CIRCOR Announces First Quarter Results

BURLINGTON, Mass., May 1 /PRNewswire-FirstCall/ -- CIRCOR International, Inc. a leading provider of valves and other fluid control devices for the instrumentation, aerospace, thermal fluid and energy markets, today announced results for its first quarter ended April 2, 2006.

Revenues for the first quarter were $127.3 million, an increase of 25% from $102.2 million for the first quarter 2005. Net income for the first quarter 2006 was $5.2 million, or $0.32 per diluted share, equal to the results for the 2005 first quarter. The earnings per share for the first quarter 2006 includes a $0.01 charge for the adoption of FAS 123R, the expensing of stock options.

The Company received orders totaling a record $203.2 million during the first quarter 2006, an increase of 82% over the same period in 2005. Backlog at March-end 2006 reached another record of $241.3 million, up 69% over March 2005 backlogs and sequentially increasing 70% over the fourth quarter of 2005. Excluding acquisitions completed during the past 12 months, orders increased 54% and backlogs rose 31% compared to first quarter 2005.

During the first quarter 2006, the Company's free cash flow was a use of $5.2 million (defined as net cash used in operating activities, less capital expenditures and dividends paid) and included an investment in higher inventory to support the record backlog. The acquisitions of Sagebrush Pipeline Equipment Company and Hale-Hamilton during the first quarter 2006 used a combined $61 million in cash, resulting in the Company having an 18% net debt to total capitalization ratio at the end of the first quarter.

CIRCOR's Instrumentation and Thermal Fluid Controls Products segment revenues increased 19% to $72.4 million compared to $61.0 million in the first quarter 2005 primarily due to acquisitions. Incoming orders for this segment increased 31% to $87.3 million compared to the first quarter last year and backlogs increased 76% compared to March-end 2005 as a result of acquisitions and growth at existing businesses. This segment's operating margin for the first quarter decreased to 9.1% as production and supply issues that arose during the second half of 2005 continue to be resolved.

CIRCOR's Energy Products segment revenues increased 33% to $54.9 million from $41.2 million in the first quarter last year, primarily due to organic sales growth to oil and gas markets. Including acquisitions, incoming orders for the quarter rose 155% to $116.0 million compared to the same period last year and ending backlog totaled $130.6 million, an increase of 63% compared to March-end 2005, both representing records for this segment. These orders and backlog figures include approximately $30 million of the $50 million of letters of intent received for major international natural gas projects as of year-end 2005, which were converted into purchase orders in the first quarter. The remaining $20 million of these letters of intent are expected to be processed and recorded as orders during the second quarter 2006. Worldwide market conditions for oil and gas projects continue to be strong. This segment's operating margin grew 240 basis points to 10.4% for the first quarter of 2006, compared to the same period last year.

David A. Bloss, Sr., Chairman and Chief Executive Officer, said, "We are pleased with how our markets are performing and our record level of orders and backlog. The extremely strong oil and gas market and the success of our acquisition efforts have contributed significantly to our growth this past quarter. We remain concentrated on improving our bottom line profit performance and have implemented many changes to correct our internal processes, upgrade management and improve our supplier performance, particularly within our Instrumentation and Thermal Fluid Controls Segment. These actions will continue during the second quarter and should result in an improvement in our operating performance during the second half of 2006."

CIRCOR provided guidance for its second quarter 2006 results, indicating it expects earnings to be in the range of $0.37 to $0.39 per diluted share excluding special charges but including a non-cash charge of approximately $0.01 per diluted share for the adoption of FAS 123R relating to expensing of stock options.

CIRCOR International has scheduled a conference call to review its results for the first quarter 2006 on Tuesday, May 2, 2006 at 9:00 a.m. ET. Interested parties may access the call by dialing [phone] for US & Canada and [phone] for International locations. A replay of the call will be available from 12:00 noon ET on May 2, 2006 through midnight on Monday, May 8, 2006. To access the replay, interested parties can dial [phone] or [phone] and enter confirmation code #1149621 when prompted. The presentation slides that will be discussed in the conference call are expected to be available on Monday, May 1, 2006 by 6:00 p.m. ET. The presentation slides may be downloaded from the Quarterly Earnings page of the Investors section on the CIRCOR Website: http://www.circor.com/. An audio recording of the conference call also is expected to be posted on the Company's website by May 5, 2006.

