CIRCOR Reports Third-Quarter 2018 Financial Results

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.

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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 Companys 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 2018Q3 2017Change
Revenue$297.5$159.786%
GAAP Operating Income$8.2$6.919%
Adjusted Operating Income1$24.4$11.9105%
GAAP Operating Margin2.8%4.3%(150) bps
Adjusted Operating Margin18.2%7.4%80 bps
GAAP (Loss) Earnings Per Share (Diluted)$(0.34)$0.22(255)%
Adjusted Earnings Per Share (Diluted)1$0.52$0.4321%
Operating Cash Flow$24.1$(16.9)243%
Free Cash Flow2$19.0$(19.2)199%
Orders$307.4$158.194%

Segment Results

($ millions)Q3 2018Q3 2017

Change

Industrial
Revenue$118.7$30.0296%
Segment Operating Income$14.6$5.7156%
Segment Operating Margin12.3%18.9%(660) bps
Orders$114.9$27.3321%
Energy
Revenue$121.0$88.637%
Segment Operating Income$9.2$6.933%
Segment Operating Margin7.6%7.8%(20) bps
Orders$111.0$84.931%
Aerospace & Defense
Revenue$57.8$41.141%
Segment Operating Income$8.7$4.3102%
Segment Operating Margin15.1%10.5%460 bps
Orders$81.5$45.978%

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 CIRCORs website. The live call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. The webcast will be archived on the Companys 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 Companys 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 Companys current financial results with the Companys 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.

CIRCORs management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring the Companys 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 Companys strategy is to grow organically and through complementary acquisitions; simplify CIRCORs operations; achieve world class operational excellence; and attract and retain top talent. For more information, visit the Companys 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 EndedNine Months Ended

September 30, 2018

October 1, 2017

September 30, 2018

October 1, 2017

Net revenues$297,514$159,693$874,462$456,131
Cost of revenues212,436112,390624,829314,527
GROSS PROFIT85,07847,303249,633141,604
Selling, general and administrative expenses74,10638,120229,343116,425
Special and restructuring charges (recoveries), net2,7562,31917,202(443)
OPERATING INCOME8,2166,8643,08825,622
Other expense (income):
Interest expense, net14,1002,44539,6566,298
Other (income) expense, net(1,580)823(7,200)2,022
TOTAL OTHER EXPENSE, NET12,5203,26832,4568,320
(LOSS) INCOME BEFORE INCOME TAXES(4,304)3,596(29,368)17,302
Provision for (benefit from) income taxes2,537(21)(10,988)(57)
NET (LOSS) INCOME$(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:
Basic19,84316,50319,82916,486
Diluted19,84316,70919,82916,721
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:
Depreciation21,55610,889
Amortization36,8459,491
Bad debt expense1,078265
Loss on write down of inventory4,6321,463
Amortization of inventory fair value step-up6,600
Compensation expense of share-based plans4,3032,696
Change in fair value of contingent consideration(12,200)
Amortization of debt issuance costs2,852
Loss on sale or write down of property, plant and equipment1,30587
Loss on sale of business5,300
Changes in operating assets and liabilities, net of effects of acquisition and disposition:
Trade accounts receivable21,5108,782
Inventories4,463(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 activities23,4632,008
INVESTING ACTIVITIES
Additions to property, plant and equipment(17,030)(7,773)
Proceeds from the sale of property, plant and equipment207269
Business acquisition, working capital adjustment6,3001,467
Net cash used in investing activities(10,523)(6,037)
FINANCING ACTIVITIES
Proceeds from long-term debt199,600378,263
Payments of long-term debt(186,874)(361,325)
Debt issuance costs(727)
Dividends paid(1,879)
Proceeds from the exercise of stock options690707
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 period112,29358,279
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, 2018December 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, respectively192,110223,922
Inventories226,047244,896
Restricted cash9191,937
Prepaid expenses and other current assets84,26557,282
Total Current Assets574,675638,393
PROPERTY, PLANT AND EQUIPMENT, NET215,206217,539
OTHER ASSETS:
Goodwill504,638505,762
Intangibles, net470,722513,364
Deferred income taxes33,13022,334
Other assets14,4799,407
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 liabilities108,031170,454
Accrued compensation and benefits30,82734,734
Total Current Liabilities250,258322,517
LONG-TERM DEBT, NET802,069787,343
DEFERRED INCOME TAXES25,39726,122
PENSION LIABILITY, NET142,067150,719
OTHER NON-CURRENT LIABILITIES18,88818,124
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS EQUITY:
Common stock212212
Additional paid-in capital443,984438,721
Retained earnings253,107274,243
Common treasury stock, at cost(74,472)(74,472)
Accumulated other comprehensive loss, net of tax(48,660)(36,730)
Total Shareholders Equity574,171601,974
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY$1,812,850$1,906,799

