UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 2, 2011
CIRCOR INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE | 001-14962 | 04-3477276 | ||
(State or other jurisdiction of incorporation) |
(Commission file number) |
(IRS employer identification no.) |
25 CORPORATE DRIVE, SUITE 130
BURLINGTON, MASSACHUSETTS 01803-4238
(Address of principal executive offices) (Zip Code)
(781) 270-1200
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01 | Entry into a Material Definitive Agreement. |
On May 2, 2011, Circor International, Inc. (the Company) entered into a Credit Agreement (the Credit Agreement), dated as of May 2, 2011, among the Company, as borrower, certain subsidiaries of the Company, as guarantors (the Subsidiary Guarantors), the lenders from time to time party thereto (the Lenders) and SunTrust Bank, as administrative agent, swing line lender and a letter of credit issuer. The Credit Agreement provides for a $300 million revolving line of credit as well as an option to increase the revolving line of credit by $150 million if certain conditions in the Credit Agreement are satisfied (the Line of Credit). The Line of Credit may be used to borrow revolving loans or, subject to certain limitations, to issue letters of credit on the Companys behalf. The Line of Credit expires on the earlier of May 2, 2016 or the date on which it is terminated by the Company or the Lenders in accordance with the Credit Agreement, on which date all amounts outstanding under the Credit Agreement will be due. The Company may repay any borrowings under the Credit Agreement at any time, subject to certain restrictions stated in the Credit Agreement.
The Companys previous revolving credit facility was governed by a Credit Agreement, dated as of July 29, 2009 (the Prior Credit Agreement), among the Company, as borrower, certain subsidiaries of the Company, as guarantors (the Subsidiary Guarantors), the lenders from time to time party thereto (the Lenders) and Keybank National Association, as joint-lead arranger, co-bookrunner and administrative agent, swing line lender and a letter of credit issuer. The Prior Credit Agreement, under which the Company had approximately $98 million outstanding, was terminated, as of May 2, 2011, and replaced by the Credit Agreement. As of the date of this current report, there was approximately $96 million outstanding under the Line of Credit. In addition, there were approximately $3.0 million of outstanding letters of credit issued under the Prior Credit Agreement, which shall automatically be deemed to constitute and continue as letters of credit issued under the Credit Agreement.
The borrowings under the Line of Credit bear interest and fees as set forth in the Credit Agreement. Under the Credit Agreement, the Company must comply with various financial and non-financial covenants. The financial covenants include a minimum interest coverage ratio and a maximum leverage ratio. The primary non-financial covenants include, but are not limited to, restrictions on the Companys ability to conduct certain mergers or acquisitions, sell certain assets, incur certain future indebtedness or liens and make certain investments or loans. The Credit Agreement also includes events of default, including, without limitation, payment defaults, representation or warranty inaccuracies, covenant violations, cross-defaults to other agreements evidencing indebtedness for borrowed money, invalidity of certain loan documents relating to the Credit Agreement, certain judgments, bankruptcy and insolvency events and the occurrence of events constituting a change of control. The Lenders are entitled to accelerate repayment of the loans under the Credit Agreement upon the occurrence of any events of default under the Credit Agreement.
Each Subsidiary Guarantor absolutely and unconditionally guarantees all of the obligations under the Credit Agreement. Under certain circumstances, the Company and the Subsidiary Guarantors must pledge certain equity interests in the Subsidiary Guarantors.
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Item 1.02 | Termination of a Material Definitive Agreement. |
See the disclosure under Item 1.01 above, which is incorporated herein by reference.
Item 2.02 | Results of Operations and Financial Condition. |
By press release dated May 5, 2011, the Company announced its financial results for the three months ended April 3, 2011. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Form 8-K and the Exhibit 99.1 attached hereto shall not be deemed filed for purposes of Section 18 of the Securities and Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by special reference in such filing.
