CIRCOR Reports Fourth-Quarter and Year-End 2018 Financial Results

BURLINGTON, Mass.--(BUSINESS WIRE)--Feb. 26, 2019-- 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 fourth quarter and full year ended December 31, 2018. Results include the acquisition of the Colfax Fluid Handling business, which CIRCOR acquired in December 2017.

Fourth-Quarter 2018 Highlights

Orders of $297 million, up 37% on a reported basis and up 2% on a pro forma organic basis
Revenue of $301 million, up 47% on a reported basis and up 4% on a pro forma organic basis
GAAP Operating Margin of 2.1%, up 460 bps
Adjusted Operating Margin of 9.1%, up 320 bps on a pro forma basis
GAAP Loss per Share of ($1.06); Adjusted Earnings per Share of $0.62
Operating Cash Flow of $26 million
Debt pay down of $25 million

“2018 was a transformational year for CIRCOR as our team integrated the largest deal in the Company’s history,” said Scott Buckhout, President and Chief Executive Officer. “As we begin the second year of integration, our synergy plan is ahead of schedule, with committed run-rate cost synergies now expected by the end of year three.

“We ended the year with solid fourth-quarter results, including strong organic growth and robust margin expansion,” said Buckhout. “In addition, we executed well on our cash management actions, reducing working capital to 24% of sales and generating $26 million of operating cash flow.

“De-levering the Company remains a top priority. We reduced our debt by $25 million in the fourth quarter,” added Buckhout. “As previously announced, in January we sold our non-core Reliability Services business for $85 million and used the net proceeds to pay down debt. We continue to evaluate the sale of other non-core businesses to further accelerate the reduction of our outstanding debt.

“We remain optimistic about the outlook across the majority of our end markets. Going forward, we will continue to focus on creating long-term value for shareholders by investing in growth, expanding margins, generating strong free cash flow, and de-levering the Company,” concluded Buckhout.

First-Quarter 2019 Guidance
For the first quarter of 2019, CIRCOR expects revenue in the range of $245 million to $260 million, and GAAP loss per share in the range of $(0.15) to $(0.01), which reflects acquisition-related amortization expense of $(0.50) to $(0.52) and other special and restructuring (charges) gains of $0.05 to $0.07, which includes an expected gain on the sale of Reliability Services, offset by restructuring and special charges. Excluding the impact of amortization, special and restructuring (charges) gains, adjusted EPS is expected to be in the range of $0.32 to $0.42 per share. Presentation slides that provide supporting information to this guidance and fourth-quarter and year-end 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 tomorrow, February 27, 2019.


Selected Consolidated Results (unaudited)

($ millions except EPS)	Q4 2018		Q4 2017		Change			FY 2018		FY 2017	Change
Revenue	$	301.4	$	205.6		47%	$	1,175.8	$	661.7	78%
GAAP Operating Income (Loss)	$	6.3	$	(5.1)		n/m	$	9.4	$	20.6	(54)%
Adjusted Operating Income¹	$	27.5	$	18.7		47%	$	96.6	$	51.7	87%
GAAP Operating Margin		2.1%		(2.5)%		460 bps		0.8%		3.1%	(230) bps
Adjusted Operating Margin¹		9.1%		9.1%		0 bps		8.2%		7.8%	40 bps
GAAP (Loss) Earnings Per Share	$	(1.06)	$	(0.32)		(232)%	$	(1.99)	$	0.70	n/m
Adjusted Earnings Per Share¹ (Diluted)¹	$	0.62	$	0.57		9%	$	2.11	$	1.71	23%
Operating Cash Flow	$	26.3	$	7.6		246%	$	49.8	$	9.6	419%
Free Cash Flow²	$	19.8	$	1.5		n/m	$	26.4	$	(4.0)	n/m
Orders	$	296.6	$	216.5		37%	$	1,239.5	$	701.6	77%


Segment Results

($ millions)	Q4 2018		Q4 2017		Change			FY 2018		FY 2017	Change
Industrial
Revenue	$	120.6	$	52.1		131%	$	487.4	$	139.1	250%
Segment Operating Income	$	14.7	$	5.0		194%	$	57.3	$	19.9	188%
Segment Operating Margin		12.2%		9.6%		260 bps		11.8%		14.3%	(250) bps
Orders	$	121.9	$	47.2		158%	$	510.1	$	132.0	286%