CIRCOR INTERNATIONAL, INC. SUMMARY OF ORDERS AND BACKLOG (in millions) UNAUDITED

Three Months EndedNine 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 & Defense81.545.9200.8142.3
Industrial114.927.3388.284.8
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 & Defense173.0108.2
Industrial178.031.3
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

20172018
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR2ND QTR3RD QTRTOTAL
ORDERS
Energy$100,012$73,140$84,857$118,073$376,082$129,762$113,171$110,987$353,920
Aerospace & Defense56,41639,90245,939$52,043194,30059,79359,44181,533200,767
Industrial27,65429,88927,29646,407131,246136,607136,746114,876388,229
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 & Defense41,60143,30441,117$56,961182,98358,47757,50057,757173,734
Industrial27,39729,65130,00652,056139,110117,131131,064118,734366,929
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 & Defense3,7844,3744,33310,88423,3758,9316,9928,70924,632
Industrial4,3844,9015,6754,97219,93212,94815,03714,60942,594
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 %
Energy8.4%10.4%7.8%8.9%8.9%5.7%8.2%7.6%7.2%
Aerospace & Defense9.1%10.1%10.5%19.1%12.8%15.3%12.2%15.1%14.2%
Industrial16.0%16.5%18.9%9.6%14.3%11.1%11.5%12.3%11.6%
Adjusted Operating Margin6.3%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

20172018
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR2ND QTR3RD QTRTOTAL
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 proceeds2,8112,3752,3186,10313,6078,1413,5635,11916,823
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 equivalents65,65677,27275,627110,356110,356123,30569,03071,33471,334
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 EQUITY58%58%60%132%132%139%144%145%145%
GROSS DEBT, NET OF CASH AS % OF EQUITY43%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

20172018
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR2ND QTR3RD QTRTOTAL
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 charges4731,0671,540
Amortization of inventory step-up4,3004,3006,6006,600
Restructuring charges, net1,4583,5663416976,0629,6158441,34811,807
Acquisition amortization2,5522,5992,6944,69712,54211,79711,76711,73335,297
Acquisition depreciation2332331,8371,7351,7425,314
Special (recoveries) charges, net(2,268)(5,520)1,97813,7997,9892,8311,1561,4085,395
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 charges0.020.050.08
Amortization of inventory step-up0.250.260.330.33
Restructuring charges, net0.090.210.020.040.360.490.040.070.59
Acquisition amortization0.150.160.160.270.740.600.590.591.77
Acquisition depreciation0.010.010.090.090.090.27
Special (recoveries) charges, net(0.14)(0.33)0.120.800.470.140.060.070.27
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

20172018
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR2ND QTR3RD QTRTOTAL
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)724215,6185,6765,8797,646(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), net2,2685,520(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

