UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 1, 2018
CIRCOR INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE | 001-14962 | 04-3477276 | ||
(State or other jurisdiction of incorporation) | (Commission file number) | (IRS employer identification no.) | ||
30 CORPORATE DRIVE, SUITE 200
BURLINGTON, MASSACHUSETTS 01803-4238
(Address of principal executive offices) (Zip Code)
(781) 270-1200
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨ | |
Item 2.02. Results of Operations and Financial Condition.
By press release dated May 1, 2018, CIRCOR International, Inc. (the “Company”) announced its financial results for the three months ended April 1, 2018. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Item 2.02 of Form 8-K and the Exhibits 99.1 and 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by special reference in such filing.
The Company’s management evaluates segment operating performance using operating income before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition-related activities; restructuring and other costs/income including costs arising from facility consolidations and gains and losses from the sale of product lines; and amortization of acquisition-related intangible assets. The Company also refers to this measure as segment operating income or adjusted operating income. The Company uses this measure because it helps management understand and evaluate the segments’ core operating results and facilitates comparison of performance for determining incentive compensation achievement.
In the press release and accompanying supplemental information, the Company uses the following non-GAAP financial measures: Adjusted operating income, adjusted operating margin, free cash flow, adjusted net income, adjusted earnings per share (EPS), EBITDA, adjusted EBITDA, net debt, combined financial information, and organic revenue, described as follows:
• | Adjusted operating income is defined as GAAP operating income excluding intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains. |
• | Adjusted operating margin is defined as adjusted operating income divided by net revenues. |
• | Free cash flow is defined as net cash flow from operating activities, less net capital expenditures. Management of this Company believes free cash flow is an important measure of its liquidity as well as its ability to service long-term debt, fund future growth and to provide a return to shareholders. We also believe this free cash flow definition does not have any material limitations. |
• | Adjusted net income is defined as net income, excluding intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains, net of tax. |
• | Adjusted EPS is defined as earnings per common share diluted, excluding the per share impact of intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains, net of tax. |
• | EBITDA is defined as net income plus net interest expense, provision for income taxes, depreciation and amortization. |
• | Adjusted EBITDA is defined as EBITDA plus the impact of special charges/gains including the impact of restructuring related inventory charges, cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, and impairments, net of tax. |
• | Net Debt is defined at total debt minus cash and cash equivalents. |
• | Combined financial information - Combined segment revenue, combined segment operating income and combined segment operating margin represent the historical CIRCOR segment revenue, segment operating income and segment operating margins all adjusted to include the respective amount related to the Fluid Handling acquisition as though the acquisition was completed on January 1, 2017. |
• | Organic revenue - the change in revenue excluding the impact of acquisitions and changes in foreign exchange rates. |
Our management uses these non-GAAP measures to gain an understanding of our comparative operating performance (when comparing such results with previous periods or forecasts). 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 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 of 5 to 20 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. |
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 peers and 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 incentive 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 our non-GAAP financial measures to the most directly comparable GAAP financial measure is provided in the supplemental information table titled “Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms” which is included as an attachment to the press release in Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d) | Exhibits. |
Exhibit No. | Description |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 1, 2018 CIRCOR INTERNATIONAL, INC.
/s/ Rajeev Bhalla
By: Rajeev Bhalla
Title: | Executive Vice President and Chief Financial Officer |
EXHIBIT 99.1
CIRCOR Reports First-Quarter 2018 Financial Results
Burlington, MA - May 1, 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 first quarter ended April 1, 2018. Results include the acquisition of the Colfax Fluid Handling business, which CIRCOR acquired in December 2017.
First-Quarter 2018 Highlights
• | Orders of $326.2 million, up 77% and down 1% organically |
• | Revenue of $275.6 million, up 90% and up 4% organically |
• | Backlog of $561 million, up $60 million in the quarter |
• | GAAP Loss Per Share of $0.88, Adjusted Earnings per Share of $0.40 |
• | Integration of Fluid Handling businesses on track |
“The momentum we saw across many of our end markets in Q4 2017 is continuing as we move through the early stages of 2018,” said Scott Buckhout, President and Chief Executive Officer. “For CIRCOR overall, our reported results were stronger than we expected as we entered the quarter. Our book to bill ratio in Q1 was almost 1.2, increasing our backlog by $60 million. Orders continue to be healthy and we expect that trend to continue through the second quarter.”
