CIRCOR Reports Third-Quarter 2018 Financial Results

BURLINGTON, Mass.--(BUSINESS WIRE)--Nov. 5, 2018-- 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 third quarter ended September 30, 2018. Results include the acquisition of the Colfax Fluid Handling business, which CIRCOR acquired in December 2017.

Third-Quarter 2018 Highlights

Orders of $307 million, up 94% on a reported basis and up 13% on a pro forma organic basis
Revenue of $298 million, up 86% on a reported basis and up 10% on a pro forma organic basis
GAAP Loss per Share of $0.34; Adjusted Earnings per Share of $0.52
Operating Cash Flow of $24 million; Free Cash Flow of $19 million
Debt pay down of $18 million
Fluid Handling integration remains on track

“Organic growth in our Energy and Aerospace & Defense segments, combined with the contribution of the Fluid Handling acquisition, drove another quarter of top-line momentum for CIRCOR,” said Scott Buckhout, President and Chief Executive Officer. “Order intake exceeded $300 million, led by the Industrial segment, reflecting favorable demand trends across most of our end markets.”

“Our working capital and cash management actions are gaining traction, and during the quarter we generated $24 million of operating cash flow and reduced our debt by $18 million,” added Buckhout.

“The integration of Fluid Handling is on track, and our synergy plan is ahead of schedule. We expect to deliver the committed run-rate cost synergies by the end of year three, a year earlier than our original timeline. We remain focused on driving long-term growth and de-levering the Company through debt reduction and margin enhancement,” concluded Buckhout.

Fourth-Quarter 2018 Guidance
For the fourth quarter of 2018, CIRCOR expects revenue in the range of $295 million to $315 million, and GAAP loss per share in the range of $(0.19) to $(0.04), which reflects acquisition-related amortization expense of $0.54 to $0.56 and other special and restructuring charges of $0.13 to $0.16. Excluding the impact of amortization, special and restructuring charges, adjusted EPS is expected to be in the range of $0.53 to $0.63 per share. 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 tomorrow, November 6, 2018.


Selected Consolidated Results (unaudited)
($ millions except EPS)	Q3 2018		Q3 2017		Change
Revenue	$	297.5	$	159.7	86%
GAAP Operating Income	$	8.2	$	6.9	19%
Adjusted Operating Income¹	$	24.4	$	11.9	105%
GAAP Operating Margin		2.8%		4.3%	(150) bps
Adjusted Operating Margin¹		8.2%		7.4%	80 bps
GAAP (Loss) Earnings Per Share (Diluted)	$	(0.34)	$	0.22	(255)%
Adjusted Earnings Per Share (Diluted)¹	$	0.52	$	0.43	21%
Operating Cash Flow	$	24.1	$	(16.9)	243%
Free Cash Flow²	$	19.0	$	(19.2)	199%
Orders	$	307.4	$	158.1	94%


Segment Results
($ millions)	Q3 2018		Q3 2017		Change
Industrial
Revenue	$	118.7	$	30.0	296%
Segment Operating Income	$	14.6	$	5.7	156%
Segment Operating Margin		12.3%		18.9%	(660) bps
Orders	$	114.9	$	27.3	321%

Energy
Revenue	$	121.0	$	88.6	37%
Segment Operating Income	$	9.2	$	6.9	33%
Segment Operating Margin		7.6%		7.8%	(20) bps
Orders	$	111.0	$	84.9	31%

Aerospace & Defense
Revenue	$	57.8	$	41.1	41%
Segment Operating Income	$	8.7	$	4.3	102%
Segment Operating Margin		15.1%		10.5%	460 bps
Orders	$	81.5	$	45.9	78%

1.Adjusted Consolidated and Segment Results for Q3 2018 exclude non-cash acquisition-related intangible amortization, special and restructuring charges totaling $16.2 million ($17.2 million, net of tax). These charges include: (i) $13.5 million for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $1.3 million related to restructuring activities, primarily severance, related to our Reliability Services and Germany-based Pumps business; and (iii) $1.4 million primarily related to the separation of Fluid Handling business from Colfax Corporation and exiting a product line.Consolidated and Segment Results for Q3 2017 exclude special and restructuring charges and non-cash acquisition-related intangible amortization, totaling $5.0 million ($3.5 million, net of tax). These charges include: (i) $2.7 million for non-cash acquisition-related intangible amortization expense; (ii) $1.8 million in transaction fees associated with the acquisition of Colfax Fluid Handling; (iii) $0.3 million related to previously announced restructuring actions; and (iv) $0.2 million related to the sale of our France build-to-print business.

