CIRCOR Reports Second-Quarter 2019 Financial Results

BURLINGTON, Mass.--()--CIRCOR International, Inc. (NYSE: CIR), a leading provider of flow control solutions and other highly engineered products for the Industrial, Energy and Aerospace & Defense markets, today announced financial results for the second quarter ended June 30, 2019.

Second-Quarter 2019 Highlights

  • Orders of $276 million and Revenue of $270 million
  • Orders in A&D grew 57% year-over-year
  • GAAP Operating Margin of 1.5%, down 120 bps year-over-year; 280 bps sequentially
  • GAAP Loss per Share of $(0.93)
  • $0.45 Adjusted Earnings per Share; $0.56 excluding Engineered Valves
  • Adjusted Operating Margin of 8.7%, up 50 bps year-over-year; 120 bps sequentially
  • Completed divestiture of non-core Engineered Valves in July
  • Adjusted Operating Margin of 10.0% excluding Engineered Valves
  • Industrial Segment Operating Margin of 13.5%, up 200 bps year-over-year; 380 bps sequentially
  • A&D Segment Operating Margin of 16.1%, up 390 bps year-over-year; 80 bps sequentially

We reported solid second-quarter 2019 results driven by strong performance in our Industrial and Aerospace & Defense businesses,” said Scott Buckhout, President and Chief Executive Officer. “We reduced our debt by almost $60 million in the first half of 2019, underscoring our commitment to deleveraging. In July, we completed the divestiture of our loss-making upstream oil & gas engineered valve business, which is consistent with our strategy to exit non-core businesses and further simplify the Company.”

Mr. Buckhout continued, “As detailed in our June investor update presentation, we are executing on a detailed plan to deliver substantial earnings growth while deleveraging over the next 18 months. Our second-quarter results are right in line with that plan.

Looking ahead to the second half of the year, we expect results to continue to improve as we benefit from higher volume, price increases and additional integration savings. We remain focused on enhancing shareholder value and we are confident that our plan will deliver significant value in the near- and long-term,” concluded Mr. Buckhout.

Execution of Our Strategic Plan and Evaluation of Value Creation Opportunities – Our Path Forward

The CIRCOR Board of Directors and management team have taken decisive actions over the past five years to transform the Company, and we continue to build on that transformation. CIRCOR has outlined a comprehensive 18-month plan to deliver substantial value to shareholders. We delivered on our plan in the second quarter, and we are confident in our previously provided outlook for the balance of 2019 and 2020. As we continue to build on our transformation and execute our strategic plan, the Company will evaluate a broad range of operational, financial, and strategic options that could potentially deliver value in excess of the strategic plan. These options include further portfolio simplification, capital allocation opportunities, and the sale of part or all of CIRCOR, among others. There can be no assurance that the Company will pursue any particular action or transaction; however, CIRCOR will assess all viable paths to enhancing shareholder value, including continuing to execute our strategic plan.

Third-Quarter 2019 Guidance
For the third quarter of 2019, CIRCOR expects revenue in the range of $250 million to $260 million, and GAAP loss per share in the range of $(2.15) to $(1.85), which reflects acquisition-related amortization expense of $(0.49) and other special and restructuring charges of $(2.18) to $(1.96), including an expected loss on the sale of the Engineered Valves business in the range of $(1.85) to $(1.65). Excluding the impact of amortization, special and restructuring (charges) gains, adjusted EPS is expected to be in the range of $0.52 to $0.60 per share. The revenue and adjusted EPS exclude the results from the Company’s Engineered Valves business, which was divested in July. Presentation slides that provide supporting information to this guidance and second-quarter results are posted on the “Investors” section of the Company’s website, http://investors.circor.com, and will be discussed during the conference call at 9:00 a.m. ET today, August 1, 2019.

Selected Consolidated Results (unaudited)

 

($ millions except EPS)

Q2 2019

 

Q2 2018

 

Change

Revenue

$

269.6

 

 

$

301.4

 

 

 

(11)%

 

Revenue excluding divested businesses1

 

$

269.6

 

 

$

282.5

 

 

 

(5)%

 

GAAP Operating Income

$

4.1

 

 

$

8.3

 

 

 

(51)%

 

Adjusted Operating Income2

$

23.6

 

 

$

24.8

 

 

 

(5)%

 

GAAP Operating Margin

 

1.5%

 

 

 

2.7%

 

 

 

(120) bps

 

Adjusted Operating Margin2

 

8.7%

 

 

 

8.2%

 

 

 

50 bps

 

GAAP (Loss) Earnings Per Share (Diluted)

$

(0.93)

 

 

$

0.30

 

 

 

N/M

 

Adjusted Earnings Per Share (Diluted)2

$

0.45

 

 

$

0.57

 

 

 

(21)%

 

Operating Cash Flow

$

12.3

 

 

$

(0.5)

