CIRCOR International, Inc. (NYSE: CIR), a leading provider of
flow control solutions and other highly engineered products for the
Industrial, Aerospace & Defense, and Energy markets, today
announced adjusted and preliminary GAAP financial results for the
third quarter ended September 29, 2019.
The results presented in this press release are considered
preliminary, as the Company has not completed its review procedures
related to reporting discontinued operations and related
impairments and associated tax effects. As the Company completes
its review, material adjustments may arise between the date of this
press release and the date the Company files with the Securities
and Exchange Commission its Quarterly Report on Form 10-Q for the
quarter ended September 29, 2019.
Third-Quarter 2019 Highlights
- Results including Distributed Valves (consistent with guidance)
- Revenue of $252 million
- Adjusted Earnings per Share of $0.48
- Results from continuing operations excluding divestitures
- Revenue of $237 million
- Preliminary GAAP Loss per Share of ($1.05)
- Adjusted Earnings per Share of $0.63
- Preliminary GAAP operating margin of (1.0)%
- Adjusted Operating Margin of 11.0% (excluding
divestitures)
- Completed divestiture of non-core Engineered Valves
- Completed divestiture of non-core Spence and Nicholson Product
lines for ~$85M
- Announced intention to exit non-core Distributed Valves now
classified as discontinued operations
- Debt Paydown of $89 million in the quarter; $148 million
YTD
- On track to deliver 2019 and 2020 targets communicated in
18-month plan
“We had a solid third-quarter 2019 with continuing operations
delivering 7% organic revenue growth and 11.0% adjusted operating
margin, up 160 basis points from a year ago,” said Scott Buckhout,
President and Chief Executive Officer. “Consistent with our stated
strategy to exit commodity businesses, simplify the Company, and
accelerate the deleveraging process, we completed divestures of two
non-core businesses and reduced our debt by $89 million during the
quarter. In October, we announced our intention to sell our
Distributed Valves business, in-line with our strategic shift away
from upstream oil and gas and focus on more attractive end markets
with enhanced growth and earnings potential.
“Our third quarter performance and outlook for the remainder of
the year are in-line with the targets communicated in our 18-month
plan. We remain committed to driving long-term growth, expanding
margins, generating strong free cash flow, and deleveraging the
Company as we drive value for shareholders,” concluded Mr.
Buckhout.
Fourth-Quarter 2019 Guidance
For the fourth quarter of 2019, CIRCOR expects revenue in the
range of $238 million to $248 million, and GAAP earnings per share
from continuing operations in the range of $0.03 to $0.19, which
reflects acquisition-related amortization expense of $(0.49), and
other special and restructuring charges of $(0.24) to $(0.20).
Excluding the impact of amortization and special and restructuring
(charges) gains, adjusted EPS is expected to be in the range of
$0.78 to $0.88 per share. The revenue and adjusted EPS exclude the
results from the Company’s Distributed Valves business, which will
continue to be reported as discontinued operations until a sale is
completed. Presentation slides that provide supporting information
to this guidance and third-quarter results are posted on the
“Investors” section of the Company’s website,
http://investors.circor.com, and will be discussed during the
conference call at 9:00 a.m. ET today, November 6, 2019.
