CIRCOR Reports Third-Quarter 2020 Financial Results

November 5, 2020 at 6:00 AM EST

BURLINGTON, Mass.--(BUSINESS WIRE)--Nov. 5, 2020-- CIRCOR International, Inc. (NYSE: CIR), one of the world’s leading providers of mission critical flow control products and services for the Industrial and Aerospace & Defense markets, today announced GAAP and adjusted financial results for the third quarter ended September 27, 2020.

Third Quarter 2020 Overview

  • Revenue of $187 million, down 21% reported, down 15% organically
    • Aerospace & Defense revenue of $62 million, down 8% reported, down 9% organically
    • Industrial revenue of $124 million, down 27% reported, down 18% organically
  • Revenue drop through to earnings of 19%
  • GAAP loss per share of $(2.93); Adjusted earnings per share of $0.36
  • GAAP operating margin of 2.4%; Adjusted operating margin of 9.3%
  • Aerospace & Defense operating margin of 23.7%, up 360 bps versus last year
  • Gross debt reduction of $119 million and net debt reduction of $122 million over last 12 months
  • Remain on track to achieve $45 million 2020 cost reduction plan
  • Free cash flow flat and in line with prior guidance

“While the COVID-19 pandemic continues to have an impact around the globe, the strength, resilience, and diversification of our portfolio – together with the outstanding work and commitment of our employees – is mitigating the effect of the weaker economic environment,” said Scott Buckhout, CIRCOR’s President and CEO. “Fortunately, the mission critical nature of our products has ensured that our pricing strategy remains on track. In addition, the CIRCOR Operating System continues to play a pivotal role in driving execution, with most operating metrics improving through the downturn. We are working with urgency to ensure CIRCOR is positioned to take full advantage of an eventual market recovery by launching a record number of new products and establishing ongoing collaboration with customers and suppliers.”

“Looking ahead, we are focused on driving value for shareholders by investing in growth, expanding margins, generating strong free cash flow, and de-levering the balance sheet,” concluded Buckhout.

Selected Preliminary Consolidated Results

($ in millions except EPS)

 

Q3 2020

 

Q3 2019

 

Change

 

Q3 YTD
2020

 

Q3 YTD
2019

 

Change

Revenue

 

$

186.6

 

 

$

237.1

 

 

-21

%

 

$

564.9

 

 

$

721.7

 

 

-22

%

Revenue - excluding divested businesses1

 

186.6

 

 

216.4

 

 

-14

%

 

560.0

 

 

645.1

 

 

-13

%

GAAP operating (loss) income

 

4.4

 

 

(9.1)

 

 

148

%

 

(70.4)

 

 

20.7

 

 

-440

%

Adjusted operating income2

 

17.3

 

 

25.6

 

 

-32

%

 

44.3

 

 

77.6

 

 

-43

%

GAAP operating margin

 

2.4

%

 

(3.8)

%

 

620 bps

 

(12.5)

%

 

2.9

%

 

-1540 bps

Adjusted operating margin2

 

9.3

%

 

10.8

%

 

-150 bps

 

7.8

%

 

10.8

%

 

-300 bps

Adjusted operating margin ex divestitures2

 

9.3

%

 

10.6

%

 

-130 bps

 

7.9

%

 

9.8

%

 

-190 bps

GAAP loss per share (diluted)

 

$

(2.93)

 

 

$

(5.64)

 

 

48

%

 

$

(8.59)

 

 

$

(6.81)

 

 

-26

%

Adjusted earnings per share (diluted)2

 

$

0.36

 

 

$

0.63

 

 

-43

%

 

$

0.78

 

 

$

1.80

 

 

-57

%

Operating cash flow

 

2.5

 

 

9.1

 

 

-73

%

 

(46.4)

 

 

(0.9)

 

 

-5056

%

Free cash flow3

 

0.1

 

 

10.1

 

 

-99

%

 

(55.6)

 

 

(6.6)

 

 

-742

%

Orders

 

166.6

 

 

223.0

 

 

-25

%

 

567.7

 

 

740.9

 

 

-23

%

Orders - excluding divested businesses1

 

166.6

 

 

200.9

 

 

-17

%

 

563.2

 

 

663.8

 

 

-15

%

Segment Results

($ in millions)

 

Q3 2020

 

Q3 2019

 

Change

 

Q3 YTD
2020

 

Q3 YTD
2019

 

Change

Aerospace & Defense

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

62.2

 

 

$

67.6

 

 

-8

%

 

$

190.0

 

 

$

193.6

 

 

-2

%

Segment operating income

 

14.8

 

 

13.6

 

 

9

%

 

40.4

 

 

33.4

 