 

 

 

N/M

 

Free Cash Flow3

$

9.3

 

 

$

(4.0)

 

 

 

N/M

 

 

Orders

$

276.3

 

 

$

309.4

 

 

 

(11)%

 

Orders excluding divested businesses1

 

$

276.3

 

 

$

286.5

 

 

 

(4)%

 

 

Segment Results

($ millions)

Q2 2019

 

Q2 2018

 

Change

Energy

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

85.6

 

 

$

112.8

 

 

 

(24)%

 

Revenue excluding divested business1

$

85.6

 

 

$

95.4

 

 

 

(10)%

 

Segment Operating Income

$

3.5

 

 

$

9.2

 

 

 

(62)%

 

Segment Operating Margin

 

4.1%

 

 

 

8.2%

 

 

 

(410) bps

 

Orders

$

62.2

 

 

$

113.2

 

 

 

(45)%

 

Orders excluding divested business1

$

62.2

 

 

$

94.8

 

 

 

(34)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Defense

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

64.7

 

 

$

57.5

 

 

 

13%

 

Segment Operating Income

$

10.4

 

 

$

7.0

 

 

 

49%

 

Segment Operating Margin

 

16.1%

 

 

 

12.2%

 

 

 

390 bps

 

Orders

$

93.4

 

 

$

59.4

 

 

 

57%

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

119.3

 

 

$

131.1

 

 

 

(9)%

 

Revenue excluding divested business1

$

119.3

 

 

$

129.6

 

 

 

(8)%

 

Segment Operating Income

$

16.1

 

 

$

15.0

 

 

 

7%

 

Segment Operating Margin

 

13.5%

 

 

 

11.5%

 

 

 

200 bps

 

Orders

$

120.7

 

 

$

136.7

 

 

 

(12)%

 

Orders excluding divested business1

$

120.7

 

 

$

132.3

 

 

 

(9)%

 

 
  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 the reported orders and revenues. Divested businesses include Reliability Services (Energy) and Delden (Industrial), which were sold before Q2 2019. No adjustment has been made for Engineered Valves which was sold in Q3 2019.
  2. Adjusted Consolidated and Segment Results for Q2 2019 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $19.5 million ($23.2 million, net of tax). These charges include: (i) $12.4 million charge for non-cash acquisition-related intangible amortization and depreciation expense; (ii ) $2.1 million of professional fees associated with an unsolicited tender offer to acquire all outstanding shares of the Company’s common stock; (iii) $1.3 million for restructuring-related inventory charges; (iv) $1.1 million loss associated with divested businesses; and (v) $2.6 million of other special and restructuring charges. Adjusted Consolidated and Segment Results for Q2 2018 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $16.6 million ($5.5 million, net of tax). These charges include: (i) $13.5 million charge for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $1.9 million charge related to restructuring activities, primarily severance, related to our Engineered Valves, Reliability Services and Germany-based Pumps business; and (iii) $1.2 million primarily related to the separation of the Fluid Handling business from Colfax Corporation and exiting a product line.
  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, August 1, 2019. To listen to the live conference call and view the accompanying presentation slides, please visit “Webcasts & Presentations” in the “Investors” portion of CIRCOR’s website. The live call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. The webcast will be archived on the Company’s website for one year.

Use of Non-GAAP Financial Measures

Adjusted operating income, Adjusted operating margin, Adjusted net income, Adjusted earnings per share (diluted), EBITDA, Adjusted EBITDA, net debt, free cash flow, organic growth, pro forma combined amounts and pro forma organic growth (and such measures further excluding Engineered Valves) are non-GAAP financial measures. These non-GAAP financial measures are used by management in our financial and operating decision making because we believe they reflect our ongoing business and facilitate period-to-period comparisons. We believe these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company’s current operating performance and future prospects in the same manner as management does, if they so choose. These non-GAAP financial measures also allow investors and others to compare the Company’s current financial results with the Company’s past financial results in a consistent manner.

For example:

  • We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to these restructuring activities are not indicative of our normal operating costs.
  • We exclude certain acquisition-related costs, including significant transaction costs and amortization of inventory and fixed-asset step-ups and the related tax effects. We exclude these costs because we do not believe they are indicative of our normal operating costs.
  • We exclude the expense and tax effects associated with the non-cash amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives up to 25 years. Exclusion of the non-cash amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.
  • We also exclude certain gains/losses and related tax effects, which are either isolated or cannot be expected to occur again with any predictability, and that we believe are not indicative of our normal operating gains and losses. For example, we exclude gains/losses from items such as the sale of a business, significant litigation-related matters and lump-sum pension plan settlements.
  • Due to the significance of 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 June 30, 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 third-quarter 2019 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: our ability to respond to competitive developments and to grow our business, both domestically and internationally; changes in the cost, quality or supply of raw materials; our ability to comply with our debt obligations; our ability to successfully implement our acquisition, divestiture or restructuring strategies, including our integration of the Fluid Handling business; changes in industry standards, trade policies or government regulations, both in the United States and internationally; our ability to operate our manufacturing facilities at current or higher levels and respond to increases in manufacturing costs; and any actions of stockholders or others in response to expiration of the recent unsolicited tender offer and the cost and disruption of responding to those actions. BEFORE MAKING ANY INVESTMENT DECISIONS REGARDING OUR COMPANY, WE STRONGLY ADVISE YOU TO READ THE SECTION ENTITLED "RISK FACTORS" IN OUR MOST RECENT ANNUAL REPORT ON FORM 10-K AND SUBSEQUENT REPORTS ON FORMS 10-Q, WHICH CAN BE ACCESSED UNDER THE "INVESTORS" LINK OF OUR WEBSITE AT WWW.CIRCOR.COM. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

