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Share Name | Share Symbol | Market | Type |
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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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0.00 | 0.00% | 56.00 | 0 | 01:00:00 |
CIRCOR International, Inc. (NYSE: CIR), a leading provider of flow control solutions and other highly engineered products for markets including oil & gas, aerospace, power, process and industrial solutions, today announced financial results for the second quarter ended July 2, 2017.
Second Quarter 2017 Highlights
“We closed the first half of the year with solid second quarter results, including revenue of $151 million and adjusted earnings per share of $0.39,” said Scott Buckhout, President and Chief Executive Officer. “Orders in our Energy segment were up 8% organically due to strong demand in our Distributed Valves business. In our Advanced Flow Solutions segment, our year-to-date order intake increased 5% organically over the prior year and our strong backlog positions us to deliver revenue growth and margin expansion in the second half of the year.”
“After the close of the second quarter, we exited one of our two French factories, consolidated operations into our low cost facility in Morocco, and completed the sale of our low margin ‘build-to-print’ business,” added Buckhout. “Exiting this sub-scale factory reduces CIRCOR’s structural cost and will contribute to our margin expansion efforts going forward.”
“We remain optimistic about the market outlook across the majority of our end markets. Going forward, we will continue to focus on creating long-term value for shareholders by investing in growth, expanding margins, generating strong free cash flow, and being disciplined with capital deployment,” concluded Buckhout.
Third-Quarter 2017 GuidanceThe Company will provide its guidance for the third quarter of 2017 during the conference call later today.
Selected Consolidated Results (unaudited)
($ millions except EPS) Q2 2017 Q2 2016 Change Revenue $ 151.2 $ 146.4 3 % GAAP Operating Income $ 11.4 $ 5.3 113 % Adjusted Operating Income1 $ 12.0 $ 11.9 1 % GAAP Operating Margin 7.5 % 3.7 % 380 bps Adjusted Operating Margin1 8.0 % 8.1 % (10) bps GAAP Earnings Per Share (Diluted) $ 0.54 $ 0.23 135 % Adjusted Earnings Per Share (Diluted)1 $ 0.39 $ 0.53 (26 )% Operating Cash Flow $ 2.7 $ 10.1 (74 )% Free Cash Flow2 $ 0.3 $ 8.2 (96 )% Orders $ 142.9 $ 135.3 6 %Segment Results
($ millions) Q2 2017 Q2 2016 Change Energy Revenue $ 82.6 $ 80.7 2 % Segment Operating Income $ 8.9 $ 9.3 (5 )% Segment Operating Margin 10.7 % 11.5 % (80) bps Orders $ 77.9 $ 58.9 32 % Advanced Flow Solutions Revenue $ 68.6 $ 65.7 5 % Segment Operating Income $ 8.6 $ 8.1 6 % Segment Operating Margin 12.5 % 12.3 % 20 bps Orders $ 65.1 $ 76.5 (15 )%1. Consolidated and Segment Results for Q2 2017 exclude special and restructuring charges and non-cash acquisition-related intangible amortization, totaling $0.6 million (pre-tax). This net charge includes (i) $2.6 million charge for non-cash acquisition-related intangible amortization expense, (ii) $5.3 million charge related to the sale of our France build-to-print business, (iii) $1.3 million of charges related to exit of manufacturing operations in China, including $0.8 million related to environmental clean-up costs, (iv) $1.1 of other restructuring activities, primarily reductions-in-force, across Europe and North America, and (v) a $9.7 million gain related to the revaluation of the contingent consideration for purchase of Critical Flow Solutions. Consolidated and Segment Results for Q2 2016 exclude special and restructuring charges totaling $6.6 million (pre-tax). The Q2 2016 charges include (i) $1.5 million charge related to the closure of the Brazil manufacturing operations; (ii) $1.9 million charge for non-cash acquisition-related intangible amortization expense; (iii) $2.1 million for the closure of the California machining facility; and (iv) $1.1 million of other restructuring activities.2. Free Cash Flow is a non-GAAP financial measure and is calculated by subtracting GAAP capital expenditures, net of proceeds from asset sales, from GAAP Operating Cash Flow.
