CIRCOR Reports Second-Quarter 2018 Financial Results

July 26, 2018 at 5:12 PM EDT

BURLINGTON, Mass.--(BUSINESS WIRE)--Jul. 26, 2018-- CIRCOR International, Inc. (NYSE: CIR), a leading provider of flow control solutions and other highly engineered products for the Industrial, Energy and Aerospace & Defense markets, today announced financial results for the second quarter ended July 1, 2018. Results include the acquisition of the Colfax Fluid Handling business, which CIRCOR acquired in December 2017.

Second-Quarter 2018 Highlights

  • Orders of $309.4 million, up 116% on a reported basis and up 15% on a pro forma organic basis
  • Revenue of $301.4 million, up 99% on a reported basis and up 9% on a pro forma organic basis
  • GAAP Earnings per Share of $0.30; Adjusted Earnings per Share of $0.57
  • Acquisition integration on track

“Our top-line momentum continued in the second quarter as most of our end markets remained strong,” said Scott Buckhout, President and Chief Executive Officer. “We generated over $300 million of sales in the quarter. Our book to bill ratio was again above one, positioning us well for the second half of 2018.”

“Our organizational re-alignment around end markets is producing results and our integration activities are on track. We remain confident in our ability to realize the committed synergies,” added Buckhout.

“Our priorities remain driving long-term growth, generating strong cash flow and de-levering the Company by reducing debt and expanding margins,” concluded Buckhout.

Third-Quarter 2018 Guidance
For the third quarter of 2018, CIRCOR expects revenue in the range of $290 million to $300 million, and GAAP loss per share of $0.23 to $0.06, which reflects acquisition-related amortization expense of $0.52 to $0.54 and other special and restructuring charges of $0.09 to $0.14. Excluding the impact of amortization, special and restructuring charges, adjusted EPS is expected to be in the range of $0.45 to $0.55 per share. Presentation slides that provide supporting information to this guidance and second-quarter results are posted on the “Investors” section of the Company’s website, http://investors.circor.com, and will be discussed during the conference call at 9:00 a.m. ET tomorrow, July 27, 2018.

                 

Selected Consolidated Results (unaudited)

               
  ($ millions except EPS)     Q2 2018   Q2 2017     Change
  Revenue     $ 301.4     $ 151.2     99%
  GAAP Operating Income     $ 8.3     $ 11.4     (27)%
  Adjusted Operating Income1     $ 24.8     $ 12.0     107%
  GAAP Operating Margin       2.7%       7.5%     (490) bps
  Adjusted Operating Margin1       8.2%       8.0%     20 bps
  GAAP Earnings Per Share (Diluted)     $ 0.30     $ 0.54     (44)%
  Adjusted Earnings Per Share (Diluted)1     $ 0.57     $ 0.39     46%
  Operating Cash Flow     $ (1.9)     $ 2.7     N/M
  Free Cash Flow2     $ (5.9)     $ 0.3     N/M
  Orders     $ 309.4     $ 142.9    

116%

                         
                   

Segment Results

               
  ($ millions)     Q2 2018   Q2 2017   Change
  Industrial                      
  Revenue     $ 131.1     $ 29.7     341%
  Segment Operating Income     $ 15.0     $ 4.9     206%
  Segment Operating Margin       11.5%       16.5%     (500) bps
  Orders     $ 136.7     $ 29.9     357%
                         
  Energy                      
  Revenue     $ 112.8     $ 78.3     44%
  Segment Operating Income     $ 9.2     $ 8.2     12%
  Segment Operating Margin       8.2%       10.4%     (230) bps
  Orders     $ 113.2     $ 73.1     55%
                         
  Aerospace & Defense                      
  Revenue     $ 57.5     $ 43.3     33%
  Segment Operating Income     $ 7.0     $ 4.4     59%
  Segment Operating Margin       12.2%       10.1%     210 bps
  Orders     $ 59.4     $ 39.9     49%
                         

1.Adjusted Consolidated and Segment Results for Q2 2018 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $16.6 million ($5.5 million, net of tax). These charges include: (i) $13.5 million charge for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $1.9 million charge related to restructuring activities, primarily severance, related to our Engineered Valves, Reliability Services and Germany-based Pumps business; and (iii) $1.2 million primarily related to the separation of the Fluid Handling business from Colfax Corporation and exiting a product line.Consolidated and Segment Results for Q2 2017 exclude special and restructuring charges and non-cash acquisition-related intangible amortization, totaling $0.6 million ($2.5 million, net of tax). These charges include (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 charge related to the exit of manufacturing operations in China, including $0.8 million related to environmental clean-up costs, (iv) $1.1 million charge related to 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.
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.
N/M = Not meaningful