About CIRCOR International, Inc.
CIRCOR International, Inc. designs, manufactures and markets differentiated technology products and sub-systems for markets including oil & gas, industrial, aerospace & defense and commercial marine. CIRCOR has a diversified flow and motion control product portfolio with recognized, market-leading brands that fulfill its customers’ mission critical needs. The Company’s strategy is to grow organically and through complementary acquisitions; simplify CIRCOR’s operations; achieve world class operational excellence; and attract and retain top talent. For more information, visit the Company’s investor relations website at http://investors.circor.com.

 

CIRCOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(UNAUDITED)

 

Three Months Ended

 

Six Months Ended

 

June 30, 2019

 

July 1, 2018

 

June 30, 2019

 

July 1, 2018

Net revenues

$

269,607

 

 

$

301,368

 

 

$

540,002

 

 

$

576,948

 

Cost of revenues

191,079

 

 

213,117

 

 

387,605

 

 

412,393

 

GROSS PROFIT

78,528

 

 

88,251

 

 

152,397

 

 

164,555

 

Selling, general and administrative expenses

69,408

 

 

77,999

 

 

139,380

 

 

155,237

 

Special and restructuring charges (recoveries), net

4,992

 

 

2,000

 

 

(2,823

)

 

14,446

 

OPERATING INCOME (LOSS)

4,128

 

 

8,252

 

 

15,840

 

 

(5,128

)

Other expense (income):

 

 

 

 

 

 

 

Interest expense, net

12,856

 

 

13,755

 

 

26,035

 

 

25,556

 

Other expense (income), net

81

 

 

(3,759

)

 

(1,832

)

 

(5,620

)

TOTAL OTHER EXPENSE, NET

12,937

 

 

9,996

 

 

24,203

 

 

19,936

 

LOSS BEFORE INCOME TAXES

(8,809

)

 

(1,744

)

 

(8,363

)

 

(25,064

)

Provision for (benefit from) income taxes

9,711

 

 

(7,646

)

 

14,790

 

 

(13,525

)

NET (LOSS) INCOME

$

(18,520

)

 

$

5,902

 

 

$

(23,153

)

 

$

(11,539

)

(Loss) earnings per common share:

 

 

 

 

 

 

 

Basic

$

(0.93

)

 

$

0.30

 

 

$

(1.16

)

 

$

(0.58

)

Diluted

$

(0.93

)

 

$

0.30

 

 

$

(1.16

)

 

$

(0.58

)

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

19,906

 

 

19,836

 

 

19,888

 

 

19,821

 

Diluted

19,906

 

 

20,005

 

 

19,888

 

 

19,821

 

 

CIRCOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

 

Six Months Ended

OPERATING ACTIVITIES

June 30, 2019

 

July 1, 2018

Net loss

$

(23,153

)

 

$

(11,539

)

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

 

 

 

Depreciation

12,173

 

 

14,491

 

Amortization

24,355

 

 

24,611

 

Bad debt expense

75

 

 

903

 

Loss on write down of inventory

6,620

 

 

4,076

 

Amortization of inventory fair value step-up

 

 

6,600

 

Compensation expense for share-based plans

3,132

 

 

2,866

 

Amortization of debt issuance costs

1,997

 

 

2,008

 

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

(826

)

 

1,037

 

Gain on sale of business

(9,165

)

 

 

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

 

 

 

Trade accounts receivable

13,570

 

 

13,163

 

Inventories

(15,048

)

 

(14,824

)

Prepaid expenses and other assets

(5,363

)

 

(16,617

)

Accounts payable, accrued expenses and other liabilities

(18,406

)

 

(27,385

)

Net cash used in operating activities

(10,039

)

 

(610

)

INVESTING ACTIVITIES

 

 

 

Additions to property, plant and equipment

(7,542

)

 

(11,879

)

Proceeds from the sale of property, plant and equipment

858

 

 

175

 

Proceeds from the sale of business, net

82,203

 

 

 