Energy
Revenue	$	117.4	$	96.6		22%	$	451.2	$	339.6	33%
Segment Operating Income	$	9.4	$	8.6		9%	$	33.5	$	30.1	11%
Segment Operating Margin		8.0%		8.9%		(90) bps		7.4%		8.9%	(150) bps
Orders	$	98.0	$	118.0		(17)%	$	451.9	$	376.0	20%

Aerospace & Defense
Revenue	$	63.3	$	57.0		11%	$	237.0	$	183.0	30%
Segment Operating Income	$	11.4	$	10.9		5%	$	36.0	$	23.4	54%
Segment Operating Margin		18.0%		19.1%		(110) bps		15.2%		12.8%	240 bps
Orders	$	76.7	$	51.3		50%	$	277.5	$	193.5	43%

1.		Adjusted Consolidated and Segment Results for Q4 2018 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $21.2 million ($33.4 million, net of tax). These charges include: (i) $13.7 million for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $4.4 million related to the sale of businesses; (iii) $3.1 million related to other special and restructuring activities, primarily in Oklahoma City; and (iv) $10.9 million related to the write-off of a deferred tax asset due to changes in US tax law. Consolidated and Segment Results for Q4 2017 exclude special and restructuring charges and non-cash acquisition-related intangible and inventory step-up amortization, totaling $23.7 million ($15.5 million, net of tax). This net charge includes (i) $9.2 million charge for non-cash acquisition-related intangible amortization expense, including the amortization of a step-up in fair value of inventories; (ii) $8.9 million in transaction fees associated with the acquisition of the Colfax Fluid Handling business; (iii) $2.4 million for settlement of a legal matter; (iv) $1.8 million write-off for deferred financing fees associated with the prior debt agreement; and (v) $1.4 million related to previously announced restructuring actions.
2.		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 tomorrow, February 27, 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 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 the Fluid Handling acquisition and to provide a more meaningful comparison of changes in our orders and revenue, we also discuss these changes on a “pro forma organic” basis. Pro forma organic is calculated assuming the Fluid Handling acquisition was completed on January 1, 2017 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 first-quarter 2019 guidance, our future performance, including realization of cost reductions from restructuring activities and expected synergies, 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, divesture 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; and our ability to operate our manufacturing facilities at current or higher levels and respond to increases in manufacturing costs. 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 (LOSS) INCOME
(in thousands, except per share data)
(UNAUDITED)

	Three Months Ended						Twelve Months Ended
	December 31, 2018			December 31, 2017			December 31, 2018			December 31, 2017
Net revenues	$	301,363		$	205,578		$	1,175,825		$	661,710
Cost of revenues	209,345			146,362			834,175			460,890
GROSS PROFIT	92,018			59,216			341,650			200,820
Selling, general and administrative expenses	79,085			49,776			308,427			166,201
Special and restructuring charges (recoveries), net	6,637			14,495			23,839			14,051
OPERATING INCOME	6,296			(5,055		)	9,384			20,568
Other expense (income):
Interest expense, net	13,257			4,479			52,913			10,777
Other (income) expense, net	(234		)	1,655			(7,435		)	3,678
TOTAL OTHER EXPENSE, NET	13,023			6,134			45,478			14,455
(LOSS) INCOME BEFORE INCOME TAXES	(6,727		)	(11,189		)	(36,094		)	6,113
Provision for (benefit from) income taxes	14,278			(5,619		)	3,290			(5,676		)
NET (LOSS) INCOME	$	(21,005	)	$	(5,570	)	$	(39,384	)	$	11,789
(Loss) Earnings per common share:
Basic	$	(1.06	)	$	(0.32	)	$	(1.99	)	$	0.71
Diluted	$	(1.06	)	$	(0.32	)	$	(1.99	)	$	0.70
Weighted average number of common shares outstanding:
Basic	19,848			17,233			19,834			16,674
Diluted	19,848			17,233			19,834			16,849
Dividends declared per common share	$	—		$	0.0375		$	—		$	0.1500


CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)

