CIRCOR Reports First-Quarter 2013 Financial Results

Share Name	Share Symbol	Market	Type
CIRCOR International Inc	NYSE:CIR	NYSE	Common Stock

	Price Change	% Change	Share Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
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CIRCOR (NYSE:CIR)
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CIRCOR International, Inc. (NYSE: CIR), a leading provider of valves and other highly engineered products for markets including energy, oil & gas, power generation and aerospace, today announced financial results for the first quarter ended March 31, 2013.

“CIRCOR began the year achieving both revenue and adjusted EPS at the high end of our Q1 guidance ranges,” said Scott Buckhout, CIRCOR’s President and Chief Executive Officer. “Our focus on improving operating results and expanding margins led to a 6% year-over-year increase in adjusted EPS and a 70 basis point improvement in adjusted operating margins.”

“Bookings grew 12% sequentially due to increased Aerospace orders, as well as strong demand in Energy for large international projects,” said Buckhout. “In Brazil, we received our first large oil and gas valve order since acquiring operations in this market.”

“The repositioning actions we took in all three of our segments to generate greater profitability and better focus on key strategic markets are on track for completion by the end of the current second quarter,” said Buckhout. “We expect to begin realizing the full run-rate of approximately $7 million in annualized savings from these actions in the second half of 2013.”

“We anticipate improved performance on both the top and bottom lines in the second quarter and we remain focused on margin expansion and evaluating further repositioning opportunities. Our key markets are attractive and have significant long-term growth potential. We believe these markets will continue to provide opportunities for CIRCOR to expand organically and through acquisitions,” concluded Buckhout.

Consolidated Results

Revenues for the first quarter of 2013 were $205.4 million, a 4% decrease from $214.3 million in the first quarter of 2012, due primarily to lower energy shipments as a result of lower North American rig counts. Adjusted earnings per diluted share in the first quarter of 2013, excluding the impact of special charges of $0.07, was $0.52, a 6% increase compared to the prior year’s first-quarter results of $0.49. Net income for the first quarter of 2013, including special charges, was $7.9 million, or $0.45 per diluted share, compared with net income of $8.6 million, or $0.49 per diluted share, for the first quarter of 2012.

The Company received orders totaling $226.8 million during the first quarter of 2013, a decrease of 9% compared with the first quarter of 2012 due primarily to lower Energy orders in both the North American short cycle and large international project businesses. This was partially offset by growth in both Aerospace and Flow Technologies. Backlog as of March 31, 2013 was $457.3 million, up 6% from backlog of $432.3 million at April 1, 2012.

During the first quarter of 2013, the Company generated $1.1 million of free cash flow, up $8.2 million from the same period in 2012 due primarily to improved working capital.

Energy

Energy segment revenues decreased 11% to $96.7 million for the first quarter of 2013 from $109.3 million for the first quarter of 2012. First-quarter 2013 Energy segment revenues declined across most markets compared to the same period in 2012 when revenues were particularly strong with high rig counts. In addition, the year-over-year decrease was exacerbated by unfavorable foreign currency fluctuations.

Incoming orders for the first quarter of 2013 were $110.1 million, a decrease of 19% year-over-year as a result of a decline in rig counts in North America and timing of large international projects. Ending backlog totaled $217.8 million, an increase of 12% year-over-year, primarily due to higher order levels in the Middle East within the Company’s large international project business.

For the first quarter of 2013, the Energy segment’s adjusted operating margin increased to 11.1% from 8.2% in the first quarter of 2012, primarily driven by improved large international project pricing. This was partially offset by lower volume and increases in selling and marketing expenses to expand the Company's presence in emerging markets. Segment adjusted operating margin for the quarter excludes special and repositioning related inventory charges of $0.6 million related to the repositioning of the Company’s Brazil operations.

Flow Technologies

Flow Technologies segment revenues increased 7% to $71.4 million for the first quarter of 2013 from $66.9 million in the first quarter of 2012. The revenue increase was primarily due to higher power generation and instrumentation revenues, partially offset by unfavorable foreign currency fluctuations.

Incoming orders for the Flow Technologies segment were $74.5 million for the first quarter of 2013, an increase of 2% year-over-year, primarily driven by power generation and instrumentation, partially offset by lower HVAC orders. Ending backlog totaled $76.9 million, an increase of 1% over last year.

Flow Technologies adjusted operating margin for the first quarter of 2013 increased to 12.7% from 11.3% in the first quarter of 2012, primarily due to higher volume and associated leverage. Segment adjusted operating margin excludes special and repositioning charges of $0.1 million related to repositioning activities in India.