“As we announced in Q1, we have re-aligned our businesses to focus on three primary end markets - Industrial, Energy, and Aerospace & Defense,” Buckhout said. “This is part of our strategy to simplify the business, clarify customer and channel relationships, and better exploit growth opportunities across the organization.”
“The Fluid Handling acquisition brings a strong platform for revenue growth and profitability. Fluid Handling orders were up 16% on a pro forma, organic basis in the quarter. The integration is on track, and we are confident in our ability to fully realize all of the committed synergies,” added Buckhout.
“Overall, we remain committed to driving long-term growth, generating strong cash flow, and delevering the Company by reducing debt and expanding margins,” concluded Buckhout.
Second-Quarter 2018 Guidance
For the second quarter of 2018, CIRCOR expects revenue in the range of $275 million to $285 million, and GAAP loss per share of $0.09 to $0.27, which reflects acquisition-related amortization expense of $0.51 to $0.53 and other special and restructuring charges of $0.12 to $0.18. Excluding the impact of amortization, special and restructuring charges, adjusted EPS is expected to be in the range of $0.44 to $0.54 per share. Presentation slides that provide supporting information to this guidance and first-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, May 2, 2018.
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1. | Adjusted Consolidated and Segment Results for Q1 2018 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $33.2 million ($25.5 million, net of tax). These charges include: (i) $20.2 million charge for non-cash acquisition-related intangible amortization expense, including the amortization of a step-up in fair value of inventories ($6.6 million); (ii) $10.5 million charge related to restructuring activities, primarily severance, related to our Engineered Valves, Reliability Services and Germany-based Pumps business; and (iii) $2.5 million related to the separation of Fluid Handling business from Colfax Corporation. Consolidated and Segment Results for Q1 2017 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $1.7 million ($0.6 million, net of tax). These charges include (i) $2.6 million charge for non-cash acquisition-related intangible amortization expense, (ii) $1.5 million charge related to other restructuring activities, primarily the exit of manufacturing operations in China and France; and (iii) $2.3 million net special gain primarily related to updating fair value estimates related to the purchase of Critical Flow Solutions, partially offset by Brazil losses incurred subsequent to our Q1 2016 closure of manufacturing operations. |
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. |
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Conference Call Information
CIRCOR International will hold a conference call to review its financial results at 9:00 a.m. ET tomorrow, May 2, 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 and pro forma combined amounts 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. |
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.
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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 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. 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 recently acquired Fluid Handling business; changes in industry standards 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.
Contact:
Rajeev Bhalla
