CIRCOR Reports Preliminary Fourth-Quarter and Year-End 2019 Financial Results

March 2, 2020 at 6:55 AM EST

BURLINGTON, Mass.--(BUSINESS WIRE)-- CIRCOR International, Inc. (NYSE: CIR), a leading provider of severe service flow control solutions and other highly engineered products for the Industrial and Aerospace & Defense markets, today announced preliminary financial results for the fourth quarter and full year ended December 31, 2019.

As disclosed in a Form 12b-25 that the Company filed with the SEC today, CIRCOR requires additional time to file its Form 10-K for the year ended December 31, 2019.

Highlights

  • Strong fourth quarter 2019 results from continuing operations
    • Revenue of $243 million, down 9% reported, up 2% organically
    • Preliminary GAAP earnings per share from continuing operations of $0.16
    • Adjusted earnings per share of $0.82
    • Preliminary GAAP operating margin of 7.0%
    • Adjusted operating margin of 13.3%
    • A&D Segment operating margin of 22.9%, up 490 bps year-over-year
  • Delivered 2019 Adjusted EBITDA target and on track for 2020 targets communicated in 18-month plan
  • Completed the sale of non-core Instrumentation & Sampling in January 2020 for $172 million
  • Achieved pro-forma net leverage ratio of 3.6 times
  • Repriced debt in February 2020, reducing interest expense by 25 bps

“We ended the year with another solid quarter, delivering a record 13.3% adjusted operating margin from continuing operations, up 190 basis points from a year ago,” said Scott Buckhout, President and Chief Executive Officer. “In January we sold our Instrumentation and Sampling business for $172 million with net proceeds going to further reduce debt.”

“We delivered on our 2019 goal to achieve substantial earnings growth while deleveraging the Company,” Mr. Buckhout continued. “Since January 2019, we have generated over $340 million in proceeds from non-core asset sales, enabling CIRCOR to accelerate the reduction of debt."

“Looking ahead, we are on track to deliver our 2020 commitments. We continue to focus on driving long-term growth, expanding margins, generating strong free cash flow, and deleveraging as we drive value for our shareholders,” concluded Mr. Buckhout.

First-Quarter 2020 Guidance

For the first quarter of 2020, CIRCOR expects revenue in the range of $190 million to $205 million, and GAAP loss per share in the range of $(0.25) to $(0.05), which reflects acquisition-related amortization expense of $(0.48) and other special and restructuring (charges) gains of $(0.27) to $(0.17). Excluding the impact of amortization, special and restructuring (charges) gains, adjusted EPS is expected to be in the range of $0.50 to $0.60 per share. This guidance excludes revenue and earnings from the Instrumentation & Sampling business which was sold on January 31, 2020. Presentation slides that provide supporting information to this guidance and fourth-quarter and year-end 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 today, March 2, 2020.

Selected Preliminary Consolidated Results

($ millions except EPS)

 

Q4 2019

Q4 2018

Change

 

FY 2019

 

FY 2018

Change

Revenue

$

242.6

$

266.7

-9%

$

964.3

$

1,013.5

-5%

Revenue excluding divested business

$

242.6

$

240.1

1%

$

947.8

$

915.8

3%

GAAP Operating Income

$

17.0

$

10.3

65%

$

37.7

$

21.7

74%

Adjusted Operating Income1

$

32.2

$

30.9

4%

$

109.8

$

101.9

8%

GAAP Operating Margin

 

7.0%

 

3.9%

310 bps

 

3.9%

 

2.1%

180 bps

Adjusted Operating Margin1

 

13.3%

 

11.6%

170 bps

 

11.4%

 

10.1%

130 bps

Adjusted Operating Margin Ex Divestitures

 

13.3%

 

11.4%

190 bps

 

11.2%

 

9.8%

140 bps

GAAP Earnings (Loss) Per Share

$

0.08

$

(1.07)

107%

$

(6.73)

$

(1.99)

238%

Adjusted Earnings Per Share (Diluted)1

$

0.82

$

0.76

8%

$

2.62

$

2.30

14%

Operating Cash Flow

$

16.8

$

30.5

-45%

$

15.9

$

54.0

-71%

Free Cash Flow2

$

18.4

$

24.0

-23%

$

11.7

$

30.6

-62%

Orders

$

236.5

$

270.9

-13%

$

977.5

$

1099.2

-11%

Orders excluding divested businesses

$

236.5

$

244.1

-3%

$

958.5

$

991.4

-3%

 

Segment Results

($ millions)

Q4 2019

Q4 2018

Change

FY 2019

FY 2018

Change

Industrial

 

 

 

 

 

 

 

 

 