	Twelve Months Ended
OPERATING ACTIVITIES	December 31, 2018			December 31, 2017
Net (loss) income	$	(39,384	)	$	11,789
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation	28,754			15,290
Amortization	49,255			14,747
Bad debt expense	2,141			810
Loss on write down of inventory	6,987			3,037
Amortization of inventory fair value step-up	6,600			4,300
Compensation expense of share-based plans	4,971			3,807
Change in fair value of contingent consideration	—			(12,200		)
Debt extinguishment and amortization of debt issuance costs	3,823			2,569
Loss on sale or write down of property, plant and equipment	1,316			360
Loss on sale of business	1,882			5,300
Changes in operating assets and liabilities, net of effects of acquisition and disposition:
Trade accounts receivable	35,250			(5,734		)
Inventories	11,356			(19,494		)
Prepaid expenses and other assets	(70,749		)	(8,578		)
Accounts payable, accrued expenses and other liabilities	7,551			(6,366		)
Net cash provided by operating activities	49,753			9,637
INVESTING ACTIVITIES
Additions to property, plant and equipment	(23,588		)	(14,541		)
Proceeds from the sale of property, plant and equipment	231			934
Proceeds from the sale of affiliate	2,753			—
Business acquisition, working capital adjustment	6,300			(488,517		)
Net cash used in investing activities	(14,304		)	(502,124		)
FINANCING ACTIVITIES
Proceeds from long-term debt	248,300			1,090,883
Payments of long-term debt	(260,146		)	(523,183		)
Debt issuance costs	—			(30,366		)
Dividends paid	—			(2,506		)
Proceeds from the exercise of stock options	690			740
Return of cash to seller	(61,201		)	—
Net cash (used in) provided by financing activities	(72,357		)	535,568
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,860		)	8,996
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(42,768		)	52,077
Cash, cash equivalents and restricted cash at beginning of period	112,293			58,279
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	69,525		$	110,356


CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(UNAUDITED)

	December 31, 2018			December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	68,517		$	110,356
Trade accounts receivable, less allowance for doubtful accounts of $6,965 and $4,791, respectively	183,552			223,922
Inventories	217,378			244,896
Prepaid expenses and other current assets	90,658			58,353
Assets held for sale	46,898			866
Total Current Assets	607,003			638,393
PROPERTY, PLANT AND EQUIPMENT, NET	201,799			217,539
OTHER ASSETS:
Goodwill	501,892			505,762
Intangibles, net	441,973			513,364
Deferred income taxes	29,478			22,334
Other assets	12,797			9,407
TOTAL ASSETS	$	1,794,942		$	1,906,799
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	123,881		$	117,329
Accrued expenses and other current liabilities	115,162			170,454
Accrued compensation and benefits	33,878			34,734
Liabilities held for sale	11,141			—
Total Current Liabilities	284,062			322,517
LONG-TERM DEBT, NET	778,187			787,343
DEFERRED INCOME TAXES	33,931			26,122
PENSION LIABILITY, NET	146,522			150,719
OTHER NON-CURRENT LIABILITIES	19,917			18,124
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock	212			212
Additional paid-in capital	444,673			438,721
Retained earnings	232,100			274,243
Common treasury stock, at cost	(74,472		)	(74,472		)
Accumulated other comprehensive loss, net of tax	(70,190		)	(36,730		)
Total Shareholders’ Equity	532,323			601,974
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,794,942		$	1,906,799


CIRCOR INTERNATIONAL, INC. SUMMARY OF ORDERS AND BACKLOG (in millions) UNAUDITED
	Three Months Ended				Twelve Months Ended
	December 31, 2018		December 31, 2017		December 31, 2018		December 31, 2017
ORDERS (1) (3)
Energy	$	98.0	$	118.0	$	451.9	$	376.0
Aerospace & Defense	76.7		51.3		277.5		193.5
Industrial	121.9		47.2		510.1		132.0
Total orders	$	296.6	$	216.5	$	1,239.5	$	701.5

BACKLOG (2) (3)	December 31, 2018		December 31, 2017
Energy	$	183.5	$	183.0
Aerospace & Defense	179.6		163.7
Industrial	163.8		155.8
Total backlog	$	526.9	$	502.5

Note 1: Orders do not include the foreign exchange impact due to the re-measurement of customer order backlog amounts denominated in foreign currencies.

Note 2: Backlog represents unshipped customer orders for which revenue has not been recognized.

Note 3: 2018 backlog reflects adjustments related to the cumulative impact of changes in revenue recognition due to the Company's adoption of ASC 606. December 31, 2017 amounts restated for Q1 2018 organizational realignment.