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, November 6, 2018. 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 fourth-quarter 2018 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, 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; 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						Nine Months Ended
	September 30, 2018			October 1, 2017			September 30, 2018			October 1, 2017
Net revenues	$	297,514		$	159,693		$	874,462		$	456,131
Cost of revenues	212,436			112,390			624,829			314,527
GROSS PROFIT	85,078			47,303			249,633			141,604
Selling, general and administrative expenses	74,106			38,120			229,343			116,425
Special and restructuring charges (recoveries), net	2,756			2,319			17,202			(443		)
OPERATING INCOME	8,216			6,864			3,088			25,622
Other expense (income):
Interest expense, net	14,100			2,445			39,656			6,298
Other (income) expense, net	(1,580		)	823			(7,200		)	2,022
TOTAL OTHER EXPENSE, NET	12,520			3,268			32,456			8,320
(LOSS) INCOME BEFORE INCOME TAXES	(4,304		)	3,596			(29,368		)	17,302
Provision for (benefit from) income taxes	2,537			(21		)	(10,988		)	(57		)
NET (LOSS) INCOME	$	(6,841	)	$	3,617		$	(18,380	)	$	17,359
(Loss) Earnings per common share:
Basic	$	(0.34	)	$	0.22		$	(0.93	)	$	1.05
Diluted	$	(0.34	)	$	0.22		$	(0.93	)	$	1.04
Weighted average number of common shares outstanding:
Basic	19,843			16,503			19,829			16,486
Diluted	19,843			16,709			19,829			16,721
Dividends declared per common share	$	—		$	0.0375		$	—		$	0.1125


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

	Nine Months Ended
OPERATING ACTIVITIES	September 30, 2018			October 1, 2017
Net (loss) income	$	(18,380	)	$	17,359
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation	21,556			10,889
Amortization	36,845			9,491
Bad debt expense	1,078			265
Loss on write down of inventory	4,632			1,463
Amortization of inventory fair value step-up	6,600			—
Compensation expense of share-based plans	4,303			2,696
Change in fair value of contingent consideration	—			(12,200		)
Amortization of debt issuance costs	2,852			—
Loss on sale or write down of property, plant and equipment	1,305			87
Loss on sale of business	—			5,300
Changes in operating assets and liabilities, net of effects of acquisition and disposition:
Trade accounts receivable	21,510			8,782
Inventories	4,463			(29,703		)
Prepaid expenses and other assets	(31,034		)	(11,424		)
Accounts payable, accrued expenses and other liabilities	(32,267		)	(997		)
Net cash provided by operating activities	23,463			2,008
INVESTING ACTIVITIES
Additions to property, plant and equipment	(17,030		)	(7,773		)
Proceeds from the sale of property, plant and equipment	207			269
Business acquisition, working capital adjustment	6,300			1,467
Net cash used in investing activities	(10,523		)	(6,037		)
FINANCING ACTIVITIES
Proceeds from long-term debt	199,600			378,263
Payments of long-term debt	(186,874		)	(361,325		)
Debt issuance costs	—			(727		)
Dividends paid	—			(1,879		)
Proceeds from the exercise of stock options	690			707
Return of cash to seller	(61,201		)	—
Net cash (used in) provided by financing activities	(47,785		)	15,039
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,154		)	6,338
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(39,999		)	17,348
Cash, cash equivalents and restricted cash at beginning of period	112,293			58,279
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	72,294		$	75,627


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

	September 30, 2018			December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	71,334		$	110,356
Trade accounts receivable, less allowance for doubtful accounts of $6,965 and $4,791, respectively	192,110			223,922
Inventories	226,047			244,896
Restricted cash	919			1,937
Prepaid expenses and other current assets	84,265			57,282
Total Current Assets	574,675			638,393
PROPERTY, PLANT AND EQUIPMENT, NET	215,206			217,539
OTHER ASSETS:
Goodwill	504,638			505,762
Intangibles, net	470,722			513,364
Deferred income taxes	33,130			22,334
Other assets	14,479			9,407
TOTAL ASSETS	$	1,812,850		$	1,906,799
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	111,400		$	117,329
Accrued expenses and other current liabilities	108,031			170,454
Accrued compensation and benefits	30,827			34,734
Total Current Liabilities	250,258			322,517
LONG-TERM DEBT, NET	802,069			787,343
DEFERRED INCOME TAXES	25,397			26,122
PENSION LIABILITY, NET	142,067			150,719
OTHER NON-CURRENT LIABILITIES	18,888			18,124
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock	212			212
Additional paid-in capital	443,984			438,721
Retained earnings	253,107			274,243
Common treasury stock, at cost	(74,472		)	(74,472		)
Accumulated other comprehensive loss, net of tax	(48,660		)	(36,730		)
Total Shareholders’ Equity	574,171			601,974
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,812,850		$	1,906,799


