Document
false0001091883 0001091883 2020-08-07 2020-08-07
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): August 7, 2020
logoa02.jpg

CIRCOR INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-14962
04-3477276
(State or other jurisdiction
of incorporation or organization)
 
(Commission File Number)
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
 
 
 
 
30 CORPORATE DRIVE, SUITE 200

 
 
 

Burlington,
MA
01803-4238
(Address of principal executive offices and Zip Code)
(Zip Code)
 
 
(781) 270-1200
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act: 
 
 
 
 
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, par value logoa02.jpg

CIRCOR INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
001-14962
04-3477276
(State or other jurisdiction
of incorporation or organization)
 
(Commission File Number)
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
 
 
 
 
30 CORPORATE DRIVE, SUITE 200

 
 
 

Burlington,
MA
01803-4238
(Address of principal executive offices and Zip Code)
(Zip Code)
 
 
(781) 270-1200
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act: 
 
 
 
 
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, par value $0.01 per share
 
CIR
 
New York Stock Exchange
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company  
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  




Item 2.02. Results of Operations and Financial Condition.

By press release dated August 7, 2020, CIRCOR International, Inc. (the “Company”) announced its financial results for the three months ended June 28, 2020. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Item 2.02 of Form 8-K and the Exhibits 99.1 and 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by special reference in such filing.

The Company’s management evaluates segment operating performance using operating income before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition-related activities; restructuring and other costs/income including costs arising from facility consolidations and gains and losses from the sale of product lines; and amortization of acquisition-related intangible assets. The Company also refers to this measure as segment operating income or adjusted operating income. The Company uses this measure because it helps management understand and evaluate the segments’ core operating results and facilitates comparison of performance for determining incentive compensation achievement.

In the press release and accompanying supplemental information, the Company uses the following non-GAAP financial measures: adjusted operating income, adjusted operating margin, free cash flow, adjusted net income, adjusted earnings per share (EPS), EBITDA, adjusted EBITDA, net debt, combined financial information, and organic revenue, described as follows:

Adjusted operating income is defined as GAAP operating income excluding intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains.

Adjusted operating margin is defined as adjusted operating income divided by net revenues.

Free cash flow is defined as net cash flow from operating activities, less net capital expenditures. Management of this Company believes free cash flow is an important measure of its liquidity as well as its ability to service long-term debt, fund future growth and to provide a return to shareholders. We also believe this free cash flow definition does not have any material limitations.

Adjusted net income is defined as net income, excluding intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains, net of tax.
  
Adjusted EPS is defined as earnings per common share diluted, excluding the per share impact of intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains, net of tax.
  
EBITDA is defined as net income plus net interest expense, provision for income taxes, depreciation and amortization.
  
Adjusted EBITDA is defined as EBITDA plus the impact of special charges/gains including the impact of restructuring related inventory charges, cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, and impairments, net of tax.

Net Debt is defined at total debt minus cash and cash equivalents.

Organic growth - the change in revenue and orders excluding the impact of acquisitions, divestitures and changes in foreign exchange rates.

Our management uses these non-GAAP measures to gain an understanding of our comparative operating performance (when comparing such results with previous periods or forecasts). 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 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 of 5 to 20 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.
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 peers and 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 incentive 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 our non-GAAP financial measures to the most directly comparable GAAP financial measure is provided in the supplemental information table titled “Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms” which is included as an attachment to the press release in Exhibit 99.1.


Item 9.01    Financial Statements and Exhibits. 
(d)
Exhibits.

Exhibit No.
Description
Press Release regarding Earnings
Second Quarter 2020 Investor Review Presentation
              


    





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
 
CIRCOR INTERNATIONAL, INC.
August 7, 2020
/s/ Abhi Khandelwal
 
Abhi Khandelwal
 
Senior Vice President and Chief Financial Officer








 
CIR
 
New York Stock Exchange
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company  
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  




Item 2.02. Results of Operations and Financial Condition.

By press release dated August 7, 2020, CIRCOR International, Inc. (the “Company”) announced its financial results for the three months ended June 28, 2020. The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Item 2.02 of Form 8-K and the Exhibits 99.1 and 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by special reference in such filing.

The Company’s management evaluates segment operating performance using operating income before certain charges/credits to cost of revenues and selling, general and administrative expenses, principally associated with acquisition-related activities; restructuring and other costs/income including costs arising from facility consolidations and gains and losses from the sale of product lines; and amortization of acquisition-related intangible assets. The Company also refers to this measure as segment operating income or adjusted operating income. The Company uses this measure because it helps management understand and evaluate the segments’ core operating results and facilitates comparison of performance for determining incentive compensation achievement.

In the press release and accompanying supplemental information, the Company uses the following non-GAAP financial measures: adjusted operating income, adjusted operating margin, free cash flow, adjusted net income, adjusted earnings per share (EPS), EBITDA, adjusted EBITDA, net debt, combined financial information, and organic revenue, described as follows:

Adjusted operating income is defined as GAAP operating income excluding intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains.

