CIRCOR Reports Third-Quarter 2018 Financial Results

November 5, 2018 at 4:52 PM EST

BURLINGTON, Mass.--(BUSINESS WIRE)--Nov. 5, 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 third quarter ended September 30, 2018. Results include the acquisition of the Colfax Fluid Handling business, which CIRCOR acquired in December 2017.

Third-Quarter 2018 Highlights

  • Orders of $307 million, up 94% on a reported basis and up 13% on a pro forma organic basis
  • Revenue of $298 million, up 86% on a reported basis and up 10% on a pro forma organic basis
  • GAAP Loss per Share of $0.34; Adjusted Earnings per Share of $0.52
  • Operating Cash Flow of $24 million; Free Cash Flow of $19 million
  • Debt pay down of $18 million
  • Fluid Handling integration remains on track

“Organic growth in our Energy and Aerospace & Defense segments, combined with the contribution of the Fluid Handling acquisition, drove another quarter of top-line momentum for CIRCOR,” said Scott Buckhout, President and Chief Executive Officer. “Order intake exceeded $300 million, led by the Industrial segment, reflecting favorable demand trends across most of our end markets.”

“Our working capital and cash management actions are gaining traction, and during the quarter we generated $24 million of operating cash flow and reduced our debt by $18 million,” added Buckhout.

“The integration of Fluid Handling is on track, and our synergy plan is ahead of schedule. We expect to deliver the committed run-rate cost synergies by the end of year three, a year earlier than our original timeline. We remain focused on driving long-term growth and de-levering the Company through debt reduction and margin enhancement,” concluded Buckhout.

Fourth-Quarter 2018 Guidance
For the fourth quarter of 2018, CIRCOR expects revenue in the range of $295 million to $315 million, and GAAP loss per share in the range of $(0.19) to $(0.04), which reflects acquisition-related amortization expense of $0.54 to $0.56 and other special and restructuring charges of $0.13 to $0.16. Excluding the impact of amortization, special and restructuring charges, adjusted EPS is expected to be in the range of $0.53 to $0.63 per share. Presentation slides that provide supporting information to this guidance and third-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, November 6, 2018.

           

Selected Consolidated Results (unaudited)

($ millions except EPS)     Q3 2018 Q3 2017 Change
Revenue $ 297.5 $ 159.7 86%
GAAP Operating Income $ 8.2 $ 6.9 19%
Adjusted Operating Income1 $ 24.4 $ 11.9 105%
GAAP Operating Margin 2.8% 4.3% (150) bps
Adjusted Operating Margin1 8.2% 7.4% 80 bps
GAAP (Loss) Earnings Per Share (Diluted) $ (0.34) $ 0.22 (255)%
Adjusted Earnings Per Share (Diluted)1 $ 0.52 $ 0.43 21%
Operating Cash Flow $ 24.1 $ (16.9) 243%
Free Cash Flow2 $ 19.0 $ (19.2) 199%
Orders $ 307.4 $ 158.1 94%
           

Segment Results

($ millions)     Q3 2018 Q3 2017

 

Change

Industrial
Revenue $ 118.7 $ 30.0 296%
Segment Operating Income $ 14.6 $ 5.7 156%
Segment Operating Margin 12.3% 18.9% (660) bps
Orders $ 114.9 $ 27.3 321%
 
Energy
Revenue $ 121.0 $ 88.6 37%
Segment Operating Income $ 9.2 $ 6.9 33%
Segment Operating Margin 7.6% 7.8% (20) bps
Orders $ 111.0 $ 84.9 31%
 
Aerospace & Defense
Revenue $ 57.8 $ 41.1 41%
Segment Operating Income $ 8.7 $ 4.3 102%
Segment Operating Margin 15.1% 10.5% 460 bps
Orders $ 81.5 $ 45.9 78%

1.Adjusted Consolidated and Segment Results for Q3 2018 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $16.2 million ($17.2 million, net of tax). These charges include: (i) $13.5 million for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $1.3 million related to restructuring activities, primarily severance, related to our Reliability Services and Germany-based Pumps business; and (iii) $1.4 million primarily related to the separation of Fluid Handling business from Colfax Corporation and exiting a product line.Consolidated and Segment Results for Q3 2017 exclude special and restructuring charges and non-cash acquisition-related intangible amortization, totaling $5.0 million ($3.5 million, net of tax). These charges include: (i) $2.7 million for non-cash acquisition-related intangible amortization expense; (ii) $1.8 million in transaction fees associated with the acquisition of Colfax Fluid Handling; (iii) $0.3 million related to previously announced restructuring actions; and (iv) $0.2 million related to the sale of our France build-to-print business.