Conference Call Information
CIRCOR International will hold a conference call to review its financial results at 9:00 a.m. ET tomorrow, July 27, 2018. To listen to the live conference call and view the accompanying presentation slides, please visit “Webcasts & Presentations” in the “Investors” portion of CIRCOR’s website. The live call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. The webcast will be archived on the Company’s website for one year.

Use of Non-GAAP Financial Measures
Adjusted operating income, Adjusted operating margin, Adjusted net income, Adjusted earnings per share (diluted), EBITDA, Adjusted EBITDA, net debt, free cash flow, organic growth, pro forma combined amounts and pro forma organic growth 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:

  • We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to these restructuring activities are not indicative of our normal operating costs.
  • We exclude certain acquisition-related costs, including significant transaction costs and amortization of inventory and fixed-asset step-ups and the related tax effects. We exclude these costs because we do not believe they are indicative of our normal operating costs.
  • We exclude the expense and tax effects associated with the non-cash amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives up to 25 years. Exclusion of the non-cash amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.
  • We also exclude certain gains/losses and related tax effects, which are either isolated or cannot be expected to occur again with any predictability, and that we believe are not indicative of our normal operating gains and losses. For example, we exclude gains/losses from items such as the sale of a business, significant litigation-related matters and lump-sum pension plan settlements.
  • Due to the significance of the Fluid Handling acquisition and to provide a more meaningful comparison of changes in our orders and revenue, we also discuss these changes on a “pro forma organic” basis. Pro forma organic is calculated assuming the Fluid Handling acquisition was completed on January 1, 2017 and excluding the impact of changes in foreign currency exchange rates.

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 included in this news release.

Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27 A of the Securities Act of 1933, as amended, and Section 21 E 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 third-quarter 2018 guidance, our future performance, including realization of cost reductions from restructuring activities and expected synergies, and our corporate priorities. Actual events, performance or results could differ materially from the anticipated events, performance or results expressed or implied by such forward-looking statements. Important factors that could cause actual results to vary from expectations include, but are not limited to: our ability to respond to competitive developments and to grow our business, both domestically and internationally; changes in the cost, quality or supply of raw materials; our ability to comply with our debt obligations; our ability to successfully implement our acquisition, divesture or restructuring strategies, including our integration of the Fluid Handling business; changes in industry standards, trade policies or government regulations, both in the United States and internationally; and our ability to operate our manufacturing facilities at current or higher levels and respond to increases in manufacturing costs. 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 differentiated technology products and sub-systems for markets including oil & gas, industrial, aerospace & defense and commercial marine. CIRCOR has a diversified flow and motion control product portfolio with recognized, market-leading brands that fulfill its customers’ mission critical 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 talent. For more information, visit the Company’s investor relations website at http://investors.circor.com.

           

CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share data)
(UNAUDITED)

           
      Three Months Ended   Six Months Ended
      July 1, 2018   July 2, 2017   July 1, 2018   July 2, 2017
Net revenues     $ 301,368     $ 151,231     $ 576,948     $ 296,439  
Cost of revenues     213,117     103,563     412,393     202,139  
GROSS PROFIT     88,251     47,668     164,555     94,300  
Selling, general and administrative expenses     77,999     38,218     155,237     78,305  
Special and restructuring charges (recoveries), net     2,000     (1,954 )   14,446     (2,763 )
OPERATING INCOME (LOSS)     8,252     11,404     (5,128 )   18,758  
Other expense (income):                  
Interest expense, net     13,755     2,184     25,556     3,853  
Other (income) expense, net     (3,759 )   974     (5,620 )   1,200  
TOTAL OTHER EXPENSE, NET     9,996     3,158     19,936     5,053  
(LOSS) INCOME BEFORE INCOME TAXES     (1,744 )   8,246     (25,064 )   13,705  
(Benefit from) provision for income taxes     (7,646 )   (724 )   (13,525 )   (37 )
NET INCOME (LOSS)     $ 5,902     $ 8,970     $ (11,539 )   $ 13,742  
Earnings (Loss) per common share:                  
Basic     $ 0.30     $ 0.54     $ (0.58 )   $ 0.83  
Diluted     $ 0.30     $ 0.54     $ (0.58 )   $ 0.82  
Weighted average number of common shares outstanding:                  
Basic     19,836     16,497     19,821     16,478  
Diluted     20,005     16,762     19,906     16,726  
Dividends declared per common share     $     $ 0.0375     $     $ 0.0750  
                                   