Executive Vice President & Chief Financial Officer
CIRCOR International
(781) 270-1200
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CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in thousands, except per share data)
(UNAUDITED)
Three Months Ended | |||||||
April 1, 2018 | April 2, 2017 | ||||||
Net revenues | $ | 275,580 | $ | 145,208 | |||
Cost of revenues | 199,276 | 98,575 | |||||
GROSS PROFIT | 76,304 | 46,633 | |||||
Selling, general and administrative expenses | 77,238 | 40,089 | |||||
Special and restructuring charges (recoveries), net | 12,446 | (810 | ) | ||||
OPERATING (LOSS) INCOME | (13,380 | ) | 7,354 | ||||
Other expense (income): | |||||||
Interest expense, net | 11,801 | 1,669 | |||||
Other (income) expense, net | (1,861 | ) | 225 | ||||
TOTAL OTHER EXPENSE, NET | 9,940 | 1,894 | |||||
(LOSS) INCOME BEFORE INCOME TAXES | (23,320 | ) | 5,460 | ||||
(Benefit from) provision for income taxes | (5,879 | ) | 687 | ||||
NET (LOSS) INCOME | $ | (17,441 | ) | $ | 4,773 | ||
(Loss) Earnings per common share: | |||||||
Basic | $ | (0.88 | ) | $ | 0.29 | ||
Diluted | $ | (0.88 | ) | $ | 0.29 | ||
Weighted average number of common shares outstanding: | |||||||
Basic | 19,806 | 16,458 | |||||
Diluted | 19,806 | 16,691 | |||||
Dividends declared per common share | $ | — | $ | 0.0375 | |||
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CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
Three Months Ended | |||||||
OPERATING ACTIVITIES | April 1, 2018 | April 2, 2017 | |||||
Net (loss) income | $ | (17,441 | ) | $ | 4,773 | ||
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||||
Depreciation | 7,334 | 3,798 | |||||
Amortization | 12,329 | 3,092 | |||||
Bad debt expense (recovery) | 192 | (54 | ) | ||||
Loss on write down of inventory | 6,466 | 548 | |||||
Compensation expense of share-based plans | 1,365 | 738 | |||||
Change in fair value of contingent consideration | — | (2,500 | ) | ||||
Interest amortization | 881 | — | |||||
Loss (gain) on sale or write down of property, plant and equipment | 1,284 | (110 | ) | ||||
Changes in operating assets and liabilities, net of effects of acquisition and disposition: | |||||||
Trade accounts receivable | 12,141 | 14,018 | |||||
Inventories | (13,833 | ) | 2,030 | ||||
Prepaid expenses and other assets | (6,616 | ) | (4,297 | ) | |||
Accounts payable, accrued expenses and other liabilities | (4,249 | ) | (5,841 | ) | |||
Net cash (used in) provided by operating activities | (147 | ) | 16,195 | ||||
INVESTING ACTIVITIES | |||||||
Additions to property, plant and equipment | (8,234 | ) | (3,001 | ) | |||
Proceeds from the sale of property, plant and equipment | 93 | 190 | |||||
Business acquisition, working capital adjustment | — | 1,467 | |||||
Net cash used in investing activities | (8,141 | ) | (1,344 | ) | |||
FINANCING ACTIVITIES | |||||||
Proceeds from long-term debt | 71,950 | 34,900 | |||||
Payments of long-term debt | (44,106 | ) | (43,100 | ) | |||
Dividends paid | — | (624 | ) | ||||
Proceeds from the exercise of stock options | 301 | 295 | |||||
Return of cash to seller | (7,905 | ) | — | ||||
Net cash provided by (used in) financing activities | 20,240 | (8,529 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 957 | 1,055 | |||||
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 12,909 | 7,377 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 112,293 | 58,279 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 125,202 | $ | 65,656 | |||
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CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(UNAUDITED)