Adjusted operating margin is defined as adjusted operating income divided by net revenues.

Free cash flow is defined as net cash flow from operating activities, less net capital expenditures. Management of this Company believes free cash flow is an important measure of its liquidity as well as its ability to service long-term debt, fund future growth and to provide a return to shareholders. We also believe this free cash flow definition does not have any material limitations.

Adjusted net income is defined as net income, excluding intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains, net of tax.
  
Adjusted EPS is defined as earnings per common share diluted, excluding the per share impact of intangible amortization from acquisitions completed subsequent to December 31, 2011, depreciation and cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, the impact of restructuring related inventory, impairment and special charges or gains, net of tax.
  
EBITDA is defined as net income plus net interest expense, provision for income taxes, depreciation and amortization.
  
Adjusted EBITDA is defined as EBITDA plus the impact of special charges/gains including the impact of restructuring related inventory charges, cost of goods sold charges related to step-up valuations from acquisitions completed subsequent to December 31, 2016, and impairments, net of tax.

Net Debt is defined at total debt minus cash and cash equivalents.

Organic growth - the change in revenue and orders excluding the impact of acquisitions, divestitures and changes in foreign exchange rates.

Our management uses these non-GAAP measures to gain an understanding of our comparative operating performance (when comparing such results with previous periods or forecasts). 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 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 of 5 to 20 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.
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 peers and 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 incentive 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 our non-GAAP financial measures to the most directly comparable GAAP financial measure is provided in the supplemental information table titled “Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms” which is included as an attachment to the press release in Exhibit 99.1.


Item 9.01    Financial Statements and Exhibits. 
(d)
Exhibits.

Exhibit No.
Description
Press Release regarding Earnings
Second Quarter 2020 Investor Review Presentation
              


    





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
 
CIRCOR INTERNATIONAL, INC.
August 7, 2020
/s/ Abhi Khandelwal
 
Abhi Khandelwal
 
Senior Vice President and Chief Financial Officer









Exhibit






CIRCOR Reports Second-Quarter 2020 Financial Results


Burlington, MA - August 7, 2020

CIRCOR International, Inc. (NYSE: CIR), one of the world’s leading providers of mission critical flow control products and services for the Industrial and Aerospace & Defense markets, today announced GAAP and adjusted financial results for the second quarter ended June 28, 2020.

Second Quarter 2020 Overview
Orders of $193 million produced a book-to-bill ratio of 1.04 and backlog increase of $7 million
Revenue of $186 million, down 24% reported, down 14% organically
Aerospace & Defense revenue of $62 million, down 4% reported, down 3% organically
Industrial revenue of $124 million, down 32% reported, down 19% organically
GAAP loss per share of $(1.68); Adjusted earnings per share of $0.22
GAAP operating margin of (0.7%); Adjusted operating margin of 8.5%
Aerospace & Defense operating margin of 21.1%, up 500 bps versus last year
Completed exit from upstream Oil & Gas: Divested loss-making Distributed Valves
All manufacturing facilities operating at level of demand
Remain on track to achieve $45 million 2020 cost reduction plan
Gross debt reduction of $156 million and net debt reduction of $205 million over last 12 months

“As we continue to navigate the COVID-19 environment, CIRCOR’s top priority remains the health and safety of our employees, customers and suppliers,” said Scott Buckhout, CIRCOR’s President and CEO. “I would like to thank the entire CIRCOR team for doing a remarkable job serving our customers during this challenging time. I am pleased to report that as of today, all of our facilities are operational, with limited direct disruption from the COVID-19 pandemic.”
Mr. Buckhout continued, “Our team has been effectively executing and building upon the 18-month strategic plan that we laid out last summer. Consistent with this plan, we completed our exit from upstream Oil & Gas, remain on track to launch 45 new products this year, and have expanded our planned 2020 cost actions to better align our cost structure with the current market environment.”
“Looking ahead, we continue to focus on creating long-term value for shareholders by positioning the Company for growth, expanding margins, generating strong free cash flow, and de-levering the balance sheet.”



    





1




Selected Preliminary Consolidated Results
($ millions except EPS)
 
Q2 2020
 
Q2 2019
 
Change
 
Q2 YTD 2020
 
Q2 YTD 2019
 
Change
Revenue
 
$
186.1

 
$
245.8

 
-24
 %
 
$
378.3

 
$
484.6

 
-22
 %
Revenue - excluding divested businesses 1
 
186.1

 
219.7

 
-15
 %
 
373.4

 
428.7

 
-13
 %
GAAP operating (loss) income
 
(1.4
)
 
12.0

 
-112
 %
 
(74.8
)
 
29.8

 
-351
 %
Adjusted operating income 2
 
15.9

 
28.6

 
-44
 %
 
27.0

 
52.0

 
-48
 %
GAAP operating margin
 
(0.7
)%
 
4.9
%
 
-560 bps

 
(19.8
)%
 
6.1
%
 
-2590 bps

Adjusted operating margin 2
 
8.5
 %
 
11.6
%
 
-310 bps

 
7.1
 %
 
10.7
%
 
-360 bps

Adjusted operating margin ex divestitures 1&2
 
8.5
 %
 
10.6
%
 
-210 bps

 
7.2
 %
 
9.5
%
 
-230 bps

GAAP loss per share (diluted)
 