       

 

CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)

       
      Six Months Ended
OPERATING ACTIVITIES     July 1, 2018   July 2, 2017
Net (loss) income     $ (11,539 )   $ 13,742  
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:          
Depreciation     14,491     7,345  
Amortization     24,611     6,216  
Bad debt expense (recovery)     532     (319 )
Loss on write down of inventory     9,084     1,068  
Compensation expense of share-based plans     2,866     1,386  
Change in fair value of contingent consideration         (12,200 )
Interest amortization     1,172      
Loss (gain) on sale or write down of property, plant and equipment     1,124     (66 )
Loss on sale of business         5,300  
Changes in operating assets and liabilities, net of effects of acquisition and disposition:          
Trade accounts receivable     13,223     16,478  
Inventories     (12,920 )   (12,382 )
Prepaid expenses and other assets     (17,534 )   (8,011 )
Accounts payable, accrued expenses and other liabilities     (27,146 )   305  
Net cash (used in) provided by operating activities     (2,036 )   18,862  
INVESTING ACTIVITIES          
Additions to property, plant and equipment     (12,315 )   (5,504 )
Proceeds from the sale of property, plant and equipment     175     318  
Business acquisition, working capital adjustment     6,300     1,467  
Net cash used in investing activities     (5,840 )   (3,719 )
FINANCING ACTIVITIES          
Proceeds from long-term debt     137,162     333,021  
Payments of long-term debt     (104,194 )   (332,233 )
Dividends paid         (1,251 )
Proceeds from the exercise of stock options     440     707  
Return of cash to seller     (61,201 )    
Net cash used in financing activities     (27,793 )   (206 )
Effect of exchange rate changes on cash and cash equivalents     (5,755 )   4,056  
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH     (41,424 )   18,993  
Cash, cash equivalents and restricted cash at beginning of period     112,247     58,279  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD     $ 70,823     $ 77,272  
                   
           

CIRCOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(UNAUDITED)

           
      July 1, 2018   December 31, 2017
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents     $ 69,030     $ 110,356  
Trade accounts receivable, less allowance for doubtful accounts of $6,704 and $4,791, respectively     199,805     223,922  
Inventories     244,153     244,896  

Restricted cash

   

1,792

   

1,937

 
Prepaid expenses and other current assets    

70,133

   

57,282

 
Total Current Assets     584,913     636,456  
PROPERTY, PLANT AND EQUIPMENT, NET     217,471     217,539  
OTHER ASSETS:          
Goodwill     501,723     505,762  
Intangibles, net     481,585     513,364  
Deferred income taxes    

41,498

    22,334  
Other assets     11,995     9,407  

TOTAL ASSETS

    $

1,839,185

    $ 1,904,862  
LIABILITIES AND SHAREHOLDERS’ EQUITY          
CURRENT LIABILITIES:          
Accounts payable     $ 114,152     $ 117,329  
Accrued expenses and other current liabilities     105,922     170,454  
Accrued compensation and benefits     32,041     34,734  
Total Current Liabilities     252,115     322,517  
LONG-TERM DEBT     819,779     787,343  
DEFERRED INCOME TAXES    

27,320

    26,122  
PENSION LIABILITY, NET     142,417     150,719  
OTHER NON-CURRENT LIABILITIES     23,561     18,124  
COMMITMENTS AND CONTINGENCIES          
SHAREHOLDERS’ EQUITY:          
Common stock     212     212  
Additional paid-in capital     442,318     438,721  
Retained earnings     259,948     274,243  
Common treasury stock, at cost     (74,472 )   (74,472 )
Accumulated other comprehensive loss, net of tax     (54,013 )   (36,730 )
Total Shareholders’ Equity     573,993     601,974  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY     $

1,839,185

    $ 1,906,799  
                   
 

CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions)
UNAUDITED

 