Conference Call InformationCIRCOR International will hold a conference call to review its financial results today, July 28, 2017, at 9:00 a.m. ET. To listen to the conference call and view the accompanying presentation slides, visit “Webcasts & Presentations” in the “Investors” portion of the CIRCOR website. The call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. The webcast will be archived for one year on the Company’s website.
Use of Non-GAAP Financial MeasuresAdjusted operating income, Adjusted operating margin, Adjusted net income, Adjusted earnings per share (diluted), EBITDA, Adjusted EBITDA, net debt and free cash flow are non-GAAP financial measures. These non-GAAP financial measures are used by management in our financial and operating decision making because we believe they better reflect our ongoing business and allow for meaningful period-to-period comparisons. We believe these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company’s current operating performance and future prospects in the same manner as management does, if they so choose. These non-GAAP financial measures also allow investors and others to compare the Company’s current financial results with the Company’s past financial results in a consistent manner. For example:
CIRCOR’s management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring the Company’s operating performance and comparing such performance to that of prior periods and to the performance of our competitors. We use such measures when publicly providing our business outlook, assessing future earnings potential, evaluating potential acquisitions and dispositions and in our financial and operating decision-making process, including for compensation purposes.
Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with accounting principles generally accepted in the United States. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.
Safe Harbor StatementThis 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 the realization of cost reductions from restructuring activities. 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 flow control solutions and other highly engineered products and sub-systems for markets including oil & gas, aerospace, power, process and industrial solutions. CIRCOR has a diversified product portfolio with recognized, market-leading brands that fulfill its customers’ unique application needs. The Company’s strategy is to grow organically and through complementary acquisitions; simplify CIRCOR’s operations; achieve world class operational excellence; and attract and retain top industry talent. For more information, visit the Company’s investor relations website at http://investors.circor.com.
CIRCOR INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
UNAUDITED
Three Months Ended Six Months Ended July 2, 2017 July 3, 2016 July 2, 2017 July 3, 2016 Net revenues $ 151,231 $ 146,392 $ 296,439 $ 297,190 Cost of revenues 103,563 99,961 202,139 205,526 GROSS PROFIT 47,668 46,431 94,300 91,664 Selling, general and administrative expenses 38,218 36,490 78,305 74,289 Special and restructuring (recoveries) charges, net (1,954 ) 4,594 (2,763 ) 6,533 OPERATING INCOME 11,404 5,347 18,758 10,842 Other expense (income): Interest expense, net 2,184 605 3,853 1,236 Other expense (income), net 974 (549 ) 1,200 (1,077 ) TOTAL OTHER EXPENSE, NET 3,158 56 5,053 159 INCOME BEFORE INCOME TAXES 8,246 5,291 13,705 10,683 (Benefit from) Provision for income taxes (724 ) 1,478 (37 ) 2,998 NET INCOME $ 8,970 $ 3,813 $ 13,742 $ 7,685 Earnings per common share: Basic $ 0.54 $ 0.23 $ 0.83 $ 0.47 Diluted $ 0.54 $ 0.23 $ 0.82 $ 0.46 Weighted average number of common shares outstanding: Basic 16,497 16,424 16,478 16,403 Diluted 16,762 16,595 16,726 16,538 Dividends declared per common share $ 0.0375 $ 0.0375 $ 0.0750 $ 0.0750 CIRCOR INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