CIRCOR INTERNATIONAL, INC. SUMMARY OF ORDERS AND BACKLOG (in millions) UNAUDITED
	Three Months Ended				Nine Months Ended
	September 30, 2018		October 1, 2017		September 30, 2018		October 1, 2017
ORDERS (1) (3)
Energy	$	111.0	$	84.9	$	353.9	$	258.0
Aerospace & Defense	81.5		45.9		200.8		142.3
Industrial	114.9		27.3		388.2		84.8
Total orders	$	307.4	$	158.1	$	942.9	$	485.1

BACKLOG (2) (3)	September 30, 2018		October 1, 2017
Energy	$	205.9	$	138.8
Aerospace & Defense	173.0		108.2
Industrial	178.0		31.3
Total backlog	$	556.9	$	278.3

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. October 1, 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			TOTAL
ORDERS
Energy	$	100,012		$	73,140		$	84,857		$	118,073		$	376,082		$	129,762		$	113,171		$	110,987		$	353,920
Aerospace & Defense	56,416			39,902			45,939			$	52,043		194,300			59,793			59,441			81,533			200,767
Industrial	27,654			29,889			27,296			46,407			131,246			136,607			136,746			114,876			388,229
Total	$	184,082		$	142,931		$	158,092		$	216,523		$	701,628		$	326,162		$	309,358		$	307,396		$	942,916

NET REVENUES
Energy	$	76,210		$	78,276		$	88,570		$	96,561		$	339,617		$	99,972		$	112,804		$	121,023		$	333,799
Aerospace & Defense	41,601			43,304			41,117			$	56,961		182,983			58,477			57,500			57,757			173,734
Industrial	27,397			29,651			30,006			52,056			139,110			117,131			131,064			118,734			366,929
Total	$	145,208		$	151,231		$	159,693		$	205,578		$	661,710		$	275,580		$	301,368		$	297,514		$	874,462

SEGMENT OPERATING INCOME
Energy	$	6,407		$	8,170		$	6,936		$	8,618		$	30,131		$	5,696		$	9,242		$	9,163		$	24,101
Aerospace & Defense	3,784			4,374			4,333			10,884			23,375			8,931			6,992			8,709			24,632
Industrial	4,384			4,901			5,675			4,972			19,932			12,948			15,037			14,609			42,594
Corporate expenses	(5,479		)	(5,396		)	(5,067		)	(5,802		)	(21,744		)	(7,802		)	(6,448		)	(8,034		)	(22,284		)
Adjusted Operating Income	$	9,096		$	12,049		$	11,877		$	18,672		$	51,694		$	19,773		$	24,823		$	24,447		$	69,043

SEGMENT OPERATING MARGIN %
Energy	8.4		%	10.4		%	7.8		%	8.9		%	8.9		%	5.7		%	8.2		%	7.6		%	7.2		%
Aerospace & Defense	9.1		%	10.1		%	10.5		%	19.1		%	12.8		%	15.3		%	12.2		%	15.1		%	14.2		%
Industrial	16.0		%	16.5		%	18.9		%	9.6		%	14.3		%	11.1		%	11.5		%	12.3		%	11.6		%
Adjusted Operating Margin	6.3		%	8.0		%	7.4		%	9.1		%	7.8		%	7.2		%	8.2		%	8.2		%	7.9		%


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			TOTAL
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	16,195		$	2,667		$	(16,854	)	$	7,629		$	9,637		$	(145	)	$	(465	)	$	24,073		$	23,463
LESS:
Capital expenditures, net of sale proceeds	2,811			2,375			2,318			6,103			13,607			8,141			3,563			5,119			16,823
FREE CASH FLOW	$	13,384		$	292		$	(19,172	)	$	1,526		$	(3,970	)	$	(8,286	)	$	(4,028	)	$	18,954		$	6,640
GROSS DEBT	$	243,000		$	252,856		$	269,026		$	795,208		$	795,208		$	823,665		$	827,629		$	831,613		$	831,613
LESS:
Cash & cash equivalents	65,656			77,272			75,627			110,356			110,356			123,305			69,030			71,334			71,334
GROSS DEBT, NET OF CASH	$	177,344		$	175,584		$	193,399		$	684,852		$	684,852		$	700,360		$	758,599		$	760,279		$	760,279
TOTAL SHAREHOLDERS' EQUITY	$	415,537		$	438,097		$	451,885		$	601,974		$	601,974		$	592,096		$	573,992		$	574,171		$	574,171

