BURLINGTON, Mass., July 30 /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 the second quarter ended June 29, 2008.
Revenues for the 2008 second quarter were $206.6 million, an increase of 25% from $165.9 million for the second quarter 2007. Net income for the second quarter of 2008 increased 84% to $18.4 million, or $1.08 per diluted share. Net income for the second quarter of 2007 was $10.0 million, or $0.60 per diluted share, which included $0.03 per diluted share of special charges primarily related to the consolidation of manufacturing facilities.
For the six months ended June 29, 2008, revenues were $383.2 million, an increase of 17% from $327.2 million for the comparable period in 2007. Net income for the first half of 2008 was $31.3 million, or $1.85 per diluted share, an increase of 80% from $17.4 million, or $1.05 per diluted share, from the first half of 2007.
The Company received orders totaling $197.9 million during the second quarter of 2008 a decrease of 13% from the second quarter of 2007, and a 17% decrease from the first quarter of 2008. The year-over-year reduction in activity was primarily driven by exceptional energy project orders in the second quarter of 2007. Sequentially, the reduction was due primarily to strong maritime orders and energy project orders in the first quarter of 2008. For the first six months of 2008, orders totaled $434.9 million with a second quarter 2008 ending backlog of $446.0 million. This compares to 2007 orders for the first six months of $415.2 million and a second quarter 2007 ending backlog of $373.7 million and represents year-over-year increases of 5% and 19%, respectively.
During the second quarter of 2008, the Company generated $31.6 million of free cash flow (defined as net cash from operating activities, less capital expenditures and dividends paid) and, for the first six months of 2008, the Company had free cash flow of $26.2 million. This compares favorably to the first six months of 2007 during which the Company generated zero free cash flow. The improvement from 2007 largely resulted from the sharp increase in profitability and reduced working capital needs.
Circor's Instrumentation and Thermal Fluid Controls Products segment revenues increased 15%, to $98.9 million from $85.7 million in the second quarter 2007, with approximately 4% of the increase due to favorable currency adjustments. Incoming orders for this segment were $101.0 million for the second quarter 2008, an increase of 2% from $99.1 million in the second quarter 2007 despite the fact that the 2007 second quarter orders included stronger multi-quarter aerospace orders. This segment's operating margin for the second quarter 2008 was 10.9% compared to 8.7% in the second quarter of 2007, and 11.3% in the first quarter of 2008. Compared to the second quarter of 2007 improvement primarily came from price, mix of shipments, volume and productivity.
Circor's Energy Products segment revenues increased by $27.5 million, or 34%, to $107.7 million for the quarter ended June 29, 2008 compared to $80.2 million in the quarter ended July 1, 2007. Higher foreign exchange rates, primarily the higher Euro compared to the US dollar, accounted for approximately 12% of the incremental revenue increase. Incoming orders for the quarter were $96.9 million, a decrease of 25% compared to $129.3 million in the second quarter of 2007 which included some strong multi-quarter oil and gas project orders. This segment's operating margin was 20.4% during the second quarter of 2008 compared to 16.3% for the second quarter of 2007 and 16.2% for the first quarter of 2008. Consistent with the first quarter of 2008, margins benefited from favorable mix on large international oil and gas projects and increased unit volume, partially offset by material inflation and unfavorable currency impacts from China sourcing as the RMB continued to appreciate versus the US dollar.
Bill Higgins, Circor's President and Chief Executive Officer, said, "Our second quarter results once again exceeded our expectations, producing another record quarter with operating margins of 13.3% compared to 9.5% for the similar period in 2007 and 11.0% in the first quarter of 2008. Also, free cash flow has greatly exceeded the first half of last year. Both segments continued to contribute with Instrumentation and Thermal Fluids operating margins 220 basis points over the second quarter of 2007 and Energy Products 410 basis points higher. These strong results are the combination of many factors including solid global end markets, favorable European currencies and a great mix of products and projects as well as a continued focus on operational improvements."
Circor provided guidance for its third quarter 2008 results, indicating it expects earnings to be in the range of $0.90 to $1.00 per diluted share, excluding special charges.