Selected Preliminary Consolidated Results (unaudited)
($ millions except EPS)
Q3 2019
Q3 2018
Change
Revenue
$
237.1
$
247.2
(4)%
Revenue excluding divested
businesses1
$
234.1
$
223.5
5%
GAAP Operating (Loss) Income
$
(2.3)
$
8.5
N/M
Adjusted Operating Income2
$
25.6
$
25.0
2%
GAAP Operating Margin
(1.0)%
3.5%
(450) bps
Adjusted Operating Margin2
10.8%
10.1%
70 bps
Adjusted Operating Margin excluding
divestitures2
11.0%
9.4%
160 bps
GAAP (Loss) Earnings Per Share
(Diluted)
$
(5.30)
$
(0.34)
N/M
Adjusted Earnings Per Share
(Diluted)2
$
0.63
$
0.53
11%
Operating Cash Flow
$
8.1
$
24.1
N/M
Free Cash Flow3
$
9.0
$
19.0
N/M
Orders
$
223.0
$
283.6
(21)%
Orders excluding divested
businesses1
$
218.2
$
257.3
(15)%
Segment Results
($ millions)
Q3 2019
Q3 2018
Change
Energy
Revenue
$
55.8
$
70.7
(21)%
Revenue excluding divested
business1
$
55.8
$
54.1
3%
Segment Operating Income2
$
5.3
$
9.5
(44)%
Segment Operating Margin2
9.4%
13.4%
(400) bps
Orders
$
53.3
$
87.1
(39)%
Orders excluding divested
business1
$
53.3
$
68.0
(22)%
Aerospace & Defense
Revenue
$
67.6
$
57.8
17%
Segment Operating Income2
$
13.5
$
8.7
55%
Segment Operating Margin2
20.0%
15.1%
490 bps
Orders
$
64.0
$
81.5
(21)%
Industrial
Revenue
$
113.6
$
118.7
(4)%
Revenue excluding divested
business1
$
110.6
$
111.6
(1)%
Segment Operating Income2
$
14.0
$
14.6
(4)%
Segment Operating Margin2
12.3%
12.3%
0 bps
Orders
$
105.7
$
114.9
(8)%
Orders excluding divested
business1
$
100.9
$
107.8
(6)%
- 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), Spence/Nicholson
(Industrial), and Delden (Industrial), which were sold before
September 29, 2019.
- Adjusted Consolidated and Segment Results for Q3 2019 exclude a
loss from discontinued operations of $84.7 million and a net gain
from non-cash acquisition-related intangible amortization, special
and restructuring charges totaling $18.8 million ($13.9 million,
net of tax). These charges include: (i) $12.3 million charge for
non-cash acquisition-related intangible amortization and
depreciation expense; (ii) $4.0 million of professional fees
associated with an unsolicited tender offer to acquire all
outstanding shares of the Company’s common stock; (iii) $6.7
million for restructuring-related programs across Industrial,
Energy and Corporate; (iv) $4.6 million net loss associated with
the sale of businesses; and (v) $0.3 million of other special and
restructuring charges. Adjusted Consolidated and Segment Results
for Q3 2018 exclude a loss from discontinued operations of $2.9
million and non-cash acquisition-related intangible amortization,
special and restructuring charges totaling $16.5 million ($14.7
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 and (ii) $3.0 million of other special and restructuring
charges.
- 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 6, 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 and organic growth, (and such
measures further excluding divested businesses) are non-GAAP
financial measures. These non-GAAP financial measures are used by
management in our financial and operating decision making because
we believe they reflect our ongoing business and facilitate
period-to-period comparisons. We believe these non-GAAP financial
measures provide useful information to investors and others in
understanding and evaluating the Company’s current operating
performance and future prospects in the same manner as management
does, if they so choose. These non-GAAP financial measures also
allow investors and others to compare the Company’s current
financial results with the Company’s past financial results in a
consistent manner.
For example:
- We exclude costs and tax effects associated with restructuring
activities, such as reducing overhead and consolidating facilities.
We believe that the costs related to these restructuring activities
are not indicative of our normal operating costs.
- We exclude certain acquisition-related costs, including
significant transaction costs and amortization of inventory and
fixed-asset step-ups and the related tax effects. We exclude these
costs because we do not believe they are indicative of our normal
operating costs.
- We exclude the expense and tax effects associated with the
non-cash amortization of acquisition-related intangible assets
because a significant portion of the purchase price for
acquisitions may be allocated to intangible assets that have lives
up to 25 years. Exclusion of the non-cash amortization expense
allows comparisons of operating results that are consistent over
time for both our newly acquired and long-held businesses and with
both acquisitive and non-acquisitive peer companies.
- We also exclude certain gains/losses and related tax effects,
which are either isolated or cannot be expected to occur again with
any predictability, and that we believe are not indicative of our
normal operating gains and losses. For example, we exclude
gains/losses from items such as the sale of a business, significant
litigation-related matters and lump-sum pension plan
settlements.
- We exclude the results of discontinued operations.