$
(1.68
)
 
$
(0.93
)
 
-81
 %
 
$
(5.66
)
 
$
(1.16
)
 
-388
 %
Adjusted earnings per share (diluted) 2
 
$
0.22

 
$
0.65

 
-66
 %
 
$
0.42

 
$
1.17

 
-64
 %
Operating cash flow
 
(24.9
)
 
12.3

 
-302
 %
 
(48.8
)
 
(10.0
)
 
-388
 %
Free cash flow 3
 
(28.4
)
 
9.3

 
-405
 %
 
(55.8
)
 
(16.7
)
 
-234
 %
Orders
 
192.6

 
258.0

 
-25
 %
 
401.1

 
518.0

 
-23
 %
Orders - excluding divested businesses 1
 
192.6

 
233.6

 
-18
 %
 
396.7

 
462.9

 
-14
 %

Segment Results
($ millions)

Q2 2020

Q2 2019

Change

Q2 YTD 2020

Q2 YTD 2019

Change
Aerospace & Defense












Revenue

$
62.2


$
64.7


-4
 %

$
127.7


$
125.9


1
 %
Segment operating income

13.1


10.4


26
 %

25.6


19.8


29
 %
Segment operating margin

21.1
%

16.1
%

 500 bps


20.1
%

15.7
%

440 bps

Orders

$
76.6


$
93.4


-18
 %

$
148.6


$
181.5


-18
 %













Industrial












Revenue

$
123.8


$
181.1


-32
 %

$
250.5


$
358.7


-30
 %
Revenue - excluding divested businesses 1

123.8


155.0


-20
 %

245.6


302.8


-19
 %
Segment operating income 2

12.4


26.2


-53
 %

17.6


48.8


-64
 %
Segment operating margin 2

10.0
%

14.5
%

-450 bps


7.0
%

13.6
%

-660 bps

Orders

$
116.0


$
164.6


-30
 %

$
252.5


$
336.5


-25
 %
Orders - excluding divested businesses 1

116.0


140.2


-17
 %

248.0


281.4


-12
 %


1.
Orders and revenue excluding divested businesses are non-GAAP measures and are calculated by subtracting the orders and revenues generated by the divested businesses during the periods prior to their divestiture from reported orders and revenues. Divested businesses include Reliability Services, Spence/Nicholson and Instrumentation & Sampling (all Industrial) which were sold before June 28, 2020.
2.
Adjusted consolidated and segment results for Q2 2020 exclude net loss from discontinued operations of $43.8 million and net loss from non-cash acquisition-related intangible amortization, special and restructuring charges totaling $17.3 million ($5.3 million income, net of tax). These charges include: (i) $11.7 million for non-cash acquisition-related intangible amortization and depreciation expense; (ii) $4.6 million of professional fees associated with an unsolicited tender offer to acquire all outstanding shares of the Company’s common stock; and (iii) $1.0 million of other special and restructuring charges. Adjusted consolidated and segment results for Q2 2019 exclude net loss from discontinued operations of $17.2 million and net loss from non-cash acquisition-related intangible amortization, special and restructuring charges totaling $16.6 million ($14.3 million, net of tax). These charges include: (i) $12.4

2



million for non-cash acquisition-related intangible amortization expense and amortization of the step-up in fixed asset values; (ii) $2.1 million of professional fees associated with an unsolicited tender offer to acquire all outstanding shares of the Company’s common stock;(iii) $1.4 million related to the divestiture of our Reliability Services business; and (iv) $0.7 million of other special and restructuring charges.
3.
Free cash flow is a non-GAAP financial measure and is calculated by subtracting GAAP capital expenditures, net of proceeds from asset sales, from GAAP operating cash flow.


Conference Call Information
CIRCOR International will hold a conference call to review its financial results at 9:00 a.m. ET today, August 7, 2020. To listen to the live conference call and view the accompanying presentation slides, please visit “Webcasts & Presentations” in the “Investors” portion of CIRCOR’s website. The live call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. The webcast will be archived on the Company’s website for one year.
Use of Non-GAAP Financial Measures
Adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share (diluted), EBITDA, adjusted EBITDA, net debt, free cash flow and organic growth (and such measures further excluding discontinued operations) are non-GAAP financial measures. These non-GAAP financial measures are used by management in our financial and operating decision making because we believe they reflect our ongoing business and facilitate period-to-period comparisons. We believe these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company’s current operating performance and future prospects in the same manner as management does, if they so choose. These non-GAAP financial measures also allow investors and others to compare the Company’s current financial results with the Company’s past financial results in a consistent manner. For example:
We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to these restructuring activities are not indicative of our normal operating costs.
We exclude certain acquisition-related costs, including significant transaction costs and amortization of inventory and fixed-asset step-ups and the related tax effects. We exclude these costs because we do not believe they are indicative of our normal operating costs.
We exclude the expense and tax effects associated with the non-cash amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives up to 25 years. Exclusion of the non-cash amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.
We also exclude certain gains/losses and related tax effects, which are either isolated or cannot be expected to occur again with any predictability, and that we believe are not indicative of our normal operating gains and losses. For example, we exclude gains/losses from items such as the sale of a business, significant litigation-related matters and lump-sum pension plan settlements.
We exclude the results of discontinued operations.
We exclude goodwill impairment charges.
Due to the significance of recently sold businesses and to provide a comparison of changes in our orders and revenue, we also discuss these changes on an “organic” basis. Organic is calculated assuming the divestitures completed prior to June 28, 2020 were completed on January 1, 2019 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