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 Information
CIRCOR International will hold a conference call to review its financial results at 9:00 a.m. ET tomorrow, November 6, 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 reflect our ongoing business and facilitate 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 fourth-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, divestiture 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 (LOSS) INCOME
(in thousands, except per share data)
(UNAUDITED)

 

       
Three Months Ended Nine Months Ended

September 30,
2018

   

October 1,
2017

September 30,
2018

   

October 1,
2017

Net revenues $ 297,514 $ 159,693 $ 874,462 $ 456,131
Cost of revenues 212,436   112,390   624,829   314,527  
GROSS PROFIT 85,078 47,303 249,633 141,604
Selling, general and administrative expenses 74,106 38,120 229,343 116,425
Special and restructuring charges (recoveries), net 2,756   2,319   17,202   (443 )
OPERATING INCOME 8,216   6,864   3,088   25,622  
Other expense (income):
Interest expense, net 14,100 2,445 39,656 6,298
Other (income) expense, net (1,580 ) 823   (7,200 ) 2,022  
TOTAL OTHER EXPENSE, NET 12,520   3,268   32,456   8,320  
(LOSS) INCOME BEFORE INCOME TAXES (4,304 ) 3,596 (29,368 ) 17,302
Provision for (benefit from) income taxes 2,537   (21 ) (10,988 ) (57 )
NET (LOSS) INCOME $ (6,841 ) $ 3,617   $ (18,380 ) $ 17,359  
(Loss) Earnings per common share:
Basic $ (0.34 ) $ 0.22 $ (0.93 ) $ 1.05
Diluted $ (0.34 ) $ 0.22 $ (0.93 ) $ 1.04
Weighted average number of common shares outstanding:
Basic 19,843 16,503 19,829 16,486
Diluted 19,843 16,709 19,829 16,721
Dividends declared per common share $ $ 0.0375 $ $ 0.1125
 

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

 

   
Nine Months Ended
OPERATING ACTIVITIES

September 30,
2018

   

October 1,
2017

Net (loss) income $ (18,380 ) $ 17,359
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation 21,556 10,889
Amortization 36,845 9,491
Bad debt expense 1,078 265
Loss on write down of inventory 4,632 1,463
Amortization of inventory fair value step-up 6,600
Compensation expense of share-based plans 4,303 2,696
Change in fair value of contingent consideration (12,200 )
Amortization of debt issuance costs 2,852
Loss on sale or write down of property, plant and equipment 1,305 87
Loss on sale of business 5,300
Changes in operating assets and liabilities, net of effects of acquisition and disposition:
Trade accounts receivable 21,510 8,782
Inventories 4,463 (29,703 )
Prepaid expenses and other assets (31,034 ) (11,424 )
Accounts payable, accrued expenses and other liabilities (32,267 ) (997 )
Net cash provided by operating activities 23,463   2,008  
INVESTING ACTIVITIES
Additions to property, plant and equipment (17,030 ) (7,773 )
Proceeds from the sale of property, plant and equipment 207 269
Business acquisition, working capital adjustment 6,300   1,467  
Net cash used in investing activities (10,523 ) (6,037 )
FINANCING ACTIVITIES
Proceeds from long-term debt 199,600 378,263
Payments of long-term debt (186,874 ) (361,325 )
Debt issuance costs (727 )
Dividends paid (1,879 )
Proceeds from the exercise of stock options 690 707
Return of cash to seller (61,201 )  
Net cash (used in) provided by financing activities (47,785 ) 15,039  
Effect of exchange rate changes on cash, cash equivalents and restricted cash (5,154 ) 6,338  
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (39,999 ) 17,348
Cash, cash equivalents and restricted cash at beginning of period 112,293   58,279  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 72,294   $ 75,627  
 

CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(UNAUDITED)

 

       
September 30, 2018 December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 71,334 $ 110,356
Trade accounts receivable, less allowance for doubtful accounts of $6,965 and $4,791, respectively 192,110 223,922
Inventories 226,047 244,896
Restricted cash 919 1,937
Prepaid expenses and other current assets 84,265   57,282  
Total Current Assets 574,675   638,393  
PROPERTY, PLANT AND EQUIPMENT, NET 215,206 217,539
OTHER ASSETS:
Goodwill 504,638 505,762
Intangibles, net 470,722 513,364
Deferred income taxes 33,130 22,334
Other assets 14,479   9,407  
TOTAL ASSETS $ 1,812,850   $ 1,906,799  
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 111,400 $ 117,329
Accrued expenses and other current liabilities 108,031 170,454
Accrued compensation and benefits 30,827   34,734  
Total Current Liabilities 250,258   322,517  
LONG-TERM DEBT, NET 802,069 787,343
DEFERRED INCOME TAXES 25,397 26,122
PENSION LIABILITY, NET 142,067 150,719
OTHER NON-CURRENT LIABILITIES 18,888 18,124
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock 212 212
Additional paid-in capital 443,984 438,721
Retained earnings 253,107 274,243
Common treasury stock, at cost (74,472 ) (74,472 )
Accumulated other comprehensive loss, net of tax (48,660 ) (36,730 )
Total Shareholders’ Equity 574,171   601,974  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,812,850   $ 1,906,799  
 