Business acquisition, working capital consideration adjustment

 

 

6,300

 

Net cash provided by (used in) investing activities

75,519

 

 

(5,404

)

FINANCING ACTIVITIES

 

 

 

Proceeds from long-term debt

149,500

 

 

136,600

 

Payments of long-term debt

(208,300

)

 

(105,511

)

Proceeds from the exercise of stock options

106

 

 

440

 

Return of cash to Fluid Handling Seller

 

 

(61,201

)

Net cash used in financing activities

(58,694

)

 

(29,672

)

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

793

 

 

(5,785

)

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

7,579

 

 

(41,471

)

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

69,525

 

 

112,293

 

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

$

77,104

 

 

$

70,822

 

CIRCOR INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(UNAUDITED)

 

June 30, 2019

 

December 31, 2018

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

76,082

 

 

$

68,517

 

Trade accounts receivable, less allowance for doubtful accounts of $4,695 and $6,735 at June 30, 2019 and December 31, 2018, respectively

166,623

 

 

183,552

 

Inventories

226,953

 

 

217,378

 

Prepaid expenses and other current assets

99,012

 

 

90,659

 

Assets held for sale

4,520

 

 

87,940

 

Total Current Assets

573,190

 

 

648,046

 

PROPERTY, PLANT AND EQUIPMENT, NET

194,932

 

 

201,799

 

OTHER ASSETS:

 

 

 

Goodwill

461,771

 

 

459,205

 

Intangibles, net

410,957

 

 

441,302

 

Deferred income taxes

31,548

 

 

28,462

 

Other assets

40,299

 

 

12,798

 

TOTAL ASSETS

$

1,712,697

 

 

$

1,791,612

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

118,648

 

 

$

123,881

 

Accrued expenses and other current liabilities

107,445

 

 

107,312

 

Accrued compensation and benefits

30,314

 

 

33,878

 

Current portion of long-term debt

 

 

7,850

 

Liabilities held for sale

 

 

11,141

 

Total Current Liabilities

256,407

 

 

284,062

 

LONG-TERM DEBT

728,653

 

 

778,187

 

DEFERRED INCOME TAXES

38,232

 

 

33,932

 

PENSION LIABILITY, NET

149,204

 

 

150,623

 

OTHER NON-CURRENT LIABILITIES

45,302

 

 

15,815

 

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; 19,900,885

and 19,845,205 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

212

 

 

212

 

Additional paid-in capital

444,109

 

 

440,890

 

Retained earnings

210,065

 

 

232,102

 

Common treasury stock, at cost (1,372,488 shares at June 30, 2019 and December 31, 2018)

(74,472

)

 

(74,472

)

Accumulated other comprehensive loss, net of tax

(85,015

)

 

(69,739

)

Total Shareholders’ Equity

494,899

 

 

528,993

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,712,697

 

 

$

1,791,612

 

 

CIRCOR INTERNATIONAL, INC.

SUMMARY OF ORDERS AND BACKLOG

(in millions)

UNAUDITED

 

Three Months Ended

 

Six Months Ended

 

June 30, 2019

 

July 1, 2018

 

June 30, 2019

 

July 1, 2018

ORDERS (1)

 

 

 

 

 

 

 

Energy

$

62.2

 

 

$

113.2

 

 

$

130.0

 

 

$

242.9

 

Aerospace & Defense

93.4

 

 

59.4

 

 

181.5

 

 

119.2

 

Industrial

120.7

 

 

136.7

 

 

244.4

 

 

273.4

 

Total orders

$

276.3

 

 

$

309.3

 

 

$

555.9

 

 

$

635.5

 

 

 

 

 

 

 

 

 

BACKLOG (2)

June 30, 2019

 

July 1, 2018

 

 

 

 

Energy

$

116.2

 

 

$

217.7

 

 

 

 

 

Aerospace & Defense

235.0

 

 

152.1

 

 

 

 

 

Industrial

175.7

 

 

167.3

 

 

 

 

 

Total backlog

$

526.9

 

 

$

537.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Note 1: Orders do not include the foreign exchange impact due to the re-measurement of customer order backlog amounts denominated in foreign currencies. Q2 2018 orders include $22.8 million, related to businesses divested prior to June 30, 2019 (Reliability Services and Delden).

Note 2: Backlog includes unshipped customer orders for which revenue has not been recognized. Backlog at Q2 2018 includes $29.0 million related to businesses divested prior to June 30, 2019 (Reliability Services and Delden).

CIRCOR INTERNATIONAL, INC.