CIRCOR INTERNATIONAL, INC. SEGMENT INFORMATION (in thousands, except percentages) UNAUDITED

	2017															2018
	1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL			1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL
ORDERS
Energy	$	100,012		$	73,140		$	84,857		$	118,030		$	376,039		$	129,762		$	113,171		$	110,987		$	97,990		$	451,910
Aerospace & Defense	56,416			39,902			45,939				51,278		193,535			59,793			59,441			81,533			76,702			277,469
Industrial	27,654			29,889			27,296			47,154			131,993			136,607			136,746			114,876			121,886			510,115
Total	$	184,082		$	142,931		$	158,092		$	216,462		$	701,567		$	326,162		$	309,358		$	307,396		$	296,578		$	1,239,494

NET REVENUES
Energy	$	76,210		$	78,276		$	88,570		$	96,561		$	339,617		$	99,972		$	112,804		$	121,023		$	117,433		$	451,232
Aerospace & Defense	41,601			43,304			41,117				56,961		182,983			58,477			57,500			57,757			63,283			237,017
Industrial	27,397			29,651			30,006			52,056			139,110			117,131			131,064			118,734			120,647			487,576
Total	$	145,208		$	151,231		$	159,693		$	205,578		$	661,710		$	275,580		$	301,368		$	297,514		$	301,363		$	1,175,825

SEGMENT OPERATING INCOME
Energy	$	6,407		$	8,170		$	6,936		$	8,618		$	30,131		$	5,696		$	9,242		$	9,163		$	9,396		$	33,497
Aerospace & Defense	3,784			4,374			4,333			10,884			23,375			8,931			6,992			8,709			11,415			36,047
Industrial	4,384			4,901			5,675			4,972			19,932			12,948			15,037			14,609			14,746			57,340
Corporate expenses	(5,479		)	(5,396		)	(5,067		)	(5,802		)	(21,744		)	(7,802		)	(6,448		)	(8,034		)	(8,015		)	(30,299		)
Adjusted Operating Income	$	9,096		$	12,049		$	11,877		$	18,672		$	51,694		$	19,773		$	24,823		$	24,447		$	27,542		$	96,585

SEGMENT OPERATING MARGIN %
Energy	8.4		%	10.4		%	7.8		%	8.9		%	8.9		%	5.7		%	8.2		%	7.6		%	8.0		%	7.4		%
Aerospace & Defense	9.1		%	10.1		%	10.5		%	19.1		%	12.8		%	15.3		%	12.2		%	15.1		%	18.0		%	15.2		%
Industrial	16.0		%	16.5		%	18.9		%	9.6		%	14.3		%	11.1		%	11.5		%	12.3		%	12.2		%	11.8		%
Adjusted Operating Margin	6.3		%	8.0		%	7.4		%	9.1		%	7.8		%	7.2		%	8.2		%	8.2		%	9.1		%	8.2		%


CIRCOR INTERNATIONAL, INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS (in thousands, except percentages) UNAUDITED

	2017															2018
	1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL			1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	16,195		$	2,667		$	(16,854	)	$	7,629		$	9,637		$	(145	)	$	(465	)	$	24,073		$	26,290		$	49,753
LESS:
Capital expenditures, net of sale proceeds	2,811			2,375			2,318			6,103			13,607			8,141			3,563			5,119			6,534			23,357
FREE CASH FLOW	$	13,384		$	292		$	(19,172	)	$	1,526		$	(3,970	)	$	(8,286	)	$	(4,028	)	$	18,954		$	19,756		$	26,396
GROSS DEBT	$	243,000		$	252,856		$	269,026		$	795,208		$	795,208		$	823,665		$	827,629		$	831,613		$	807,050		$	807,050
LESS:
Cash & cash equivalents	65,656			77,272			75,627			110,356			110,356			123,305			69,030			71,334			68,517			68,517
GROSS DEBT, NET OF CASH	$	177,344		$	175,584		$	193,399		$	684,852		$	684,852		$	700,360		$	758,599		$	760,279		$	738,533		$	738,533
TOTAL SHAREHOLDERS' EQUITY	$	415,537		$	438,097		$	451,885		$	601,974		$	601,974		$	592,096		$	573,992		$	574,171		$	532,323		$	532,323

GROSS DEBT AS % OF EQUITY	58		%	58		%	60		%	132		%	132		%	139		%	144		%	145		%	152		%	152		%
GROSS DEBT, NET OF CASH AS % OF EQUITY	43		%	40		%	43		%	114		%	114		%	118		%	132		%	132		%	138		%	139		%