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

 

    Three Months Ended     Nine Months Ended

September 30,
2018

   

October 1,
2017

September 30,
2018

   

October 1,
2017

ORDERS (1) (3)  
Energy $ 111.0 $ 84.9 $ 353.9 $ 258.0
Aerospace & Defense 81.5 45.9 200.8 142.3
Industrial 114.9   27.3   388.2   84.8
Total orders $ 307.4   $ 158.1   $ 942.9   $ 485.1
 
BACKLOG (2) (3)

September 30,
2018

October 1,
2017

Energy $ 205.9 $ 138.8
Aerospace & Defense 173.0 108.2
Industrial 178.0   31.3  
Total backlog $ 556.9   $ 278.3  
 

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 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. October 1, 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     3RD QTR     TOTAL
ORDERS                            
Energy $ 100,012 $ 73,140 $ 84,857 $ 118,073 $ 376,082 $ 129,762 $ 113,171 $ 110,987 $ 353,920
Aerospace & Defense 56,416 39,902 45,939 $ 52,043 194,300 59,793 59,441 81,533 200,767
Industrial 27,654       29,889       27,296       46,407       131,246       136,607       136,746       114,876       388,229  
Total $ 184,082       $ 142,931       $ 158,092       $ 216,523       $ 701,628       $ 326,162       $ 309,358       $ 307,396       $ 942,916  
 
NET REVENUES
Energy $ 76,210 $ 78,276 $ 88,570 $ 96,561 $ 339,617 $ 99,972 $ 112,804 $ 121,023 $ 333,799
Aerospace & Defense 41,601 43,304 41,117 $ 56,961 182,983 58,477 57,500 57,757 173,734
Industrial 27,397       29,651       30,006       52,056       139,110       117,131       131,064       118,734       366,929  
Total $ 145,208       $ 151,231       $ 159,693       $ 205,578       $ 661,710       $ 275,580       $ 301,368       $ 297,514       $ 874,462  
 
SEGMENT OPERATING INCOME
Energy $ 6,407 $ 8,170 $ 6,936 $ 8,618 $ 30,131 $ 5,696 $ 9,242 $ 9,163 $ 24,101
Aerospace & Defense 3,784 4,374 4,333 10,884 23,375 8,931 6,992 8,709 24,632
Industrial 4,384 4,901 5,675 4,972 19,932 12,948 15,037 14,609 42,594
Corporate expenses (5,479 )     (5,396 )     (5,067 )     (5,802 )     (21,744 )     (7,802 )     (6,448 )     (8,034 )     (22,284 )
Adjusted Operating Income $ 9,096       $ 12,049       $ 11,877       $ 18,672       $ 51,694       $ 19,773       $ 24,823       $ 24,447       $ 69,043  
 
SEGMENT OPERATING MARGIN %
Energy 8.4 % 10.4 % 7.8 % 8.9 % 8.9 % 5.7 % 8.2 % 7.6 % 7.2 %
Aerospace & Defense 9.1 % 10.1 % 10.5 % 19.1 % 12.8 % 15.3 % 12.2 % 15.1 % 14.2 %
Industrial 16.0 %     16.5 %     18.9 %     9.6 %     14.3 %     11.1 %     11.5 %     12.3 %     11.6 %
Adjusted Operating Margin 6.3 %     8.0 %     7.4 %     9.1 %     7.8 %     7.2 %     8.2 %     8.2 %     7.9 %
   