Aerospace

Aerospace segment revenues decreased 2% to $37.3 million for the first quarter of 2013 from $38.1 million in the first quarter of 2012 primarily due to a decline in landing gear shipments associated with exiting the low margin landing gear overhaul product line as part of the repositioning actions in California.

Incoming orders for the first quarter of 2013 were $42.2 million, an increase of 5% year-over-year, primarily due to higher landing gear orders. Ending backlog totaled $162.7 million, an increase of 1% year-over-year.

Aerospace segment adjusted operating margin for the first quarter of 2013 decreased to 3.5% from 10.8% in the first quarter of 2012, primarily due to product development investments and start-up costs for new programs, including the A350, A330 and Blackhawk with an approximate impact of 500bps. In addition, during Q1 of 2012 CIRCOR completed a large engineering project which favorably impacted segment adjusted operating margin that quarter. Segment adjusted operating margin for Q1 2013 excludes special and repositioning charges of $0.9 million related to the repositioning of certain operations and manufacturing activities.

Financial Outlook

For the second quarter of 2013 the Company expects revenues to be in the range of $214 to $220 million, up sequentially from the first quarter of 2013, led by Energy.

During the second quarter, the Company expects to incur pre-tax repositioning related charges of between $4.2 and $4.8 million. Excluding those charges, adjusted earnings are expected to be in the range of $0.64 to $0.70 per diluted share, up sequentially from the first quarter of 2013 with margin expansion in all segments.

The tax rate on adjusted earnings is expected to be approximately 29.5%. Excluding repositioning, the rate is anticipated to be approximately 31.1%. This guidance assumes that exchange rates remain at present levels.

Conference Call Information

CIRCOR International will hold a conference call to review its financial results today, May 2, 2013, at 10:00 a.m. ET. Those who wish to listen to the conference call and view the accompanying presentation slides should visit “Webcasts & Presentations” in the “Investors” portion of the CIRCOR website. The 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 Company’s website.

Use of Non-GAAP Financial Measures

Adjusted net income, adjusted earnings per diluted share, adjusted operating margin, and free cash flow are non-GAAP financial measures and are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Free cash flow is defined as net cash from operating activities less capital expenditures. CIRCOR believes that such information provides an additional measurement and consistent historical comparison of the Company’s performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Reliance should not be placed on forward-looking statements because they involve unknown risks, uncertainties and other factors, which are, in some cases, beyond the control of CIRCOR. Any statements in this press release that are not statements of historical fact are forward-looking statements, including, but not limited to, those relating to CIRCOR’s future performance, including second-quarter revenue and earnings guidance and estimated total annualized pre-tax savings from repositioning actions. Actual events, performance or results could differ materially from the anticipated events, performance or results expressed or implied by such forward-looking statements. BEFORE MAKING ANY INVESTMENT DECISIONS REGARDING OUR COMPANY, WE STRONGLY ADVISE YOU TO READ THE SECTION ENTITLED "RISK FACTORS" IN OUR MOST RECENT ANNUAL REPORT ON FORM 10-K AND SUBSEQUENT REPORTS ON FORMS 10-Q, WHICH CAN BE ACCESSED UNDER THE "INVESTORS" LINK OF OUR WEBSITE AT WWW.CIRCOR.COM. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

About CIRCOR International, Inc.

CIRCOR International, Inc. designs, manufactures and markets valves and other highly engineered products for markets including energy, oil & gas, power generation and aerospace. With more than 7,500 customers in over 100 countries, CIRCOR has a diversified product portfolio with recognized, market-leading brands. CIRCOR’s culture, built on the CIRCOR Business System, is defined by the Company’s commitment to attracting, developing and retaining the best talent and pursuing continuous improvement in all aspects of its business and operations. The Company’s strategy includes growing organically by investing in new, differentiated products; adding value to component products; and increasing the development of mission-critical subsystems and solutions. CIRCOR also plans to leverage its strong balance sheet to acquire strategically complementary businesses. For more information, visit the Company’s investor relations web site at http://investors.circor.com.