SEGMENT INFORMATION

(in thousands, except percentages)

UNAUDITED

 

 

 

 

 

 

 

 

 

 

2018

2019

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

TOTAL

ORDERS

 

 

 

 

 

 

 

 

Energy

$

129,762

 

$

113,171

 

$

110,987

 

$

97,990

 

$

451,910

 

$

67,770

 

$

62,239

 

$

130,009

 

Aerospace & Defense

59,793

 

59,441

 

81,533

 

76,702

 

277,469

 

88,107

 

93,405

 

181,512

 

Industrial

136,607

 

136,746

 

114,876

 

121,886

 

510,115

 

123,746

 

120,660

 

244,406

 

Total

$

326,162

 

$

309,358

 

$

307,396

 

$

296,578

 

$

1,239,494

 

$

279,623

 

$

276,304

 

$

555,927

 

 

 

 

 

 

 

 

 

 

NET REVENUES

 

 

 

 

 

 

 

 

Energy

$

99,972

 

$

112,804

 

$

121,023

 

$

117,433

 

$

451,232

 

$

98,417

 

$

85,591

 

$

184,008

 

Aerospace & Defense

58,477

 

57,500

 

57,757

 

63,283

 

237,017

 

61,240

 

64,694

 

125,934

 

Industrial

117,131

 

131,064

 

118,734

 

120,647

 

487,576

 

110,738

 

119,322

 

230,060

 

Total

$

275,580

 

$

301,368

 

$

297,514

 

$

301,363

 

$

1,175,825

 

$

270,395

 

$

269,607

 

$

540,002

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING INCOME

 

 

 

 

 

 

 

 

Energy

$

5,696

 

$

9,242

 

$

9,163

 

$

9,396

 

$

33,497

 

$

6,783

 

$

3,498

 

$

10,281

 

Aerospace & Defense

8,931

 

6,992

 

8,709

 

11,415

 

36,047

 

9,374

 

10,443

 

19,817

 

Industrial

12,948

 

15,037

 

14,609

 

14,746

 

57,340

 

10,786

 

16,138

 

26,924

 

Corporate expenses

(7,802

)

(6,448

)

(8,034

)

(8,015

)

(30,299

)

(6,703

)

(6,493

)

(13,196

)

CIRCOR Adjusted Operating Income

$

19,773

 

$

24,823

 

$

24,447

 

$

27,542

 

$

96,585

 

$

20,240

 

$

23,586

 

$

43,826

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING MARGIN %

 

 

 

 

 

 

 

 

Energy

5.7

%

8.2

%

7.6

%

8.0

%

7.4

%

6.9

%

4.1

%

5.6

%

Aerospace & Defense

15.3

%

12.2

%

15.1

%

18.0

%

15.2

%

15.3

%

16.1

%

15.7

%

Industrial

11.1

%

11.5

%

12.3

%

12.2

%

11.8

%

9.7

%

13.5

%

11.7

%

CIRCOR Adjusted Operating Margin

7.2

%

8.2

%

8.2

%

9.1

%

8.2

%

7.5

%

8.7

%

8.1

%

SEGMENT OPERATING MARGIN % EXCLUDING DIVESTITURES

 

 

 

 

 

 

 

Energy

6.7

%

7.5

%

6.0

%

7.8

%

7.0

%

7.1

%

4.1

%

5.7

%

Aerospace & Defense

15.3

%

12.2

%

15.1

%

18.0

%

15.2

%

15.3

%

16.1

%

15.7

%

Industrial

11.4

%

11.9

%

12.8

%

12.7

%

12.2

%

9.7

%

13.5

%

11.7

%

CIRCOR Adjusted Operating Margin Excluding Divestitures (1)

7.7

%

8.2

%

7.9

%

9.3

%

8.3

%

7.6

%

8.7

%

10.6

%

(1) Divestitures are Reliability Services (Energy) sold in January 2019 and Delden (Industrial) sold in October 2018. The table above does not reflect the removal of the Engineered Valves business sold in July 2019.

 

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

Total

 

 

 

 

 

 

 

 

 

ORDERS

 

 

 

 

 

 

 

 

Energy

$

16,891

$

18,389

$

19,145

$

15,451

$

69,875

4,104

$

$

4,104

Industrial

4,848

4,484

2,302

4,796

16,430

CIRCOR

$

21,738

$

22,873

$

21,446

$

20,247

$

86,305

4,104

$

$

4,104

 

 

 

 

 

 

 

 

 

NET REVENUES

 

 

 

 

 

 

 

 

Energy

$

14,731

$

17,419

$

16,579

$

16,885

$

65,613

3,106

$

$

3,106

Industrial

3,897

1,499

2,070

3,846

11,312

CIRCOR

$

18,628

$

18,918

$

18,649

$

20,731

$

76,925

3,106

$

$

3,106

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING INCOME

 

 

 

 

 

 

 

 

Energy

$

8

$

2,085

$

2,905

$

1,597

$

6,596

$

$

Industrial

79

(427)

(371)

(78)

(798)

CIRCOR

$

87

$

1,658

$

2,534

$

1,519

$

5,798

$

$

(1) Divested businesses include Reliability Services (Energy) sold in January 2019 and Delden (Industrial) sold in October 2018.