 

Revenue

$

107.1

$

120.6

-11%

$

450.7

$

487.6

-8%

Revenue excluding divested businesses

$

107.1

$

110.9

-3%

$

437.3

$

455.6

-4%

Segment Operating Income

$

11.8

$

14.7

-20%

$

52.7

$

57.3

-8%

Segment Operating Margin

 

11.0%

 

12.2%

-120 bps

$

11.7%

 

11.8%

-10 bps

Orders

$

97.3

$

121.9

-20%

$

447.4

$

510.1

-12%

Orders excluding divested business1

$

97.3

$

110.5

-12%

$

432.6

$

472.1

-8%

 

 

 

 

 

 

 

 

 

 

 

Energy

 

 

 

 

 

 

 

 

 

 

Revenue

$

56.5

$

82.8

-32%

$

241.0

$

288.9

-17%

Revenue excluding divested business1

$

56.5

$

65.9

-14%

$

237.9

$

223.3

7%

Segment Operating Income

$

7.3

$

12.7

-43%

$

30.9

$

38.8

-20%

Segment Operating Margin

 

12.9%

 

15.4%

-250 bps

 

12.8%

 

13.4%

-60 bps

Orders

$

70.8

$

72.3

-2%

$

216.1

$

311.6

-31%

Orders excluding divested business1

$

70.8

$

56.9

24%

$

212.0

$

241.8

-12%

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Defense

 

 

 

 

 

 

 

 

 

 

Revenue

$

79.1

$

63.3

25%

$

272.6

$

237.0

15%

Segment Operating Income

$

18.1

$

11.4

59%

$

51.5

$

36.0

43%

Segment Operating Margin

 

22.9%

 

18.0%

490 bps

 

18.9%

 

15.2%

370 bps

Orders

$

68.5

$

76.7

-11%

$

313.9

$

277.5

13%

1

Adjusted Consolidated and Segment results for Q4 2019 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $15.2 million ($13.4 million, net of tax). These charges include: (i) $12.2 million for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $2.3 million related to restructuring and cost saving initiatives; (iii) $1.3 million of professional fees associated with an unsolicited tender offer to acquire all outstanding shares of the Company’s common stock; (iv) $1.2 million related to divestitures, partially offset by (v) a $1.8 million gain on the sale of a building. Adjusted Consolidated and Segment Results for Q4 2018 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $20.6 million ($31.6 million, net of tax). These charges include: (i) $13.6 million for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $4.4 million related to the sale of businesses; (iii) $2.6 million related to other special and restructuring activities and (iv) $10.9 million related to the write-off of a deferred tax asset due to changes in US tax law.

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 today, March 2, 2020. 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 and organic growth, (and such measures and revenue further excluding divested businesses) 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.
  • We exclude the results of discontinued operations.
  • Due to the significance of recently sold businesses and to provide a comparison of changes in our orders and revenue, we also discuss these changes on an “organic” basis. Organic is calculated assuming the divestitures completed prior to September 29, 2019 were completed on January 1, 2018 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 first-quarter 2020 guidance, our future performance, including future growth and profitability, increase in shareholder value, realization of cost reductions from restructuring activities and expected synergies, plans to reduce our outstanding debt 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: adjustments identified by the Company or its auditors in the course of completing the year-end audit, our ability to successfully integrate acquired businesses, as contemplated, our ability to successfully implement our divestiture, restructuring or simplification strategies, the possibility that expected benefits related to the Fluid Handling acquisition may not materialize as expected, any adverse changes in governmental policies, variability of raw material and component pricing, changes in our suppliers’ performance, fluctuations in foreign currency exchange rates, changes in tariffs or other taxes related to doing business internationally, our ability to hire and retain key personnel, our ability to operate our manufacturing facilities at efficient levels including our ability to prevent cost overruns and reduce costs, our ability to generate increased cash by reducing our working capital, our prevention of the accumulation of excess inventory, our ability to successfully implement our restructuring or simplification strategies, fluctuations in interest rates, our ability to successfully defend product liability actions, any actions of stockholders or others in response to the expiration of the recent unsolicited tender offer and the cost and disruption of responding to those actions, as well as the uncertainty associated with the current worldwide economic conditions and the continuing impact on economic and financial conditions in the United States and around the world, including as a result of health pandemics, natural disasters, terrorist attacks, current Middle Eastern conflicts and related matters. 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. For more information, visit the Company’s investor relations website at http://investors.circor.com.