CIRCOR International, Inc. is a leading provider of valves and fluid control products that allow customers around the world to use fluids safely and efficiently in the instrumentation, aerospace, thermal fluid and energy markets. CIRCOR's executive headquarters are located at 25 Corporate Drive, Burlington, MA 01803.

This press release contains certain statements that are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995 (the "Act") and releases issued by the Securities and Exchange Commission (SEC). The words "may," "hope," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential," "continue," and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. We believe that it is important to communicate our future expectations to our stockholders, and we, therefore, make forward- looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that we are not able to accurately predict or control, and our actual results, performance or achievements may differ materially from the expectations we describe in our forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the cyclicality and highly competitive nature of some of our end markets, changes in the price of and demand for oil and gas in both domestic and international markets, variability of raw material and component pricing, fluctuations in foreign currency exchange rates, and our ability to continue operating our manufacturing facilities at efficient levels and to successfully implement our acquisition strategy. We advise you to read further about these and other risk factors set forth under the caption "Certain Risk Factors That May Affect Future Results" in our SEC filings. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

CIRCOR INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) UNAUDITED April 2, December 31, 2006 2005 ASSETS Current Assets: Cash and cash equivalents $27,069 $31,112 Trade accounts receivable, less allowance for doubtful accounts of $2,126 and $1,943 respectively 84,298 77,731 Inventories 123,429 107,687 Prepaid expenses and other current assets 7,323 3,791 Deferred income taxes 4,773 4,328 Assets held for sale 3,171 1,115 Total Current Assets 250,063 225,764 Property, Plant and Equipment, net 71,581 63,350 Other Assets: Goodwill 168,611 140,179 Intangibles, net 31,223 20,941 Other assets 18,843 10,146 Total Assets $540,321 $460,380 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $56,711 $49,736 Accrued expenses and other current liabilities 29,579 26,031 Accrued compensation and benefits 11,501 14,509 Income taxes payable 4,565 3,418 Notes payable and current portion of long-term debt 24,112 27,213 Total Current Liabilities 126,468 120,907 Long-term Debt, Net of Current Portion 71,228 6,278 Deferred Income Taxes 11,954 11,237 Other Noncurrent Liabilities 13,283 11,235 Shareholders' Equity: Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued and outstanding -- -- Common stock, $.01 par value; 29,000,000 shares authorized; and 15,895,586 and 15,823,529 issued and outstanding, respectively 159 158 Additional paid-in capital 216,627 215,274 Retained earnings 86,888 82,318 Accumulated other comprehensive income 13,714 12,973 Total Shareholders' Equity 317,388 310,723 Total Liabilities and Shareholders' Equity $540,321 $460,380 CIRCOR INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) UNAUDITED Three Months Ended April 2, 2006 April 3, 2005 Net revenues $ 127,295 $ 102,238 Cost of revenues 88,957 69,297 GROSS PROFIT 38,338 32,941 Selling, general and administrative expenses 29,849 24,090 Special charges -- 305 OPERATING INCOME 8,489 8,546 Other (income) expense: Interest income (109) (85) Interest expense 1,133 872 Other expense (income), net (131) (181) Total other expense 893 606 INCOME BEFORE INCOME TAXES 7,596 7,940 Provision for income taxes 2,431 2,779 NET INCOME $ 5,165 $ 5,161 Earnings per common share: Basic $ 0.33 $ 0.33 Diluted $ 0.32 $ 0.32 Weighted average common shares outstanding: Basic 15,853 15,515 Diluted 16,197 16,054 CIRCOR INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) UNAUDITED Three Months Ended April 2, 2006 April 3, 2005 OPERATING ACTIVITIES Net income $ 5,165 $ 5,161 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 2,619 2,597 Amortization 515 38 Compensation expense of stock- based plans 790 206 (Gain) loss on sale of property, plant and equipment (23) 7 Equity in undistributed earnings of affiliates (33) (63) Changes in operating assets and liabilities, net of effects from business acquisitions: Trade accounts receivable 2,405 (134) Inventories (6,222) (11,697) Prepaid expenses and other assets (2,378) (3,892) Accounts payable, accrued expenses and other liabilities (5,878) 11,619 Net cash (used in) provided by operating activities (3,040) 3,842 INVESTING ACTIVITIES Additions to property, plant and equipment (1,578) (3,668) Proceeds from sale of property, plant and equipment 14 -- Proceeds from sale of assets held for sale 100 -- Business acquisition, net of cash acquired (61,015) (34,690) Net cash used in investing activities (62,479) (38,358) FINANCING ACTIVITIES Proceeds from long-term borrowings 64,608 2,645 Payments of long-term debt (3,578) (2,374) Dividends paid (595) (586) Proceeds from the exercise of stock options 297 2,250 Tax effect of share based compensation 368 -- Net cash provided by financing activities 61,100 1,935 Effect of exchange rate changes on cash and cash equivalents 376 (1,130) INCREASE IN CASH AND CASH EQUIVALENTS (4,043) (33,711) Cash and cash equivalents at beginning of year 31,112 58,653 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,069 $ 24,942 CIRCOR INTERNATIONAL, INC. SUMMARY OF ORDERS AND BACKLOG (in thousands) UNAUDITED Three Months Ended April 2, 2006 April 3, 2005 ORDERS Instrumentation & Thermal Fluid Controls $ 87,264 $ 66,434 Energy Products 115,979 45,525 Total orders $ 203,243 $ 111,959 April 2, December 31, 2006 2005 BACKLOG Instrumentation & Thermal Fluid Controls $ 110,737 $ 84,018 Energy Products 130,605 58,137 Total backlog $ 241,342 $ 142,155 Note: Backlog includes all unshipped customer orders. CIRCOR INTERNATIONAL, INC. SUMMARY REPORT BY SEGMENT (in thousands, except earnings per share) UNAUDITED 2005 2006 1ST QTR 2ND QTR 3RD QTR 4TH QTR YTD 1ST QTR NET REVENUES Instrumentation & Thermal Fluid Controls (TFC) $61,025 $62,908 $59,031 $68,312 $251,276 $72,434 Energy Products 41,213 55,749 50,191 52,102 199,255 54,861 Total Revenues 102,238 118,657 109,222 120,414 450,531 127,295 OPERATING MARGIN Instrumentation & TFC 14.8% 12.1% 9.4% 9.5% 11.4% 9.1% Energy Products 8.0% 10.7% 11.3% 9.5% 10.0% 10.4% Segment operating margin 12.0% 11.5% 10.3% 9.5% 10.8% 9.7% Corporate expenses -3.4% -2.6% -3.3% -3.2% -3.1% -3.0% Special charges -0.3% -0.1% -0.5% -0.6% -0.4% 0.0% Total operating margin 8.4% 8.7% 6.6% 5.8% 7.3% 6.7% OPERATING INCOME Instrumentation & TFC (excl. special & unusual charges) 9,004 7,641 5,532 6,517 28,694 6,595 Energy Products (excl. special & unusual charges) 3,290 5,957 5,680 4,932 19,859 5,702 Segment operating income (excl. special & unusual charges) 12,294 13,598 11,212 11,449 48,553 12,297 Corporate expenses (3,443) (3,105) (3,553) (3,817) (13,918) (3,808) Special charges (305) (133) (496) (696) (1,630) -- Total operating