CIRCOR Reports First-Quarter 2010 Results

CIRCOR International, Inc. (NYSE: CIR), a provider of valves and other highly engineered products and subsystems that control the flow of fluids safely and efficiently in the aerospace, energy and industrial markets, today announced financial results for the first quarter ended April 4, 2010.

Management Comments on First-Quarter Results

"We recorded first-quarter earnings that exceeded our guidance range due to lower-than-expected asbestos charges and a favorable asbestos related insurance adjustment,” said Chairman and Chief Executive Officer Bill Higgins. "Excluding these benefits to earnings, we still would have reported EPS in line with our guidance on lower-than-expected sales. Revenue was below our guidance range as a result of delayed shipments for large international energy projects.”

"The highlight of the quarter was the year-over-year improvements we recorded in bookings across each of our reporting segments,” Higgins said. "Our Energy segment delivered 32% year-over-year growth in bookings, driven by increased demand in our short-cycle business. Flow Technologies reported a 26% increase in bookings as a result of strengthening across many end markets. Our Aerospace segment delivered a 47% improvement in bookings compared with the year-ago quarter due to strong landing gear and other military orders.”

Consolidated Results

Revenues for the first quarter of 2010 were $146.3 million, a 17% decrease from $175.6 million generated in the first quarter of 2009. Net income for the first quarter of 2010 decreased 45% to $5.7 million, or $0.33 per diluted share, compared with $10.5 million, or $0.61 per diluted share, for the first quarter of 2009. First-quarter 2010 net income reflects $0.6 million of pre-tax asbestos recoveries related to the Company’s Leslie Controls subsidiary compared with $8.3 million in asbestos charges in the first quarter of 2009.

There were no special charges (recoveries) in the first quarter of 2010. First-quarter 2009 net income included a pre-tax gain of $1.1 million related to proceeds from the sale of land use rights, recorded as a special recovery.

Consolidated Orders and Free Cash Flow

The Company received orders totaling $161.1 million during the first quarter of 2010, an increase of 32% compared with the first quarter of 2009 and a 6% sequential decrease compared with the fourth quarter of 2009. The year-over-year increase in orders reflects stabilizing market conditions, while the sequential decrease is the result of lower-than-expected large international energy and pipeline solutions projects. In addition, the Company booked unusually high maritime orders in the fourth quarter of 2009. Backlog as of April 4, 2010 was $330.4 million, up 11% from backlog of $298.1 million at March 29, 2009 and up sequentially by 4% from December 31, 2009.

During the first quarter of 2010, the Company used $7.0 million of free cash flow (defined as net cash from operating activities, less capital expenditures and dividends paid) compared to using $7.9 million in the first quarter of 2009.

Energy

CIRCOR’s Energy segment revenues decreased by 35% to $57.7 million for the quarter ended April 4, 2010 compared with $89.3 million in the quarter ended March 29, 2009. The year-over-year decrease included organic declines of 47% across all areas, slightly offset by growth from acquisitions of 9% and favorable foreign currency adjustments of 3%.

Incoming orders for the first quarter of 2010 were $60.3 million, an increase of 32% from $45.8 million in the first quarter of 2009, and a decrease of 23% sequentially. The year-over-year increase was due to increased strength in the short-cycle business while the sequential decrease related to lower bookings of large international projects and pipeline solutions projects than the final quarter of 2009. Ending backlog totaled $135.4 million, a 6% increase compared with $127.3 million at the end of the first quarter of 2009, and a 2% increase sequentially.

The Energy segment adjusted operating margin, which excludes the impact of special charges, was 3.5% during the first quarter of 2010 compared with 18.1% for the first quarter of 2009 and 3.0% for the fourth quarter of 2009. First-quarter 2010 margins were negatively impacted year over year by organic revenue declines across the segment, the associated lost operating leverage, unfavorable pricing in large international projects, and the dilutive impact of the Pipeline Engineering acquisition. These factors were partially offset by lower commissions and increased productivity.

Aerospace

CIRCOR’s Aerospace segment revenues decreased by 4% to $27.3 million for the first quarter of 2010 from $28.3 million in the first quarter of 2009. Growth through acquisitions of 8% and favorable foreign currency adjustments of 1% were offset by organic declines of 13%. Incoming orders for the first quarter of 2010 were $33.0 million, an increase of 47% from $22.4 million in the first quarter of 2009, and a 39% increase from $23.7 million in the final quarter of 2009. The year-over-year and sequential increases were primarily due to military orders as well as the year-over-year increase from acquisitions. Ending backlog totaled $121.0 million, a 12% increase compared with $108.2 million at the end of the first quarter of 2009, and a 5% increase sequentially.

The Aerospace segment’s adjusted operating margin, which excludes the impact of special charges, was 13.2% for the first quarter of 2010 compared with 15.4% for the first quarter of 2009 and 14.7% for the fourth quarter of 2009. First-quarter 2010 margins were affected by reduced volume and associated leverage, as well as the dilutive impact of acquisitions and investments in new programs partially offset by productivity and favorable mix.

Flow Technologies

CIRCOR’s Flow Technologies segment revenues increased 6% to $61.3 million from $58.0 million in the first quarter of 2009. First-quarter 2010 revenues reflected organic growth of 3% and favorable foreign currency adjustments of 3%. Incoming orders for this segment were $67.8 million for the first quarter of 2010, an increase of 26% from $53.6 million in the first quarter of 2009 and a decrease of 2% sequentially. The year-over-year increase was due to strengthening demand across many end markets except chemical, refining and commercial construction. Ending backlog totaled $74.0 million, an 18% increase compared with $62.6 million at the end of the first quarter of 2009, and a 9% increase sequentially.

This segment’s adjusted operating margin, which excludes the impact of special and asbestos charges, for the first quarter of 2010 was 10.2% compared with 11.6% in the first quarter of 2009, and 11.7% in the fourth quarter of 2009. First-quarter 2010 margins were affected by unfavorable product mix, partially offset by productivity enhancements.

Business and Financial Outlook

"Our positive bookings trend during the past two quarters continues to provide us with reason for cautious optimism about the remainder of the year,” continued Higgins. "In Energy, we believe that the short-cycle business has stabilized and we are hopeful that an increasing number of large international projects will be released. In Flow Technologies, we believe many of our end markets bottomed in the second quarter of 2009 and will continue to improve. In Aerospace, our outlook is improving with freight and passenger traffic increasing, and OEMs announcing higher aircraft production later in the year. The recent financial headwinds in Europe and the Gulf coast oil crisis have created some uncertainties we will watch closely. However, we believe we have seen the bottom in many of our markets and bookings are beginning to improve in these areas.”

"As our sales volumes rebound, CIRCOR’s lean cost structure will enable us to drive profitability improvement across the organization. Our balance sheet remains strong and our ability to generate cash flow allows us to complement organic growth with strategic acquisitions,” concluded Higgins.

CIRCOR currently expects revenues for the second quarter of 2010 in the range of $170 million to $180 million and earnings, excluding special charges, to be in the range of $0.28 to $0.38 per diluted share.

Conference Call Information

CIRCOR International will hold a conference call to review its financial results today, May 10, 2010, at 5:00 p.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. 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. 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.

About CIRCOR International, Inc. CIRCOR International, Inc. designs, manufactures and markets valves and other highly engineered products and subsystems that control the flow of fluids safely and efficiently in the aerospace, energy and industrial markets. With more than 9,000 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.