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


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			TOTAL
NET INCOME (LOSS)	$	4,773		$	8,970		$	3,617		$	(5,571	)	$	11,789		$	(17,441	)	$	5,902		$	(6,841	)	$	(18,380	)
LESS:
Restructuring related inventory charges	—			—			—			—			—			473			1,067			—			1,540
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			11,807
Acquisition amortization	2,552			2,599			2,694			4,697			12,542			11,797			11,767			11,733			35,297
Acquisition depreciation	—			—			—			233			233			1,837			1,735			1,742			5,314
Special (recoveries) charges, net	(2,268		)	(5,520		)	1,978			13,799			7,989			2,831			1,156			1,408			5,395
Income tax impact	(1,137		)	(3,124		)	(1,497		)	(8,279		)	(14,037		)	(7,687		)	(11,056		)	967			(17,776		)
ADJUSTED NET INCOME	$	5,378		$	6,491		$	7,133		$	9,876		$	28,878		$	8,025		$	11,415		$	10,357		$	29,797

EARNINGS (LOSS) PER COMMON SHARE (Diluted)	$	0.29		$	0.54		$	0.22		$	(0.32	)	$	0.70		$	(0.88	)	$	0.30		$	(0.34	)	$	(0.93	)
LESS:
Restructuring related inventory charges	—			—			—			—			—			0.02			0.05			—			0.08
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			0.59
Acquisition amortization	0.15			0.16			0.16			0.27			0.74			0.60			0.59			0.59			1.77
Acquisition depreciation	—			—			—			0.01			0.01			0.09			0.09			0.09			0.27
Special (recoveries) charges, net	(0.14		)	(0.33		)	0.12			0.80			0.47			0.14			0.06			0.07			0.27
Income tax impact	(0.07		)	(0.19		)	(0.09		)	(0.48		)	(0.83		)	(0.39		)	(0.55		)	0.05			(0.89		)
ADJUSTED EARNINGS PER SHARE (Diluted)	$	0.32		$	0.39		$	0.43		$	0.57		$	1.71		$	0.40		$	0.57		$	0.52		$	1.49


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			TOTAL
NET INCOME (LOSS)	$	4,773		$	8,970		$	3,617		$	(5,571	)	$	11,789		$	(17,441	)	$	5,902		$	(6,841	)	$	(18,380	)
LESS:
Interest expense, net	(1,669		)	(2,184		)	(2,445		)	(4,479		)	(10,777		)	(11,801		)	(13,755		)	(14,100		)	(39,656		)
Depreciation	(3,798		)	(3,547		)	(3,544		)	(4,401		)	(15,290		)	(7,334		)	(7,157		)	(7,065		)	(21,556		)
Amortization	(3,092		)	(3,124		)	(3,275		)	(5,256		)	(14,747		)	(12,329		)	(12,282		)	(12,234		)	(36,845		)
(Provision for) benefit from income taxes	(687		)	724			21			5,618			5,676			5,879			7,646			(2,537		)	10,988
EBITDA	$	14,019		$	17,101		$	12,860		$	2,947		$	46,927		$	8,144		$	31,450		$	29,095		$	68,689
LESS:
Restructuring related inventory charges	—			—			—			—			—			(473		)	(1,067		)	—			(1,540		)
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		)	(11,807		)
Special recoveries (charges), net	2,268			5,520			(1,978		)	(13,799		)	(7,989		)	(2,831		)	(1,156		)	(1,408		)	(5,395		)
ADJUSTED EBITDA	$	13,209		$	15,147		$	15,179		$	21,743		$	65,278		$	27,663		$	34,517		$	31,851		$	94,031