CIRCOR INTERNATIONAL, INC.
Preliminary Condensed Consolidated Statement of Operations
(in millions, except per share data)
(UNAUDITED)

 

 

Three Months Ended

 

Twelve Months Ended

 

December 31, 2019

 

December 31, 2018

 

December 31, 2019

 

December 31, 2018

Net revenues

$

242,638

 

 

$

266,716

 

 

$

964,313

 

 

$

1,013,470

 

Cost of revenues

164,634

 

 

176,704

 

 

655,504

 

 

688,267

 

Gross Profit

78,004

 

 

90,012

 

 

308,809

 

 

325,203

 

Selling, general and administrative expenses

58,029

 

 

72,732

 

 

248,256

 

 

284,641

 

Special and restructuring charges, net

2,979

 

 

6,985

 

 

22,872

 

 

18,909

 

Operating income

16,996

 

 

10,295

 

 

37,681

 

 

21,653

 

Other expense (income):

 

 

 

 

 

 

 

Interest expense, net

10,763

 

 

13,264

 

 

48,609

 

 

52,975

 

Other (income) expense, net

1,919

 

 

(347

)

 

(836

)

 

(7,426

)

Total other expense, net

12,682

 

 

12,917

 

 

47,773

 

 

45,549

 

Income (loss) from continuing operations before income taxes

4,314

 

 

(2,622

)

 

(10,092

)

 

(23,896

)

Provision for income taxes

1,163

 

 

13,885

 

 

14,676

 

 

9,451

 

Income (loss) from continuing operations, net of tax

3,151

 

 

(16,507

)

 

(24,768

)

 

(33,347

)

Loss from discontinued operations, net of tax

(1,595

)

 

(4,497

)

 

(109,167

)

 

(6,037

)

Net income (loss)

$

1,556

 

 

$

(21,004

)

 

$

(133,935

)

 

$

(39,384

)

 

 

 

 

 

 

 

 

Basic income (loss) per common share:

 

 

 

 

 

 

 

Basic income (loss) from continuing operations

$

0.16

 

 

$

(0.84

)

 

$

(1.24

)

 

$

(1.68

)

Basic (loss) from discontinued operations

$

(0.08

)

 

$

(0.23

)

 

$

(5.48

)

 

$

(0.30

)

Net income (loss)

$

0.08

 

 

$

(1.07

)

 

$

(6.73

)

 

$

(1.99

)

 

 

 

 

 

 

 

 

Diluted (loss) income per common share:

 

 

 

 

 

 

 

Diluted income (loss) from continuing operations

$

0.16

 

 

$

(0.84

)

 

$

(1.24

)

 

$

(1.68

)

Diluted (loss) from discontinued operations

$

(0.08

)

 

$

(0.23

)

 

$

(5.48

)

 

$

(0.30

)

Net income (loss)

$

0.08

 

 

$

(1.07

)

 

$

(6.73

)

 

$

(1.99

)

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

19,920

 

 

19,722

 

 

19,903

 

 

19,834

 

Diluted

20,148

 

 

19,972

 

 

19,903

 

 

19,834

 

CIRCOR INTERNATIONAL, INC.
Preliminary Condensed Consolidated Statement of Cash Flows
(in thousands)
(UNAUDITED)

 

 

Twelve Months Ended

OPERATING ACTIVITIES

December 31, 2019

 

December 31, 2018

Net loss

$

(133,935

)

 

$

(39,384

)

Loss from discontinued operations

(109,167

)

 

(6,037

)

Loss from continuing operations

(24,768

)

 

(33,347

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation

22,045

 

 

26,183

 

Amortization

47,591

 

 

49,129

 

Provision for bad debt expense

616

 

 

(261

)

Loss on write down of inventory and amortization of fair value step-up

366

 

 

7,675

 

Compensation expense of share-based plans

5,418

 

 

4,965

 

Amortization of debt issuance costs

4,622

 

 

3,937

 

Deferred income tax benefit

(3,440

)

 

(2,367

)

(Gain) loss on disposal of property, plant and equipment

(1,793

)

 

1,380

 

Loss on sale of businesses

3,615

 

 

1,882

 

Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:

 

 

 

Trade accounts receivable

25,822

 

 

(12,229

)

Inventories

(9,557

)

 

6,620

 

Prepaid expenses and other assets

(9,827

)

 

(26,770

)

Accounts payable, accrued expenses and other liabilities

(28,780

)

 

30,458

 

Net cash provided by continuing operations

31,931

 

 

57,255

 

Net cash used in discontinued operations

(16,018

)

 

(3,261

)

Net cash provided by operating activities

15,913

 

 

53,994

 

INVESTING ACTIVITIES

 

 

 

Purchases of property, plant and equipment

(13,855

)

 

(20,114

)

Proceeds from the sale of property, plant and equipment

5,735

 

 