In the press release and accompanying supplemental information, the Company uses the following non-GAAP financial measures: free cash flow, EBIT, EBITDA, adjusted operating income, and adjusted earnings per share (EPS). Management of the Company believes that free cash flow (defined as net cash flow from operating activities, less capital expenditures and dividends paid) is an important measure of its liquidity as well as its ability to service long-term debt, fund future growth and to provide a return to shareholders. We also believe this free cash flow definition does not have any material limitations. EBIT (defined as net income plus interest expense, net plus provision for income taxes), EBITDA (defined as net income plus interest expense, net, plus provision for income taxes, plus depreciation and amortization), adjusted operating income (defined as operating income, excluding the impact of Leslie asbestos and bankruptcy charges), and adjusted EPS (defined as earnings per common share, excluding Leslie asbestos and bankruptcy charges, net of tax) are provided because management believes these measurements are useful for investors and financial institutions to analyze and compare companies on the basis of operating performance. Free cash flow, EBIT, EBITDA, adjusted operating income, and adjusted EPS are not measurements for financial performance under GAAP and should not be construed as a substitute for cash flows, operating income, net income or earnings per share. Free cash flow, EBIT, EBITDA, adjusted operating income, and adjusted EPS as we have calculated here, may not necessarily be comparable to similarly titled measures used by other companies. A reconciliation of free cash flow, EBIT, EBITDA, adjusted operating income, and adjusted EPS to the most directly comparable GAAP financial measure is provided in the supplemental information table titled Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms which is included as an attachment to the press release.
Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
See the disclosure under Item 1.01 above, which is incorporated herein by reference.
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Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
Exhibit No. |
Description | |
99.1 | Press Release regarding Earnings, Dated May 5, 2011 |
4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 5, 2011 | CIRCOR INTERNATIONAL, INC. | |||||
/s/ Frederic M. Burditt | ||||||
By: | Frederic M. Burditt | |||||
Title: | Vice President, Chief Financial Officer and Treasurer |
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Exhibit 99.1
PRESS RELEASE
CIRCOR Reports 39% Revenue Growth for First Quarter of 2011
Adjusted Earnings Per Share Grew by 58%
Total Orders Increase by 30% Year-Over-Year, Energy Up 72%
Leslie Subsidiary Emerges from Bankruptcy
Company Enters into New Credit Agreement for $300 Million with Improved Terms
Burlington, MA May 5, 2011 CIRCOR International, Inc. (NYSE: CIR), a leading provider of valves and other highly engineered products for the industrial, aerospace and energy markets, today announced financial results for the first quarter ended April 3, 2011.
Management Comments on First-Quarter Results
CIRCOR is off to a strong start in 2011, said Chairman and Chief Executive Officer Bill Higgins. Revenues grew by 39% year over year, and adjusted earnings per share, excluding Leslie asbestos and bankruptcy charges, increased by 58%. Our short-cycle Energy and Flow Technologies end markets are the strongest, benefiting from early-cycle economic activity. Total Orders for the quarter were up 30% year over year; with Energy bookings growing 72%.
We are very pleased to have accomplished the final step to permanently resolve Leslies asbestos liability. Last week we funded the asbestos trust and Leslie Controls has emerged from bankruptcy. said Higgins. In addition, to support our strategic growth, we have entered into a new $300 million, five-year unsecured credit agreement, which provides better terms than our previous arrangement and additional borrowing capacity.
CIRCOR also announced that Paul M. Coppinger will be leaving the Company May 13, 2011. As President of CIRCOR Energy, Mr. Coppinger led the segment through a period of plant consolidations and lean implementations. Commenting on the Companys search for a new CIRCOR Energy leader, Mr. Higgins said, This individual will drive the transition to accelerating global growth both organically and through acquisitions.
Consolidated Results
Revenues for the first quarter of 2011 were $203.4 million, a 39% increase from $146.3 million generated in the first quarter of 2010. CIRCOR reported net income for the first quarter of 2011 of $7.9 million, or $0.45 per diluted share, compared with net income of $5.7 million, or $0.33 per diluted share, for the first quarter of 2010.
Consolidated adjusted operating earnings, which excludes Leslie asbestos and bankruptcy charges, was $13.8 million for the first quarter of 2011 compared to $7.3 million for first quarter 2010, an increase of 89%.
1
First-quarter 2011 net income included pretax Leslie asbestos and bankruptcy charges of $1.0 million, compared with $0.6 million of pretax asbestos recoveries in the first quarter of 2010. Excluding Leslie asbestos and bankruptcy charges and recoveries net of tax, adjusted earnings per diluted share increased 58% to $0.49 for the first quarter of 2011, compared with $0.31 in the first quarter of 2010.
Consolidated Orders and Free Cash Flow
The Company received orders totaling $221.6 million during the first quarter of 2011, an increase of 30% compared with the first quarter of 2010 and a 4% increase compared with the fourth quarter of 2010. Backlog as of April 3, 2011 was $419.1 million, up 27% from backlog of $330.4 million at April 4, 2010 and up 4% from $404.3 million at December 31, 2010.
During the first quarter of 2011, the Company generated $0.9 million of free cash flow (defined as net cash from operating activities, less capital expenditures and dividends paid) compared with using $7.0 million in the first quarter of 2010, primarily due to higher net income and working capital improvements.