20172018
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL1ST QTR2ND QTR3RD QTRTOTAL
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 charges4731,0671,540
Amortization of inventory step-up4,3004,3006,6006,600
Restructuring charges, net1,4583,5663416976,0629,6158441,34811,807
Acquisition amortization2,5522,5992,6944,69712,54211,79711,76711,73335,297
Acquisition depreciation2332331,8371,7351,7425,314
Special (recoveries) charges, net(2,268)(5,520)1,97813,7997,9892,8311,1561,4085,395
ADJUSTED OPERATING INCOME$9,096$12,049$11,877$18,672$51,694$19,773$24,821$24,447$69,041
GAAP OPERATING MARGIN5.1%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, net1.0%2.4%0.2%0.3%0.9%3.5%0.3%0.5%1.4%
Acquisition amortization1.8%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 MARGIN6.3%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 QTR2ND QTR3RD QTR4TH QTRTOTAL
ORDERS – Recast
Energy$100,012$73,140$84,857$118,073$376,082
Aerospace & Defense56,41639,90245,93952,043194,300
Industrial27,65429,88927,29646,407131,246
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 & Defense8,25524,3759,7166,81649,162
Industrial77,94476,86687,37860,193302,381
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 & Defense64,67164,27755,65558,859243,462
Industrial105,598106,755114,674106,601433,628
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 & Defense41,60143,30441,11756,961182,983
Industrial27,39729,65130,00652,056139,110
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 & Defense10,72817,04411,2086,91845,898
Industrial85,26483,31085,60472,489326,667
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 & Defense52,32960,34852,32563,879228,881
Industrial112,661112,961115,610124,545465,777
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 QTR2ND QTR3RD QTR4TH QTRTOTAL
SEGMENT OPERATING INCOME – Recast
Energy$6,407$8,170$6,936$8,618$30,131
Aerospace & Defense3,7844,3744,33310,88423,375
Industrial4,3844,9015,6754,97219,932
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 & Defense1,4883,6612,201(367)6,983
Industrial8,8337,7094,365(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 & Defense5,2728,0356,53410,51730,358
Industrial13,21712,61010,0403,55839,425
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
Energy6.9%9.6%8.2%8.6%8.3%
Aerospace & Defense10.1%13.3%12.5%16.5%13.3%
Industrial11.7%11.2%8.7%2.9%8.5%
Corporate expenses(2.1)%(2.0)%(1.8)%(1.9)%(2.0)%
Total7.5%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

IndustrialEnergyAerospace & Defense
ORDERSReported

Pro Forma Combined

Reported

Pro Forma Combined

Reported

Pro Forma Combined

$%$%$%$%$%$%
201727,296114,67484,857106,25845,93955,655
Organic7,85329%2,0272%7,0688%7,1427%24,47353%26,09247%
Acquisitions79,915293%%19,14523%%11,33525%%
Foreign Exchange(188)(1)%(1,825)(2)%(83)%(2,413)(2)%(214)%(214)%
Total Change87,580321%202%26,13031%4,7294%35,59477%25,87846%
2018114,876114,876110,987110,98781,53381,533
IndustrialEnergyAerospace & Defense
NET REVENUEReported

Pro Forma Combined

Reported

Pro Forma Combined

Reported

Pro Forma Combined

$%$%$%$%$%$%
201730,006115,61188,569106,35841,11752,325
Organic(308)(1)%4,9284%16,18718%15,55915%5,93514%5,58911%
Acquisitions89,280298%%16,57919%%10,86226%%
Foreign Exchange(244)(1)%(1,805)(2)%(311)%(893)(1)%(157)%(157)%
Total Change88,728296%3,1233%32,45537%14,66614%16,64040%5,43210%
2018118,734118,734121,023121,02357,75757,757

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

CIRCOR
ORDERSReported

Pro Forma Combined

$%$%
2017158,092276,587
Organic39,39425%35,26113%
Acquisitions110,39570%%
Foreign Exchange(485)%(4,452)(2)%
Total Change149,30494%30,80910%
2018307,396307,396
CIRCOR
NET REVENUEReported

Pro Forma Combined

$%$%
2017159,693274,294
Organic21,81514%26,07610%
Acquisitions116,72173%%
Foreign Exchange(715)%(2,856)(1)%
Total Change137,82186%23,2208%
2018297,514297,514

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

2017
1ST QTR2ND QTR3RD QTR4TH QTRTOTAL
FLUID HANDLING GAAP OPERATING INCOME (LOSS)$4,359$19,738$2,241$3,129$29,467
LESS:
Asbestos costs2,6902,5172,3791,2748,860
Impairment charges
Exited businesses65(26)(47)(8)
Acquisition amortization7968108182,424
Restructuring and other special charges (recoveries)2,328(10,589)636(5,372)(12,997)
Stay bonus2,3002,300
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.

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