 

 

 

 

 

 

 

 

 

ENGINEERED VALVES

 

 

 

 

 

 

 

 

The table above does not include the results of the Engineered Valves business in the Energy segment which was sold in July 2019. Its results are:

 

 

 

 

 

 

 

 

 

 

2018

2019

 

1st QTR

2nd QTR

3rd QTR

4th QTR

Total

1st QTR

2nd QTR

Total

Orders

$

20,489

$

21,889

$

4,695

$

11,324

$

58,397

7,257

9,218

$

16,475

Net Revenues

9,600

8,674

17,491

14,633

50,398

14,331

8,304

22,635

Segment Operating Income

(1,512)

(3,314)

(1,996)

(1,767)

(8,589)

(1,569)

(2,456)

(4,025)

 

CIRCOR INTERNATIONAL, INC.

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

(in thousands, except percentages)

UNAUDITED

 

2018

2019

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

TOTAL

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

$

(145

)

$

(465

)

$

24,073

 

$

30,531

 

$

53,994

 

$

(22,378

)

$

12,339

 

$

(10,039

)

LESS:

 

 

 

 

 

 

 

 

Capital expenditures, net of sale proceeds

8,141

 

3,563

 

5,119

 

6,534

 

23,357

 

3,689

 

2,995

 

6,684

 

FREE CASH FLOW

$

(8,286

)

$

(4,028

)

$

18,954

 

$

23,997

 

$

30,637

 

$

(26,067

)

$

9,344

 

$

(16,723

)

 

 

 

 

 

 

 

 

 

GROSS DEBT

$

823,665

 

$

827,629

 

$

831,613

 

$

807,050

 

$

807,050

 

$

753,950

 

$

748,250

 

$

748,250

 

LESS: Cash & cash equivalents

123,305

 

69,030

 

71,334

 

68,517

 

68,517

 

73,619

 

76,082

 

76,082

 

GROSS DEBT, NET OF CASH

$

700,360

 

$

758,599

 

$

760,279

 

$

738,533

 

$

738,533

 

$

680,331

 

$

672,168

 

$

672,168

 

 

 

 

 

 

 

 

 

 

TOTAL SHAREHOLDERS' EQUITY

$

592,096

 

$

573,992

 

$

574,171

 

$

528,993

 

$

528,993

 

$

516,177

 

$

494,899

 

$

494,899

 

 

 

 

 

 

 

 

 

 

GROSS DEBT AS % OF EQUITY

139

%

144

%

145

%

153

%

153

%

146

%

151

%

151

%

GROSS DEBT, NET OF CASH AS % OF EQUITY

118

%

132

%

132

%

140

%

140

%

132

%

136

%

136

%

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

TOTAL

NET (LOSS) INCOME

$

 

(17,441

)

$

 

5,902

 

$

 

(6,841

)

$

 

(21,005

)

$

 

(39,385

)

 

$

 

 

(4,633

)

$

 

 

(18,520

)

$

 

 

(23,153

)

LESS:

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges

 

473

 

 

1,067

 

 

 

862

 

 

2,402

 

 

 

3,143

 

 

2,112

 

 

5,255

 

Amortization of inventory step-up

 

6,600

 

 

 

 

 

6,600

 

 

 

 

 

Restructuring charges, net

 

9,615

 

 

844

 

 

1,348

 

 

945

 

 

12,752

 

 

 

863

 

 

1,527

 

 

2,390

 

Acquisition amortization

 

11,797

 

 

11,767

 

 

11,733

 

 

12,013

 

 

47,310

 

 

 

12,078

 

 

11,247

 

 

23,325

 

Acquisition depreciation

 

1,837

 

 

1,735

 

 

1,742

 

 

1,735

 

 

7,049

 

 

 

1,122

 

 

1,107

 

 

2,229

 

Special charges (recoveries), net

 

2,831

 

 

1,156

 

 

1,408

 

 

5,692

 

 

11,087

 

 

 

(8,678

)

 

3,465

 

 

(5,213

)

Income tax impact

 

(7,687

)

 

(11,056

)

 

967

 

 

12,124

 

 

(5,652

)

 

 

3,751

 

 

8,164

 

 

11,915

 

ADJUSTED NET INCOME

$

 

8,025

 

$

 

11,415

 

$

 

10,357

 

$

 

12,366

 

$

 

42,163

 

 

$

 

 

7,645

 

$

 

 

9,102

 

$

 

 

16,748

 

 

 

 

 

 

 

 

 

 

 

EARNINGS (LOSS) PER COMMON SHARE (Diluted)

$

 

(0.88

)

$

 

0.30

 

$

 

(0.34

)

$

 

(1.05

)

$

 

(1.99

)

 

$

 

(0.23

)

$

 

(0.93

)