156

 

Proceeds from divestitures

861

 

 

 

Proceeds from the sale of business, net

162,591

 

 

2,753

 

Business acquisitions, net of cash acquired

 

 

3,727

 

Net cash provided by (used in) continuing investing activities

155,332

 

 

(13,478

)

Net cash used in discontinued investing activities

(2,296

)

 

(3,399

)

Net cash provided by (used in) investing activities

153,036

 

 

(16,877

)

FINANCING ACTIVITIES

 

 

 

Proceeds from long-term debt

281,600

 

 

248,300

 

Payments of short-term and long-term debt

(434,797

)

 

(260,146

)

Debt issuance costs

 

 

 

Dividends paid

 

 

 

Proceeds from the exercise of stock options

253

 

 

690

 

Return of cash to seller

 

 

(62,917

)

Net cash used in continuing financing activities

(152,944

)

 

(74,073

)

Net cash used in financing activities

(152,944

)

 

(74,073

)

Effect of exchange rate changes on cash and cash equivalents

197

 

 

(5,812

)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

16,202

 

 

(42,768

)

Cash and cash equivalents at beginning of year

69,525

 

 

112,293

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

$

85,727

 

 

$

69,525

 

CIRCOR INTERNATIONAL, INC.
Preliminary Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(UNAUDITED)

 

 

December 31, 2019

 

December 31, 2018

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

84,531

 

 

$

68,517

 

Short-term investments

 

 

 

Trade accounts receivable, less allowance for doubtful accounts

125,422

 

 

167,181

 

Inventories

137,309

 

 

143,682

 

Income taxes refundable

 

 

 

Prepaid expenses and other current assets

72,164

 

 

71,428

 

Assets held for sale

161,193

 

 

197,238

 

Total Current Assets

580,619

 

 

648,046

 

PROPERTY, PLANT AND EQUIPMENT, NET

172,179

 

 

189,672

 

OTHER ASSETS:

 

 

 

Goodwill

271,893

 

 

450,605

 

Intangibles, net

385,542

 

 

440,281

 

Deferred income taxes

30,852

 

 

19,906

 

Assets held for sale

 

 

30,374

 

Other assets

35,360

 

 

12,728

 

TOTAL ASSETS

$

1,476,445

 

 

$

1,791,612

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

79,399

 

 

$

94,715

 

Accrued expenses and other current liabilities

99,669

 

 

92,496

 

Accrued compensation and benefits

19,518

 

 

30,703

 

Liabilities held for sale

43,289

 

 

58,298

 

Notes payable and current portion of long-term debt

 

 

7,850

 

Total Current Liabilities

241,875

 

 

284,062

 

LONG-TERM DEBT

636,297

 

 

778,187

 

DEFERRED INCOME TAXES

21,425

 

 

33,607

 

PENSION LIABILITY, NET

146,801

 

 

150,623

 

LIABILITIES HELD FOR SALE

 

 

861

 

OTHER NON-CURRENT LIABILITIES

38,636

 

 

15,279

 

SHAREHOLDERS’ EQUITY:

 

 

 

Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding

 

 

 

Common stock, $0.01 par value; 29,000,000 shares authorized; 19,912,362 and 19,845,205 shares issued at December 31, 2019 and 2018, respectively

213

 

 

212

 

Additional paid-in capital

446,657

 

 

440,890

 

Retained earnings

99,280

 

 

232,102

 

Common treasury stock, at cost (1,372,488 shares at December 31, 2019 and 2018)

(74,472

)

 

(74,472

)

Accumulated other comprehensive loss, net of tax

(80,267

)

 

(69,739

)

Total Shareholders’ Equity

391,411

 

 

528,993

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,476,445

 

 

$

1,791,612

 

CIRCOR INTERNATIONAL, INC.
Segment Information
(in millions)
UNAUDITED

 

Three Months Ended

 

Twelve Months Ended

 

December 31, 2019

 

December 31, 2018

 

December 31, 2019

 

December 31, 2018

ORDERS (1) (3)

 

 

 

 

 

 

 

Energy

$

70.8

 

 

$

72.3

 

 

$

216.1

 

 

$

311.6

 

Aerospace & Defense

68.5

 

 

76.7

 

 

313.9

 

 

277.5

 

Industrial

97.3

 

 

121.9

 

 

447.4

 

 

510.1

 

Total orders

$

236.5

 

 

$

270.9

 

 

$

977.5

 

 

$

1,099.2

 

 

 

 

 

 

 

 

 

BACKLOG (2) (3)

December 31, 2019

 

December 31, 2018

 

 

 

 

Energy

$

74.1

 

 

$

110.5

 

 

 

 

 

Aerospace & Defense

194.5

 

 

156.3

 

 

 

 

 

Industrial

152.1

 

 

163.8

 

 

 

 

 

Total Backlog

$

420.7

 

 

$

430.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Numbers may not add due to rounding.