 

21

%

Segment operating margin

 

23.7

%

 

20.1

%

 

360 bps

 

21.3

%

 

17.2

%

 

410 bps

Orders

 

59.1

 

 

64.0

 

 

-8

%

 

207.8

 

 

245.5

 

 

-15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

124.4

 

 

$

169.4

 

 

-27

%

 

$

374.9

 

 

$

528.1

 

 

-29

%

Revenue - excluding divested businesses1

 

124.4

 

 

148.7

 

 

-16

%

 

370.0

 

 

451.5

 

 

-18

%

Segment operating income

 

9.8

 

 

21.3

 

 

-54

%

 

27.4

 

 

70.0

 

 

-61

%

Segment operating margin

 

7.9

%

 

12.6

%

 

-470 bps

 

7.3

%

 

13.3

%

 

-600 bps

Orders

 

107.5

 

 

159.0

 

 

-32

%

 

359.9

 

 

495.5

 

 

-27

%

Orders - excluding divested businesses1

 

107.5

 

 

136.9

 

 

-21

%

 

355.5

 

 

418.3

 

 

-15

%

  1. Orders and revenue excluding divested businesses are non-GAAP measures and are calculated by subtracting the orders and revenues generated by the divested businesses during the periods prior to their divestiture from reported orders and revenues. Divested businesses include Reliability Services, Spence/Nicholson and Instrumentation & Sampling (all Industrial) which were sold before September 27, 2020.
  2. Adjusted consolidated and segment results for Q3 2020 exclude net income from discontinued operations of $0.3 million and net loss from non-cash acquisition-related intangible amortization, special and restructuring charges totaling $12.9 million. These charges include: (i) $11.6 million for non-cash acquisition-related intangible amortization and depreciation expense; (ii) $0.8 million of professional fees and other costs associated with restructuring and cost reductions; and (iii) $0.5 million of other special and restructuring charges. It also excludes the Q3 2020 charge for valuation allowance against deferred tax assets by virtue of using an effective tax rate in the adjusted results which is a $53.3 million adjustment to taxes. Adjusted consolidated and segment results for Q3 2019 exclude net loss from discontinued operations of $84.7 million and net loss from non-cash acquisition-related intangible amortization, special and restructuring charges totaling $34.7 million ($40.2 million, net of tax). These charges include: (i) $12.3 million for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $11.6 million related to business sales; (iii) $8.0 million of professional fees and other costs associated with restructuring and cost reductions; (iv) $4.0 million of professional fees associated with an unsolicited tender offer to acquire all outstanding shares of the Company’s common stock; and (iv) $1.1 million of other special and restructuring recoveries.
  3. 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, November 5, 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 (833) 665-0658 or (914) 987-7312. The conference ID number is 9088809. Participants are encouraged to dial in to the call at least 15 minutes prior to the start time. 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 further excluding discontinued operations) 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.

We exclude goodwill impairment charges.

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 27, 2020 were completed on January 1, 2019 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 certain statements that are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “Act”). The words “may,” “hope,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” and other expressions, which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking statements, although not all forward-looking statements are accompanied by such words. We believe that it is important to communicate our future expectations to our stockholders, and we, therefore, make forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that we are not able to accurately predict or control and our actual results may differ materially from the expectations we describe in our forward-looking statements. Forward-looking statements, including statements about outlook for the fourth quarter, the expected and potential direct or indirect impacts of the COVID-19 pandemic on our business, the realization of cost reductions from restructuring activities and expected synergies, the number of new product launches and future cash flows from operating activities, involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the duration and severity of the COVID-19 pandemic and its impact on the global economy; changes in the price of and demand for oil and gas in both domestic and international markets; 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 divestiture; restructuring or simplification strategies; fluctuations in interest rates; our ability to successfully defend product liability 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 COVID-19, natural disasters, terrorist attacks and other similar matters. We advise you to read further about these and other risk factors set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019, which is filed with the Securities and Exchange Commission ("SEC") and is available on the SEC's website at www.sec.gov. 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 is one of the world’s leading providers of mission critical flow control products and services for the Industrial and Aerospace & Defense markets. The Company has a product portfolio of market-leading brands serving its customers’ most demanding applications. CIRCOR markets its solutions directly and through various sales partners to more than 14,000 customers in approximately 100 countries. The Company has a global presence with approximately 3,200 employees and is headquartered in Burlington, Massachusetts. For more information, visit the Company’s investor relations website at http://investors.circor.com.

 

CIRCOR INTERNATIONAL, INC. 