      Three Months Ended   Six Months Ended
      July 1, 2018   July 2, 2017   July 1, 2018   July 2, 2017
ORDERS (1) (3)                  
Energy     $ 113.2     $ 73.1     $ 242.9     $ 173.2
Aerospace & Defense     59.4     39.9     119.2     96.3
Industrial     136.7     29.9     273.4     57.5
Total orders     $ 309.3     $ 142.9     $ 635.5     $ 327.0
                   
BACKLOG (2) (3)     July 1, 2018   July 2, 2017        
Energy     $ 217.7     $ 140.1          
Aerospace & Defense     152.1     105.7          
Industrial     167.3     33.8          
Total backlog     $ 537.1     $ 279.6          
                   

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 represents unshipped customer orders for which revenue has not been recognized.
Note 3: 2018 backlog reflects adjustments related to the cumulative impact of changes in revenue recognition due to the Company's adoption of ASC 606. July 2, 2017 amounts restated for Q1 2018 organizational realignment.

 

CIRCOR INTERNATIONAL, INC.
SEGMENT INFORMATION
(in thousands, except percentages)
UNAUDITED

 

                                   
      2017   2018
      1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR   2ND QTR   TOTAL
ORDERS                                  
Energy     $ 100,012     $ 73,140     $ 84,857     $ 118,073     $ 376,082     $ 129,762     $ 113,171     $ 242,933  
Aerospace & Defense     56,416     39,902     45,939     $ 52,043     194,300     59,793     59,441     119,234  
Industrial     27,654     29,889     27,296     46,407     131,246     136,607     136,746     273,353  
Total     $ 184,082     $ 142,931     $ 158,092     $ 216,523     $ 701,628     $ 326,162     $ 309,358     $ 635,520  
                                   
NET REVENUES                                  
Energy     $ 76,210     $ 78,276     $ 88,570     $ 96,561     $ 339,617     $ 99,972     $ 112,804     $ 212,776  
Aerospace & Defense     41,601     43,304     41,117     $ 56,961     182,983     58,477     57,500     $ 115,977  
Industrial     27,397     29,651     30,006     52,056     139,110     117,131     131,064     $ 248,195  
Total     $ 145,208     $ 151,231     $ 159,693     $ 205,578     $ 661,710     $ 275,580     $ 301,368     $ 576,948  
                                   
SEGMENT OPERATING INCOME                                  
Energy     $ 6,407     $ 8,170     $ 6,936     $ 8,618     $ 30,131     $ 5,696     $ 9,242     $ 14,938  
Aerospace & Defense     3,784     4,374     4,333     10,884     23,375     8,931     6,992     $ 15,923  
Industrial     4,384     4,901     5,675     4,972     19,932     12,948     15,037     $ 27,985  
Corporate expenses     (5,479 )   (5,396 )   (5,067 )   (5,802 )   (21,744 )   (7,802 )   (6,448 )   $ (14,250 )
Adjusted Operating Income     $ 9,096     $ 12,049     $ 11,877     $ 18,672     $ 51,694     $ 19,773     $ 24,823     $ 44,596  
                                   
SEGMENT OPERATING MARGIN %                                  
Energy     8.4 %   10.4 %   7.8 %   8.9 %   8.9 %   5.7 %   8.2 %   7.0 %
Aerospace & Defense     9.1 %   10.1 %   10.5 %   19.1 %   12.8 %   15.3 %   12.2 %   13.7 %
Industrial     16.0 %   16.5 %   18.9 %   9.6 %   14.3 %   11.1 %   11.5 %   11.3 %
Adjusted Operating Margin     6.3 %   8.0 %   7.4 %   9.1 %   7.8 %   7.2 %   8.2 %   7.7 %
                                                   
 

CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS
(in thousands, except percentages)
UNAUDITED

           
      2017   2018
      1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR   2ND QTR   TOTAL
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES     $ 16,195     $ 2,667     $ (16,854 )   $ 7,629     $ 9,637     $ (147 )   $ (1,893 )   $ (2,040 )
LESS:                                  
Capital expenditures, net of sale proceeds     2,811     2,375     2,318     6,103     13,607     8,141     3,999     12,140  
FREE CASH FLOW     $ 13,384     $ 292     $ (19,172 )   $ 1,526     $ (3,970 )   $ (8,288 )   $ (5,892 )   $ (14,180 )
TOTAL DEBT     $ 243,000     $ 252,856     $ 269,026     $ 795,208     $ 795,208     $ 823,665     $ 827,629     $ 827,629  
LESS:                                  
Cash & cash equivalents     65,656     77,272     75,627     110,356     110,356     123,305     69,030     69,030  
NET DEBT     $ 177,344     $ 175,584     $ 193,399     $ 684,852     $ 684,852     $ 700,360     $ 758,599     $ 758,599  
TOTAL SHAREHOLDERS' EQUITY     $ 415,537     $ 438,097     $ 451,885     $ 601,974     $ 601,974     $ 588,312     $ 573,992     $ 573,992  
                                   