 

 

 

 

(1) Orders do not include the foreign exchange impact due to the re-measurement of customer backlog amounts denominated in foreign currencies. Orders for the three months and year ended December 31, 2019 include orders from businesses divested prior to December 31, 2019 of $0.0 million and $19.0 million, respectively. Orders for the three months and year ended December 31, 2018 include orders from businesses divested of $26.8 million and $107.8 million, respectively. Divested businesses are Reliability Services (Energy), Spence / Nicholson (Industrial) and Delden (Industrial).

Note 2: Backlog include unshipped customer orders for which revenue has not been recognized. Backlog at Q4 2018 includes $20.3 million and $1.7 million for Energy and Industrial related to divested businesses.

CIRCOR INTERNATIONAL, INC.

Segment Information

(in thousands, except percentages)

UNAUDITED

 

2018

2019

As Reported

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

ORDERS

 

 

 

 

 

 

 

 

 

 

Energy

$

85,335

 

$

66,825

 

$

87,146

 

$

72,319

 

$

311,626

 

$

48,088

 

$

43,982

 

$

53,276

 

$

70,768

 

$

216,114

 

Aerospace & Defense

59,793

59,441

81,533

76,702

277,469

 

88,107

 

93,405

 

63,968

 

68.459

 

313,939

 

Industrial

136,607

 

136,746

 

114,876

 

121,886

 

510,115

 

123,746

120,660

105,710

97,323

447,438

 

Total

$

281,735

 

$

263,012

 

$

283,555

 

$

270,907

 

$

1,099,210

 

$

259,941

 

$

258,047

 

$

222,954

 

$

236,550

 

$

977,491

 

 

 

 

 

 

 

 

 

 

 

 

NET REVENUES

 

 

 

 

 

 

 

 

 

 

Energy

$

64,279

 

$

71,094

 

$

70,718

 

$

82,786

 

$

288,877

 

$

66,876

 

$

61,752

 

$

55,835

 

$

56,519

 

$

240,982

 

Aerospace & Defense

58,477

 

57,500

 

57,757

 

63,283

 

237,017

 

61,240

 

64,694

 

67,621

 

79,070

 

272,625

 

Industrial

117,131

 

131,064

 

118,734

 

120,647

 

487,576

 

110,738

119,322

113,596

107,050

450,706

 

Total

$

239,888

 

$

259,658

 

$

247,209

 

$

266,716

 

$

1,013,470

 

$

238,854

 

$

245,768

 

$

237,052

 

$

242,639

 

$

964,313

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING INCOME

 

 

 

 

 

 

 

 

 

 

Energy

$5,627

$

10,691

 

$

9,726

 

$

12,735

 

$

38,779

 

$ 9,978

 

$ 8,343

 

$ 5,286

 

$ 7,287

$ 30,894

 

Aerospace & Defense

8,931

 

6,992

 

8,709

 

11,415

 

36,047

 

9,374

 

10,443

 

13,564

 

18,099

 

51,480

 

Industrial

12,946

 

15,037

 

14,609

 

14,748

 

57,340

 

10,787

 

16,138

 

13,953

 

11,810

 

52,688

 

Corporate Expenses

(7,800

)

(6,451

)

(8,034

)

(8,004

)

(30,289

)

(6,705

)

(6,335

)

(7,209

)

(5,013

)

(25,262

)

Total

$

19,704

 

$

26,269

 

$

25,010

 

$

30,894

 

$

101,877

 

$

23,434

 

$

28,589

 

$

25,594

 

$

32,183

 

$

109,800

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING MARGIN %

 

 

 

 

 

 

 

 

 

 

Energy

8.8

%

15.0

%

13.8

%

15.4

%

13.4

%

14.9

%

13.5

%

9.5

%

12.9

%

12.8

%

Aerospace & Defense

15.3

%

12.2

%

15.1

%

18.0

%

15.2

%

15.3

%

16.1

%

20.1

%

22.9

%

18.9

%

Industrial

11.1

%

11.5

%

12.3

%

12.2

%

11.8

%

9.7

%

13.5

%

12.3

%

11.0

%

11.7

%

Total

8.2

%

10.1

%

10.1

%

11.6

%

10.1

%

9.8

%

11.6

%

10.8

%

13.3

%

11.4

%

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING MARGIN % Excluding Divestitures (1)

 

 

 

 

 

 

 

 

 

 

Energy

11.3%

16.0%

12.6%

16.9%

14.4%

15.6%

13.5%

9.5%

12.9%

13.0%

Aerospace & Defense

15.3%

12.2%

15.1%

18.0%

15.2%

15.3%

16.1%

20.1%

22.9%

18.9%

Industrial

10.5%

11.3%

12.0%

11.5%

11.4%

8.7%

12.7%

12.6%

11.0%

11.3%

Total

8.4%

9.9%

9.4%

11.4%

9.8%

9.5%

11.2%

10.9%

13.3%

11.2%

Numbers may not add due to rounding.