$

 

(1.16

)

LESS:

 

 

 

 

 

 

 

 

 

Restructuring related inventory charges

 

0.02

 

 

0.05

 

 

 

0.04

 

 

0.12

 

 

 

0.16

 

 

0.11

 

 

0.26

 

Amortization of inventory step-up

 

0.33

 

 

 

 

 

0.33

 

 

 

 

 

Restructuring charges, net

 

0.49

 

 

0.04

 

 

0.07

 

 

0.05

 

 

0.64

 

 

 

0.04

 

 

0.08

 

 

0.12

 

Acquisition amortization

 

0.60

 

 

0.59

 

 

0.59

 

 

0.60

 

 

2.37

 

 

 

0.60

 

 

0.57

 

 

1.17

 

Acquisition depreciation

 

0.09

 

 

0.09

 

 

0.09

 

 

0.09

 

 

0.35

 

 

 

0.06

 

 

0.06

 

 

0.11

 

Special charges (recoveries), net

 

0.14

 

 

0.06

 

 

0.07

 

 

0.29

 

 

0.55

 

 

 

(0.43

)

 

0.17

 

 

(0.26

)

Income tax impact

 

(0.39

)

 

(0.55

)

 

0.05

 

 

0.61

 

 

(0.28

)

 

 

0.19

 

 

0.39

 

 

0.60

 

ADJUSTED EARNINGS PER SHARE (Diluted)

$

 

0.40

 

$

 

0.57

 

$

 

0.52

 

$

 

0.62

 

$

 

2.11

 

 

$

 

 

0.38

 

$

 

 

0.45

 

$

 

 

0.84

 

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

TOTAL

NET (LOSS) INCOME

$

(17,441

)

$

5,902

 

$

(6,841

)

$

(21,005

)

$

(39,385

)

$

(4,633

)

$

(18,520

)

$

(23,153

)

LESS:

 

 

 

 

 

 

 

 

Interest expense, net

(11,801

)

(13,755

)

(14,100

)

(13,257

)

(52,913

)

(13,179

)

(12,856

)

(26,035

)

Depreciation

(7,334

)

(7,157

)

(7,065

)

(7,198

)

(28,754

)

(5,944

)

(6,229

)

(12,173

)

Amortization

(12,329

)

(12,282

)

(12,234

)

(12,410

)

(49,255

)

(12,836

)

(11,519

)

(24,355

)

Benefit from (provision for) income taxes

5,879

 

7,646

 

(2,537

)

(14,278

)

(3,290

)

(5,079

)

(9,711

)

(14,790

)

EBITDA

$

8,144

 

$

31,450

 

$

29,095

 

$

26,138

 

$

94,827

 

$

32,405

 

$

21,795

 

$

54,200

 

LESS:

 

 

 

 

 

 

 

 

Restructuring related inventory charges

(473

)

(1,067

)

 

(862

)

(2,402

)

(3,143

)

(2,112

)

(5,255

)

Amortization of inventory step-up

(6,600

)

 

 

 

(6,600

)

 

 

 

Restructuring charges, net

(9,615

)

(844

)

(1,348

)

(945

)

(12,752

)

(863

)

(1,527

)

(2,390

)

Special (charges) recoveries, net

(2,831

)

(1,156

)

(1,408

)

(5,692

)

(11,087

)

8,678

 

(3,465

)

5,213

 

ADJUSTED EBITDA

$

27,663

 

$

34,517

 

$

31,851

 

$

33,637

 

$

127,668

 

$

27,733

 

$

28,899

 

$

56,632

 

CIRCOR INTERNATIONAL, INC.

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

(in thousands, except percentages)

UNAUDITED

 

2018

2019

 

1ST QTR

2ND QTR

3RD QTR

4TH QTR

TOTAL

1ST QTR

2ND QTR

TOTAL

GAAP OPERATING INCOME (LOSS)

$

(13,380

)

$

8,252

 

$

8,216

 

$

6,296

 

$

9,384

 

$

11,712

 

$

4,128

 

$

15,840

 

LESS:

 

 

 

 

 

 

 

 

Restructuring related inventory charges

473

 

1,067

 

 

862

 

2,402

 

3,143

 

2,112

 

5,255

 

Amortization of inventory step-up

6,600

 

 

 

 

6,600

 

 

 

 

Restructuring charges, net

9,615

 

844

 

1,348

 

945

 

12,752

 

863

 

1,527

 

2,390

 

Acquisition amortization

11,797

 

11,767

 

11,733

 

12,013

 

47,310

 

12,078

 

11,247

 

23,325

 

Acquisition depreciation

1,837

 

1,735

 

1,742

 

1,735

 

7,049

 

1,122

 

1,107

 

2,229

 

Special charges (recoveries), net

2,831

 

1,156

 

1,408

 

5,692

 

11,087

 

(8,678

)

