INDUSTRIAL
AEROSPACE & DEFENSE
Investor Update
Scott Buckhout
January 13, 2021
Safe Harbor
This presentation 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," "should," "expect," "plan," "intend," "believe," "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 the expected and potential direct or indirect impacts of the COVID-19 pandemic on our business and execution of our strategic plan, 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; 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; restructuring or simplification strategies; fluctuations in interest rates; 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, Brexit, natural disasters, terrorist attacks, and other similar matters. BEFORE MAKING ANY INVESTMENT DECISIONS REGARDING OUR COMPANY, WE STRONGLY ADVISE YOU TO READ FURTHER ABOUT THESE AND OTHER RISK FACTORS SET FORTH IN THE "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, 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.
See page 20 for information on the use of non-GAAP financial measures.
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Leading Provider of Mission Critical Flow Control Products Globally
CIRCOR COMPANY PROFILE
$869M | ~3,500 | Revenue by End Markets | |
• Products for mission | |||
2019 | |||
critical and severe | 2019 REVENUE | EMPLOYEES | |
service applications |
- Leader in niche segments with benefits of scale
- Global and diverse end markets with longstanding customer base
- Proven operator with clear roadmap for value creation
$112M | ~13% | Defense | |
Aerospace & | |||
2019 ADJUSTED | 2019 ADJUSTED | 27% | |
Downstream | |||
EBITDA ($) | EBITDA (%) | O&G | Industrial |
% | 46% | ||
Select Brands | Aftermarket | ||
27% |
Revenue by Geography
2019
ROW 16%
Pumps | Valves | Actuation |
North
America
46%
EMEA
38%
Three-Screw | Centrifugal | Bottom Unheading | Electromechanical |
Device | Actuation |
* 2019 Proforma Financials Reflecting Continuing Operations
2
CIRCOR Today
A Leading Supplier Of Mission Critical Flow Control Applications
- Differentiated technologies with customer specific solutions
- Superior technology and custom solutions that serve mission critical markets and sustain a competitive advantage
- Exceptional aftermarket service and support
- Critical to win and retain customers in mission critical markets
- Installed base provides high-margin recurring revenue
- Presence in major markets for scale and growth
- Provides scale required for higher returns while serving niche market segments
- Leverages investments in engineering, manufacturing, supply chain, etc
3
CIRCOR End Market Diversification
CIRCOR 2019 Revenue by End Market | Recent Highlights |
Aftermarket
27%
Aerospace & Defense
27%
Industrial
46%
Aerospace & Defense (5%)
Industrial (22%)
Commercial Aerospace (8%)
Defense (14%)
Other End Markets (5%)
Downstream O&G (10%)
Machinery Manufacturing
Commercial Marine
Chemical Processing
Midstream O&G
Power
Building & Construction
Wastewater
Other End Markets
• Completed exit from Upstream Oil & Gas with divestiture of Distributed Valves
• Large global installed base driving higher
margin Aftermarket orders, mitigating broader | |
economic decline | |
• Key program wins and existing platform growth | |
in Defense driving strong performance | |
OEM | • Strength in Defense offsetting pressure in |
73% | |
Commercial Aerospace due to COVID-19 | |
• Diversified Industrial portfolio with no end | |
market more than 6% of revenue |
Note: Revenue excludes divested businesses.
4 | Numbers may not add due to rounding. |
CIRCOR 2020 Summary
Strong Year Despite Unprecedented Macro Challenges
Resilient business portfolio continues to deliver
- End market and product diversification mitigating impact of weaker economic environment
- Regional diversity in Industrial end markets serving as a natural hedge
- Robustness in Defense offsetting pressure from Commercial Aerospace
- Mission critical product portfolio ensuring price increases despite market downturn
Strong Operational Execution
- Continued focus on productivity and cost resulting in favorable decrementals
- $45 million of structural and temporary cost actions for 2020
- Aerospace and Defense strong margin expansion driven by productivity and price
- CIRCOR Operating System delivering improved operating performance across most metrics
Positioning CIRCOR to take advantage of market recovery
- 49 new product launches in 2020
- Close collaboration with suppliers and customers to ensure available capacity as demand recovers
- Continued focus on deleveraging and liquidity
5
Strategic Priorities
People
Growth
Margin Expansion
Digital
Transformation
M&A
- Attract the best people
- Develop critical talent
- Build an inclusive, growth-oriented culture
- New products and programs
- Regional expansion
- Aftermarket
- Strategic pricing
- Low-costfootprint - India, China and Morocco
- G&A optimization
- CIRCOR Operating System
- Enhance our products
- Improve the customer experience
- Business intelligence and automation
- Bolt-onsin Industrial and A&D
- Logical adjacencies
6
People
Talent Attraction | Talent Development | Culture |
Hire best talent | Develop and retain critical talent | Build inclusive, growth-oriented |
culture
• | Strong employee value proposition | • | Targeted development actions | • Shared Purpose, Mission and Values | |
• | Competitive Total Rewards | • | Leadership development programs | • | Diversity & Inclusion |
• | Strong employer brand | • | Rigorous succession planning | • | Site based engagement plans |
7
Growth
New Products and Programs Regional Expansion
• A&D executing on a solid pipeline of | • | Strong focus on regional |
new programs | expansion in Industrial - China, | |
India and USA | ||
• Industrial driving digitalization of | ||
products and suite of automation | • | Opportunity to grow commercial |
solutions | marine in Asia | |
• | Industrial downstream | |
leveraging India low-cost | ||
structure to penetrate new | ||
markets | ||
8 |
Aftermarket
- Dedicated organizations to drive aftermarket growth inside A&D and Industrial
- Proactively managing large installed base in Industrial to provide enhanced after-sales support
- Forming service partnerships at local level in more remote regions
Margin Expansion
Pricing
- Aftermarket Focus
- Value-based
- Surgical
- Prices reflect product positioning and value
Optimize & Transition
Manufacturing
- Outsource non-core
- Transition to low cost
- Optimize G&A
- Lower costs, improved controls
- Promotes centers of excellence
- Local for local
9
Drive COS
- Continuous improvement
- Engage workforce
- Clear goals, accountability, and recognition
- Safety, quality, and delivery
- Reduced lead times
- Better working capital
Digital Transformation
Product Enhancement
IIoT
Smart Products
- Digital tagging for select products
- Smart connected devices
- Condition Monitoring
Ease of Doing Business | Operational Capabilities |
Simplify Buying Process | Business Intelligence and |
Automation |
• | Configure, Price, Quote customer | • | Roll-out business intelligence |
interface | platform across CIRCOR | ||
• | Enhance and expand CRM | • | Virtual prototyping tools for |
engineering |
- Improve insights from installed base
• Enhanced cyber security
10
Financial Outlook
Organic Growth | Margin Expansion | ||
• +100 to 150 bps higher than end market | • Near term (18-24 months) AOI% outlook | ||
growth driven by strategic initiatives | • | Industrial: low teens | |
• | A&D: mid 20s |
- Continued execution on price initiatives
• CIRCOR Operating System delivering improved operating performance
Free Cash Flow | Debt & Leverage | ||
• FCF conversion of 90-95% of adjusted | • | Operating cash flow used to pay down | |
net income | debt | ||
• Intense focus on working capital | • | Targeting long-term leverage ratio of 2 to | |
2.5x net debt to EBITDA |
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Disclaimer
Circor International Inc. published this content on 13 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 January 2021 15:11:04 UTC