Circor International (CIR) 2 Mar 202019 Q4 Earnings call transcript

Good day, ladies and gentlemen. Welcome to CIRCOR International's Fourth Quarter Fiscal Year 2019 Financial Results Conference Call. Today's call will be recorded. At this time, all participants have been placed in a listen-only mode. There will be an opportunity for questions and comments after the prepared remarks. instructions] [Operator

the opening Scott go remarks turn Merrill from ahead. over for Associates and call now Solomon to Sharon I'll introductions. Please

Thank morning, good you, everyone. and

CIRCOR's Chadi On & and we'll Presentation the Investors Web be are the Financial Scott site today today the slides link. Buckhout, Section to on call Officer. The of CEO; the Chahine, Webcast available and referring company's at Chief is on President CIRCOR's www.circor.com

future contains Please and expectations expectations. turn identify slide statements to and other uncertainties, These discussion subject risks, forward-looking known Today's to are that two. unknown factors.

discussion factors, available CIRCOR's are SEC For of a to and The you filings. company on review its full XX-K, other XX-Qs, these the Web filings advises site company's Form circor.com. at

from remarks. by materially the or Actual X, today, represent only results Any statements view those today's as company's of XXXX. March differ implied anticipated forward-looking could

may While specifically update a company statements forward-looking the CIRCOR date, so. duty choose later to do any at disclaims these to

refer available income, management and CIRCOR's today's adjusted adjusted non-GAAP tables Web GAAP measures measures. free reconciliation to cash CIRCOR's charges recoveries. on of the adjusted net release financial are adjusted the A metrics to press income, These and On measures operating organic certain flow, margins, in non-GAAP special the EPS, call, will exclude of comparable operating earnings site.

three. I'll now turn slide Please over to to the call turn Scott.

good Scott, and morning, everyone. you, Thank

and our in filing our internal finance filing. of with Before in transactions manage morning I'd We've I on our reporting, weaknesses to the XXb-XX of material large in a number to financial ability second-half control primarily this get delay into financials, manner. unique the our identified the transformative explaining team's comment XXXX the over timely to associated XX-K like

could the matters operations, discontinued independent our a affected that cyber of the financial we're facilities. any financial results determine matter under XX impact and impact three there We're experts are accounting reporting is manufacturing of order evaluating believe incident our with a We're the to if conducting discontinued matters have working review in material and of control. operations. and recent that Within certain with on our an authorities,

reviews controls statements Based audit reviews we our XXXX. complete on our internal and results complete, adjustments today. and these financial firm do its audit for financial analyses to the of expect Until are we're the preliminary not discussing to-date, cannot

diligently can appreciate, further, you hope, and reporting but our cannot is process, financial soon as our form I this as file this will As working rest XX-K discuss to we top possible. priority. assured, finalize We're our

year, and in million foreign Adjusted last of Orders a level. from received exchange $X.XX was XXX We We quarter. about into goals communicated our and basis we get XXXX. orders for outlook Now, that with quarter EPS. and solid plan in commitments, plan, I'm June, of on made pleased our were points our adjusted value. first, me XX.X%, delivered report basis delivered and XXX strategic results on We'll our recap points let's up progress Last million XX-month to we QX $X headwinds. XXXX last for of XXXX. $XXX operating on let after for we're our significant and our deliver for high of revenue, margin organically quarter. another the delivering $XXX detailed million X% down delivering divestitures, track we've results adjusting about QX at more talk to the shareholder but from

partially push-outs ratio strong prior million, A&D up previous orders defense orders we prior In down our from projects orders were mainly a up $XX were about total year. Aerospace versus and offset In due was XXXX, new about by million, driven to Defense of spares globally, or had million, and quarter, X% quarter, quarter XXX%. the aftermarket from large segment program $XX solid The XX% for by orders. segment, $XXX book-to-bill of Industrial capital of wins.