(1) Divested businesses include Reliability Services (Energy), Spence / Nicholson (Industrial) and Delden (Industrial) which were sold before September 29, 2019. Engineered Valves and Distributed Valves are discontinued operations and not reflected in the As Reported figures in accordance with US GAAP.

CIRCOR INTERNATIONAL, INC.
Supplemental Information Regarding Divested Businesses
(in thousands)
UNAUDITED

 

2018

2019

Divested Businesses (1)

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

ORDERS

 

 

 

 

 

 

 

 

 

 

Energy

$16,891

$18,389

$19,145

$15,451

$69,875

$4,104

$—

$—

$—

$4,104

Industrial

9,708

9,836

7,078

11,351

37,973

4,778

5,275

4,798

14,851

Total

$26,599

$28,225

$26,223

$26,802

$107,849

$8,882

$5,275

$4,798

$—

$18,955

 

 

 

 

 

 

 

 

 

 

 

NET REVENUES

 

 

 

 

 

 

 

 

 

 

Energy

$14,731

$17,419

$16,579

$16,885

$65,613

$3,106

$—

$—

$—

$3,106

Industrial

8,816

6,317

7,123

9,762

32,017

5,366

5,198

2,891

13,456

Total

$23,547

$23,735

$23,702

$26,647

$97,630

$8,473

$5,198

$2,891

$—

$16,562

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING INCOME

 

 

 

 

 

 

 

 

 

 

Energy

$8

$2,085

$2,905

$1,597

$6,596

$—

$—

$—

$—

$—

Industrial

1,573

897

1,174

1,983

5,627

1,630

1,642

3,272

Total

$1,582

$2,982

$4,079

$3,580

$12,223

$1,630

$1,642

$—

$—

$3,272

Numbers may not add due to rounding.

(1) Divested businesses include Reliability Services (Energy), Spence/Nicholson (Industrial) and Delden (Industrial) which were sold before September 29, 2019. Engineered Valves and Distributed Valves are discontinued operations and not reflected in the As Reported figures in accordance with US GAAP.

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

 

2018

2019

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

Net Cash (Used In) Provided by Operating Activities

$(145)

$(465)

$24,073

$30,531

$53,994

$(22,378)

$12,339

$9,128

$16,822

$15,913

 

LESS:

 

 

 

 

 

 

 

 

 

 

Capital expenditures, net of sale proceeds (a)

8,141

3,563

5,119

6,534

23,357

3,689

2,995

(963)

(1,535)

4,186

FREE CASH FLOW

$(8,286)

$(4,028)

$18,954

$23,997

$30,637

$(26,067)

$9,344

$10,091

$18,357

$11,727

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Debt

$823,665

$827,629

$831,613

$807,050

$807,050

$753,950

$748,250

$659,100

$653,850

$653,850

Less: Cash & Cash Equivalents

123,305

69,030

71,334

68,517

68,517

73,619

76,082

69,225

84,531

84,531

GROSS DEBT, NET OF CASH

$700,360

$758,599

$760,279

$738,533

$738,533

$680,331

$672,168

$589,875

$569,319

$569,319

 

 

 

 

 

 

 

 

 

 

 

TOTAL SHAREHOLDERS' EQUITY

$592,096

$573,992

$574,171

$528,993

$528,993

$516,177

$494,899

$375,388

$391,411

$391,411

 

 

 

 

 

 

 

 

 

 

 

GROSS DEBT AS % OF EQUITY

139%

144%

145%

153%

153%

146%

151%

176%

167%

167%

GROSS DEBT, NET OF CASH AS % OF EQUITY

118%

132%

132%

140%

140%

132%

136%

157%

145%

145%

Numbers may not add due to rounding.

(a) Includes capital expenditures, net of sales proceeds of discontinued operations.