CIRCOR International will hold a conference call to review its results on Thursday, July 31, 2008, at 1:00 pm ET. Interested parties may access the call by dialing 888-797-2994 from the US and Canada and (913) 312-6681 from international locations. A replay of the call will be available from 4:00 pm ET on Thursday, July 31, 2008, through 4:00 pm ET on Thursday, August 7, 2008. To access the replay, interested parties should dial (888) 203-1112 or (719) 457-0820 and enter confirmation code #9284343 when prompted. The presentation slides that will be discussed in the conference call are expected to be available today, Wednesday, July 30, 2008, by 6:00 pm ET and may be downloaded from the quarterly earnings page of the investor section on the CIRCOR website at http://www.circor.com/quarterlyearnings.
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. 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, 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.
CIRCOR INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) UNAUDITED Three Months Ended Six Months Ended June 29, July 1, June 29, July 1, 2008 2007 2008 2007 Net revenues $206,605 $165,937 $383,180 $327,200 Cost of revenues 139,698 116,116 261,383 232,587 GROSS PROFIT 66,907 49,821 121,797 94,613 Selling, general and administrative expenses 39,417 33,376 74,637 65,464 Special charges - 615 160 1,305 OPERATING INCOME 27,490 15,830 47,000 27,844 Other (income) expense: Interest income (305) (77) (506) (130) Interest expense 282 961 629 2,232 Other (income) expense, net 248 214 648 118 Total other expense 225 1,098 771 2,220 INCOME BEFORE INCOME TAXES 27,265 14,732 46,229 25,624 Provision for income taxes 8,840 4,714 14,909 8,200 NET INCOME $18,425 $10,018 $31,320 $17,424 Earnings per common share: Basic $1.09 $0.61 $1.87 $1.07 Diluted $1.08 $0.60 $1.85 $1.05 Weighted average common shares outstanding: Basic 16,829 16,390 16,756 16,301 Diluted 17,053 16,679 16,965 16,582 CIRCOR INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) UNAUDITED Six Months Ended June 29, July 1, 2008 2007 OPERATING ACTIVITIES Net income $31,320 $17,424 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,851 5,620 Amortization 1,332 1,258 Compensation expense of stock-based plans 2,642 1,711 Tax effect of share based compensation (1,639) (2,065) Loss on sale of assets held for sale 1 210 Gain on disposal of property, plant and equipment (60) (28) Equity in undistributed income of affiliates - 43 Changes in operating assets and liabilities, net of effects from business acquisitions: Trade accounts receivable (13,668) 938 Inventories (1,039) (15,276) Prepaid expenses and other assets (3,044) (6,927) Accounts payable, accrued expenses and other liabilities 12,015 2,367 Net cash provided by operating activities 33,711 5,275 INVESTING ACTIVITIES Additions to property, plant and equipment (6,267) (4,042) Proceeds from disposal of property, plant and equipment 162 412 Proceeds from sale of assets held for sale 311 508 Purchase of ST investments (91,346) Proceeds from sale of ST investments 69,306 Business acquisitions, net of cash acquired (7,263) - Net cash used in investing activities (35,097) (3,122) FINANCING ACTIVITIES Proceeds from debt borrowings 54,505 45,994 Payments of debt (53,294) (55,616) Dividends paid (1,257) (1,223) Proceeds from the exercise of stock options 2,275 2,611 Tax effect of share based