four. points Please was of plan, low manufacturing. in the XXX refinery down organically offset and Revenue quarter X% growth productivity initiatives, transitions margin valves. from and continuing Industrial price turn basis A&D, driven organically. sampling, in instrumentation expansion in communicated was to and growth, revenue the in simplification lower up delivering the operations slide and by actions X% revenue cost XX% with transformation organic ongoing XX-month was by A&D The strong to increases,

product oil actions commodity of The at approximately flow sampling disposition our business, our Spence business transformation. generated business, other on January sell control of proud the XXXX, lines non-core business $XXX in completed in sale the over proceeds cash. Since sharpened $XX the intent made away focus approximately completed reduce we've million cash, million used instrumentation We've I'm business for loss-making asset of sales, sold the our and and upstream progress of valve our cash, debt. million in When look net taken distributed and reliability Nicholson sold platforms. our from businesses, XXXX, proceeds in services include divested completed for our for and to we gas, mission-critical the announced valves loss-making shift $XX $XXX million and engineered from we and our largely approximately to our core

strategic In XX-month priorities addition, on communicated our in plan. we delivered our

achievements last I June eliminated of four and in as net leverage organic executed reduced second-half so and slide, a We our of XXX margin XX%, gas commoditized can We products XXXX, our on noted we divestitures basis million since turns. A&D by the representing slide from approximately two launched points AOI an plan year, XX year. the new exited few We of five, businesses, and last notable exceptional new growth oil of the to the our generated $XX products. XX%, majority turn Group. Energy and of published up delivered Please upstream in expansion. highlight revenue

plan. And drive finally, products we with in reduced We and continue to the innovation growth. and invest corporate costs group in to XX-month new line

six. Please turn to slide

slide, a commitment our on and commitments, Overall, delivered our about to as As our feel of to a XXXX track we're we we result XXXX. below divestitures. the deliver important XXXX XXXX. and It's as momentum full-term we our leverage our good how we noted non-core note that enter on ended is

last of as willingness the is CIRCOR, you Finally, a to XXXX behalf to and help after has to he everyone this his seamless at Chadi as thank the want been of team, management earnings on his year-end step continue and close Chadi plans leadership ensure of Chadi's filing member XX-K. call know, to down a effective valued for transition. to the our I

to turn before I'll to results quarter outlook markets. that, call review for the discuss end in detail fourth more the Chadi over With I the our

Thank and you, everyone. morning good Scott,

I me, for forward. As my this last is CIRCOR certainly path have a bittersweet in confidence great earnings call, moment but

compared Let's million, decline begin sales down segment well. initiatives, by organically partially quarter Industrial excluding reported QX XXXX, margin margin XX%, down X% basis X% industrial offset XXXX, driven and segment It's delivered and sequentially as The that of divestitures. basis by increases, starting by QX our segment of mix and reduced worth by points with reviewing XX revenue simplification on The QX results, $XXX headwinds XXX the foreign noting in Industrial XXXX. The price was from industrial seven. volume with productivity. points from over slide currency

previous and years, seasonal in line expect a we expansion. XXXX, with in QX revenue dip margin a slight For

of Aerospace of had XXX volume, driven and year, XXX XX% basis the both up Aerospace and growth across segments. points seasonal dip was Commercial eight, manufacturing versus by and we slide on Defense our but points for and up to million, price, QX, XXXX, prior Defense sequentially, productivity. operating moderate strength quarter. Turning from revenue QX In sales favorable expect basis a organic mix, margin $XX Defense organically business and XX.X%,