Energy
CIRCORs Energy segment revenues of $99.2 million for the quarter ended April 3, 2011 represent a 72% increase from $57.7 million for the quarter ended April 4, 2010. The increase included 65% organic growth, 4% growth from acquisitions, and a positive foreign currency adjustment of 3%. The growth was primarily the result of strong shipment volume for large international projects and short-cycle North American business, the acquisition of SF Valves in February, and favorable foreign currency fluctuations.
Incoming orders for the first quarter of 2011 were $113.7 million, an increase of 72% year over year, but down 6% sequentially. The year-over-year growth was primarily due to strength in large international projects, which has rebounded from the low order intake in the previous year. Ending backlog totaled $203.1 million, a 50% increase year over year and a 13% increase sequentially.
For the first quarter of 2011, the Energy segment adjusted operating margin of 6.4% compares with 3.5% for the first quarter of 2010 and 6.7% for the fourth quarter of 2010. The year-over-year increase was driven primarily by the improved margins and revenue in the North American short-cycle businesses, partially offset by pricing pressure on large international projects.
Aerospace
CIRCORs Aerospace segment revenues increased by 18% to $32.1 million for the first quarter of 2011 from $27.3 million in the first quarter of 2010. The increase in revenues was driven by 14% growth from acquisitions, 4% organic growth, and a 1% positive foreign currency adjustment.
Incoming orders for the first quarter of 2011 were $32.8 million, a decrease of 6% year over year, but up 7% sequentially. The year-over-year order decrease was primarily due to the timing of military landing gear orders which were high in the first quarter of 2010, partially offset by the positive impact of acquisitions. Ending backlog totaled $135.3 million, an increase of 12% year over year, but down 8% sequentially.
2
The Aerospace segments adjusted operating margin was 11.6% for the first quarter of 2011, compared with 13.2% for the first quarter of 2010, and 14.1% for the fourth quarter of 2010. First-quarter 2011 adjusted operating margins decreased year over year primarily as a result of higher costs associated with the integration of the Castle acquisition.
Flow Technologies
CIRCORs Flow Technologies segment revenues increased 18% to $72.1 million for the first quarter of 2011 from $61.3 million in the first quarter of 2010. First-quarter 2011 revenues reflected organic growth of 15%, due to continued semiconductor strength and steady progress in process and industrial markets, growth from acquisitions of 2%, and a favorable foreign currency adjustment of 1%.
Incoming orders for this segment were $75.0 million for the first quarter of 2011, an increase of 9% year over year and 24% sequentially. The year-over-year and sequential increase reflects an improvement in most markets except refining and maritime. Ending backlog totaled $80.7 million, an increase of 9% year over year and an increase of 5% sequentially.
This segments adjusted operating margin, which excludes the impact of Leslie asbestos and bankruptcy charges, for the first quarter of 2011, was 13.7%, compared with 10.2% in the first quarter of 2010 and 12.5% in the fourth quarter of 2010. The first-quarter year-over-year adjusted operating margin increase was due primarily to higher volumes and associated leverage.
Business and Financial Outlook
2011 is shaping up to be a year of improving performance for CIRCOR, said Higgins. Short cycle bookings for our Energy business remain solid and large international projects are continuing to recover. We expect Energy margins will slowly improve, as we work through the lower margin project backlog. Commercial aerospace has come off the bottom; however, military sales will remain soft for the near-term. The end markets within our Flow Technologies business are healthy.
CIRCOR currently expects revenues for the second quarter of 2011 in the range of $200 million to $207 million and adjusted earnings are expected to be in the range of $0.42 to $0.52 per diluted share. CIRCORs guidance for adjusted earnings per share assumes a 31% tax rate and that exchange rates remain at present levels.
Conference Call Information
CIRCOR International will hold a conference call to review its financial results today, May 5, 2011, 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 Companys website.
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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 Companys 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 CIRCORs future performance, including second-quarter revenue and earnings guidance. 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 industrial, aerospace and energy markets. With more than 7,000 customers in over 100 countries, CIRCOR has a diversified product portfolio with recognized, market-leading brands. CIRCORs culture, built on the CIRCOR Business System, is defined by the Companys commitment to attracting, developing and retaining the best talent and pursuing continuous improvement in all aspects of its business and operations. The Companys 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 Companys investor relations web site at http://investors.circor.com.