CIRCOR INTERNATIONAL, INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS (in thousands, except per share data) UNAUDITED

	2017															2018
	1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL			1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL
NET INCOME (LOSS)	$	4,773		$	8,970		$	3,617		$	(5,571	)	$	11,789		$	(17,441	)	$	5,902		$	(6,841	)	$	(21,005	)	$	(39,385	)
LESS:
Restructuring related inventory charges	—			—			—			—			—			473			1,067			—			864			2,404
Amortization of inventory step-up	—			—			—			4,300			4,300			6,600			—			—			—			6,600
Restructuring charges, net	1,458			3,566			341			697			6,062			9,615			844			1,348			944			12,751
Acquisition amortization	2,552			2,599			2,694			4,697			12,542			11,797			11,767			11,733			12,012			47,309
Acquisition depreciation	—			—			—			233			233			1,837			1,735			1,742			1,735			7,049
Special (recoveries) charges, net	(2,268		)	(5,520		)	1,978			13,799			7,989			2,831			1,156			1,408			5,692			11,087
Income tax impact	(1,137		)	(3,124		)	(1,497		)	(8,279		)	(14,037		)	(7,687		)	(11,056		)	967			12,124			(5,652		)
ADJUSTED NET INCOME	$	5,378		$	6,491		$	7,133		$	9,876		$	28,878		$	8,025		$	11,415		$	10,357		$	12,366		$	42,163

EARNINGS (LOSS) PER COMMON SHARE (Diluted)	$	0.29		$	0.54		$	0.22		$	(0.32	)	$	0.70		$	(0.88	)	$	0.30		$	(0.34	)	$	(1.06	)	$	(1.99	)
LESS:
Restructuring related inventory charges	—			—			—			—			—			0.02			0.05			—			0.04			0.12
Amortization of inventory step-up	—			—			—			0.25			0.26			0.33			—			—			—			0.33
Restructuring charges, net	0.09			0.21			0.02			0.04			0.36			0.49			0.04			0.07			0.05			0.64
Acquisition amortization	0.15			0.16			0.16			0.27			0.74			0.60			0.59			0.59			0.60			2.37
Acquisition depreciation	—			—			—			0.01			0.01			0.09			0.09			0.09			0.09			0.35
Special (recoveries) charges, net	(0.14		)	(0.33		)	0.12			0.80			0.47			0.14			0.06			0.07			0.29			0.55
Income tax impact	(0.07		)	(0.19		)	(0.09		)	(0.48		)	(0.83		)	(0.39		)	(0.55		)	0.05			0.61			(0.28		)
ADJUSTED EARNINGS PER SHARE (Diluted)	$	0.32		$	0.39		$	0.43		$	0.57		$	1.71		$	0.40		$	0.57		$	0.52		$	0.62		$	2.11


CIRCOR INTERNATIONAL, INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS (in thousands) UNAUDITED

	2017															2018
	1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL			1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL
NET INCOME (LOSS)	$	4,773		$	8,970		$	3,617		$	(5,571	)	$	11,789		$	(17,441	)	$	5,902		$	(6,841	)	$	(21,005	)	$	(39,385	)
LESS:
Interest expense, net	(1,669		)	(2,184		)	(2,445		)	(4,479		)	(10,777		)	(11,801		)	(13,755		)	(14,100		)	(13,257		)	(52,913		)
Depreciation	(3,798		)	(3,547		)	(3,544		)	(4,401		)	(15,290		)	(7,334		)	(7,157		)	(7,065		)	(7,198		)	(28,754		)
Amortization	(3,092		)	(3,124		)	(3,275		)	(5,256		)	(14,747		)	(12,329		)	(12,282		)	(12,234		)	(12,509		)	(49,354		)
(Provision for) benefit from income taxes	(687		)	724			21			5,618			5,676			5,879			7,646			(2,537		)	(14,278		)	(3,290		)
EBITDA	$	14,019		$	17,101		$	12,860		$	2,947		$	46,927		$	8,144		$	31,450		$	29,095		$	26,237		$	94,926
LESS:
Restructuring related inventory charges	—			—			—			—			—			(473		)	(1,067		)	—			(864		)	(2,404		)
Amortization of inventory step-up	—			—			—			(4,300		)	(4,300		)	(6,600		)	—			—			—			(6,600		)
Restructuring charges, net	(1,458		)	(3,566		)	(341		)	(697		)	(6,062		)	(9,615		)	(844		)	(1,348		)	(944		)	(12,751		)
Special recoveries (charges), net	2,268			5,520			(1,978		)	(13,799		)	(7,989		)	(2,831		)	(1,156		)	(1,408		)	(5,692		)	(11,087		)
ADJUSTED EBITDA	$	13,209		$	15,147		$	15,179		$	21,743		$	65,278		$	27,663		$	34,517		$	31,851		$	33,737		$	127,768