UNAUDITED
Six Months Ended July 2, 2017 July 3, 2016 OPERATING ACTIVITIES Net income $ 13,742 $ 7,685 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 7,345 6,476 Amortization 6,216 5,098 Bad debt recovery (319 ) (853 ) Loss on write down of inventory 1,068 4,011 Compensation expense of share-based plans 1,386 2,909 Tax effect of share-based plan compensation — 116 Change in fair value of contingent consideration (12,200 ) — (Gain) Loss on sale or write down of property, plant and equipment (66 ) 3,116 Loss on sale of business5,300
— Changes in operating assets and liabilities, net of effects of acquisition: Trade accounts receivable 16,478 11,555 Inventories (12,382 ) 13,281 Prepaid expenses and other assets (8,011 ) (3,480 ) Accounts payable, accrued expenses and other liabilities305
(32,161 ) Net cash provided by operating activities 18,862 17,753 INVESTING ACTIVITIES Purchases of property, plant and equipment (5,504 ) (6,998 ) Proceeds from the sale of property, plant and equipment 318 1,138 Business acquisition working capital adjustment 1,467 — Net cash used in investing activities (3,719 ) (5,860 ) FINANCING ACTIVITIES Proceeds from long-term debt 333,021 65,939 Payments of long-term debt (332,233 ) (58,890 ) Debt issuance costs (450 ) — Dividends paid (1,251 ) (1,249 ) Proceeds from the exercise of stock options 707 180 Tax effect of share-based plan compensation — (116 ) Net cash (used in) provided by financing activities (206 ) 5,864 Effect of exchange rate changes on cash and cash equivalents 4,056 672 INCREASE IN CASH AND CASH EQUIVALENTS 18,993 18,429 Cash and cash equivalents at beginning of period 58,279 54,541 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 77,272 $ 72,970 CIRCOR INTERNATIONAL, INC.CONSOLIDATED BALANCE SHEETS
(in thousands)
UNAUDITED
July 2, 2017 December 31, 2016 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 77,272 $ 58,279 Trade accounts receivable, less allowance for doubtful accounts of $4,761 and $5,056, respectively 121,161 133,046 Inventories 161,750 149,584 Prepaid expenses and other current assets 38,285 29,557 Total Current Assets 398,468 370,466 PROPERTY, PLANT AND EQUIPMENT, NET 98,428 99,713 OTHER ASSETS: Goodwill 210,009 206,659 Intangibles, net 132,057 135,778 Other assets 10,283 8,140 TOTAL ASSETS $ 849,245 $ 820,756 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 63,879 $ 46,767 Accrued expenses and other current liabilities 45,388 50,707 Accrued compensation and benefits 16,593 20,249 Notes payable and current portion of long-term debt 5,000 — Total Current Liabilities 130,860 117,723 LONG-TERM DEBT 247,856 251,200 DEFERRED INCOME TAXES 10,731 13,657 OTHER NON-CURRENT LIABILITIES 21,701 33,766 SHAREHOLDERS’ EQUITY: Common stock 179 178 Additional paid-in capital 292,619 289,423 Retained earnings 277,451 265,543 Common treasury stock, at cost (74,472 ) (74,472 ) Accumulated other comprehensive loss, net of tax (57,680 ) (76,262 ) Total Shareholders’ Equity 438,097 404,410 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 849,245 $ 820,756 CIRCOR INTERNATIONAL, INC.SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED
Three Months Ended Six Months Ended July 2, 2017 July 3, 2016 July 2, 2017 July 3, 2016 ORDERS (1) Energy $ 77.9 $ 58.9 $ 181.7 $ 130.2 Advanced Flow Solutions 65.1 76.5 145.3 141.8 Total orders $ 142.9 $ 135.3 $ 327.0 $ 272.0 BACKLOG (2) July 2, 2017 July 3, 2016 Energy $ 143.9 $ 98.1 Advanced Flow Solutions 135.7 146.0 Total backlog $ 279.6 $ 244.1Note 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 unshipped customer orders, including backlog associated with acquisitions.