Contact:
Frederic M. Burditt
Chief Financial Officer
CIRCOR International
(781) 270-1200
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CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
UNAUDITED
Three Months Ended | ||||||||
April 3, 2011 | April 4, 2010 | |||||||
Net revenues |
$ | 203,370 | $ | 146,269 | ||||
Cost of revenues |
147,160 | 103,550 | ||||||
GROSS PROFIT |
56,210 | 42,719 | ||||||
Selling, general and administrative expenses |
42,437 | 35,418 | ||||||
Leslie asbestos and bankruptcy charges (recoveries) |
1,001 | (648 | ) | |||||
OPERATING INCOME |
12,772 | 7,949 | ||||||
Other expense (income): |
||||||||
Interest income |
(43 | ) | (43 | ) | ||||
Interest expense |
816 | 597 | ||||||
Other expense (income), net |
915 | (51 | ) | |||||
Total other expense |
1,688 | 503 | ||||||
INCOME BEFORE INCOME TAXES |
11,084 | 7,446 | ||||||
Provision for income taxes |
3,178 | 1,713 | ||||||
NET INCOME |
$ | 7,906 | $ | 5,733 | ||||
Earnings per common share: |
||||||||
Basic |
$ | 0.46 | $ | 0.34 | ||||
Diluted |
$ | 0.45 | $ | 0.33 | ||||
Weighted average common shares outstanding: |
||||||||
Basic |
17,163 | 17,051 | ||||||
Diluted |
17,378 | 17,193 |
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
UNAUDITED
Three Months Ended | ||||||||
April 3, 2011 | April 4, 2010 | |||||||
OPERATING ACTIVITIES |
||||||||
Net income |
$ | 7,906 | $ | 5,733 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
Depreciation |
3,575 | 3,228 | ||||||
Amortization |
1,418 | 979 | ||||||
Compensation expense of stock-based plans |
1,136 | 843 | ||||||
Tax effect of share based compensation |
(256 | ) | 112 | |||||
Loss on disposal of property, plant and equipment |
2 | 0 | ||||||
Changes in operating assets and liabilities, net of effects from business acquisitions: |
||||||||
Trade accounts receivable |
1,421 | (10,734 | ) | |||||
Inventories |
(4,622 | ) | (4,332 | ) | ||||
Prepaid expenses and other assets |
(6,781 | ) | (8,212 | ) | ||||
Accounts payable, accrued expenses and other liabilities |
416 | 9,609 | ||||||
Net cash provided by (used in) operating activities |
4,215 | (2,774 | ) | |||||
INVESTING ACTIVITIES |
||||||||
Additions to property, plant and equipment |
(2,693 | ) | (3,606 | ) | ||||
Proceeds from the sale of property, plant and equipment |
12 | 13 | ||||||
Purchase of investments |
(1 | ) | 0 | |||||
Business acquisitions, net of cash acquired |
(20,221 | ) | (340 | ) | ||||
Net cash used in investing activities |
(22,903 | ) | (3,933 | ) | ||||
FINANCING ACTIVITIES |
||||||||
Proceeds from long-term debt |
60,748 | 16,110 | ||||||
Payments of long-term debt |
(34,778 | ) | (15,972 | ) | ||||
Dividends paid |
(663 | ) | (639 | ) | ||||
Proceeds from the exercise of stock options |
213 | 256 | ||||||
Tax effect of share based compensation |
256 | (112 | ) | |||||
Net cash provided by (used in) financing activities |
25,776 | (357 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents |
651 | (1,474 | ) | |||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
7,739 | (8,538 | ) | |||||
Cash and cash equivalents at beginning of year |
45,752 | 46,350 | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 53,491 | $ | 37,812 | ||||
CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
UNAUDITED
April 3, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash & cash equivalents |