Condensed Consolidated Statements of Operations

(in thousands, except per share data) (unaudited)

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

 

Q3 2020

 

Q3 2019

 

Q3 2020

 

Q3 2019

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

186,640

 

 

$

237,052

 

 

$

564,920

 

 

$

721,675

 

Cost of revenues

 

130,630

 

 

162,578

 

 

389,905

 

 

490,870

 

Gross profit

 

56,010

 

 

74,474

 

 

175,015

 

 

230,805

 

Selling, general and administrative expenses

 

50,652

 

 

60,039

 

 

164,948

 

 

190,227

 

Goodwill impairment charge

 

 

 

 

 

116,182

 

 

 

Special and restructuring charges (recoveries), net

 

938

 

 

23,519

 

 

(35,747)

 

 

19,893

 

Operating income (loss)

 

4,420

 

 

(9,084)

 

 

(70,368)

 

 

20,685

 

Other expense (income), net:

 

 

 

 

 

 

 

 

Interest expense, net

 

8,202

 

 

11,804

 

 

25,699

 

 

37,846

 

Other expense (income), net

 

765

 

 

(759)

 

 

229

 

 

(2,755)

 

Total other expense, net

 

8,967

 

 

11,045

 

 

25,928

 

 

35,091

 

(Loss) income from continuing operations before income taxes

 

(4,547)

 

 

(20,129)

 

 

(96,296)

 

 

(14,406)

 

Provision for (benefit from) income taxes

 

54,318

 

 

7,520

 

 

40,923

 

 

13,513

 

(Loss) income from continuing operations, net of tax

 

(58,865)

 

 

(27,649)

 

 

(137,219)

 

 

(27,919)

 

Income (loss) from discontinued operations, net of tax

 

341

 

 

(84,688)

 

 

(34,345)

 

 

(107,572)

 

Net loss

 

$

(58,524)

 

 

$

(112,337)

 

 

$

(171,564)

 

 

$

(135,491)

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share:

 

 

 

 

 

 

 

 

Basic from continuing operations

 

$

(2.94)

 

 

$

(1.39)

 

 

$

(6.87)

 

 

$

(1.40)

 

Basic from discontinued operations

 

$

0.02

 

 

$

(4.25)

 

 

$

(1.72)

 

 

$

(5.41)

 

Net loss

 

$

(2.93)

 

 

$

(5.64)

 

 

$

(8.59)

 

 

$

(6.81)

 

Diluted income (loss) per common share:

 

 

 

 

 

 

 

 

Diluted from continuing operations

 

$

(2.94)

 

 

$

(1.39)

 

 

$

(6.87)

 

 

$

(1.40)

 

Diluted from discontinued operations

 

$

0.02

 

 

$

(4.25)

 

 

$

(1.72)

 

 

$

(5.41)

 

Net loss

 

$

(2.93)

 

 

$

(5.64)

 

 

$

(8.59)

 

 

$

(6.81)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

20,001

 

 

19,916

 

 

19,975

 

 

19,898

 

Diluted

 

 

20,001

 

 

19,916

 

 

19,975

 

 

19,898

 

 

CIRCOR INTERNATIONAL, INC. 

Condensed Consolidated Statements of Cash Flows

(in thousands) (unaudited)

 

 

 

 

 

Nine Months Ended

 

 

 

 

September 27,
2020

 

September 29,
2019

OPERATING ACTIVITIES

 

 

 

 

Net loss

 

$

(171,564)

 

 

$

(135,491)

 

Loss from discontinued operations, net of income taxes

 

(34,345)

 

 

(107,572)

 

Loss from continuing operations

 

(137,219)

 

 

(27,919)

 

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

Depreciation

 

14,881

 

 

16,618

 

Amortization

 

32,418

 

 

36,023

 

Provision for bad debt expense

 

7,219

 

 

(469)

 

Write down of inventory

 

2,386

 

 

301

 

Compensation expense for share-based plans

 

4,076

 

 

4,200

 

Amortization of debt issuance costs

 

6,463

 

 

3,669

 

Deferred tax provision

 

35,582

 

 

11,812

 

Loss on sale or write-down of property, plant and equipment

 

 

 

2,889

 

Goodwill impairment charge

 

116,182

 

 

 

(Gain) loss on sale of businesses

 

(54,253)

 

 

2,707

 

Changes in operating assets and liabilities, net of effects of acquisition and disposition:

 

 

 

Trade accounts receivable

 

18,051

 

 

17,413

 

Inventories

 

(8,477)

 

 

(11,724)

 

Prepaid expenses and other assets

 

(39,184)

 

 

(20,546)

 

Accounts payable, accrued expenses and other liabilities

 

(30,468)

 

 

(18,300)

 

Net cash (used in) provided by continuing operating activities

(32,343)