CIRCOR INTERNATIONAL, INC.SEGMENT INFORMATION
(in thousands, except percentages)
UNAUDITED
2016 2017 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR TOTAL NET REVENUES Energy $ 83,409 $ 80,736 $ 68,901 $ 89,000 $ 322,046 $ 80,135 $ 82,586 $ 162,721 Advanced Flow Solutions 67,389 65,656 65,932 69,236 268,213 65,073 68,645 $ 133,718 Total $ 150,798 $ 146,392 $ 134,833 $ 158,236 $ 590,259 $ 145,208 $ 151,231 $ 296,439 SEGMENT OPERATING INCOME Energy $ 9,296 $ 9,293 $ 6,755 $ 9,276 $ 34,619 $ 6,864 $ 8,858 $ 15,722 Advanced Flow Solutions 8,452 8,064 8,008 8,939 33,463 7,711 8,587 16,298 Corporate expenses (6,488 ) (5,431 ) (6,522 ) (7,231 ) (25,672 ) (5,479 ) (5,396 ) (10,875 ) Adjusted Operating Income $ 11,260 $ 11,926 $ 8,240 $ 10,984 $ 42,410 $ 9,096 $ 12,049 $ 21,145 SEGMENT OPERATING MARGIN % Energy 11.1 % 11.5 % 9.8 % 10.4 % 10.7 % 8.6 % 10.7 % 9.7 % Advanced Flow Solutions 12.5 % 12.3 % 12.1 % 12.9 % 12.5 % 11.8 % 12.5 % 12.2 % Adjusted Operating Margin 7.5 % 8.1 % 6.1 % 6.9 % 7.2 % 6.3 % 8.0 % 7.1 % CIRCOR INTERNATIONAL, INC.RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands, except percentages)
UNAUDITED
2016 2017 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR TOTAL NET CASH PROVIDED BY OPERATING ACTIVITIES $ 7,654 $ 10,100 $ 21,196 $ 20,449 $ 59,399 $ 16,195 $ 2,667 $ 18,862 LESS: Capital expenditures, net of sale proceeds 3,934 1,926 3,730 3,402 12,992 2,811 2,375 5,186 FREE CASH FLOW $ 3,720 $ 8,174 $ 17,466 $ 17,047 $ 46,407 $ 13,384 $ 292 $ 13,676 TOTAL DEBT $ 97,800 $ 97,600 $ 92,400 $ 251,200 $ 251,200 $ 243,000 $ 252,856 $ 252,856 LESS: Cash & cash equivalents 66,580 72,970 84,929 58,279 58,279 65,656 77,272 77,272 NET DEBT $ 31,220 $ 24,630 $ 7,471 $ 192,921 $ 192,921 $ 177,344 $ 175,584 $ 175,584 TOTAL SHAREHOLDERS' EQUITY $ 414,107 $ 411,367 $ 416,598 $ 404,410 $ 404,410 $ 415,537 $ 438,097 $ 438,097 TOTAL DEBT AS % OF EQUITY 24 % 24 % 22 % 62 % 62 % 58 % 58 % 58 % NET DEBT AS % OF EQUITY 8 % 6 % 2 % 48 % 48 % 43 % 40 % 40 % CIRCOR INTERNATIONAL, INC.RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands, except per share data)
UNAUDITED
2016 2017 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR TOTAL NET INCOME (LOSS) $ 3,872 $ 3,813 $ 4,418 $ (2,002 ) $ 10,101 $ 4,773 $ 8,970 $ 13,742 LESS: Restructuring related inventory charges 1,958 75 — 813 2,846 — — — Amortization of inventory step-up — — — 1,366 1,366 — — — Impairment charges — — 208 — 208 — — — Restructuring charges, net 1,163 3,259 2,252 2,301 8,975 1,458 3,566 5,025 Acquisition amortization 1,868 1,911 1,888 4,234 9,901 2,552 2,599 5,151 Special charges (recoveries), net 776 1,334 379 5,707 8,196 (2,268 ) (5,520 ) (7,788 ) Income tax impact (954 ) (1,611 ) (1,519 ) (4,487 ) (8,571 ) (1,137 ) (3,124 ) (4,261 ) ADJUSTED NET INCOME $ 8,683 $ 8,781 $ 7,626 $ 7,932 $ 33,022 $ 5,378 $ 6,491 $ 11,869 EARNINGS (LOSS) PER COMMON SHARE (Diluted) $ 0.23 $ 0.23 $ 0.27 $ (0.12 ) $ 0.61 $ 0.29 $ 0.54 $ 0.82 LESS: Restructuring related inventory charges 0.12 — — 0.05 0.17 — — — Amortization of inventory step-up — — — 0.08 0.08 — — — Impairment charges — — 0.01 — 0.01 — — — Restructuring charges, net 0.07 0.20 0.14 0.14 0.54 0.09 0.21 0.30 Acquisition amortization 0.11 0.12 0.11 0.26 0.60 0.15 0.16 0.31 Special charges (recoveries), net 0.05 0.08 0.02 0.35 0.50 (0.14 ) (0.33 ) (0.47 ) Income tax impact (0.06 ) (0.10 ) (0.09 ) (0.27 ) (0.52 ) (0.07 ) (0.19 ) (0.25 ) ADJUSTED EARNINGS PER SHARE (Diluted) $ 0.52 $ 0.53 $ 0.46 $ 0.48 $ 1.99 $ 0.32 $ 0.39 $ 0.71 CIRCOR INTERNATIONAL, INC.RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands)