$ | 53,491 | $ | 45,752 | ||||
Short-term investments |
107 | 101 | ||||||
Trade accounts receivable, less allowance for doubtful accounts of $1,249 and $822, respectively |
141,280 | 138,860 | ||||||
Inventories |
177,340 | 167,797 | ||||||
Income taxes refundable |
1,806 | 1,625 | ||||||
Prepaid expenses and other current assets |
13,200 | 5,749 | ||||||
Deferred income tax asset |
20,422 | 20,111 | ||||||
Insurance receivables |
38 | 38 | ||||||
Assets held for sale |
542 | 542 | ||||||
Total Current Assets |
408,226 | 380,575 | ||||||
Property, Plant and Equipment, net |
100,251 | 95,768 | ||||||
Other Assets: |
||||||||
Goodwill |
72,843 | 63,175 | ||||||
Intangibles, net |
61,977 | 62,322 | ||||||
Deferred income tax asset |
11,829 | 11,829 | ||||||
Other assets |
11,582 | 2,526 | ||||||
Total Assets |
$ | 666,708 | $ | 616,195 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | 86,099 | $ | 80,577 | ||||
Accrued expenses and other current liabilities |
51,572 | 51,248 | ||||||
Accrued compensation and benefits |
20,354 | 22,305 | ||||||
Leslie asbestos and bankruptcy related liabilities |
79,801 | 79,831 | ||||||
Income taxes payable |
0 | 38 | ||||||
Notes payable and current portion of long-term debt |
8,178 | 851 | ||||||
Total Current Liabilities |
246,004 | 234,850 | ||||||
Long-Term Debt, net of current portion |
22,858 | 684 | ||||||
Deferred income taxes |
400 | 0 | ||||||
Other Non-Current Liabilities |
22,740 | 23,841 | ||||||
Shareholders Equity: |
||||||||
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued and outstanding |
0 | 0 | ||||||
Common stock, $.01 par value; 29,000,000 shares authorized; and 17,202,100 and 17,112,688 issued and outstanding, respectively |
172 | 171 | ||||||
Additional paid-in capital |
255,348 | 254,154 | ||||||
Retained earnings |
103,631 | 96,389 | ||||||
Accumulated other comprehensive income |
15,555 | 6,106 | ||||||
Total Shareholders Equity |
374,706 | 356,820 | ||||||
Total Liabilities and Shareholders Equity |
$ | 666,708 | $ | 616,195 | ||||
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED
Three Months Ended | ||||||||
April 3, 2011 | April 4, 2010 | |||||||
ORDERS1 |
||||||||
Energy |
$ | 113.7 | $ | 66.2 | ||||
Aerospace |
32.8 | 34.8 | ||||||
Flow Technologies |
75.0 | 69.1 | ||||||
Total orders |
$ | 221.5 | $ | 170.1 | ||||
April 3, 2011 | April 4, 2010 | |||||||
BACKLOG2 |
||||||||
Energy |
$ | 203.1 | $ | 135.4 | ||||
Aerospace |
135.3 | $ | 121.0 | |||||
Flow Technologies |
80.7 | $ | 74.0 | |||||
Total backlog |
$ | 419.1 | $ | 330.4 | ||||
Note 1: Beginning in Q2 2010, orders have been adjusted to exclude the foreign exchange impact from backlog remeasurement. The three months ended April 4, 2010 reflects an increase of $9.0 million.
Note 2: Backlog includes all unshipped customer orders.
CIRCOR INTERNATIONAL, INC.
SUMMARY REPORT BY SEGMENT
(in thousands, except earnings per share)
UNAUDITED
2010 | 2011 | |||||||||||||||||||||||
1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | YTD | 1ST QTR | |||||||||||||||||||
NET REVENUES |
||||||||||||||||||||||||
Energy |
$ | 57,722 | $ | 77,305 | $ | 80,613 | $ | 90,229 | $ | 305,869 | $ | 99,170 | ||||||||||||
Aerospace |
27,274 | 27,811 | 28,316 | 35,465 | 118,866 | 32,110 | ||||||||||||||||||
Flow Technologies |