income 8,546 10,360 7,163 6,936 33,005 8,489 INTEREST EXPENSE, NET (787) (667) (728) (628) (2,810) (1,024) OTHER (EXPENSE) INCOME, NET 181 (204) (174) 53 (144) 131 PRETAX INCOME 7,940 9,489 6,261 6,361 30,051 7,596 PROVISION FOR INCOME TAXES (2,779) (3,321) (1,955) (1,613) (9,668) (2,431) EFFECTIVE TAX RATE 35.0% 35.0% 31.2% 25.4% 32.2% 32.0% NET INCOME $5,161 $6,168 $4,306 $4,748 $20,383 $5,165 Weighted Average Common Shares Outstanding (Diluted) 16,054 16,171 16,228 16,172 16,019 16,197 EARNINGS PER COMMON SHARE (Diluted) $0.32 $0.38 $0.27 $0.29 $1.27 $0.32 EARNINGS PER COMMON SHARE (Diluted) excluding special charges $0.33 $0.39 $0.29 $0.33 $1.34 $0.32 EBIT $8,727 $10,156 $6,989 $6,989 $32,861 $8,620 Depreciation 2,597 2,586 2,450 2,192 9,825 2,619 Amortization of intangibles 38 227 65 258 588 515 EBITDA $11,362 $12,969 $9,504 $9,439 $43,274 $11,754 EBITDA AS A PERCENT OF SALES 11.1% 10.9% 8.7% 7.8% 9.6% 9.2% CAPITAL EXPENDITURES $3,668 $3,136 $4,649 $3,568 $15,021 $1,578 CIRCOR INTERNATIONAL, INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS (in thousands) UNAUDITED 2005 2006 1ST QTR 2ND QTR 3RD QTR 4TH QTR YTD 1ST QTR FREE CASH FLOW [NET CASH FLOW FROM OPERATING ACTIVITIES LESS CAPITAL EXPENDITURES LESS DIVIDENDS PAID] $(412) $12,565 $5,307 $10,487 $27,947 $(5,213) ADD: Capital expenditures 3,668 3,136 4,649 3,568 15,021 1,578 Dividends paid 586 589 590 593 2,358 595 NET CASH PROVIDED BY OPERATING ACTIVITIES $3,842 $16,290 $10,546 $14,648 $45,326 $(3,040) NET (CASH) DEBT [TOTAL DEBT LESS CASH AND CASH EQUIVALENTS LESS INVESTMENTS] $15,367 $10,371 $2,054 $2,293 $2,293 $68,271 ADD: Cash and cash equivalents 24,942 29,269 39,154 31,112 31,112 27,069 Investments 4,117 4,026 4,308 86 86 -- TOTAL DEBT $44,426 $43,666 $45,516 $33,491 $33,491 $95,340 NET DEBT AS % OF NET CAPITALIZATION 4.9% 3.3% 0.7% 0.7% 0.7% 17.7% NET CAPITALIZATION [TOTAL DEBT PLUS SHAREHOLDERS' EQUITY LESS CASH AND CASH EQUIVALENTS, LESS INVESTMENTS] $313,378 $310,514 $309,763 $313,016 $313,016 $385,659 LESS: Total debt (44,426) (43,666) (45,516) (33,491) (33,491) (95,340) ADD: Cash and cash equivalents 24,942 29,269 39,154 31,112 31,112 27,069 Investments 4,117 4,026 4,308 86 86 -- TOTAL SHAREHOLDERS' EQUITY 298,011 300,143 307,709 310,723 310,723 317,388 ADD: Total debt 44,426 43,666 45,516 33,491 33,491 95,340 TOTAL CAPITAL $342,437 $343,809 $353,225 $344,214 $344,214 $412,728 TOTAL DEBT/ TOTAL CAPITAL 13.0% 12.7% 12.9% 9.7% 9.7% 23.1% EBIT[NET INCOME LESS INTEREST EXPENSE, NET LESS TAXES] $8,727 $10,156 $6,989 $6,989 $32,861 $8,620 LESS: Interest expense, net (787) (667) (728) (628) (2,810) (1,024) Provision for income taxes (2,779) (3,321) (1,955) (1,613) (9,668) (2,431) NET INCOME $5,161 $6,168 $4,306 $4,748 $20,383 $5,165 EBITDA [NET INCOME LESS INTEREST EXPENSE, NET LESS DEPRECIATION LESS AMORTIZATION LESS TAXES] $11,362 $12,969 $9,504 $9,439 $43,274 $11,754 LESS: Interest expense, net (787) (667) (728) (628) (2,810) (1,024) Depreciation (2,597) (2,586) (2,450) (2,192) (9,825) (2,619) Amortization of intangibles (38) (227) (65) (258) (588) (515) Provision for income taxes (2,779) (3,321) (1,955) (1,613) (9,668) (2,431) NET INCOME $5,161 $6,168 $4,306 $4,748 $20,383 $5,165 INCOME EXCLUDING SPECIAL CHARGES [NET INCOME LESS SPECIAL CHARGES, NET OF TAX] $5,359 $6,254 $4,647 $5,268 $21,489 $5,165 LESS: Special charges, net of tax (198) (86) (341) (520) (1,106) -- NET INCOME $5,161 $6,168 $4,306 $4,748 $20,383 $5,165 Weighted average common shares outstanding (diluted) 16,054 16,171 16,228 16,172 16,019 16,197 EARNINGS PER SHARE EXCLUDING SPECIAL CHARGES $0.33 $0.39 $0.29 $0.33 $ 1.34 $0.32