3



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 certain statements that are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “Act”). The words “may,” “hope,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” and other expressions, which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking statements, although not all forward-looking statements are accompanied by such words. We believe that it is important to communicate our future expectations to our stockholders, and we, therefore, make forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that we are not able to accurately predict or control and our actual results may differ materially from the expectations we describe in our forward-looking statements. Forward-looking statements, including statements about outlook for the third quarter, the expected and potential direct or indirect impacts of the COVID-19 pandemic on our business, the realization of cost reductions from restructuring activities and expected synergies, the number of new product launches and future cash flows from operating activities, involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the duration and severity of the COVID-19 pandemic and its impact on the global economy; changes in the price of and demand for oil and gas in both domestic and international markets; our ability to successfully integrate acquired businesses; any adverse changes in governmental policies; variability of raw material and component pricing; changes in our suppliers’ performance; fluctuations in foreign currency exchange rates; changes in tariffs or other taxes related to doing business internationally; our ability to hire and retain key personnel; our ability to operate our manufacturing facilities at efficient levels including our ability to prevent cost overruns and reduce costs; our ability to generate increased cash by reducing our working capital; our prevention of the accumulation of excess inventory; our ability to successfully implement our divestiture; restructuring or simplification strategies; fluctuations in interest rates; our ability to successfully defend product liability actions; as well as the uncertainty associated with the current worldwide economic conditions and the continuing impact on economic and financial conditions in the United States and around the world, including as a result of COVID-19, natural disasters, terrorist attacks, current Middle Eastern conflicts and other similar matters. BEFORE MAKING ANY INVESTMENT DECISIONS REGARDING OUR COMPANY, WE STRONGLY ADVISE YOU TO READ FURTHER ABOUT THESE AND OTHER RISK FACTORS SET FORTH IN THE “RISK FACTORS” OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2019, WHICH IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") AND IS AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV, AND SUBSEQUENT REPORTS ON FORMS 10-Q, WHICH CAN BE ACCESSED UNDER THE "INVESTORS" LINK OF OUR WEBSITE AT WWW.CIRCOR.COM. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.


4



About CIRCOR International, Inc.
CIRCOR International is one of the world’s leading providers of mission critical flow control products and services for the Industrial and Aerospace & Defense markets. The Company has a product portfolio of market-leading brands serving its customers’ most demanding applications.  CIRCOR markets its solutions directly and through various sales partners to more than 14,000 customers in approximately 100 countries.  The Company has a global presence with approximately 3,200 employees and is headquartered in Burlington, Massachusetts. For more information, visit the Company’s investor relations website at http://investors.circor.com.

Contact:
Abhi Khandelwal
Senior Vice President Finance & Chief Financial Officer
CIRCOR International
(781) 270-1200



5




CIRCOR INTERNATIONAL, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)

 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
 
 
Q2 2020
 
Q2 2019
 
Q2 2020
 
Q2 2019
 
 
 
 
 
 
 
 
 
 
 
Net revenues
 
$
186,066

 
$
245,768

 
$
378,279

 
$
484,623

Cost of revenues
 
127,105

 
163,851

 
259,275

 
328,292

Gross profit
 
58,961

 
81,917

 
119,004

 
156,331

Selling, general and administrative expenses
 
54,738

 
65,682

 
114,296

 
130,188

Goodwill impairment charge
 

 

 
116,182

 

Special and restructuring (charges) recoveries, net
 
5,607

 
4,215

 
(36,685
)
 
(3,627
)
Operating (loss) income
 
(1,384
)
 
12,020

 
(74,789
)
 
29,770

Other expense (income):
 
 
 
 
 
 
 
 
Interest expense (income), net
 
8,486

 
12,947

 
17,497

 
26,041

Other income, net
 
2,144

 
153

 
(536
)
 
(1,995
)
Total other expense, net
 
10,630

 
13,100

 
16,961

 
24,046

(Loss) income from continuing operations before income taxes
 
(12,014
)
 
(1,080
)
 
(91,750
)
 
5,724

(Benefit from) provision for income taxes
 
(21,769
)
 
284

 
(13,395
)
 
5,993

Income (loss) from continuing operations, net of tax
 
9,755

 
(1,364
)
 
(78,355
)
 