TOTAL DEBT AS % OF EQUITY     58 %   58 %   60 %   132 %   132 %   140 %   144 %   144 %
NET DEBT AS % OF EQUITY     43 %   40 %   43 %   114 %   114 %   119 %   132 %   132 %
                                                   
 
CIRCOR INTERNATIONAL, INC.

RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS

(in thousands, except per share data)

UNAUDITED

           
      2017   2018
      1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR   2ND QTR   TOTAL
NET INCOME (LOSS)     $ 4,773     $ 8,970     $ 3,617     $ (5,571 )   $ 11,789     $ (17,441 )   $ 5,902     $ (11,539 )
LESS:                                  
Restructuring related inventory charges                         473     1,067     1,540  
Amortization of inventory step-up                 4,300     4,300     6,600         6,600  
Restructuring charges, net     1,458     3,566     341     697     6,062     9,615     844     10,459  
Acquisition amortization     2,552     2,599     2,694     4,697     12,542     11,797     11,767     23,564  
Acquisition depreciation                 233     233     1,837     1,735     3,572  
Special (recoveries) charges, net     (2,268 )   (5,520 )   1,978     13,799     7,989     2,831     1,156     3,987  
Income tax impact     (1,137 )   (3,124 )   (1,497 )   (8,279 )   (14,037 )   (7,687 )   (11,056 )   (18,743 )
ADJUSTED NET INCOME     $ 5,378     $ 6,491     $ 7,133     $ 9,876     $ 28,878     $ 8,025     $ 11,415     $ 19,440  
                                   
EARNINGS (LOSS) PER COMMON SHARE (Diluted)     $ 0.29     $ 0.54     $ 0.22     $ (0.32 )   $ 0.70     $ (0.88 )   $ 0.30     $ (0.58 )
LESS:                                  
Restructuring related inventory charges                         0.02     0.05     0.08  
Amortization of inventory step-up                 0.25     0.26     0.33         0.33  
Restructuring charges, net     0.09     0.21     0.02     0.04     0.36     0.49     0.04     0.53  
Acquisition amortization     0.15     0.16     0.16     0.27     0.74     0.60     0.59     1.18  
Acquisition depreciation                 0.01     0.01     0.09     0.09     0.18  
Special (recoveries) charges, net     (0.14 )   (0.33 )   0.12     0.80     0.47     0.14     0.06     0.20  
Income tax impact     (0.07 )   (0.19 )   (0.09 )   (0.48 )   (0.83 )   (0.39 )   (0.55 )   (0.94 )
ADJUSTED EARNINGS PER SHARE (Diluted)     $ 0.32     $ 0.39     $ 0.43     $ 0.57     $ 1.71     $ 0.40     $ 0.57     $ 0.98  
                                                                   
 
CIRCOR INTERNATIONAL, INC.

RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS

(in thousands)

UNAUDITED

           
      2017   2018
      1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR   2ND QTR   TOTAL
NET INCOME (LOSS)     $ 4,773     $ 8,970     $ 3,617     $ (5,571 )   $ 11,789     $ (17,441 )   $ 5,902     $ (11,539 )
LESS:                                  
Interest expense, net     (1,669 )   (2,184 )   (2,445 )   (4,479 )   (10,777 )   (11,801 )   (13,755 )   (25,556 )
Depreciation     (3,798 )   (3,547 )   (3,544 )   (4,401 )   (15,290 )   (7,334 )   (7,157 )   (14,491 )
Amortization     (3,092 )   (3,124 )   (3,275 )   (5,256 )   (14,747 )   (12,329 )   (12,282 )   (24,611 )
(Provision for) benefit from income taxes     (687 )   724     21     5,618     5,676     5,879     7,646     13,525  
EBITDA     $ 14,019     $ 17,101     $ 12,860     $ 2,947     $ 46,927     $ 8,144     $ 31,450     $ 39,594  
LESS:                                  
Restructuring related inventory charges                         (473 )   (1,067 )   (1,540 )
Amortization of inventory step-up                 (4,300 )   (4,300 )   (6,600 )       (6,600 )
Restructuring charges, net     (1,458 )   (3,566 )   (341 )   (697 )   (6,062 )   (9,615 )   (844 )   (10,459 )
Special recoveries (charges), net     2,268     5,520     (1,978 )   (13,799 )   (7,989 )   (2,831 )   (1,156 )   (3,987 )
ADJUSTED EBITDA     $ 13,209     $ 15,147     $ 15,179     $ 21,743     $ 65,278     $ 27,663     $ 34,517     $ 62,180  
                                                                   
