Press Release

EX-99.1 2 dex991.htm PRESS RELEASE Press Release

EXHIBIT 99.1

PRESS RELEASE


Contact:		Frederic M. Burditt
		Chief Financial Officer
		CIRCOR International, Inc.
		(781) 270-1200

CIRCOR Reports Second Quarter Earnings of $1.08 Per Share

•

Company posts record quarterly operating margins at 13.3%

•

Diluted earnings per share increased 80% over the second quarter of 2007 on revenue growth of 25%

Burlington, MA, July 30, 2008

CIRCOR International, Inc. (NYSE: CIR), 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, 2008			July 1, 2007			June 29, 2008			July 1, 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, 2008			July 1, 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, 2008		December 31, 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, 2008		July 1, 2007		June 29, 2008		July 1, 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, 2008		July 1, 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															2008
	1ST QTR			2ND QTR			3RD QTR			4TH QTR			YTD			1ST QTR			2ND QTR			YTD
NET REVENUES
Instrumentation & Thermal Fluid Controls (TFC)	$	81,296		$	85,740		$	85,094		$	91,466		$	343,596		$	88,450		$	98,867		$	187,317
Energy Products		79,967			80,197			78,923			83,057			322,144			88,125			107,738			195,863

Total		161,263			165,937			164,017			174,523			665,740			176,575			206,605			383,180


ADJUSTED OPERATING MARGIN
Instrumentation & TFC (excl. special & asbestos charges)		8.9	%		9.6	%		9.3	%		12.8	%		10.2	%		12.5	%		12.6	%		12.6	%
Energy Products (excl. special charges)		12.7	%		16.3	%		17.4	%		15.3	%		15.4	%		16.2	%		20.4	%		18.5	%
Segment operating income (excl. special & asbestos charges)		10.8	%		12.8	%		13.2	%		14.0	%		12.7	%		14.4	%		16.6	%		15.6	%
Corporate expenses (excl. special & asbestos charges)		-2.3	%		-2.3	%		-3.0	%		-3.1	%		-2.7	%		-2.6	%		-2.4	%		-2.5	%
Asbestos charges (attributable to Instrumentation & TFC)		-0.6	%		-0.6	%		-1.1	%		-2.1	%		-1.1	%		-0.6	%		-1.0	%		-0.8	%
Special charges		-0.4	%		-0.4	%		-1.3	%		0.5	%		-0.4	%		-0.1	%		0.0	%		0.0	%
Total operating margin		7.4	%		9.5	%		7.8	%		9.3	%		8.5	%		11.0	%		13.3	%		12.3	%

ADJUSTED OPERATING INCOME
Instrumentation & TFC (excl. special & asbestos charges)		7,271			8,204			7,913			11,681			35,069			11,069			12,451			23,520
Energy Products (excl. special charges)		10,125			13,063			13,745			12,675			49,608			14,303			21,938			36,241

Segment operating income (excl. special & asbestos charges)		17,396			21,267			21,658			24,356			84,677			25,372			34,389			59,761
Corporate expenses (excl. special & asbestos charges)		(3,653	)		(3,804	)		(4,942	)		(5,463	)		(17,862	)		(4,628	)		(4,890	)		(9,518	)
Asbestos charges (attributable to Instrumentation & TFC)		(1,038	)		(1,018	)		(1,837	)		(3,641	)		(7,534	)		(1,075	)		(2,009	)		(3,084	)
Special charges		(691	)		(615	)		(2,130	)		922			(2,514	)		(160	)		—			(160	)

Total operating income		12,014			15,830			12,749			16,174			56,767			19,509			27,490			46,999

INTEREST EXPENSE, NET		(1,218	)		(884	)		(744	)		(155	)		(3,001	)		(145	)		23			(122	)
OTHER (EXPENSE) INCOME, NET		97			(215	)		1,508			(133	)		1,257			(401	)		(248	)		(649	)


PRETAX INCOME		10,893			14,731			13,513			15,886			55,023			18,963			27,265			46,228
PROVISION FOR INCOME TAXES		(3,486	)		(4,713	)		(3,148	)		(5,765	)		(17,112	)		(6,068	)		(8,840	)		(14,908	)

EFFECTIVE TAX RATE		32.0	%		32.0	%		23.3	%		36.3	%		31.1	%		32.0	%		32.4	%		32.2	%
NET INCOME	$	7,407		$	10,018		$	10,365		$	10,121		$	37,911		$	12,895		$	18,425		$	31,320

Weighted Average Common Shares Outstanding (Diluted)		16,533			16,679			16,768			16,925			16,730			16,872			17,053			16,965

EARNINGS PER COMMON SHARE (Diluted)	$	0.45		$	0.60		$	0.62		$	0.60		$	2.27		$	0.76		$	1.08		$	1.85