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			TOTAL
GAAP OPERATING INCOME (LOSS)	$	7,354		$	11,404		$	6,864		$	(5,054	)	$	20,568		$	(13,380	)	$	8,252		$	8,216		$	3,088
LESS:
Restructuring related inventory charges	—			—			—			—			—			473			1,067			—			1,540
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			11,807
Acquisition amortization	2,552			2,599			2,694			4,697			12,542			11,797			11,767			11,733			35,297
Acquisition depreciation	—			—			—			233			233			1,837			1,735			1,742			5,314
Special (recoveries) charges, net	(2,268		)	(5,520		)	1,978			13,799			7,989			2,831			1,156			1,408			5,395
ADJUSTED OPERATING INCOME	$	9,096		$	12,049		$	11,877		$	18,672		$	51,694		$	19,773		$	24,821		$	24,447		$	69,041

GAAP OPERATING MARGIN	5.1		%	7.5		%	4.3		%	(2.5		)%	3.1		%	(4.9		)%	2.7		%	2.8		%	0.4		%
LESS:
Restructuring related inventory charges	—		%	—		%	—		%	—		%	—		%	0.2		%	0.4		%	—		%	0.2		%
Amortization of inventory step-up	—		%	—		%	—		%	2.1		%	0.6		%	2.4		%	—		%	—		%	0.8		%
Restructuring charges, net	1.0		%	2.4		%	0.2		%	0.3		%	0.9		%	3.5		%	0.3		%	0.5		%	1.4		%
Acquisition amortization	1.8		%	1.7		%	1.7		%	2.3		%	1.9		%	4.3		%	3.9		%	3.9		%	4.0		%
Acquisition depreciation	—		%	—		%	—		%	0.1		%	—		%	0.7		%	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		%	0.6		%
ADJUSTED OPERATING MARGIN	6.3		%	8.0		%	7.4		%	9.1		%	7.8		%	7.2		%	8.2		%	8.2		%	7.9		%

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. Q3 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	27,296				114,674				84,857				106,258				45,939				55,655

Organic	7,853		29	%	2,027		2	%	7,068		8	%	7,142		7	%	24,473		53	%	26,092		47	%
Acquisitions	79,915		293	%	—		—	%	19,145		23	%	—		—	%	11,335		25	%	—		—	%
Foreign Exchange	(188	)	(1	)%	(1,825	)	(2	)%	(83	)	—	%	(2,413	)	(2	)%	(214	)	—	%	(214	)	—	%
Total Change	87,580		321	%	202		—	%	26,130		31	%	4,729		4	%	35,594		77	%	25,878		46	%

2018	114,876				114,876				110,987				110,987				81,533				81,533


	Industrial								Energy								Aerospace & Defense
NET REVENUE	Reported				Pro Forma Combined				Reported				Pro Forma Combined				Reported				Pro Forma Combined
	$		%		$		%		$		%		$		%		$		%		$		%
2017	30,006				115,611				88,569				106,358				41,117				52,325

Organic	(308	)	(1	)%	4,928		4	%	16,187		18	%	15,559		15	%	5,935		14	%	5,589		11	%
Acquisitions	89,280		298	%	—		—	%	16,579		19	%	—		—	%	10,862		26	%	—		—	%
Foreign Exchange	(244	)	(1	)%	(1,805	)	(2	)%	(311	)	—	%	(893	)	(1	)%	(157	)	—	%	(157	)	—	%
Total Change	88,728		296	%	3,123		3	%	32,455		37	%	14,666		14	%	16,640		40	%	5,432		10	%

2018	118,734				118,734				121,023				121,023				57,757				57,757


CIRCOR INTERNATIONAL, INC. Q3 2018 Organic Growth Calculations (in thousands, except percentages) UNAUDITED

	CIRCOR
ORDERS	Reported				Pro Forma Combined
	$		%		$		%
2017	158,092				276,587

Organic	39,394		25	%	35,261		13	%
Acquisitions	110,395		70	%	—		—	%
Foreign Exchange	(485	)	—	%	(4,452	)	(2	)%
Total Change	149,304		94	%	30,809		10	%

2018	307,396				307,396


	CIRCOR
NET REVENUE	Reported				Pro Forma Combined
	$		%		$		%
2017	159,693				274,294

Organic	21,815		14	%	26,076		10	%
Acquisitions	116,721		73	%	—		—	%
Foreign Exchange	(715	)	—	%	(2,856	)	(1	)%
Total Change	137,821		86	%	23,220		8	%

2018	297,514				297,514


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/20181105005984/en/

Source: CIRCOR International, Inc.

CIRCOR International
Rajeev Bhalla, 781-270-1200
Executive Vice President & Chief Financial Officer

News Release

CIRCOR Reports Third-Quarter 2018 Financial Results