CIRCOR INTERNATIONAL, INC. RECONCILIATION OF KEY PERFORMANCE MEASURES TO COMMONLY USED GENERALLY ACCEPTED ACCOUNTING PRINCIPLE TERMS (in thousands, except percentages) UNAUDITED

	2017															2018
	1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL			1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL
GAAP OPERATING INCOME (LOSS)	$	7,354		$	11,404		$	6,864		$	(5,054	)	$	20,568		$	(13,380	)	$	8,252		$	8,216		$	6,296		$	9,384
LESS:
Restructuring related inventory charges	—			—			—			—			—			473			1,067			—			864			2,404
Amortization of inventory step-up	—			—			—			4,300			4,300			6,600			—			—			—			6,600
Restructuring charges, net	1,458			3,566			341			697			6,062			9,615			844			1,348			944			12,751
Acquisition amortization	2,552			2,599			2,694			4,697			12,542			11,797			11,767			11,733			12,012			47,309
Acquisition depreciation	—			—			—			233			233			1,837			1,735			1,742			1,735			7,049
Special (recoveries) charges, net	(2,268		)	(5,520		)	1,978			13,799			7,989			2,831			1,156			1,408			5,692			11,087
ADJUSTED OPERATING INCOME	$	9,096		$	12,049		$	11,877		$	18,672		$	51,694		$	19,773		$	24,821		$	24,447		$	27,543		$	96,584

GAAP OPERATING MARGIN	5.1		%	7.5		%	4.3		%	(2.5		)%	3.1		%	(4.9		)%	2.7		%	2.8		%	2.1		%	0.8		%
LESS:
Restructuring related inventory charges	—		%	—		%	—		%	—		%	—		%	0.2		%	0.4		%	—		%	0.3		%	0.2		%
Amortization of inventory step-up	—		%	—		%	—		%	2.1		%	0.6		%	2.4		%	—		%	—		%	—		%	0.6		%
Restructuring charges, net	1.0		%	2.4		%	0.2		%	0.3		%	0.9		%	3.5		%	0.3		%	0.5		%	0.3		%	1.1		%
Acquisition amortization	1.8		%	1.7		%	1.7		%	2.3		%	1.9		%	4.3		%	3.9		%	3.9		%	4.0		%	4.0		%
Acquisition depreciation	—		%	—		%	—		%	0.1		%	—		%	0.7		%	0.6		%	0.6		%	0.6		%	0.6		%
Special (recoveries) charges, net	(1.6		)%	(3.7		)%	1.2		%	6.7		%	1.2		%	1.0		%	0.4		%	0.5		%	1.9		%	0.9		%
ADJUSTED OPERATING MARGIN	6.3		%	8.0		%	7.4		%	9.1		%	7.8		%	7.2		%	8.2		%	8.2		%	9.1		%	8.2		%

The Company is providing certain combined information related to the recently acquired Fluid Handling business.


CIRCOR INTERNATIONAL, INC.
SEGMENT INFORMATION - COMBINED
(in thousands, except percentages)
UNAUDITED

	2017
	1ST QTR		2ND QTR		3RD QTR		4TH QTR		TOTAL
ORDERS - Recast
Energy	$	100,012	$	73,140	$	84,857	$	118,073	$	376,082
Aerospace & Defense	56,416		39,902		45,939		52,043		194,300
Industrial	27,654		29,889		27,296		46,407		131,246
Total	$	184,082	$	142,931	$	158,092	$	216,523	$	701,628

ORDERS - Fluid Handling
Energy	$	23,679	$	16,882	$	21,401	$	11,803	$	73,765
Aerospace & Defense	8,255		24,375		9,716		6,816		49,162
Industrial	77,944		76,866		87,378		60,193		302,381
Total	$	109,878	$	118,123	$	118,495	$	78,812	$	425,308