(269
)
Loss from discontinued operations, net of tax
 
(43,847
)

(17,156
)

(34,685
)

(22,884
)
Net loss
 
$
(34,092
)

$
(18,520
)
 
$
(113,040
)

$
(23,153
)
 
 
 
 
 
 
 
 
 
 
 
Basic income (loss) per common share:
 
 
 
 
 
 
 
 
Basic from continuing operations
 
$
0.49

 
$
(0.07
)
 
$
(3.93
)
 
$
(0.01
)
Basic from discontinued operations
 
$
(2.19
)
 
$
(0.86
)
 
$
(1.74
)
 
$
(1.15
)
Net loss
 
$
(1.71
)
 
$
(0.93
)
 
$
(5.66
)
 
$
(1.16
)
Diluted income (loss) per common share:
 
 
 
 
 
 
 
 
Diluted from continuing operations
 
$
0.48

 
$
(0.07
)
 
$
(3.93
)
 
$
(0.01
)
Diluted from discontinued operations
 
$
(2.16
)
 
$
(0.86
)
 
$
(1.74
)
 
$
(1.15
)
Net loss
 
$
(1.68
)
 
$
(0.93
)
 
$
(5.66
)
 
$
(1.16
)
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
 
19,987

 
19,906

 
19,962

 
19,888

Diluted
 
 
20,286

 
19,906

 
19,962

 
19,888











6




CIRCOR INTERNATIONAL, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands) (unaudited)
 
 
 
 
Six Months Ended
 
 
 
 
June 28, 2020
 
June 30, 2019
OPERATING ACTIVITIES
 
 
 
 
Net loss
 
$
(113,040
)
 
$
(23,153
)
Loss from discontinued operations, net of income taxes
 
(34,685
)
 
(22,884
)
Loss from continuing operations
 
(78,355
)
 
(269
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
     Depreciation
 
10,079

 
11,067

     Amortization
 
21,492

 
24,317

     Provision for bad debt expense
 
7,768

 
21

     Loss on write-down of inventory
 
352

 
961

     Compensation expense for share-based plans
 
2,290

 
2,976

     Amortization of debt issuance costs
 
5,488

 
1,997

     Loss on sale or write-down of property, plant and equipment
 

 
72

     Goodwill impairment charge
 
116,182

 

     Gain on sale of businesses
 
(54,253
)
 
(9,165
)
Changes in operating assets and liabilities, net of effects of acquisition and disposition:
 
 
 
     Trade accounts receivable
 
768

 
17,867

     Inventories
 
(12,370
)
 
(12,868
)
     Prepaid expenses and other assets
 
(25,264
)
 
(11,592
)
     Accounts payable, accrued expenses and other liabilities
 
(31,475
)
 
(30,465
)
     Net cash (used in) provided by continuing operating activities
(37,298
)
 
(5,081
)
     Net cash used in discontinued operating activities
(11,532
)
 
(4,958
)
Net cash used in operating activities
 
(48,830
)

(10,039
)
INVESTING ACTIVITIES
 
 
 
 
Additions to property, plant and equipment
 
(6,815
)
 
(6,358
)
Proceeds from sale of property, plant and equipment
 
(142
)
 
858

Proceeds from the sale of business
 
169,375

 
82,203

Proceeds from collection of beneficial interest
 
1,339

 

Net cash provided by continuing investment activities
 
163,757

 
76,703

Net cash provided by (used in) discontinued investing activities
 
(10,071
)
 
(1,184
)
Net cash provided by investing activities
 
153,686

 
75,519

FINANCING ACTIVITIES
 
 
 
 
Proceeds from long-term debt
 
129,325

 
149,500

Payments of long-term debt
 
(191,141
)
 
(208,300
)
Proceeds from the exercise of stock options
 
118

 
106

Net cash used in continuing financing activities
(61,698
)
 
(58,694
)
Net cash used in financing activities
 
(61,698
)
 
(58,694
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
(2,421
)
 
793

INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
40,737

 
7,579

Cash, cash equivalents, and restricted cash at beginning of period
85,727

 
69,525

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD
$
126,464

 
$
77,104


7



CIRCOR INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets
(in thousands) (unaudited)
 
 
June 28, 2020
 
December 31, 2019
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
125,421

 
$
84,531

Trade accounts receivable, less allowance for doubtful accounts of $10,877 and $3,086 at June 28, 2020 and December 31, 2019, respectively
117,131

 
125,422

Inventories
148,383

 
137,309

Prepaid expenses and other current assets
94,969

 
66,664

Assets held for sale

 
161,193

Total Current Assets
 
485,904

 
575,119

PROPERTY, PLANT AND EQUIPMENT, NET
167,194

 
172,179

OTHER ASSETS:
 
 
 