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

 

2018

2019

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

NET (LOSS) INCOME

$(17,441)

$5,902

$(6,841)

$(21,005)

$(39,384)

$(4,634)

$(18,520)

$(112,337)

$1,556

$(133,935)

LESS:

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges

473

16

(137)

352

325

(1,145)

(820)

Amortization of inventory step-up

6,600

6,600

Restructuring charges, net

3,424

524

1,075

825

5,848

358

299

5,038

(509)

5,186

Acquisition amortization

11,797

11,767

11,735

12,012

47,311

12,078

11,247

11,202

11,188

45,715

Acquisition depreciation

1,837

1,735

1,742

1,735

7,049

1,124

1,106

1,101

1,021

4,352

Special charges (recoveries), net

3,360

1,629

1,913

6,160

13,061

(8,200)

3,916

18,481

3,489

17,686

Income tax impact

(5,798)

(4,213)

(1,857)

10,998

(870)

3,625

(2,266)

5,533

(1,752)

5,140

Net income (loss) from discontinued operations

3,468

(4,802)

2,874

4,498

6,038

5,728

17,156

84,688

1,595

109,167

ADJUSTED NET INCOME

$7,719

$12,556

$10,642

$15,086

$46,004

$10,404

$12,938

$12,592

$16,588

$52,492

 

 

 

 

 

 

 

 

 

 

 

(LOSS) EARNINGS PER COMMON SHARE (Diluted)

$(0.88)

$0.30

$(0.34)

$(1.06)

$(1.99)

$(0.23)

$(0.93)

$(5.64)

$0.08

$(6.73)

LESS:

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges

0.02

(0.01)

0.02

0.02

(0.06)

(0.04)

Amortization of inventory step-up

0.33

0.33

Restructuring charges, net

0.17

0.03

0.05

0.04

0.29

0.02

0.02

0.25

(0.03)

0.26

Acquisition amortization

0.60

0.59

0.59

0.61

2.39

0.61

0.57

0.56

0.56

2.30

Acquisition depreciation

0.09

0.09

0.09

0.09

0.36

0.06

0.06

0.06

0.05

0.22

Special charges (recoveries), net

0.17

0.08

0.10

0.31

0.66

(0.41)

0.20

0.93

0.18

0.89

Income tax impact

(0.29)

(0.21)

(0.10)

0.55

(0.06)

0.18

(0.12)

0.28

(0.10)

0.24

Earnings (Loss) Per Share from discontinued operations

0.18

(0.24)

0.14

0.23

0.30

0.29

0.86

4.25

0.08

5.48

ADJUSTED EARNINGS PER SHARE (Diluted)

$0.39

$0.63

$0.53

$0.76

$2.30

$0.52

$0.64

$0.63

$0.82

$2.62

Numbers may not add due to rounding.

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

 

2018

2019

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

NET (LOSS) INCOME

$(17,441)

$5,902

$(6,841)

$(21,005)

$(39,384)

 

$(4,633)

$(18,520)

$(112,338)

$1,556

$(133,935)

LESS:

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

11,810

13,764

14,137

13,264

52,975

 

13,094

12,947

11,804

10,764

48,609

Depreciation

4,834

4,791

9,983

6,576

26,183

 

5,499

5,568

5,551

5,427

22,045

Amortization

14,134

13,985

8,632

12,477

49,228

 

12,536

11,685

11,629

11,741

47,591

Benefit from (provision for) income taxes

(3,782)

(608)

(45)

13,885

9,451

 

5,709

284

7,490

1,193

14,676

Loss from discontinued operations

3,468

(4,802)

2,874

4,498

6,038

 

5,728

17,156

84,688

1,595

109,167

EBITDA

$13,023

$33,032

$28,740

$29,695

$104,490

 

$37,933

$29,120

$8,857

$32,276

$108,153

LESS:

 

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges

473

16

(137)

352

 

325

(1,145)

(820)

Amortization of inventory step-up

6,600

6,600

 

Restructuring charges, net

3,424

524

1,075

825

5,848

 

358

299

5,038

(509)

5,186

Special recoveries (charges), net

3,360

1,629

1,913

6,160

13,061

 

(8,200)

3,916

18,481

3,489

17,686

ADJUSTED EBITDA

$26,880

$35,200

$31,728

$36,544

$130,351

 

$30,416

$33,335

$31,230

$35,256

$130,203

Numbers may not add due to rounding.