- Due to the significance of recently sold businesses and to
provide a comparison of changes in our orders and revenue, we also
discuss these changes on an “organic” basis. Organic is calculated
assuming the divestitures completed prior to September 29, 2019
were completed on January 1, 2018 and excluding the impact of
changes in foreign currency exchange rates.
CIRCOR’s management uses these non-GAAP measures, in addition to
GAAP financial measures, as the basis for measuring the Company’s
operating performance and comparing such performance to that of
prior periods and to the performance of our competitors. We use
such measures when publicly providing our business outlook,
assessing future earnings potential, evaluating potential
acquisitions and dispositions and in our financial and operating
decision-making process, including for compensation purposes.
Investors should recognize that these non-GAAP measures might
not be comparable to similarly titled measures of other companies.
These measures should be considered in addition and not as a
substitute for or superior to, any measure of performance, cash
flow or liquidity prepared in accordance with accounting principles
generally accepted in the United States. A reconciliation of the
non-GAAP financial measures to the most directly comparable GAAP
measures is included in this news release.
Safe Harbor Statement
This press release contains forward-looking statements within
the meaning of Section 27 A of the Securities Act of 1933, as
amended, and Section 21 E of the Securities Exchange Act of 1934,
as amended. Reliance should not be placed on forward-looking
statements because they involve unknown risks, uncertainties and
other factors, which are, in some cases, beyond the control of
CIRCOR. Any statements in this press release that are not
statements of historical fact are forward-looking statements,
including, but not limited to, those relating to CIRCOR's
fourth-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 other 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. For more
information, visit the Company’s investor relations website at
http://investors.circor.com.
CIRCOR INTERNATIONAL, INC.
Preliminary Condensed Consolidated Statement of Operations (in
millions, except per share data) (UNAUDITED)
Three Months Ended
September 29, 2019
September 30, 2018
Net revenues
$
237.1
$
247.2
Cost of revenues
162.6
167.1
GROSS PROFIT
74.5
80.1
Selling, general and administrative
expenses
60.0
68.5
Special and restructuring charges, net
16.7
3.0
OPERATING (LOSS) INCOME
(2.3
)
8.5
Other expense (income):
Interest expense, net
11.8
14.1
Other income, net
(0.8
)
(1.6
)
LOSS FROM CONTINUING OPEARTIONS BEFORE
INCOME TAXES
(13.3
)
(4.0
)
Provision for income taxes
7.5
—
Loss from continuing operations, net of
tax
(20.8
)
(4.0
)
Loss from discontinued operations, net of
tax
(84.7
)
(2.9
)
NET LOSS
$
(105.5
)
$
(6.8
)
Basic loss per common share:
Basic loss from continuing operations
$
(1.05
)
$
(0.20
)
Basic loss from discontinuing
operations
$
(4.25
)
$
(0.14
)
Net Loss
$
(5.30
)
$
(0.34
)
Diluted loss per common share:
Diluted loss from continuing
operations
$
(1.05
)
$
(0.20
)
Diluted loss from discontinuing
operations
$
(4.25
)
$
(0.14
)
Net Loss
$
(5.30
)
$
(0.34
)
Weighted average number of common shares
outstanding:
Basic
19.9
19.8
Diluted
19.9
19.8
Numbers may not add due to rounding.
The results presented in this press
release are considered preliminary, as the Company has not
completed its review procedures related to reporting discontinued
operations and related impairments and associated tax effects. As
the Company completes its review, material adjustments may arise
between the date of this press release and the date the Company
files with the SEC its Quarterly Report on Form 10-Q for the
quarter ended September 29, 2019.
CIRCOR INTERNATIONAL, INC.