 
CIRCOR INTERNATIONAL, INC.

RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS

(in thousands, except percentages)

UNAUDITED

           
      2017   2018
      1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL   1ST QTR   2ND QTR   TOTAL
GAAP OPERATING INCOME (LOSS)     $ 7,354     $ 11,404     $ 6,864     $ (5,054 )   $ 20,568     $ (13,380 )   $ 8,252     $ (5,128 )
LESS:                                  
Restructuring related inventory charges                         473     1,067     1,540  
Amortization of inventory step-up                 4,300     4,300     6,600         6,600  
Restructuring charges, net     1,458     3,566     341     697     6,062     9,615     844     10,459  
Acquisition amortization     2,552     2,599     2,694     4,697     12,542     11,797     11,767     23,564  
Acquisition depreciation                 233     233     1,837     1,735     3,572  
Special (recoveries) charges, net     (2,268 )   (5,520 )   1,978     13,799     7,989     2,831     1,156     3,987  
ADJUSTED OPERATING INCOME     $ 9,096     $ 12,049     $ 11,877     $ 18,672     $ 51,694     $ 19,773     $ 24,821     $ 44,594  
                                   
GAAP OPERATING MARGIN     5.1 %   7.5 %   4.3 %   (2.5 )%   3.1 %   (4.9 )%   2.7 %   (0.9 )%
LESS:                                  
Restructuring related inventory charges     %   %   %   %   %   0.2 %   0.4 %   0.3 %
Amortization of inventory step-up     %   %   %   2.1 %   0.6 %   2.4 %   %   1.1 %
Restructuring charges, net     1.0 %   2.4 %   0.2 %   0.3 %   0.9 %   3.5 %   0.3 %   1.8 %
Acquisition amortization     1.8 %   1.7 %   1.7 %   2.3 %   1.9 %   4.3 %   3.9 %   4.1 %
Acquisition depreciation     %   %   %   0.1 %   %   0.7 %   0.6 %   0.6 %
Special (recoveries) charges, net     (1.6 )%   (3.7 )%   1.2 %   6.7 %   1.2 %   1.0 %   0.4 %   0.7 %
ADJUSTED OPERATING MARGIN     6.3 %   8.0 %   7.4 %   9.1 %   7.8 %   7.2 %   8.2 %   7.7 %
                                                   

The Company is providing certain combined information related to the recently acquired Fluid Handling business.

       

CIRCOR INTERNATIONAL, INC.
SEGMENT INFORMATION - COMBINED
(in thousands, except percentages)
UNAUDITED

       
      2017
      1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL
ORDERS - Recast                      
Energy     $ 100,012     $ 73,140     $ 84,857     $ 118,073     $ 376,082
Aerospace & Defense     56,416     39,902     45,939     52,043     194,300
Industrial     27,654     29,889     27,296     46,407     131,246
Total     $ 184,082     $ 142,931     $ 158,092     $ 216,523     $ 701,628
                       
ORDERS - Fluid Handling                      
Energy     $ 23,679     $ 16,882     $ 21,401     $ 11,803     $ 73,765
Aerospace & Defense     8,255     24,375     9,716     6,816     49,162
Industrial     77,944     76,866     87,378     60,193     302,381
Total     $ 109,878     $ 118,123     $ 118,495     $ 78,812     $ 425,308
                       
ORDERS - Combined                      
Energy     $ 123,690     $ 90,022     $ 106,258     $ 129,876     $ 449,846
Aerospace & Defense     64,671     64,277     55,655     58,859     243,462
Industrial     105,598     106,755     114,674     106,601     433,628
Total     $ 293,959     $ 261,054     $ 276,587     $ 295,336     $ 1,126,936
                       