compensation 1,639 2,065 Net cash provided by (used in) financing activities 3,868 (6,169) Effect of exchange rate changes on cash and cash equivalents 1,691 645 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,173 (3,371) Cash and cash equivalents at beginning of year 34,662 28,652 CASH AND CASH EQUIVALENTS AT END OF PERIOD $38,835 $25,281 CIRCOR INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) UNAUDITED June 29, December 31, 2008 2007 ASSETS Current Assets: Cash & cash equivalents $38,835 $34,662 Investments 31,590 8,861 Trade accounts receivable, less allowance for doubtful accounts of $2,225 and $2,151, respectively 144,876 125,663 Inventories 179,953 171,661 Prepaid expenses and other current assets 6,435 3,990 Deferred income taxes 8,927 8,220 Insurance receivable 6,912 6,885 Assets held for sale - 312 Total Current Assets 417,528 360,254 Property, Plant and Equipment, net 85,617 82,465 Other Assets: Goodwill 184,914 169,110 Intangibles, net 47,733 47,373 Non-current insurance receivable 5,848 5,014 Other assets 1,912 12,253 Total Assets $743,552 $676,469 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $91,322 $82,038 Accrued expenses and other current liabilities 77,072 72,481 Accrued compensation and benefits 19,501 21,498 Asbestos liability 9,723 9,697 Income taxes payable 14,259 7,900 Notes payable and current portion of long-term debt 388 201 Total Current Liabilities 212,265 193,815 Long-Term Debt, net of current portion 23,241 21,901 Deferred Income Taxes 19,786 19,106 Long-Term Asbestos Liability 8,774 7,062 Other Non-Current Liabilities 13,528 14,201 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 16,442,319 and 16,181,070 issued and outstanding, respectively 168 167 Additional paid-in capital 247,159 240,000 Retained earnings 174,689 144,644 Accumulated other comprehensive income 43,942 35,573 Total Shareholders' Equity 465,958 420,384 Total Liabilities and Shareholders' Equity $743,552 $676,469 CIRCOR INTERNATIONAL, INC. SUMMARY OF ORDERS AND BACKLOG (in thousands) UNAUDITED Three Months Ended Six Months Ended June 29, July 1, June 29, July 1, 2008 2007 2008 2007 ORDERS Instrumentation & Thermal Fluid Controls $101,002 $99,057 $212,168 $183,828 Energy Products 96,877 129,345 222,736 231,416 Total orders $197,879 $228,402 $434,904 $415,244 June 29, July 1, 2008 2007 BACKLOG Instrumentation & Thermal Fluid Controls $164,259 $130,224 Energy Products 281,714 243,490 Total backlog $445,973 $373,714 Note: Backlog includes all unshipped customer orders. CIRCOR INTERNATIONAL, INC. SUMMARY REPORT BY SEGMENT (in thousands, except earnings per share) UNAUDITED 2007 1ST QTR 2ND QTR 3RD QTR 4TH QTR YTD NET REVENUES Instrumentation & Thermal Fluid Controls (TFC) $81,296 $85,740 $85,094 $91,466 $343,596 Energy Products 79,967 80,197 78,923 83,057 322,144 Total 161,263 165,937 164,017 174,523 665,740 ADJUSTED OPERATING MARGIN Instrumentation & TFC (excl. special & asbestos charges) 8.9% 9.6% 9.3% 12.8% 10.2% Energy Products (excl. special charges) 12.7% 16.3% 17.4% 15.3% 15.4% Segment operating income (excl. special & asbestos charges) 10.8% 12.8% 13.2% 14.0% 12.7% Corporate expenses (excl. special & asbestos charges) -2.3% -2.3% -3.0% -3.1% -2.7% Asbestos charges (attributable to Instrumentation & TFC) -0.6% -0.6% -1.1% -2.1% -1.1% Special charges -0.4% -0.4% -1.3% 0.5% -0.4% Total operating margin 7.4% 9.5% 7.8% 9.3% 8.5% ADJUSTED