CIRCOR INTERNATIONAL, INC. CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except per share data)

UNAUDITED Three Months Ended March 31, 2013 April 1, 2012 Net revenues $ 205,398 $ 214,280 Cost of revenues 145,549 155,668 GROSS PROFIT 59,849 58,612 Selling, general and administrative expenses 45,571 44,912 Special charges 1,378 — OPERATING INCOME 12,900 13,700 Other (income) expense: Interest income (43 ) (83 ) Interest expense 830 1,164 Other, net 612 138 TOTAL OTHER EXPENSE 1,399 1,219 INCOME BEFORE INCOME TAXES 11,501 12,481 Provision for income taxes 3,592 3,896 NET INCOME $ 7,908 $ 8,585 Earnings per common share: Basic $ 0.45 $ 0.50 Diluted $ 0.45 $ 0.49 Weighted average number of common shares outstanding: Basic 17,511 17,315 Diluted 17,529 17,390 CIRCOR INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED) Three Months Ended March 31, 2013 April 1, 2012 OPERATING ACTIVITIES Net income $ 7,908 $ 8,585 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 4,009 4,008 Amortization 758 964 Compensation expense of share-based plans 1,028 1,195 Tax effect of share-based compensation (285 ) 479

(Gain) loss on property, plant and equipment

(66 ) 2 Changes in operating assets and liabilities, net of effects from business acquisitions: Trade accounts receivable (2,455 ) 3,539 Inventories (6,461 ) (2,179 ) Prepaid expenses and other assets (827 ) (5,549 ) Accounts payable, accrued expenses and other liabilities 2,198 (14,011 ) Net cash provided by (used in) operating activities 5,807 (2,967 ) INVESTING ACTIVITIES Additions to property, plant and equipment (4,707 ) (4,122 ) Proceeds from the sale of property, plant and equipment 75 15 Net cash used in investing activities (4,632 ) (4,107 ) FINANCING ACTIVITIES Proceeds from long-term debt 33,598 41,123 Payments of long-term debt (37,655 ) (47,806 ) Dividends paid (670 ) (666 ) Proceeds from the exercise of stock options 1,368 73 Tax effect of share-based compensation 285 (479 ) Net cash used in financing activities (3,074 ) (7,755 ) Effect of exchange rate changes on cash and cash equivalents (2,207 ) 1,265 DECREASE IN CASH AND CASH EQUIVALENTS (4,105 ) (13,564 ) Cash and cash equivalents at beginning of period 61,738 54,855 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 57,633 $ 41,291 CIRCOR INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

UNAUDITED

March 31, 2013

December 31, 2012

ASSETS CURRENT ASSETS: Cash and cash equivalents $ 57,633 $ 61,738 Short-term investments 99 101 Trade accounts receivable, less allowance for doubtful accounts of $1,683 and $1,706, respectively 150,849 150,825 Inventories 201,618 198,005 Prepaid expenses and other current assets 17,647 16,510 Deferred income tax asset 15,365 15,505 Assets held for sale 542 542 Total Current Assets 443,753 443,226 PROPERTY, PLANT AND EQUIPMENT, NET 104,756 105,903 OTHER ASSETS: Goodwill 76,535 77,428 Intangibles, net 42,954 45,157 Deferred income tax asset 28,563 30,064 Other assets 7,549 8,203 TOTAL ASSETS $ 704,110 $ 709,981 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 90,756 $ 80,361 Accrued expenses and other current liabilities 58,683 67,235 Accrued compensation and benefits 22,732 26,540 Income taxes payable 982 393 Notes payable and current portion of long-term debt 8,000 7,755 Total Current Liabilities 181,153 182,284 LONG-TERM DEBT, NET OF CURRENT PORTION 58,546 62,729 DEFERRED INCOME TAXES 9,956 10,744 OTHER NON-CURRENT LIABILITIES 35,636 35,977 SHAREHOLDERS’ EQUITY: Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding — — Common stock, $0.01 par value; 29,000,000 shares authorized; 17,549,210 and 17,445,687 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively 175 174 Additional paid-in capital 264,719 262,744 Retained earnings 165,750 158,509 Accumulated other comprehensive loss, net of taxes (11,825 ) (3,180 ) Total Shareholders’ Equity 418,819 418,247 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 704,110 $ 709,981 CIRCOR INTERNATIONAL, INC. SUMMARY OF ORDERS AND BACKLOG

(in millions)

UNAUDITED Three Months Ended

March 31, 2013

April 1, 2012

ORDERS (1) Energy $ 110.1 $ 135.6 Aerospace 42.2 40.2 Flow Technologies 74.5 72.9 Total orders $ 226.8 $ 248.7 BACKLOG (2) March 31, 2013 April 1, 2012 Energy $ 217.8 $ 195.2 Aerospace 162.7 161.1 Flow Technologies 76.8 76.0 Total backlog $ 457.3 $ 432.3

Note 1: Orders do not include the foreign exchange impact due to the re-measurement of customer order backlog amounts denominated in foreign currencies.

Note 2: Backlog includes all unshipped customer orders.