 

 

16,674

 

Net cash used in discontinued operating activities

(14,022)

 

 

(17,585)

 

Net cash used in operating activities

 

(46,365)

 

 

(911)

 

INVESTING ACTIVITIES

 

 

 

 

Additions to property, plant and equipment

 

(9,147)

 

 

(9,519)

 

Proceeds from sale of property, plant and equipment

 

(122)

 

 

99

 

Proceeds from the sale of business

 

166,210

 

 

163,056

 

Proceeds from beneficial interest of factored receivables

 

2,212

 

 

 

Net cash provided by continuing investment activities

 

159,153

 

 

153,636

 

Net cash used in discontinued investing activities

 

(11,338)

 

 

(2,435)

 

Net cash provided by investing activities

 

147,815

 

 

151,201

 

FINANCING ACTIVITIES

 

 

 

 

Proceeds from long-term debt

 

165,800

 

 

231,950

 

Payments of long-term debt

 

(279,191)

 

 

(379,897)

 

Proceeds from the exercise of stock options

 

117

 

 

106

 

Net cash used in continuing financing activities

(113,274)

 

 

(147,841)

 

Net cash used in financing activities

 

(113,274)

 

 

(147,841)

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

29

 

 

(1,753)

 

(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

(11,795)

 

 

696

 

Cash, cash equivalents, and restricted cash at beginning of period

85,727

 

 

69,525

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD

$

73,932

 

 

$

70,221

 

 

CIRCOR INTERNATIONAL, INC. 

Condensed Consolidated Balance Sheets

(in thousands) (unaudited)

 

 

 

September 27,
2020

 

December 31,
2019

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

72,772

 

 

$

84,531

 

Trade accounts receivable, less allowance for doubtful accounts of $10,424 and $3,086 at September 27, 2020 and December 31, 2019, respectively

102,840

 

 

125,422

 

Inventories

144,476

 

 

137,309

 

Prepaid expenses and other current assets

98,401

 

 

66,664

 

Assets held for sale

 

 

161,193

 

Total Current Assets

 

418,489

 

 

575,119

 

PROPERTY, PLANT AND EQUIPMENT, NET

167,037

 

 

172,179

 

OTHER ASSETS:

 

 

 

Goodwill

158,117

 

 

271,893

 

Intangibles, net

357,038

 

 

385,542

 

Deferred income taxes

905

 

 

30,852

 

Other assets

43,621

 

 

35,360

 

TOTAL ASSETS

$

1,145,207

 

 

$

1,470,945

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

63,966

 

 

$

79,399

 

Accrued expenses and other current liabilities

86,176

 

 

94,169

 

Accrued compensation and benefits

27,570

 

 

19,518

 

Liabilities held for sale

 

 

43,289

 

Total Current Liabilities

 

177,712

 

 

236,375

 

LONG-TERM DEBT

527,721

 

 

636,297

 

DEFERRED INCOME TAXES

16,823

 

 

21,425

 

PENSION LIABILITY, NET

143,599

 

 

146,801

 

OTHER NON-CURRENT LIABILITIES

58,538

 

 

38,636

 

COMMITMENTS AND CONTINGENCIES

 

 

 

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; 19,997,931 and 19,912,362 outstanding at September 27, 2020 and December 31, 2019 respectively

214

 

 

213

 

Additional paid-in capital

451,351

 

 

446,657

 

(Accumulated deficit) retained earnings

(72,528)

 

 

99,280

 

Common treasury stock, at cost (1,372,488 shares at September 27, 2020 and December 31, 2019)

(74,472)

 

 

(74,472)

 

Accumulated other comprehensive loss, net of tax

(83,751)

 

 

(80,267)

 

Total Shareholders' Equity

 

220,814

 

 

391,411

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,145,207

 

 

$

1,470,945

 

 

CIRCOR INTERNATIONAL, INC. 

Summary of Orders and Backlog

(in millions) (unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

Q3 2020

 

Q3 2019

 

Q3 2020

 

Q3 2019

 

 

 

 

 

 

 

 

 

ORDERS (1)

 

 

 

 

 

 

 

 

Aerospace & Defense

 

$

59.1

 

 

$

64.0

 

 

$

207.8

 

 

$

245.5

 

Industrial

 

107.5

 

 

159.0

 

 

359.9

 

 

495.4

 

Total Orders

 

$

166.6

 

 

$

223.0

 

 

$

567.7

 

 

$

740.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q3 2020

 

Q3 2019

 

 

 

 

BACKLOG (2)

 

 

 

 

 

 

 

 

Aerospace & Defense

 

$

211.4

 

 

$

206.9

 

 

 

 

 

Industrial

 

204.0

 

 

218.4

 

 

 

 

 

Total Backlog

 

$

415.4

 

 

$

425.3

 

 

 

 

 

Note 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 nine months ended September 27, 2020 include orders from businesses divested prior to September 27, 2020 of $4.5 million. Orders for the three months ended September 27, 2019 include orders from businesses divested of $22.1 million ($77.1 million for the nine months ended September 27, 2019). Divested businesses are Reliability Services, Spence/Nicholson and Instrumentation & Sampling, all in the Industrial segment.