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     3RD QTR     TOTAL
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 16,195     $ 2,667     $ (16,854 )     $ 7,629     $ 9,637 $ (145 )     $ (465 )     $ 24,073     $ 23,463
LESS:
Capital expenditures, net of sale proceeds 2,811       2,375       2,318       6,103       13,607       8,141       3,563       5,119       16,823  
FREE CASH FLOW $ 13,384       $ 292       $ (19,172 )     $ 1,526       $ (3,970 )     $ (8,286 )     $ (4,028 )     $ 18,954       $ 6,640  
GROSS DEBT $ 243,000 $ 252,856 $ 269,026 $ 795,208 $ 795,208 $ 823,665 $ 827,629 $ 831,613 $ 831,613
LESS:
Cash & cash equivalents 65,656       77,272       75,627       110,356       110,356       123,305       69,030       71,334       71,334  
GROSS DEBT, NET OF CASH $ 177,344       $ 175,584       $ 193,399       $ 684,852       $ 684,852       $ 700,360       $ 758,599       $ 760,279       $ 760,279  
TOTAL SHAREHOLDERS' EQUITY $ 415,537 $ 438,097 $ 451,885 $ 601,974 $ 601,974 $ 592,096 $ 573,992 $ 574,171 $ 574,171
 
GROSS DEBT AS % OF EQUITY 58 % 58 % 60 % 132 % 132 % 139 % 144 % 145 % 145 %
GROSS DEBT, NET OF CASH AS % OF EQUITY 43 % 40 % 43 % 114 % 114 % 118 % 132 % 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     3RD QTR     TOTAL
NET INCOME (LOSS) $ 4,773     $ 8,970     $ 3,617     $ (5,571 )     $ 11,789 $ (17,441 )     $ 5,902     $ (6,841 )     $ (18,380 )
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 1,348 11,807
Acquisition amortization 2,552 2,599 2,694 4,697 12,542 11,797 11,767 11,733 35,297
Acquisition depreciation 233 233 1,837 1,735 1,742 5,314
Special (recoveries) charges, net (2,268 ) (5,520 ) 1,978 13,799 7,989 2,831 1,156 1,408 5,395
Income tax impact (1,137 )     (3,124 )     (1,497 )     (8,279 )     (14,037 )     (7,687 )     (11,056 )     967       (17,776 )
ADJUSTED NET INCOME $ 5,378       $ 6,491       $ 7,133       $ 9,876       $ 28,878       $ 8,025       $ 11,415       $ 10,357       $ 29,797  
 
EARNINGS (LOSS) PER COMMON SHARE (Diluted) $ 0.29 $ 0.54 $ 0.22 $ (0.32 ) $ 0.70 $ (0.88 ) $ 0.30 $ (0.34 ) $ (0.93 )
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 0.07 0.59
Acquisition amortization 0.15 0.16 0.16 0.27 0.74 0.60 0.59 0.59 1.77
Acquisition depreciation 0.01 0.01 0.09 0.09 0.09 0.27
Special (recoveries) charges, net (0.14 ) (0.33 ) 0.12 0.80 0.47 0.14 0.06 0.07 0.27
Income tax impact (0.07 )     (0.19 )     (0.09 )     (0.48 )     (0.83 )     (0.39 )     (0.55 )     0.05       (0.89 )
ADJUSTED EARNINGS PER SHARE (Diluted) $ 0.32       $ 0.39       $ 0.43       $ 0.57       $ 1.71       $ 0.40       $ 0.57       $ 0.52       $ 1.49  
 

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     3RD QTR     TOTAL
NET INCOME (LOSS) $ 4,773     $ 8,970     $ 3,617     $ (5,571 )     $ 11,789 $ (17,441 )     $ 5,902     $ (6,841 )     $ (18,380 )
LESS:
Interest expense, net (1,669 ) (2,184 ) (2,445 ) (4,479 ) (10,777 ) (11,801 ) (13,755 ) (14,100 ) (39,656 )
Depreciation (3,798 ) (3,547 ) (3,544 ) (4,401 ) (15,290 ) (7,334 ) (7,157 ) (7,065 ) (21,556 )
Amortization (3,092 ) (3,124 ) (3,275 ) (5,256 ) (14,747 ) (12,329 ) (12,282 ) (12,234 ) (36,845 )
(Provision for) benefit from income taxes (687 )     724       21       5,618       5,676       5,879       7,646       (2,537 )     10,988  
EBITDA $ 14,019 $ 17,101 $ 12,860 $ 2,947 $ 46,927 $ 8,144 $ 31,450 $ 29,095 $ 68,689
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 ) (1,348 ) (11,807 )
Special recoveries (charges), net 2,268       5,520       (1,978 )     (13,799 )     (7,989 )     (2,831 )     (1,156 )     (1,408 )     (5,395 )
ADJUSTED EBITDA $ 13,209       $ 15,147       $ 15,179       $ 21,743       $ 65,278       $ 27,663       $ 34,517       $ 31,851       $ 94,031  
 