CIRCOR INTERNATIONAL, INC. SUMMARY REPORT BY SEGMENT

(in thousands, except earnings per share)

UNAUDITED 2012 2013 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR NET REVENUES Energy $ 109,264 $ 113,527 $ 109,968 $ 96,582 $ 429,341 $ 96,722 Aerospace 38,085 35,896 31,795 35,316 141,092 37,326 Flow Technologies 66,931 70,439 68,041 69,707 275,119 71,350 Total 214,280 219,862 209,804 201,605 845,552 205,398 * ADJUSTED OPERATING MARGIN Energy 8.2 % 11.1 % 14.0 % 12.5 % 11.4 % 11.1 % Aerospace 10.8 % 8.8 % 4.2 % 3.5 % 7.0 % 3.5 % Flow Technologies 11.3 % 12.8 % 13.1 % 13.1 % 12.6 % 12.7 % Segment operating margin 9.6 % 11.3 % 12.2 % 11.1 % 11.1 % 10.3 % Corporate expenses (3.2 )% (2.9 )% (3.4 )% (3.4 )% (3.2 )% (3.2 )% * Adjusted operating margin 6.4 % 8.4 % 8.8 % 7.8 % 7.8 % 7.1 % Repositioning inventory charges 0.0 % 0.0 % 2.0 % 0.0 % 0.5 % 0.1 % Impairment charges 0.0 % 0.0 % 4.9 % 0.0 % 1.2 % 0.0 % Special charges 0.0 % 0.0 % 0.7 % 1.9 % 0.6 % 0.7 % Total operating margin 6.4 % 8.4 % 1.3 % 5.8 % 5.5 % 6.3 % * ADJUSTED OPERATING INCOME Energy 8,928 12,580 15,432 12,100 49,040 10,751 Aerospace 4,124 3,153 1,324 1,234 9,835 1,320 Flow Technologies 7,587 9,043 8,919 9,105 34,654 9,044 Segment operating income 20,639 24,776 25,675 22,439 93,529 21,115 Corporate expenses (6,939 ) (6,297 ) (7,170 ) (6,802 ) (27,207 ) (6,588 ) * Adjusted operating income 13,700 18,479 18,505 15,637 66,322 14,528 Repositioning inventory charges — — 4,124 37 4,161 250 Impairment charges — — 10,348 — 10,348 — Special charges — — 1,377 3,905 5,282 1,378 Total operating income 13,700 18,479 2,656 11,695 46,531 12,900 INTEREST EXPENSE, NET (1,081 ) (1,017 ) (1,122 ) (1,038 ) (4,258 ) (787 ) OTHER EXPENSE, NET (138 ) (184 ) (564 ) 373 (514 ) (612 ) PRETAX INCOME 12,481 17,278 970 11,030 41,759 11,501 (PROVISION) BENEFIT FOR INCOME TAXES (3,896 ) (6,142 ) 899 (1,822 ) (10,960 ) (3,592 ) EFFECTIVE TAX RATE 31.2 % 35.5 % (92.8 )% 16.5 % 26.2 % 31.2 % NET INCOME $ 8,585 $ 11,136 $ 1,869 $ 9,208 $ 30,799 $ 7,908 Weighted Average Common Shares Outstanding (Diluted) 17,390 17,451 17,467 17,499 17,452 17,529 EARNINGS PER COMMON SHARE (Diluted) $ 0.49 $ 0.64 $ 0.11 $ 0.53 $ 1.76 $ 0.45 ADJUSTED EBITDA $ 18,534 $ 23,043 $ 22,809 $ 16,808 $ 81,194 $ 18,682 ADJUSTED EBITDA AS A % OF SALES 8.6 % 10.5 % 10.9 % 8.3 % 9.6 % 9.1 % CAPITAL EXPENDITURES $ 4,122 $ 6,661 $ 3,314 $ 4,073 $ 18,170 $ 4,707 * Adjusted Operating Income & Margin exclude inventory repositioning, impairment and special charges. CIRCOR INTERNATIONAL, INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS

(in thousands, except earnings per share)