 

Note 2: Backlog includes unshipped customer orders for which revenue has not been recognized. Backlog at Q3 2019 includes $9.1 million for Industrial related to divested businesses.

 

CIRCOR INTERNATIONAL, INC. 

Segment Information

(in thousands, except percentages)

UNAUDITED

 

 

 

2019

2020

As reported

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

TOTAL

ORDERS

 

 

 

 

 

 

 

 

 

 

Aerospace & Defense

 

$

88,107

 

$

93,405

 

$

63,968

 

$

68,459

 

$

313,939

 

$

72,031

 

$

76,616

 

$

59,105

 

$

207,752

 

Industrial

 

171,834

 

164,642

 

158,986

 

168,091

 

663,553

 

136,443

 

116,023

 

107,453

 

359,919

 

Total

 

$

259,941

 

$

258,047

 

$

222,954

 

$

236,550

 

$

977,492

 

$

208,474

 

$

192,639

 

$

166,558

 

$

567,671

 

 

 

 

 

 

 

 

 

 

 

 

NET REVENUES

 

 

 

 

 

 

 

 

 

 

Aerospace & Defense

 

$

61,240

 

$

64,694

 

$

67,621

 

$

79,070

 

$

272,625

 

$

65,493

 

$

62,241

 

$

62,249

 

$

189,983

 

Industrial

 

177,615

 

181,074

 

169,431

 

163,568

 

691,688

 

126,720

 

123,825

 

124,391

 

374,937

 

Total

 

$

238,855

 

$

245,768

 

$

237,052

 

$

242,638

 

$

964,313

 

$

192,213

 

$

186,066

 

$

186,640

 

$

564,920

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING INCOME

 

 

 

 

 

 

 

 

 

 

Aerospace & Defense

 

$

9,374

 

$

10,443

 

$

13,564

 

$

19,099

 

$

52,480

 

$

12,494

 

$

13,142

 

$

14,782

 

$

40,418

 

Industrial

 

22,581

 

26,174

 

21,278

 

20,757

 

90,790

 

5,169

 

12,406

 

9,807

 

27,383

 

Corporate expenses

 

(8,522)

 

(8,028)

 

(9,248)

 

(7,671)

 

(33,469)

 

(6,588)

 

(9,664)

 

(7,244)

 

(23,496)

 

Total

 

$

23,433

 

$

28,589

 

$

25,594

 

$

32,185

 

$

109,801

 

$

11,075

 

$

15,884

 

$

17,345

 

$

44,305

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING MARGIN %

 

 

 

 

 

 

 

 

 

 

Aerospace & Defense

 

15.3

%

16.1

%

20.1

%

24.2

%

19.2

%

19.1

%

21.1

%

23.7

%

21.3

%

Industrial

 

12.7

%

14.5

%

12.6

%

12.7

%

13.1

%

4.1

%

10.0

%

7.9

%

7.3

%

Total

 

9.8

%

11.6

%

10.8

%

13.3

%

11.4

%

5.8

%

8.5

%

9.3

%

7.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

2020

Results of divested businesses (1)

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

TOTAL

ORDERS - Industrial

 

$

30,611

 

$

24,448

 

$

22,090

 

$

18,047

 

$

95,196

 

$

4,449

 

$

 

$

 

$

4,449

 

NET REVENUES - Industrial

 

$

29,787

 

$

26,101

 

$

20,697

 

$

18,602

 

$

95,187

 

$

4,900

 

$

 

$

 

$

4,900

 

SEGMENT OP. INC. - Industrial

 

$

6,217

 

$

5,229

 

$

2,677

 

$

3,166

 

$

17,289

 

$

 

$

 

$

 

$

 

 

CIRCOR INTERNATIONAL, INC. 