NET REVENUES - Recast                      
Energy     $ 76,210     $ 78,276     $ 88,570     $ 96,561     $ 339,617
Aerospace & Defense     41,601     43,304     41,117     56,961     182,983
Industrial     27,397     29,651     30,006     52,056     139,110
Total     $ 145,208     $ 151,231     $ 159,693     $ 205,578     $ 661,710
                       
NET REVENUES - Fluid Handling                      
Energy     $ 15,546     $ 17,705     $ 17,789     $ 13,663     $ 64,703
Aerospace & Defense     10,728     17,044     11,208     6,918     45,898
Industrial     85,264     83,310     85,604     72,489     326,667
Total     $ 111,538     $ 118,059     $ 114,601     $ 93,070     $ 437,268
                       
NET REVENUES - Combined                      
Energy     $ 91,756     $ 95,981     $ 106,359     $ 110,224     $ 404,320
Aerospace & Defense     52,329     60,348     52,325     63,879     228,881
Industrial     112,661     112,961     115,610     124,545     465,777
Total     $ 256,746     $ 269,290     $ 274,294     $ 298,648     $ 1,098,978
                                         

Notes:
- Items labeled "Recast" represent previously reported CIRCOR information, adjusted to reflect the impact of our February 28, 2018 organizational realignment
- Items labeled "Fluid Handling" represent the information from the Fluid Handling businesses prior to their acquisition by CIRCOR on December 10, 2017
- Items labeled "Combined" represent the sum of the Recast and Fluid Handling information

       

CIRCOR INTERNATIONAL, INC.
SEGMENT INFORMATION - COMBINED
(in thousands, except percentages)
UNAUDITED

       
      2017
      1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL
SEGMENT OPERATING INCOME - Recast                      
Energy     $ 6,407     $ 8,170     $ 6,936     $ 8,618     $ 30,131  
Aerospace & Defense     3,784     4,374     4,333     10,884     23,375  
Industrial     4,384     4,901     5,675     4,972     19,932  
Corporate expenses     (5,479 )   (5,396 )   (5,067 )   (5,802 )   (21,744 )
Total     $ 9,096     $ 12,049     $ 11,877     $ 18,672     $ 51,694  
                       
SEGMENT OPERATING INCOME - Fluid Handling                      
Energy     $ (83 )   $ 1,080     $ 1,761     $ 812     $ 3,570  
Aerospace & Defense     1,488     3,661     2,201     (367 )   6,983  
Industrial     8,833     7,709     4,365     (1,414 )   19,493  
Corporate expenses                      
Total     $ 10,238     $ 12,450     $ 8,327     $ (969 )   $ 30,046  
                       
SEGMENT OPERATING INCOME - Combined                      
Energy     $ 6,324     $ 9,250     $ 8,697     $ 9,430     $ 33,701  
Aerospace & Defense     5,272     8,035     6,534     10,517     30,358  
Industrial     13,217     12,610     10,040     3,558     39,425  
Corporate expenses     (5,479 )   (5,396 )   (5,067 )   (5,802 )   (21,744 )
Total     $ 19,334     $ 24,499     $ 20,204     $ 17,703     $ 81,740  
                       
SEGMENT OPERATING MARGIN - Combined                      
Energy     6.9 %   9.6 %   8.2 %   8.6 %   8.3 %
Aerospace & Defense     10.1 %   13.3 %   12.5 %   16.5 %   13.3 %
Industrial     11.7 %   11.2 %   8.7 %   2.9 %   8.5 %
Corporate expenses     (2.1 )%   (2.0 )%   (1.8 )%   (1.9 )%   (2.0 )%
Total     7.5 %   9.1 %   7.4 %   5.9 %   7.4 %
                       

Notes:
- Items labeled "Recast" represent previously reported CIRCOR information, adjusted to reflect the impact of our February 28, 2018 organizational realignment
- Items labeled "Fluid Handling" represent the information from the Fluid Handling businesses prior to their acquisition by CIRCOR on December 10, 2017
- Items labeled "Combined" represent the sum of the Recast and Fluid Handling information
- Segment Operating Margin - Combined represent Segment Operating Income - Combined divided by Segment Net Revenues Combined

                                                   