We strong year-over-year. margin expansion expect

from timing driven to were versus sales slide million, up prior XX% in driven quarter, refinery the and by mix was operating by Adjusted margin $XX valves. prior from continued improved down largely project quarter, Turning and valves. flat nine, quarter project XXX basis refinery energy XX.X%, versus year, points prior and cooperation

as eliminated segment. will have we part forward, energy valve business Industrial the refinery of the Going and be segment, reported our

to slide QX items. for XX, Turning P&L selected

tax Our adjusted quarter for was by tax and rate and credits. tax foreign differential driven XX%, R&D the full-year higher

other in $XX interest a million. up of made unrealized for businesses is by offset expense on of charge was continued compared and year-on-year. expense quarter The be acquisition million component FX adjusted this down to the million balance. headwinds related recorded the associated related remainder Looking non-cash The $X restructuring charge of years, with Approximately $X income. a by realized pre-tax to million partially driven with restructuring gain is nearly amortization venture million of we was of largest $X.XX million, Other items takeover fees primarily The defense. $XX approximately expense prior at $X lower $X.X special related EPS position totaling facility. charges, million. total change debt $XX and sale and loss Net the income and

Turning flow net pay-down. net including XXXX, our We've PP&E. of basis X.X cash million from million slide debt was pro our on we $XXX $XX operating from Also, reduced of leverage approximately debt QX. Free cash reduced QX, year-end, we flow proceeds during sale position forma by $XX to over in times was XX, million our by $X two on to $XXX in million since as had up debt times. the million

to the our discuss outlook. hand Scott I will now market call to

Thank you, Chadi.

markets end the drivers momentum Now, we through I'll as of an our will that us and move give XXXX. provide overview believe we

we've As segment. our exited energy discussed, before

forward, and in two we'll So report results our A&D. going Industrial segments,

turn slide Please XX. to

in with China, The an aftermarket in seeing push-out sequentially large a saw intake commercial dedicated created team aftermarket in we some Industrial. strength power generation. weakness as We're in project the down were of result in that due offset in project world. anticipated of the while the of commercial partially rest orders in than start business was aftermarket of QX, Americas weaker Orders in order X% four-market in by Europe QX about the The we Let's modest last the year. middle acceleration and mainly a marine was globally. growth and our in to increase QX from orders

QX beginning refinery outlook As remains orders and into QX. remains we reminder, in XX% of consolidated project activity valve healthy, this strong. business business year-over-year the in up for valves The our industrial. Refinery were a XXXX pipeline

We expect in of strengthen first-half orders ongoing XXXX. the

order specific difficult be with orders As in we've mentioned project in can predict. past, to timing business this lumpy the

of we four-market in Industrial, global in projects sluggish markets out we improved with to Capital pushed as activity finalize project and For ownership line with levels QX. QX, year. overall last remain expect

in We year. the be to Orders line momentum with strong expect our to expected in in continue. QX are business QX aftermarket last

applications. engine by defense and and was $XX strength businesses. and primarily another of both products Aerospace The by from missile our new generated defense and Defense million driven at quarter strong driven Defense spares, Our orders and commercial U.S. Group

Commercial their driven U.S. aerospace the like QX. continued segment Joint aerospace remain to quarter, DDG Airbus CVN-XX Virginia continues well with increase for increase major new build Strike the are programs aircraft and be line spares. Overall, to to orders defense QX wins. related Fighter, destroyer Fighter submarine, strong, program as Class and and prior class by to orders defense programs defense and in including XX by expected Strike in large Class defense expect wars sequentially the as strong multiple Commercial the like the upward the for submarine, rates and Navy the orders Virginia Joint we and the carrier. platforms strength The by trend commercial in ongoing in aerospace, quarters the driven the AXXX, backlog driven

With implications overall the for The to we're respect be our supply in Pacific. a coronavirus, impact That to segment, the the the chain. in our limited. headwind sales, growth possible said proving assess impact market's our in and colleagues, a factor business China situation been monitoring for closely to the and coronavirus Asia industrial on initiatives weakness has in China of and is

it's be Looking large predict impact. start supply an may impact the Europe too XXXX, could end more with see impact. our this ahead, a measures. At to we situation we to or worsens, If chain the of in complications early anticipate based on markets, other that border size stage, on control the logistics, and meaningful there in particularly

our you keep can that into we'll impact any informed guidance. forward, only At XXXX modest this time, Going we materially influence our changes factored business. a potential