Segment Information (in millions, except percentages)
UNAUDITED
2018
2019
As Reported
1ST QTR
2ND QTR
3RD QTR
4TH QTR
TOTAL
1ST QTR
2ND QTR
3RD QTR
TOTAL
ORDERS
Energy
$
85.3
$
66.8
$
87.1
$
72.3
$
311.6
$
48.1
$
44.0
$
53.3
$
145.3
Aerospace & Defense
59.8
59.4
81.5
76.7
277.5
88.1
93.4
64.0
245.5
Industrial
136.6
136.7
114.9
121.9
510.1
123.7
120.7
105.7
350.1
Total
$
281.7
$
263.0
$
283.6
$
270.9
$
1,099.2
$
259.9
$
258.0
$
223.0
$
740.9
NET REVENUES
Energy
$
64.3
$
71.1
$
70.7
$
82.8
$
288.9
$
66.9
$
61.8
$
55.8
$
184.5
Aerospace & Defense
58.5
57.5
57.8
63.3
237.0
61.2
64.7
67.6
193.6
Industrial
117.1
131.1
118.7
120.6
487.6
110.7
119.3
113.6
343.7
Total
$
239.9
$
259.7
$
247.2
$
266.7
$
1,013.5
$
238.9
$
245.8
$
237.1
$
721.7
2018
2019
DIVESTED BUSINESSES (a)
1ST QTR
2ND QTR
3RD QTR
4TH QTR
Total
1ST QTR
2ND QTR
3RD QTR
Total
ORDERS
Energy
$
16.9
$
18.4
$
19.1
$
15.5
$
69.9
$
4.1
$
—
$
—
$
4.1
Industrial
$
9.7
$
9.8
$
7.1
$
11.4
$
38.0
$
4.1
$
5.3
$
4.8
$
14.2
NET REVENUES
Energy
$
14.7
$
17.4
$
16.6
$
16.9
$
65.6
$
3.1
$
—
$
—
$
3.1
Industrial
$
8.8
$
6.3
$
7.1
$
9.0
$
31.3
$
5.4
$
5.2
$
2.9
$
13.5
OTHER INFORMATION
Q3 2019
Q3 2018
Q3 2019
Q4 2018
BACKLOG (b)
Debt & Cash
Energy
$
59.3
$
121.6
Gross Debt
$
659.1
$
807.1
Aerospace & Defense
206.9
150.6
Cash & Equivalents
69.2
68.5
Industrial
159.1
178.0
Net Debt
$
589.9
$
738.5
Total
$
425.3
$
450.2
Numbers may not add due to rounding.
(a) Divested businesses include
Reliability Services (Energy), Spence / Nicholson (Industrial) and
Delden (Industrial) which were sold before September 29, 2019.
Engineered Valves and Distributed Valves are discontinued
operations and not reflected in the As Reported figures in
accordance with US GAAP.
(b) Backlog at Q3 2018 includes $21.6
million and $15.0 million for Energy and Industrial, respectively
related to divested businesses. A&D 2018 backlog has been
adjusted to conform to current period reporting methodology.
CIRCOR INTERNATIONAL, INC.
Segment Information (in millions) UNAUDITED
Three Months Ended
September 29, 2019
September 30, 2018
ORDERS
Energy
$
53.3
$
87.1
Aerospace & Defense
64.0
81.5
Industrial
105.7
114.9
Total orders
$
223.0
$
283.6
NET REVENUES
September 29, 2019
September 30, 2018
Energy
$
55.8
$
70.7
Aerospace & Defense
67.6
57.8
Industrial
113.6
118.7
Total
$
237.1
$
247.2
SEGMENT OPERATING INCOME
September 29, 2019
September 30, 2018
Energy
$
5.3
$
9.5
Aerospace & Defense
13.5
8.7
Industrial
14.0
14.6
Corporate expenses
(7.1
)
(7.8
)
CIRCOR Adjusted Operating Income
$
25.6
$
25.0
SEGMENT OPERATING MARGIN %
September 29, 2019
September 30, 2018
Energy
9.4
%
13.4
%
Aerospace & Defense
20.0
%
15.1
%
Industrial
12.3
%
12.3
%
CIRCOR Adjusted Operating Margin
10.8
%
10.1
%
SEGMENT OPERATING MARGIN %
EXCLUDING DIVESTITURES (a)
September 29, 2019
September 30, 2018
Energy
9.4
%
12.2
%
Aerospace & Defense
20.0
%
15.1
%
Industrial
12.6
%
12.0
%
CIRCOR
11.0
%
9.4
%
Numbers may not add due to rounding.