Goodwill
156,654

 
271,893

Intangibles, net
363,087

 
385,542

Deferred income taxes
53,357

 
30,852

Other assets
34,171

 
35,360

TOTAL ASSETS
$
1,260,367

 
$
1,470,945

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable
$
68,155

 
$
79,399

Accrued expenses and other current liabilities
102,717

 
94,169

Accrued compensation and benefits
27,318

 
19,518

Liabilities held for sale

 
43,289

Total Current Liabilities
 
198,190

 
236,375

LONG-TERM DEBT
578,613

 
636,297

DEFERRED INCOME TAXES
20,229

 
21,425

PENSION LIABILITY, NET
145,138

 
146,801

OTHER NON-CURRENT LIABILITIES
44,846

 
38,636

COMMITMENTS AND CONTINGENCIES
 
 
 
SHAREHOLDERS' EQUITY:
 
 
 
Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding

 

Common stock, $0.01 par value; 29,000,000 shares authorized; 19,994,356 and 19,912,362 shares issued and outstanding at June 28, 2020 and December 31, 2019, respectively
214

 
213

Additional paid-in capital
449,576

 
446,657

(Accumulated deficit) retained earnings
(13,982
)
 
99,280

Common treasury stock, at cost (1,372,488 shares at June 28, 2020 and December 31, 2019)
(74,472
)
 
(74,472
)
Accumulated other comprehensive loss, net of tax
(87,985
)
 
(80,267
)
Total Shareholders' Equity
 
273,351

 
391,411

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
1,260,367

 
$
1,470,945




8




CIRCOR INTERNATIONAL, INC.
Summary of Orders and Backlog
(in millions) (unaudited)
 
 
 
 
Three Months Ended

Six Months Ended
 
 
 
 
Q2 2020

Q2 2019

Q2 2020

Q2 2019
 
 
 
 







ORDERS (1)










Aerospace & Defense

$
76.6


$
93.4


$
148.6


$
181.5



Industrial

116.0


164.6


252.5


336.5



Total Orders

$
192.6


$
258.0


$
401.1


$
518.0



























Q2 2020

Q2 2019




BACKLOG (2)










Aerospace & Defense

$
214.2


$
235.0









Industrial

217.8


238.1









Total Backlog

$
432.0


$
473.1


















Note 1: Orders do not include the foreign exchange impact due to the re-measurement of customer backlog amounts denominated in foreign currencies. Orders for the six months ended June 28, 2020 include orders from businesses divested prior to June 28, 2020 of $4.5 million. Orders for the three months ended June 30, 2019 include orders from businesses divested of $24.4 million ($55.1 million for the six months ended June 30, 2019). Divested businesses are Reliability Services, Spence/Nicholson and Instrumentation and Sampling, all in the Industrial segment.











Note 2: Backlog includes unshipped customer orders for which revenue has not been recognized. Backlog at Q2 2019 includes $11.3 million for Industrial related to divested businesses.


9



CIRCOR INTERNATIONAL, INC.
Segment Information
(in thousands, except percentages) (unaudited)
















2019
2020
As Reported

1ST QTR
2ND QTR
3RD QTR
4TH QTR
TOTAL
1ST QTR
2ND QTR
TOTAL
ORDERS











Aerospace & Defense

$
88,107

$
93,405

$
63,968

$
68,459

$
313,939

$
72,031

$
76,616

$
148,647


Industrial


171,834

164,642

158,986

168,091

663,553

136,443

116,023

252,466



Total

$
259,941

$
258,047

$
222,954

$
236,550

$
977,492

$
208,474

$
192,639

$
401,113













NET REVENUES










Aerospace & Defense

$
61,240

$
64,694

$
67,621

$
79,070

$
272,625

$
65,493

$
62,241

$
127,734


Industrial


177,615

181,074

169,431

163,568

691,688

126,720

123,825

250,545



Total

$
238,855

$
245,768

$
237,052

$
242,638

$
964,313

$
192,213

$
186,066

$
378,279













SEGMENT OPERATING INCOME










Aerospace & Defense

$
9,374

$
10,443

$
13,564

$
19,099

$
52,480

$
12,494

$
13,142

$
25,636


Industrial


22,581

26,174

21,278

20,757

90,790

5,169

12,406

17,575


Corporate expenses

(8,522
)
(8,028
)
(9,248
)
(7,671
)
(33,469
)
(6,588
)
(9,664
)
(16,252
)


Total

$
23,433

$
28,589

$
25,594

$
32,185

$
109,801

$
11,075

$
15,884

$
26,959













SEGMENT OPERATING MARGIN %









Aerospace & Defense

15.3
%
16.1
%
20.1
%
24.2
%
19.2
%
19.1
%
21.1
%
20.1
%

Industrial


12.7
%
14.5
%
12.6
%
12.7
%
13.1
%
4.1
%
10.0
%
7.0
%


Total

9.8
%
11.6
%
10.8
%
13.3
%
11.4
%
5.8
%
8.5
%
7.1
%
















2019
2020
Results of Divested Businesses (1)