April 1, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 123,305 | $ | 110,356 | |||
Trade accounts receivable, less allowance for doubtful accounts of $13,512 and $15,434, respectively | 204,437 | 223,922 | |||||
Inventories | 265,065 | 244,896 | |||||
Prepaid expenses and other current assets | 67,129 | 59,219 | |||||
Total Current Assets | 659,936 | 638,393 | |||||
PROPERTY, PLANT AND EQUIPMENT, NET | 226,439 | 217,539 | |||||
OTHER ASSETS: | |||||||
Goodwill | 515,177 | 505,762 | |||||
Intangibles, net | 497,027 | 513,364 | |||||
Deferred income taxes | 28,236 | 22,334 | |||||
Other assets | 8,861 | 9,407 | |||||
TOTAL ASSETS | $ | 1,935,676 | $ | 1,906,799 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 118,441 | $ | 117,329 | |||
Accrued expenses and other current liabilities | 179,106 | 170,454 | |||||
Accrued compensation and benefits | 30,865 | 34,734 | |||||
Total Current Liabilities | 328,412 | 322,517 | |||||
LONG-TERM DEBT | 815,795 | 787,343 | |||||
DEFERRED INCOME TAXES | 31,099 | 26,122 | |||||
PENSION LIABILITY, NET | 150,572 | 150,719 | |||||
OTHER NON-CURRENT LIABILITIES | 21,486 | 18,124 | |||||
COMMITMENTS AND CONTINGENCIES | |||||||
SHAREHOLDERS’ EQUITY: | |||||||
Common stock | 212 | 212 | |||||
Additional paid-in capital | 436,915 | 438,721 | |||||
Retained earnings | 254,046 | 274,243 | |||||
Common treasury stock, at cost | (74,472 | ) | (74,472 | ) | |||
Accumulated other comprehensive loss, net of tax | (28,389 | ) | (36,730 | ) | |||
Total Shareholders’ Equity | 588,312 | 601,974 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,935,676 | $ | 1,906,799 | |||
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CIRCOR INTERNATIONAL, INC. SUMMARY OF ORDERS AND BACKLOG (in millions) UNAUDITED | |||||||
Three Months Ended | |||||||
April 1, 2018 | April 2, 2017 | ||||||
ORDERS (1) (3) | |||||||
Energy | $ | 129.8 | $ | 100.0 | |||
Aerospace & Defense | 59.8 | 56.4 | |||||
Industrial | 136.6 | 27.7 | |||||
Total orders | $ | 326.2 | $ | 184.1 | |||
BACKLOG (2) (3) | April 1, 2018 | April 2, 2017 | |||||
Energy | $ | 224.1 | $ | 142.8 | |||
Aerospace & Defense | 165.8 | 106.2 | |||||
Industrial | 170.6 | 32.9 | |||||
Total backlog | $ | 560.5 | $ | 281.9 | |||
Note 1: Orders do not include the foreign exchange impact due to the re-measurement of customer order backlog amounts denominated in foreign currencies. | |||||||
Note 2: Backlog includes unshipped customer orders for which revenue has not been recognized. | |||||||
Note 3: April 2, 2017 segment amounts restated for Q1 2018 organizational realignment. | |||||||
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CIRCOR INTERNATIONAL, INC. SEGMENT INFORMATION (in thousands, except percentages) UNAUDITED | ||||||||||||||||||
2017 | 2018 | |||||||||||||||||
1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | TOTAL | 1ST QTR | |||||||||||||
ORDERS | ||||||||||||||||||
Energy | $ | 100,012 | $ | 73,140 | $ | 84,857 | $ | 118,073 | $ | 376,082 | $ | 129,762 | ||||||
Aerospace & Defense | 56,416 | 39,902 | 45,939 | $ | 52,043 | 194,300 | 59,793 | |||||||||||
Industrial | 27,654 | 29,889 | 27,296 | 46,407 | 131,246 | 136,607 | ||||||||||||
Total | $ | 184,082 | $ | 142,931 | $ | 158,092 | $ | 216,523 | $ | 701,628 | $ | 326,162 | ||||||
NET REVENUES | ||||||||||||||||||
Energy | $ | 76,210 | $ | 78,276 | $ | 88,570 | $ | 96,561 | $ | 339,617 | $ | 99,972 | ||||||
Aerospace & Defense | 41,601 | 43,304 | 41,117 | $ | 56,961 | 182,983 | 58,477 | |||||||||||