3,465

 

(5,213

)

ADJUSTED OPERATING INCOME

$

19,773

 

$

24,821

 

$

24,447

 

$

27,543

 

$

96,584

 

$

20,240

 

$

23,586

 

$

43,826

 

 

 

 

 

 

 

 

 

 

GAAP OPERATING MARGIN

(4.9

)%

2.7

%

2.8

%

2.1

%

0.8

%

4.3

%

1.5

%

2.9

%

LESS:

 

 

 

 

 

 

 

 

Restructuring related inventory charges

0.2

%

0.4

%

%

0.3

%

0.2

%

1.2

%

0.8

%

1.0

%

Amortization of inventory step-up

2.4

%

%

%

%

0.6

%

%

%

%

Restructuring charges, net

3.5

%

0.3

%

0.5

%

0.3

%

1.1

%

0.3

%

0.6

%

0.4

%

Acquisition amortization

4.3

%

3.9

%

3.9

%

4.0

%

4.0

%

4.5

%

4.2

%

4.3

%

Acquisition depreciation

0.7

%

0.6

%

0.6

%

0.6

%

0.6

%

0.4

%

0.4

%

0.4

%

Special charges (recoveries), net

1.0

%

0.4

%

0.5

%

1.9

%

0.9

%

(3.2

)%

1.3

%

(1.0

)%

ADJUSTED OPERATING MARGIN

7.2

%

8.2

%

8.2

%

9.1

%

8.2

%

7.5

%

8.7

%

8.0

%

Impact of Divestitures (1)

0.5

%

%

(0.3

)%

0.2

%

0.1

%

0.1

%

%

0.1

%

ADJUSTED OPERATING MARGIN EXCLUDING DIVESTITURES (1)

7.7

%

8.2

%

7.9

%

9.3

%

8.3

%

7.6

%

8.7

%

8.1

%

(1) Divestitures are Reliability Services (Energy) sold in January 2019 and Delden (Industrial) sold in October 2018. The above table does not reflect the removal of Engineered Valves business sold in July 2019.

CIRCOR INTERNATIONAL, INC.

Q2 2019 Organic Growth Calculations

(in millions, except percentages)

UNAUDITED

 

 

Industrial

 

Energy

 

Aerospace & Defense

 

CIRCOR

ORDERS

$

 

%

 

$

 

%

 

$

 

%

 

$

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 2018

$

136.7

 

 

 

 

$

113.2

 

 

 

 

$

59.4

 

 

 

 

$

309.4

 

 

 

Divestitures (1)

(4.5

)

 

 

 

(18.4

)

 

 

 

 

 

 

 

(22.9

)

 

 

Q1 2018 Excluding Divestitures

132.3

 

 

 

 

94.8

 

 

 

 

59.4

 

 

 

 

286.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Organic

(6.9

)

 

-5%

 

(31.4

)

 

-33%

 

35.0

 

 

59

%

 

(3.3

)

 

-1%

FX

(4.7

)

 

-4%

 

(1.2

)

 

-1%

 

(1.0

)

 

-2%

 

(6.9

)

 

-2%

Total Change Excluding Divestitures

(11.6

)

 

-9%

 

(32.5

)

 

-34%

 

34.0

 

 

57

%

 

(10.2

)

 

-4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 2019

$

120.7

 

 

 

 

$

62.2

 

 

 

 

$

93.4

 

 

 

 

$

276.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial

 

Energy

 

Aerospace & Defense

 

CIRCOR

NET REVENUE

$

 

%

 

$

 

%

 

$

 

%

 

$

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 2018

$

131.1

 

 

 

 

$

112.8

 

 

 

 

$

57.5

 

 

 

 

$

301.4

 

 

 

Divestitures (1)

(1.5

)

 

 

 

(17.4

)

 

 

 

 

 

 

 

(18.9

)

 

 

2018 Excluding Divestitures

129.6

 

 

 

 

95.4

 

 

 

 

57.5

 

 

 

 

282.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Organic

(5.4

)

 

-4%

 

(8.7

)

 

-9%

 

8.2

 

 

14

%

 

(6.0

)

 

-2%

FX

(4.8

)

 

-4%

 

(1.1

)

 

-1%

 

(1.0

)

 

-2%

 

(6.9

)

 

-2%

Total Change Excluding Divestitures

(10.2

)

 

-8%

 

(9.8

)

 

-10%

 

7.2

 

 

12

%

 

(12.8

)

 

-4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2 2019

$

119.3

 

 

 

 

$

85.6

 

 

 

 

$

64.7

 

 

 

 

$

269.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Divestitures include businesses sold prior to the end of Q2 2019 which are Reliability Services (Energy) and Delden (Industrial). Engineered Valves, which was sold in July 2019 is not reflected above as a divestiture.

Numbers may not add due to rounding.

 

Contacts

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

Contacts

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