the turn over back Chadi to I'll guidance. to Now, call discuss

$X.XX. million Thank the The $XXX EPS revenue we result which in quarter, of $X.XX Scott. Overall, of the to quarter million to was divested range the January range strong expansion. Slide we XXXX to first in you, XX. expect and XXXX. expect $XXX instrumentation adjusted In the excludes year-on-year in sampling, of and Turn guidance cents

in disbursements to prior quarter XXXX the negative flow to similar due years. cash QX free expect We in be and seasonal increase to throughout

for following per for XXXX, $X.XX of Regarding quarter acquisition of charges special charges share, and per amortization totaling the we restructuring anticipate share. expense special items, and $X.XX related $X.XX restructuring charges the to first

adjusted We approximately XXXX XX%. expect XX% the be tax rate to to

With to Scott. that, let it back turn me over

we're Thank track sharpened of critical June you, completed in to and published our oil on on businesses, core, company. from we've divested Chadi. our the To deliver platforms, largely plan mission our gas, shift de-leverage right summarize, significantly focus away flow commodity last XX-month the upstream other control year, and

free we business initiatives, pricing and remain low-cost new flow, enter growth, strong portfolio, long-term from cash de-leveraging XXXX, manufacturing further committed we product benefits to expect As actions driving realize improved the continued launches, our expanding simplification to facilities. business generating and our margins, company. We

to questions. happy be take Now, your Chadi and I'll

of with proceed from Instructions] Thank you. comes your line with question question. Kaplowitz Andrew Please Our [Operator Citi. first

This question. taking Thanks Piyush morning. of Good behalf my on for is Andy.

morning. good Sure,

On Industrials, large mentioned in you're today. dynamics OEM. bit that growth elaborate in little seeing the weakness and on more projects you geographic Maybe

the You should the in is other mentioned Asia we of? there that now aware is only coronavirus, be have be weakness soft, that of expected any is Europe function or past, a to and drivers in

I'll So, take that. yes,

So, capital that saw we're the projects, in in seeing capital global. in was QX weakness we projects

was we expect well weaker between expected the difference as markets in across as in expected. The Europe, So, it Asia-Pacific. was what it did so than came four Americas, more we North in strength America,

significantly aftermarket in it we better On also thought would the positive, grew QX. the globally than

basically of existing on life extending aftermarket. and customers the installations, So, our more we're spending seeing

is hard with the is and really to Asia coronavirus. the impact We're it far attributable weakness we're The in but China, see. so not sure definitely to coronavirus much seeing in how of

to So, to We a an export if $XX China, we impact. largely talk industrial aggregate, roughly China. opposed coronavirus Defense, where back million don't Aerospace sales sales of an issue I about don't as we of impact that's inside & CIRCOR, in the China, for lot it's of what expect step in in do including into general

China relatively of inside a standpoint. modest impact revenue the would us So be from for

ops, business have seen small supply total a in percentage do in chain haven't the will base. for On of our from we far, disruption both disc and business, kind our largely that, any China and energy suppliers our relatively supply side, say so and industrial I of it's we that

a you obviously our start Europe of huge know, and now, not So, as guidance or into this in impact. impact course, and modest but could impact a we've on from factored of then things stage, America, we're and at the XXXX, seeing expectations change have a coronavirus, for seeing relatively that bigger in CIRCOR, we an North impact

the color it rate Industrial, you growth Got given guide there? initial provide then it, your seeing, continuing flattish, to was on low around want the to and organic you lowered for current single-digit, any environment are you

where and continue they're we would we a scenario, deliver even We're down we roughly to XXXX. right, around commitments they year-over-year. you're down to XXXX So, XXXX actually our expect are if business for -- sales in versus expected planning flat industrial year-over-year,

magnitude markets a expecting but obviously prior-year. more we built them matters Now now, to contingency plans getting we're be industrials down little lot, still difficult, but very as or of flat versus the around

drivers particular All XXXX? cash color should right, continues going can we forward? free cash that to highlight flow for remain on think want cash about that Any to free how you flow think that any and weak, support lastly, you