ORDERS - Combined
Energy	$	123,690	$	90,022	$	106,258	$	129,876	$	449,846
Aerospace & Defense	64,671		64,277		55,655		58,859		243,462
Industrial	105,598		106,755		114,674		106,601		433,628
Total	$	293,959	$	261,054	$	276,587	$	295,336	$	1,126,936

NET REVENUES - Recast
Energy	$	76,210	$	78,276	$	88,570	$	96,561	$	339,617
Aerospace & Defense	41,601		43,304		41,117		56,961		182,983
Industrial	27,397		29,651		30,006		52,056		139,110
Total	$	145,208	$	151,231	$	159,693	$	205,578	$	661,710

NET REVENUES - Fluid Handling
Energy	$	15,546	$	17,705	$	17,789	$	13,663	$	64,703
Aerospace & Defense	10,728		17,044		11,208		6,918		45,898
Industrial	85,264		83,310		85,604		72,489		326,667
Total	$	111,538	$	118,059	$	114,601	$	93,070	$	437,268

NET REVENUES - Combined
Energy	$	91,756	$	95,981	$	106,359	$	110,224	$	404,320
Aerospace & Defense	52,329		60,348		52,325		63,879		228,881
Industrial	112,661		112,961		115,610		124,545		465,777
Total	$	256,746	$	269,290	$	274,294	$	298,648	$	1,098,978

Notes:
	- Items labeled "Recast" represent previously reported CIRCOR information, adjusted to reflect the impact of our February 28, 2018 organizational realignment
	- Items labeled "Fluid Handling" represent the information from the Fluid Handling businesses prior to their acquisition by CIRCOR on December 10, 2017
	- Items labeled "Combined" represent the sum of the Recast and Fluid Handling information


CIRCOR INTERNATIONAL, INC.
SEGMENT INFORMATION - COMBINED
(in thousands, except percentages)
UNAUDITED

	2017
	1ST QTR			2ND QTR			3RD QTR			4TH QTR			TOTAL
SEGMENT OPERATING INCOME - Recast
Energy	$	6,407		$	8,170		$	6,936		$	8,618		$	30,131
Aerospace & Defense	3,784			4,374			4,333			10,884			23,375
Industrial	4,384			4,901			5,675			4,972			19,932
Corporate expenses	(5,479		)	(5,396		)	(5,067		)	(5,802		)	(21,744		)
Total	$	9,096		$	12,049		$	11,877		$	18,672		$	51,694

SEGMENT OPERATING INCOME - Fluid Handling
Energy	$	(83	)	$	1,080		$	1,761		$	812		$	3,570
Aerospace & Defense	1,488			3,661			2,201			(367		)	6,983
Industrial	8,833			7,709			4,365			(1,414		)	19,493
Corporate expenses	—			—			—			—			—
Total	$	10,238		$	12,450		$	8,327		$	(969	)	$	30,046

SEGMENT OPERATING INCOME - Combined
Energy	$	6,324		$	9,250		$	8,697		$	9,430		$	33,701
Aerospace & Defense	5,272			8,035			6,534			10,517			30,358
Industrial	13,217			12,610			10,040			3,558			39,425
Corporate expenses	(5,479		)	(5,396		)	(5,067		)	(5,802		)	(21,744		)
Total	$	19,334		$	24,499		$	20,204		$	17,703		$	81,740

SEGMENT OPERATING MARGIN - Combined
Energy	6.9		%	9.6		%	8.2		%	8.6		%	8.3		%
Aerospace & Defense	10.1		%	13.3		%	12.5		%	16.5		%	13.3		%
Industrial	11.7		%	11.2		%	8.7		%	2.9		%	8.5		%
Corporate expenses	(2.1		)%	(2.0		)%	(1.8		)%	(1.9		)%	(2.0		)%
Total	7.5		%	9.1		%	7.4		%	5.9		%	7.4		%

Notes:

- Items labeled "Recast" represent previously reported CIRCOR information, adjusted to reflect the impact of our February 28, 2018 organizational realignment

- Items labeled "Fluid Handling" represent the information from the Fluid Handling businesses prior to their acquisition by CIRCOR on December 10, 2017

- Items labeled "Combined" represent the sum of the Recast and Fluid Handling information

- Segment Operating Margin - Combined represent Segment Operating Income - Combined divided by Segment Net Revenues Combined