Industrial | 27,397 | 29,651 | 30,006 | 52,056 | 139,110 | 117,131 | ||||||||||||
Total | $ | 145,208 | $ | 151,231 | $ | 159,693 | $ | 205,578 | $ | 661,710 | $ | 275,580 | ||||||
SEGMENT OPERATING INCOME | ||||||||||||||||||
Energy | $ | 6,407 | $ | 8,170 | $ | 6,936 | $ | 8,618 | $ | 30,131 | $ | 5,696 | ||||||
Aerospace & Defense | 3,784 | 4,374 | 4,333 | 10,884 | 23,375 | 8,931 | ||||||||||||
Industrial | 4,384 | 4,901 | 5,675 | 4,972 | 19,932 | 12,948 | ||||||||||||
Corporate expenses | (5,479 | ) | (5,396 | ) | (5,067 | ) | (5,802 | ) | (21,744 | ) | (7,802 | ) | ||||||
Adjusted Operating Income | $ | 9,096 | $ | 12,049 | $ | 11,877 | $ | 18,672 | $ | 51,694 | $ | 19,773 | ||||||
SEGMENT OPERATING MARGIN % | ||||||||||||||||||
Energy | 8.4 | % | 10.4 | % | 7.8 | % | 8.9 | % | 8.9 | % | 5.7 | % | ||||||
Aerospace & Defense | 9.1 | % | 10.1 | % | 10.5 | % | 19.1 | % | 12.8 | % | 15.3 | % | ||||||
Industrial | 16.0 | % | 16.5 | % | 18.9 | % | 9.6 | % | 14.3 | % | 11.1 | % | ||||||
Adjusted Operating Margin | 6.3 | % | 8.0 | % | 7.4 | % | 9.1 | % | 7.8 | % | 7.2 | % | ||||||
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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 | |||||||||||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | $ | 16,195 | $ | 2,667 | $ | (16,854 | ) | $ | 7,629 | $ | 9,637 | $ | (147 | ) | ||||
LESS: | ||||||||||||||||||
Capital expenditures, net of sale proceeds | 2,811 | 2,375 | 2,318 | 6,103 | 13,607 | 8,141 | ||||||||||||
FREE CASH FLOW | $ | 13,384 | $ | 292 | $ | (19,172 | ) | $ | 1,526 | $ | (3,970 | ) | $ | (8,288 | ) | |||
TOTAL DEBT | $ | 243,000 | $ | 252,856 | $ | 269,026 | $ | 795,208 | $ | 795,208 | $ | 823,665 | ||||||
LESS: | ||||||||||||||||||
Cash & cash equivalents | 65,656 | 77,272 | 75,627 | 110,356 | 110,356 | 123,305 | ||||||||||||
NET DEBT | $ | 177,344 | $ | 175,584 | $ | 193,399 | $ | 684,852 | $ | 684,852 | $ | 700,360 | ||||||
TOTAL SHAREHOLDERS' EQUITY | $ | 415,537 | $ | 438,097 | $ | 451,885 | $ | 601,974 | $ | 601,974 | $ | 588,312 | ||||||
TOTAL DEBT AS % OF EQUITY | 58 | % | 58 | % | 60 | % | 132 | % | 132 | % | 140 | % | ||||||
NET DEBT AS % OF EQUITY | 43 | % | 40 | % | 43 | % | 114 | % | 114 | % | 119 | % | ||||||
10
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 | |||||||||||||
NET INCOME (LOSS) | $ | 4,773 | $ | 8,970 | $ | 3,617 | $ | (5,571 | ) | $ | 11,789 | $ | (17,441 | ) | ||||
LESS: | ||||||||||||||||||
Restructuring related inventory charges | — | — | — | — | — | 473 | ||||||||||||
Amortization of inventory step-up | — | — | — | 4,300 | 4,300 | 6,600 | ||||||||||||
Restructuring charges, net | 1,458 | 3,566 | 341 | 697 | 6,062 | 9,615 | ||||||||||||
Acquisition amortization | 2,552 | 2,599 | 2,694 | 4,697 | 12,542 | 11,797 | ||||||||||||
Acquisition depreciation | — | — | — | 233 | 233 | 1,837 | ||||||||||||
Special charges (recoveries), net | (2,268 | ) | (5,520 | ) | 1,978 | 13,799 | 7,989 | 2,831 | ||||||||||
Income tax impact | (1,137 | ) | (3,124 | ) | (1,497 | ) | (8,279 | ) | (14,037 | ) | (7,687 | ) | ||||||
ADJUSTED NET INCOME | $ | 5,378 | $ | 6,491 | $ | 7,133 | $ | 9,876 | $ | 28,878 | $ | 8,025 | ||||||
EARNINGS (LOSS) PER COMMON SHARE (Diluted) | $ | 0.29 | $ | 0.54 | $ | 0.22 | $ | (0.32 | ) | $ | 0.70 | $ | (0.88 | ) | ||||
LESS: | ||||||||||||||||||
Restructuring related inventory charges | — | — | — | — | — | 0.02 | ||||||||||||
Amortization of inventory step-up | — | — | — | 0.25 | 0.26 | 0.33 | ||||||||||||
Restructuring charges, net | 0.09 | 0.21 | 0.02 | 0.04 | 0.36 | 0.49 | ||||||||||||