UNAUDITED 2012 2013 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR FREE CASH FLOW [NET CASH FLOW FROM OPERATING ACTIVITIES LESS CAPITAL EXPENDITURES] $(7,089) $5,077 $18,746 $25,619 $42,353 $1,100 ADD: Capital Expenditures 4,122 6,661 3,314 4,073 18,170 4,707 NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $(2,967) $11,738 $22,060 $29,692 $60,523 $5,807 NET DEBT [TOTAL DEBT LESS CASH & CASH EQUIVALENTS LESS INVESTMENTS] $57,263 $54,376 $34,706 $8,645 $8,645 $8,814 ADD: Cash & Cash Equivalents 41,291 41,414 48,976 61,738 61,738 57,633 Investments 101 98 102 101 101 99 TOTAL DEBT $98,655 $95,888 $83,784 $70,484 $70,484 $66,546 DEBT AS % OF EQUITY 25% 24% 20% 17% 17% 16% TOTAL DEBT 98,655 95,888 83,784 70,484 70,484 66,546 TOTAL SHAREHOLDERS' EQUITY 399,018 397,957 409,016 418,247 418,247 418,819 EBIT [NET INCOME LESS INCOME TAXES LESS INTEREST EXPENSE, NET] $13,562 $ 18,295 $2,092 $12,068 $46,017 $12,287 LESS: Interest expense, net (1,081) (1,017) (1,122) (1,038) (4,258) (787) (Provision) benefit for income taxes (3,896) (6,142) 899 (1,822) (10,960) (3,592) NET INCOME $8,585 $11,136 $1,869 $9,208 $30,799 $7,908 ADJUSTED OPERATING INCOME [OPERATING INCOME EXCLUDING INVENTORY REPOSITIONING, IMPAIRMENT AND SPECIAL CHARGES] $13,700 $ 18,479 $18,505 $ 15,600 $ 66,322 $14,528 LESS: Inventory repositioning charges — — 4,124 37 4,161 250 Impairment charges — — 10,348 — 10,348 — Special charges — — 1,377 3,905 5,282 1,378 OPERATING INCOME $13,700 $18,479 $2,656 $11,695 $46,531 $12,900 ADJUSTED EARNINGS PER SHARE [EPS EXCLUDING INVENTORY REPOSITIONING, IMPAIRMENT AND SPECIAL CHARGES, NET OF TAX] $0.49 $0.64 $0.77 $0.69 $ 2.59 $0.52 LESS: Inventory repositioning charges, net of tax $— $— $0.17 $— $0.17 $0.01 Impairment charges, net of tax $— $— $0.43 $— $0.43 $— Special charges, net of tax $— $— $0.06 $0.16 $0.22 $0.06 EARNINGS PER COMMON SHARE (Diluted) $0.49 $0.64 $0.11 $0.53 $1.76 $0.45 EBITDA [NET INCOME LESS NET INTEREST EXPENSE, DEPRECIATION, AMORTIZATION AND INCOME TAXES] $18,534 $23,043 $ 2,092 $ 12,068 $ 65,345 $17,054 LESS: Interest expense, net (1,081) (1,017) (1,122) (1,038) (4,258) (787) Depreciation (4,008) (3,825) (3,932) (3,967) (15,732) (4,009) Amortization (964) (923) (936) (773) (3,596) (758) (Provision) benefit for income taxes (3,896) (6,142) 899 (1,822) (10,960) (3,592) NET INCOME $8,585 $11,136 $1,869 $9,208 $30,799 $7,908 ADJUSTED EBIDTA [NET INCOME EXCLUDING INVENTORY REPOSITIONING, IMPAIRMENT AND SPECIAL CHARGES, NET INTEREST EXPENSE, DEPRECIATION, AMORTIZATION AND INCOME TAXES] $18,534 $23,043 $22,809 $20,750 $ 85,136 $18,682 Inventory repositioning charges $— $— $(4,124) $(37) $(4,161) $(250) Impairment charges $— $— $(10,348) $— $(10,348) $— Special charges $— $— $(1,377) $(3,905) $(5,282) $(1,378) Interest expense, net $(1,081) $(1,017) $(1,122) $(1,038) $(4,258) $(787) Depreciation $(4,008) $(3,825) $(3,932) $(3,967) $(15,732) $(4,009) Amortization $(964) $(923) $(936) $(773) $(3,596) $(758) (Provision) benefit for income taxes $(3,896) $(6,142) $899 $(1,822) $(10,960) $(3,592) NET INCOME $8,585 $11,136 $1,869 $9,208 $30,799 $7,908 CIRCOR INTERNATIONAL, INC. RECONCILIATION OF FUTURE PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS UNAUDITED 2nd Quarter 2013 Low High EXPECTED ADJUSTED EARNINGS PER SHARE [EPS EXCLUDING INVENTORY REPOSITIONING, IMPAIRMENT AND SPECIAL CHARGES, NET OF TAX] $ 0.64 $ 0.70

LESS: REPOSITIONING RELATED CHARGES [INVENTORY REPOSITIONING, IMPAIRMENT AND SPECIAL CHARGES, NET OF TAX]

(0.19

)

(0.17

)

EXPECTED EARNINGS PER COMMON SHARE (Diluted)

0.45

0.53

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CIR CIRCOR International Inc