Hello, is Chadi. Piyush. This

our XXXX So, discontinued primary the of is the operation. cash flow of driver weak contribution our in

a the cash for cash. on two million. July, be the totality In DV it to of XXXX, was our one valves, these negative of in slight flow $XX businesses and a other engineered One had drag continue sold

my in this we look we've XXXX, I look at million that we would a while, million I look $XX us QX, of discontinued in XXXX. in at in totality, for say but around I to cash away. million flow over the DV. go at $XX XXXX, in the with reduced $X would We've XXXX, still expect that's our the we achieved look activity mostly total as When as growth I then, free remarks cash for We for rest year at million, dip total our exited QX nicely we've expect, a operation as flow $XX in said -- on when I a year. prepared look Therefore,

you, All right, in thank guys. I queue. get will back

you. Thank

Our next of your question. Stifel. question comes Please from Nathan the line with Jones proceed with

morning, Good everyone.

Nathan. morning, Good

Nathan. Hello,

and worse a a maybe some the industrial Maybe to businesses, in by me worse think put bit bit last with then Scott. XXXX & Hi, little in the in Chadi. kind puts getting better Hi, energy and the playing start to in margins, we of July and businesses, offset you like Aerospace the relative of out we year? $XXX could plan it little out million, way see business. takes the were Defense Is the activity I being than the better looks quite that's to frankly you that in expecting

that. So, me comment on let

think industrial agree. what yes, top on Industrial than thought the Aerospace than weaker than we Defense will thought. line. line expected top and the we being bottom & will be the I significantly the worse we is, line on be stronger

committed a thought on well. as there's -- So, energy is last Nathan, on about cost little year, are what's not left the actions as being playing with side. and cost more with Maybe to expected. the bit we're the track is aggressive of of well. is actually that I in agree then last out playing we looking we're the piece Energy what that we middle as out

net commitment. if feeling about still good out, all it we're So, you XXXX our

& more bit about the little we Okay, could in a margins Aerospace then maybe Defense. talk here

in quarters. at XX% of here or couple the been above You've last

at something kind shipments your as new at some mid-teens the are in looking Defense, XX% margins & strong fourth not baseline ago. target setting quarter. XXXX, I that can a be think and that long that -- kind had of in level, all Aerospace is that clearly maintained Are we of here You we're here? in

in So, and of set see kind above target it's XX% at to those have a back-half, we pretty impressive the here? new

So, long-term believe XXs, our there so, I to we're low we've that and obviously. high-teens, saying target is medium been

that see expansion see XXXX. in and through growth you'll XXXX, continue You should margin expect to continue year-over-year, quarter each you'll to

margins. is both seeing you're what there's revenue So, as know, in you seasonality sustainable, and

see won't through to QX year-over-year, So the XXXX. QX, you'll expansion solid margin see you'll margin in in same exact you but you see, saw continue that

Nathan…

Go ahead, Chadi.

to what a orders, and momentum in and gaining to is that add fruit good have a done we XXXX, at A&D. lot aftermarket, spot think carryover and I Just of we've what into Scott said, our XXXX. we on we great pricing, When efforts in look focused and

we're So, we when we we it the there, $XX XX that the seeing plan, million, put in this front look of in pricing a of A&D. you bridge lot a that months at lot coming from of put

at we why our margin comfortable margin, that. So with the that's when look and we of very feel our very, sustainability

to forma on get down pro I more deployment What plans want at that the at debt? leverage by Three, start one slide six slip XXXX. of for that. the need say paying here to just does to and kind the Okay, you before capital think year, end down I would X.X just than the other level number of in end of your looking

the our range. X.X So, X between and is level comfort long-term

focused XXXX So, we're through the on de-leveraging very still process.

it Okay, on. Thanks much, I'll pass very helps. that

Nathan. you, Thank

you. Thank

ladies you, gentlemen. you. and Thank Thank

We have that our call. today's of of end the the question-and-answer with session, conclusion reached and

have day. You Thank your you may this lines for wonderful your time. participation, at a and disconnect