1ST QTR
2ND QTR
3RD QTR
4TH QTR
TOTAL
1ST QTR
2ND QTR
TOTAL
ORDERS - Industrial

$
30,611

$
24,448

$
22,090

$
18,047

$
95,196

$
4,449

$

$
4,449

NET REVENUES - Industrial

$
29,787

$
26,101

$
20,697

$
18,602

$
95,187

$
4,900

$

$
4,900

SEGMENT OP. INC. - Industrial

$
6,217

$
5,229

$
2,677

$
3,166

$
17,289

$

$

$





10



CIRCOR INTERNATIONAL, INC.
Supplemental Information Regarding Divested Businesses
(in thousands, except percentages) (unaudited)
 




2019
2020
 
Results Excluding Divested Businesses (1)

1ST QTR
2ND QTR
3RD QTR
4TH QTR
TOTAL
1ST QTR
2ND QTR
TOTAL
 
ORDERS










 

Aerospace & Defense

$
88,107

$
93,405

$
63,968

$
68,459

$
313,939

$
72,031

$
76,616

$
148,647

 

Industrial


141,223

140,194

136,896

150,044

568,357

131,994

116,023

248,017

 


Total

$
229,330

$
233,599

$
200,864

$
218,503

$
882,296

$
204,025

$
192,639

$
396,664

 












 
NET REVENUES









 

Aerospace & Defense

$
61,240

$
64,694

$
67,621

$
79,070

$
272,625

$
65,493

$
62,241

$
127,734

 

Industrial


147,828

154,973

148,734

144,966

596,501

121,820

123,825

245,645

 


Total

$
209,068

$
219,667

$
216,355

$
224,036

$
869,126

$
187,313

$
186,066

$
373,379

 












 
SEGMENT OPERATING INCOME









 

Aerospace & Defense

$
9,374

$
10,443

$
13,564

$
19,099

$
52,480

$
12,494

$
13,142

$
25,636

 

Industrial


16,364

20,945

18,601

17,591

73,501

5,169

12,406

17,575

 

Corporate expenses

(8,522
)
(8,028
)
(9,248
)
(7,671
)
(33,469
)
(6,588
)
(9,664
)
(16,252
)
 


Total

$
17,216

$
23,360

$
22,917

$
29,019

$
92,512

$
11,075

$
15,884

$
26,959

 












 
SEGMENT OPERATING MARGIN %








 

Aerospace & Defense

15.3
%
16.1
%
20.1
%
24.2
%
19.2
%
19.1
%
21.1
%
20.1
%
 

Industrial


11.1
%
13.5
%
12.5
%
12.1
%
12.3
%
4.2
%
10.0
%
7.2
%
 


Total

8.2
%
10.6
%
10.6
%
13.0
%
10.6
%
5.9
%
8.5
%
7.2
%
 












 
(1) Divested businesses are related to the Industrial Segment and include Reliability Services, Spence/Nicholson and Instrumentation & Sampling. Engineered Valves and Distributed Valves are discontinued operations and not reflected in the As Reported figures in accordance with US GAAP.
 
 


11



CIRCOR INTERNATIONAL, INC.
Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms
(in thousands, except percentages) (unaudited)






2019
2020


1ST QTR
2ND QTR
3RD QTR
4TH QTR
TOTAL
1ST QTR
2ND QTR
TOTAL
Net Cash (Used In) Provided By Operating Activities

$
(22,378
)
$
12,339

$
9,128

$
16,822

$
15,911

$
(23,947
)
$
(24,883
)
$
(48,830
)

Less: Capital expenditures, net of sale proceeds (a)

3,689

2,995

(963
)
(1,535
)
4,186

3,412

3,527

6,939


FREE CASH FLOW

$
(26,067
)
$
9,344

$
10,091

$
18,357

$
11,725

$
(27,359
)
$
(28,410
)
$
(55,769
)


























Gross Debt


$
753,950

$
748,250

$
659,100

$
653,850

$
653,850

$
602,288

$
592,038

$
592,038


Less: Cash & Cash equivalents

73,619

76,082

69,225

84,531

84,531

170,861

125,421

125,421


NET DEBT

$
680,331

$
672,168

$
589,875

$
569,319

$
569,319

$
431,427

$
466,617

$
466,617















TOTAL SHAREHOLDERS' EQUITY

$
516,177

$
494,899

$
375,388

$
391,411

$
391,411

$
290,845

$
273,351

$
273,351














GROSS DEBT AS % OF EQUITY

146
%
151
%
176
%
167
%
167
%
207
%
217
%
217
%
NET DEBT AS % OF EQUITY

132
%
136
%
157
%
145
%
145
%
148
%
171
%
171
%













(a) includes capital expenditures, net of sales proceeds of discontinued operations




























CIRCOR INTERNATIONAL, INC.