61,273 | 62,889 | 68,648 | 68,365 | 261,175 | 72,090 | ||||||||||||||||||
Total |
146,269 | 168,005 | 177,577 | 194,059 | 685,910 | 203,370 | ||||||||||||||||||
* ADJUSTED OPERATING MARGIN |
||||||||||||||||||||||||
Energy |
3.5 | % | 8.3 | % | 11.1 | % | 6.7 | % | 7.7 | % | 6.4 | % | ||||||||||||
Aerospace |
13.2 | % | 14.6 | % | 9.6 | % | 14.1 | % | 13.0 | % | 11.6 | % | ||||||||||||
Flow Technologies |
10.2 | % | 10.1 | % | 13.1 | % | 12.5 | % | 11.5 | % | 13.7 | % | ||||||||||||
Segment operating margin |
8.1 | % | 10.0 | % | 11.7 | % | 10.1 | % | 10.1 | % | 9.8 | % | ||||||||||||
Corporate expenses |
-3.1 | % | -3.1 | % | -2.7 | % | -3.3 | % | -3.1 | % | -3.0 | % | ||||||||||||
* Adjusted operating margin |
5.0 | % | 6.9 | % | 8.9 | % | 6.7 | % | 7.0 | % | 6.8 | % | ||||||||||||
Leslie asbestos and bankruptcy charges (recoveries) |
-0.4 | % | 17.2 | % | 1.3 | % | 1.1 | % | 4.8 | % | 0.5 | % | ||||||||||||
Total operating margin |
5.4 | % | -10.3 | % | 7.6 | % | 5.6 | % | 2.2 | % | 6.3 | % | ||||||||||||
* ADJUSTED OPERATING INCOME |
||||||||||||||||||||||||
Energy |
2,025 | 6,424 | 8,968 | 6,024 | 23,441 | 6,393 | ||||||||||||||||||
Aerospace |
3,607 | 4,067 | 2,726 | 5,002 | 15,402 | 3,727 | ||||||||||||||||||
Flow Technologies |
6,276 | 6,367 | 8,997 | 8,512 | 30,152 | 9,854 | ||||||||||||||||||
Segment operating income |
11,908 | 16,858 | 20,691 | 19,538 | 68,995 | 19,974 | ||||||||||||||||||
Corporate expenses |
(4,607 | ) | (5,274 | ) | (4,859 | ) | (6,494 | ) | (21,234 | ) | (6,201 | ) | ||||||||||||
* Adjusted operating income |
7,301 | 11,584 | 15,832 | 13,044 | 47,761 | 13,773 | ||||||||||||||||||
Leslie asbestos and bankruptcy charges (recoveries) |
(648 | ) | 28,908 | 2,343 | 2,173 | 32,776 | 1,001 | |||||||||||||||||
Total operating income |
7,949 | (17,325 | ) | 13,490 | 10,871 | 14,986 | 12,772 | |||||||||||||||||
INTEREST EXPENSE, NET |
(554 | ) | (586 | ) | (734 | ) | (641 | ) | (2,515 | ) | (773 | ) | ||||||||||||
OTHER (EXPENSE) INCOME, NET |
51 | (258 | ) | 853 | (608 | ) | 38 | (915 | ) | |||||||||||||||
PRETAX INCOME (LOSS) |
7,446 | (18,169 | ) | 13,609 | 9,622 | 12,508 | 11,084 | |||||||||||||||||
(PROVISION) BENEFIT FOR INCOME TAXES |
(1,713 | ) | 6,928 | (3,210 | ) | (1,890 | ) | 115 | (3,178 | ) | ||||||||||||||
EFFECTIVE TAX RATE |
23.0 | % | 38.1 | % | 23.6 | % | 19.6 | % | -0.9 | % | 28.7 | % | ||||||||||||
NET INCOME (LOSS) |
$ | 5,733 | $ | (11,241 | ) | $ | 10,399 | $ | 7,732 | $ | 12,624 | $ | 7,906 | |||||||||||
Weighted Average Common Shares Outstanding (Diluted) |
17,193 | 17,109 | 17,258 | 17,378 | 17,297 | 17,378 | ||||||||||||||||||
EARNINGS PER COMMON SHARE (Diluted) |
$ | 0.33 | $ | (0.66 | ) | $ | 0.60 | $ | 0.44 | $ | 0.73 | $ | 0.45 | |||||||||||
EBIT |
$ | 8,000 | $ | (17,583 | ) | $ | 14,343 | $ | 10,263 | $ | 15,024 | $ | 11,857 | |||||||||||
Depreciation |
3,228 | 3,115 | 3,166 | 3,566 | 13,075 | 3,575 | ||||||||||||||||||
Amortization of intangibles |
979 | 964 | 1,122 | 1,236 | 4,301 | 1,418 | ||||||||||||||||||
EBITDA |
$ | 12,207 | $ | (13,504 | ) | $ | 18,631 | $ | 15,065 | $ | 32,400 | $ | 16,850 | |||||||||||
EBITDA AS A PERCENT OF SALES |
8.3 | % | -8.0 | % | 10.5 | % | 7.8 | % | 4.7 | % | 8.3 | % | ||||||||||||
CAPITAL EXPENDITURES |
$ | 3,606 | $ | 4,580 | $ | 3,213 | $ | 3,513 | $ | 14,913 | $ | 2,693 | ||||||||||||