OPERATING INCOME Instrumentation & TFC (excl. special & asbestos charges) 7,271 8,204 7,913 11,681 35,069 Energy Products (excl. special charges) 10,125 13,063 13,745 12,675 49,608 Segment operating income (excl. special & asbestos charges) 17,396 21,267 21,658 24,356 84,677 Corporate expenses (excl. special & asbestos charges) (3,653) (3,804) (4,942) (5,463) (17,862) Asbestos charges (attributable to Instrumentation & TFC) (1,038) (1,018) (1,837) (3,641) (7,534) Special charges (691) (615) (2,130) 922 (2,514) Total operating income 12,014 15,830 12,749 16,174 56,767 INTEREST EXPENSE, NET (1,218) (884) (744) (155) (3,001) OTHER (EXPENSE) INCOME, NET 97 (215) 1,508 (133) 1,257 PRETAX INCOME 10,893 14,731 13,513 15,886 55,023 PROVISION FOR INCOME TAXES (3,486) (4,713) (3,148) (5,765) (17,112) EFFECTIVE TAX RATE 32.0% 32.0% 23.3% 36.3% 31.1% NET INCOME $7,407 $10,018 $10,365 $10,121 $37,911 Weighted Average Common Shares Outstanding (Diluted) 16,533 16,679 16,768 16,925 16,730 EARNINGS PER COMMON SHARE (Diluted) $0.45 $0.60 $0.62 $0.60 $2.27 EBIT $12,111 $15,615 $14,257 $16,041 $58,024 Depreciation 2,808 2,812 2,662 2,588 10,870 Amortization of intangibles 626 632 659 662 2,579 EBITDA $15,545 $19,059 $17,578 $19,291 $71,473 EBITDA AS A PERCENT OF SALES 9.6% 11.5% 10.7% 11.1% 10.7% CAPITAL EXPENDITURES $1,776 $2,266 $2,844 $5,097 $11,983 CIRCOR INTERNATIONAL, INC. SUMMARY REPORT BY SEGMENT (in thousands, except earnings per share) UNAUDITED 2008 1ST QTR 2ND QTR YTD NET REVENUES Instrumentation & Thermal Fluid Controls (TFC) $88,450 $98,867 $187,317 Energy Products 88,125 107,738 195,863 Total 176,575 206,605 383,180 ADJUSTED OPERATING MARGIN Instrumentation & TFC (excl. special & asbestos charges) 12.5% 12.6% 12.6% Energy Products (excl. special charges) 16.2% 20.4% 18.5% Segment operating income (excl. special & asbestos charges) 14.4% 16.6% 15.6% Corporate expenses (excl. special & asbestos charges) -2.6% -2.4% -2.5% Asbestos charges (attributable to Instrumentation & TFC) -0.6% -1.0% -0.8% Special charges -0.1% 0.0% 0.0% Total operating margin 11.0% 13.3% 12.3% ADJUSTED OPERATING INCOME Instrumentation & TFC (excl. special & asbestos charges) 11,069 12,451 23,520 Energy Products (excl. special charges) 14,303 21,938 36,241 Segment operating income (excl. special & asbestos charges) 25,372 34,389 59,761 Corporate expenses (excl. special & asbestos charges) (4,628) (4,890) (9,518) Asbestos charges (attributable to Instrumentation & TFC) (1,075) (2,009) (3,084) Special charges (160) - (160) Total operating income 19,509 27,490 46,999 INTEREST EXPENSE, NET (145) 23 (122) OTHER (EXPENSE) INCOME, NET (401) (248) (649) PRETAX INCOME 18,963 27,265 46,228 PROVISION FOR INCOME TAXES (6,068) (8,840) (14,908) EFFECTIVE TAX RATE 32.0% 32.4% 32.2% NET INCOME $12,895 $18,425 $31,320 Weighted Average Common Shares Outstanding (Diluted) 16,872 17,053 16,965 EARNINGS PER COMMON SHARE (Diluted) $0.76 $1.08 $1.85 EBIT $19,108 $27,242 $46,350 Depreciation 2,874 2,977 5,851 Amortization of intangibles 656 676 1,332 EBITDA $22,638 $30,895 $53,533 EBITDA AS A PERCENT OF SALES 12.8% 15.0% 14.0% CAPITAL EXPENDITURES $2,851 $3,416 $6,267 CIRCOR INTERNATIONAL, INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS (in thousands) UNAUDITED 2007 1ST QTR 2ND QTR 3RD QTR 4TH QTR YTD FREE CASH FLOW [NET CASH FLOW FROM OPERATING ACTIVITIES LESS CAPITAL EXPENDITURES LESS DIVIDENDS