Acquisition amortization | 0.15 | 0.16 | 0.16 | 0.27 | 0.74 | 0.60 | ||||||||||||
Acquisition depreciation | — | — | — | 0.01 | 0.01 | 0.09 | ||||||||||||
Special charges (recoveries), net | (0.14 | ) | (0.33 | ) | 0.12 | 0.80 | 0.47 | 0.14 | ||||||||||
Income tax impact | (0.07 | ) | (0.19 | ) | (0.09 | ) | (0.48 | ) | (0.83 | ) | (0.39 | ) | ||||||
ADJUSTED EARNINGS PER SHARE (Diluted) | $ | 0.32 | $ | 0.39 | $ | 0.43 | $ | 0.57 | $ | 1.71 | $ | 0.40 | ||||||
11
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 | |||||||||||||
NET INCOME (LOSS) | $ | 4,773 | $ | 8,970 | $ | 3,617 | $ | (5,571 | ) | $ | 11,789 | $ | (17,441 | ) | ||||
LESS: | ||||||||||||||||||
Interest expense, net | (1,669 | ) | (2,184 | ) | (2,445 | ) | (4,479 | ) | (10,777 | ) | (11,801 | ) | ||||||
Depreciation | (3,798 | ) | (3,547 | ) | (3,544 | ) | (4,401 | ) | (15,290 | ) | (7,334 | ) | ||||||
Amortization | (3,092 | ) | (3,124 | ) | (3,275 | ) | (5,256 | ) | (14,747 | ) | (12,329 | ) | ||||||
(Provision for) benefit from income taxes | (687 | ) | 724 | 21 | 5,618 | 5,676 | 5,879 | |||||||||||
EBITDA | $ | 14,019 | $ | 17,101 | $ | 12,860 | $ | 2,947 | $ | 46,927 | $ | 8,144 | ||||||
LESS: | ||||||||||||||||||
Restructuring related inventory charges | — | — | — | — | — | (473 | ) | |||||||||||
Amortization of inventory step-up | — | — | — | (4,300 | ) | (4,300 | ) | (6,600 | ) | |||||||||
Restructuring charges, net | (1,458 | ) | (3,566 | ) | (341 | ) | (697 | ) | (6,062 | ) | (9,615 | ) | ||||||
Special (charges) recoveries, net | 2,268 | 5,520 | (1,978 | ) | (13,799 | ) | (7,989 | ) | (2,831 | ) | ||||||||
ADJUSTED EBITDA | $ | 13,209 | $ | 15,147 | $ | 15,179 | $ | 21,743 | $ | 65,278 | $ | 27,663 | ||||||
12
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 | |||||||||||||
GAAP OPERATING INCOME (LOSS) | $ | 7,354 | $ | 11,404 | $ | 6,864 | $ | (5,054 | ) | $ | 20,568 | $ | (13,380 | ) | ||||
LESS: | ||||||||||||||||||
Restructuring related inventory charges | — | — | — | — | — | 473 | ||||||||||||
Amortization of inventory step-up | — | — | — | 4,300 | 4,300 | 6,600 | ||||||||||||
Restructuring charges, net | 1,458 | 3,566 | 341 | 697 | 6,062 | 9,615 | ||||||||||||
Acquisition amortization | 2,552 | 2,599 | 2,694 | 4,697 | 12,542 | 11,797 | ||||||||||||
Acquisition depreciation | — | — | — | 233 | 233 | 1,837 | ||||||||||||
Special charges (recoveries), net | (2,268 | ) | (5,520 | ) | 1,978 | 13,799 | 7,989 | 2,831 | ||||||||||
ADJUSTED OPERATING INCOME | $ | 9,096 | $ | 12,049 | $ | 11,877 | $ | 18,672 | $ | 51,694 | $ | 19,773 | ||||||
GAAP OPERATING MARGIN | 5.1 | % | 7.5 | % | 4.3 | % | (2.5 | )% | 3.1 | % | (4.9 | )% | ||||||
LESS: | ||||||||||||||||||
Restructuring related inventory charges | — | % | — | % | — | % | — | % | — | % | 0.2 | % | ||||||
Amortization of inventory step-up | — | % | — | % | — | % | 2.1 | % | 0.6 | % | 2.4 | % | ||||||
Restructuring charges, net | 1.0 | % | 2.4 | % | 0.2 | % | 0.3 | % | 0.9 | % | 3.5 | % | ||||||
Acquisition amortization | 1.8 | % | 1.7 | % | 1.7 | % | 2.3 | % | 1.9 | % | 4.3 | % | ||||||
Acquisition depreciation | — | % | — | % | — | % | 0.1 | % | — | % | 0.7 | % | ||||||
Special charges (recoveries), net | (1.6 | )% | (3.7 | )% | 1.2 | % | 6.7 | % | 1.2 | % | 1.0 | % | ||||||
ADJUSTED OPERATING MARGIN | 6.3 | % | 8.0 | % | 7.4 | % | 9.1 | % | 7.8 | % | 7.2 | % | ||||||
13
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 | |||||||||||||
14
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 | ||||||||||||||||
15
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. | |||||||||||||||
16
EXHIBIT 99.2