12



Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms
(in thousands, except percentages) (unaudited)




2019
2020

1ST QTR
2ND QTR
3RD QTR
4TH QTR
TOTAL
1ST QTR
2ND QTR
TOTAL
NET (LOSS) INCOME
$
(4,633
)
$
(18,520
)
$
(112,338
)
$
1,555

$
(133,936
)
$
(78,948
)
$
(34,092
)
$
(113,040
)

LESS:











Restructuring related inventory charges (recoveries)
325


(1,145
)

(820
)
(602
)

(602
)


Amortization of inventory step-up










Restructuring charges, net
358

299

5,038

(509
)
5,186

2,883

588

3,471



Acquisition amortization
12,077

11,247

11,202

11,189

45,715

10,218

10,681

20,899



Acquisition depreciation
1,123

1,106

1,102

1,021

4,352

974

980

1,954



Special (recoveries) charges, net
(8,200
)
3,917

18,481

3,488

17,686

(45,175
)
5,019

(40,156
)


Goodwill impairment charge





116,182


116,182



Income tax impact
3,625

(2,266
)
5,533

(1,752
)
5,140

7,704

(22,549
)
(14,845
)


Net loss (income) from discontinued operations
5,728

17,156

84,688

1,595

109,167

(9,162
)
43,848

34,686

ADJUSTED NET INCOME
$
10,403

$
12,939

$
12,561

$
16,587

$
52,490

$
4,074

$
4,475

$
8,549













(LOSS) EARNINGS PER COMMON SHARE (Diluted)
$
(0.23
)
$
(0.93
)
$
(5.64
)
$
0.08

$
(6.73
)
$
(3.96
)
$
(1.68
)
$
(5.66
)

LESS:











Restructuring related inventory charges (recoveries)
0.02

0.00

(0.06)

0.00

(0.04)

(0.03)

0.00

(0.03)



Amortization of inventory step-up
0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00



Restructuring charges, net
0.02

0.02

0.25

(0.03)

0.26

0.14

0.03

0.17



Acquisition amortization
0.61

0.57

0.56

0.56

2.30

0.51

0.53

1.05



Acquisition depreciation
0.06

0.06

0.06

0.05

0.22

0.05

0.05

0.10



Special (recoveries) charges, net
(0.41)

0.20

0.93

0.18

0.89

(2.27)

0.25

(2.01)



Goodwill impairment charge
0.00

0.00

0.00

0.00

0.00

5.83

0.00

5.82



Income tax impact
0.18

(0.12)

0.28

(0.10)

0.24

0.39

(1.11)

(0.75)



Loss per share from discontinued operations
0.29

0.86

4.25

0.08

5.48

(0.46)

2.16

1.74

ADJUSTED EARNINGS PER SHARE (Diluted)
$
0.52

$
0.65

$
0.63

$
0.82

$
2.62

$
0.20

$
0.22

$
0.42



13



CIRCOR INTERNATIONAL, INC.
Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms
(in thousands, except percentages) (unaudited)





2019
2020


1ST QTR
2ND QTR
3RD QTR
4TH QTR
TOTAL
1ST QTR
2ND QTR
TOTAL
NET (LOSS) INCOME

$
(4,633
)
$
(18,520
)
$
(112,338
)
$
1,555

$
(133,936
)
$
(78,948
)
$
(34,092
)
$
(113,040
)

LESS:












Interest expense, net

13,094

12,947

11,804

10,763

48,609

9,011

8,486

17,497



Depreciation

5,499

5,568

5,551

5,427

22,045

5,121

4,958

10,079



Amortization

12,536

11,685

11,629

11,741

47,591

10,516

10,976

21,492



Provision for (benefit from) income taxes

5,709

284

7,490

1,193

14,676

8,374

(21,769
)
(13,395
)


Loss (income) from discontinued operations

5,728

17,156

84,688

1,595

109,167

(9,162
)
43,847

34,685














EBITDA


$
37,933

$
29,121

$
8,825

$
32,274

$
108,152

$
(55,088
)
$
12,406

$
(42,682
)

LESS:












Restructuring related inventory charges

325


(1,145
)

(820
)
(602
)

(602
)


Amortization of inventory step-up











Restructuring charges, net

358

299

5,038

(509
)
5,186

2,883

588

3,471



Special (recoveries) charges, net

(8,200
)
3,917

18,481

3,488

17,686

(45,175
)
5,019

(40,156
)


Goodwill impairment charge






116,182


116,182

ADJUSTED EBITDA

$
30,416

$
33,337

$
31,199

$
35,253

$
130,204

$
18,200

$
18,013

$
36,213



14



CIRCOR INTERNATIONAL, INC.
Reconciliation of Key Performance Measures to Commonly Used Generally Accepted Accounting Principle Terms
(in thousands, except percentages) (unaudited)





2019
2020


1ST QTR
2ND QTR
3RD QTR
4TH QTR
TOTAL
1ST QTR
2ND QTR
TOTAL
GAAP OPERATING INCOME (LOSS)

$
17,750

$
12,020

$
(9,084
)
$
16,996

$
37,682

$
(73,405
)
$
(1,384
)
$
(74,789
)

LESS:












Restructuring related inventory charges (recoveries)

325


(1,145
)

(820
)
(602
)

(602
)


Amortization of inventory step-up











Restructuring charges, net

358

299

5,038

(509
)
5,186

2,883

588

3,471



Acquisition amortization

12,077

11,247

11,202

11,189

45,715

10,218

10,681

20,899



Acquisition depreciation

1,1