Supplemental Information Regarding Divested Businesses

(in thousands, except percentages) (unaudited)

 

 

 

2019

2020

Results excluding divested businesses

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

TOTAL

ORDERS

 

 

 

 

 

 

 

 

 

Aerospace & Defense

$

88,107

 

$

93,405

 

$

63,968

 

$

68,459

 

$

313,939

 

$

72,031

 

$

76,616

 

$

59,105

 

$

207,752

 

Industrial

141,223

 

140,194

 

136,896

 

150,044

 

568,357

 

131,994

 

116,023

 

107,453

 

355,470

 

Total

$

229,330

 

$

233,599

 

$

200,864

 

$

218,503

 

$

882,296

 

$

204,025

 

$

192,639

 

$

166,558

 

$

563,222

 

 

 

 

 

 

 

 

 

 

 

 

NET REVENUES

 

 

 

 

 

 

 

 

 

Aerospace & Defense

$

61,240

 

$

64,694

 

$

67,621

 

$

79,070

 

$

272,625

 

$

65,493

 

$

62,241

 

$

62,249

 

$

189,983

 

Industrial

147,828

 

154,973

 

148,734

 

144,966

 

596,501

 

121,820

 

123,825

 

124,391

 

370,037

 

Total

$

209,068

 

$

219,667

 

$

216,355

 

$

224,036

 

$

869,126

 

$

187,313

 

$

186,066

 

$

186,640

 

$

560,020

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING INCOME

 

 

 

 

 

 

 

 

 

Aerospace & Defense

$

9,374

 

$

10,443

 

$

13,564

 

$

19,099

 

$

52,480

 

$

12,494

 

$

13,142

 

$

14,782

 

$

40,418

 

Industrial

16,364

 

20,945

 

18,601

 

17,591

 

73,501

 

5,169

 

12,406

 

9,807

 

27,383

 

Corporate expenses

(8,522)

 

(8,028)

 

(9,248)

 

(7,671)

 

(33,469)

 

(6,588)

 

(9,664)

 

(7,244)

 

(23,496)

 

Total

$

17,216

 

$

23,360

 

$

22,917

 

$

29,019

 

$

92,512

 

$

11,075

 

$

15,884

 

$

17,345

 

$

44,305

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING MARGIN %

 

 

 

 

 

 

 

 

 

Aerospace & Defense

15.3

%

16.1

%

20.1

%

24.2

%

19.2

%

19.1

%

21.1

%

23.7

%

21.3

%

Industrial

11.1

%

13.5

%

12.5

%

12.1

%

12.3

%

4.2

%

10.0

%

7.9

%

7.4

%

Total

8.2

%

10.6

%

10.6

%

13.0

%

10.6

%

5.9

%

8.5

%

9.3

%

7.9

%

 

 

 

 

 

 

 

 

 

 

 

(1) Divested businesses are related to the Industrial Segment and include Reliability Services, Spence/Nicholson and Instrumentation & Sampling. 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 percentages) (unaudited)

 

 

 

2019

2020

 

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

TOTAL

 

 

 

 

 

 

 

 

 

 

 

Net Cash (Used In) Provided By Operating Activities

 

$

(22,378)

 

$

12,339

 

$

9,128

 

$

16,822

 

$

15,911

 

$

(23,947)

 

$

(24,883)

 

$

2,465

 

$

(46,365)

 

LESS

 

 

 

 

 

 

 

 

 

 

Capital expenditures, net of sale proceeds (a)

 

3,689

 

2,995

 

(963)

 

(1,535)

 

4,186

 

3,412

 

3,527

 

2,330

 

9,269

 

FREE CASH FLOW

 

$

(26,067)

 

$

9,344

 

$

10,091

 

$

18,357

 

$

11,725

 

$

(27,359)

 

$

(28,410)

 

$

135

 

$

(55,634)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Debt

 

$

753,950

 

$

748,250

 

$

659,100

 

$

653,850

 

$

653,850

 

$

602,288

 

$

592,038

 

$

540,463

 

$

540,463

 

Less: Cash & Cash equivalents

 

73,619

 

76,082

 

69,225

 

84,531

 

84,531

 

170,861

 

125,421

 

72,772

 

72,772

 

GROSS DEBT, NET OF CASH

 

$

680,331

 

$

672,168

 

$

589,875

 

$

569,319

 

$

569,319

 

$

431,427

 

$

466,617

 

$

467,691

 

$

467,691

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL SHAREHOLDERS' EQUITY

 

$

516,177

 

$

494,899

 

$

375,388

 

$

391,411

 

$

391,411

 

$

290,845

 

$

273,351

 

$

220,814

 

$

220,814

 

 

 

 

 

 

 

 

 

 

 

 

GROSS DEBT AS % OF EQUITY

 

146

%

151

%

176

%

167

%

167

%

207

%

217

%

245

%

245

%

GROSS DEBT, NET OF CASH AS % OF EQUITY

 

132

%

136

%

157

%

145

%

145

%

148

%

171

%

212

%

212

%

 