CIRCOR INTERNATIONAL, INC.
Q2 2018 Organic Growth Calculations
(in thousands, except percentages)
UNAUDITED

                                                   
ORDERS              
      Industrial   Energy   Aerospace & Defense
      Reported  

Pro Forma
Combined

  Reported  

Pro Forma
Combined

  Reported  

Pro Forma
Combined

      $   %   $   %   $   %   $   %   $   %   $   %
2017     29,889         106,755         73,140         90,022         39,902         64,277      
Product line transfer             14,600                                 (14,600 )    
2017 as Adjusted     29,889         121,355         73,140         90,022         39,902         49,677      
Organic     3,267     11 %   9,780     8 %   19,470     27 %   21,449     24 %   2,766     7 %   8,664     17 %
Acquisitions     102,460     343 %       %   18,389     25 %       %   15,661     39 %       %
Foreign Exchange     1,130     4 %   5,611     5 %   2,172     3 %   1,700     2 %   1,112     3 %   1,100     2 %
Total Change     106,857     358 %   15,391     13 %   40,031     55 %   23,149     26 %   19,539     49 %   9,764    

20

%
                                                   
2018     136,746         136,746         113,171         113,171         59,441         59,441      
                                                   
NET REVENUE              
      Industrial   Energy   Aerospace & Defense
      Reported  

Pro Forma
Combined

  Reported  

Pro Forma
Combined

  Reported  

Pro Forma
Combined

      $   %   $   %   $   %   $   %   $   %   $   %
2017     29,651         112,961         78,276         95,981         43,304         60,348      
                                                   
Organic     (220 )   (1 )%   13,003     12 %   15,765     20 %   15,824     16 %   1,319     3 %   (3,948 )   (7 )%
Acquisitions     100,602     339 %       %   17,419     22 %       %   11,793     27 %       %
Foreign Exchange     1,031     3 %   5,100     5 %   1,346     2 %   1,000     1 %   1,084     3 %   1,100     2 %
Total Change     101,413     341 %   18,103    

16

%   34,529     44 %   16,824     18 %   14,196     33 %   (2,848 )   (5 )%
                                                   
2018     131,064         131,064         112,804         112,804         57,500         57,500      
 
 
CIRCOR INTERNATIONAL, INC.
Q2 2018 Organic Growth Calculations
(in thousands, except percentages)
UNAUDITED
 
ORDERS      
      Total
      Reported     Pro Forma Combined
      $   %     $   %
2017     142,931           261,054      
Product line transfer                    
2017 as Adjusted     142,931           261,054      
Organic     25,502     18 %     39,893     15 %
Acquisitions     136,511     96 %         %
Foreign Exchange     4,414     3 %     8,411     3 %
Total Change     166,427    

116

%     48,304     18 %
                     
2018     309,358           309,358      
                     
NET REVENUE      
      Total
      Reported     Pro Forma Combined
      $   %     $   %
2017     151,231           269,290      
                     
Organic     16,863     11 %     24,878     9 %
Acquisitions     129,814     86 %         %
Foreign Exchange     3,460     2 %     7,200     3 %
Total Change     150,137     99 %     32,078     12 %
                     

2018

    301,368           301,368      
                         
                       

CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF FLUID HANDLING SEGMENT INFORMATION TO GAAP OPERATING INCOME
(in thousands, except percentages)
UNAUDITED

       
      2017
      1ST QTR   2ND QTR   3RD QTR   4TH QTR   TOTAL
FLUID HANDLING GAAP OPERATING INCOME (LOSS)     $ 4,359     $ 19,738     $ 2,241     $ 3,129     $ 29,467  
LESS:                      
Asbestos costs     2,690     2,517     2,379     1,274     8,860  
Impairment charges                      
Exited businesses     65     (26 )   (47 )       (8 )
Acquisition amortization     796     810     818         2,424  
Restructuring and other special charges (recoveries)     2,328     (10,589 )   636     (5,372 )   (12,997 )
Stay bonus             2,300         2,300  
FLUID HANDLING ADJUSTED OPERATING INCOME     $ 10,238     $ 12,450     $ 8,327     $ (969 )   $ 30,046  
                       

Notes
- Amounts relate to Fluid Handling results prior to December 10, 2017, the date of CIRCOR's acquisition.

 

Source: Circor International, Inc.

CIRCOR International
Rajeev Bhalla, 781-270-1200
Executive Vice President & Chief Financial Officer