CIRCOR INTERNATIONAL, INC.
Q4 2018 Organic Growth Calculations
(in thousands, except percentages)
UNAUDITED

	Industrial								Energy								Aerospace & Defense
ORDERS	Reported				Pro Forma Combined				Reported				Pro Forma Combined				Reported				Pro Forma Combined
	$		%		$		%		$		%		$		%		$		%		$		%
2017	47,154				107,348				118,030				129,833				51,278				58,094

Organic	6,499		14	%	16,392		15	%	(31,478	)	(27	)%	(30,201	)	(23	)%	(4,253	)	(8	)%	19,188		33	%
Acquisitions/Divestitures	68,803		146	%	1,437		1	%	12,201		10	%	—		—	%	30,257		59	%	—		—	%
Foreign Exchange	(570	)	(1	)%	(3,291	)	(3	)%	(763	)	(1	)%	(1,642	)	(1	)%	(580	)	(1	)%	(580	)	(1	)%
Total Change	74,732		158	%	14,538		14	%	(20,040	)	(17	)%	(31,843	)	(25	)%	25,424		50	%	18,608		32	%

2018	121,886				121,886				97,990				97,990				76,702				76,702


	Industrial								Energy								Aerospace & Defense
NET REVENUE	Reported				Pro Forma Combined				Reported				Pro Forma Combined				Reported				Pro Forma Combined
	$		%		$		%		$		%		$		%		$		%		$		%
2017	52,056				124,545				96,561				110,225				56,961				63,878

Organic	3,866		7	%	3,001		2	%	13,216		14	%	9,008		8	%	(3,642	)	(6	)%	24		—	%
Acquisitions/Divestitures	65,121		125	%	(3,904	)	(3	)%	8,561		9	%	—		—	%	10,584		19	%	—		—	%
Foreign Exchange	(492	)	(1	)%	(3,091	)	(2	)%	(906	)	(1	)%	(1,800	)	(2	)%	(620	)	(1	)%	(620	)	(1	)%
Total Change	68,495		132	%	(3,994	)	(3	)%	20,871		22	%	7,208		7	%	6,322		11	%	(596	)	(1	)%

2018	120,551				120,551				117,431				117,432				63,283				63,282


CIRCOR INTERNATIONAL, INC.
Q4 2018 Organic Growth Calculations
(in thousands, except percentages)
UNAUDITED

	CIRCOR
ORDERS	Reported				Pro Forma Combined
	$		%		$		%
2017	216,462				295,275

Organic	(29,232	)	(14	)%	5,379		2	%
Acquisitions/Divestitures	111,261		51	%	1,437		—	%
Foreign Exchange	(1,913	)	(1	)%	(5,513	)	(2	)%
Total Change	80,116		37	%	1,303		(1	)%

2018	296,578				296,578


	CIRCOR
NET REVENUE	Reported				Pro Forma Combined
	$		%		$		%
2017	205,578				298,649

Organic	13,548		7	%	12,140		4	%
Acquisitions/Divestitures	84,266		41	%	(3,904	)	(1	)%
Foreign Exchange	(2,030	)	(1	)%	(5,523	)	(2	)%
Total Change	95,784		47	%	2,713		1	%

2018	301,362				301,362


CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF FLUID HANDLING SEGMENT INFORMATION TO GAAP OPERATING INCOME
(in thousands, except percentages)
UNAUDITED

	2017
	1ST QTR		2ND QTR			3RD QTR			4TH QTR			TOTAL
FLUID HANDLING GAAP OPERATING INCOME (LOSS)	$	4,359	$	19,738		$	2,241		$	3,129		$	29,467
LESS:
Asbestos costs	2,690		2,517			2,379			1,274			8,860
Impairment charges	—		—			—			—			—
Exited businesses	65		(26		)	(47		)	—			(8		)
Acquisition amortization	796		810			818			—			2,424
Restructuring and other special charges (recoveries)	2,328		(10,589		)	636			(5,372		)	(12,997		)
Stay bonus	—		—			2,300			—			2,300
FLUID HANDLING ADJUSTED OPERATING INCOME	$	10,238	$	12,450		$	8,327		$	(969	)	$	30,046

Notes

- Amounts relate to Fluid Handling results prior to December 10, 2017, the date of CIRCOR's acquisition.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190226006276/en/

Source: CIRCOR International, Inc.

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

News Release

CIRCOR Reports Fourth-Quarter and Year-End 2018 Financial Results