 

 

 

 

 

 

 

 

 

 

(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 percentages) (unaudited)

 

 

 

2019

2020

 

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

TOTAL

NET (LOSS) INCOME

 

$

(4,633)

 

$

(18,520)

 

$

(112,338)

 

$

1,555

 

$

(133,936)

 

$

(78,948)

 

$

(34,092)

 

$

(58,524)

 

$

(171,564)

 

LESS:

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges

 

325

 

 

(1,145)

 

 

(820)

 

(602)

 

 

351

 

(250)

 

Restructuring charges, net

 

358

 

299

 

5,038

 

(509)

 

5,186

 

2,883

 

588

 

502

 

3,973

 

Acquisition amortization

 

12,077

 

11,247

 

11,202

 

11,189

 

45,715

 

10,218

 

10,681

 

10,625

 

31,523

 

Acquisition depreciation

 

1,123

 

1,106

 

1,102

 

1,021

 

4,352

 

974

 

980

 

1,011

 

2,965

 

Special (recoveries) charges, net

 

(8,200)

 

3,917

 

18,481

 

3,488

 

17,686

 

(45,175)

 

5,019

 

436

 

(39,720)

 

Goodwill Impairment charge

 

 

 

 

 

 

116,182

 

 

 

116,182

 

Income tax impact

 

3,625

 

(2,266)

 

5,533

 

(1,752)

 

5,140

 

7,704

 

(22,549)

 

53,240

 

38,395

 

Net loss (income) from discontinued operations

 

5,728

 

17,156

 

84,688

 

1,595

 

109,167

 

(9,162)

 

43,848

 

(341)

 

34,345

 

ADJUSTED NET INCOME

 

$

10,403

 

$

12,939

 

$

12,561

 

$

16,587

 

$

52,490

 

$

4,074

 

$

4,475

 

$

7,300

 

$

15,849

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS) EARNINGS PER COMMON SHARE (Diluted)

 

$

(0.23)

 

$

(0.93)

 

$

(5.64)

 

$

0.08

 

$

(6.73)

 

$

(3.96)

 

$

(1.68)

 

$

(2.93)

 

$

(8.59)

 

LESS:

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges

 

0.02

 

 

(0.06)

 

 

(0.04)

 

(0.03)

 

 

0.02

 

(0.01)

 

Restructuring charges, net

 

0.02

 

0.02

 

0.25

 

(0.03)

 

0.26

 

0.14

 

0.03

 

0.02

 

0.20

 

Acquisition amortization

 

0.61

 

0.57

 

0.56

 

0.56

 

2.30

 

0.51

 

0.53

 

0.53

 

1.58

 

Acquisition depreciation

 

0.06

 

0.06

 

0.06

 

0.05

 

0.22

 

0.05

 

0.05

 

0.05

 

0.15

 

Special (recoveries) charges, net

 

(0.41)

 

0.20

 

0.93

 

0.18

 

0.89

 

(2.27)

 

0.25

 

0.02

 

(1.99)

 

Impairment charge

 

 

 

 

 

 

5.83

 

 

 

5.82

 

Income tax impact

 

0.18

 

(0.12)

 

0.28

 

(0.10)

 

0.24

 

0.39

 

(1.11)

 

2.66

 

1.91

 

Earnings (Loss) per share from discontinued operations

 

0.29

 

0.86

 

4.25

 

0.08

 

5.48

 

(0.46)

 

2.16

 

(0.02)

 

1.72

 

ADJUSTED EARNINGS PER SHARE (Diluted)

 

$

0.52

 

$

0.65

 

$

0.63

 

$

0.82

 

$

2.62

 

$

0.20

 

$

0.22

 

$

0.36

 

$

0.78

 

 

CIRCOR INTERNATIONAL, INC.

Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms

(in thousands, except percentages) (unaudited)

 

 

 

2019

2020

 

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

TOTAL

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) INCOME

 

$

(4,633)

 

$

(18,520)

 

$

(112,338)

 

$

1,555

 

$

(133,936)

 

$

(78,948)

 

$

(34,092)

 

$

(58,524)

 

$

(171,564)

 

LESS:

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

13,094

 

12,947

 

11,804

 

10,763

 

48,609

 

9,011

 

8,486

 

8,202

 

25,699

 

Depreciation

 

5,499

 

5,568

 

5,551

 

5,427

 

22,045

 

5,121

 

4,958

 

4,802

 

14,881

 

Amortization

 

12,536

 

11,685

 

11,629

 

11,741

 

47,591

 

10,516

 

10,976

 

10,925

 

32,418

 

Provision for income taxes

 

5,709

 

284

 

7,490

 