 

Leverage Calculations:

 

 

 

 

 

 

Full Year 2019, as reported

 

Full Year 2019, Pro Forma for I&S Divestiture (b)

 

GROSS DEBT, NET OF CASH (Net Debt)

$

569,319

 

 

Net Debt

$

569,319

 

 

Net Debt / 2019 Adjusted EBITDA

4.4 x

 

Net proceeds from I&S sale

(160,000

)

 

 

 

 

 

 

 

Pro Forma Net Debt

$

409,319

 

 

2019 Investor Plan Comparison

 

 

 

 

 

 

2019 Adjusted EBITDA - Reported

$

130,203

 

 

2019 EBITDA as reported

$

130,203

 

 

Engineered Valves & Distributed Valves First Half (a)

(6,619

)

 

2019 I&S EBITDA

(16,811

)

 

2019 Adjusted EBITDA - Investor Plan

$

123,584

 

 

Pro Forma Adjusted EBITDA

$

113,392

 

Net Debt / Adjusted EBITDA - Investor Plan

4.6 x

Pro Forma Net Debt / Pro Forma Adjusted EBITDA

3.6 x

 

(a) The Company's June 2019 investor plan included the results of Engineered Valves and Distributed Valves for the first half of 2019. In Q3 2019, both businesses were reclassified to discontinued operations.

(b) The Company sold its Instrumentation & Sampling business in January 2020 for $172 million. These pro forma calculations reduce net debt by the expected net proceeds of $160 million and remove 2019 EBITDA from the reported EBITDA.

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

 

2018

2019

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

GAAP OPERATING (LOSS) INCOME

$

(7,787

)

$

10,599

 

$

8,545

 

$

10,295

 

$

21,653

 

$

17,749

 

$

12,020

 

$

(9,084

)

$

16,996

 

$

37,681

 

LESS:

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges

473

 

16

 

 

(137

)

352

 

325

 

 

(1,145

)

 

(820

)

Amortization of inventory step-up

6,600

 

 

 

 

6,600

 

 

 

 

 

 

Restructuring charges, net

3,424

 

524

 

1,075

 

825

 

5,848

 

358

 

299

 

5,038

 

(509

)

5,186

 

Acquisition amortization

11,797

 

11,767

 

11,735

 

12,012

 

47,311

 

12,078

 

11,247

 

11,202

 

11,188

 

45,715

 

Acquisition depreciation

1,837

 

1,735

 

1,742

 

1,735

 

7,049

 

1,123

 

1,106

 

1,101

 

1,021

 

4,351

 

Special charges (recoveries), net

3,360

 

1,629

 

1,913

 

6,160

 

13,061

 

(8,200

)

3,916

 

18,481

 

3,489

 

17,686

 

ADJUSTED OPERATING INCOME

$19,704

$26,269

$25,010

$30,890

$101,873

$23,433

$28,589

$25,594

$32,185

$109,799

 

 

 

 

 

 

 

 

 

 

 

GAAP OPERATING MARGIN

(3.2

)%

4.1

%

3.5

%

3.9

%

2.1

%

7.4

%

4.9

%

(3.8

)%

7.0

%

3.9

%

LESS:

%

%

%

%

%

%

%

%

%

%

Restructuring related inventory charges

0.2

%

%

%

(0.1

)%

%

0.1

%

%

(0.5

)%

%

(0.1

)%

Amortization of inventory step-up

2.8

%

%

%

%

0.7

%

%

%

%

%

%

Restructuring charges, net

1.4

%

0.2

%

0.4

%

0.3

%

0.6

%

0.2

%

0.1

%

2.1

%

(0.2

)%

0.5

%

Acquisition amortization

4.9

%

4.5

%

4.7

%

4.5

%

4.7

%

5.1

%

4.6

%

4.7

%

4.6

%

4.7

%

Acquisition depreciation

0.8

%

0.7

%

0.7

%

0.7

%

0.7

%

0.5

%

0.5

%

0.5

%

0.4

%

0.5

%

Special charges (recoveries), net

1.4

%

0.6

%

0.8

%

2.3

%

1.3

%

(3.4

)%

1.6

%

7.8

%

1.4

%

1.8

%

Income tax impact

%

%

%

%

%

%

%

%

%

%

Net income loss from discontinued operations

%

%

%

%

%

%

%

%

%

%

ADJUSTED OPERATING MARGIN

8.2

%

10.1

%

10.1

%

11.6

%

10.1

%

9.8

%

11.6

%

10.8

%

13.3

%

11.4

%

Impact of Divestitures (1)

0.2

%

(0.2)

%

(0.7)

%

(0.2

)%

(0.3

)%

(0.3

)%

(0.4

)%

0.1

%

%

(0.1

)%

ADJUSTED OPERATING MARGIN

EXCLUDING DIVESTITURES (1)

8.4

%

9.9

%

9.4

%

11.4

%

9.8

%

9.5

%

11.2

%

10.9

%

13.3

%

11.2

%

Numbers may not add due to rounding.

 

David F. Mullen
Senior Vice President Finance
CIRCOR International
(781) 270-1200

Source: CIRCOR International, Inc.