EBIT	$	12,111		$	15,615		$	14,257		$	16,041		$	58,024		$	19,108		$	27,242		$	46,350
Depreciation		2,808			2,812			2,662			2,588			10,870			2,874			2,977			5,851
Amortization of intangibles		626			632			659			662			2,579			656			676			1,332

EBITDA	$	15,545		$	19,059		$	17,578		$	19,291		$	71,473		$	22,638		$	30,895		$	53,533

EBITDA AS A PERCENT OF SALES		9.6	%		11.5	%		10.7	%		11.1	%		10.7	%		12.8	%		15.0	%		14.0	%

CAPITAL EXPENDITURES	$	1,776		$	2,266		$	2,844		$	5,097		$	11,983		$	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															2008
	1ST QTR			2ND QTR			3RD QTR			4TH QTR			YTD			1ST QTR			2ND 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		$	(5,366	)	$	31,553		$	26,187
ADD: Capital expenditures		1,776			2,266			2,844			5,097			11,983			2,851			3,416			6,267
Dividends paid		609			614			617			624			2,464			626			631			1,257

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	(3,044	)	$	8,319		$	14,931		$	36,710		$	56,916		$	(1,889	)	$	35,600		$	33,711

NET (CASH) DEBT [TOTAL DEBT LESS CASH & CASH EQUIVALENTS LESS INVESTMENTS]	$	39,366		$	29,848		$	11,815		$	(21,421	)	$	(21,421	)	$	(21,709	)	$	(46,796	)	$	(46,796	)
ADD: Cash & cash equivalents		27,050			25,281			30,174			34,662			34,662			42,690			38,835			38,835
Investments		87			94			100			8,861			8,861			4,036			31,590			31,590

TOTAL DEBT	$	66,503		$	55,223		$	42,089		$	22,102		$	22,102		$	25,017		$	23,629		$	23,629

NET DEBT AS % OF NET CAPITALIZATION		10	%		7	%		3	%		-5	%		-5	%		-5	%		-11	%		-11	%

NET CAPITALIZATION [TOTAL DEBT PLUS SHAREHOLDERS’ EQUITY LESS CASH & CASH EQUIVALENTS, LESS INVESTMENTS]	$	408,944		$	415,386		$	420,951		$	398,963		$	398,963		$	424,670		$	419,162		$	419,162
LESS: Total debt		(66,503	)		(55,223	)		(42,089	)		(22,102	)		(22,102	)		(25,017	)		(23,629	)		(23,629	)
ADD: Cash & cash equivalents		27,050			25,281			30,174			34,662			34,662			42,690			38,835			38,835
Investments		87			94			100			8,861			8,861			4,036			31,590			31,590

TOTAL SHAREHOLDERS’ EQUITY		369,578			385,538			409,136			420,384			420,384			446,379			465,958			465,958
ADD: Total debt		66,503			55,223			42,089			22,102			22,102			25,017			23,629			23,629

TOTAL CAPITAL	$	436,081		$	440,761		$	451,225		$	442,486		$	442,486		$	471,396		$	489,587		$	489,587

TOTAL DEBT / TOTAL CAPITAL		15	%		13	%		9	%		5	%		5	%		5	%		5	%		5	%

EBIT [NET INCOME LESS INTEREST EXPENSE, NET]	$	12,111		$	15,615		$	14,257		$	16,041		$	58,024		$	19,108		$	27,242		$	46,350
LESS: Interest expense, net		(1,218	)		(884	)		(744	)		(155	)		(3,001	)		(145	)		23			(122	)
Provision for income taxes		(3,486	)		(4,713	)		(3,148	)		(5,765	)		(17,112	)		(6,068	)		(8,840	)		(14,908	)

NET INCOME	$	7,407		$	10,018		$	10,365		$	10,121		$	37,911		$	12,895		$	18,425		$	31,320

EBITDA [NET INCOME LESS INTEREST EXPENSE, NET LESS DEPRECIATION LESS AMORTIZATION LESS TAXES]	$	15,545		$	19,059		$	17,578		$	19,291		$	71,473		$	22,638		$	30,895		$	53,533
LESS:
Interest expense, net		(1,218	)		(884	)		(744	)		(155	)		(3,001	)		(145	)		23			(122	)
Depreciation		(2,808	)		(2,812	)		(2,662	)		(2,588	)		(10,870	)		(2,874	)		(2,977	)		(5,851	)
Amortization of intangibles		(626	)		(632	)		(659	)		(662	)		(2,579	)		(656	)		(676	)		(1,332	)
Provision for income taxes		(3,486	)		(4,713	)		(3,148	)		(5,765	)		(17,112	)		(6,068	)		(8,840	)		(14,908	)

NET INCOME	$	7,407		$	10,018		$	10,365		$	10,121		$	37,911		$	12,895		$	18,425		$	31,320