1,193

 

14,676

 

8,374

 

(21,769)

 

54,318

 

40,923

 

Loss (income) from discontinued operations

 

5,728

 

17,156

 

84,688

 

1,595

 

109,167

 

(9,162)

 

43,847

 

(341)

 

34,345

 

EBITDA

 

$

37,933

 

$

29,121

 

$

8,825

 

$

32,274

 

$

108,152

 

$

(55,088)

 

$

12,406

 

$

19,383

 

$

(23,299)

 

LESS:

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges (recoveries)

 

325

 

 

(1,145)

 

 

(820)

 

(602)

 

 

351

 

(250)

 

Restructuring charges (recoveries), net

 

358

 

299

 

5,038

 

(509)

 

5,186

 

2,883

 

588

 

502

 

3,973

 

Special (recoveries) charges, net

 

(8,200)

 

3,917

 

18,481

 

3,488

 

17,686

 

(45,175)

 

5,019

 

436

 

(39,720)

 

Goodwill impairment charge

 

 

 

 

 

 

116,182

 

 

 

116,182

 

ADJUSTED EBITDA

 

$

30,416

 

$

33,337

 

$

31,199

 

$

35,253

 

$

130,204

 

$

18,200

 

$

18,013

 

$

20,671

 

$

56,885

 

 

CIRCOR INTERNATIONAL, INC.

Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms

(in thousands, except percentages) (unaudited)

 

 

 

2019

2020

 

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

3RD QTR

TOTAL

 

 

 

 

 

 

 

 

 

 

 

GAAP OPERATING INCOME (LOSS)

 

$

17,750

 

$

12,020

 

$

(9,084)

 

$

16,996

 

$

37,682

 

$

(73,405)

 

$

(1,384)

 

$

4,420

 

$

(70,368)

 

LESS:

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges (recoveries)

 

325

 

 

(1,145)

 

 

(820)

 

(602)

 

 

351

 

(250)

 

Amortization of inventory step-up

 

 

 

 

 

 

 

 

 

 

Restructuring charges (recoveries), net

 

358

 

299

 

5,038

 

(509)

 

5,186

 

2,883

 

588

 

502

 

3,973

 

Acquisition amortization

 

12,077

 

11,247

 

11,202

 

11,189

 

45,715

 

10,218

 

10,681

 

10,625

 

31,523

 

Acquisition depreciation

 

1,123

 

1,106

 

1,102

 

1,021

 

4,352

 

974

 

980

 

1,011

 

2,965

 

Special (recoveries) charges, net

 

(8,200)

 

3,917

 

18,481

 

3,488

 

17,686

 

(45,175)

 

5,019

 

436

 

(39,720)

 

Goodwill impairment charge

 

 

 

 

 

 

116,182

 

 

 

116,182

 

ADJUSTED OPERATING INCOME

 

$

23,433

 

$

28,589

 

$

25,594

 

$

32,185

 

$

109,801

 

$

11,075

 

$

15,884

 

$

17,345

 

$

44,305

 

 

 

 

 

 

 

 

 

 

 

 

GAAP OPERATING MARGIN

 

7.4

%

4.9

%

(3.8)

%

7.0

%

3.9

%

(38.2)

%

(0.7)

%

2.4

%

(12.5)

%

LESS:

 

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges (recoveries)

 

0.1

%

%

(0.5)

%

%

(0.1)

%

(0.3)

%

%

0.2

%

%

Amortization of inventory step-up

 

%

%

%

%

%

%

%

%

%

Restructuring charges (recoveries), net

 

0.1

%

0.1

%

2.1

%

(0.2)

%

0.5

%

1.5

%

0.3

%

0.3

%

0.7

%

Acquisition amortization

 

5.1

%

4.6

%

4.7

%

4.6

%

4.7

%

5.3

%

5.7

%

5.7

%

5.6

%

Acquisition depreciation

 

0.5

%

0.5

%

0.5

%

0.4

%

0.5

%

0.5

%

0.5

%

0.5

%

0.5

%

Special (recoveries) charges, net

 

(3.4)

%

1.6

%

7.8

%

1.4

%

1.8

%

(23.5)

%

2.7

%

0.2

%

(7.0)

%

Goodwill impairment charge

 

%

%

%

%

%

60.4

%

%

%

20.6

%

ADJUSTED OPERATING MARGIN

 

9.8

%

11.6

%

10.8

%

13.3

%

11.4

%

5.8

%

8.5

%

9.3

%

7.8

%

 

Abhi Khandelwal
Senior Vice President Finance & Chief Financial Officer
CIRCOR International
(781) 270-1200

Source: CIRCOR International, Inc.