(a) Divested businesses include
Reliability Services (Energy), Spence / Nicholson (Industrial) and
Delden (Industrial) which were sold before September 29, 2019.
Engineered Valves and Distributed Valves are discontinued
operations and not reflected in the As Reported figures in
accordance with US GAAP.
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED
GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS (in millions, except
per share data) UNAUDITED
2019
2018
3RD QTR
3RD QTR
NET (LOSS) INCOME
$
(105.5
)
$
(6.8
)
LESS:
Restructuring related inventory
charges
(1.1
)
—
Amortization of inventory step-up
—
—
Restructuring charges, net
5.0
1.1
Acquisition amortization
11.2
11.7
Acquisition depreciation
1.1
1.7
Special charges, net
11.7
1.9
Income tax impact
6.8
(1.9
)
Net Income from discontinued
operations
84.7
2.9
ADJUSTED NET INCOME
$
13.9
$
10.6
EARNINGS (LOSS) PER COMMON SHARE
(Diluted)
$
(5.30
)
$
(0.34
)
LESS:
Restructuring related inventory
charges
(0.06
)
—
Amortization of inventory step-up
—
—
Restructuring charges, net
0.25
0.05
Acquisition amortization
0.56
0.59
Acquisition depreciation
0.05
0.09
Special charges, net
0.58
0.10
Income tax impact
0.29
(0.09
)
Earnings Per Share from discontinued
Operations
4.25
0.14
ADJUSTED EARNINGS PER SHARE
(Diluted)
$
0.63
$
0.54
Numbers may not add due to rounding.
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED
GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS CONTINUED (in
millions, except per share data) UNAUDITED
2019
2018
3RD QTR
3RD QTR
NET (LOSS) INCOME
$
(105.5
)
$
(6.8
)
LESS:
Interest Expense, net
(11.8
)
(14.1
)
Depreciation & Amortization
(17.2
)
(18.6
)
Benefit from (provision for) income
taxes
(7.5
)
—
Loss From Discontinued
Operations
(84.7
)
(2.9
)
EBITDA
15.7
28.7
LESS:
Restructuring charges, net
(5.0
)
(1.1
)
Special charges, net
(10.5
)
(1.9
)
ADJUSTED EBITDA
$
31.2
$
31.7
Numbers may not add due to rounding.
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED
GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS CONTINUED (in
millions, except percentages) UNAUDITED
2019
2018
3RD QTR
3RD QTR
GAAP OPERATING INCOME (LOSS)
$
(2.3
)
$
8.5
LESS:
Restructuring related inventory
charges
(1.1
)
—
Amortization of inventory step-up
—
—
Restructuring charges, net
5.0
1.1
Acquisition amortization
11.2
11.7
Acquisition depreciation
1.1
1.7
Special charges, net
11.7
1.9
ADJUSTED OPERATING INCOME
$
25.6
$
25.0
GAAP OPERATING MARGIN
(1.0
)%
3.5
%
LESS:
Restructuring related inventory
charges
(0.5
)%
—
%
Amortization of inventory step-up
—
%
—
%
Restructuring charges, net
2.1
%
0.4
%
Acquisition amortization
4.7
%
4.7
%
Acquisition depreciation
0.5
%
0.7
%
Special charges, net
4.9
%
0.8
%
ADJUSTED OPERATING MARGIN
10.8
%
10.1
%
Impact of Divestitures (a)
0.2
%
(0.8
)%
ADJUSTED OPERATING MARGIN EXCLUDING
DIVESTITURES
11.0
%
9.4
%
Numbers may not add due to rounding.
(a) Divested businesses include
Reliability Services (Energy), Spence / Nicholson (Industrial) and
Delden (Industrial) which were sold before September 29, 2019.
Engineered Valves and Distributed Valves are discontinued
operations and not reflected in the As Reported figures in
accordance with US GAAP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191106005516/en/
David F. Mullen Senior Vice President Finance CIRCOR
International (781) 270-1200
CIRCOR (NYSE:CIR)
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From Apr 2023 to Apr 2024