* | Adjusted Operating Income & Margin excludes Special, Impairment, and Leslie asbestos and bankruptcy charges. |
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED
GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands)
UNAUDITED
2010 | 2011 | |||||||||||||||||||||||
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] |
$ | (7,019 | ) | $ | 11,947 | $ | (3,566 | ) | $ | 15,560 | $ | 16,921 | $ | 859 | ||||||||||
ADD: Capital expenditures |
3,606 | 4,580 | 3,213 | 3,513 | 14,913 | 2,693 | ||||||||||||||||||
Dividends paid |
639 | 640 | 703 | 661 | 2,643 | 663 | ||||||||||||||||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES |
$ | (2,774 | ) | $ | 17,167 | $ | 350 | $ | 19,734 | $ | 34,477 | $ | 4,215 | |||||||||||
NET DEBT (CASH) [TOTAL DEBT LESS CASH & CASH EQUIVALENTS LESS INVESTMENTS] |
$ | (52,713 | ) | $ | (55,976 | ) | $ | (26,225 | ) | $ | (44,318 | ) | $ | (44,318 | ) | $ | (22,562 | ) | ||||||
ADD: |
||||||||||||||||||||||||
Cash & cash equivalents |
37,812 | 60,857 | 68,526 | 45,752 | 45,752 | 53,491 | ||||||||||||||||||
Investments |
22,412 | 94 | 97 | 101 | 101 | 107 | ||||||||||||||||||
TOTAL DEBT |
$ | 7,511 | $ | 4,975 | $ | 42,398 | $ | 1,535 | $ | 1,535 | $ | 31,036 | ||||||||||||
DEBT AS % OF EQUITY |
2 | % | 2 | % | 12 | % | 0 | % | 0 | % | 8 | % | ||||||||||||
TOTAL DEBT |
7,511 | 4,975 | 42,398 | 1,535 | 1,535 | 31,036 | ||||||||||||||||||
TOTAL SHAREHOLDERS EQUITY |
349,244 | 324,128 | 351,719 | 356,820 | 356,820 | 374,706 | ||||||||||||||||||
EBIT [NET INCOME LESS INCOME TAXES LESS INTEREST EXPENSE, NET] |
$ | 8,000 | $ | (17,583 | ) | $ | 14,343 | $ | 10,263 | $ | 15,023 | $ | 11,857 | |||||||||||
LESS: |
||||||||||||||||||||||||
Interest expense, net |
(554 | ) | (586 | ) | (734 | ) | (641 | ) | (2,515 | ) | (773 | ) | ||||||||||||
Provision for income taxes |
(1,713 | ) | 6,928 | (3,210 | ) | (1,890 | ) | 115 | (3,178 | ) | ||||||||||||||
NET INCOME |
$ | 5,733 | $ | (11,241 | ) | $ | 10,399 | $ | 7,732 | $ | 12,624 | $ | 7,906 | |||||||||||
EBITDA [NET INCOME LESS INTEREST EXPENSE, NET, LESS DEPRECIATION LESS AMORTIZATION LESS INCOME TAXES] |
$ | 12,207 | $ | (13,504 | ) | $ | 18,631 | $ | 15,065 | $ | 32,399 | $ | 16,850 | |||||||||||
LESS: |
||||||||||||||||||||||||
Interest expense, net |
(554 | ) | (586 | ) | (734 | ) | (641 | ) | (2,515 | ) | (773 | ) | ||||||||||||
Depreciation |
(3,228 | ) | (3,115 | ) | (3,166 | ) | (3,566 | ) | (13,075 | ) | (3,575 | ) | ||||||||||||
Amortization |
(979 | ) | (964 | ) | (1,122 | ) | (1,236 | ) | (4,301 | ) | (1,418 | ) | ||||||||||||
Provision for income taxes |
(1,713 | ) | 6,928 | (3,210 | ) | (1,890 | ) | 115 | (3,178 | ) | ||||||||||||||
NET INCOME |
$ | 5,733 | $ | (11,241 | ) | $ | 10,399 | $ | 7,732 | $ | 12,624 | $ | 7,906 | |||||||||||
ADJUSTED INCOME [NET INCOME EXCLUDING SPECIAL, IMPAIRMENT, AND LESLIE ASBESTOS AND BANKRUPTCY CHARGES, NET OF TAX] |
$ | 5,312 | $ | 7,549 | $ | 11,922 | $ | 9,144 | $ | 33,928 | $ | 8,557 | ||||||||||||
LESS: |
||||||||||||||||||||||||
Leslie asbestos and bankruptcy charges (recoveries), net of tax |
(421 | ) | 18,790 | 1,523 | 1,412 | 21,304 | 651 | |||||||||||||||||
NET INCOME |
$ | 5,733 | $ | (11,241 | ) | $ | 10,399 | $ | 7,732 | $ | 12,624 | $ | 7,906 | |||||||||||
ADJUSTED WEIGHTED AVERAGE SHARES |
N/A | 17,109 | N/A | N/A | N/A | N/A | ||||||||||||||||||
Adjustment for anti-dilutive conversion of shares |