UNAUDITED
2016 2017 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR TOTAL NET INCOME (LOSS) $ 3,872 $ 3,813 $ 4,418 $ (2,002 ) $ 10,101 $ 4,773 $ 8,970 $ 13,742 LESS: Interest expense, net (631 ) (605 ) (605 ) (1,468 ) (3,310 ) (1,669 ) (2,184 ) (3,853 ) Depreciation (3,263 ) (3,213 ) (3,138 ) (3,690 ) (13,304 ) (3,798 ) (3,547 ) (7,345 ) Amortization (2,529 ) (2,569 ) (2,488 ) (4,730 ) (12,316 ) (3,092 ) (3,124 ) (6,216 ) (Provision for) benefit from income taxes (1,520 ) (1,478 ) 1,673 1,746 421 (687 ) 724 37 EBITDA $ 11,815 $ 11,678 $ 8,976 $ 6,140 $ 38,610 $ 14,019 $ 17,101 $ 31,119 LESS: Restructuring related inventory charges (1,958 ) (75 ) — (813 ) (2,846 ) — — — Amortization of inventory step-up — — — (1,366 ) (1,366 ) — — — Impairment charges — — (208 ) — (208 ) — — — Restructuring charges, net (1,163 ) (3,259 ) (2,252 ) (2,301 ) (8,975 ) (1,458 ) (3,566 ) (5,025 ) Special (charges) recoveries, net (776 ) (1,334 ) (379 ) (5,707 ) (8,196 ) 2,268 5,520 7,788 ADJUSTED EBITDA $ 15,712 $ 16,346 $ 11,815 $ 16,327 $ 60,201 $ 13,209 $ 15,147 $ 28,356 CIRCOR INTERNATIONAL, INC.RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands, except percentages)
UNAUDITED
2016 2017 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR TOTAL GAAP OPERATING INCOME (LOSS) $ 5,495 $ 5,347 $ 3,513 $ (3,437 ) $ 10,918 $ 7,354 $ 11,404 $ 18,758 LESS: Restructuring related inventory charges 1,958 75 — 813 2,846 — — — Amortization of inventory step-up — — — 1,366 1,366 — — — Impairment charges — — 208 — 208 — — — Restructuring charges, net 1,163 3,259 2,252 2,301 8,975 1,458 3,566 5,025 Acquisition amortization 1,868 1,911 1,888 4,234 9,901 2,552 2,599 5,151 Special charges (recoveries), net 776 1,334 379 5,707 8,196 (2,268 ) (5,520 ) (7,788 ) ADJUSTED OPERATING INCOME $ 11,260 $ 11,926 $ 8,240 $ 10,984 $ 42,410 $ 9,096 $ 12,049 $ 21,145 GAAP OPERATING MARGIN 3.6 % 3.7 % 2.6 % (2.2 )% 1.8 % 5.1 % 7.5 % 6.3 % LESS: Restructuring related inventory charges 1.3 % 0.1 % — % 0.5 % 0.5 % — % — % — % Amortization of inventory step-up — % — % — % 0.9 % 0.2 % — % — % — % Impairment charges — % — % 0.2 % — % — % — % — % — % Restructuring charges, net 0.8 % 2.2 % 1.7 % 1.5 % 1.5 % 1.0 % 2.4 % 1.7 % Acquisition amortization 1.2 % 1.3 % 1.4 % 2.7 % 1.7 % 1.8 % 1.7 % 1.7 % Special charges (recoveries), net 0.5 % 0.9 % 0.3 % 3.6 % 1.4 % (1.6 )% (3.7 )% (2.6 )% ADJUSTED OPERATING MARGIN 7.5 % 8.1 % 6.1 % 6.9 % 7.2 % 6.3 % 8.0 % 7.1 %
View source version on businesswire.com: http://www.businesswire.com/news/home/20170728005287/en/
CIRCOR InternationalRajeev Bhalla, 781-270-1200Executive Vice President & Chief Financial Officer
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