CIRCOR International : Reports Third-Quarter 2020 Financial Results

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 [phone] or [phone]. 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		%

 

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