||
Inventories | 199,764 | 198,005 | ||||||
Prepaid expenses and other current assets | 17,661 | 16,510 | ||||||
Deferred income tax asset | 15,431 | 15,505 | ||||||
Current income tax receivable | 2,171 | — | ||||||
Assets held for sale | 542 | 542 | ||||||
Total Current Assets | 454,782 | 443,226 | ||||||
PROPERTY, PLANT AND EQUIPMENT, NET | 104,477 | 105,903 | ||||||
OTHER ASSETS: | ||||||||
Goodwill | 75,491 | 77,428 | ||||||
Intangibles, net | 42,436 | 45,157 | ||||||
Deferred income tax asset | 25,283 | 30,064 | ||||||
Other assets | 6,957 | 8,203 | ||||||
TOTAL ASSETS | $ | 709,426 | $ | 709,981 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 84,245 | $ | 80,361 | ||||
Accrued expenses and other current liabilities | 59,240 | 67,235 | ||||||
Accrued compensation and benefits | 25,596 | 26,540 | ||||||
Income taxes payable | 3,996 | 393 | ||||||
Notes payable and current portion of long-term debt | 7,206 | 7,755 | ||||||
Total Current Liabilities | 180,283 | 182,284 | ||||||
LONG-TERM DEBT, NET OF CURRENT PORTION | 52,345 | 62,729 | ||||||
DEFERRED INCOME TAXES | 9,797 | 10,744 | ||||||
OTHER NON-CURRENT LIABILITIES | 34,850 | 35,977 | ||||||
CONTINGENCIES AND COMMITMENTS | ||||||||
SHAREHOLDERS' EQUITY: | ||||||||
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; 17,575,362 and 17,445,687 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively | 176 | 174 | ||||||
Additional paid-in capital | 265,940 | 262,744 | ||||||
Retained earnings | 177,748 | 158,509 | ||||||
Accumulated other comprehensive loss, net of taxes | (11,713 | ) | (3,180 | ) | ||||
Total Shareholders' Equity | 432,151 | 418,247 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 709,426 | $ | 709,981 | ||||
CIRCOR INTERNATIONAL, INC. SUMMARY OF ORDERS AND BACKLOG (in millions) (UNAUDITED) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | July 1, | June 30, | July 1, | ||||||||||||
ORDERS (1) | |||||||||||||||
Energy | $ | 107.2 | $ | 128.2 | $ | 217.4 | |||||||||