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     3RD QTR     TOTAL
GAAP OPERATING INCOME (LOSS) $ 7,354       $ 11,404     $ 6,864     $ (5,054 )     $ 20,568 $ (13,380 )     $ 8,252     $ 8,216     $ 3,088
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 1,348 11,807
Acquisition amortization 2,552 2,599 2,694 4,697 12,542 11,797 11,767 11,733 35,297
Acquisition depreciation 233 233 1,837 1,735 1,742 5,314
Special (recoveries) charges, net (2,268 )       (5,520 )     1,978       13,799       7,989       2,831       1,156       1,408       5,395  
ADJUSTED OPERATING INCOME $ 9,096         $ 12,049       $ 11,877       $ 18,672       $ 51,694       $ 19,773       $ 24,821       $ 24,447       $ 69,041  
 
GAAP OPERATING MARGIN 5.1 % 7.5 % 4.3 % (2.5 )% 3.1 % (4.9 )% 2.7 % 2.8 % 0.4 %
LESS:
Restructuring related inventory charges % % % % % 0.2 % 0.4 % % 0.2 %
Amortization of inventory step-up % % % 2.1 % 0.6 % 2.4 % % % 0.8 %
Restructuring charges, net 1.0 % 2.4 % 0.2 % 0.3 % 0.9 % 3.5 % 0.3 % 0.5 % 1.4 %
Acquisition amortization 1.8 % 1.7 % 1.7 % 2.3 % 1.9 % 4.3 % 3.9 % 3.9 % 4.0 %
Acquisition depreciation % % % 0.1 % % 0.7 % 0.6 % 0.6 % 0.6 %
Special (recoveries) charges, net (1.6 )%       (3.7 )%     1.2 %     6.7 %     1.2 %     1.0 %     0.4 %     0.5 %     0.6 %
ADJUSTED OPERATING MARGIN 6.3 %       8.0 %     7.4 %     9.1 %     7.8 %     7.2 %     8.2 %     8.2 %     7.9 %

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.
Q3 2018 Organic Growth Calculations
(in thousands, except percentages)
UNAUDITED

                                               
Industrial Energy Aerospace & Defense
ORDERS Reported

Pro Forma
Combined

Reported

Pro Forma
Combined

Reported

Pro Forma
Combined

$ % $ % $ % $ % $ % $ %
2017 27,296 114,674 84,857 106,258 45,939 55,655
 
Organic 7,853 29 % 2,027 2 % 7,068 8 % 7,142 7 % 24,473 53 % 26,092 47 %
Acquisitions 79,915 293 % % 19,145 23 % % 11,335 25 % %
Foreign Exchange (188 ) (1 )% (1,825 ) (2 )% (83 ) % (2,413 ) (2 )% (214 ) % (214 ) %
Total Change 87,580   321 % 202   % 26,130   31 % 4,729   4 % 35,594   77 % 25,878   46 %
 
2018 114,876   114,876   110,987   110,987   81,533   81,533  
 
 
Industrial Energy Aerospace & Defense
NET REVENUE Reported

Pro Forma
Combined

Reported

Pro Forma
Combined

Reported

Pro Forma
Combined

$ % $ % $ % $ % $ % $ %
2017 30,006 115,611 88,569 106,358 41,117 52,325
 
Organic (308 ) (1 )% 4,928 4 % 16,187 18 % 15,559 15 % 5,935 14 % 5,589 11 %
Acquisitions 89,280 298 % % 16,579 19 % % 10,862 26 % %
Foreign Exchange (244 ) (1 )% (1,805 ) (2 )% (311 ) % (893 ) (1 )% (157 ) % (157 ) %
Total Change 88,728   296 % 3,123   3 % 32,455   37 % 14,666   14 % 16,640   40 % 5,432   10 %
 
2018 118,734   118,734   121,023   121,023   57,757   57,757  
               

CIRCOR INTERNATIONAL, INC.
Q3 2018 Organic Growth Calculations
(in thousands, except percentages)
UNAUDITED

 
CIRCOR
ORDERS Reported

Pro Forma
Combined

$ % $ %
2017 158,092 276,587
 
Organic 39,394 25 % 35,261 13 %
Acquisitions 110,395 70 % %
Foreign Exchange (485 ) % (4,452 ) (2 )%
Total Change 149,304   94 % 30,809   10 %
 
2018 307,396   307,396  
 
 
CIRCOR
NET REVENUE Reported

Pro Forma
Combined

$ % $ %
2017 159,693 274,294
 
Organic 21,815 14 % 26,076 10 %
Acquisitions 116,721 73 % %
Foreign Exchange (715 ) % (2,856 ) (1 )%
Total Change 137,821   86 % 23,220   8 %
 
2018 297,514   297,514  
 

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