0 | 153 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Weighted average common shares outstanding (diluted) |
17,193 | 17,262 | 17,258 | 17,378 | 17,297 | 17,378 | ||||||||||||||||||
ADJUSTED EARNINGS PER SHARE [EPS EXCLUDING SPECIAL, IMPAIRMENT, AND LESLIE ASBESTOS AND BANKRUPTCY CHARGES, NET OF TAX] |
$ | 0.31 | $ | 0.44 | $ | 0.69 | $ | 0.53 | $ | 1.97 | $ | 0.49 | ||||||||||||
LESS: |
||||||||||||||||||||||||
Leslie asbestos and bankruptcy charges (recoveries), net of tax impact on EPS |
(0.02 | ) | 1.10 | 0.09 | 0.08 | 1.24 | 0.04 | |||||||||||||||||
EARNINGS PER COMMON SHARE (Diluted) |
$ | 0.33 | $ | (0.66 | ) | $ | 0.60 | $ | 0.44 | $ | 0.73 | $ | 0.45 | |||||||||||
CIRCOR INTERNATIONAL, INC
Leslie Controls Asbestos Items
(in thousands, except case information)
2010 | 2011 | |||||||||||||||||||||||
1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | YTD | 1ST QTR | |||||||||||||||||||
Quarterly Case Rollforward |
||||||||||||||||||||||||
Beginning open cases |
1,104 | 1,150 | 1,214 | 1,340 | 1,104 | 1,340 | ||||||||||||||||||
Cases filed |
150 | 169 | 132 | | 451 | | ||||||||||||||||||
Cases resolved and dismissed |
(104 | ) | (105 | ) | (6 | ) | | (215 | ) | | ||||||||||||||
Ending open cases |
1,150 | 1,214 | 1,340 | 1,340 | 1,340 | 1,340 | ||||||||||||||||||
Ending open mesothelioma cases |
623 | 672 | 713 | 713 | 713 | 713 | ||||||||||||||||||
Income Statement Amounts |
||||||||||||||||||||||||
Indemnity costs accrued (cases filed) |
$ | 699 | $ | 1,797 | $ | | $ | | $ | 2,496 | $ | | ||||||||||||
Adverse verdict costs (recoveries) |
65 | (2,455 | ) | | | (2,390 | ) | | ||||||||||||||||
Defense costs incurred |
3,731 | 3,435 | 16 | 319 | 7,501 | | ||||||||||||||||||
Insurance recoveries adjustment |
(3,652 | ) | | | | (3,652 | ) | | ||||||||||||||||
Insurance recoveries accrued |
(1,491 | ) | (1,135 | ) | | | (2,626 | ) | | |||||||||||||||
Leslie Bankruptcy related charges, net |
| 27,266 | 2,327 | 1,854 | 31,447 | 1,001 | ||||||||||||||||||
Net pre-tax Leslie asbestos and bankruptcy expense (recovery) |
$ | (648 | ) | $ | 28,908 | $ | 2,343 | $ | 2,173 | $ | 32,776 | $ | 1,001 | |||||||||||
Balance Sheet Amounts |
||||||||||||||||||||||||
Bankruptcy and indemnity liability |
$ | 57,732 | $ | 78,976 | $ | 78,067 | $ | 77,689 | $ | 77,659 | ||||||||||||||
Incurred defense cost liability |
2,099 | 3,455 | 1,997 | 2,142 | 2,142 | |||||||||||||||||||
Insurance recoveries receivable |
(7,997 | ) | (1,180 | ) | (194 | ) | (38 | ) | (38 | ) | ||||||||||||||
Net Leslie asbestos liability |
$ | 51,834 | $ | 81,251 | $ | 79,870 | $ | 79,793 | $ | 79,763 | ||||||||||||||
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF FUTURE PERFORMANCE MEASURES TO COMMONLY
USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
UNAUDITED
2nd QTR 2011 | ||||||||
Low | High | |||||||
EXPECTED ADJUSTED EARNINGS PER SHARE [EPS EXCLUDING SPECIAL, IMPAIRMENT, AND LESLIE ASBESTOS AND BANKRUPTCY CHARGES, NET OF TAX] |
$ | 0.42 | $ | 0.52 | ||||
LESS: |
||||||||
Expected special charges (recoveries), net of tax impact on EPS |
$ | | $ | | ||||
Expected impairment charges, net of tax impact on EPS |
$ | | $ | | ||||
Expected Leslie asbestos and bankruptcy charges, net of tax impact on EPS |
$ | | $ | | ||||
EXPECTED EARNINGS PER COMMON SHARE (Diluted) |
$ | 0.42 | $ | 0.52 | ||||