PAID] $(5,429) $5,439 $11,470 $30,989 $42,469 ADD: Capital expenditures 1,776 2,266 2,844 5,097 11,983 Dividends paid 609 614 617 624 2,464 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $(3,044) $8,319 $14,931 $36,710 $56,916 NET (CASH) DEBT [TOTAL DEBT LESS CASH & CASH EQUIVALENTS LESS INVESTMENTS] $39,366 $29,848 $11,815 $(21,421) $(21,421) ADD: Cash & cash equivalent 27,050 25,281 30,174 34,662 34,662 Investments 87 94 100 8,861 8,861 TOTAL DEBT $66,503 $55,223 $42,089 $22,102 $22,102 NET DEBT AS % OF NET CAPITALIZATION 10% 7% 3% -5% -5% NET CAPITALIZATION [TOTAL DEBT PLUS SHAREHOLDERS' EQUITY LESS CASH & CASH EQUIVALENTS, LESS INVESTMENTS] $408,944 $415,386 $420,951 $398,963 $398,963 LESS: Total debt (66,503) (55,223) (42,089) (22,102) (22,102) ADD: Cash & cash equivalents 27,050 25,281 30,174 34,662 34,662 Investments 87 94 100 8,861 8,861 TOTAL SHAREHOLDERS' EQUITY 369,578 385,538 409,136 420,384 420,384 ADD: Total debt 66,503 55,223 42,089 22,102 22,102 TOTAL CAPITAL $436,081 $440,761 $451,225 $442,486 $442,486 TOTAL DEBT/TOTAL CAPITAL 15% 13% 9% 5% 5% EBIT [NET INCOME LESS INTEREST EXPENSE, NET] $12,111 $15,615 $14,257 $16,041 $58,024 LESS: Interest expense, net (1,218) (884) (744) (155) (3,001) Provision for income taxes (3,486) (4,713) (3,148) (5,765) (17,112) NET INCOME $7,407 $10,018 $10,365 $10,121 $37,911 EBITDA [NET INCOME LESS INTEREST EXPENSE, NET LESS DEPRECIATION LESS AMORTIZATION LESS TAXES] $15,545 $19,059 $17,578 $19,291 $71,473 LESS: Interest expense, net (1,218) (884) (744) (155) (3,001) Depreciation (2,808) (2,812) (2,662) (2,588) (10,870) Amortization of intangibles (626) (632) (659) (662) (2,579) Provision for income taxes (3,486) (4,713) (3,148) (5,765) (17,112) NET INCOME $7,407 $10,018 $10,365 $10,121 $37,911 CIRCOR INTERNATIONAL, INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS (in thousands) UNAUDITED 2008 1ST QTR 2ND QTR YTD FREE CASH FLOW [NET CASH FLOW FROM OPERATING ACTIVITIES LESS CAPITAL EXPENDITURES LESS DIVIDENDS PAID] $(5,366) $31,553 $26,187 ADD: Capital expenditures 2,851 3,416 6,267 Dividends paid 626 631 1,257 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $(1,889) $35,600 $33,711 NET (CASH) DEBT [TOTAL DEBT LESS CASH & CASH EQUIVALENTS LESS INVESTMENTS] $(21,709) $(46,796) $(46,796) ADD: Cash & cash equivalents 42,690 38,835 38,835 Investments 4,036 31,590 31,590 TOTAL DEBT $25,017 $23,629 $23,629 NET DEBT AS % OF NET CAPITALIZATION -5% -11% -11% NET CAPITALIZATION [TOTAL DEBT PLUS SHAREHOLDERS' EQUITY LESS CASH & CASH EQUIVALENTS, LESS INVESTMENTS] $424,670 $419,162 $419,162 LESS: Total debt (25,017) (23,629) (23,629) ADD: Cash & cash equivalents 42,690 38,835 38,835 Investments 4,036 31,590 31,590 TOTAL SHAREHOLDERS' EQUITY 446,379 465,958 465,958 ADD: Total debt 25,017 23,629 23,629 TOTAL CAPITAL $471,396 $489,587 $489,587 TOTAL DEBT/TOTAL CAPITAL 5% 5% 5% EBIT [NET INCOME LESS INTEREST EXPENSE, NET] $19,108 $27,242 $46,350 LESS: Interest expense, net (145) 23 (122) Provision for income taxes (6,068) (8,840) (14,908) NET INCOME $12,895 $18,425 $31,320 EBITDA [NET INCOME LESS INTEREST EXPENSE, NET LESS DEPRECIATION LESS AMORTIZATION LESS TAXES] $22,638 $30,895 $53,533 LESS: Interest expense, net (145) 23 (122) Depreciation (2,874) (2,977) (5,851) Amortization of intangibles (656) (676) (1,332) Provision for income taxes (6,068) (8,840) (14,908) NET INCOME $12,895 $18,425 $31,320
